Please be advised that the COBRA subsidy program has been extended through 5/13/2010. This is the third extension through the Continuing Extension Act of 2010.
Special Election Period
A health plan must extend a special COBRA election period to an individual who experienced an involuntary termination of employment on or after April 1, 2010, and prior to April 15, 2010, and who would be an “assistance eligible individual” (AEI) but who does not have a COBRA election in effect on April 15, 2010. The special election period runs from April 15, 2010, through 60 days after the Notice of Special Election Period is provided to that individual.
Notice of Special Election Period
In the case of any individual who experienced a qualifying event related to a termination of employment between April 1, 2010 and April 15, 2010, an employer must provide the general COBRA notice, including a description of the availability of premium reduction in the case of a qualifying event that is an involuntary termination of employment, within 60 days of enactment of the Act or by June 14, 2010. If the general COBRA notice was already distributed, then employers may simply supplement it with an additional notice describing the extension of the availability of premium reduction with respect to involuntary terminations through May 31, 2010, and the special election period.
A Reminder – Expansion of Assistance Eligible Individuals
Under previous legislation, only individuals who experienced a qualifying event that was an employee’s involuntary termination of employment could become AEIs and take advantage of the COBRA premium subsidy. The Temporary Extension Act of 2010 expanded the premium subsidy to include as a qualifying event for purposes of the subsidy, a reduction of hours that occurred at any time on or after September 1, 2008, and is followed by an involun¬tary termination of employment that occurs on or after March 2, 2010 (and before June 1, 2010). Individuals who experience a qualifying event that falls under this expanded definition and are otherwise eligible AEIs will be eligible for the COBRA subsidy beginning with the first day of the first period of coverage for which the individual is affected.
Action Items
>>Notices. Employers should update their COBRA notices and other plan communications to include the extension of the eligibility period to May 31, 2010.
>>Assess Prior Terminations. Identify covered employees (and their qualified beneficiaries) who became eligible for COBRA on or after April 1, 2010, and before April 15, 2010, as well as their COBRA elections. Provide an updated COBRA notice to these individuals that includes a description of the extended eligibility period and the special election period. Identify those employees and beneficiaries in the group whose qualifying event is the employee’s involuntary termination of employment and who are eligible for the COBRA subsidy.
Monday, April 26, 2010
Tuesday, April 6, 2010
Health Care Reform Summary
Impact on Employers
April 6, 2010
With the passing of Health Care Reform legislation, the resulting overhaul of our country’s health care financing system is the single most important piece of Federal social legislation our generation has ever seen. There has been a broad consensus to expand affordable health coverage, reduce systemic waste and inefficiencies, and increase quality. With these goals we will ultimately achieve lower health care. This legislation outlines broad changes to the current system with significant enhancements to help support these goals. Most of the impact will take effect in 2014 while some changes will occur sooner.
After reading the 2,500 page legislation, attending webinars, and consulting with other colleagues, I have prepared a detailed review of the legislation that impacts employers and our nation as a whole. Outlined below is a summary that could also be used as a hand out for employees. If you would like to discuss the legislation further, or would like the more detailed review, please contact me at cwatkin@ipswichfinancial.com.
Tax Credit. Starting with 2010 taxes, small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit up to 35% of your premiums (50% after 2014 if you purchase insurance through an exchange). How much of a credit you'll get depends on the number of employees you have and their average wage.
Exchanges. Starting in 2014, the biggest potential benefit may kick in with the establishment of Small Business Health Options Programs – or SHOP exchanges. These will enable small companies (up to 100 employees) to pool together to have greater buying power. Theoretically, this should result in lower premium costs.
Subsidies. Starting in 2014, many self-employed individuals will qualify for a federal subsidy to help them afford the cost of purchasing health care. Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four (at today's poverty level).
Medicaid. Starting in 2014, more lower-income individuals and childless adults would be covered by Medicaid, the federal health insurance plan for the poor. This can be a big help, especially for those just starting a business, without much income.
Mandatory employer-provided coverage. Small businesses – with fewer than 50 employees – are exempt from mandatory requirements. Businesses with more than 50 employees will be required to provide coverage as of 2014 or pay a fine. This is designed to help reduce occurrences of those going to the emergency room for care with no insurance.
Mandatory personal coverage. Also as of 2014, as an individual you will be required to have health insurance or pay a fine. If you have to pay more than 8% of your income for the cheapest plan, you're not penalized.
Pre-existing conditions. Starting in June 2010, individuals who have not been able to get insurance because of pre-existing conditions can join a high risk insurance pool. As of 2014, insurance companies cannot deny insurance to adults based on pre-existing conditions.
Adult children. Starting in September 2010, dependent children up to age 26 can be covered on their parent's policy. This is the same as what we have currently in MA.
Lifetime limits. Starting in September 2010, there can be no lifetime maximum limits on policies. Also, companies cannot rescind policies except for fraud.
Preventive care. Starting in September 2010, coverage must include basic preventive care. Many of the plans currently offered include preventive care.
Taxes. Starting in January 2013, if you make over $200,000 (individual) or $250,000 (family), your Medicare tax rate will increase from 1.45% to 2.35%. A bigger potential tax bite may hit small business owners who receive capital gains, dividend, or interest income with an additional 3.8% tax on that income.
