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    Connecticut Paid Family Leave, Coming in 2021

    posted by Rachel Blakely-Gray
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  • Health Reform Checklist for Open Enrollment

    If your health plan renews on January 1, 2011, you’ll need to tell your employees about several important changes, including two special enrollment periods, as a result of the Patient Protection and Affordable Care Act (“PPACA”), otherwise known as the healthcare reform law.  These changes go into effect for all health plans renewing on or after September 23, 2010.  Assuming your open enrollment period is now or coming very soon, it makes sense to include this information with other open enrollment materials.

    First, determine whether your plan is grandfathered or non-grandfathered.  See the article What Is A Grandfathered Plan? for more details.

    Notices For Both Grandfathered and Non-Grandfathered Plans:

    Notice of Grandfathered Status – Plan participants need to be made aware of whether or not the plan is grandfathered.  See the model notice language Word document issued by the HHS.

    Special Enrollment Notice for Child Dependent Coverage Up to Age 26 – For plans that provide dependent coverage, newly eligible children will have a one-time 30-day opportunity to enroll in the coverage, if they:

    • had originally lost coverage due to reaching the prior age limit
    • are on COBRA due to losing coverage
    • or were never covered because they were above the age limit.

    Note that some states already have laws in place with the same or higher age limits than this new federal law.  If you have a grandfathered plan, you don’t need to allow adult children who are eligible for coverage through their own job until 2014.  See the model notice language issued by the HHS.

    Special Enrollment Notice for Those Who’ve Reached Their Lifetime Limit – The elimination of lifetime dollar limits is one of the PPACA changes.  Therefore, anyone on your plan who lost coverage due to meeting the lifetime dollar limit, and is otherwise still eligible for coverage now has a chance to re-enroll in the plan.  See the model notice language issued by the HHS.   Note:  Only send this special enrollment notice to those who had met the lifetime limit.

    Other Plan Changes

    Work with your insurance carrier or third party administrator to make sure your summary plan descriptions are updated with the following changes:

    Pre-Existing Conditions for Children Under Age 19 – Previously, plans could limit or exclude coverage for pre-existing conditions if the individual did not have prior coverage when they enrolled in the plan.  The PPACA changed this rule so that coverage for pre-existing conditions of children under age 19 could be covered right away.  This provision will eventually be extended to anyone (adults or children) with pre-existing conditions effective 1/1/2014.

     Notice of Rescission of Coverage – The PPACA has limited the reasons that coverage can be revoked retroactively.  Plans are required to give a notice of 30 calendar days when this happens.

    Additional Notice for Non-Grandfathered Plans:

    Patient Protection Disclosures – For new plans or existing plans that have made changes and are no longer grandfathered, you must notify plan participants of their rights to choose a primary care provider for themselves and pediatricians for their children.  The law also allows obstetrical or gynecological care without prior authorization.  See the model notice language issued by the HHS.

    Health Care Update: Change in Grandfathered Plan Definition

    The Department of Health and Human Services (HHS) has recently made an amendment to the definition of a group health plan’s “grandfathered” status.  Grandfathered health plans are not required to meet some of the new requirements of the Patient Protection and Affordable Care Act (PPACA), otherwise known as the healthcare reform law.  See the previous article What Is A Grandfathered Plan? for more details.   A grandfathered plan will lose its exemption if certain changes are made to the plan, such as significantly changing deductibles, co-pays, and employee contributions.  Originally, a plan could lose its grandfathered status if a fully insured plan changed insurance carriers.  The HHS has since amended the definition to allow health plans to change insurance carriers without losing their grandfathered plan status, as long as the plan continues to maintain the same benefit levels.

    So why was the change made?  In June 2010, the HHS had finalized the definition of a “grandfathered” health plan.  At the time, they had asked for the public to submit comments about this regulation, and it was because of these comments that the HHS has changed the definition.  Those who submitted comments raised some good points about situations where an employer has no choice but to change carriers, due to their existing carrier leaving the market, or the company being bought out.  There was also concern about insurance carriers taking advantage of rate negotiations at renewal time for employers who felt they had no choice but to stay with them to remain grandfathered.  This change also levels the playing field between large companies, who can afford to self-insure and were allowed to change third party administrators, and smaller employers, who are most likely fully insured and can now change insurance carriers.

    See the official HHS.gov.

    Six States Will Increase Minimum Wage 1/1/11

    Several states base their minimum wage rates on the Consumer Price Index (CPI) to adjust for inflation.  These states make the decision each year whether to adjust their minimum wage rate based on any change in the CPI.

