USRP Time Card Requirements – What is Acceptable?


MARCH 2019:
In the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 (USRP), several rules include a requirement for time cards or time book entries. The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) often receives questions regarding these documentation requirements.

If an employee’s payroll is to be divided between two or more classifications, the applicable time card record keeping requirements for most industries are listed at Part 3, Standard Classification System, Section V, Payroll – Remuneration, Rule 3. Division of Single Employee’s Payroll. This rule states, in part:

… the remuneration of any one employee may be divided between two or more classifications, provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee …

The rule does not require any standard format for the records, but requires that they be original, i.e., contemporaneous records, and that they be summarized, meaning totaled by operation. The accuracy of the summaries must be verifiable by reviewing the original employee records. Some employers use smartphone apps to record the required information contemporaneously, and in some cases, information for multiple employees is recorded by a supervisor rather than by the individual employees.

Rule 3 also addresses those instances in which complete and accurate records are not maintained. Rule 3 states:

If the employer fails to keep complete and accurate records as provided in this rule, the entire remuneration of the employee shall be assigned to the highest rated classification applicable to any part of the work performed by the employee. Payroll may not be divided by means of percentages, averages, estimates, or any basis other than specific time records.

Similar requirements for dividing payroll between Construction or Erection classifications are contained in Section IV, Special Industry Classification Procedures, Rule 2, Construction or Erection Work. This rule states, in part:

… Division of payroll shall be made for each separate and distinct type of construction or erection operation that is specifically described by a classification, provided separate records of payroll are maintained and provided the use of any such classification in connection with a separate job or location is not restricted by classification phraseology or footnotes. When the operations at a job or location are classified on a divided payroll basis, the remuneration of any one employee may be divided between two or more classifications provided the employer has maintained complete and accurate records supported by original time cards or time book entries which show separately, both by individual employee and in summary by operations performed, the remuneration earned by such employee. Operations for which separate records of payroll are not maintained shall be assigned to the highest rated classification applicable to the job or location if payrolls are kept separately by job within the policy period; otherwise, the highest rated classification shall be assigned based on the entire policy period …

As with Rule 3 discussed previously, Rule 2 requires summaries that can be reconciled to original, contemporaneous records when dividing an employee’s payroll between two or more classifications.

Some Construction or Erection classifications are dual wage classifications that require verification that the employee’s regular hourly wage equals or exceeds a specified amount. These classifications are subject to additional record keeping requirements that are provided at Section IV, Rule 2a(1), Records of Payroll. This rule states, in part:

For all employees, other than salaried employees, determination of the regular hourly wage must be supported by one of the following sources:

(a) Original time cards or time book entries for each employee. Original records must include the operations performed, the total hours worked each day and the times the employee started and ended each work period throughout the workday. At job locations where all of the employer’s operations cease for a uniform unpaid meal period, recording the start and stop times of the uniform break period is not required.

(b) A valid collective bargaining agreement that shows the regular hourly wage rate by job classification of worker. If using a collective bargaining agreement, the records must include an employee roster by job classification that permits the reconciliation of individual employees to the job classifications set forth in the collective bargaining agreement.

For all employees, other than salaried employees, the payroll for which an hourly wage determination cannot be reconciled to time cards or time book entries or collective bargaining agreements as specified above shall not be assigned to a classification that requires the regular hourly wage to equal or exceed a specified amount.

Note that Rule 2a for dual wage classifications is the only rule that includes a requirement for recording the times the employee started and ended each work period throughout the workday.

Each of these rules requires that certain data elements be contemporaneously recorded and summarized, but the rules do not require that a standard form or format be used. This allows employers the flexibility to use a variety of methods and technologies to record the required information.

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Information Source: WCIRB California

Classification and Test Audit Insight – News and Information for the California Underwriting and Audit Community

The Classification and Test Audit Insight e-newsletter highlights common classification and test audit issues of interest to auditors, underwriters and others. Editions are issued monthly, and past editions are available in the Learning Center section of wcirb.com.

Flash Report: 2019 Policy Assessments Released


NOVEMBER 29, 2018: 
California’s insured employers will pay less in assessments next year thanks to the absence of an assessment by the California Insurance Guarantee Association. However, costs to fund the workers’ comp system overall are on the increase. Assessments paid to support the Department of Industrial Relations and the anti-fraud activities of the California Department of Insurance and local District Attorneys are up for insured and self-insured employers alike.

Overall, the insured employer assessments handled by DIR are up 1.2 percentage points next year and will amount to 2.8% of each employers’ workers’ comp premium. DIR’s assessments were a hair under 2% of premium last year, and in 2017 they were just 1.1% of premium. These are offset for policyholders because CIGA is not assessing for 2019 which means a 2% saving or a 1.2% lower assessment overall.

Self-insured employers will end up paying more next year as they do not pay to fund CIGA’s operations and therefore are unaffected by CIGA’s historic decision not to collect an assessment next year. DIR’s assessments on self-insured employers are up 1 percentage point to 8.9% of the workers’ comp indemnity benefits that each employer paid out to injured workers. In 2017, the rate for self-insured employers was under 7%.

