Understanding the coverage process in Ohio

It’s the law in Ohio for all state-funded employers with one or more employees to have workers’ compensation coverage.

“Typically employers apply for coverage because they’re a new business or because of an acquisition, merger, or purchase or sale of an existing business,” says Scott Westerman, rate specialist at CompManagement.

Smart Business spoke with Westerman about who needs coverage and how to apply.

Who actually needs workers’ compensation coverage?

All employees of a business operating in Ohio must be covered by workers’ compensation insurance, which for state-funded employers is provided exclusively by the Ohio Bureau of Workers’ Compensation (BWC). This includes corporate officers who are considered to be employees and therefore must be covered if actively working for the corporation.

Coverage for the owners of sole proprietorships, partnerships, and LLCs acting as sole proprietorships or partnerships is not required, although such owners may elect to cover themselves if they wish. The same is true for ordained ministers of religious organizations, family farm corporate officers and individuals who are acting as corporations with no other employees. Regardless of the coverage status of such owners, all regular employees must still be covered.

Are volunteers covered under workers’ compensation?

That depends. Volunteers for private companies are not covered by BWC. Emergency volunteers of public entities, such as volunteer firemen and auxiliary police, are required to be covered. Public entities may also elect to cover nonemergency volunteers by passing a resolution stating this intent and filing form U-69 Contract for Coverage of State Agency of Political Subdivision with BWC.

How do you apply for coverage with BWC?

A private company must file form U-3 Application for Ohio Workers’ Compensation Coverage, along with payment of $120 for the minimum annual premium. Coverage goes into effect the day of receipt by BWC, but it will probably take three to four weeks for BWC to issue the permanent policy number. A new public entity just needs to provide BWC with a copy of its charter or other founding documents and BWC will issue a policy.

How does an acquisition affect coverage?

If you buy another company, either outright or as an asset purchase, you will inherit the BWC claims and payroll history of that company. This essentially means that you are inheriting the rates, good or bad, of that company. If you buy only a part of another business, then you will inherit the claims and payroll history associated with the division or operation that you buy. For this reason, it is in your best interest to review the company’s BWC history as part of your due diligence. You may do so by filing form AC-4 Request for Business Transfer Information with BWC.

Is a new policy number always necessary when buying another company?

If the new owners do not have active coverage with BWC, they should file form U-3 to apply for a new policy. The only exceptions are when there is a sale within the immediate family or when there is a stock sale with no change in name or Federal Employer Identification Number (EIN). In these cases, the new owners may inherit the existing BWC policy of the former owner if they wish to do so.

Whatever the case, form U-118 Notification of Business Acquisition/Merger or Purchase/Sale must be filed with BWC. This form may be completed by the buyer, the seller or both. BWC will then combine the previous owner’s policy into the new owners’ policy, if applicable, and the new owners will inherit all outstanding liabilities associated with the predecessor policy.

What should be done if there is a restructure, but no change in ownership?

If you are just restructuring to a new legal entity, but there is no or very minimal change in the actual ownership of the company, then form U-117 Notification of Policy Update should be completed. BWC will update your existing policy with the new name, EIN or other information as necessary.

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