Definition – Merit Rating Plan
A Merit Rating Plan is designed for the benefit of employers who are not large enough to merit an experience rating. It is based on the loss experience of the smaller business.
This plan considers the loss experience for a two year period and allows a credit of 5% on premium for employers with no lost time claims.
If an employer has two or more lost time claims, they will be assessed a 5% surcharge.
Employers with only one lost time claim will not receive a credit nor will they receive a surcharge.
Under the Merit Rating Plan, small businesses can take advantage of incentives and premium savings by operating a safe work place.
This type of plan is quite the departure from the regular Experience Modification Rating system facilitated by NCCI, WCIRB, and the State Rating Bureaus. Those ratings involve three years of experience with the most recent policy year not included in the calculations.
The Merit rated employers have to be extremely safe to not receive a 5% surcharge. The same employer would have to meet a zero tolerance level for accidents.
Overall, the plans do encourage safety for smaller employers.
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