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How to Exclude Owners, Officers, Management Members, Sole Shareholders, and Partners from your Workers’ Compensation Policy

Effective July 1, 2018, Senate Bill 189 (SB 189) amends Sections 3351 and 3352 of the California Labor Code, allowing more owners, corporate officers, and/or directors to waive workers’ compensation insurance coverage.

Who this Affects
Owners, corporate officers, and/or directors who are currently covered on your State Fund policy are potentially eligible for exclusion with this new law.

Action to Take
If you or others in your business meet the description above, please do the following:

  • Review the table “Exclusion Eligibility by Entity Type” below.
  • Consider submitting exclusion waiver(s) for eligible individual(s).
  • Complete and return the “Coverage Questionnaire for Excluded Individuals” if submitting waiver(s) to State Fund.

Exclusion Eligibility by Legal Entity Type
The new coverage exclusion regulations are different depending on the legal entity type of your business.

Exclusion Rules by Entity Type Ownership Threshold Required for Exclusion Additional Exclusion Requirements What needs to be sent to State Fund
Corporations An individual must have: At least 10% stock ownership
OR
At least 1% ownership if this individual is a direct relative* of someone with at least 10% ownership.
†If the officer/director has less than 10% ownership, then s/he must have health insurance. Individual must submit a signed Waiver Form under penalty of perjury.
Professional Corporation There is no ownership percentage requirement. The officer must be a practitioner rendering the services of the professional corporation, and owner must also have health Insurance. Individual must submit a signed Waiver Form under penalty of perjury.
Cooperative Corporation There is no ownership percentage requirement. The officer must have health insurance & a disability insurance policy that will provide the same scope of employee coverage as a workers’ comp policy. Prior to submitting a signed waiver form, Cooperative Corporations must contact the California Dept. of Insurance (CDI) at workcompquestions@insurance.ca.gov to gain written approval that their disability policy meets the CDI’s requirements under the new law.
Corporations with a Sole Shareholder / Owner A officer or director who is a sole shareholder / owner of a private corporation is automatically excluded unless they specifically elect to be covered. N/A No Waiver is needed because exclusion for a sole shareholder/sole owner is automatic.
Limited Liability Company (LLC) There is no ownership percentage threshold. Individual must be a Managing-Member to elect to be excluded from coverage. Managing-Member must submit a signed Waiver Form under penalty of perjury.
Partnership There is no ownership percentage threshold. Must be a General Partner to elect exclusion. General Partner must submit a signed Waiver Form under penalty of perjury.
Trust A person who holds the power to revoke a trust, with respect to shares of a private corporation held in trust OR general partnership interest or limited liability company interests are held in trust. Such individuals [trustor or trustee] can elect exclusion only if they are deemed to be an employee under subsection (c) or (f) of LC 3351 and otherwise meets the criteria for exclusion per one or more of the provisions of LC 3352. Such individuals must submit a signed Waiver Form consistent with the legal entity type of the company for which they work.

* SB 189 defines a direct relative as a parent, grandparent, sibling, spouse, or child.

When to Act
SB 189 only grants a 15 day grace period for back dating exclusions. Individuals who are currently included and who wish to be excluded from coverage are encouraged to submit valid waivers to State Fund as soon as possible.

How to Submit a Waiver
State Fund requires a valid waiver to exclude an eligible individual from coverage on your policy.

Review the table. If there are individuals in your business who are eligible for exclusion under these new requirements and who wish to be excluded, here are four options for submitting a waiver to State Fund:


Option 1: Click on the appropriate link below to sign a waiver electronically.

Option 2: Download and sign the waiver form, scan it, and email it to SB189form@scif.com.

Option 3: Sign the waiver form and fax it to 707-452-7849.

Option 4: Sign the waiver form and mail it to: State Fund – Attn: SB 189 Waiver, 1030 Vaquero Circle, Vacaville, CA 95688.

Impact on Policy Premium
To determine whether any exclusions we endorse to your policy will impact your estimated annual premium, please also complete and return the enclosed “Coverage Questionnaire for Excluded Individuals” when submitting a waiver to State Fund. If we do not receive the completed questionnaire, we will calculate any necessary premium changes when your policy expires.

Waiver Forms

Corporation/Professional Corporation Sign Online Printable Version
Limited Liability Company (LLC) Sign Online Printable Version
Partnership Sign Online Printable Version

 

Thank you for your attention to this important information. We appreciate your business and are committed to working with our policyholders to comply with this new law.

If you have questions, please contact your Broker or contact a State Fund Representative toll free at 888-STATEFUND (888-782-8338).

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