Earlier this year, the California Insurance Guarantee Association board of directors announced that they would not be leveling an assessment in 2019 for the first time this century. The association, which takes on the workers’ comp claims left behind by failed insurance carriers, is projecting that it has enough cash and investments on hand to pay off its workers’ comp liabilities.

At one-point CIGA had a $4 billion deficit on its workers’ comp accounts and had to issue $750 million in bonds to stay afloat. The turnaround is largely credited to the steady thoughtful leadership of executive director Wayne Wilson. Wilson is retiring this year.

The bulk of the increase in DIR’s assessments next year is going to fund the general Workers’ Compensation Administration Revolving Fund (WCARF) that is jumping from 0.8% of premium to 1.4% next year. WCARF was just 0.3% of premium in 2017. The revolving fund is largely the operating budget for the Division of Workers’ Compensation.

Also, on the increase are the assessments to fund the Division of Occupational Safety and Health through the Occupational Safety and Health Fund (OSHF) and for the Labor Commissioner’s office through the Labor Enforcement and Compliance Fund (LECF). The former is at 0.38% of premium next compared to 0.27%, while the LECF is at 0.34% compared to 0.22%.

Earlier this year, the California Fraud Assessment Commission also approved an increase in the assessment rate that employers pay to fight kickback schemes, medical mills, claimant fraud, and premium fraud, among other nefarious scams. Insured employers will be paying 0.29% of premium for these activities next year.

The assessments are fronted by carriers to the Department and then are recouped from employers as part of their workers’ comp payments in 2019. Self-insured employers pay assessments directly to DIR. The assessment letters are heading out today.

View the details

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Information Source: Workers’ Comp Executive

Flash Report: 2019 Rate Cut Deeper Than Carriers Wanted


NOVEMBER 7, 2018:
Insurance Commissioner Dave Jones’ has made the rate decision. It is the last of his tenure. It calls for an 8.4% cut in California’s workers’ comp advisory pure premium rates. The change is effective for policies that renew or incept on or after Jan. 1, 2019. California Employers will be happy.

The cut is far deeper than the 4.5% decrease recommended by the Workers’ Compensation Insurance Rating Bureau. The Bureau is a private organization with quasi-governmental responsibility. It is financially supported exclusively by insurance carriers in whose interests it operates.

Jones’ decision is squarely in line with the recommendation of Mark Priven – the actuary representing employers and organized labor on the Bureau’s Governing Committee. Priven’s recommendations have consistently been more prescient than the Bureau’s and more contemplative of California’s declining cost trends.

The Bureau’s governing committee, which is dominated by insurance industry executives, rebuffed the public members’ efforts to have Priven’s recommendation adopted. Priven presented his analysis directly to the Commissioner at a rate hearing last month (for past coverage see 2019 Rate…).

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Information Source: Workers’ Comp Executive

Mid-Year Workers’ Comp Rate Cut Approved


APRIL 4, 2018:
California employers are in line for a seventh straight cut in their workers’ comp rates. The Workers’ Compensation Insurance Rating Bureau’s governing committee members approved a filing for a 7.2% rate cut for policies incepting on or after July 1, 2018.

If this proposal is ultimately adopted, the cumulative rate cuts since Jan. 1, 2015 will be 35%.

The Bureau is a private, but quasi-governmental organization financially supported exclusively by insurance carriers in whose interests it operates.

The committee’s insurer members heard a proposal from the public members’ actuary for a deeper 11.8% cut in rates. The difference stems from alternate methodologies for projecting medical loss development and the trending methodologies used to develop his rate projection. The lower 7.2% cut passed with the unanimous support of the carrier representatives. Both public members present opposed the motion and expressed support for the deeper cut.

The proposed rate cut is based on the industry’s year-end 2017 experience that shows a continued decline in the projected loss ratio for these July 1 policies. The data show continued improvement not only on the medical front, but also some improvement on indemnity benefit costs including temporary disability benefits. Loss adjustment expenses (LAE), however, remain high and are limiting the size of the rate cut.

Driving much of the improvement in the experience is the state’s accelerating claim settlement rate. The settlement rate had been improving for several years but the pace of settlements accelerated significantly through the end of 2017. The state’s improved claims environment that is encouraging the closure of claims stems from the SB 863 reforms as well as subsequent anti-fraud initiatives targeting workers’ comp liens. Last year’s increase in settlements followed the dismissal of nearly 300,000 liens.

The Baker workers’ comp reforms significantly increased permanent disability benefits for injured workers, while introducing new dispute resolution processes that may finally be impacting the system’s TD costs. Feeding into the settlement rate as well is the impact of the subsequent lien reforms from SB 1160. The measure has reduced the number of new liens coming into the system by 40%. This measure alone amounts to savings of roughly half-a-billion dollars.

Primary Factors in the July 1, 2018 Rate Cut

Lower Loss Development: -6 percentage points
Inclusion of the 2017 Accident Year: -1 percentage points
New Drug Formulary: -0.5 percentage points
Loss Adjustment Expenses (LAE): +0.5 percentage points

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Information Source: Workers’ Comp Executive

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