"Cadillac" plans. Starting in 2018, employers who provide insurance costing more than $10,200 for individuals or $27,500 per family must pay a 40% tax on the excess cost of the premium. This could be a big burden on small businesses, as premiums are already nearing that level.
April 6, 2010
With the passing of Health Care Reform legislation, the resulting overhaul of our country’s health care financing system is the single most important piece of Federal social legislation our generation has ever seen. There has been a broad consensus to expand affordable health coverage, reduce systemic waste and inefficiencies, and increase quality. With these goals we will ultimately achieve lower health care. This legislation outlines broad changes to the current system with significant enhancements to help support these goals. Most of the impact will take effect in 2014 while some changes will occur sooner.
After reading the 2,500 page legislation, attending webinars, and consulting with other colleagues, I have prepared a detailed review of the legislation that impacts employers and our nation as a whole. Outlined below is a summary that could also be used as a hand out for employees. If you would like to discuss the legislation further, or would like the more detailed review, please contact me at cwatkin@ipswichfinancial.com.
Tax Credit. Starting with 2010 taxes, small businesses with fewer than 25 employees that pay at least 50% of the health care premiums for their employees qualify for a tax credit up to 35% of your premiums (50% after 2014 if you purchase insurance through an exchange). How much of a credit you'll get depends on the number of employees you have and their average wage.
Exchanges. Starting in 2014, the biggest potential benefit may kick in with the establishment of Small Business Health Options Programs – or SHOP exchanges. These will enable small companies (up to 100 employees) to pool together to have greater buying power. Theoretically, this should result in lower premium costs.
Subsidies. Starting in 2014, many self-employed individuals will qualify for a federal subsidy to help them afford the cost of purchasing health care. Those earning up to 400% of the poverty level will get assistance, or up to $88,200 for a family of four (at today's poverty level).
Medicaid. Starting in 2014, more lower-income individuals and childless adults would be covered by Medicaid, the federal health insurance plan for the poor. This can be a big help, especially for those just starting a business, without much income.
Mandatory employer-provided coverage. Small businesses – with fewer than 50 employees – are exempt from mandatory requirements. Businesses with more than 50 employees will be required to provide coverage as of 2014 or pay a fine. This is designed to help reduce occurrences of those going to the emergency room for care with no insurance.
Mandatory personal coverage. Also as of 2014, as an individual you will be required to have health insurance or pay a fine. If you have to pay more than 8% of your income for the cheapest plan, you're not penalized.
Pre-existing conditions. Starting in June 2010, individuals who have not been able to get insurance because of pre-existing conditions can join a high risk insurance pool. As of 2014, insurance companies cannot deny insurance to adults based on pre-existing conditions.
Adult children. Starting in September 2010, dependent children up to age 26 can be covered on their parent's policy. This is the same as what we have currently in MA.
Lifetime limits. Starting in September 2010, there can be no lifetime maximum limits on policies. Also, companies cannot rescind policies except for fraud.
Preventive care. Starting in September 2010, coverage must include basic preventive care. Many of the plans currently offered include preventive care.
Taxes. Starting in January 2013, if you make over $200,000 (individual) or $250,000 (family), your Medicare tax rate will increase from 1.45% to 2.35%. A bigger potential tax bite may hit small business owners who receive capital gains, dividend, or interest income with an additional 3.8% tax on that income.
"Cadillac" plans. Starting in 2018, employers who provide insurance costing more than $10,200 for individuals or $27,500 per family must pay a 40% tax on the excess cost of the premium. This could be a big burden on small businesses, as premiums are already nearing that level.
Friday, March 19, 2010
Is your company considering hiring new employees?
If so, there is now a tax credit that companies can take advantage of through the Hiring Incentive to Restore Employment Act (HIRE). Employers are encouraged to make hiring, pay and retention decisions as soon as possible, as the HIRE Act provides greater benefits to those employers that hire early and that substantially maintain their new hires’ wages.
On March 18, 2010, President Obama signed the Hiring Incentive to Restore Employment Act. Intended to spur employment, this statute creates significant tax incentives for employers to hire and retain workers. It applies to all for-profit and non-profit employers, regardless of size, and including public institutions of higher education. The HIRE Act exempts employers from Social Security taxes in 2010 with regard to each new employee who meets the following criteria:
• Begins employment after February 3, 2010 and before January 1, 2011;
• Certifies by signed affidavit, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date when he or she begins the new employment.
The HIRE Act also increases the current year business credit with respect to each new hire who is retained for a full year, provided that the employee:
• Was hired by the taxpayer on any date during the taxable year ending after March 18, 2010;
• Was employed by the taxpayer for a period of not less than 52 consecutive weeks; and
• Whose wages during the last 26 weeks of this employment equal at least 80% of the wages for the first 26 weeks of this employment.
The tax credit for each retained worker is increased by 6.2% of the wages paid to the retained worker during the consecutive 52-week period. If an employer paid an employee $53,400 from now until the end of the year, it could save a maximum of $3,310. An additional $1,000 income tax credit is available to employers for every new employee retained for 52 weeks, to be taken on the employer’s 2011 income tax. Please contact your tax advisor or Ipswich Bay Advisors (978-777-6554) with any questions.
