In This Issue:
- IRS Issues Guidance on Small Employer Tax Credit
- Department of Labor Releases Resources for Health Reform Compliance
- White House Releases Retiree Reinsurance Program Fact Sheet
- News for Human Resource Professionals
- HHS Secretary Issues Statement on Children’s Pre-existing Condition Provision
- IRS Chief Council Releases Opinion Regarding FSA Repayment
- Court Case Decided Concerning COBRA Election Notice
- IRS Releases Spring Edition of Employee Plan News
- State Updates: AL, CA, CO, DC, ME, TX, UT, WA and WI
IRS Issues Guidance on Small Employer Tax Credit
Effective this year, the PPACA, as amended by the Health Care and Education Reconciliation Act, provides small businesses with a tax credit regarding employee health coverage. Employers are eligible if they have fewer than 25 employees, an average annual wage less than $50,000 and the employer contributes at least 50 percent of the total premium cost or a benchmark premium. The Internal Revenue Service has provided additional guidance on their website regarding the credit including frequently asked questions and example calculations. The FAQs clarify that individuals treated as self employed (partners in a partnership, sole proprietor, more than 2 percent S-corp owner, or more than 5 percent owners) are not included in the calculation to determine the employer's number of employees or average annual wage.
Click here to view the press release.
Department of Labor Releases Resources for Health Reform Compliance
The Department of Labor (DOL) has created a new webpage that contains links to a variety of resources relating to the major health care reform legislation, PPACA. The webpage includes helpful links as well as a summary, timeline, and employer help guide:
- Summary — Includes nine categories with key points of interest under each subheading.
- Implementation Timeline — Groups by year the many components of health care reform that will become effective and provides a brief description of each one.
- Employers and Health Reform — Broken down by "small employers," "larger employers," and "all employers," it lists health care reform items that are relevant to the named employer group.
Click here to view the DOL health reform resources.
White House Releases Retiree Reinsurance Program Fact Sheet
The White House has released a Fact Sheet regarding the Reinsurance Program for Early Retirees. The paper provides information about the federal reinsurance program that will be available for employers sponsoring health plans for retirees over 55 years of age who are not eligible for Medicare. The program will reimburse employers for 80 percent of claims incurred from $15,000 up to $90,000 for retirees, their spouses and dependents. The fact sheet clarifies that the reinsurance payments are excludable from taxable income. The application for the program will be available in June.
Click here to view a complete list of questions and answers which can be found at the DOL's website.
News for Human Resource Professionals
Nursing Mothers Provision Included within Health Care Reform
The recently passed PPACA included an important provision within Section 4207 for employers concerning employees who are also nursing mothers. The provision requires employers to allow nursing mothers to express breast milk in a place, other than a bathroom, for up to one year following the birth of the child. The location provided must be shielded from view and free from intrusion from any co-workers and the public. All employers must comply, although there is an exception for employers with fewer than 50 employees only if the requirements "impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business." The terms "undue hardship" and "significant difficulty or expense" have not been defined and further regulations are expected on this. The employee must be allowed "reasonable" break times each time there is a need to express breast milk. The employer is not required to compensate for time spent expressing breast milk.
Employers should remember that some states already include legislation for nursing mothers which need to be taken into consideration in light of the federal legislation. The National Conference of State Legislatures maintains a website of provisions for nursing mothers on a federal and statewide basis.
Click here to learn more.
Click here to view legislation.
Health Incentives to Restore Employment ("HIRE") Act Signed into Law
On March 18, 2010, President Obama signed HR 2847, the Health Incentives to Restore Employment ("HIRE") Act in an effort to encourage businesses to hire those who certify that they have been unemployed for a period of at least 60 days. Employers who hire employees who worked fewer than a total of 40 hours for someone else during the 60-day period may also qualify for the incentive. The new law requires that employers get a statement from each eligible new hire certifying that he or she meets the requirements of the HIRE Act. Employers can use Form W-11 to meet this requirement.
Under the Act, businesses that hire unemployed workers from Feb. 3, 2010 through Dec. 31, 2010 may qualify for a 6.2 percent payroll tax incentive. This effectively exempts employers from Social Security taxes on wages paid to these workers. For each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees, but household employers cannot.