    Here are the six states increasing their state minimum wage hourly rates effective January 1, 2011:

    State 2010 Rate New Rate 1/1/11
    Arizona $7.25 $7.35
    Montana $7.25 $7.35
    Ohio $7.30 $7.40
    Oregon $8.40 $8.50
    Vermont $8.06 $8.15
    Washington $8.55 $8.67

     

    Colorado, Florida, Missouri, and Nevada are the other states that base their minimum wage on the CPI.  Colorado is still considering a proposal to increase their minimum wage to $7.36, and a decision should be made very soon.  Florida and Missouri have chosen not to increase for January 1, 2011, so both states will remain at $7.25.  Nevada makes its rate changes effective July 1st, and should make an announcement in the spring of 2011.

    Be aware that some states have exceptions for small businesses whose annual sales fall below a certain amount.  Some states also have different rates for minor workers and tipped employees.  Check with your state’s Department of Labor for details.   

    If you have employees working in these states, you will want to check now to see who in your workforce is being paid minimum wage, and be ready to enter pay increases in your payroll software as needed for January 1st.  You may also need to download and post new minimum wage posters, which can be found at your state’s Department of Labor website.   

    IRS Tax Calendar for Small Businesses

    describe the imageThe IRS has an online Tax Calendar for Small Businesses and Self-Employed Individuals.  The calendar helps business stay informed on various deadlines including filing tax forms, paying taxes, and other actions required by federal tax law.

    Currently the 2015 version is the only one available online.  The user friendly, garden themed calendar allows you to navigate through each month, and also includes links to resources for small businesses.  A printable PDF version of the 2015 calendar is also available. To find options on accessing the IRS tax calendar options visit the IRS.
    If you are looking for small business information and can’t find it in the calendar, visit the IRS Small Business and Self-Employed website.

    November 15th Deadline for Medicare Part D Notices

    Rx2If you sponsor a group health plan that includes prescription coverage, there are two Medicare Part D requirements imposed by the Centers for Medicare and Medicaid Services (CMS):

    1. Written Notice to Medicare Eligible Individuals

    Plan sponsors are required to send participants either a Notice of Creditable Coverage or a Notice of Non-Creditable Coverage, whichever is applicable, by November 15th each year.  If the company’s prescription coverage is creditable, it means the company plan is expected to pay on average as much as the standard Medicare Part D prescription coverage.  Your health insurance carrier/TPA can assist you in determining whether your plan’s prescription coverage is creditable, and should be able to provide you with a sample notice, or even send the notice on your behalf.  There are also model notices on the CMS website that you can use.

    The purpose of sending the notice is to help Medicare eligible individuals decide if they should enroll in a Medicare Part D prescription plan during the Medicare open enrollment period of 11/15 – 12/31.  The notice contains a warning that if they lose the company’s prescription coverage and go 63 days or longer without coverage, they will pay a penalty if they want to enroll in a Medicare prescription plan later.  CMS requires that the notice be sent to Medicare eligible participants and their dependents in your plan, whether they are active employees, COBRA eligible, disabled, or retirees.  This notice also needs to be given to any Medicare eligible employee when they first join the company plan.  Some carriers recommend that the notice be sent to all covered participants, regardless of Medicare eligibility, to ensure the requirement is met.

    2. Reporting The Status Of Your Plan to CMS

    Group health plans must also notify the CMA about their creditable coverage status no later than the 60th day after the start of each plan year.  The Disclosure to CMS Form is an online form.

    See more information about the Medicare Part D creditable coverage requirements on the CMS website.

    IRS Limits for 2011 Remain Unchanged

    The IRS has announced retirement plan and other limits for 2011.  Most limits will remain the same for 2011 as there is no Cost of Living Adjustment (COLA).

    Commonly used limits for employers:

    Employee Deferral Limit for 401k/403b Plans $16,500 (same as 2010)
    Defined Contribution Limit (Total for employee plus employer contributions) $49,000 or 100% of compensation if less (same as 2010)
    Age 50+ Catch-up Contribution Limit for 401k/403b Plans $5500 (same as 2010)
    Annual Compensation Limit (for benefit calculations) $245,000 (same as 2010)
    Employee Deferral Limit for SIMPLE Plans $11,500 (same as 2010)
    Age 50+ Catch-up Contribution Limit for SIMPLE plans $2500 (same as 2010)
    Highly Compensated Employee (HCE) Definition $110,000 (same as 2010)
    Social Security Taxable Wage Base $106,800 (same as 2010)

    The 2011 mileage reimbursement rate for business purposes has not yet been announced.  Currently it is $0.50 per mile.

