Alaska Executive Officers’ and Owners’ Workers’ Compensation Changes – What Do I Need to Know?

The Alaska Legislature passed House Bill 79 (HB 79) last session, which changes how owners, corporate officers and members of LLCs are treated for workers’ compensation purposes in mid 2019. We have provided an overview of the changes and how they will affect workers’ compensation coverage. Insurers are continuing to revise their approach to dealing with this new law. There may be new developments and we will continue to communicate changes.

Prior to HB 79

Limited Liability Company (LLCs) – Prior to this law change, members of an LLC were required to specifically elect to be covered under the LLC’s workers’ compensation policy in order to be included for coverage.
Corporations – Prior to this law change, all corporate officers were automatically included for workers’ compensation under the corporation’s workers’ compensation insurance policy. If corporate officers were not to be included in coverage, they were required to file with the State of Alaska to be excluded from the insurance policy.

When do the changes take effect?

August 1, 2019, and they will affect new and renewal policies after this date.

How will workers’ compensation change after HB 79 takes affect?

• Any Corporate Officer or LLC Member who owns 10% or more of a business will be automatically EXCLUDED from workers’ compensation coverage. However, they can elect to be covered under the Corporation’s or LLC’s policy.
• Any Corporate Officer or LLC Member who owns less than 10% of a business will be INCLUDED under the Corporation’s or LLC’s policy.
• Executive officer waivers that had been filed with the State of Alaska will be repealed effective August 1, 2019.

What is the impact to my Workers’ Compensation coverage and premium?

You may see an impact to your premium if you currently have officers excluded that have less than 10% ownership interest. In addition, if you currently have executive officers who own 10% or more of the Corporation you may need to endorse your policy in order to have coverage for those owners. We are providing an overview of actions you may need to take. Please reach out to your account team to discuss any needed changes to your policies.

Limited Liability Company (LLCs)

• 10% or more owner/member – No Changes needed to exclude from coverage. No Changes to include for coverage if you list and currently cover these individuals.
• Less than 10% owner/member – No Action needed to cover these members, they will be automatically included for coverage. At this time, NCCI rules will still apply to non-active officers for exclusion of payroll. Contact your account team to discuss your particular situation.

Corporations

• 10% or more owners who are currently excluded via an executive officer waiver filed with the State – No Changes as those owners will be automatically excluded under the new law. Parker, Smith & Feek strongly recommends that you review decision for coverage with your Account Executive.
• 10% or more owners who are currently included for workers’ compensation coverage under your policy will need to be explicitly added to your policy for coverage. Contact your account team to have your policy endorsed.
• Less than 10% owners who are currently excluded via an executive officer waiver – Premium will be charged based on NCCI audit rules. You can no longer exclude less than 10% owners from coverage under the new law. Please contact your account team for premium impact estimates.
• Less than 10% owners who are currently included for coverage – No Changes. These owners will continue to be covered under workers’ compensation.

Municipal Corporations and Charitable, Religious, Educational, and Other Non-Profit Corporations

Executive officers of these entities need to be specifically included for coverage. They are automatically EXCLUDED.

Assure that your account team is aware of any employees who are officers of your entity under the by-laws of your entity as these employees may be subject to a salary minimum or cap for premium calculation.

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