Breaking News

Payroll Debit Cards Becoming More Common

More employers are exploring the use of paycards instead of issuing paper payroll checks to employees who do not use direct deposit and don’t have bank accounts.  About 8% of U.S. households don’t have accounts in financial institutions, according to the Federal Deposit Insurance Corporation.  Paycards are often a less expensive way to distribute wages and employees can use them at many bank ATMs and in most cases can be used to make purchases from retailers or pay bills online.

While benefits to users of the cards include no check-cashing fees, users need to be aware of potential fees associated with ATM withdrawals or paying bills online, as well as monthly fees and other charges that may apply.   Employers need to be clear and upfront with employees regarding the potential fees that may be encountered when introducing paycards to employees.

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Honoring Diversity with Holiday Parties

Planning holiday parties can be challenging when trying to honor different cultures and religions.  Experts recommend that the emphasis be placed on celebrating and focusing more on what we share and less where we differ.  Trying to recognize every group often results in inadvertently leaving out someone.  The solution is to go for neutrality rather than specificity.

HR Experts On Demand recommends employers consider the following when planning and conducting holiday parties:

Focus on the opportunity to get to know more about co-workers and their families and celebrate the opportunity to spend time together.

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Paycheck Fairness Act Bill Fails

The U.S. Senate came up two votes short of passing the Paycheck Fairness Act during a vote on November 17th.  This Act would have significantly restricted factors used to compensate employees, and is now dead for the remainder of 2010.  Both SC Senators voted “no” on this important issue.  HR Experts On Demand will continue to follow this and other emerging issues impacting HR Management in small businesses.

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Employers Can Switch Health Care Carriers and Retain “Grandfathered” Status

An amendment issued on November 15, 2010, by the US Department of Labor, Health and Human Services and Treasury Department now allows employers to retain “grandfathered” status with their health plans when they change carriers if they maintain the same structure of coverage and don’t violate one of the other rules for maintaining “grandfathered” status.  The “grandfathered” exemption allows companies to avoid certain new coverage mandates and reporting requirements under the Affordable Healthcare Act.  Click here for facts regarding “grandfathered” status.  The amendment allows all group health plans to change insurance companies, shop for the same coverage at a lower cost and maintain their “grandfathered” status, as long as the change in issuer does not result in significant cost increases, a reduction in benefits, or other change described in the original grandfather rule.

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Final GINA Regulations Issued by EEOC

The Equal Employment Opportunity Commission (EEOC) issued its final regulations regarding the Genetic Information Nondiscrimination Act (GINA).   Title II of GINA prohibits employers with 15 or more employees from engaging in employment discrimination against individuals because of their genetic information. The final regulations require employers to warn employees not to provide genetic information.   Doing so allows employers to claim a safe harbor when genetic information is inadvertently received.   Specific language has been provided by the EEOC that is recommended to be contained in the notice or warning.  The recommended language asks employees not to provide genetic information and also provides a definition of what is considered genetic information.  The EEOC stated that the notice may be conveyed verbally if that is a business’s practice, or in writing.  The notice is also recommended to be attached to FMLA certification forms when given to employees to complete and take to their providers.  Wellness programs that include health risk assessments can avoid violation of Title II of GINA by identifying questions related to genetic information and make clear that the individual need not answer the questions.  HR Experts On Demand recommends that employers begin providing the notice to employees in guidebook policies as well as all situations where medical information is being requested.  Supervisors and Management should be advised not to make specific inquiries relative to health issues of employees or family members, in order to avoid inadvertently receiving genetic information.

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Contact Your Senators Now Regarding the Paycheck Fairness Act

The senate is scheduled to vote on the Paycheck Fairness Act (PFA) during the week of November 15-19.  This bill would significantly restrict the factors used to determine compensation of employees, authorize the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL) to collect wage information from employers of all sizes, and encourage employees to publicly disclose their colleagues’ wages.  If passed this bill would permit employers to base pay decisions only on production, merit and seniority of employees, and not consider experience, education, training, local labor market rates, shift differentials and profitability of an organization.  It further would enable the EEOC and DOL to collect compensation data from employers of all sizes and prevent retaliation against employees who publicly disclose the wages of other employees.  HR Experts On Demand recommends employers contact their Senators immediately and advise them how they should vote on this important issue.

