Bulletin No. 05-04
January 16, 2003

Labor Code sections specify that assessments are not part of taxable premium

A question has arisen as to whether the assessments that workers' compensation insurance carriers are required to include on employer's premium invoices are in fact separate charges and not part of the taxable premium. The California Labor Code appears to be clear on this subject.

Under Labor Code Sections 62.5 and 62.6, employers are assessed for the Workers' Compensation Administrative Revolving Fund, the Uninsured Employers Benefits Trust Fund, the Subsequent Injuries Benefits Trust Fund, and the Workers' Compensation Fraud Account. The Labor Code sections specify that these assessments be paid by employers, not their insurers, and are not to be considered a premium for the computation of a gross premium tax or agents' commission. Both Labor Code Sections 62.5 and § 62.6 contain provisions expressly excluding the assessments from these computations.

In addition, Section 15607 (a) of Title 8, California Code of Regulations states that insurers who directly pay the invoiced assessments to the Department of Industrial Relations on behalf of their insured employers shall collect each respective assessment "from each employer insured by it by applying a separate charge to all workers' compensation insurance policies issued by such insurer."