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Workers' Compensation

Security and Compliance

Introduction

Workers' compensation insurance coverage and compliance issues are addressed within the Security and Compliance Division. The main focus of this division is to ensure that nonexempt employers maintain workers’ compensation coverage for their employees.

This division is comprised of two branches:

  • The Security Branch reviews the individual self-insured employers’ claim files, monitors their financial strength and determines the security requirements necessary to secure benefits for the self-insured employers’ workforce.
  • The Compliance Branch consists of two sections: Administrative Processing Section and the Enforcement Section.
    • The Administrative Processing Section is responsible for certifying coverage, preparing Civil citations, processing penalty payments, and recording of Rejection Notices.
    • The Enforcement Section investigates the status of insurance coverage through on-site visits to Kentucky employers. This ensures that workers within the Commonwealth are protected in the event of a workplace injury.

Security Branch

The Security Branch reviews the individual self-insured employers’ claim files, monitors their financial strength and determines the security requirements necessary to secure benefits for the self-insured employers’ workforce.

Contact

Mike Watts, Branch Manager
Phone: 502-782-4510
Fax: 502-564-0916
Email: KYWC.SelfInsurance@ky.gov

Requirements for Becoming Self-Insured

First: The applicant or guarantor must have assets in excess of all liabilities of at least $10 million. If this initial requirement is met, the employer may obtain a Self-Insurance Package [PDF, 388KB]. This package includes an application (Form SI-02).

Second: Two months prior to the planned date for self-insured status, the employer must submit the completed Form SI-02 along with certified, audited financial statements for the prior three years of operation. DWC will then review the application and statements and will inform the employer of initial approval or denial.

Third: If the application and statements are initially approved, the employer must submit loss data for the past five years. The employer will then be informed of the security requirement.

Fourth: The employer must submit the following information as applicable:

  • Security: Prior to being certified as a self-insured employer and continuing thereafter, primary security adequate to secure the employer's workers' compensation liabilities shall be posted pursuant to the provisions found in KRS 342.340 and 803 KAR 25:021 Section 5. The initial security amount will be based upon the average of indemnity and medical losses during the three highest years of the preceding five years or a minimum of $500,000.
  • Guarantee Agreement: A parent company must submit a Guarantee Agreement for all subsidiaries that it intends to include under its self-insured program, including the names and addresses of each subsidiary and location. A subsidiary that has separate financial statements may qualify on its own to be self-insured.
  • Resolution of Board: A corporation must submit its board of directors' resolution, authorizing and directing the corporation to undertake to become self-insured.
  • Coverage limit: Specific excess insurance must have a minimum coverage limit of $10 million per occurrence.
  • T.P.A. Service Agreements: If a service organization is used, a statement from the service organization and self-insured employer stating that the contract between the two parties meets the requirements pertaining to claims adjustment.

Starting in 2006, the individual self-insurance certificates will remain in effect until revoked or modified by the Commissioner of the DWC. In the past, certificates were issued annually.

Reporting Requirements for Individual Self-Insurers

The files listed below will assist in meeting the reporting requirements for the 2019 simulated premium calculation and the 2019 security review.

  • Data Reporting Instructions [PDF, 421KB]
    Data reporting requirements for loss report and simulated premium calculation report.
  • Certification of Submitted Loss Data [PDF, 72KB]
    This certificate must be submitted annually to certify the loss information is accurately reported.
  • Loss Report Enclosure A [XLSX, 27KB]
    This is an example of how the loss report should look.
  • Loss Report [XLSX, 33KB]
    This is an example of how the loss report should look. This version will assist in assuring that the claims in litigation status on 12/31/18 are meeting the Department of Workers' Claims (DWC) minimum indemnity reserve requirements.
  • Simulated Premium Calculation [XLS, 45KB]
    This file will calculate the simulated premium by entering yearly loss and payroll totals in the proper cells.
  • Payroll Enclosure E [XLSX, 27KB]
    This sheet must include quarterly payroll information for each self-insured entity.

Guaranty Funds

House Bill 1 (December 1996) established three nonprofit, unincorporated guaranty associations to protect disabled workers and dependents in the event of a self-insured individual's insolvency. Separate guaranty funds now exist for individual self-insureds, group self-insureds, and coal employer self-insureds. Membership in a guaranty fund is mandatory. These funds are listed below.