     

    Health Savings Accounts/High Deductible Health Plans

    The IRS had already announced earlier this year that 2011 limits for HSA’s will be unchanged.  Here are the limits:

    Single HSA Contribution Limit $3050
    Family HSA Contribution Limit $6150
    Minimum Single HDHP Deductible $1200
    Minimum Family HDHP Deductible $2400
    Maximum Single HDHP Out-of-pocket limit $5950
    Maximum Family HDHP Out-of-pocket limit $11,900
    Age 55+ Catch-up Contribution Limit $1000

    Following the Fair Credit Reporting Act

    Updated on June 24, 2013

    When hiring for a position, do you perform a background check?  More than likely, you use consumer reports to check the background of a candidate.  Consumer reports can encompass many types of information such as criminal records, credit history, driving records, and employment history.  What happens when the results of a background check give you cause for concern?

    When you use a company to conduct background checks on your behalf, these companies are consumer reporting agencies.  When employers make hiring decisions based on consumer report information, there are steps you must follow in order to comply with the Fair Credit Reporting Act (FCRA).  The purpose of the FCRA is to protect the privacy of information found in consumer reports and to ensure that the information is as accurate as possible.

    Written Notice and Authorization
    When using consumer reports for an employment decision, you first must get the candidate’s authorization in writing, and notify them in writing that a consumer report will be used. If you use a consumer reporting agency, they should be able to provide a template that you can use. This notice and authorization can be electronic. For example, our company sends the candidate an email with a link to a website that contains the notice, and allows them to enter their information and authorize electronically. Paperless is a beautiful thing.

    Taking Adverse Action
    When a consumer reporting agency reports information to you that affects your decision to deny a job offer or promotion, there are two steps you need to take:

    Step 1:  You will need to send the candidate a “pre-adverse action disclosure” before making the official decision. This includes a summary of their rights under the FCRA and a copy of the consumer report. This gives the candidate a chance to make any corrections to the information if, in fact, it is wrong.

    Step 2:  If the candidate does not take steps to correct any inaccurate information after a period of time (usually five to seven days), you may proceed with the denial of the job or promotion, and will need to send the candidate an “adverse action notice.”  This notice can be oral, written, or electronic. The notice needs to include the name and contact information of the consumer reporting agency that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information in the credit report. Your consumer reporting agency can assist you with this process.

    Note that FCRA rules do not apply if the employer checked references directly without using a consumer reporting agency. For example, if an employer called a school directly and found out that a candidate did not have the degree they said they did, the employer can choose to deny the job without following FCRA procedure.

    For more details, the Federal Trade Commission has a good article on its website called Using Consumer Reports: What Employers Need To Know.

    Employer Credit Checks Under Fire

    In this time of high unemployment, the steps employers take to investigate candidates are being scrutinized more then ever. The Ban the Box law in Massachusetts prohibits employers from asking candidates about their criminal history on the initial written job application.  Pre-employment credit checks are also being scrutinized. As of now, Hawaii, Washington, and Oregon have laws prohibiting the employer from performing a credit check on candidates, with limited exceptions.  Many more states are also introducing similar legislation. The EEOC discourages employers from performing credit checks due to adverse impact on minorities and females, unless the candidate’s credit history is directly related to the particular job. The recession brings this issue to light, as many people looking for work may also have a tarnished credit history due to falling upon hard times. The EEOC held a public meeting last week to allow supporters from both sides of the issue to present their view. See the EEOC press release.

    Those against performing pre-employment credit checks say that the practice is harmful and unfair to workers. It negatively affects those with poor credit, and statistically, minorities and females tend to have lower credit ratings, which can make a discriminatory impact on hiring. It also poses a “catch 22” for those with poor credit who need a job to to improve their credit.

    Those in favor of performing credit checks say that most employers do not check credit history for every single position, the credit check is one of many tools to screen candidates, and helps to protect the company against fraud.

    As an employer, if you currently use credit history to make employment decisions, best practices are to first determine if it’s necessary to check credit for every position, and then document why it is necessary for those positions.

    Does Your 401(k) Plan Allow Loans?

    In the spectrum of employee benefits, 401(k) savings plans are one of the most widely used ways to help employees save for retirement.  401(k) plans (see: different types of 401k plans) are meant to be long term savings vehicles, and the IRS has many rules in place for discouraging use of this money for short term needs.  But it’s no secret in today’s economy that employees are turning to their 401(k) accounts for some relief from mounting debt.  There are limited circumstances where an employee must show a financial hardship in order to access their money sooner than retirement.  But taking a hardship withdrawal also means that the employee may have to pay a 10% early withdrawal tax penalty if they are under age 59-1/2, and the employee is suspended from contributing any more money for another six months.  This should be the absolute last resort because it really hinders the goal of saving enough money for retirement.

