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Workers' Compensation Board

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New York State
Workers' Compensation Board
328 State Street  Schenectady, New York 12305
Governor David A. Paterson


Disability Benefits Insurance Contract Bulletin

Penalties For Failure to Timely File Disability Benefits Proof of Coverage (POC) Transactions

To:  Disability Benefits Insurance Carriers and the State Insurance Fund

Date:  September 17, 2009

The New York State Legislature amended Disability Benefits Law §226 and Workers' Compensation Law §54 in 2008 to authorize the Workers' Compensation Board (Board) to penalize disability benefits carriers, workers' compensation carriers, the State Insurance Fund and workers' compensation group self-insured trusts for failure to timely file proof of coverage (POC) transactions. Timely filing of these transactions is a critical component in the Board's compliance efforts, which help level the playing field for law-abiding employers and increase the overall size of the premium pool. Timely cancellation transactions help ensure that the Board can quickly process penalties against employers with lapsed policies.

Prior to implementing disability benefits POC penalties, the coverage data in the carriers' systems must be reconciled with the Board's Insurance Compliance 2 (IC2) system. The Bureau of Compliance's Data Administration Unit (DAU) is in the process of notifying each carrier of its reconciliation schedule.

The Board anticipates that the carrier reconciliations will be completed by the end of this year and expects to issue penalties for late cancellation transactions in the first quarter of 2010. Disability benefits carriers will be notified of the specific date in a future Disability Benefits Insurance Contract Bulletin (DBIC). Since penalties will be issued only on a go-forward basis, cancellation transactions submitted prior to the effective date will not be subject to penalty. However, cancellation transactions submitted on or after the penalty effective date, which have an earlier transaction effective date, will be penalized. Cancellation transactions related to plan coverage will not be penalized initially because the Bureau of Compliance manually processes these transactions.

The penalty amount for a late cancellation transaction will be $10 for each 10 day period that a transaction is late, which is ten percent of the maximum $100 penalty authorized by the Legislature. This initial rate will be increased to the maximum rate over time. Carriers will be notified of penalty rate increases through Disability Benefits Insurance Contract Bulletins.

The timeframe for considering a cancellation transaction late depends on the transaction type. The following table will be used to determine if a transaction from a disability benefits carrier will be penalized:

Transaction Type Timely filing Transaction late but not penalized¹ Transaction late and penalized
Cancel – for non-payment of premium Received at least 10 days prior to date of cancellation Received between 9 days prior to date of cancellation and the date of cancellation Received after date of cancellation
Cancel – for all other reasons Received at least 30 days prior to date of cancellation Received between 29 and 20 days prior to date of cancellation Received after 20 days prior to date of cancellation

¹Transactions are not penalized because a full 10-day period has not elapsed.

A carrier may file with the Chair of the Board an application in writing for a redetermination review within thirty days of the imposition of a penalty. The Chair shall make a determination in writing on the issues raised on such application. Any further appeal of the redetermination review may be taken to the Appellate Division, Third Department pursuant to WCL §23.

The Board is conducting a review to determine if initial, reinstatement and supersede late transactions will be penalized. The Board does not want to penalize carriers for transactions that change legal entity status or add additional assureds because the changes are sometimes discovered only upon audit. However, IC2 would require reprogramming to exclude these transactions before issuing penalties. Therefore, if the Board determines that these late transactions will be penalized, IC2 will be reprogrammed and the penalty effective date will be announced in a future DBIC. Penalties would then be issued only on a go-forward basis.

The Board will be adding disability benefit-specific questions and answers to the FAQ document related to this new penalty on the Board's website.

If you have any questions, please contact the DAU at:


Robert E. Beloten