May 6, 2020
The Pennsylvania Insurance Department has approved the
Pennsylvania Compensation Rating Bureau
(PCRB)
Filings No. 309
and
No. 310
. These filings reflect revisions to the Pennsylvania Basic Manual and Statistical Plan Manual. The revisions include manual rule changes regarding payroll, temporary classification adjustments, and statistical reporting requirements attributable to COVID-19.
The manual changes are effective April 1, 2020, for policies in force on March 1, 2020, through December 31, 2020.
The following are the amendments to the Pennsylvania Workers Compensation Manual of Rules, Classifications and Rating Values for Workers Compensation and For Employers Liability Insurance, the Experience Rating Plan and the Merit Rating Plan for the following:
- Changes to the allocation of payroll rules as a result of COVID-19 (Basic Manual Section I Rule V, Item B.3.w; Item F.5 and Item F.10)
- Changes to the classification reassignment rules related to the temporary reassignment of duties for COVID-19 (Basic Manual Section I Rule IV, Item C.8.a.4)
- Creation of a code to capture the payroll of employees who are paid but are not working (Basic Manual Section 1 Rule IV, Item B.1.2.a)
- Changes to the Experience Rating and Merit Rating Plans to exclude losses applicable and attributable to COVID-19 (Basic Manual Section 5, Rule V, Items 4; Basic Manual Section 6, Rule Section II, Item 5 and Basic Manual Section 6, Rule Section V., Item 4.b)
- Establishing reporting requirements regarding estimated audit coding, if final premium based on audited exposure cannot be reported due to COVID-19 (Statistical Plan Manual Section II, Item B.9)
The PCRB acknowledges that the Pennsylvania stay-at-home order is having a significant impact on many aspects of society including the administration of workers compensation. Many employers have ceased operations completely, others have had to alter employee duties so they can be accomplished from home and some employers have continued to pay their employees while not working at all. The current remuneration and classification rules in the PCRB Workers Compensation Manual do not contemplate this type of extraordinary event.
Filing 309 stated that the Basic Manual permits the division of an employee’s payroll between a Standard Exception classification and another classification only when there is a single, permanent job reassignment. However, as a result of the Pennsylvania stay-at-home order, many employees’ job responsibilities have changed and they would qualify for assignment to Classification 953, Clerical Office Employees, which includes telecommuters, but their jobs have not been permanently reassigned and thus their payroll cannot be divided under the current rules. Therefore, staff is proposing Manual revisions to allow the assignment of Classification 953.
Clerical Office Employees or other appropriate classifications are based on the responsibilities of the employees. While the Pennsylvania stay-at home order is in place and for thirty days thereafter, employees whose reassigned job responsibilities meet the definition of Clerical Office Employees should be in this classification.
This change will also permit the reassignment of all-inclusive codes to 953 if the employee’s duties otherwise meet the qualifications for assignment to 953. Once normal business operations resume, appropriate classifications would be applied.
With respect to employees who continue to be paid while they are not performing any responsibilities of any kind for the employer, amendments to the Basic Manual and the Statistical Plan Manual exclude such payments during the time the Pennsylvania stay-at-home order is in place and for thirty days thereafter. The rationale for this recommendation is that because these employees are not engaged in any work activities, they have little to no work-related exposure.
Further, unlike typical sick leave, vacation pay, bonus pay, and idle time pay, this is an extraordinary payroll event that is not included within the assumptions of the current basis of payroll rules.
In order to collect payroll data regarding such payments, such amounts should be reported utilizing Statistical Code 1212. This will be used for understanding the impact of COVID-19 on the workers compensation system, for any special treatment and reporting purposes that may be required by the Department and/or other governmental entities.
Filing No. 310 addresses Paid Furloughed Employees (Statistical Code 1212) and Catastrophe Number (Cat. No.). As stated in the filing, paid furloughed employees are employees who continue to receive payments during a temporary layoff or an involuntary leave and are not performing any work duties for an employer. Effective March 1, 2020, payments by any employer or any public governmental entity to paid furloughed employees as a result of federal, state, and or/local emergency orders, laws or regulations, issued due to the COVID-19 which impact an employer’s staffing or business operations must be reported to Statistical Code 1212 – Paid Furloughed Employees. Such payments do not include any appropriated funds or loans received by an employer as authorized by a law or regulations, or public governmental entity, that are used by an employer specifically to retain or hire working employees.
Code 1212 may be used as a Statistical Code to report the payments only. If a carrier is unable to report this experience as a statistical code, please contact the PCRB to discuss reporting requirements.
Payments reported to Code 1212 are excluded from premium only if the employer keeps separate, accurate and verifiable records.
For any claims attributable to an employee occurring prior to or after a temporary layoff or an involuntary leave, report losses to the classification for work normally performed by the employee that corresponds to the employee’s payroll. No claim can be reported to Code 1212 – Paid Furloughed Employees.
The expiration date of this code will be December 31, 2020, which may be amended to an earlier or later date as circumstances warrant in consultation with Pennsylvania regulatory authorities.
As explained in Filing No. 310, any accident resulting in two or more reported claims must be reported as a catastrophe. In reporting catastrophes, all claims (compensable as well as non-compensable and contract medical) resulting from this accident shall be designated by placing the numeral "1" in the column captioned Cat. No. opposite each claim. If there is more than one catastrophe under the policy, each succeeding catastrophe should be designated by means of a separate serial number "2," "3," etc., up to and including “10”. After the number “10” is assigned the next number in the sequence will reprocess to number “1”. Numbers “11” through “99” are reserved for International Organization for Standardization (ISO) or Workers Compensation Insurance Organization (WCIO) assigned catastrophe codes. A separate series of catastrophe numbers shall be used for each policy.
This is a summary of the amendments. We encourage you to read the
Circular 1740
to ensure you are in compliance.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at
Richard.Higgins@MCC-CPAs.com
. I can be reached at
Marty.McCarthy@MCC-CPAs.com
. As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Sources: Pennsylvania Insurance Department and Pennsylvania Compensation Rating Bureau
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
