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Subject Number 046-304 Penalties For Failure to Timely File Proof of Coverage (POC) Transactions

Board Bulletins and Subject Numbers

To:   Workers' Compensation and Disability Benefits Insurance Carriers, State Insurance Fund, Group Self-insured Trusts

March 30, 2009

The New York State Legislature amended Workers Compensation Law (WCL) §54 and §226 in 2008 to authorize the Workers' Compensation Board (Board) to penalize workers' compensation carriers, disability benefits carriers, the State Insurance Fund and group self-insured trusts for failure to timely file proof of coverage (POC) transactions. Timely filing of these transactions is a critical component in the Board's compliance efforts, which help level the playing field for law-abiding employers, increase the overall size of the premium pool, and provide funding for the Uninsured Employers' Fund. Timely cancellation transactions help ensure that the Board can quickly process penalties against employers with lapsed policies. In addition, timely new policy/reinstatement transactions eliminate the need to issue unnecessary noncompliance inquiries and penalties to law-abiding employers.

The Board will implement this legislation in a series of stages. Given that the Board has reconciled policy data with workers' compensation carriers, penalties will be assessed against these carriers, in the first stage, for failure to timely submit proof of coverage transactions. In the second stage, the Board will reconcile policy data with the disability benefits' carriers, after which disability benefits POC penalties will be issued. In the third stage, the Board will reconcile policy data with group self-insured trusts and then issue group self-insured trusts POC penalties. Separate Board announcements (subject numbers) will be issued prior to implementation of the disability benefits penalties and group self-insured trust penalties.

For workers' compensation carriers, the Board will initially issue penalties through a manual or hard copy process. Initial penalties will be staggered over a period of time to ensure a successful implementation. Under separate cover, carriers will be notified when to expect their first penalty bill. Although the penalty bills will be staggered, all carriers will be penalized for late transactions received on or after April 1, 2009. In the fall of 2009, the Board will convert the manual or hard copy process to an automated process. Carriers will continue to receive the penalty letter and statement in the mail, but the summary and detailed reports will be available on the web.

Carriers will receive four documents:

  1. Penalty letter with the total penalty amount for the preceding month with a penalty invoice number which must be included with the carrier's remittance advice.
  2. Summary of late transactions with the International Association of Industrial Accident Boards and Commissions (IAIABC) transaction code reflecting the number and age of transactions that were late.
  3. Detailed late transaction report itemizing each late transaction and the individual penalty assessed.
  4. Statement of penalties that remain unpaid.

While the legislation permits the Board to issue penalties for every transaction, the Board initially will only penalize for a limited set of transactions. The balance of transactions will not be penalized but will be monitored to determine if they should be included as penalties at a later date. The following set of IAIABC transaction codes will be included in initial penalties:

Type IAIABC Transaction Code
Binder 000501
Binder 000580
New Policy 001001
New Policy 001080
Renewal 002001
Renewal 002080
Cancelled by Insurer-Non Payment 004159
Cancelled by Insurer-Underwriting Reason 004164
Cancelled by Insurer-Revocation of Voluntary Market Acceptance 004166
Cancelled by Insurer-Failure to pay deductible 004169
Cancelled by Insurer-Misrepresentation on Application 004170
Non-renew by insurer 006064
Reinstatement 007001

Please note that certain common transactions are not included in the penalty set above. For example, adding an additional assured to a policy, which is an IAIABC add location transaction, will not be penalized because it is sometimes discovered only upon audit. Changing or adding Federal Identification Numbers (FEIN) or demographic information will similarly not be penalized.

The penalty amount will be $50 for each 10 day period that a transaction is late, which is ten percent of the maximum $500 penalty authorized by the Legislature. This initial rate will be increased to the maximum rate over time. Carriers will be notified of penalty rate increases through Board announcements (subject numbers).

The timeframe for considering a transaction late depends on the transaction type. The following table will be used to determine if a transaction from a workers' compensation carrier will be penalized:

Transaction Type Timely filing Transaction late but not penalized¹ Transaction late and penalized
Cancel – for non–payment of premium Received at least 10 days prior to date of cancellation Received between 9 days prior to date of cancellation and date of cancellation Received after date of cancellation
Cancel – for all other reasons Received at least 30 days prior to date of cancellation Received between 29 and 20 days prior to date of cancellation Received after 20 days prior to date of cancellation
New policies / reinstatements / renewals / binders Received no later than 30 days after effective date Received between 31 and 40 days after effective date Received beyond 40 days after effective date

¹ Transactions are not penalized because a full 10-day period has not elapsed.

The Board will compare the transaction set type effective date, IAIABC Data Number DN0304, to the date of receipt at the Board to calculate the number of days. The received date is the date received by the Board, either directly from the carrier or via a third-party vendor.

A carrier may file with the Chair of the Board an application in writing for a redetermination review within thirty days of the imposition of a penalty. The Chair shall make a determination in writing on the issues raised on such application. Any further appeal of the redetermination review may be taken to the Appellate Division, Third Department pursuant to WCL §23.

The start date of the penalty period will be the effective date of the transaction or the effective date of the legislation (October 19, 2008), whichever is later. For example, if a penalizable transaction is received April 15, 2009 with a July 1, 2008 effective date, the penalty period will be October 19, 2008, through April 14, 2009.

During the manual billing process, carriers will be penalized when the Board receives a late transaction. When the automated process is implemented, carriers will be penalized for failure to file timely cancellation and non-renewals.

The Board will be establishing a Frequently Asked Questions document related specifically to this new penalty which will be available at the Board's website.

If you have any questions, please contact the Bureau of Compliance, Data Administration Unit at:

Zachary S. Weiss