On March 18, 2010, President Obama signed the Hiring Incentive to Restore Employment Act. Intended to spur employment, this statute creates significant tax incentives for employers to hire and retain workers. It applies to all for-profit and non-profit employers, regardless of size, and including public institutions of higher education. The HIRE Act exempts employers from Social Security taxes in 2010 with regard to each new employee who meets the following criteria:
• Begins employment after February 3, 2010 and before January 1, 2011;
• Certifies by signed affidavit, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date when he or she begins the new employment.
The HIRE Act also increases the current year business credit with respect to each new hire who is retained for a full year, provided that the employee:
• Was hired by the taxpayer on any date during the taxable year ending after March 18, 2010;
• Was employed by the taxpayer for a period of not less than 52 consecutive weeks; and
• Whose wages during the last 26 weeks of this employment equal at least 80% of the wages for the first 26 weeks of this employment.
The tax credit for each retained worker is increased by 6.2% of the wages paid to the retained worker during the consecutive 52-week period. If an employer paid an employee $53,400 from now until the end of the year, it could save a maximum of $3,310. An additional $1,000 income tax credit is available to employers for every new employee retained for 52 weeks, to be taken on the employer’s 2011 income tax. Please contact your tax advisor or Ipswich Bay Advisors (978-777-6554) with any questions.
Friday, March 12, 2010
Additional COBRA Subsidy Extension - 2010
On March 2, 2010, President Obama signed the Temporary Extension Act of 2010 (H.R. 4691), which extends the eligibility period for the COBRA premium subsidy through March 31, 2010. The eligibility period, as previously extended by the Department of Defense Appropriations Act, 2010 (P.L. 111-118), had expired on February 28, 2010.
The law also expands the definition of "assistance eligible individual" to include as a qualifying event the loss of health care coverage because of a reduction in hours followed by involuntary termination of employment. The Act provides that individuals who had a reduction of hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment on or after March 2, 2010, shall be treated as incurring a qualifying event on the date of termination of employment. As a result, these individuals will be eligible for the COBRA subsidy. The period of COBRA continuation coverage, however, is determined as though the qualifying event was the reduction of hours. Group health plans must notify affected individuals within sixty (60) days following their termination of employment of their right to the COBRA subsidy.
The Temporary Extension Act also provides short-term extensions of several authorities, including those related to unemployment compensation, Medicare physician payments, Medicare therapy caps, surface transportation programs, flood insurance programs, retransmission of television broadcasts, Federal poverty guidelines, and Small Business Administration loan guarantees.
The law also expands the definition of "assistance eligible individual" to include as a qualifying event the loss of health care coverage because of a reduction in hours followed by involuntary termination of employment. The Act provides that individuals who had a reduction of hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment on or after March 2, 2010, shall be treated as incurring a qualifying event on the date of termination of employment. As a result, these individuals will be eligible for the COBRA subsidy. The period of COBRA continuation coverage, however, is determined as though the qualifying event was the reduction of hours. Group health plans must notify affected individuals within sixty (60) days following their termination of employment of their right to the COBRA subsidy.
The Temporary Extension Act also provides short-term extensions of several authorities, including those related to unemployment compensation, Medicare physician payments, Medicare therapy caps, surface transportation programs, flood insurance programs, retransmission of television broadcasts, Federal poverty guidelines, and Small Business Administration loan guarantees.
Friday, January 22, 2010
Benefits and HR Law Update
Federal Laws pertaining to employers
Mental Health Parity Act
For plan years beginning after October 3, 2009, a group health plan that provides mental health and substance abuse benefits cannot impose special caps or limits on benefits related to mental health treatment or substance use disorders. Treatment limits and cost sharing, including deductibles, co-pays, co-insurance and out-of-pocket expenses, cannot be more restrictive than other medical and surgical benefits provided under the plan. If a plan offers out of network benefits for medical and surgical coverage, out of network benefits must also be offered for mental health and substance disorders. All fully insured plans adhere to this requirement in the plan designs offered to employers.
Michelle’s Law
In plan years beginning after October 9, 2009 (January 1, 2010 for calendar year plans), a group health plan cannot terminate coverage for a dependent college student on account of loss of full-time student status due to a medically necessary leave of absence for up to one year. The plan must furnish information about Michelle’s Law in any notice regarding certification of student status required for continued coverage under the plan. This requirement is taken care of by the health plans.
CHIP Reauthorization Act
Employees and dependents who become eligible or cease to be eligible for premium assistance for Medicaid or a state’s Children’s Health Insurance Program (“CHIP”) have special enrollment rights under group health plans subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), effective April 1, 2009. Employees must request coverage within 60 days of becoming eligible for the premium assistance. The plan document, summary plan description (“SPD”) and enrollment materials should be amended to reflect these rules. Employers are required to provide annual notice to employees regarding the assistance available and how to apply for it.
GINA
The Genetic Information Nondiscrimination Act of 2008 (“GINA”) prohibits employee group health plans and insurance companies in the group market from discriminating on the basis of genetic information. Genetic information includes information about manifestation of a disease or disorder in a family in addition to information about genetic tests. For plan years beginning after May 21, 2009, genetic information cannot be requested, required or purchased for underwriting purposes or before enrollment, participants and covered dependents cannot be required to undergo a genetic test, and genetic information cannot be used to adjust premiums or contributions for the group.
HEART Act
Pursuant to the Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART”), a cafeteria plan or health flexible spending arrangement may now permit a reservist called to active military duty for at least 180 days or an indefinite term to receive distribution of the balance to the credit of the reservist’s account.