KENTUCKY COAL EMPLOYERS' SELF-INSURANCE GUARANTY FUND
P.O. Box 910623
Lexington, KY 40591-0623
KENTUCKY INDIVIDUAL SELF-INSURANCE GUARANTY FUND
c/o Dickinson Wright PLLC
300 West Vine Street, Suite 1700
Lexington, KY 40507-1621
Phone: 859-899-8700
Fax: 844-670-6009
Chairperson: Al Cates
KENTUCKY GROUP SELF-INSURANCE GUARANTY FUND

Groups are now regulated by the Department of Insurance please call 502-564-3630 for more information.

Compliance Branch

The Compliance Branch plays an important role in the Department of Workers' Claims. The goal of the branch is to ensure that employers subject to the Workers' Compensation Act comply with statutory requirements. The branch also encourages timely compliance through educational initiatives. Compliance is confirmed by regular inspections of employers to verify compliance with the act. The branch consists of two sections: Administrative Processing and Enforcement.

Contact

Branch Manager
Phone: 1-800-731-5241
Fax: 502-564-0916

Administrative Processing Section

The Administrative Processing Section consists of a section supervisor and support staff.

Responsibilities of the section:

  • Certifying proof of coverage,
  • Process civil citations that are approved by the commissioner and issued to non-compliant employers,
  • Process payments of penalties collected to forward to Kentucky Workers' Compensation Funding Commission,
  • Process and record Rejection Notices.

Administrative Processing Forms

To Order Blank Rejection Notice (Form 4), please submit a request to:
LaborKYWCCompliance@ky.gov

Please include the following information when requesting forms:

  • Business Name
  • Contact Person
  • Mailing Address
  • Phone Number
  • Form Type
  • Quantity Requested

Only Original Form 4s are accepted for processing, no photocopies.

Contact

Amy Roe, Section Supervisor
Phone: 502-782-4485
Fax: 502-564-0916
Email: LaborKYWCCompliance@ky.gov

Enforcement Section

This section consists of a section supervisor and a staff of 10 workers' compensation coverage and compliance investigators located in various field offices across the state. The section investigates Uninsured Employer Fund (UEF) claims, leads generated in-house, and complaints reported through various sources. When necessary, testimony and evidence are presented in official proceedings.

Contact

Will McGinnis, Section Supervisor
Phone: 502-782-4450
Fax: 502-564-0916
Email: will.mcginnis@ky.gov

Security and Compliance FAQ

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    Administrative Processing

  • Where do I get the employee leasing application?

    ​The employee leasing application is on the website under the Forms link. (Form EL1 and EL2). An application can be faxed to an employer, but we cannot accept a fax or email return.

  • How do I apply for 'Split Coverage" or "Wrap Up Coverage'?
    A separate insurance policy may be issued if authorized by the Commissioner of the Department of Workers' Claims. The application forms are available for download on the website. They are Form 375 (Application for Split Coverage), and Form 375 Wrap Up (Application for Split Coverage). Refer to link below:

    Procedures for Wrap Up (Special Projects) and Split Coverage
  • Is coverage information for an employer available to the public?
    An 'Insurance Coverage Lookup' link is available on this website. You will need the employer name, FEIN (Federal Employer Identification Number) or policy number to search.
  • Enforcement

