Executive Officer

Rules, classification and premium determination for types of officers

A. Corporate Officer Definitions

The statutory definition in the Indiana WC Act is as follows: IC 22-3-6-1(b)(1) An executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation, other than a municipal corporation or governmental subdivision or a charitable, religious, educational, or other nonprofit corporation, is an employee of the corporation under IC 22-3-2 through IC 22-3-6. An officer of a corporation who is an employee of the corporation under IC 22-3-2 through IC 22-3-6 may elect not to be an employee of the corporation under IC 22-3-2 through IC 22-3-6. An officer of a corporation who is also an owner of any interest in the corporation may elect not to be an employee of the corporation under IC 22-3-2 through IC 22-3-6. If an officer makes this election, the officer must serve written notice of the election on the corporation’s insurance carrier and the board. An officer of a corporation may not be considered to be excluded as an employee under IC 22-3-2 through IC 22-3-6 until the notice is received by the insurance carrier and the board. 

The Indiana Code is available on the State of Indiana website. 

The key to establishing “executive officer” status is more than just the title. The title/status must be established in accordance with the charter and bylaws of the corporation. Merely calling an employee an “assistant vice president,” for example, does not automatically deem him/her an executive officer. 

The definition for an Executive Officer is found in the Basic Manual Rule 2.E.1: “Executive officers of a corporation or unincorporated association are the president, vice president, secretary, treasurer, or any other officer appointed in accordance with the charter or bylaws of such entity.”​  

B. Exclusion From Coverage

1. Officer Inactive
In instances where an executive officer is inactive in the business (perhaps serving on the corporate board of directors for the value of his/her name) and may only attend annual meetings or directors meetings, then our rules permit the exclusion of the payroll of such officer in determining the insured’s premium, but the officer is still covered. Please see section below on “Exclusion From Premium.”  

2. Any Corporate Officer Exclusion
Effective July 1, 2014, any officer of a corporation may now elect to exclude himself/herself from the WC Act, Senate Enrolled Act 294. The next year, effective May 7, 2015, SEA 33 added owner wording: “An officer of a corporation who is also an owner of any interest in the corporation may elect not to be an employee of the corporation…”  State Form 36097 must be completed as part of the application process and be signed by either the Officer or the authorized agent.

The WC Board of Indiana revised State Form 36097 (R8 / 6-15), Notice For Workers Compensation and Occupational Diseases Coverage (“Election Form”). For more information, please see ICRB Circular 2014-06.

The Board will accept 35097 forms from both scenarios under the statute in IC 22-3-6-1 (b)(1): 

  1. An officer who is an employee of the corporation… may elect not to be an employee, and 
  2. An officer of a corporation who is also an owner of any interest in the corporation ​may elect not to be an employee

The Board points out that the important thing to do, for the officer who works at the corporation or is an owner who may not actually work there, is that they inform their agent when they take out the policy on the other employees. They can both exclude themselves and adapt the form as they see fit. So, even though the state form only addresses an officer with an ownership interest, both officer scenarios are accepted by the Board.

Regarding stockholders and shareholders, they aren’t mentioned or covered in the statute. What is relevant is if they are officers, then they come within the statute.  If they are not, they don’t. If they work at the corporation, they are employees.​

It is also appropriate to attach endorsement WC 00 03 08 (Partners, Officers and Others Exclusion Endorsement) and insert wording to identify the excluded officer. 

To rescind an election, the Board does not have a form, so a letter to the Board and carrier should be acceptable. 

Note on Sole Officer of a Corporation
Effective 05/13/09 to 07/01/2014, House Enrolled Act 1701 revised the definition of an executive officer of a corporation (including a Subchapter S corporation) under IC 22-3-6-1(b) (1). It added a provision that an officer of a corporation who is the sole officer of the corporation may elect not to be an employee of the corporation. 

Effective July 1, 2014, Senate Enrolled Act 294 provides that any officer of a corporation may now elect to exclude himself/herself from the WC Act. For more information, please see ICRB Circular 2009-05, and ICRB Circular 2010-09

Assigned Risk Application Procedure:
The applicant is responsible for submitting the clearance certificate to the State. The approved clearance certificate should be submitted with the application. If the clearance certificate is not yet completed or approved, the ICRB needs at least a copy of the signed form before binding the application.

Once we have the signed form, we can assume it is pending approval by the State and we can bind coverage. We will make a note to the servicing carrier that the form is pending approval. The servicing carrier may make a business decision to:

  • assume the corporate officer is not exempt and charge premium for the exposure, until the exclusion is official, or
  • allow a reasonable time (30 days) for the State to approve the clearance certificate. After that, it would be appropriate for the carrier to charge the employer for the officer’s coverage until the exclusion is official (clearance certificate approved and received).   