HITECH Act
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) contains new rules for protection of personal health information held by providers, plans and other covered entities. These changes include requirements when protected health information is disclosed, procedures for transferring data electronically, and enforcement by the Department of Health & Human Services. As a service provider, Ipswich Bay Advisors is required to have a Business Associates Agreement in place with all of our clients. We had sent these out in the fall of 2009 to all of our clients.
COBRA Subsidy / American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (“ARRA”) provided a subsidy for COBRA premiums to “assistance eligible individuals” who are involuntarily terminated and lose group health coverage. President Obama provided and extension for the subsidy which amends ARRA by extending the COBRA subsidy period from 9 to 15 months and extending the cut-off for commencement of the subsidy period from December 31, 2009 to February 28, 2010. Employers or their COBRA administrators must now update their COBRA eligibility and election notices to include the extended subsidy information. In addition, within 60 days of enactment of the Act, special notice must be given to any COBRA assistance eligible individual who was either already on COBRA on or after October 31, 2009 or was involuntarily terminated on or after October 31, 2009 who already received a COBRA rights notice that did not include the subsidy extension information.
Medicare’s Mandatory Insurer Reporting Law
The Medicare, Medicaid, and SCHIP Extension Act of 2007 added new mandatory reporting requirements (the “Mandatory Insurer Reporting Law”) for group health plans. For full insured health plans, the insurance carriers are complying with the reporting requirements.
Massachusetts laws pertaining to employers
2009 1099-HC forms
Massachusetts health care reform law requires most residents age 18 and older to have health coverage that meets minimum creditable coverage (MCC) standards set by the Commonwealth Health Insurance Connector Authority. By January 31, 2010, all insurance carriers will issue 2009 1099-HC forms to qualifying subscribers residing in Massachusetts who were enrolled in a health insurance plan at any time during the 2009 calendar year. This form provides proof that individuals were enrolled in a health plan during 2009. Individuals will need to provide the 1099-HC information to their tax preparer for filing with their tax returns.
Massachusetts Data Security Law
In August 2009, the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) revised, for the second time, the Massachusetts data security law, implementing regulations and extended the compliance deadline, for the third time, to March 1, 2010. The law requires a company that owns or licenses personal information about a Massachusetts resident to notify the attorney general, the director of consumer affairs and business regulation, and the affected resident if it knows or has reason to know of (1) a breach of security, or (2) that the personal information of a resident was acquired or used by an unauthorized person or used for an unauthorized purpose. Personal information (PI) is defined as a resident’s first name and last name or first initial and last name in combination with any one or more of the following: (1) Social Security number; (2) driver’s license number or state-issued identification card number; or (3) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number, or password, that would permit access to a resident’s financial account.
As currently written, the data security regulations require companies that own or license PI to (1) maintain a comprehensive information security program that complies with the regulations; and (2) take all reasonable steps to verify that any third-party vendors with access to such PI are capable of maintaining appropriate security measures to protect the data, consistent with the regulations and applicable federal regulations. The regulations do not require a specific certification or separate agreement to address the Massachusetts data security law, provided that the parties have an agreement prior to March 1, 2010, which addresses protective data security measures.
As a service provider, Ipswich Bay Advisors is required to have a Business Associates Agreement in place with all of our clients. We had sent these out in the fall of 2009 to all of our clients.
Health Insurance Responsibility Disclosure Amendments
The Massachusetts Executive Office of Health and Human Services (EOHHS) has made several changes to the Health Insurance Responsibility Disclosure (HIRD) form, effective April 1, 2009. The HIRD form has been updated to eliminate information that the Division of Health Care Finance and Policy deemed unnecessary and added new questions regarding employer disclosures. Below is a brief summary of the changes to the HIRD requirements:
Employer HIRD forms are now due at the same time as the Fair Share Contribution filings. For some employers this means that they are limited to submitting one employer HIRD report per year. In designating whether an employer has 11 or more full-time employees, the determination is now based on quarterly payroll hours rather than annual payroll hours. Employers are required to report new information, including details about the employer’s full-time criteria and whether the employer collects employee HIRD forms from employees who decline to participate in the group health plan or Section 125 plan. Employers are required to collect signed employee HIRD forms if they have either 5,500 payroll hours in any quarter or 22,000 payroll hours in a year. If you have any questions about administration of the HIRD forms or need a copy of the revised form, please contact our office.
Mental Health Parity Act
For plan years beginning after October 3, 2009, a group health plan that provides mental health and substance abuse benefits cannot impose special caps or limits on benefits related to mental health treatment or substance use disorders. Treatment limits and cost sharing, including deductibles, co-pays, co-insurance and out-of-pocket expenses, cannot be more restrictive than other medical and surgical benefits provided under the plan. If a plan offers out of network benefits for medical and surgical coverage, out of network benefits must also be offered for mental health and substance disorders. All fully insured plans adhere to this requirement in the plan designs offered to employers.
Michelle’s Law
In plan years beginning after October 9, 2009 (January 1, 2010 for calendar year plans), a group health plan cannot terminate coverage for a dependent college student on account of loss of full-time student status due to a medically necessary leave of absence for up to one year. The plan must furnish information about Michelle’s Law in any notice regarding certification of student status required for continued coverage under the plan. This requirement is taken care of by the health plans.