This reduced tax withholding will have no effect on the employee's future Social Security benefits, and employers would still need to withhold the employee's 6.2 percent share of Social Security taxes, as well as income taxes. The employer and employee's shares of Medicare taxes would also still apply to these wages. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.
Click here to view HR 2847.
Click here to view the IRS press release.
Click here to view Form W-11.
Click here to view FAQs.
HHS Secretary Issues Statement on Children’s Pre-existing Condition Provision
Under PPACA, children under age 19 may not have a pre-existing condition exclusion applied to their coverage for plan years beginning on or after Sept. 23, 2010. However, policies are not required to be guaranteed issue until 2014. This meant that an insurance carrier in the individual market could still outright deny a child's application for coverage until 2014. On March 29, 2010, US Department of Health and Human Services (HHS) Secretary Kathleen Sebelius issued a statement indicating that was not the intention of the law's language and that future regulations issued by HHS would clarify this. She states, "I am preparing to issue regulations in the weeks ahead ensuring that the term 'pre-existing condition exclusion' applies to both a child's access to a plan and to his or her benefits once he or she is in the plan."
Click here to learn more.
IRS Chief Council Releases Opinion Regarding FSA Repayment
On March 26, 2010, the Chief Council of the IRS released Chief Counsel Advice No. 201012060. If an employee's reimbursements from the health FSA exceed his or contributions to the health FSA at the time of lay-off or termination, the employer cannot recoup the difference from the employee. Though neither the previously proposed regulations nor the current health FSA regulations stated explicitly that such recoupment is not permitted, it has long been understood in the industry as a violation of the uniform coverage rule. An attempt to recoup excessive distributions would be considered a violation of the uniform coverage rule and could result in the loss of favorable tax status for the benefits paid under the health FSA.
Click here to learn more.
Court Case Decided Concerning COBRA Election Notice
The case of Olvera v. Sierra Nevada Coll., 2010 WL 185950 (D. Nev. 2010) involved an employee who had moved and accused the plan administrator, who was also the employer, of not providing a timely COBRA Election Notice following her termination of employment. The employer's third-party administrator (TPA) had proof that the Election Notice was mailed to the employee's last known address. The court concurred that the Election Notice was deemed to have been sent and the plan administrator is not required to show that the former employee had actually received the notice. This case reinforces that as long as there is proof that the Notice was mailed in a manner "reasonably calculated to ensure actual receipt of the material," as written in the regulations, the plan administrator may assume that the Notice was received.
Click here to learn more.
IRS Releases Spring Edition of Employee Plan News
The IRS recently released the Spring 2010 edition of the Employee Plans Newsletter. The newsletter contains a number of pertinent articles, citations and links related to retirement plans including:
- Do's and Don'ts for Form 5307 Applications
- What Can and Can’t Be Rolled Over to a Roth IRA
- Determining the Taxable Portion of Your Rollover to a Roth IRA
- Distribute Excess Deferrals
- Fix-It Guides — Common Problems, Real Solutions!
- Multi-employer Funding Issues
Click here to view the newsletter.
| Alabama |
On Jan. 22, 2010, the Governor of Alabama approved Public Act 27, which served as a resolution to notify the federal government of the Alabama state legislature's concern that federal legislation which directs states to comply under the threat of civil or criminal penalties may violate the 10th amendment under the United States Constitution. As we reported in the March 30, 2010 edition of Compliance Corner, the attorney general for Alabama was included within a multi-state lawsuit opposing health provisions within the recently passed PPACA.
Click here to learn more.
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| California |
Employers subject to the San Francisco Health Care Security Ordinance must return their Annual Reporting Form by April 30, 2010. The requirement applies to employers with 20 or more employees who have any employees working in San Francisco. The Form is used to report the employer's compliance with the city's health care spending requirement.
Click here to learn more.
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| Colorado |
Senate Bill 10-035, effective Jan. 1, 2011, permits employers to make a deduction from an employee paycheck for automatic enrollment to an employee retirement plan. The bill also provides relief for employers with automatic enrollment. The employer is not liable for investment decisions made by the employer on behalf of any participating employee with respect to the default investment of contributions made for the employee to the plan provided that the following requirements are met: (1) the plan allows employees quarterly opportunities to select investment from those available under the plan; (2) the employee is given notice that he/she will be put in a default election without providing investment direction; and, (3) the employee is provided with an annual notice of the default contributions made to their account. The relief from liability extends to retirement plan officials who make the default investments on behalf of the employee. This applies to all employer sponsored retirement plans within Colorado, even those not subject to ERISA.