    But what about loans?  What if an employee is in a bind, and wants to borrow money from their 401(k)?  Although not the ideal place to borrow money, 401(k) loans aren’t as damaging to the employee’s retirement nest egg as hardship withdrawals because:

    1. There are no income taxes on the loan, as long as they pay the money back.
    2. There is no 10% early withdrawal penalty, as long as they pay the money back.
    3. Unless your plan says otherwise, there is no suspension of contributions.  The employee can continue to make salary deferrals and contribute to their 401(k) account at the same time they are repaying their loan.
    4. The process for obtaining a 401(k) loan is quicker and the cost is cheaper than applying for a bank loan.
    5. The employee is paying themselves back with interest.
    6. Normally the employee can borrow up to 50% of their vested account balance, up to $50,000.

    When an employee takes a loan on their 401(k) money, they essentially are paying themselves back at an interest rate that’s outlined in the plan document.  A common interest rate used is the Wall Street Journal Prime Rate or Prime + 1% or 2%.  With the Prime Rate being so low these days (3.25% as of right now), 401(k) loans are a popular choice among employees to access their money.

    There are definitely some drawbacks and limitations that employees need to be made aware of before taking a loan:

    1. Taking a loan reduces the money in your account.  Therefore this reduces the ability for your account balance to grow, and this loan money will miss out on investment gains.
    2. If your employment terminates before you are able to pay back the entire loan, the remainder of the unpaid loan does become taxable, and subject to the 10% penalty if under age 59-1/2 .
    3. The maximum time to repay a loan is five years.  If you are borrowing to purchase a home, the term loan can be extended.
    4. If you are borrowing to purchase a home, the interest you pay is not tax deductible.
    5. The loan is repaid with after-tax payroll deductions.  So your take home pay will be reduced by the actual amount of your loan repayment.

    If you don’t currently allow for loans and are considering adding them to your 401(k) plan, there may be additional expenses and will be additional administration for each loan request.  The administration steps go something like this:

    • Step 1:  The employee completes a loan request form.  This can either be a piece of paper, or online if your 401(k) provider has a website that allows for this.
    • Step 2:  The plan administrator normally approves the request before submitting it to the 401(k) provider.  I can’t speak for all 401(k) providers, but nowadays, the loan processing time should take less than a week.
    • Step 3:  Upon receiving the loan request, the 401(k) provider will create a loan amortization schedule and send the employee a check (or wire the money) along with their repayment schedule.  Sometimes the employee is required to sign a separate promissory note, sometimes the employee agrees to the terms of the loan simply by endorsing the back of the check.
    • Step 4:  The 401(k) provider will also send a copy of the loan repayment schedule to the plan administrator.
    • Step 5:  This employee’s loan repayment will need to be set up as an after-tax deduction in your payroll system.   If your payroll software has the ability to track a “lifetime limit” or “goal, the deduction will automatically turn off once it has reached the limit.
    • Step 6:  The loan repayment will need to be remitted to the 401(k) provider each pay, along with salary deferrals and company contributions.  It’s very important to make sure these repayments get submitted, or else the loan could go into default.

    Be sure to keep all documentation for each employee’s loan request, as you will need this if/when your 401(k) plan is audited.

    It’s important for both the plan administrator and employees to be aware of the caveats of 401(k) loans.  Although borrowing from a 401(k) should not be encouraged, it could be a better alternative for the employee than an early withdrawal.

    There are a ton of details involved in 401k withholding, are you prepared to deal with that while running payroll? Don’t worry, our easy payroll software has you covered. We automatically update our software for policy changes, so that you don’t have to stress over it. Try it for free today!

    W-2 Health Cost Reporting Delayed One Year

    Good news for employers and payroll administrators!  According to an IRS News Release posted earlier this week, employers will have an additional year to comply with the Affordable Care Act requirement to show total healthcare costs on the W-2.  Originally, this requirement was to begin with 2011 W-2’s, but now the employer has the option to either begin reporting in 2011, or can wait until 2012 with no penalties.  The IRS has issued a draft 2011 Form W-2 showing how the W-2 will look for next year’s wages.  This will give employers and payroll providers more time to ensure that payroll systems are set up properly to comply with this requirement.

    The IRS expects to issue further guidance on this reporting requirement before the end of the year for employers who do choose to report in 2011.

