A Guide to Self-Insuring Worker's Compensation in the State of New Jersey

By: Vihaan Easwar and Maureen Abbey Scorese

According to An Employer’s Guide to Workers’ Compensation in New Jersey, all corporations, partnerships, limited liability corporations (LLCs), and sole proprietorships must obtain either workers’ compensation insurance or be approved for self-insurance.

Is anyone exempt from providing workers’ compensation insurance in the State of New Jersey?

There are no exceptions from providing workers’ compensation insurance for companies in New Jersey. Therefore, there are no exclusions for family members or minimum payroll exceptions.

What’s the procedure for self-insuring employees?

The New Jersey Department of Banking and Insurance (NJDOBI) outlines the procedure of self-insuring workers’ compensation in New Jersey. Businesses who believe they qualify should refer to the following:

1. Review relevant legal statutes. N.J.A.C. 11:2 – 33 stipulates the filing requirements for an employer looking to self-insure, covering the required documents and follow-up steps. N.J.S.A. 34:15.120.15 – 120.30 formally creates the “New Jersey Self-Insurers Guaranty Association.”
2. Prepare the initial materials to be sent to the NJDOBI:
   1. An applicant’s copy of audited annual reports and Form 10K from the last three years
   2. Any quarterly reports available since the last 10K, a brief description of the nature, location, number of employees
   3. Estimated average annual payroll in New Jersey for every separate corporate entity that wishes to qualify
   4. A check in the amount of $1,500 made payable to the State Treasurer of New Jersey.
3. Prepare the second set of materials:
   1. Form 290(detailed application for a corporation to formally exempt itself from insuring any or all of its workers’ compensation burden)
   2. Form 291A(record of any open death or disability claims)
   3. An indemnity agreement for all subsidies seeking exemptions
   4. Two separate $500 checks made payable to the NJGISA
   5. One $500 check made payable to the State Treasurer of New Jersey,
   6. A copy of all materials from the first step.

What are the consequences of an employer failing to insure?

According to the New Jersey Department of Labor and Workforce Development, failure to insure is a serious offense. Under the law, it is a disorderly person’s offense, and if determined to be willful, a fourth-degree offense. The penalty can be as high as $5,000 in the first ten days, and up to $5,000 for each additional ten-day period afterwards. In the case of a corporation, corporate officers can be held liable for failure to insure.

Conclusion

Managing workers’ compensation insurance can seem confusing and daunting, especially when the consequences of an unintentional error can be severe. For more information regarding workers’ compensation requirements, help submitting a self-insurance application, or questions regarding your business, contact the trusted Chugh, LLP corporate attorneys.