CHIP Reauthorization Act
Employees and dependents who become eligible or cease to be eligible for premium assistance for Medicaid or a state’s Children’s Health Insurance Program (“CHIP”) have special enrollment rights under group health plans subject to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), effective April 1, 2009. Employees must request coverage within 60 days of becoming eligible for the premium assistance. The plan document, summary plan description (“SPD”) and enrollment materials should be amended to reflect these rules. Employers are required to provide annual notice to employees regarding the assistance available and how to apply for it.
GINA
The Genetic Information Nondiscrimination Act of 2008 (“GINA”) prohibits employee group health plans and insurance companies in the group market from discriminating on the basis of genetic information. Genetic information includes information about manifestation of a disease or disorder in a family in addition to information about genetic tests. For plan years beginning after May 21, 2009, genetic information cannot be requested, required or purchased for underwriting purposes or before enrollment, participants and covered dependents cannot be required to undergo a genetic test, and genetic information cannot be used to adjust premiums or contributions for the group.
HEART Act
Pursuant to the Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART”), a cafeteria plan or health flexible spending arrangement may now permit a reservist called to active military duty for at least 180 days or an indefinite term to receive distribution of the balance to the credit of the reservist’s account.
HITECH Act
The Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) contains new rules for protection of personal health information held by providers, plans and other covered entities. These changes include requirements when protected health information is disclosed, procedures for transferring data electronically, and enforcement by the Department of Health & Human Services. As a service provider, Ipswich Bay Advisors is required to have a Business Associates Agreement in place with all of our clients. We had sent these out in the fall of 2009 to all of our clients.
COBRA Subsidy / American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (“ARRA”) provided a subsidy for COBRA premiums to “assistance eligible individuals” who are involuntarily terminated and lose group health coverage. President Obama provided and extension for the subsidy which amends ARRA by extending the COBRA subsidy period from 9 to 15 months and extending the cut-off for commencement of the subsidy period from December 31, 2009 to February 28, 2010. Employers or their COBRA administrators must now update their COBRA eligibility and election notices to include the extended subsidy information. In addition, within 60 days of enactment of the Act, special notice must be given to any COBRA assistance eligible individual who was either already on COBRA on or after October 31, 2009 or was involuntarily terminated on or after October 31, 2009 who already received a COBRA rights notice that did not include the subsidy extension information.
Medicare’s Mandatory Insurer Reporting Law
The Medicare, Medicaid, and SCHIP Extension Act of 2007 added new mandatory reporting requirements (the “Mandatory Insurer Reporting Law”) for group health plans. For full insured health plans, the insurance carriers are complying with the reporting requirements.
Massachusetts laws pertaining to employers
2009 1099-HC forms
Massachusetts health care reform law requires most residents age 18 and older to have health coverage that meets minimum creditable coverage (MCC) standards set by the Commonwealth Health Insurance Connector Authority. By January 31, 2010, all insurance carriers will issue 2009 1099-HC forms to qualifying subscribers residing in Massachusetts who were enrolled in a health insurance plan at any time during the 2009 calendar year. This form provides proof that individuals were enrolled in a health plan during 2009. Individuals will need to provide the 1099-HC information to their tax preparer for filing with their tax returns.
Massachusetts Data Security Law
In August 2009, the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) revised, for the second time, the Massachusetts data security law, implementing regulations and extended the compliance deadline, for the third time, to March 1, 2010. The law requires a company that owns or licenses personal information about a Massachusetts resident to notify the attorney general, the director of consumer affairs and business regulation, and the affected resident if it knows or has reason to know of (1) a breach of security, or (2) that the personal information of a resident was acquired or used by an unauthorized person or used for an unauthorized purpose. Personal information (PI) is defined as a resident’s first name and last name or first initial and last name in combination with any one or more of the following: (1) Social Security number; (2) driver’s license number or state-issued identification card number; or (3) financial account number, or credit or debit card number, with or without any required security code, access code, personal identification number, or password, that would permit access to a resident’s financial account.
As currently written, the data security regulations require companies that own or license PI to (1) maintain a comprehensive information security program that complies with the regulations; and (2) take all reasonable steps to verify that any third-party vendors with access to such PI are capable of maintaining appropriate security measures to protect the data, consistent with the regulations and applicable federal regulations. The regulations do not require a specific certification or separate agreement to address the Massachusetts data security law, provided that the parties have an agreement prior to March 1, 2010, which addresses protective data security measures.
As a service provider, Ipswich Bay Advisors is required to have a Business Associates Agreement in place with all of our clients. We had sent these out in the fall of 2009 to all of our clients.
Health Insurance Responsibility Disclosure Amendments
The Massachusetts Executive Office of Health and Human Services (EOHHS) has made several changes to the Health Insurance Responsibility Disclosure (HIRD) form, effective April 1, 2009. The HIRD form has been updated to eliminate information that the Division of Health Care Finance and Policy deemed unnecessary and added new questions regarding employer disclosures. Below is a brief summary of the changes to the HIRD requirements:
Employer HIRD forms are now due at the same time as the Fair Share Contribution filings. For some employers this means that they are limited to submitting one employer HIRD report per year. In designating whether an employer has 11 or more full-time employees, the determination is now based on quarterly payroll hours rather than annual payroll hours. Employers are required to report new information, including details about the employer’s full-time criteria and whether the employer collects employee HIRD forms from employees who decline to participate in the group health plan or Section 125 plan. Employers are required to collect signed employee HIRD forms if they have either 5,500 payroll hours in any quarter or 22,000 payroll hours in a year. If you have any questions about administration of the HIRD forms or need a copy of the revised form, please contact our office.
