California Senate Bill 189 will go into effect on July 1^st this year. The bill allows officers and directors of companies to opt out of workers’ comp coverage if they own a certain percentage of the business, lowering the threshold of ownership from 15 percent to 10 percent.

This bill came after AB 2883 had set the threshold at 15 percent. When AB 2883 passed it did not include language exempting in-force policies, it applied to workers’ comp policies in effect on January 1^st, 2017, and could not be appealed for a couple of reasons. SB 189 hopes to fix the unintended problems caused by that bill.

One of the goals of the bill is to reduce workers’ compensation fraud, since some companies were reporting their workers as owners so they could reduce their workers’ comp premiums. By reducing the threshold of ownership, lawmakers are hoping to ease regulatory burdens on small or middle-market businesses who were more impacted by that percentage difference in ownership. It will only apply to renewed or new policies written after July 1^st, 2018.

Those who wish to opt out will have to sign a waiver that they are covered by a healthcare plan.

Corporate officers can also opt out of they own one percent of the company and a family member owns at least ten percent. The exception can now apply to an owner of a professional corporation who is rendering the professional services of that corporation. Sole shareholders of corporations are automatically excluded and don’t need the waiver.

Read this summary from the IIACBCal (Independent Insurance Agents & Brokers of California) and more from Insurance Journal and WCIRB (Workers’ Compensation Insurance Rating Bureau).