Premium audit questions
Why is my workers’ compensation policy audited each year?
Your policy each year is issued with estimated payroll and classification codes and these need to be verified at the end of each policy period. Superior Point conducts premium audits for all policyholders at the end of each policy period.
Many factors can change in your company throughout the course of a policy period. Premium audits verify that premiums are fair and accurate at the end of this period.
When is the premium audit performed?
Most often, shortly after policy expiration, but an interim audit can also occur early in the policy period to verify the accuracy of estimated exposures. If your policy is cancelled, the audit will be performed shortly after the cancellation date.
How will my premium audit be conducted?
Depending on the size and type of your business, the audit may be completed physically at your location by a Superior Point auditor or online by you.
For online premium audits, shortly after your policy expires, you will be sent a letter informing you how to submit the records needed to complete your audit.
For physical premium audits, a premium auditor will contact you about scheduling your onsite physical audit. He or she will then meet with you to review your records.
What does “being audited” mean?
The two basic exposure types for a workers’ compensation policy are payroll (remuneration) and total cost of uninsured contractors. When your policy is first set up your policy premium is based on estimated payrolls and classification codes. Your estimate should have been your best projection for the coming policy period.
Shortly after your policy expires, your actual premium exposure during the policy period will be determined by the premium audit. After the premium audit of your workers’ compensation policy is completed, you will receive a Final Statement of Audit. This statement will indicate any additional premium you owe or any credit you will receive due to the payroll or exposure adjustment as determined by the premium audit.
What is the definition of payroll?
Payroll is defined as remuneration paid to employees and also includes payments to uninsured contractors.
What is the definition of remuneration?
Remuneration means to give or pay for some work or service done; to make up for, to compensate. Workers’ compensation policies will always refer to the term “remuneration.” Payroll, the most common item included in remuneration, is not the only item. A few other examples include: wages, salaries and hourly pay, including retroactive wages or salaries, commissions, bonuses, overtime, vacation time, holiday pay, sick days, etc. For a more specific definition, ask your agent.
I am a contractor that uses subcontractors. What do I need to provide?
According to the Minnesota Department of Labor and Industry, there is a checklist to ensure you are meeting requirements. A “9 factor test” solely determines if your subcontractors truly are independent. Documentation needs to be provided for all of your subcontractors that proves they substantially meet all nine points on the test.
I am the only owner of my business and have no employees; do I still need to complete a premium audit?
Yes. You need to provide records confirming that you are still a single member owner with no employees. You will need to complete the online premium audit and provide your business tax documentation.
How often do I need to complete a premium audit?
You are required to complete an audit annually, or if your policy cancels mid-term.
What happens if I do not complete my audit?
Any active policies will be cancelled. You will NOT be able to get coverage in the Assigned Risk Plan again until your premium audit is completed. There will also be an additional audit non-compliance charge of 200% of your estimated annual premium and your audit will remain in non-compliance.
I completed my premium audit form. Why do I need to provide my business tax forms?
Your tax forms confirm the information you provided.
Can I just send you my tax documents or payroll report and you can complete the premium audit form?
No. The state requires the premium audit form be completed by the policyholder.
Can I do my premium audit over the phone?
No. Unfortunately, the premium audit needs to be completed online. You can get a paper audit form, which can be mailed along with your supporting business tax documentation.
I do not want to do the premium audit online; can I complete a paper form?
Yes, a paper form can be downloaded here.
I only file my business taxes annually. What do I need to send?
Send the most current annual business taxes that fall within your policy period.
I filed an extension on my taxes. What can I send?
A QuickBooks report or similar accounting program annual report is acceptable. If you do not have this type of report, you must submit business taxes with the premium audit or the policy will be cancelled due to failure to comply.
I hired a nanny. What documentation do you need?
Complete the premium audit and provide the average weekly hours worked by each nanny or caregiver employed.
What is a physical audit?
A representative of Superior Point will come to your business location to physically obtain the required documentation necessary for your premium audit.
Why am I getting a physical audit?
The Minnesota Department of Commerce has developed new standards for physical audits that are applied by total annual premium. To view these new requirements, please view the premium audit page of this website. Failure to comply with the premium audit requirements will lead to policy cancellation.
What documentation is needed for a physical audit?
To properly complete your physical audit, you will need to supply the following information as required by the Minnesota Department of Commerce.
- Quarterly Federal 941’s, Annual 940, Quarterly State Unemployment reports, Annual 943 (Farms), Tax returns (Schedule C)
- Payroll reports for the time period of the policy / Gross wages for an adjustment period to verify payroll to the government quarterly reports (Please ask your auditor for the adjustment if you need help)
- Check register / bank statements
- 1099’s / subcontractor payments / certificates of insurance / subcontractor invoices