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In This Issue
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Grandfathered Plans
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About SPDs
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Going Paperless
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Charitable Donations
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Revised Form 941
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Final Rule on Child Labor
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IRS
Releases Revised Form 941 for HIRE Act
The
IRS has issued the newly
revised payroll tax Form 941 which most eligible employers can use to
claim the special payroll tax exemption that applies to many new workers
hired during 2010.
Designed
to encourage employers to hire and retain new workers, the payroll tax
exemption and the related new hire retention credit were created by the
Hiring Incentives to Restore Employment (HIRE) Act signed by President
Obama on March 18, 2010.
The
payroll tax exemption is an exemption from the employer's 6.2 percent
share of social security tax on all wages paid to qualified employees
from March 19, 2010 (the day after the date of enactment of the HIRE Act)
through December 31, 2010. The employee's 6.2 percent share of social
security tax and the employer and employee's shares of Medicare tax still
apply to all wages.
In
addition, for each qualified employee retained for at least a year whose
wages did not significantly decrease in the second half of the year,
businesses may claim a new hire retention credit of up to $1,000 per
worker on their income tax return. Further details on both the tax credit
and the payroll tax exemption can be found in a recently-expanded list of
answers to frequently-asked
questions about the new law now.
How
to Claim the Payroll Tax Exemption
Form 941, Employer's
QUARTERLY Federal Tax Return, revised for use beginning with the second
calendar quarter of 2010, can be filed by most employers claiming
the payroll tax exemption for wages paid to qualified employees. The HIRE
Act does not allow employers to claim the exemption for wages paid in the
first quarter but provides for a credit in the second quarter. The
instructions for the new Form 941 explain how this credit for wages paid
from March 19 through March 31 can be claimed on the second quarter
return.
DOL
Publishes Final Rule on Child Labor
The
U.S. Department of Labor has published a final rule
that revises the child labor regulations to federal Fair Labor Standards
Act. The final rule revises the child labor regulations to incorporate
statutory amendments to the Fair Labor Standards Act, and to update and
clarify the regulations that establish protections for youth employed in
nonagricultural occupations.
The
new regulations give employers clear notice that there are certain jobs
children are not permitted to perform, according to U.S. Secretary of
Labor Hilda Solis. They also expand opportunities for young workers to
gain safe, positive work experience in fields such as advertising,
teaching, banking and information technology, as well as through
school-supervised work-study programs.
The
revisions also implement specific recommendations made by the National
Institute for Occupational Safety and Health in its 2002 report to the
Department of Labor. The Department of Labor is revising the regulations
to incorporate the 2008 amendment to section 16(e) of the Fair Labor
Standards Act that substantially increased the maximum permissible civil
money penalty an employer may be assessed for child labor violations that
cause the death or serious injury of a young worker. The effective date
of the rule is July 19, 2010.
To
view the final rule in the Federal
Register, please click here.
New
Office of Consumer Information and Insurance Oversight (OCIIO)
Implementing Health Care Reform
The
Department of Health and Human Services (HHS) has been entrusted with the
responsibility for implementing many major provisions of the health care
reform bill, the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act of 2010. Accordingly,
the Office of Consumer Information and Insurance Oversight (OCIIO) has
been established to help HHS implement many of the provisions of the
legislation that address private health insurance.
OCIIO
is responsible for ensuring compliance with the new insurance market
rules, such as the prohibitions on rescissions and on pre-existing
condition exclusions for children that take effect this year. The Office
will oversee the new medical loss ratio rules and will assist states in
reviewing insurance rates. OCIIO will provide guidance and oversight for
the state-based insurance exchanges. It will also administer the
temporary high-risk pool program and the early retiree reinsurance
program, and compile and maintain data for an internet portal providing
information on insurance options.
The
OCIIO website contains information on Initiatives and Programs of the
Office, such as medical loss ratios and the high-risk pool program,
Regulations and Guidance, including requests for comments, Gathering
Insurance Information, and FAQs about the Office. To visit the OCIIO
website, please click
here.
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Health Care Reform &
Grandfathered Plans
 The Affordable
Care Act specifically exempts "grandfathered plans"- those
plans that were in effect on March 23, 2010 - from having to implement a
number of the Act's requirements. Thus, it is vital for employers and
administrators of these grandfathered plans to understand what changes
they must make in 2010 and in future years.
The
following is a timeline of required key changes to grandfathered health
plans:
What Must Be
Done in 2010
Extend
Dependent Coverage Up to Age 26
For plan
years starting on or after September 23, 2010, the new health law
requires group and individual health plans that cover dependents to
continue to make dependent coverage available until age 26. This
requirement applies to grandfathered as well as non-grandfathered plans.
However, for plan years beginning before Jan. 1, 2014, grandfathered
group health plans offering dependent coverage will not need to make this
coverage available if the adult child is eligible to enroll in another
employer-sponsored health plan.
