SIG08: Recent Legislative Changes in HR/Payroll

1. SIG08: Recent Legislative Changes in HR/Payroll Leslie Vail, CPA, MVP

2. Agenda • 2010 HIRE Act • Work Opportunity Tax Credit – WOTC • Health Care Reform Act – PPACA • W-2 reporting requirement • Provisions currently in force • Grandfathered status Non-health Requirements • Small Business Tax Credit • Medicare Tax Hikes

3. 2010 HIRE Act • Payroll tax holiday! • Hire a worker unemployed for 60 days • No more FICA_S for balance of 2010 • Another $1K available after 52 weeks • continuous 52 weeks employment • 2nd 26-week period pay must be at least 80% of the first 26-week period • No minimum hours • No income limit

4. 2010 HIRE Act • Can’t take both WOTC and HIRE • No family members • Can’t replace a no cause fire • Worker must sign affidavit of unemployment

5. Work Opportunity Tax Credit - WOTC • WOTC Extended thru 8/31/2011 • 12 Targeted Groups • Up to $9,000 for EACH new hire • Forms to file w/in 28 days • Can’t take both HIRE and WOTC Next we have the Health Care Plan

6. Health Care Reform Act – PPACA • W-2 reporting requirement • Provisions currently in force • Grandfathered plans • Not grandfathered plans

7. W-2 Reporting (PPACA) • deferred until the 2012 tax year * • Value of health care benefits provided • Includes employee’s portion too • Calculated according to COBRA rules • Form W-2 draft released 10/12/2010 * W-2 Reporting requirements have been waived by the IRS for 2011

8. Delayed Until 2012

9. W-2 Reporting, what’s included? • Medical plans • Prescription drug plans • Dental and vision plans • unless stand-alone • Executive physicals • On-site clinics • Medicare supplement policies • Employee assistance programs

10. Not included in W-2 Reporting • Long-term care • Accident policies • Disability income • ‘Cancer’ policies • Hospital or other indemnity policy if paid by employee with after tax $ • HSA Contributions • Salary reduction Health FSA • Life insurance

11. When Rules are in Force • Generally speaking, the following rules apply to plan years beginning after 9/23/2010 unless noted

12. Lose Grandfathered Status If: • Change insurance carriers • Reduce benefits • Increase co-insurance % • Raise co-payment >19%* • Raise deductibles >19%* • Raise out-of-pockets >19%* • Cut contribution rate by 5% • No limit on premium increases * includes 15% plus medical inflation – currently at 4%

13. In Force Now for Employers Unrelated to Health Coverage • Max on Tax-favored adoption benefits up to $13,170 per child • Nursing mothers get as many UNPAID breaks as necessary to express milk • Employer must provide a private place to perform above (not the bathroom) • NO GRANDFATHER CONCEPT

14. Small Business Tax Credit • Business pays for health insurance • Fewer than 25 FTE • Average wages < $25,000 • Credit up to 35% of 2010 premium paid

15. Medicare Tax Hikes • Starting in 2013 • Wages over $200K for single • Wages over $250K for married • Additional .9% withholding • Withholding applies to > $200K * • 3.8% Medicare tax on investment income * No exceptions based on marital status

16. Patient’s Bill of Rights • No lifetime dollar limits • No “unreasonable” annual limits • Lift preexisting condition exclusion on enrollees under 19 • No coverage rescissions • Covered emergency services * • Access to certain doctors * * Does not apply to Grandfathered plans

17. Who’s a ‘Child’ – Cannot Use • Financial dependency on the participant • Residency with the participant • Student status • Employment • Eligibility for other coverage * • Any combination of these factors * exception for availability through child’s employment available to Grandfathered plans

18. No Lifetime Dollar Limits • No dollar limits on lifetime benefits • Can completely exclude benefits for a particular condition • excluding ‘essential health benefits’ • Limits on Dr. visits or hospital days – UNKNOWN

19. If Grandfathered= TRUEStill subject to these provisions • Children up to age 26 with exceptions • Must comply with automatic enrollment • Lifetime dollar limits prohibited • Annual dollar limits prohibited (rules apply) • No rescission of coverage • No pre-existing condition exclusion for under 19 enrollees • Must provide explanation of coverage

20. If Grandfathered= TRUEYES subject to these provisions • W-2 Reporting Requirements • No incentive for enrollee to switch to temp High Risk Pool • Medical loss ratios less than 85% results in rebates to enrollees • Restrictions on reimbursement of OTC

21. If Grandfathered= TRUENO subject to these provisions • Coverage of child coverage up to 26yrs without exceptions • Internal and external appeals process • Access to emergency care

22. If Grandfathered= TRUENO subject to these provisions • Wellness and Health promotion activities • Extension of nondiscrimination rules • Access to pediatricians and OB/GYN • Required notice for ‘freedom of choice” provisions • Required notice for access to OB/GYN

23. Lose Grandfathered Status If: • Change insurance carriers • Reduce benefits • Increase co-insurance % • Raise co-payment >19%* • Raise deductibles >19%* • Raise out-of-pockets >19%* • Cut contribution rate by 5% • No limit on premium increases * includes 15% plus medical inflation – currently at 4%

24. In Force Now for Employers Unrelated to Health Coverage • Max on Tax-favored adoption benefits up to $13,170 per child • Nursing mothers get as many UNPAID breaks as necessary to express milk • Employer must provide a private place to perform above (not the bathroom) • NO GRANDFATHER CONCEPT

25. Medicare Tax Hikes • Starting in 2013 • Wages over $200K for single • Wages over $250K for married • Additional .9% withholding • Withholding applies to > $200K * • 3.8% Medicare tax on investment income * No exceptions based on marital status

26. Investment Income Includes • Capital Gains * • Dividends • Interest • Annuities • Royalties • Rents • Pass-throughs(excluding active participation) • Excludes tax exempt income (munis) * includes gains of > $500K for a couple selling their home.

27. Wrap up • 2010 HIRE Act • Work Opportunity Tax Credit – WOTC • Health Care Reform Act – PPACA • W-2 reporting requirement • Provisions currently in force • Grandfathered status Non-health Requirements • Small Business Tax Credit • Medicare Tax Hikes