• No lifetime limits on coverage for all plans
• No rescissions of coverage when people get sick and have previously made an unintentional mistake on their application
• Extension of parents’ coverage to young adults under 26 years old

• No exclusions for children with pre-existing conditions
• No “restricted” annual limits

• Coverage of recommended preventive services with no cost sharing
• Patient protections such as guaranteed access to OB-GYNs and pediatricians

The fact sheet estimates that about 70% of small businesses with health care plans will be grandfathered in the first year.  The projection is based on the fact that small businesses typically buy commercial insurance and frequently make changes in insurers and coverage.  The interim rules also outline requirements for increased transparency, and conditions when a grandfathered status can be revoked.

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Young Adult Coverage under PPACA

The new Patient Protection and Affordable Care Act (PPACA) provides that adult children must be allowed to remain covered on their parent’s group health care plan until age 26, effective for plan or policy years beginning on or after September 23, 2010.  The Department of Health and Human Services encourages employers to allow this expanded coverage immediately in order to avoid gaps for new graduates or other young adults, and avoid costs of removing from coverage and re-enrolling them later.

Coverage must be allowed if the young adult does not have other employer-provided coverage available, even if the young adult no longer lives with the parent/parents, or is not a dependent on a parent’s tax return, or is no longer a student, or married.  If married, the young adult’s spouse or children do not qualify.  Plans must allow for a 30-day enrollment opportunity for the young adults and a written notice.  The value of any employer-provided health coverage for young adults is excluded from the employee’s income for tax purposes.  More detail and a list of companies who are immediately implementing this coverage can be found here.  While the Department of Health and Human Services estimates this change will only raise premiums in 2011 for employer plans about 0.7%, health insurers predict this provision alone will increase premiums 1.5%-2%.  Some consultants are estimating a total health care cost trend increase of 11% or more for 2011.  According to Mercer, an HR consultancy, cost increases have averaged 6% per year over the last five years.

Employers will need to determine whether to add the young adult coverage now or wait until renewal, decide how to handle eligible young adults currently on COBRA, and determine a communications plan regarding this issue.

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IRS Provides Guidance For Tax Treatment of Coverage For Adult Children

In order to encourage employers to provide immediate dependent coverage to adult children under age 27, the IRS has released guidance in Notice 2010-38.  The guidance allows both the reimbursement for adult children’s medical care, and the value of the coverage to be excluded from gross income under Section 106 of the IRC, and further confirms these benefits are not considered wages for FICA and FUTA purposes.  The guidance additionally allows employees to revoke a current election under a Cafeteria Plan and authorize a new election as the result of the change-in-status event, in order to pay for the additional costs of adding adult children to the plan.

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Limits Unchanged for 2011 Health Savings Accounts and High-Deductible Health Plans

Qualified high-deductible health plans (HDHPs), also known as catastrophic plans, have higher deductibles as their name implies, and lower premiums than traditional plans and are a growing trend with U.S. employers.   When a high-deductible health plan is in place, employers may also establish Health Savings Accounts (HSAs).  These accounts are owned by the employee and are tax advantaged with no federal tax withheld on funds deposited into these accounts.  The funds may be used by the employee to pay for qualified medical expenses without tax liability.
For 2011, the IRS has determined no change will be made to the limits for High Deductible Health Plans and Health Savings Accounts.  Limits will remain as follows:

2011 Limits for High-Deductible Health Plans and Health Savings Accounts

HDHP minimum deductible amounts	Individual: $1,200    Family: $2,400
HDHP maximum out of pocket amounts	Individual: $5,950    Family: $11,900
HSA statutory contribution amount	Individual: $3,500    Family: $6,150
HSA catch-up contributions (age 55 or older)	$1,000

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FLSA Misclassification Bill in both Houses of Congress

The Employee Misclassification Prevention Act targets abuse of the employee/independent contractor classifications and is aimed at ensuring that employees are properly classified under the Fair Labor Standards Act (FLSA).  The FLSA establishes federal minimum wage and overtime provisions, among other things.  If passed, this bill would increase penalties on employers for misclassification up to $1,100 per employee for first-time violators and up to $5,000 per employee for repeat or willful violators, allow for double liquidated damages, increase reporting and communication requirements, provide protection from retaliation, and other reforms.  This Bill would have an immediate impact on employers and their use of independent contractors, require additional record keeping, reporting and communications by employers, and allow for heavier penalties for violations including first-time offenses occurring under good faith.

Employers need to review and update job descriptions and ensure proper classification of employees and independent contractors.  Obtaining outside assistance from experts helps to show good faith efforts for proper classification.