Prohibit
Lifetime Limits
For plan
years starting on or after September, 23, 2010, grandfathered health
plans may not impose lifetime limits on coverage for "essential
health benefits." Essential health benefits will be further defined
by the U.S. Department of Health and Human Services (HHS).
Restrict
Annual Limits
For plan
years starting on or after September 23, 2010, grandfathered group health
plans are prohibited from imposing annual limits on essential health
benefits other than restricted annual limits to be set by HHS. Effective
Jan 1. 2014, grandfathered group health plans may not set any annual
limits on essential benefits coverage.
Drop
Pre-Existing Condition Exclusions for Children
For plan
years starting on or after September 23, 2010, grandfathered group health
plans must not exclude children on the basis of pre-existing conditions.
Effective Jan. 1, 2014, group health plans may not impose pre-existing
condition exclusions on adults or children.
No
Rescission of Coverage
For plan
years starting on or after September 23, 2010, grandfathered health plans
are prohibited from rescinding a participant's coverage, absent fraud or
an intentional misrepresentation of material fact.
Required Change
in 2011
No
Reimbursements for Over-the-Counter Drugs Not Prescribed
For
expenses incurred after Dec. 31, 2010, distributions from HSAs or Archer
MSAs, or reimbursements for FSAs or HRAs, qualify only if made for a
medicine or drug that is a prescribed drug, or insulin. Over-the-counter
medicine obtained with a prescription will continue to be a qualified
medical expense.
What
Grandfathered Plans Must Do in 2014
No
Exclusions for Dependent Coverage
In 2014,
grandfathered group health plans offering dependent coverage will need to
continue to make this coverage available until age 26, even if the adult
child is eligible to enroll in another employer-sponsored health plan.
No
Annual Limits
In 2014,
grandfathered group health plans may not set any annual limits on
essential benefits coverage.
No
Excessive Waiting Periods
For plan
years starting on or after Jan. 1, 2014, grandfathered health plans may
not apply waiting periods for coverage that exceed 90 days.
Future Changes
to Grandfathered Health Plans
Employers
and administrators should note that thus far, the Affordable Care Act
does not provide guidance as to what extent a plan can be changed without
losing grandfathered status. Changes relevant to a plan's continuing
status as "grandfathered" might include changes in premiums, deductibles,
and types of coverage.
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All about Summary Plan
Descriptions (SPDs)
 Participants or
beneficiaries receiving benefits under an ERISA-covered retirement or
health plan must receive a Summary Plan Description or SPD. ERISA
requires the plan administrator to provide the SPD to plan participants
free of charge. The SPD is an important document that informs
participants what the plan provides and how it operates. SPD information
includes:
- When an
employee can start to participate in the plan;
- How
service and benefits are calculated;
- When
benefits become vested;
- When and
in what form benefits are paid; and
- How to
file benefits claims
Administrators
should also note that if a plan is changed, participants must be
informed. The notification of the change must occur either through a
revised SPD, or in a separate document called a Summary of Material
Modifications (SMM). These notices must also be given to participants
free of charge.
The
SPD - a Legal Document
Because
the SPD of a retirement or health plan discloses such important
information to participants about the plan, and ERISA plans are
contractual in nature, the summary can be a legally binding document.
Thus, administrators should carefully review the terms included in the
SPD. Any plan administrator who creates or changes a summary using a
boilerplate document should consult with a benefits specialist or
attorney before distributing the SPD to participants.
Written
in Plain English
As the
plan "summary," the SPD should be easy to understand. In fact,
U.S. Department of Labor regulations actually require the summary to be
written in language that average plan participants can understand.
Technical terms should therefore be used only when necessary. You should
also define any unclear terms. Finally, you may want to add graphics to
your SPD so participants can quickly locate key information, such as
vesting periods, benefits calculations and eligible beneficiaries. You
can do this with charts, boxes or bullet points.
Consider
Distributing the SPD Electronically
The
administrator of an employee benefit plan can furnish documents to
participants and beneficiaries through the use of electronic media, if it
meets certain requirements under ERISA regulations. The regulations
essentially require that unless the participant, beneficiary, or other
individual has access to documents as part of his or her job duties, the
individual must consent to receive them electronically. The plan
administrator has to take steps to confirm that the individual can truly
receive electronic documents through email or other electronic means.
Notice must also be given to individuals of their right to withdraw their
consent to electronic delivery at any time without charge, and their
right to obtain paper copies of the documents upon request. For more
information on distributing plan documents through the use of electronic
media, please click
here.
For
the convenience of plan participants, consider creating a file of the SPD
that can be viewed on a company intranet. By doing so, the summary can be
quickly revised (with the proper notice given) and always be accessed by
participants. If you post multiple SPDs on a company intranet, make sure
each summary is separately grouped so users can easily understand which
plan summary they are viewing.
