Policy Name:	Cancellation of Workers’ Compensation Coverage
Policy #:	EP-03-01
Code/Rule Reference	Ohio Administrative Code (OAC) 4123-17-76.
Effective Date:	10/20/2022
Approved:	Rex Blateri, Chief of Employer Services
Origin:	Employer Policy
Supersedes:	All EM policies and procedures regarding the cancellation of workers’ compensation coverage that predate the effective date of this policy.
History:	Revised January 12, 2023; January 18, 2022; April 4, 2018; September 22, 2017; March 13, 2017; October 31, 2016; March 18, 2015; May 7, 2014; April 15, 2014. New Policy, October 25, 2013.
Review Date:	January 2028

 

 

I.      Policy Purpose

 

The Ohio Bureau of Workers’ Compensation (BWC) sets forth the following guidelines for processing an employer’s request to cancel its workers’ compensation coverage and BWC cancellations of workers’ compensation coverage.

 

II.    Applicability

 

This policy applies to BWC Customer Assistance, BWC Collections, BWC Employer Compliance, BWC Policy Processing, BWC Regional Employer Services, employers, and their authorized representatives.

 

III.   Definitions

 

A.    Cancellation of workers’ compensation coverage: The termination of workers’ compensation coverage when an employer ceases operations, or coverage is no longer needed.

 

B.    True-up: Annual reconciliation of estimated payroll and actual payroll. All employers must file annual payroll after the conclusion of the policy year. BWC will calculate any premium obligation or credit for the completed policy year. For an employer cancelling coverage, true-up is due within forty-five (45) days of the date of the BWC notice of cancellation.

 

C.   BWC Cancellations: Cancellations that are initiated by BWC to remove lapsed and unpaid policies. These are not requested by an employer but identified by BWC pursuant to OAC 4123-17-76.

 

IV.  Policy

A.    Employer requirements.

1.    An employer may cancel its workers’ compensation coverage if all the following criteria are met.

a.    The employer notified BWC in writing, including by email or by fax.

b.    One of the following circumstances apply:

i.      The employer ceases operations in Ohio, or

ii.     The employer no longer has employees as defined in ORC 4123.01(A)(1)(b), and the employer agrees to cancel any elective coverage permitted under ORC Chapter 4123.

c.     The employer must true-up for the final policy year, and any other missing policy years, as set forth in OAC 4123-17-14.

2.    The employer’s cancellation request must provide BWC with the following information:

a.    Reason for the cancellation; and

b.    Cancellation effective date.

3.    BWC will send correspondence instructing the employer to report actual payroll, or true-up, online at www.bwc.ohio.gov through the last date it had employees.

a.    The employer must true-up and pay any premium that is owed within forty-five (45) days of the date of the cancellation.

b.    If an employer fails to true-up within forty-five (45) days of the cancellation, BWC will increase the employer’s estimated annual premium (EAP) by ten percent (10%) and bill the employer.

c.     Failure to pay any premium owed will result in certification of the debt to the Attorney General.

 

B.    Cancellation request by employer for current policy year.

1.    Cancellations will be effective on or one day after the date of receipt, to ensure coverage through the last day of business with existing employees.

a.    Payroll should be reported through the time the employer was in business.

b.    Additional considerations are outlined in section IV.D of this policy.

2.    Future cancellations.

a.    Requests received within 30 days of the effective date should be held until such time the cancellation can be processed.

b.    Requests received where the effective date is further than 30 days, should be resubmitted on or at a date closer to the requested cancellation date. 

 

C.   Cancellation request by employer for previous policy years.

1.    BWC may retroactively cancel an employer’s coverage for good cause shown. Good cause means a substantial reason, one that affords a legal justification or a legal excuse, as set forth in OAC 4123-14-03(B).

2.    If an employer requests a cancellation date in a prior policy period, the policy will be cancelled the date received, and a letter will be sent to the employer informing them of the documentation required for a retroactive cancellation. The employer must prove they have ceased operations or no longer has employees as defined in ORC 4123.01(A)(1)(b), as of the date requested.

a.    Documentation for retroactive cancellation:

i.      Federal Tax Forms

a)    Copies of the sole proprietor’s individual tax return, including any Schedule C (Form 1040), for the year cancellation is requested and the subsequent year should indicate if business income is included.

b)    For other business types including corporations and partnerships, copies of U.S. Corporation Income Tax Return for the year cancellation is requested, and the return for the following year showing no business income.

c)    If the owner or officer of the business can produce W-2s, this evidence indicates he or she was working for another employer. This information alone may not be conclusive as an individual can be employed and operate a business simultaneously. This documentation along with other information can assist in making the determination.