Thursday, December 24, 2009
COBRA Subsidy Extended
The American Recovery and Reinvestment Act of 2009 (ARRA), commonly known as the federal economic stimulus bill, passed earlier this year, required companies to provide a COBRA subsidy for up to 9 months. The ARRA also requires employers to pay 65% of the group health care insurance plan premiums for COBRA assistance eligible employees who were involuntarily terminated from employment between September 1, 2008 and December 31, 2009. Eligible individuals pay only 35% of their COBRA premiums. The employer may recover the 65% premium subsidy by taking a credit on its quarterly federal employment tax return. Certain high-income individuals may have to repay all or part of the premium subsidy through an increase in their income tax liability for the year. Subsidy eligibility ends when the individuals are eligible for coverage under another group medical insurance plan or Medicare, or the normal period for COBRA eligibility ends. Employees terminated for cause may not be assistance eligible. By now, employers or their COBRA administrators have amended their COBRA notices and practices to be ARRA compliant.
On December 19, 2009, President Obama signed into law H.R. 3326, the Department of Defense Appropriations Act, 2010 (Act). The Act immediately amends the ARRA by extending the COBRA subsidy period from 9 to 15 months and extending the cut-off for commencement of the subsidy period from December 31, 2009 to February 28, 2010.
Employers or their COBRA administrators must now update their COBRA eligibility and election notices to include the extended subsidy information. In addition, within 60 days of enactment of the Act, special notice must be given to any COBRA assistance eligible individual who was either already on COBRA on or after October 31, 2009 or was involuntarily terminated on or after October 31, 2009 who already received a COBRA rights notice that did not include the subsidy extension information.
According to the U.S. Department of Labor’s (DOL) press release, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by “60 days after date of enactment” or, if later, 30 days after notice of the extension is provided by their plan administrator.
On December 19, 2009, President Obama signed into law H.R. 3326, the Department of Defense Appropriations Act, 2010 (Act). The Act immediately amends the ARRA by extending the COBRA subsidy period from 9 to 15 months and extending the cut-off for commencement of the subsidy period from December 31, 2009 to February 28, 2010.
Employers or their COBRA administrators must now update their COBRA eligibility and election notices to include the extended subsidy information. In addition, within 60 days of enactment of the Act, special notice must be given to any COBRA assistance eligible individual who was either already on COBRA on or after October 31, 2009 or was involuntarily terminated on or after October 31, 2009 who already received a COBRA rights notice that did not include the subsidy extension information.
According to the U.S. Department of Labor’s (DOL) press release, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by “60 days after date of enactment” or, if later, 30 days after notice of the extension is provided by their plan administrator.
Tuesday, December 1, 2009
Weathering The Storm
“It wasn’t you,” the part time Boston Globe reporter was told when she was recently laid off. She went on to write an article explaining why that phrase was no consolation and provided no comfort for her hard work and career with the newspaper. Yes, she understood the cost cutting reasons for the layoff, but ultimately it was a dehumanizing experience. She writes, “But I should have known better. When someone dumps you, has it ever, in the history of humankind, actually helped to be told ‘It wasn’t you’?” What makes this downturn in the economy such a difficult time for those laid off is that, “when people who know you and your work say your qualities and qualifications don’t matter in a major decision like a layoff, all that you are is somehow negated. You’re a number.” These are very good lessons for companies facing today’s hard times.
As employers face these financial difficulties they are forced to strategically think of ways to sustain their business, while looking to the future. Maintaining a strategic mindset is a critical part of this process. Employers could either view employees as Costs to be cut OR Assets to be conserved and developed. Depending on how your organization is thinking, the decisions made will differ dramatically. Here are a few considerations when faced with having to reduce employees:
According to a recent Society for Human Resource Management study, the average turnover rate for companies with no layoffs is 10.4%. A 5% reduction in force produces a 14.9% turnover rate and a 10% reduction in force produces a 15.5% turnover rate. As you can see, the impact of layoffs tends to trigger additional turnover.
* There are indirect costs associated with layoffs including heightened insecurity, reduced productivity and low morale.
* The tone and content of the terminations are critical. Leading with the heart and following with the head is the most effective. Show employees that you are compassionate, provide dignity, respect and adopt a “helping” relationship.
* Understanding the Survivor Syndrome will provide for an improved return to normal productivity levels. Fear and anxiety brings out the fight/flight response in individuals.
* Engaging camaraderie will bring people back to rational and logical problem solving, collegial environment allowing them to process the loss of their colleagues and move forward. * Lastly, re-igniting old company rituals or introducing new ones are a way to focus attention to the future. Give survivors a reason to stay and articulate your vision for the future will provide for successful teamwork through this difficult period.
Economical challenging times require creative solutions, especially among small and midsize employers who, despite budget constraints, are looking at cost-cutting measures, minimizing costs on retirement and health & benefit programs, and making effective decisions to help preserve key talent. After surveying a few companies, here are a few strategies that employers have introduced:
Inflexxion, located in Needham MA, is a health-related technology company that develops online interactive programs that reduce health-related risks, enhance clinical outcomes, and positively influence quality of care. This privately held company with over 87 employees was seeing revenues decrease due to the poor economic climate. As a result, they implemented cost management changes to reduce expenses. With these changes, Inflexxion is optimisitc that it will perform strongly in these challenging times.
