What are Class Codes?
Class codes are used to categorize job functions and are the standard basis of workers’ compensation premium ratings. For example, a bus driver is at a greater risk of personal injury than an office worker. The Standard Classification System was developed by the Workers’ Compensation Insurance Rating Bureau of California (WCIRB). A full listing of the employment classifications codes may be obtained by contacting the NPU office.
Click here for for a table to help determine what components of payroll are to be included for the purposes of rate development and premium calculations.
How are the Class Code Rates developed?
The rates are developed based on an actuarial analysis of the historical pool losses, total payroll per class code, and the probability of future losses to determine the required funding to protect against anticipated future losses.
How is the basic premium determined?
The basic premium is determined by multiplying the base class code rate by each $100 of payroll. For example, an organization may have $100,000 of payroll in the Clerical (8810) class code, at a rate of $1.17. The calculation for the base premium is:
$100,000/100 = $1,000 x 1.17 = $1,170.00
The base premium for this class code is $1,170.00
This process is repeated for each payroll class. The total base premium is the sum of the class code calculations.
What is an “Ex Mod” and how is it calculated?
The Experience Modification Factor, or “Ex Mod,” is a factor used to modify the calculated needed premium based on a member’s actual loss experience. An Ex Mod is individually calculated for each member and is based on an analysis of their historical loss experience over a three year period. An Ex Mod greater than 1.0 is an indicator of notable losses during the analysis period, while an Ex Mod less than 1.0 reflects an organization’s exemplary risk management efforts.
How is the gross premium determined?
The gross premium is the sum of the base premium of all class codes multiplied by the Ex Mod. For example, an organization with a total base premium of $2,500 and an Ex Mod of 1.49 would have a gross premium of $3,725.00: ($2,500 x 1.49 = $3,725.00)
How do I pay the premiums?
The premiums are calculated and paid on a monthly basis. NPU will provide you with an easy to use Excel spreadsheet with your organization’s class code rates and Ex Mods included. Simply input the total payroll by class code designation and the spreadsheet will calculate your payment. Print the completed spreadsheet and mail it along with the indicated premium to NPU. Payments are due by the 10th of each month for the previous month’s payroll. Each year an audit of the members’ payroll for the prior year will be conducted to verify accuracy in reporting.
How are employees with two different job functions rated? Can I allocate an employee’s payroll between different class codes?
One of the unique benefits to NPU Workers’ Compensation Group membership is the flexibility to allocate an employee’s payroll amongst various labor class codes. This distinctive rating methodology is not offered by most commercial carriers, and can result in substantial premium savings for members. For example, if an employee spends some time driving a bus, but is mostly in the office performing administrative or other clerical functions, his or her payroll can be allocated between these two classifications, which may result in premium savings for the organization.
What is the premium deposit?
The premium deposit is a requirement of all pool members and is calculated as 1/12th of the annual premium, or one month’s payment. The premium deposit funds remain on deposit for the length of the membership, functioning much like a rental deposit. Collection of a premium deposit is standard operating procedure amongst insurers in the Workers’ Compensation market; however many companies set the deposit at 25% of the annual premium rather than the 8.33% of the NPU Workers’ Compensation Group pool.
The premium deposit is recalculated annually based on payroll. Should member’s gross premium increase, the required deposit will increase and additional funds will be collected to meet the deposit requirement. Conversely, should the premium decreases a credit will be issued.
Whom do I contact for answers to other questions I may have?
For all general questions and specific to class codes and rate development:
Anna Marie Will, Program Administrator
annamarie@nonprofitsunited.com
877-551-6717
For questions related to premium calculations and payments:
Delsie Rilla, Accounts Receivable
delsie@nonprofitsunited.com
800.442.4742 xt 307 Tim Mulvenon, Controller (WCG Finance Manager)
tim@nonprofitsunited.com
800.442.4742 xt 302 |
