Businesses are always in the process of evolving. They may acquire or sell business operations or entities, they may reorganize or they may change their legal entity status. Any business that finds itself in a transformative process will most likely be introduced to the ERM-14, a form required by many state workers’ compensation bureaus to report changes in a business’s ownership, structure or status.
What is the ERM-14?
The ERM-14 is a confidential form completed by the insured and submitted to the NCCI for the purpose of assisting the various workers’ compensation bureaus to verify coverage and determine combinability of entities as it relates to premium calculation. Note that there are a few states that no longer accept the ERM-14 and have their own website applications for reporting business changes (currently CA, NJ, and coming soon MN, but always confirm with your state).
The ERM-14 can appear intimidating due to the level of detail it requires, but its complexity is directly related to the fact that it is used to report many different types of business transactions. The ERM-14 is used to report any of the following business changes:
Business name and/or legal entity change
Sale, merger, acquisition or consolidation of entities
Transfer of assets
Formation of a new entity
Placement of a business into a trust or receivership
To determine the combinability of separate entities
What Information is Needed to Complete the ERM-14?
The ERM-14 is intended to give rating bureaus a snapshot of the entity both before and after one of the above changes. Be prepared to provide the following:
Some business transactions can be quite complicated. Fortunately, the ERM-14 provides space for a description of the transaction so the insured can provide additional details if necessary. It is possible that relevant state bureaus will then ask for additional clarity if it’s needed.
What Happens if the ERM-14 is Not Completed?
Although completion of the ERM-14 may not be the most pleasurable of business tasks, there can be significant consequences for failing to provide this information to state workers’ compensation bureaus. Bureaus may be unable to verify coverage for a newly formed or acquired entity, which in turn may result in fines against the insured. Other state regulatory departments may deny or delay issuance of permits because they are unable to verify workers’ compensation coverage for an entity. In addition, an insured may face obstacles acquiring work contracts if prospective clients are unable to verify coverage for the entity that is to perform the work.
Perhaps most importantly, state workers’ compensation bureaus may be unable to determine a business’s correct experience modification rating factor, which is used in premium calculation. Accurate experience modification factors benefit all businesses within an industry, by rewarding businesses with good safety records with lower premiums.
Where Can I Find More Information About the Process to Notify Bureaus of Ownership Charges?
Margaret Barlow is Vice President, Account Management Director at Old Republic Risk Management. She leads a team comprised of dedicated insurance professionals who focus on delivering best in class customer service. In addition, they are responsible for leading the renewal transaction and serve as the primary service relationship between our external customers, insureds, Broker Partners, TPAs and Captive Managers. She is located at our headquarters in Brookfield, WI.