For
more information from the DOL on SPDs, please click
here.
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 Going
Paperless - Is It Right for Your Company?
Decreasing
or eliminating the use of paper from your business operation will
potentially save your company money, time and physical space. Many
managers and workers tend to think and perform better when their work
environment is well-organized and free of clutter. Going paperless can
really liberate more office space and streamline your business
environment.
Less
Paper Equals More Savings
Eliminating
paper provides a number of clear cost savings. First, there are the costs
for paper, file cabinets as well as those associated with photocopying.
Then, depending on the amount of paper you accumulate, you may need
additional employees to collect and organize files.
Save
Time & Increase Productivity
Decreasing
the amount of paper your company uses, combined with an efficient
electronic document system, can directly correlate to increased
productivity. For example, storing shared documents on a company server
will allow workers to upload files and collaborate on projects without
having to exchange multiple hard copies with their colleagues. As files
are edited and updated, they can be discarded or kept with labeled dates.
In addition to the cost savings of going paperless, if your employees can
quickly and efficiently take care of their administrative
responsibilities with electronic documentation, they will have more time
to spend on other tasks.
Establish
an Organized System for Company Documents
Making
some office procedures paperless but not others can create a very
confusing situation. If you have to search both file cabinets and server
folders for a document, you may end up taking more time than you did
before the reorganization. You may also create office confusion as to
which files are now electronic, potentially wasting more employee time.
If you do decide to go paperless, remember that technology alone is not a
substitute for a structured, organized approach to your company's
documents. Decide on consistent procedures and communicate them to your
employees. In the long run, your business will be better off for it.
Be
Sure to Back-Up Your Important Documents
As your
business grows, you may find the information your company accumulates
increases right along with the size of your company. It's not all that
hard to lose track of an important document here and there. For important
paper documents that you receive, it's always a good idea to scan and
create a PDF version. Then, if a document or file should be misplaced,
you can simply reprint it. As an extra backup, email files to yourself
and/or others so they can be accessed anywhere. Finally, you may also
want to consider installing a nightly backup of all the documents that
reside on your server to a separate hard drive so that in the event your
server should do down, your company documents are safe.
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 Your Business
& Charitable Donations
Does
your business participate in charitable giving? Supporting causes that
are worthwhile to companies and employees can be rewarding enough, but
there are also potential tax advantages. If you are considering making a
donation, you first need to ensure that the charity is a qualified
organization as defined by the IRS. For more information on
charitable contributions from the IRS, please click here.
According
to the IRS, the organization must be structured and operated for one or
more limited purposes, including religious, charitable, educational,
scientific, literary, or the prevention of cruelty to children or
animals. Certain other purposes include war veterans' organizations and
those that foster amateur sports competition. You can search
here for an online list of organizations eligible to receive
tax-deductible charitable contributions.
Before
Donating - Review the Charity Checklist
The
Federal Trade Commission (FTC) has established a Charity
Checklist to help ensure that your donation dollars benefit the
people and organizations you want to support. These tips are particularly
useful if you're solicited by an organization's employees or volunteers by
phone, mail or e-mail. The following are a number of important tips
featured in the FTC's Charity Checklist.
- Be careful
to scrutinize charities that spring up quickly in connection with
current events or natural disasters. They may
make a compelling case for your money, but they probably don't have
the infrastructure to get the donations to the affected areas or
people.
- Request
written information about the charity, including the name, address,
and telephone number. A legitimate charity or
fundraiser will send you information about the charity's mission,
how your donation will be used, and proof that your contribution is
tax deductible.
- Contact
the office that regulates charitable organizations and charitable
solicitations in your state to see if the charity or fundraiser must
be registered. Your state office also can verify how
much of each dollar donated goes to the charity, and how much goes
to fundraising and management expenses.
- Don't be
shy about asking who wants your money. Some
charities hire professional fundraisers for large-scale mailings,
telephone drives, and other solicitations rather than use their own
staff or volunteers, and then use a portion of the donations to pay
the fundraiser's fees. If you're solicited for a donation, ask if
the caller is a paid fundraiser, who they work for, and the
percentage of your donation that will go to the charity and to the
fundraiser. If you don't get a clear answer -consider donating to a
different organization.
- Call the
charity.
Find out if the organization is aware of the solicitation and has
authorized the use of its name. If not, you may be dealing with a
scam artist.
- Check with
local recipients. If giving to local organizations
is important to you, make sure they will benefit from your
generosity. If a charity tells you that your dollars will support a
local organization, like a fire department, police department, or
hospital, call the organization to verify the claim.
- Inquire
whether your contribution is tax deductible. It is important
to ask for a receipt showing the amount of your contribution and
stating that it is tax deductible.
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