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October 1, 2010 New Date for Federal Drug Testing Guidelines Revisions

Implementation of revisions to the Mandatory Guidelines for Federal Workplace Drug Testing Programs has been delayed from May 1, 2010, to October 1, 2010, by the U.S. Department of Health and Human Services.  The revisions will require testing for Ecstasy (also known as MDMA) and 6-acetylmorphine (a metabolite of heroin), as well as lowering of the test cutoff concentration for amphetamines, and for cocaine.

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W-2 Reporting Requirement Requires Immediate Attention

For tax years beginning 1-1-2011, employers are required to report the aggregate cost of employer-sponsored health insurance coverage on employees’ Form W-2s.  Because employees who terminate during the year may request their Form W-2s early, the change to payroll systems must be in place by January 2011.  Reporting must include a monthly calculation of costs of medical plans, prescription drug plans, executive physicals, on-site clinics, Medicare supplemental policies, and employee assistance programs.  Dental and vision costs must also be included unless they are “stand-alone” plans.  Early interpretation suggests reporting also applies to former employees who are provided health coverage, such as early retirees and terminated employees on COBRA, and their surviving spouses, even though they would not normally receive a Form W-2.  Should this interpretation stand, it could dramatically increase an employer’s overall W-2 reporting requirements.

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Latest Extension to Unemployment Comp and COBRA Subsidy

The latest extension for Unemployment Compensation and COBRA Subsidy was passed on April 15, 2010, and provides the following extensions:

Another proposal, H.R.4213 is being considered that would extend unemployment and COBRA benefits through the end of 2010.

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Veterans Are In Demand For Jobs In 2010

Through the first quarter of 2010, employers have expressed significantly more interest in hiring veterans than in the previous two years.  Organizations that help veterans become re-employed indicate more employers are attending job fairs focusing on military personnel and asking for referrals.  While employers are asking questions about veterans’ abilities to transition to civilian life and cope with post-traumatic stress disorder, these issues have not been stumbling blocks to job offers.  Many employers find veterans to be highly disciplined workers with strong skills and to be high performers.

Employers must be certain to follow laws such as the Family and Medical Leave Act (FMLA) and the Uniformed Services Employment and Re-employment Rights Act (USERRA) as they apply to veterans and family members, and be aware of their responsibilities to make reasonable accommodations under the Americans With Disabilities Act (ADA) and amendments when needed. 

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Standards Set for Internships in the “For Profit” Private Sector

The DOL recently released new standards for employers to use in determining whether or not they are required to pay at least minimum wage and overtime under the Fair Labor Standards Act (FLSA) to the interns for their services.  The standards apply only to “for profit” private sector employers.  Should the internship meet the standards and be considered training, employers are not required to pay interns.  Six criteria are involved and include:

Should all six criteria exist, it is not necessary to consider the intern an employee and the provisions of the FLSA do not apply to the intern.  If interns are engaged in the operations of the employer or performing productive work, employers will be required to consider the intern an employee and meet wage and overtime requirements of the FLSA.  When establishing internship programs, employers should consider carefully the training to be assigned and type of supervision provided.
The DOL plans to continue its review to determine whether additional guidance is needed for internships in the public and not-for-profit sectors.

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COBRA Subsidy Extended Again
(March 2010)

President Barack Obama has signed legislation that extends the deadline for qualifying for subsidies for COBRA continuation coverage, allowing workers who are involuntarily terminated in March to qualify for the program. H.R. 4691 extends the deadline so that workers who are involuntarily terminated between September 1, 2008 and March 31, 2010 are eligible for up to 15 months of COBRA subsidies.

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended by the Department of Defense Appropriations Act of 2010, allowed workers who were involuntarily terminated between September 1, 2008 and February 28, 2010 to be eligible for 65 percent COBRA subsidies. So, workers who were involuntarily terminated after February 28 wouldn't have been eligible for the COBRA subsidy unless Congress passed another extension, which it did.

H.R. 4691 extends the deadline so that workers who are involuntarily terminated between September 1, 2008 and March 31, 2010 are eligible for up to 15 months of COBRA subsidies. The legislation also makes a few other changes and clarifications about the COBRA program.