    Health Reform Checklist for Open Enrollment

    If your health plan renews on January 1, 2011, you’ll need to tell your employees about several important changes, including two special enrollment periods, as a result of the Patient Protection and Affordable Care Act (“PPACA”), otherwise known as the healthcare reform law.  These changes go into effect for all health plans renewing on or after September 23, 2010.  Assuming your open enrollment period is now or coming very soon, it makes sense to include this information with other open enrollment materials.

    First, determine whether your plan is grandfathered or non-grandfathered.  See the article What Is A Grandfathered Plan? for more details.

    Notices For Both Grandfathered and Non-Grandfathered Plans:

    Notice of Grandfathered Status – Plan participants need to be made aware of whether or not the plan is grandfathered.  See the model notice language Word document issued by the HHS.

    Special Enrollment Notice for Child Dependent Coverage Up to Age 26 – For plans that provide dependent coverage, newly eligible children will have a one-time 30-day opportunity to enroll in the coverage, if they:

    • had originally lost coverage due to reaching the prior age limit
    • are on COBRA due to losing coverage
    • or were never covered because they were above the age limit.

    Note that some states already have laws in place with the same or higher age limits than this new federal law.  If you have a grandfathered plan, you don’t need to allow adult children who are eligible for coverage through their own job until 2014.  See the model notice language issued by the HHS.

    Special Enrollment Notice for Those Who’ve Reached Their Lifetime Limit – The elimination of lifetime dollar limits is one of the PPACA changes.  Therefore, anyone on your plan who lost coverage due to meeting the lifetime dollar limit, and is otherwise still eligible for coverage now has a chance to re-enroll in the plan.  See the model notice language issued by the HHS.   Note:  Only send this special enrollment notice to those who had met the lifetime limit.

    Other Plan Changes

    Work with your insurance carrier or third party administrator to make sure your summary plan descriptions are updated with the following changes:

    Pre-Existing Conditions for Children Under Age 19 – Previously, plans could limit or exclude coverage for pre-existing conditions if the individual did not have prior coverage when they enrolled in the plan.  The PPACA changed this rule so that coverage for pre-existing conditions of children under age 19 could be covered right away.  This provision will eventually be extended to anyone (adults or children) with pre-existing conditions effective 1/1/2014.

     Notice of Rescission of Coverage – The PPACA has limited the reasons that coverage can be revoked retroactively.  Plans are required to give a notice of 30 calendar days when this happens.

    Additional Notice for Non-Grandfathered Plans:

    Patient Protection Disclosures – For new plans or existing plans that have made changes and are no longer grandfathered, you must notify plan participants of their rights to choose a primary care provider for themselves and pediatricians for their children.  The law also allows obstetrical or gynecological care without prior authorization.  See the model notice language issued by the HHS.

    Health Care Update: Change in Grandfathered Plan Definition

    The Department of Health and Human Services (HHS) has recently made an amendment to the definition of a group health plan’s “grandfathered” status.  Grandfathered health plans are not required to meet some of the new requirements of the Patient Protection and Affordable Care Act (PPACA), otherwise known as the healthcare reform law.  See the previous article What Is A Grandfathered Plan? for more details.   A grandfathered plan will lose its exemption if certain changes are made to the plan, such as significantly changing deductibles, co-pays, and employee contributions.  Originally, a plan could lose its grandfathered status if a fully insured plan changed insurance carriers.  The HHS has since amended the definition to allow health plans to change insurance carriers without losing their grandfathered plan status, as long as the plan continues to maintain the same benefit levels.

    So why was the change made?  In June 2010, the HHS had finalized the definition of a “grandfathered” health plan.  At the time, they had asked for the public to submit comments about this regulation, and it was because of these comments that the HHS has changed the definition.  Those who submitted comments raised some good points about situations where an employer has no choice but to change carriers, due to their existing carrier leaving the market, or the company being bought out.  There was also concern about insurance carriers taking advantage of rate negotiations at renewal time for employers who felt they had no choice but to stay with them to remain grandfathered.  This change also levels the playing field between large companies, who can afford to self-insure and were allowed to change third party administrators, and smaller employers, who are most likely fully insured and can now change insurance carriers.

    See the official HHS.gov.

    Six States Will Increase Minimum Wage 1/1/11

    Several states base their minimum wage rates on the Consumer Price Index (CPI) to adjust for inflation.  These states make the decision each year whether to adjust their minimum wage rate based on any change in the CPI.

