Stock Option Plan

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					 Payroll (Not Remuneration)
NCCI Inclusions and Exclusions
State Exceptions as they apply to IAAW States



   Shari Balazs – Overland Solutions
     Kurt Lang – Safeco Insurance
    Basic Manual-2001 Edition
Rule 2 --- Premium Basis and Payroll Allocation
A. PREMIUM BASIS Effective 01 Jul 2001
Premium is calculated on the basis of the total
   payroll paid or payable by the insured……..
   Paid


   Payable (Earned)
 B. Payroll Effective 01 Jul 2001
1. Includes
     a. Wages or Salaries, including retroactive wages or
        salaries.

     b. Commissions and draws against commissions


     c. Bonus including stock bonus plans
               Stock Bonus
Stock Bonus – a bonus
  paid with shares of
  corporate stock.
The stock shares are
  considered a substitute
  for money and their
  value is to be included
              Stock Option Plan
   Stock Option Plan – an option is the right to buy a specified
    number of shares of stock at a set price. The value of the
    option is the difference between the current price of the
    stock and the price the employee paid for the stock.


   Awarding of stock options is no longer just for
       officers, it is also given to employees.

   A stock option is considered an employer provided
    perk which is excluded from Payroll.
Pay for holidays, vacations, or periods of sickness

                             Vacation pay is
                              excluded in OR,
                              holiday, vacation and
                              sick pay excluded in
                              SD.
    Piecework, Profit sharing or incentive plans

   Piecework – employee is paid a certain amount for each piece
    of work produced. By working efficiently, an employee
    could earn more money than by working on an hourly basis.
   Profit Sharing – employer distributes monies based on the
    profit of the company. Distribution can be based on a %,
    years of service, or some other method. (Profit sharing is
    excluded in OR based on 3 criteria.)
   Incentive Plan – similar to piecework plan, except for
    increase in an employee’s hourly rate of pay after a preset
    quota has been completed. This is not overtime pay so all
    incentive wages are included.
Payment or Allowances to Employees for Hand or
    Power Tools furnished by the employee

   In some trades (logging) it
    is customary to grant a
    monetary tool allowance
    to employees who furnish
    their own power tool for
    use in their work for their
    employer. Such payments
    or allowances are to be
    included.
    The rental value of an apartment or house provided to
    an employee based on comparable accommodations.
    Rental Values – the employee is provided an apartment or house at no
     charge or at a substantially reduced amount. This value of housing and
     paid utilities must be established on the basis of market value based on
     actual rentals of similar housing in the vicinity.

    Clergy, apartment manager, maintenance person for an apartment or
    condominium complex, manager for a public storage facility.

    (Not included in CA unless classification phraseology specifically
    includes lodging or wages are reduced by the an amount equal to the
    value of such lodging.)
    (The value of lodging not included in AZ.)
    (Rental value of an apt or house subject to a minimum of $150/month in
    NV.)
The value of meals received by employee as
              part of their pay
                        This must be shown in the
                         insured’s records

                        Not included in CA unless
                         classification phraseology
                         specifically includes meals or
                         the wages are reduced by an
                         amount equal to the value of
                         such meals.

                        Not applicable in AZ.

                        MT & NV set minimums per
                         day and week.
          Salary Reduction Plans
   No deductions for payments by employees to employment savings,
    retirement or cafeteria plans. The typical salary reduction plan has a
    specific % of the employee’s wages going into one of these plans,
    thereby lowering their taxable earnings.

    The amount by which an employee’s salary is reduced to fund the
    fringe benefit portion of a cafeteria plan qualified under Section 125 of
    the IRS code shall not be included in the payroll – CA RULE.

    NEW FEATURE – the employer’s records are to be maintained to
    show separately such amounts by employee and in summary by type of
    operation performed.
Davis – Bacon Wages
            Included if the
             contractor pays the
             base wage and
             prevailing wage as
             salary.
                Annuity Plans
   The money deducted
    from an employees
    salary for the purchase
    of the annuity contract
    is chargeable – similar
    to salary reduction
    plans.
                     EXCLUSIONS
   Tips are usually not paid by the employer.
     (MT does not allow reportable tips to be excluded.)