To achieve these cost management changes, they formed an employee task force to evaluate what expenses should be cut. The five person task force did not include any senior management and met during lunch and after hours. The task force’s focus was to not disrupt the perception of Inflexxion as a great employer and to make sure that each implemented change made good business sense. Some of the changes included:
* Negotiating lower prices with some of their vendors;
* Eliminating free snacks in the kitchen, providing a boost for the vending supply company;
* Creating both cost and environmental awareness with employees by having everyone shut off lights, pitch in to water the office plants versus a plant company, and reduce unnecessary use of supplies;
* Temporarily stopping the employer match to the 401(k) plan with the intent to resume it in 2010;
* With the recent health insurance renewal, the company was faced with a 13% increase. The company decided to implement a high-deductible plan, and Inflexxion is covering the cost of the deductible. The increase to employees is marginal as a result.
* Eliminating one paid holiday. The task force is also considering a reduced four day work week in July;
* With salary reductions not an option, they chose to implement a hiring and salary freeze and lay off six employees;
* To boost morale, the group came up with great ideas. To start, they held a Wii bowling tournament in the office with the winner getting the prime parking space for a month. This has transformed into an after hours Wii bowling league.
National Braille Press (NBP), a non-profit organization, is weathering 2009 with a focus on managing to the budget. NBP is a Boston, MA braille printing and publishing company founded in 1927. The guiding purposes of NBP are to promote the literacy of blind children through Braille, and to provide access to information that empowers blind people to actively engage in work, family, and community affairs. As a non-profit company, they are seeing donations down with little options for staffing reductions, as their operations are already very tight. A key focus for them was to manage the endowment very carefully. With the downturn in the financial markets, regular reviews of fund performance with their investment committee were essential. As their employees saw many other employers reducing staff, they were asking “are our jobs safe?” To add fuel to their fears, an issue arose at the end of 2008 regarding the administration of their 403(b) plan which caused employees to feel their money was not safe either. To create a sense of stability, NBP responded immediately to the 403(b) plan issue and provided added employee communication through meetings and written communications. They have finalized their budget and believe that no future layoffs will be necessary as long as they can manage within their budget. They have also completed their benefits renewal. Expecting a 10% increase, they were able to reduce it to zero with some minor changes to employees out of pocket expenses. NBP is on a steady road for the remainder of 2009.
Dalton Electric Heating Co., Inc., located in Ipswich, MA, is weathering the storm by ensuring that no layoffs occur at the company. Dalton Electric is a privately held company founded in 1921 and manufactures industrial heaters. Dalton's Watt-Flex Cartridge Heaters and Diff-Therm Platen heaters are used throughout the world in manufacturing industries including aerospace, automotive, plastics, and composites. The company has worked closely with employees to reassure them that no layoffs will occur for as long as possible. They review financials each quarter and aggressively looked at cost-cutting measures for expenses. They have not made any benefit plan changes but froze salaries on 1/1/2009. Their business has slowed this year, but remains steady. The senior management is constantly reminding employees that their efforts are appreciated and have regular meetings to discuss the status of the company. Having a “being in this all together” approach has been well received by the employees and they are buying into making this all work. To date, Dalton has met their goal of no layoffs.
Beth Israel Deaconess Medical Center (BIDMC), a Boston MA hospital with over 6,300 employees was faced with cutting $20M from their budget at the beginning of 2009. Paul Levy, Chief Operating Officer, chose a unique strategy to achieve this goal. He has been writing on his blog for some time where he elicits feedback from employees and provides updates on the organization. He reached out to employees to help BIDMC achieve their budgetary reductions through his blog and received incredibly valuable and constructive solutions. It was estimated that 600 jobs were to be cut and the most important request from employees was to provide earnings protection to the lowest paid 900 employees. They requested that BIDMC find as many savings as possible so as to protect the lower wage earners from losing their jobs. This group would be financially impacted most significantly by any layoffs. Some cost savings measures implemented include:
· Temporary discontinuance of the employer match in the 401(k) plan.
· Suspension of earned time for six weeks, including no cash out option;
· Elimination of Blackberry and cell phone expense reimbursements;
· Elimination of the company barbeque;
· Executives voluntarily implemented pay reductions;
· Eliminated 70 positions based on structure changes and performance and suspended filling the 100 open positions.
By inviting employees to attend town meetings and collecting feedback from his blog, Paul Levy was able to achieve his goal for BIDMC. Through this process, employees appreciated feeling informed and invested in the future of the hospital.
In many ways this will be a milestone era for our country, companies and Human Resources. Roller coaster gas prices, a historic presidential election and unprecedented financial turmoil have created an atmosphere of uncertainty that most of us have never experienced. Through it all, we should remain strong and committed to providing our employees with honesty and compassion.
As employers face these financial difficulties they are forced to strategically think of ways to sustain their business, while looking to the future. Maintaining a strategic mindset is a critical part of this process. Employers could either view employees as Costs to be cut OR Assets to be conserved and developed. Depending on how your organization is thinking, the decisions made will differ dramatically. Here are a few considerations when faced with having to reduce employees:
According to a recent Society for Human Resource Management study, the average turnover rate for companies with no layoffs is 10.4%. A 5% reduction in force produces a 14.9% turnover rate and a 10% reduction in force produces a 15.5% turnover rate. As you can see, the impact of layoffs tends to trigger additional turnover.
