A contractor has annual gross receipts of $2,800,000. What is the minimum workers' compensation deposit required?
Correct Answer
A) $75,000
Based on B&P Code Section 7125, contractors with gross receipts between $2M-$3M must maintain a $75,000 workers' compensation deposit.
Why This Is the Correct Answer
B&P Code Section 7125 establishes a tiered workers' compensation deposit schedule based on annual gross receipts. For contractors with gross receipts between $2,000,000 and $3,000,000, the minimum required deposit is $75,000. At $2,800,000 in gross receipts, this contractor falls squarely within that tier, making $75,000 the correct minimum deposit amount.
Why the Other Options Are Wrong
Option B: $25,000
$25,000 corresponds to a lower gross receipts tier — typically for smaller contractors with receipts well below $2 million. Applying this lower deposit to a $2.8 million contractor would result in an under-secured workers' compensation arrangement that does not meet the statutory minimum.
Option C: $100,000
$100,000 is the deposit required for the next higher tier, which applies to contractors with gross receipts above $3,000,000. Since this contractor's receipts are $2,800,000 — still within the $2M–$3M bracket — $100,000 overstates the minimum requirement for this tier.
Option D: $50,000
$50,000 falls between the $25,000 and $75,000 tiers but does not correspond to any specific tier threshold under the Section 7125 schedule for the $2M–$3M gross receipts range. This distractor exploits the tendency to select a middle value without knowing the exact tiered amounts.
Memory Technique
Memorize the key tiers: under $2M = $25,000; $2M–$3M = $75,000; over $3M = $100,000. Think of it as small/medium/large: $25K / $75K / $100K. When the gross receipts have a '2' at the front (millions), the deposit has a '7' at the front (thousands).
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