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2011 Retirement Plan Contribution Limits Established

The IRS has announced limits for retirement plan contributions for 2011 as follows:

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South Carolina Has an Interesting Amendment on Ballot for the
November 2nd Election

The state of South Carolina has an interesting amendment on its ballot for the November 2nd election.  The South Carolina Secret Union Voting Amendment, also known as Amendment 2, will appear on the ballot as a legislatively-referred constitutional amendment.  The measure will allow voters to decide whether or not secret ballots are a fundamental right in a union election. 

You are probably aware that over the past four years, there have been efforts by the United States Congress to pass the federal Employee Free Choice Act.  This legislation would eliminate secret ballot union elections if the majority of employees in a company simply signed a union authorization card.  While this legislation passed in the House, it did not pass in the Senate.  Many congressmen, as well as President Obama, are in favor of this legislation.  The future status of the bill is unclear at this time.

The South Carolina ballot will read:  “Must Article ll of the Constitution of this State, relating to the right of suffrage, be amended by adding Section 12 so as to provide that the fundamental right of an individual to vote by secret ballot is guaranteed for a designation, a selection, or an authorization for employee representation by a labor organization?”

Explanation:  “a ‘yes’ vote will give employees the constitutional right to vote by secret ballot when they are voting on whether to be represented by a labor union.”

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W-2 Reporting Requirement Delayed

The IRS announced that employers will not be required to report the cost of employer-sponsored group health coverage on Forms W-2 for 2011, as was initially  required under the Patient Protection and Affordable Care Act of 2010 (PPACA).  PPACA required employers to report the aggregate cost of “applicable employer-sponsored coverage” on Forms W-2 issued to employees for 2011. The IRS now has indicated the reporting requirement will not be mandatory for Forms W-2 issued for 2011, and no penalties will be imposed for failure to report the cost of coverage.  “Applicable employer-sponsored coverage” is generally defined as coverage under any group health plan made available to an employee by an employer that is excludable from the employee’s gross income under the Internal Revenue Code.  This delay was issued to provide employers with additional time to make any necessary changes to their payroll systems or procedures in preparation for compliance with the reporting requirement.  Further guidance from the Treasury Department and IRS is anticipated before the end of 2010.

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Small Business Jobs and Credit Act of 2010 Signed into Law

President Barack Obama signed the Small Business Jobs and Credit Act of 2010 into law and indicated the bill will help provide loans to small business and cut taxes for millions of small business owners without adding to the deficit.  The Treasury Department will administer the new lending fund and distribute the money to small community banks that qualify by promising to extend loans to small business owners.  Tax breaks included in the legislation are:

• Exclusion of capital gains:  The legislation will eliminate taxes on capital gains for investments in qualifying small businesses.
• Help for start-ups:  The legislation increases the cap in deductions for business expenses for start-ups from $5,000 to $10,000 for 2010.
• Increase of Section 179:  In an effort to get companies to spend money and invest in equipment, the legislation changes Section 179 of the tax code by allowing businesses to write off capital expenditures immediately.

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Compliance Important with Temporary Staffing for the Holidays

Employers who add temporary staff for the holiday season are reminded that legal requirements apply to these short-term workers. Frequently, employers ignore some worker protections because of short employment duration; however, HR Experts On Demand recommends the following areas be prudently addressed:

• I-9 requirements must be followed for temporary workers.
• Avoid creating a contract of employment by indicating the employee will be employed for a certain number of days.  Instead, indicate the period of employment will be no more than “X” number of days and employment remains at-will.
• Provide an Employee Handbook for temporary employees which includes policies that apply to them, requires them to sign off to acknowledge receipt, and agree to be bound by its policies.
• Do not classify temporary workers as independent contractors unless a thorough analysis has been conducted to determine the work fits the criteria of independent contractors.
• If minors are hired, make sure FLSA directives regarding hours of work and type of work for the worker’s age group are followed.
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 ICE and DOL Collaborate to Target Employee Misclassification and Worker Eligibility


Both the U.S. Immigration and Customs Enforcement (ICE) agency and the U.S. Department of Labor’s Wage and Hour Division are scheduling inspections and audits this fall focusing on misclassification of employees as independent contractors and worker eligibility.  The two agencies are working together, targeting industries with historically high rates of past violations such as manufacturing, distribution, hospitality and sanitation.  HR Experts On Demand advises employers to review, carefully consider, and document factors for determining independent contractor status, review I-9 documentation and processes to ensure records are accurate and up-to-date, review payroll documentation relative to minimum wage and overtime pay requirements, and seek assistance to conduct the reviews if needed.  Companies who receive notice of an inspection or audit are advised to contact their attorneys before responding to agency communications.