Click here to learn more.
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| District of Columbia |
The DC Department of Insurance, Securities and Banking (DISB) recently issued an emergency order to freeze certain rate increase proposals that exceed 15 percent. The emergency act applies to individual and group policies and covers the effective period between March 23, 2010 and June 23, 2010, and increases greater than 15 percent will need to be refunded within 150 calendar days. After the 90-day period, rate would be reset to the previously approved and issued rate. The department will not approve increases greater than 15 percent, and will closely review increase over 10 percent.
Click here to learn more.
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| Maine |
The Maine State Legislature enacted Emergency Regulation HP 1259 in response to the passages of the federal Department of Defense Appropriations Act of 2010 and the federal Temporary Extension Act of 2010. In order to parallel federal amendments to the state's "mini-COBRA" law, effective immediately, continuation coverage for employer sponsored group insurance policies is available for 15 months, instead of 12 months. The subsidy is also available to employees involuntarily terminated through March 31, 2010. The emergency regulation clarifies that as long as federal law continues to be amended, Maine state continuation will permit assistance eligible employees to receive the subsidy for the full time periods available under federal law.
Click here to learn more.
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| Texas |
The Department of Insurance has issued regulations regarding the Healthy Texas program, which is scheduled to begin Jan. 1, 2011. The program was introduced in SB 78 in late 2009 with the purpose of assisting small businesses in purchasing affordable health plan coverage for employees. The policy will be exempt from many state mandates and need only provide coverage for inpatient and outpatient hospital services, physician services, and prescription drug benefits. To be eligible for the program, the employer must have no more than 50 employees, at least 30 percent of the employees receive annual wages in an amount equal to or less than 300 percent of the federal poverty level, the employer has not offered group health benefits for 12 months, at least 60 percent of the employees must participate in the Healthy Texas plan, and the employer must contribute at least 50 percent of the employee only premium cost. The plan must provide coverage for dependents, but the employer does not have to contribute to the dependent premium cost. The plan must not have a waiting period greater than 90 days and is subject to state continuation.
Click here to learn more.
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| Utah |
HB 66, known as "Prosthetic Limb Health Insurance Parity" was signed by the Governor on March 30, 2010 and amends the Utah Insurance Code so that beginning Jan. 1, 2011, certain insurers will be required to offer to employers sponsoring group health plans at least one plan that provides coverage for prosthetic limbs at a coinsurance rate of 80 percent to be paid by the insurer and 20 percent to be paid by the insured, as long as the device is purchased from an in-network provider.
Click here to learn more.
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| Washington |
Effective Feb. 4, 2010, the Insurance Commissioner has issued a rule requiring health carriers to prominently post and display health plan disclosure information on their web sites, and provide disclosure information in other forms of electronic communication and paper copies upon request.
Click here to learn more.
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| Wisconsin |
The Wisconsin Administrative Register dated Feb. 28, 2010 included language in response to the passages of the federal Department of Defense Appropriations Act of 2010 and the federal Temporary Extension Act of 2010. In order to parallel federal amendments to the state's "mini-COBRA" law, effective immediately, notice of the extended subsidy and retroactive coverage and premium payment must be given to assistance eligible individuals, including those assistance eligible individuals who are or were eligible for coverage under state law.
Click here to learn more.
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This material was created by NFP, its subsidiaries, or affiliates for distribution by their Registered Representatives, Investment Advisor Representatives, and/or Agents. This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. Neither NFP Securities, Inc. nor NFP Benefits Partners offer legal or tax services. The information contained in this edition is issued for informational purposes only and has been collected from regulations, statutes, laws, court decisions and administrative rulings and should not be viewed as interpretation or relied upon as legal or tax advice. This information is known to be current as of the initial date of distribution. Please note that changes to the legislation, regulations, statutes, policies, etc., may have occurred and are not reflected herein.
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