It's a Tuesday afternoon and the mail arrives: one bill, three circulars, an ad for refrigerator magnets with your logo on them, and a letter from SAIF Corporation.
You open the letter from SAIF. It's a notice that your business has been selected for a workers' compensation premium audit.
For some, the word "audit" brings up nightmares of combing through boxes of bills, receipts, invoices, tax forms, and other documents that may or may not still exist. Fortunately, a workers' compensation premium is based on payroll, so the SAIF premium audit focuses primarily on payroll records, cash disbursement records, and information related to the type of business you are running.
1 What is a premium audit?
A premium audit measures and verifies a policyholder's "premium base" by looking at business records. The premium base determines the appropriate size of the premium. The audit ensures that you are neither overpaying nor underpaying. Usually differences arise when the business reports payroll inaccurately, misclassifies workers, fails to keep accurate time records, or changes some of the business operations that impact the classifications
for its policy.
Auditing policyholders keeps the system fair and equitable for everyone, enabling SAIF to be an effective steward of the Industrial Accident Fund, from which SAIF pays all claims.
2 How did my business get picked?
The law requires us to audit on an annual basis all of our policyholders with earned premium exceeding $9,999, until two consecutive policy year audits show a difference of less than five percent. Thereafter, SAIF must audit the policy at least every third year. For policyholders with smaller premiums, requirements are less stringent: we are required to audit at least five percent of these employers per year. SAIF also has other business rules that call for audits of policyholders based on size, industry, audit history, and other policy characteristics.
3 What's this going to cost me?
Quite possibly, nothing at all. In 2009 (a typical year), 22 percent of our audits showed no differences, and 35 percent resulted in premium being refunded to the policyholder because of overpayment. Forty-three percent resulted in additional premium being billed.
4 What can I do to avoid paying more?
It's all about accurate payroll reporting and proper classification of your business. If your payroll records are accurate, a premium will be neither owed nor credited. But with about 550 different class codes describing all kinds of work, payroll reporting can be a little bit complicated. If you have any changes in either your payroll or your business operations, call your agent or SAIF at 800.285.8525. We'll be happy to help you.
5 What can I expect?
If your business is selected for a premium audit, SAIF will typically notify you by letter soon after the policy period ends. An audit representative will call to schedule the audit.
Depending upon how well you are organized, as well as the complexity of your business, your audit may last from an hour to a full day. If you prefer the audit to take place at your accountant's office or another location, the auditor will still need to interview you or a key employee who is knowledgeable about the daily business operations.
Our auditors are friendly, highly trained people who are committed to making your premium audit a pleasant, hassle-free experience.
6 What if I disagree with the results of my audit?
You have the right to appeal your premium audit if you disagree with the results. We recommend you first review the audit letter carefully and call your auditor with questions. Be ready to supply additional information to support your case.
If you are still not satisfied, you must contact the Oregon Department of Consumer and Business Services (DCBS) within 60 days of receiving the final premium audit billing in order to request a hearing. DCBS sends a petition that must be completed and returned in 60 days, and you may also request a stay of collection. Interest will accrue while the audit is in dispute if you lose the appeal.
(Reprinted from Comp News, Spring 2010)