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Use of Smart Phones Creates Overtime Pay Issue

A recent lawsuit involving the Chicago Police Department brings to light the importance of a clear policy regarding use by non-exempt employees of company-provided equipment during non-working hours.  Many employers provide non-exempt employees with company cell phones so they can respond immediately to work-related issues during scheduled work hours.  However, when non-exempt employees respond to calls during non-working hours, the time becomes compensable under the Fair Labor Standards Act (FLSA), and the phone records provide clear proof of the time spent on calls.  Regardless of whether the employee is authorized to respond to these calls after hours, the time must be paid, including pay at time and one-half when total hours for the work week exceed 40.  HR Experts On Demand recommends employers implement a clear policy regarding response to calls, e-mails, text messages, or other communications involving customers or clients during non-work hours.  The risk of litigation and FLSA violations will be minimized by implementing a policy that restricts smart phones and other communication devices only to exempt employees, or by instructing non-exempt employees to communicate with customers or clients only during regular work hours.

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Bill Would Help Small Businesses

The U.S. Senate approved the Small Business Jobs and Credit Act of 2010 on September 16th and has forwarded to the House of Representative for debate.  The bill is designed to give an economic boost to small businesses through tax breaks and easier access to credit.   Proponents estimate it would create up to 700,000 new jobs.  Opponents claim it is just another bailout for banks and would do little to help small business owners.  The Senate version includes nearly $12 billion in tax relief for small businesses and a new $30 billion lending fund.  President Obama has been actively encouraging Congress to approve the legislation so he could sign into law.

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Employers Reacting to Costs of Healthcare Reform

Healthcare cost increases for 2011 are now estimated at an overall average of 10.1% to comply with the Patient Protection and Affordable Care Act (PPACA)  and trend increases. Small employers are predicting nearly 12% increase in their fully-insured plans.  Requirements of PPACA now in effect, including extending dependent eligibility to age 26 and removing annual and lifetime benefit maximums, account for 2.3% of the total increase.  Nearly half of respondents to a recent Mercer survey indicated they will not retain grandfathered status for their plans because of the severe restrictions of doing so.  Small employers indicate they will make adjustments to plan design and cost shifting to bring their cost increase down to 6%.  Small employers are putting their plans out for bid, and increasing premium share for employees, with significant premium increases for dependent coverage.  Employers are encouraged to carefully consider the short and long-term impact of plan design and cost shifting strategies, as well as communicate frequently and consistently with employees regarding the impact of healthcare costs on the business and how employees can help to manage their costs.

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More Pending Legislation Targeting Misclassification of Workers

Both the House of Representatives and Senate have introduced their versions of The Fair Playing Field Act of 2010, a bill that further addresses misclassification of employees as independent contractors.  The bills would end IRS guidance regarding worker classification and require the Secretary of the Treasury to issue prospective guidance clarifying the employment status of individuals for federal employment tax purposes.  These bills come on the heels of the Employee Misclassification Protection Act that was introduced in April this year, focusing on wage and hour issues associated with misclassification of employees as nonemployees.  As reported earlier, the Labor Department also announced in its spring 2010 regulatory agenda, a plan to issue a proposed rule that would require employers to conduct an analysis in writing as to the classification status of independent contractors and provide a copy to workers.  Employers are urged to review, carefully consider, and document factors for determining employee or independent contractor status to demonstrate good faith efforts in properly classifying workers.

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Sexual Harassment In The Workplace Is Still Prevalent

While it has been almost 20 years since the infamous sexual harassment case between Anita Hill and Clarence Thomas, and 12 years since the Bill Clinton-Monica Lewinsky affair, sexual harassment in the workplace continues to occur.  According to a recent poll of 12,000 people in 24 countries globally, nearly 10 percent reported they had been harassed sexually or physically at work.  In the United States, that number was approximately 8 percent.  It is unclear why the problem is increasing, which might be suggested with the more recent high-profile reports of sexual harassment involving senior-level executives, or whether employees feel more empowered to report the incidents.  The survey found that people age 35 and under were most likely to report being sexually harassed at work.  HR Experts On Demand recommends employers review their discrimination and sexual harassment policies and procedures, and update management training to prevent, identify and resolve potential claims of sexual harassment.

