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New Audit Requirements for Dual Wage Classifications

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New Audit Requirements for Dual Wage Classifications

On November 30, 2012, the Insurance Commissioner approved amendments to the California Workers' Compensation Uniform Statistical Reporting Plan - 1995 (USRP) that establish new audit requirements for policies effective on or after January 1, 2014 that develop payroll in a high wage, dual wage construction classification.

Currently, the USRP at Part 3, Standard Classification System, Section VI, Administration of Classification System, Rule 4(a)(2) states: "Each policy producing a final premium of less than $10,000 shall be physically audited at sufficient intervals to ensure determination of proper payrolls." The Insurance Commissioner's Decision adds a new audit requirement for policies effective on or after January 1, 2014. The new audit requirement provides that each policy producing a final premium of less than $10,000 and developing exposure in a high wage, dual construction classification must be physically audited unless the policy is a renewal and the insurer physically audited one of the two immediately preceding policy periods. This new audit requirement also applies to policies issued to Owner Controlled Insurance Programs (also known as "wrap up" policies).

"Physical Audit" is defined in the USRP at Part 1, General Provisions, Section II, General Definitions, Rule 15, as follows:

An audit of payroll, whether conducted at the policyholder's location or at a remote site, that is based upon an auditor's examination of the policyholder's books of accounts and original payroll records (in either electronic or hard copy form) as necessary to determine and verify the exposure amounts by classification.

A list of the dual wage construction classifications is shown in Appendix II of the USRP. The USRP can be viewed, printed or downloaded by visiting the Manuals and Plans section.

For more information, see WCIRB Bulletin 2012-23

April 17, 2013