3. Public or Nonprofit Officer
Public officers traditionally have been excluded from coverage, based on the theory that one who exercises the power of a public official cannot be regarded as an employee of the state or political subdivision. Coverage has been extended to members of the Indiana General Assembly. However, an entity may elect to cover the officer(s). IC 22-3-6-1(b) (2) states “An executive officer of a municipal corporation or other governmental subdivision or of a charitable, religious, educational, or other nonprofit corporation may…be brought within the coverage…by specifically including the executive officer in the contract of insurance.” This is accomplished by attaching the “Sole Proprietors, Partners, Officers and Others Coverage Endorsement” (WC 00 03 10) to the policy.

The endorsement gives the carrier the flexibility to name the officers individually, or by describing them, such as “all executive officers,” or “all executive officers except the president.”​

The key is to use the language the carrier is comfortable with and so that it is clear to all parties who is to be included so there’s no doubt when charging for premium or when a claim occurs.​​ 

If the executive officer of a nonprofit or government entity met the definition of executive officer in the Basic Manual, Rule BM‐EXEC‐E11E8, then the executive officer payroll rules would apply. There is a special rule that applies to the payroll computation for executive officers of volunteer fire departments. 

For a discussion on Township Trustee, please the separate document on this subject. 

4. Sole Proprietor, Partner, or LLC Member
A different scenario exists for a sole proprietor, partner, and a member or manager of a limited liability company (LLC). They are not considered employees but may elect to include themselves as employees per IC 22-3-6-1.  

C. Exclusion From Premium 
To determine if there’s a premium charge, first you must determine if the executive officer in question is active or inactive. If he’s considered active, then a premium charge is required per our rules, subject to minimum and maximum limits for officers. If he’s inactive, then no premium charge applies per Basic Manual Rule BM‐EXEP‐RE6B6: “Payroll is excluded when…The executive officer is elected for the value of his/her name or because of stock holdings, has no duties and does not visit the premises, except perhaps to attend directors’ meetings. The executive officer ceases to perform any duties and does not visit the premises, except perhaps to attend directors’ meetings.” The rule provides that the carrier must exclude payroll of an officer in calculating the employer’s premium when the officer is virtually inactive. It doesn’t say not to provide coverage (the statute mandates coverage is provided).The rule uses common sense. The point is that if an officer is inactive, then the carrier has no exposure, and therefore, no premium charge is necessary to cover the “exposure.” The rule implies it is not fair to charge premium for inactive officers for which virtually no exposure exists.  

D. Payroll & Classification 
Rules on including or not including an executive officer’s payroll are found in the Basic Manual, Rule BM‐EXEP‐RE6B6. Rules on the classification assignment for an executive officer are found in BM‐EXEP‐RE6B6. In general, executive officer rules apply on a policy basis. So, one officer that is active in two corporations and each corporation has its own policy, then you look at the officer’s payroll and classification separately for each policy. The exception would be if one carrier writes multiple corporations under one or multiple policies, then, you can consider them as one unit (entity) for purposes of applying the executive officer rule. This exception can be most helpful by applying only one maximum payroll limitation to an officer’s payroll even though he/she might be paid under several of the corporations that are all covered under the one policy. You add up all payroll from all corporations under one policy for an executive officer, and then apply the maximum if the total payroll exceeds the limit. See Basic Manual Rule BM‐EXEC‐E11E8, for the rule language. Payroll limitations (minimum and maximum) apply to the average weekly payroll of an officer for the number of weeks employed during the policy period. For amounts, please see table below. Reference Basic Manual Rule BM‐EXEP‐RE6B6.  

E. Payroll Limitations for Business Owners 
For calculating premium, our rules place an advisory minimum and maximum payroll for executive officers, and beginning for 2012, also for sole proprietors, partners, and limited liability company (LLC) members. The limitations apply to the average weekly payroll. The amounts appear in the Basic Manual rate pages, Miscellaneous Values page. Below is a chart showing the amounts for recent years. 

(Refer to Basic Manual Rule 2-E) 

Sole Proprietor, Partner, LLC memberexcluded, can opt inmin/max same as officer
Executive Officerincluded (corp officer can opt out)Min Annual2022
Max Annual2022
Min Week2022
Max Week2022

 Here’s a summary of the changes for Payroll Derivation for 2014:

  • Statewide Average Weekly Wage (SAWW) for executive officers, sole proprietors, partners, and LLC members based on latest available U.S. Department of Labor (USDOL) Bureau of Labor Statistics (BLS)
  • Occupational Employment Statistics Quarterly Census of Employment and Wages (QCEW), Total Private Industry. State Average Weekly Wage (SAWW) = $795
  • Minimum equal to 85% of the SAWW (795 x 0.85 = 710) rounded to nearest 50 = $700
  • Maximum equal to 4 times the SAWW (795 x 4 = 3,340) rounded to nearest 100 = $3,200

F. Corporate Officer Resignation 
A corporate officer may resign at any time by notifying the corporate board. The change can become effective no sooner than the date of the notification. The process does not require a filing with the Secretary of State.

The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.