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HR Audits and Records Maintenance Are Important to Avoid and
Limit Company Liability

Regular audits of HR documents, collection and usage of employee information, document retention, and destruction, and administrative practices can help to limit company liability issues and penalties resulting from improper employment records maintenance procedures and HR practices.  Privacy and usage of medical information about employees is protected by HIPAA Privacy, HIPAA Security, HITECH Act and ADA.  Employee files should only contain information relevant to the job and nothing that distinguishes an employee’s protected class.  Company information systems need to be secure and maintained to avoid company liability due to unauthorized access and identity theft.  State and federal record retention laws address the length of time certain documents must be retained or when they should be destroyed, and companies should have policies in place to address record retention as well as process for destruction.  I-9 documents must be maintained separately from employee personnel files and kept up to date.  These issues, and more, are addressed in HR Document and Compliance Audits conducted by HR Experts On Demand, and cover more than 15 categories of document compliance and best practices.

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Congressional Bill Would Provide Business Incentives to Hire Veterans

The House of Representatives Veterans’ Affairs Committee’s Subcommittee on Economic Opportunity has referred a new Bill, H.R. 5484, along with an amendment to a previous Bill, H.R. 929, to full committee that would create business incentives to hire veterans and provide job training for unemployed veterans.   The proposed legislation would result in quarterly payments to employers for providing apprenticeship and on-the-job training to eligible veterans leading to job offers upon completion of the training.  The payments would amount to one-half of the usual hourly wages for employees in training – up to a total of $20,000.  Eligible veterans would include those who were not otherwise eligible for education or training services, had been honorably discharged, had not acquired a marketable skill since leaving military service and had been unemployed for at least 90 of the preceding 180 days, or earning not more than 150% of the federal minimum wage.  Watch for updates regarding this pending legislation.

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Company Liability for Failure to Report Discovery of Employees Viewing Child Porn

Did you know that seven states, including South Carolina, require information technology workers to report the discovery of child pornography on company computers to law enforcement officials?  Failure to report such information could result in fines or jail time.  Companies also face potential exposure to criminal prosecution for not reporting someone who’s engaging in child pornography using the company’s electronic resources.  Companies frequently are reluctant to report these findings for reasons such as involvement of high ranking executives, because they are horrified, or embarrassed.   It is illegal to download child pornography from a website under federal law and includes a mandatory minimum prison term of five years for receipt, possession or distribution of child pornography.  HR Experts On Demand recommends companies review their policies to make sure illegal and inappropriate use of computers is banned, that there is no reasonable expectation of privacy when using a company computer, disciplinary actions for policy violations are spelled out, that the policy is applied consistently, and annual training to remind employees of the policy is conducted, in order to limit liability. 

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Department of Labor provides $97.5 Million to SC for Jobless Benefits

As the result of enacting laws that extend benefits to more people, South Carolina will receive an additional $97.5 million from the U.S. Department of Labor for unemployment insurance benefits.  The newly enacted laws allowing for the additional monies provide unemployment benefits to part-time workers and recent entrants to the workforce, as well as people who become unemployed for reasons related to sick or disabled immediate family members.  The money is available from the American Recovery and Reinvestment Act, does not have to be repaid to the government, and is available to the state immediately.

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Persons With Disabilities Promised More Job Opportunities

Along with commemorating the 20th anniversary of the Americans with Disabilities Act, President Obama signed an executive order calling for several federal agencies to design recruitment and hiring strategies within 60 days that will be used as a model for hiring more people with disabilities.  Training for hiring managers and human resources staffs has also been mandated regarding how to employ people with disabilities.  He has ordered federal agencies to hire 100,000 more employees with disabilities over the next five years.

A senior level official at each agency will be in charge of improving employment opportunities for people with disabilities and will oversee the development of the agencies’ plans, create recruitment and training programs, and coordinate employment counseling.