d)    If the owner or officer does not have copies of their tax returns,  tax return transcripts can be requested from the IRS by calling 1-800-908-9946; by submitting to the IRS Form 4506T, Request for Transcript of Tax Return; or by registering and creating an online email account. Delivery takes approximately five to ten calendar days. Information about obtaining IRS transcripts can be found at this link.

ii.     Other documentation includes:

a)    Final Ohio State Universal Sales Tax Return (UST 1) or Ohio sales tax report where the employer has marked to cancel its vendor license.

b)    Ohio Department of Taxation Update Information (ST 3C) where the employer requested cancellation of its account.

c)    The Wage Detail portion of the employer’s final Unemployment Compensation Quarterly Tax Return filed with the Ohio Department of Job and Family Services. This report shows the number of weeks the employer paid wages and must support the requested cancellation effective date.

d)    Ohio Department of Job and Family Services Disposition of Business (JFS 20110) closing the employer’s unemployment tax account.

e)    Purchase agreement or other sales documents may prove the former business or equipment was sold. A U-118, Notification of Business Acquisition/Merger or Purchase/Sale, could also be used as evidence.

f)     Dissolution documents proving an operation has gone out of business may include records from the Secretary of State’s office or release documents from other agencies.

g)    Bankruptcy documents.

h)    Proof of incarceration of the owner of the business.

i)      Proof of death of the owner of the business.

j)      A BWC staff member may request a site visit by BWC Field staff for industries such as retail and manufacturing where operational status can clearly be determined by observation of the location.

b.    When processing a retroactive cancellation, items in Section IV.D must also be considered.

 

D.   BWC evaluation of cancellation request.

1.    The cancellation effective date must be at least one day after the last date the employer had employees to ensure active coverage through the cancellation effective date. The cancellation effective date may be extended to the day after the final date of the policy year.

2.    Claim related issues must be resolved.

a.    BWC staff must verify through research there are no claims filed with a date of injury on or after the requested cancellation effective date.

b.    If the employer has any claims with a date of injury on or after the requested cancellation effective date, BWC staff will contact the employer to obtain the appropriate cancellation effective date or verify the business was sold or transferred.

3.    Elective coverage considerations:

a.    The cancellation effective date must not be earlier than the elective coverage cancellation effective date.

b.    Unless documentation is provided, the cancellation effective date must not be during a policy year that the employer paid elective coverage premium.

4.    BWC reserves the right to revise the employer’s cancellation effective date based on evidence, including but not limited to, documentation received from a BWC audit or investigation.

5.    BWC will issue a warrant in the name of the employer of record as shown in BWC systems if it is determined the employer is entitled to a refund. The name on the warrant will not be modified. BWC recommends the employer confirm no refund is anticipated before closing a company bank account. Financial institutions may not honor a refund warrant on a closed account.

 

E.    BWC Cancellation.

1.    BWC may proactively cancel policies.

2.    The parameters for a BWC cancellation are set forth in OAC 4123-17-76.

3.    BWC will enter notes and save documents to the appropriate systems to support a BWC cancellation.

 

F.    Reversal of Cancellations.

The following principles will guide the reversal of a cancellation.

1.    BWC errors are corrected without penalty to the employer.

2.    Employer’s request to reverse cancellation.

a.    If the employer’s request is prior to completing true-up, BWC may reverse the cancellation and reinstate coverage.

b.    If the employer’s request is after they have completed true-up, the employer may need to submit a new Application for Ohio Workers’ Compensation Coverage (U-3) with the non-refundable application fee.

 

G.   Resolution of complaints and extenuating circumstances.

1.    Employer complaints are processed under the General Employer Complaint Policy.

2.    Extenuating circumstances.

a.    The employer has ceased operations and failed to notify BWC to cancel coverage, resulting in a lapsed, BWC initiated or cancelled uncollectable status.

Resolution: BWC may consider if the criteria for BWC initiated cancellation applies. If the employer meets the criteria under OAC 4123-17-76(A)(1), a retroactive cancellation can be approved without documentation.

b.    The employer establishes it ceased operations or no longer has employees as defined in ORC 4123.01(A)(1)(b). 

Resolution: See section IV.C for required documentation.

3.    Adjustment of payroll.

BWC staff can accept actual payroll, with appropriate documentation, even if the employer’s requested cancellation effective date is denied under this policy.

4.    If the employer’s requested cancellation effective date is denied, BWC will still cancel the employer’s workers’ compensation coverage. The cancellation effective date will be the date the cancellation request was received, or other date as determined in accordance with this policy.