To accurately calculate a member’s premium, the NHADA WCT must perform an audit to determine members’ actual payroll figures for the previous year. We have decided to use one auditing firm this year to keep the audits consistent. NEIS will be performing these audits beginning in January for NHADA Workers Compensation Trust members. You will have the choice of an in-person or virtual audit. Smaller members will be assigned a telephone audit. NEIS has a secure website for collecting your payroll information for virtual audits. This annual audit is critical. The auditors will be reviewing the 2021 final payroll figures to determine how accurately members’ estimated their payroll figures.
Audits are performed beginning in January and must be completed by March 25. Once all audits are complete, we can begin the process of calculating rebates. Members can assist in this process by scheduling the audit timely, preparing for the audit, and promptly meeting with the auditor on the agreed-upon date and time. The auditors charge NHADA by the hour, so if they are kept waiting to meet with the member or for information, the audit will cost more. This cost is passed directly onto the members through increased administrative costs, adversely affecting rebates.
When the auditor performs the payroll audit, they must review the general ledger, payroll records, and at least three-quarters of the members’ filed quarterly tax returns (IRS form 941). Gross overtime costs by each classification of an employee must be totaled. One-third of overtime is deducted from the payroll by classification for premium calculation purposes. The auditor must see the gross overtime broken out by classification in order to exclude it. All employees should be identified by name and title, including executive officers and owners.
The auditors will also review all 1099 forms to ensure that “employees,” as defined by the workers’ compensation statute RSA 281-A: 2, VI, (b) (1), are not misclassified as independent contractors (see http://www.gencourt.state.nh.us/rsa/html/XXIII/281-A/281-A-2.htm). The workers’ compensations statute defines an employee in a seven-part test, and all seven criteria must be met to prove a person is an independent contractor. The NH Dept. of Labor, U.S. Dept. of Labor, and IRS are all concerned about the misclassification of employees. If an audit from one of these entities reveals a misclassified employee, severe civil penalties may be levied. Please remember that swap drivers are generally considered employees and not independent contractors unless they are employed by a company providing service to you and covered by their workers’ compensation policy, or they hold themselves out to be a business unto themselves. The State and federal government will always decide on the employer/employee relationship based on the applicable statutes. Please contact Pete Sheffer or the NHADA Legal Hotlines if you have questions.
Members’ 2021 premium will be recalculated upon receipt of the completed audit, and a final bill will be produced. If the net result is an overpayment, the overpayment will be applied to your 2022 premium. If the net result is an underpayment, a bill will be sent and is due within 30 days of receipt. All members will receive a copy of their audit with a bill or an explanation of how the overpayment will be applied to the future premium. If you have questions or concerns about the audit, please notify us immediately. Once the rebate checks are disbursed in May, an audit cannot be changed.
The 2022-year premium will be estimated based on the actual audit payroll figures from 2021. We understand that payrolls fluctuate over the year, particularly in the current economic climate. Therefore, in June of every year, we send out a self-audit form for members to complete to adjust the payroll figures. Our collective goal at the end of the year is to avoid large premium adjustments. If members believe their payroll figures have changed at any time during the year, please contact Marianne Gourgiotis to update your payroll figures. She will gladly recalculate your premium, and your monthly billing will be adjusted accordingly.
Remember to be prepared for your audit, have your materials ready and please do not keep the auditor waiting. Accurate premium billing is dependent upon accurate audits. Contact Marianne Gourgiotis if you have premium questions at 603-224-2369.