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Clarification Issued on Allowable Cost Sharing for Preventive Services

The Patient Protection and Affordable Care Act (PPACA) requires employers to fully cover certain preventive services, such as screenings and immunizations, with no employee cost-sharing requirements for plans that are not grandfathered beginning on or after September 23, 2010.   However, regulations issued by the departments of Labor, Treasury, and Health and Human Services identify circumstances when cost sharing will continue to be allowed.  Examples include:

Preventive services that employees receive from out-of-network providers

Office visits when a recommended preventive service is billed as a separate charge

Treatment resulting from a preventive service if the treatment is not itself a recommended preventive service

Estimates from regulators are that requiring allowable preventive services to be provided with no cost sharing will increase group health care plan costs by an average of 1.5% for employers that do not already provide preventive services coverage.  Overall costs could be lower in the future if medical problems are spotted and treated as the result of preventive tests and screenings.

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Government Website Provides Resources for Healthcare Reform Issues

The federal government has launched its new website:  http://www.healthcare.gov with information for consumers and employers regarding provisions of the Patient Protection and Affordable Care Act (PPACA) as well as general healthcare information and tips.  On its Small Employers link, it lists the top 5 things small business need to know as:

Availability of small business tax credit this year of up to 35% for employers who qualify.

Financial help available through the Early Retiree Reinsurance Program for employer-based plans that provide health insurance to retirees ages 55—64.

Increase in small business tax credit up to 50% in 2014 for qualifying businesses.

Beginning in 2014, small businesses with generally fewer than 100 employees can shop in an Exchange.

Employers with fewer than 50 employees are exempt from new employer responsibility policies.  They don’t have to pay an assessment if their employees get tax credits through an Exchange.

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Clarification of the FMLA Definition of “Son or Daughter” Issued by DOL

The Family and Medical Leave Act (FMLA) allows eligible employees to take up to 12 weeks of unpaid leave during a 12-month period to care for a child, spouse, parent, or for themselves, and includes time off for the adoption or the birth of a child.  New guidance issued by the U.S. Department of Labor clarifies the definition of “son or daughter” as it relates to “a child of a person standing in loco parentis.”  The definition of loco parentis is “in place of parent.”  Persons who have no biological or legal relationship to the child may now be eligible for unpaid FMLA leave under the new interpretation.  The clarification states that “the employer may require the employee to provide reasonable documentation or statement of a family relationship.  A simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship.”  Further, “it is the Administrator’s interpretation that the regulations do not require an employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child.”   The letter specifically includes unmarried partners and same sex partners, and clearly states that, “Neither the statute nor the regulations restrict the number of parents a child may have under the FMLA.”   In addition to coverage by same sex and unmarried partners, other examples include uncles who care for nieces or nephews when their single parent has been called to active military duty or grandmothers who care for a sick grandchild when the mother is also ill.

HR Experts On Demand recommends that employers carefully consider FMLA requests by employees to act in loco parentis in light of this interpretation, as well as all requests for FMLA leave.

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Do Reference Checks Really Make A Difference?

Do you think that checking professional references prior to hire is a waste of time and candidates only provide references who are going to say positive things about the candidate?  According to a recent survey by OfficeTeam of more than 1000 senior managers at companies with 20 or more employees, 21% of job seekers are dropped after reference checks are completed.  In addition to Background Checks, which verify items such as social security number, employment and academic verification, criminal history, and searches of the Patriot Act and Sex Offender registries, HR Experts On Demand recommends professional Reference Checks to get a better picture of the candidate’s work habits, behaviors, relationships, and applied skills. 

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Plan/Prevent/Protect May Be the Next Regulatory and Enforcement Initiative.

The Department of Labor (DOL) has announced its Spring 2010 Regulatory Agenda to include a “Plan/Prevent/Protect” strategy that mandates all employers prepare, implement and share with employees their comprehensive compliance programs for wage and hour, workplace safety and health, affirmative action, and pensions.  This new strategy would place the onus on employers to, in effect, certify their own compliance.
 
“Plan” would require employers to create a plan for identifying and remediating potential violations and other risks to workers, and that the plans are available to workers so they can fully understand them and help monitor their implementation.  It would apply to the areas mentioned above, including wage and hour, workplace safety and health, affirmative action, and pensions.

“Prevent” would require employers to thoroughly and completely implement the plans mentioned above  in a manner that prevents legal violations, rather than just creating plans on paper that are not carried out.

“Protect” would require employers to ensure that the plan’s objectives are met on a regular basis, that is, actually protect workers from violations of their workplace rights.