    Here are the six states increasing their state minimum wage hourly rates effective January 1, 2011:

    State 2010 Rate New Rate 1/1/11
    Arizona $7.25 $7.35
    Montana $7.25 $7.35
    Ohio $7.30 $7.40
    Oregon $8.40 $8.50
    Vermont $8.06 $8.15
    Washington $8.55 $8.67

     

    Colorado, Florida, Missouri, and Nevada are the other states that base their minimum wage on the CPI.  Colorado is still considering a proposal to increase their minimum wage to $7.36, and a decision should be made very soon.  Florida and Missouri have chosen not to increase for January 1, 2011, so both states will remain at $7.25.  Nevada makes its rate changes effective July 1st, and should make an announcement in the spring of 2011.

    Be aware that some states have exceptions for small businesses whose annual sales fall below a certain amount.  Some states also have different rates for minor workers and tipped employees.  Check with your state’s Department of Labor for details.   

    If you have employees working in these states, you will want to check now to see who in your workforce is being paid minimum wage, and be ready to enter pay increases in your payroll software as needed for January 1st.  You may also need to download and post new minimum wage posters, which can be found at your state’s Department of Labor website.   

    IRS Tax Calendar for Small Businesses

    describe the imageThe IRS has an online Tax Calendar for Small Businesses and Self-Employed Individuals.  The calendar helps business stay informed on various deadlines including filing tax forms, paying taxes, and other actions required by federal tax law.

    Currently the 2015 version is the only one available online.  The user friendly, garden themed calendar allows you to navigate through each month, and also includes links to resources for small businesses.  A printable PDF version of the 2015 calendar is also available. To find options on accessing the IRS tax calendar options visit the IRS.
    If you are looking for small business information and can’t find it in the calendar, visit the IRS Small Business and Self-Employed website.

    November 15th Deadline for Medicare Part D Notices

    Rx2If you sponsor a group health plan that includes prescription coverage, there are two Medicare Part D requirements imposed by the Centers for Medicare and Medicaid Services (CMS):

    1. Written Notice to Medicare Eligible Individuals

    Plan sponsors are required to send participants either a Notice of Creditable Coverage or a Notice of Non-Creditable Coverage, whichever is applicable, by November 15th each year.  If the company’s prescription coverage is creditable, it means the company plan is expected to pay on average as much as the standard Medicare Part D prescription coverage.  Your health insurance carrier/TPA can assist you in determining whether your plan’s prescription coverage is creditable, and should be able to provide you with a sample notice, or even send the notice on your behalf.  There are also model notices on the CMS website that you can use.

    The purpose of sending the notice is to help Medicare eligible individuals decide if they should enroll in a Medicare Part D prescription plan during the Medicare open enrollment period of 11/15 – 12/31.  The notice contains a warning that if they lose the company’s prescription coverage and go 63 days or longer without coverage, they will pay a penalty if they want to enroll in a Medicare prescription plan later.  CMS requires that the notice be sent to Medicare eligible participants and their dependents in your plan, whether they are active employees, COBRA eligible, disabled, or retirees.  This notice also needs to be given to any Medicare eligible employee when they first join the company plan.  Some carriers recommend that the notice be sent to all covered participants, regardless of Medicare eligibility, to ensure the requirement is met.

    2. Reporting The Status Of Your Plan to CMS

    Group health plans must also notify the CMA about their creditable coverage status no later than the 60th day after the start of each plan year.  The Disclosure to CMS Form is an online form.

    See more information about the Medicare Part D creditable coverage requirements on the CMS website.

    IRS Limits for 2011 Remain Unchanged

    The IRS has announced retirement plan and other limits for 2011.  Most limits will remain the same for 2011 as there is no Cost of Living Adjustment (COLA).

    Commonly used limits for employers:

    Employee Deferral Limit for 401k/403b Plans $16,500 (same as 2010)
    Defined Contribution Limit (Total for employee plus employer contributions) $49,000 or 100% of compensation if less (same as 2010)
    Age 50+ Catch-up Contribution Limit for 401k/403b Plans $5500 (same as 2010)
    Annual Compensation Limit (for benefit calculations) $245,000 (same as 2010)
    Employee Deferral Limit for SIMPLE Plans $11,500 (same as 2010)
    Age 50+ Catch-up Contribution Limit for SIMPLE plans $2500 (same as 2010)
    Highly Compensated Employee (HCE) Definition $110,000 (same as 2010)
    Social Security Taxable Wage Base $106,800 (same as 2010)

    The 2011 mileage reimbursement rate for business purposes has not yet been announced.  Currently it is $0.50 per mile.

