Jul 10, 2019

The single member of an LLC no longer has to elect WC coverage

Limited liability companies, authorized under Connecticut’s Public Act 93-267, are business entities that combine the limited liability protection afforded to a corporation with the tax advantages enjoyed by a partnership.

Over the last 24 years, the Connecticut Workers’ Compensation Commission has updated its workers’ compensation requirements for LLCs. Here is a brief outline:

Effective Dec. 1, 1995, the Connecticut Workers’ Compensation Commission regarded members and managers of LLCs as corporate officers. Members are equivalent to owners/shareholders and managers are equivalent to executive officers. By treating members and managers as officers, they are permitted to exclude themselves individually, using WCC Form 6B. Prior to Dec. 1, 1995, they had been declared to be “partners” by the WCC, which meant that all of the members and managers had to exclude themselves together, or all had to remain covered together.

On April 17, 2003, the WCC issued Memorandum 2003-02, which shifted its policy with regard to a one-member LLC. Instead of being regarded as an officer, a sole member was to be treated as a sole proprietor for purposes of eligibility under the Workers’ Compensation Act. A sole member was presumed to be excluded, unless an election was registered by filing WCC Form 75. There continued to be a presumption of inclusion under the act for multiple members of an LLC, unless an exclusion was registered by filing WCC Form 6B.

In its most recent ruling (on June 14, 2019), in light of the Supreme Court decision in Gould v. Stamford [331 Conn. 289 (2019)], which held that single-member limited liability companies are not required to elect to accept the provisions of the Workers’ Compensation Act, the WCC withdrew its Memorandum 2003-02 and superseded it with Memorandum 2019-02. To implement the change, the WCC amended Form 6B and Form 75, accordingly.

Consequently, now a single member of an LLC needs to make sure his or her coverage intentions are known. If coverage is desired, no action is required. If coverage is not desired, Form 6B needs to be filed to exclude the member from coverage so that premium for that member is not charged when the policy is audited.

PIACT recommends that you first contact your insurers to see how they will treat these policyholders prior to renewal. But, a prudent action would be to contact all of your single-member LLC clients now and offer the exclusion form.