{"id":3444,"date":"2017-01-18T15:05:29","date_gmt":"2017-01-18T15:05:29","guid":{"rendered":"https:\/\/gillespieinsuranceservices.com\/?p=3444"},"modified":"2025-04-17T12:49:11","modified_gmt":"2025-04-17T12:49:11","slug":"what-is-ab-2883","status":"publish","type":"post","link":"https:\/\/finfrockweb.com\/gis\/business-insurance\/what-is-ab-2883\/","title":{"rendered":"What is AB 2883?"},"content":{"rendered":"

This article should have probably been written a few months ago. \u00a0I actually did partially write about it\u00a0here<\/a>. \u00a0In that article\u00a0I didn\u2019t mention that AB 2883 was the law behind the change, nor did I mention all the types of business entities affected by it. \u00a0So that\u2019s what I\u2019ll do here. \u00a0Here\u2019s the simplified summarized version of law AB 2883 that went into effect on January 1st, 2017.<\/h4>\n

<\/p>\n

So what is this AB 2883 that we all keep hearing so much about?<\/p>\n

This is a law that changes the rules on who can be excluded in a workers comp policy.<\/p>\n

To start, there are four common types of legal entities that businesses operate as;\u00a0Sole Proprietorships, Partnerships, Limited Liability Companies (LLCs),\u00a0<\/strong>and\u00a0Corporations<\/strong>.<\/p>\n

In a\u00a0Sole Proprietorship<\/strong>, only the individual owner and (usually) the spouse can be excluded. \u00a0 AB 2883 makes no changes to sole proprietorships. \u00a0So if you are operating as a sole proprietor, don\u2019t worry: this law has no effect on you. \u00a0If you have more questions on the rules of exclusion for sole proprietorships, go ahead and click\u00a0here<\/a>\u00a0to read my article on it.<\/p>\n

Next we have\u00a0Partnerships<\/strong>. \u00a0In the old days, any partner could be excluded. \u00a0Now, because of AB 2883, only general partners are eligible to be excluded. \u00a0 Anyone that\u2019s any other type of partner besides a general partner will have to be covered based on his\/her actual payroll.<\/p>\n

After partnerships\u00a0we have\u00a0LLCs<\/strong>, which are similar to partnerships in how they\u2019re treated. \u00a0 In the old days, any member of the LLC\u00a0could be excluded. \u00a0Now, because of AB 2883, only managing members are eligible to be excluded. \u00a0 Anyone that\u2019s any other type of member besides a managing member will have to be covered based on his\/her actual payroll.<\/p>\n

Lastly, we have\u00a0Corporations<\/strong>. \u00a0 In the old days, \u00a0any owner\/officer could be excluded regardless of how many shares he\/she owned (as long as all the other conditions are met, which you can read about\u00a0here<\/a>). \u00a0Now, because of AB 2883, you have to own at least 15% of the corporation in order to be excluded. \u00a0 Any owner\/officer that owns less than 15% will have to be covered based on his\/her actual payroll.<\/p>\n

That\u2019s essentially it! \u00a0It\u2019s a fairly simply law, although the ramifications can be huge, and especially disastrous for those that are caught unaware.<\/p>\n

You may wonder how your insurance company is going to know who owns what and what title he has. \u00a0That\u2019s a fine question. \u00a0Every insurance company should have already sent you a form which all your company owners\/officers will sign confirming their titles (and ownership percentages if you\u2019re a corporation). \u00a0 If you\u2019re a business owner with a workers comp policy and haven\u2019t signed the form, call your insurance company or agent right away.<\/p>\n

Some may be wondering, \u201cWhat is the point of this law? \u00a0Why did it go into force?\u201d \u00a0You may also notice that this law seems to make it more difficult to exclude owners which results in\u00a0a higher chance of paying significantly more on your workers comp. \u00a0Unfortunately, when new laws get passed no one really tells us why, but I have my own theory: workers comp is meant to cover employees and exclude owners. \u00a0As workers comp rates rise, many employers will find ways to keep their premiums as low as possible, and one such way of doing so is by turning certain employees into owners by giving them titles and tiny amounts of ownership, thus allowing them to be excluded. \u00a0For example, if I own a corporation and I have 10 employees, why not give each employee 1% ownership and title them \u201cVice President\u201d so I don\u2019t have to get a workers comp policy at all? \u00a0My guess is AB 2883\u00a0is intended to stop these types of\u00a0situations.<\/p>\n

One last thing: since this law went into effect as of January 1st, 2017, your policy will be subject to it as of January 1st, 2017. \u00a0For example, let\u2019s say one of your owners Art Vandelay was excluded under the old rules but under AB 2883 is no longer eligible to be excluded. \u00a0Art Vandelay will be begin to be covered as of January 1st, 2017 based on his actual payroll. \u00a0Your policy paperwork may still say that Art Vandelay is excluded, but it doesn\u2019t matter. \u00a0The law changed and he\u2019s no longer eligible to be excluded. \u00a0You may be on a\u00a0fixed billing plan and not pay anything different after January 1st, 2017, but at final audit time, your auditor will include all post-January 1st, 2017 payroll for Mr Vandelay.<\/p>\n

That\u2019s AB 2883 in a nutshell. \u00a0Good luck out there, business owners!<\/p>\n","protected":false},"excerpt":{"rendered":"

This article should have probably been written a few […]<\/p>\n","protected":false},"author":3,"featured_media":3445,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,7,13],"tags":[],"class_list":["post-3444","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-insurance","category-liability-insurance","category-workers-compensation"],"_links":{"self":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/comments?post=3444"}],"version-history":[{"count":1,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3444\/revisions"}],"predecessor-version":[{"id":44631,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/posts\/3444\/revisions\/44631"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media\/3445"}],"wp:attachment":[{"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/media?parent=3444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/categories?post=3444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finfrockweb.com\/gis\/wp-json\/wp\/v2\/tags?post=3444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}