     

    Health Savings Accounts/High Deductible Health Plans

    The IRS had already announced earlier this year that 2011 limits for HSA’s will be unchanged.  Here are the limits:

    Single HSA Contribution Limit $3050
    Family HSA Contribution Limit $6150
    Minimum Single HDHP Deductible $1200
    Minimum Family HDHP Deductible $2400
    Maximum Single HDHP Out-of-pocket limit $5950
    Maximum Family HDHP Out-of-pocket limit $11,900
    Age 55+ Catch-up Contribution Limit $1000

    Following the Fair Credit Reporting Act

    Updated on June 24, 2013

    When hiring for a position, do you perform a background check?  More than likely, you use consumer reports to check the background of a candidate.  Consumer reports can encompass many types of information such as criminal records, credit history, driving records, and employment history.  What happens when the results of a background check give you cause for concern?

    When you use a company to conduct background checks on your behalf, these companies are consumer reporting agencies.  When employers make hiring decisions based on consumer report information, there are steps you must follow in order to comply with the Fair Credit Reporting Act (FCRA).  The purpose of the FCRA is to protect the privacy of information found in consumer reports and to ensure that the information is as accurate as possible.

    Written Notice and Authorization
    When using consumer reports for an employment decision, you first must get the candidate’s authorization in writing, and notify them in writing that a consumer report will be used. If you use a consumer reporting agency, they should be able to provide a template that you can use. This notice and authorization can be electronic. For example, our company sends the candidate an email with a link to a website that contains the notice, and allows them to enter their information and authorize electronically. Paperless is a beautiful thing.

    Taking Adverse Action
    When a consumer reporting agency reports information to you that affects your decision to deny a job offer or promotion, there are two steps you need to take:

    Step 1:  You will need to send the candidate a “pre-adverse action disclosure” before making the official decision. This includes a summary of their rights under the FCRA and a copy of the consumer report. This gives the candidate a chance to make any corrections to the information if, in fact, it is wrong.

    Step 2:  If the candidate does not take steps to correct any inaccurate information after a period of time (usually five to seven days), you may proceed with the denial of the job or promotion, and will need to send the candidate an “adverse action notice.”  This notice can be oral, written, or electronic. The notice needs to include the name and contact information of the consumer reporting agency that provided the report, a statement that the reporting agency did not make the decision for adverse action, and a notice of the individual’s right to dispute the information in the credit report. Your consumer reporting agency can assist you with this process.

    Note that FCRA rules do not apply if the employer checked references directly without using a consumer reporting agency. For example, if an employer called a school directly and found out that a candidate did not have the degree they said they did, the employer can choose to deny the job without following FCRA procedure.

    For more details, the Federal Trade Commission has a good article on its website called Using Consumer Reports: What Employers Need To Know.

    Employer Credit Checks Under Fire

    In this time of high unemployment, the steps employers take to investigate candidates are being scrutinized more then ever. The Ban the Box law in Massachusetts prohibits employers from asking candidates about their criminal history on the initial written job application.  Pre-employment credit checks are also being scrutinized. As of now, Hawaii, Washington, and Oregon have laws prohibiting the employer from performing a credit check on candidates, with limited exceptions.  Many more states are also introducing similar legislation. The EEOC discourages employers from performing credit checks due to adverse impact on minorities and females, unless the candidate’s credit history is directly related to the particular job. The recession brings this issue to light, as many people looking for work may also have a tarnished credit history due to falling upon hard times. The EEOC held a public meeting last week to allow supporters from both sides of the issue to present their view. See the EEOC press release.

    Those against performing pre-employment credit checks say that the practice is harmful and unfair to workers. It negatively affects those with poor credit, and statistically, minorities and females tend to have lower credit ratings, which can make a discriminatory impact on hiring. It also poses a “catch 22” for those with poor credit who need a job to to improve their credit.

    Those in favor of performing credit checks say that most employers do not check credit history for every single position, the credit check is one of many tools to screen candidates, and helps to protect the company against fraud.

    As an employer, if you currently use credit history to make employment decisions, best practices are to first determine if it’s necessary to check credit for every position, and then document why it is necessary for those positions.

    Does Your 401(k) Plan Allow Loans?

    In the spectrum of employee benefits, 401(k) savings plans are one of the most widely used ways to help employees save for retirement.  401(k) plans (see: different types of 401k plans) are meant to be long term savings vehicles, and the IRS has many rules in place for discouraging use of this money for short term needs.  But it’s no secret in today’s economy that employees are turning to their 401(k) accounts for some relief from mounting debt.  There are limited circumstances where an employee must show a financial hardship in order to access their money sooner than retirement.  But taking a hardship withdrawal also means that the employee may have to pay a 10% early withdrawal tax penalty if they are under age 59-1/2, and the employee is suspended from contributing any more money for another six months.  This should be the absolute last resort because it really hinders the goal of saving enough money for retirement.

