Compliance Corner with Norma

Ready...Get Set...for 2014

It's been a busy year for company owners and human resources managers trying to keep up with the healthcare reform changes. Even though parts of the law were delayed, such as the large employer penalty and some features of the small employer Exchange, most features of the law will roll out on January 1, 2014. So December 2013 is a good time to review your compliance checklist to prepare for all the changes. Here's a quick review of some actions (not a complete list!) that employers and HR managers should consider. 

Count employees.  Employers must count their employees for two reasons. First, employers must determine if they are small (less than 50 employees) or large (more than 50 employees). The second reason to count employees applies only to large employers.  Large employers must determine which employees are full-time to verify which employees would be counted if the employer penalty is assessed. 

Large employers can use the Look Back Measurement Method to determine which employees have an "on-going" status as full-time employees who will be counted if the employer penalty is assessed.  Employers can experiment during 2014 with how the new law will affect them since the penalty was delayed until 2015.

COBRA notice. Employees and their beneficiaries who lose coverage through their employer's group health plan now have the option of obtaining individual coverage via the Exchange.  To ensure employees and their beneficiaries knew about their new choices, the COBRA notice letter was modified to include the Exchange option.  Employers and HR managers should verify that they are using the new COBRA notice letter.

Cafeteria Plans.  Employers with cafeteria or Section 125 plans must revise their Plan Document to include a new "change in status" election for employees. Employees must be allowed one election during the plan year to (1) revoke the cafeteria plan in order to obtain individual coverage via the Exchange or (2) drop their individual coverage obtained through the Exchange in order to join the cafeteria plan.    

Discrimination Testing.  Employers with fully-insured health plans must ensure that the plan does not favor highly compensated employees based on eligibility to participate and the benefits provided under the plan. (The test at 26 U.S.C. §105(h) is also used for discrimination testing of 401(k) plans.) The IRS will not enforce this requirement until new regulations are issued. However, employers may want to pro-actively test their plans for compliance to be prepared.

Employers subject to ERISA should also consider the non-discrimination rule applicable to similarly situated employees.  Under ERISA, it is not discriminatory to classify employees by: (1) full-time versus part-time status, (2) different geographic location, (3) membership in a collective bargaining unit, (4) date of hire, (5) length of service, (6) current employee versus former employee status, and (7) different occupations.

Obviously there are many more requirements for employers, small and large, under the healthcare reform law.  And of course, there are always lots of other priorities for company owners and HR managers.  But steps taken now to comply can save time, aggravation and money later.  

Disclaimer: The information above is general in nature and does not constitute legal or tax advice on the issues discussed. Please consult a lawyer or tax professional to discuss your company's specific circumstances.   

Norma Shirk

Manager/Owner

Corporate Compliance Risk Advisor, LLC

norma.shirk@complianceriskadvisor.com

Small Businesses May Be Able to Keep Existing Health Coverage in 2014

If allowed by a particular state and insurance company, small businesses may be able to renew their current group plans for 2014 even though the coverage does not comply with certain rules under Health Care Reform. Not all states and insurers will permit coverage to continue.

Small group health insurance that is renewed for a policy year starting between January 1, 2014 and October 1, 2014 will not be considered to be out of compliance with some of the law's key provisions that were originally scheduled to take effect next year, if certain conditions are met. These provisions include the requirements to cover essential health benefits and limit annual cost-sharing under the plan.

Source:  HR360.com  

State Minimum Wage Rates Set to Increase

The minimum wage will rise in a number of states next year. Unless otherwise noted, the following minimum wage rates (per hour) are scheduled to become effective on January 1, 2014:

• Arizona: $7.90 ($4.90 for tipped employees)
• California: $9.00, effective July 1, 2014
• Colorado: $8.00 ($4.98 for tipped employees)--proposed
• Connecticut: $8.70
• Florida: $7.93 ($4.91 for tipped employees)
• Missouri: $7.50 ($3.75 for tipped employees)
• Montana: $7.90
• New Jersey: $8.25
• New York: $8.00, effective December 31, 2013
• Ohio: $7.95 ($3.98 for tipped employees), except that the federal minimum wage of $7.25 per hour may be paid to employees whose employers gross $292,000 or less per year
• Oregon: $9.10
• Rhode Island: $8.00
• Vermont: $8.73 ($4.23 for tipped employees)
• Washington: $9.32

Source:  HR360.com 

Employees Without Health Insurance May Face Penalties--5 Q&As

The individual mandate under Health Care Reform, which is expected to go into effect on January 1, 2014, requires individuals of all ages (including children) to have minimum essential health coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. Below are five important things to know about the requirement.

3. Do an employee's spouse and dependent children have to be covered under the same policy or plan that covers the employee?
No. An employee, his or her spouse, and dependent children do not have to be covered under the same policy or plan. However, the employee, spouse, and each dependent child for whom the employee may claim a personal exemption on his or her federal income tax return must have minimum essential coverage or qualify for an exemption, or a payment will be owed.

4. A company's health plan is "grandfathered." Does the employer's plan provide minimum essential coverage?
Yes. Grandfathered group health plans provide minimum essential coverage.

5. What is the amount of the individual mandate penalty?
The amount of any payment owed takes into account the number of months in a given year an individual is without minimal essential coverage or an exemption. For 2014, the penalty is the higher of:

3 Guidelines to Reward Employees for a Job Well Done

Guidelines for Giving Rewards
Remember that even the best intentions can subject a company to liability if the employer is not careful. Consider the following tips to help you stay on track when rewarding your employees:

• Be careful. Employers can generally decide whether or not to give employees a bonus or raise, but be careful about making any verbal or written commitments--even a casual mention of a bonus or raise could be construed as binding. And remember to check with your accountant or a financial professional about the tax implications of any rewards you plan to give.
• Be clear. The U.S. Small Business Administration (SBA) suggests including your reward policy in your employee welcome kit or benefits package and reminding employees of your policy when performance review season comes around.
• Be objective. When it comes to assessing eligibility for a pay increase or other benefits, the SBA recommends establishing a clear grading system upon which to measure performance in a fair and consistent manner; documenting your reasons for making the award; and backing it up with performance examples.

Source: HR360.com