To be excluded from the Workers’ Comp policy,
- The employee must be an Executive Officer of the corporation
- The employee must own some stock in the company
- The company must be a “closed corporation” i.e., all of the company stock must be owned by the executive officers and directors, and no one else
But should you exclude eligible officers?
A recent situation in which a family-run closely held company added a long term employee as a shareholder and officer poses an interesting question. Though eligible for exclusion, thus saving the company the Workers’ Comp expense, is it a good business decision to do so?
Remember what is covered by Workers’ Comp:
- Medical Costs to treat a work-related injury
- Disability income during treatment and rehab
- Death benefit
If the company is certain that all three major benefits from Workers’ Comp are part of an executive compensation package, then perhaps the Workers’ Comp benefits are redundant.
But, make sure! Don’t assume the medical and disability income provider will gladly cover job related injuries.
If you don’t currently have the benefits that the Executive Officer will be excluding from Workers’ Comp, you may want to keep him on the policy until such benefits have been arranged.
Finally, you should have all Executive Officers to be excluded from Workers’ Comp coverage, sign off an acknowledgement that they are fully aware they are legally waiving out of the Workers’ Comp benefits.
You will want something in writing, in the event of the unthinkable injury rendering the officer to permanent disability or death. The company may be found responsible for providing the benefits to a widow without the benefit of coverage provided by Workers’ Comp.
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