    But what about loans?  What if an employee is in a bind, and wants to borrow money from their 401(k)?  Although not the ideal place to borrow money, 401(k) loans aren’t as damaging to the employee’s retirement nest egg as hardship withdrawals because:

    1. There are no income taxes on the loan, as long as they pay the money back.
    2. There is no 10% early withdrawal penalty, as long as they pay the money back.
    3. Unless your plan says otherwise, there is no suspension of contributions.  The employee can continue to make salary deferrals and contribute to their 401(k) account at the same time they are repaying their loan.
    4. The process for obtaining a 401(k) loan is quicker and the cost is cheaper than applying for a bank loan.
    5. The employee is paying themselves back with interest.
    6. Normally the employee can borrow up to 50% of their vested account balance, up to $50,000.

    When an employee takes a loan on their 401(k) money, they essentially are paying themselves back at an interest rate that’s outlined in the plan document.  A common interest rate used is the Wall Street Journal Prime Rate or Prime + 1% or 2%.  With the Prime Rate being so low these days (3.25% as of right now), 401(k) loans are a popular choice among employees to access their money.

    There are definitely some drawbacks and limitations that employees need to be made aware of before taking a loan:

    1. Taking a loan reduces the money in your account.  Therefore this reduces the ability for your account balance to grow, and this loan money will miss out on investment gains.
    2. If your employment terminates before you are able to pay back the entire loan, the remainder of the unpaid loan does become taxable, and subject to the 10% penalty if under age 59-1/2 .
    3. The maximum time to repay a loan is five years.  If you are borrowing to purchase a home, the term loan can be extended.
    4. If you are borrowing to purchase a home, the interest you pay is not tax deductible.
    5. The loan is repaid with after-tax payroll deductions.  So your take home pay will be reduced by the actual amount of your loan repayment.

    If you don’t currently allow for loans and are considering adding them to your 401(k) plan, there may be additional expenses and will be additional administration for each loan request.  The administration steps go something like this:

    • Step 1:  The employee completes a loan request form.  This can either be a piece of paper, or online if your 401(k) provider has a website that allows for this.
    • Step 2:  The plan administrator normally approves the request before submitting it to the 401(k) provider.  I can’t speak for all 401(k) providers, but nowadays, the loan processing time should take less than a week.
    • Step 3:  Upon receiving the loan request, the 401(k) provider will create a loan amortization schedule and send the employee a check (or wire the money) along with their repayment schedule.  Sometimes the employee is required to sign a separate promissory note, sometimes the employee agrees to the terms of the loan simply by endorsing the back of the check.
    • Step 4:  The 401(k) provider will also send a copy of the loan repayment schedule to the plan administrator.
    • Step 5:  This employee’s loan repayment will need to be set up as an after-tax deduction in your payroll system.   If your payroll software has the ability to track a “lifetime limit” or “goal, the deduction will automatically turn off once it has reached the limit.
    • Step 6:  The loan repayment will need to be remitted to the 401(k) provider each pay, along with salary deferrals and company contributions.  It’s very important to make sure these repayments get submitted, or else the loan could go into default.

    Be sure to keep all documentation for each employee’s loan request, as you will need this if/when your 401(k) plan is audited.

    It’s important for both the plan administrator and employees to be aware of the caveats of 401(k) loans.  Although borrowing from a 401(k) should not be encouraged, it could be a better alternative for the employee than an early withdrawal.

    There are a ton of details involved in 401k withholding, are you prepared to deal with that while running payroll? Don’t worry, our easy payroll software has you covered. We automatically update our software for policy changes, so that you don’t have to stress over it. Try it for free today!

    W-2 Health Cost Reporting Delayed One Year

    Good news for employers and payroll administrators!  According to an IRS News Release posted earlier this week, employers will have an additional year to comply with the Affordable Care Act requirement to show total healthcare costs on the W-2.  Originally, this requirement was to begin with 2011 W-2’s, but now the employer has the option to either begin reporting in 2011, or can wait until 2012 with no penalties.  The IRS has issued a draft 2011 Form W-2 showing how the W-2 will look for next year’s wages.  This will give employers and payroll providers more time to ensure that payroll systems are set up properly to comply with this requirement.

    The IRS expects to issue further guidance on this reporting requirement before the end of the year for employers who do choose to report in 2011.

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