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DOT Announces Texting Ban for Truck Drivers
Distracted Driving a Problem for All
(January 2010)

U.S. Department of Transportation prohibits texting by interstate truck drivers and commercial bus and van drivers who carry more than eight passengers.  Truck and bus drivers who text while driving commercial vehicles may be subject to civil or criminal penalties of up to $2,750.  Distracted driving is a problem that persists in any business where employees travel in a vehicle as part of their daily tasks.  The risk applies to administrative employees as well as sales representatives, consultants and commercial drivers.  Employers may be liable for the actions of their employees who are distracted while driving, even if the employee is using the cell phone for business purposes on his or her personal time. HR Experts On Demand^SM encourages every employer to develop a Distracted Driving policy and incorporate it into its Employee Handbook.  It should cover the new DOT  new regulation and also (1) prohibit all employees from texting (define and give examples) while driving on company business in company owned, employee-owned vehicles and rental cars, and (2) to prohibit (or discourage) all employees from talking on cell phones while in motion. State laws and insurance policy stipulations that govern texting and cell phone use must also be incorporated.

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The Department of Labor will seek to enact an array of 90 rules and regulations in 2010. Its Wage and Hour Division’s regulatory agenda currently has proposed rules the Family and Medical Leave Act (FMLA), record keeping under the Fair Labor Standards Act (FLSA) and other amendments to the FLSA.  The Wage and Hour Division intends to initiate rulemaking to update the record keeping regulation issued under the FLSA. That proposal would require more openness and transparency by demonstrating employers’ compliance with minimum wage and overtime requirements to workers, with the goal of  ensuring better compliance by regulated entities and assist the department with its enforcement efforts.   The division recently hired 250 new investigators to boost its ability to ensure compliance with wage and hour laws. HR Experts On Demand^SM encourages employers to perform internal audits of compliance with all existing FLSA wage and hour regulations and, if they have 15 or more employees, the  Lilly Ledbetter Fair Pay Act of 2009.

COBRA Subsidy Law Extended, Expanded
(December 2009)

President Barack Obama signed into law an extension and expansion of the COBRA premium subsidy law. The extension means new compliance obligations for employers, as the program now runs through Feb. 28, 2010, the subsidy period is expanded by six months and new notice requirements must be met within a tight time frame.

The American Recovery and Reinvestment Act (ARRA) of 2009 established a new law under which "assistance-eligible individuals" (AEIs) were initially entitled to receive a 65-percent subsidy for continuation coverage premiums for up to nine months. Under the original law, an AEI is any COBRA qualified beneficiary who elects COBRA coverage and: (1) has a loss of group health coverage as a result of an involuntary termination of employment (other than gross misconduct); and (2) has a qualifying event between Sept. 1, 2008, and Dec. 31, 2009, is otherwise eligible for COBRA coverage during that period and elects that coverage.

The amount of time an AEI can receive a subsidy increases from nine to 15 months.  The subsidy eligibility period is expanded to include the period that begins with Sept. 1, 2008, and ends with Feb. 28, 2010 (formerly Dec. 31, 2009). Significantly, the new rule does not require that COBRA coverage begin by the end of the period (Feb. 28). Instead, the person is an AEI as long as the COBRA qualifying event (involuntary termination of employment) occurs by Feb. 28, 2010, and is entitled to COBRA coverage as a result of that event.  For any AEI for whom the premium subsidy now applies due to the extension, there is a transition period consisting of any period of coverage that begins before December 21, 2009, the extension's enactment date.  Plan administrators must provide a notice on extension rights to AEIs.  Other complex reporting and notice rules must also be complied with.   HR Experts On Demand^SM recommends employers obtain the assistance needed to ensure they are providing the notices and complying with other provisions of the extension and expansion required on a timely basis.  Larger employers (and small employers with 20 or more employees and high turnover) should consider outsourcing all aspects of COBRA administration, an increasing difficult area to administer internally.

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 IRS Launches Radom Employment Taxes Audits
(November 2009)

The IRS has announced that 5,000 or more employers are to be randomly selected for detailed employment tax audits. The focus will be on four areas:  improper classification of workers as independent contractors rather than as employees, fringe benefits, reimbursed expenses, and compensation of owner employees.  Determining whether a worker is classified correctly as an employee or independent contractor has been a recurring audit theme. Who is or is not an independent contractor is not easily determined. Consequently, the engagement of services of a worker as an independent contractor should be carefully reviewed both at the outset and during the course of the relationship. Small businesses and nonprofit organizations often believe they have wide latitude to classify a worker as an independent contractor, and as a result, commonly misclassify workers as independent contractors.  HR Experts On Demand^SM encourages all employers to better understand the factors reviewed by the IRS, including behavioral control, financial control and type of relationship.   Formal agreements should be entered into with those workers properly classified as independent contractors.  Employers should also perform internal audits to determine compliance with regulations related to fringe benefits, reimbursed expenses and compensation of owner employees to make changes in business practices and to help mitigate any risks that may occur if they are subsequently audited by the IRS.

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