  • When is workers' compensation insurance required?
    Employers with one or more workers are required to maintain coverage. There are no exceptions for family member employees, temporary, or part time employees. Out-of-state employers performing any work in this state are required to have Kentucky coverage. (Ohio employers refer to next question.)
  • Is Ohio BWC coverage sufficient for work done in Kentucky?
    No. An Ohio employer performing work (even temporary) in Kentucky must have a separate insurance policy. Coverage must be afforded by an approved carrier providing benefits in accordance with the Kentucky Workers’ Compensation Act. Kentucky does not accept the Form C-110s filed by Ohio employees as these are not enforceable by Kentucky courts. Any worker injured in this state has the right to file a claim for benefits under terms of our law.
  • What can happen if I do not have workers' compensation insurance for employees?
    Non-compliant employers are subject to a fine of $100 to $1,000 per employee. Each employee and each day of violation shall constitute a separate offense. Additionally, an employer may be held liable to an injured employee (or employee of an uninsured contractor or subcontractor) for income benefits including lost wages and medical expenses.
  • What is the difference between employees and independent contractors?
    Independent contractors generally are skilled individuals who work in a distinct occupation or business. Courts have determined certain criteria for classification as an independent contractor. The major factors are:
    • The nature of the work performed as it relates to the possible employer. An independent contractor’s work is not a regular and recurring part of the possible employer’s business. It is usually for a specific project with a beginning and ending date. An independent contractor provides the same services for other customers.
    • The extent of control of the details of the work. An independent contractor provides materials and equipment to perform the job and has potential for profit or risk of loss on the project. An independent contractor does not receive instructions or training from the employer, has the right to hire or fire helpers without permission from other, and has final control of the job.
    • Professional skill of the worker. Independent contractors have a specialized skill, trade, or license. They usually maintain a separate place of business, advertise, and have a business telephone.
    • Intentions of the parties. A written contract should describe the obligations and responsibilities of each party, a specific project described, dates of project and prices agreed upon in advance. The method of payment is not a primary factor.
  • What if I use 'contract labor?'
    This term is often misunderstood by business owners. Refer to the previous question for factors used in determining a worker's classification. Call the Compliance Branch with any questions concerning worker classification.
  • Do members of a Limited Liability Company (LLC) or a partnership have to maintain workers' compensation insurance if there are no employees?
    Partnerships of LLCs that consists of 'qualified' partners or members only are exempt from maintaining coverage under certain circumstances. 'Qualified partner or member' is defined by KRS 342.012 as having a meaningful partnership agreement or articles of organization that shows on its face that the partner or member has made some contribution that enables the partner or member to substantially participate in the profits (or loss) of the business as well as participate in the decision making process. The partnership or LLC shall provide upon the request of the commissioner or his or her representative a copy of the partnership agreement or articles of organization for purpose of demonstrating compliance. Coverage is required for any non-qualified partner or LLC member.
  • Is workers' compensation insurance required for officers of a corporation?
    Yes. KRS 342.640(2) designates officers of corporations as employees. Corporate officers may exempt themselves from coverage by filing an Employee's Written Notice of Rejection (Form 4). Obtain the form from the Compliance Branch or Administrative Services at 502-564-5550. The notice is not effective unless the original notarized form is filed with this agency. Filing a Form 4 forfeits your right to workers' compensation benefits. Seeking legal advice from an attorney prior to rejecting coverage is recommended.
  • How do I obtain a copy of a previously filed Form 4?
    Make a written request on an OPEN RECORDS REQUEST FORM. Download the form from the FORMS link on this Web site. Provide the employee's name (social security number if available), and business name and address. Include the approximate filing date if known. The request should include a self-addressed stamped envelope and 75 cents per copy (check or money order payable to Commonwealth of Kentucky Office of State Treasurer). Mail request to:

    Department of Workers' Claims
    Attention: Compliance Branch
    657 Chamberlin Ave.
    Frankfort, KY 40601
  • Is an employer required to show proof of coverage?
    Kentucky statute requires every employer to display a Workers' Compensation Posting Notice conspicuously at its principal office and other locations, where employees report for payroll and personnel matters. [KRS 342.610(6)] Contact your insurance agent or workers' compensation carrier for a current notice if you did not receive one with your latest policy.
  • What is the purpose of an Affidavit of Exemption by Building Contractor?
    Every local building permit official shall require proof of workers’ compensation insurance prior to issuing any building permit. An applicant with no employees must certify exemption to the building permit official. We provide two forms for this purpose. One is an affidavit of exemption for corporation or partnership and the other is an affidavit of exemption for individual. These forms are available for download from the FORMS link on this Web site. (Do not confuse these affidavits with the Form 4.)
  • Do employees pay any part of the workers' compensation insurance premium?
    Kentucky Revised Statute 342.420 specifically prohibits the employer from deducting premium from wages or salary of any employee entitled to benefits.
  • How do I obtain workers' compensation insurance coverage?
    By purchasing a policy from an insurance agent that represents approved insurance companies.