Recently, this question from a concerned employer came to me:

“Do I have to report the money I contribute to an employee’s retirement plan to my workers’ comp carrier?”

My response:

Contributory payments made by the employer in connection with group insurance, stock purchase plans or qualified retirement plans and deferred compensation plans are not to be included in the payroll you report for workers’ comp. Plan must be qualified under Section 125.

To really answer the question, my next question is, “Is it a qualifying plan under Section 125 IRS code?”

If its not, then its considered money they earned but THEY chose to defer and therefore it IS reportable as payroll for workers’ comp …

Example 1 –

Joe earns $2,000 and his employer elects to put another $200 into his retirement account. If it qualifies under Section 125, the employer only reports payroll of $2,000 for both payroll and comp purposes and Joe does too. If not, the employer must report payroll of $2,200 because Joe is deemed to have earned $2,200, irregardless of how much Joe takes home right now.  Make sure it qualifies as a Section 125 plan!

Example 2 –

Joe earns $2,200 and JOE elects to put $200 into his retirement account. Even if it qualfies under a Section 125, you still have to report wages of $2,200 for workers comp because that’s what he earned.

Example 3 –

Joe earns $2,200 and he elects to have $200 taken out as part of his contribution for his own health insurance costs through a Section 125 plan. He only reports income of $2,000 and you only report payroll of $2,000.

Example 4 –

Joe earns $2,200 and he elects to have $200 deposited into his Health Savings Account. He only reports income of $2,000 and you only report payroll of $2,000, PLUS any contributions you make as the employer on top of the $2,200 are not reportable to workers’ comp.

So if the employer contributes $200 and Joe contributes $200 , for workers’ comp purposes, only $2,000 total is reported.

Does that clarify?

Bottom line, make sure its a qualifying plan. If your employees are currently paying a portion of their own health insurance costs outside of a Section 125 plan, both you and they are wasting a lot of money.

Tom Moshier
Commercial Insurance
tmoshier@vanbeurden.com
Kingsburg • (559) 634-7139
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I was having lunch the other day with some friends who are in the contracting business.  One of them is well-known — a veteran in construction.  The other person is just starting out on his own but has been around construction for over 20 years.

Naturally, we soon got around to “talking shop”.  And I asked them to decide about the workers compensation injuries they had both seen over their careers.  Specifically, I asked them whether it was an unsafe work environment that had caused the majority of injuries or whether it was the unsafe act of an employee(s).

To my surprise, on top of both of their lists was the “unsafe acts of employees”.

I guess I shouldn’t have been surprised because in my experience, it has been the unsafe acts (we like to call them “stupid acts” – they had another term…) and not safety practices that have caused the majority of injuries.

You might say, “So what…I can’t fix stupid”.  Well, that’s true.  But you can be very careful the next time you are making a hiring decision.

Also, since you can’t be out and about – always policing your employees, be sure to foster an environment where they are actively looking out for one another.  If one employee sees another taking a shortcut here or rushing there, have the employee say something.  If the unsafe employee won’t listen, be sure the second employee can talk to a supervisor or manager.

Those two simple steps, can limit the number of claims you have going forward.

Tom Moshier
Commercial Insurance
tmoshier@vanbeurden.com
Kingsburg • (559) 634-7139
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As today’s California contracting market continues…eh…to contract, there is a common expectation that more and more projects will continue to get “sideways” as subs and general suffer under the weight of decreased margins.  It always happens in the building cycle.  Already, many sureties are seeing an uptick in claims.  Translated, that means not all the sub- contractors on a particular job may be able to complete that job.

And once a job get’s sideways…it seems to be forever cursed!  Work slows, then stops.  The owner won’t pay or can’t pay the general, mechanics liens become more real and eventually…lawsuits may fly.  So what can you do?

Well, unless you’re a general contractor who actually pulls financials or D&B’s on all your subs, there are some things you can do to minimize some of the risk for the acts of your subcontractors.  One of those is through the use of insurance endorsements.  I call this “Pushing the Risk Around”

Background

Almost every contractor requires that the subs on a job, or sub’s-sub name the contractor and owner as an additional insured.  But what does that mean?

It means that if there is a problem (loosely defined here) on the job by one of the subs, the sub is going to name you and the owner of the project as an additional insured.

This means that if the GC gets sued by the owner or some other party, your policy is going to be first in line (assuming you’re the sub) and your policy may be called on to defend the sub, the sub’s sub and the GC…almost everyone!

Under California law, you are liable for the acts of your sub – or more accurately – your insurance policy could be liable for the acts of your sub.   But does that seem fair?  Well it depends…

If you had knowledge of the sub’s acts or inability to act, due to some circumstance, it absolutely could be 100% fair!  But, if you didn’t…then probably not but you’ll still have to pay!

However, did you know that there is something you could have done to protect you own assets and insurance policy a little bit more from the acts or failure to act of your sub?  You could have protected yourself with an Additional Insured endorsement from your sub’s insurance company that names you as an additional insured.  In addition, you could have your sub’s insurance policy contractually name you as the “Secondary policy” and your policy could be named as “non-contributory”.

Many insurance forms have these endorsements available, but it is surprising how few contractors actually take the time to protect themselves better from the “sole acts” of their subs.  With this “Primary and Non-Contributory” language, your subs policy will protect you from the sole and negligent acts of the subs.  Without it, your policy will probably be liable.

So, word to the wise, if you haven’t done so lately, go back and re-read your subcontractor agreement.  Even if you do business on a handshake, make sure the Additional Insured, Primary and Non-Contributory language is in place.  That way, if your sub screws up and you’re not at fault, your insurance company shouldn’t have to pay.

It takes just a moment to really stop this problem from “Pushing YOU around” in the end.

Tom Moshier
Commercial Insurance
tmoshier@vanbeurden.com
Kingsburg • (559) 634-7139
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The next time you are looking for an insurance agent, consider asking them for some ideas that can help your business that are not insurance related. For example, I have several contractor clients that have now done business with each other because I got the chance to introduce them. You never know who will be doing what, and a good network can be a real value to a client. It’s all about getting out there and knowing what’s going on in their business.

Tom Moshier
Commercial Insurance
tmoshier@vanbeurden.com
Kingsburg • (559) 634-7139
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Hello world!

I enjoy the everyday challenges and I especially enjoy helping business owners find solutions to the unique problems they have. I specialize in contractors’ bonding needs, and as a Certified Work Comp Advisor, I can help all kinds of employers reduce costs.

Happy New Year 2010, and thanks for reading my first blog post. We plan to update these soon.

Tom Moshier
Commercial Insurance
tmoshier@vanbeurden.com
Kingsburg • (559) 634-7139
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