   Banquet tips or voluntary gratuities – NCCI recently ruled that for tips
    to be excluded they must be freely given by the customer and not
    controlled by the employer.
    Banquet tips are not freely given and paid by the employer so they are
    not excludable.
    Private clubs that solicit contributions from its members (voluntary or
    otherwise) to distribute to the employees, these monies are considered
    bonuses and not tips and are not excludable.

    CA States the following: Tips, voluntary or prepaid, received from
    other than the employer, or one acting on behalf of the employer are
    not included in the payroll.
Extra Pay for Overtime Work
  (Overtime pay is not applicable in UT & NV)

                           Does not apply to
                            Premium Pay and
                            Guaranteed Wages.
              Other Exclusions

   Payment into a 3rd party trust under the Davis
    Bacon Act.

   Dismissal or severance payments.


   3rd party sick pay or disability pay.
     Expense Reimbursements
 Incurred in business of the employer
 Shown separately in their records
 Is a fair estimate of actual expenses occurred.


    If verified business expenses occur but not shown
    in records then a reasonable expense allowance is
    permitted, to a maximum of $30 per day.
    ($75 day maximum allowed for OR & AZ)
      Work Uniform Allowance
   Likely with airline
    pilots who receive
    money to keep their
    uniforms clean.
Employer Contribution to Employee
Savings Plans or Retirement Plans
                  Monies paid to the
                   employee’s 401K or
                   retirement account is
                   excluded
                  (doesn’t show up
                   under the employee
                   gross pay).
    Payroll Inclusions Not Discussed in
              the NCCI Manual
   Accumulated Sick or Vacation Pay – usually paid at the
    employee’s termination or retirement.

   Safety Bonus Pay – (except for OR & NM)

   Travel Time Payments – wages paid for the time an
    employee spends traveling from his residence to a job site or
    from job site to job site.

   Bereavement or Jury duty pay
Payroll Exclusions Not Discussed in
         the NCCI Manual
   Imputed pay ( personal car usage, moving expense,
    life insurance premium over $50,000.)

   Earned income credit – refund from government paid
    by the employer to low wage earners who qualify.

   Unanticipated Bonus & Profit Sharing (OR only) See
    Special OR page in User’s Guide for explanation of
    the specific criteria..
   General Liability Inclusions
(That Differ from Workers Compensation)
                       Payroll of Leased
                        Workers – if payroll is
                        not available the full
                        contract price should
                        be used as payroll.

                       Fees paid to
                        Employment
                        Agencies.
      General Liability Exclusions
(That Differ from Workers Compensation)
   The payroll of clerical
    office, salespersons,
    drivers & their
    helpers, draftspersons
    and aircraft pilots &
    co-pilots.
      General Liability Exclusions
(That Differ From Workers Compensation)
             Washington Payroll Limitation
   For premium computation purposes, use the average
    weekly payroll of each employee. Do not use any part of
    an employee’s average weekly payroll which exceeds
    $600.
    EXAMPLE:
    1st week employee’s gross wage           $1,100.
    2nd week employee’s gross wage             $400.
    3rd week employee’s gross wage             $500.
    Total gross wage                         $2,000.
    Multiple gross wage by weeks worked      $1,800.
    Excess payroll                            $200.
             Summary
      Main Points to Remember
   Audit on a paid basis.

   Know the difference between a stock option and stock bonus.


   Know the difference between sick pay, PTO, 3rd party sick
    or disability pay.

   Pursue the market value of similar housing when making a
    charge for the rental value of an apartment or house.

   The employee’s 125 earnings are excluded only in CA and
    now require summarization.
             Summary
      Main Points to Remember
   Be prepared for Davis Bacon related questions when
    auditing contractors.

   Inputted pay is for taxation purposes and is not included.

   Know the criteria for excluding Unanticipated/Profit Sharing
    Bonuses in OR.

   Temporary employees are included for GL payroll based
    audits. (Under their direction & control)

   $600 rule in WA for GL payroll based audits applies after
    figuring the total number of weeks worked.
           Summary
    Main Points to Remember
Banquet   tips are no longer excluded except for CA.

For  salary reduction plans,(retirement savings, 401K)
determine whose money is it? If the employee’s money
then usually it is included. If the employer’s money it is
usually not paid directly to the employee and is excluded

Don’t  commit to a deduction you are not sure of; better
to advise the insured you will confirm upon research.

				
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