Employers who fail to take these steps to plan, prevent and protect will be considered out of compliance and could be subject to remedial action.  These initiatives are considered only to be the beginning as Congress continues its major emphasis on promoting protection of workers’ rights.  While these initiatives have not yet been implemented, HR Experts On Demand recommends employers begin to audit their current policies and plans in these areas and make appropriate changes to minimize the likelihood of federal enforcement actions, private lawsuits or union organizing.

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Emergency Unemployment Compensation and COBRA Premium Subsidies End?

As of June 2, 2010, the extension for federal Emergency Unemployment Compensation ended, as did Cobra premium subsidies on May 31, 2010.  To date, Congress has not passed further extensions to either of these benefits.  A proposal, H.R. 4213 which would extend both benefits through the end of the year met resistance and extension to both benefits has not been passed.

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Businesses with Fewer than 100 Employees
Must Comply with State Verification Laws on July 1


Starting  July 1, businesses with fewer than 100 employees must comply with South Carolina’s 2008 immigration law which requires employers to verify the work status of all new employees hired.  Employers can use the federal E-Verify database, which is free, or they can require a state-issued driver’s license or identification card, or documents issued by certain reciprocal state.   Under the SC law, using E-Verify is a safe harbor.  Employers who choose E-Verify must use it consistently with all newly hired employees.  Verification under the state law must be made within five days of hire.  The law does not change requirements of federal employment verification laws.

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Update to E-Verify Launched 6-13-10

A redesigned E-Verify interface has been launched by the U.S. Citizenship and Immigration Services in order to provide enhanced security, usability, accuracy and efficiency.  Users must complete a short tutorial before using the redesigned system.  The USCIS website has also been updated to be more user-friendly, include simplification of terminology and includes easy-to-find, useful links. 

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Clarification of Restrictions to ‘Grandfathered’ Health Plans

Interim Final Rules designed to clarify allowable changes to health care plans that can be made and permit the plans to retain a ‘grandfathered’ status under the Patient Protection and Affordable Care Act (PPACA) have been issued, and include a fact sheet that can be viewed here.  Grandfathered plans do not have to comply with two of the new requirements under the PPACA.  Routine changes that can be made and allow plans to retain grandfathered status include:

• Cost adjustments to keep pace with medical inflation
• Adding new benefits
• Making modest adjustments to existing benefits
• Voluntarily adopting new consumer protections under the new law
• Making changes to comply with state and other federal laws
• Routine and modest adjustments to co-payments, deductibles and employer contributions

All health plans, including grandfathered plans, must include the following provisions for plan years beginning on or after September 23, 2010:

• 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

Plans for the vast majority of Americans who get their health insurance through employers, whether a plan is grandfathered or not will also provide:

• No exclusions for children with pre-existing conditions
• No “restricted” annual limits
Plans that are not grandfathered must also provide:
• 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:

• Federal Emergency Unemployment Compensation (EUC) has been extended to allow applicants to file for benefits from April 5, 2010 to June 2, 2010, and receive benefits from September 4, 2010 to November 2010.
• Individuals may also qualify for Federal Additional Compensation (FAC) for the same period as federal Emergency Unemployment Compensation (EUC) and receive an extra $25 weekly benefit on state and federal unemployment compensation.
• The federal government will provide 100% reimbursement for weeks of regular federal extended benefit payments for an extended period from April 5, 2010 to June 2, 2010, and allows the state option to continue the benefit extension from September 4, 2010 to November 6, 2010.
• Eligibility for the COBRA health insurance 65% subsidy has been extended to people who lost their jobs through May 31, 2010.  Transition relief for individuals who lost their jobs between March 31, 2010 and the date of enactment has also been provided.

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:

• The internship must be similar to training provided in an educational environment.
• The internship experience must be solely for the benefit of the intern.
• The intern does not displace a regular employee and works under close supervision.
• The employer accommodating the internship gets no immediate advantage from the intern’s activities, and may find his operations impeded by the intern’s presence.
• The intern is not necessarily entitled to a job at the conclusion of the internship.
• Both the intern and the employer understand that the intern is not entitled to wages for time spent in the internship.

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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DOL Announces 2010 Goals
and Hires 250 Investigators
(December 2010)

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.


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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 Random 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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