* There are indirect costs associated with layoffs including heightened insecurity, reduced productivity and low morale.
* The tone and content of the terminations are critical. Leading with the heart and following with the head is the most effective. Show employees that you are compassionate, provide dignity, respect and adopt a “helping” relationship.
* Understanding the Survivor Syndrome will provide for an improved return to normal productivity levels. Fear and anxiety brings out the fight/flight response in individuals.
* Engaging camaraderie will bring people back to rational and logical problem solving, collegial environment allowing them to process the loss of their colleagues and move forward. * Lastly, re-igniting old company rituals or introducing new ones are a way to focus attention to the future. Give survivors a reason to stay and articulate your vision for the future will provide for successful teamwork through this difficult period.
Economical challenging times require creative solutions, especially among small and midsize employers who, despite budget constraints, are looking at cost-cutting measures, minimizing costs on retirement and health & benefit programs, and making effective decisions to help preserve key talent. After surveying a few companies, here are a few strategies that employers have introduced:
Inflexxion, located in Needham MA, is a health-related technology company that develops online interactive programs that reduce health-related risks, enhance clinical outcomes, and positively influence quality of care. This privately held company with over 87 employees was seeing revenues decrease due to the poor economic climate. As a result, they implemented cost management changes to reduce expenses. With these changes, Inflexxion is optimisitc that it will perform strongly in these challenging times.
To achieve these cost management changes, they formed an employee task force to evaluate what expenses should be cut. The five person task force did not include any senior management and met during lunch and after hours. The task force’s focus was to not disrupt the perception of Inflexxion as a great employer and to make sure that each implemented change made good business sense. Some of the changes included:
* Negotiating lower prices with some of their vendors;
* Eliminating free snacks in the kitchen, providing a boost for the vending supply company;
* Creating both cost and environmental awareness with employees by having everyone shut off lights, pitch in to water the office plants versus a plant company, and reduce unnecessary use of supplies;
* Temporarily stopping the employer match to the 401(k) plan with the intent to resume it in 2010;
* With the recent health insurance renewal, the company was faced with a 13% increase. The company decided to implement a high-deductible plan, and Inflexxion is covering the cost of the deductible. The increase to employees is marginal as a result.
* Eliminating one paid holiday. The task force is also considering a reduced four day work week in July;
* With salary reductions not an option, they chose to implement a hiring and salary freeze and lay off six employees;
* To boost morale, the group came up with great ideas. To start, they held a Wii bowling tournament in the office with the winner getting the prime parking space for a month. This has transformed into an after hours Wii bowling league.
National Braille Press (NBP), a non-profit organization, is weathering 2009 with a focus on managing to the budget. NBP is a Boston, MA braille printing and publishing company founded in 1927. The guiding purposes of NBP are to promote the literacy of blind children through Braille, and to provide access to information that empowers blind people to actively engage in work, family, and community affairs. As a non-profit company, they are seeing donations down with little options for staffing reductions, as their operations are already very tight. A key focus for them was to manage the endowment very carefully. With the downturn in the financial markets, regular reviews of fund performance with their investment committee were essential. As their employees saw many other employers reducing staff, they were asking “are our jobs safe?” To add fuel to their fears, an issue arose at the end of 2008 regarding the administration of their 403(b) plan which caused employees to feel their money was not safe either. To create a sense of stability, NBP responded immediately to the 403(b) plan issue and provided added employee communication through meetings and written communications. They have finalized their budget and believe that no future layoffs will be necessary as long as they can manage within their budget. They have also completed their benefits renewal. Expecting a 10% increase, they were able to reduce it to zero with some minor changes to employees out of pocket expenses. NBP is on a steady road for the remainder of 2009.
Dalton Electric Heating Co., Inc., located in Ipswich, MA, is weathering the storm by ensuring that no layoffs occur at the company. Dalton Electric is a privately held company founded in 1921 and manufactures industrial heaters. Dalton's Watt-Flex Cartridge Heaters and Diff-Therm Platen heaters are used throughout the world in manufacturing industries including aerospace, automotive, plastics, and composites. The company has worked closely with employees to reassure them that no layoffs will occur for as long as possible. They review financials each quarter and aggressively looked at cost-cutting measures for expenses. They have not made any benefit plan changes but froze salaries on 1/1/2009. Their business has slowed this year, but remains steady. The senior management is constantly reminding employees that their efforts are appreciated and have regular meetings to discuss the status of the company. Having a “being in this all together” approach has been well received by the employees and they are buying into making this all work. To date, Dalton has met their goal of no layoffs.
Beth Israel Deaconess Medical Center (BIDMC), a Boston MA hospital with over 6,300 employees was faced with cutting $20M from their budget at the beginning of 2009. Paul Levy, Chief Operating Officer, chose a unique strategy to achieve this goal. He has been writing on his blog for some time where he elicits feedback from employees and provides updates on the organization. He reached out to employees to help BIDMC achieve their budgetary reductions through his blog and received incredibly valuable and constructive solutions. It was estimated that 600 jobs were to be cut and the most important request from employees was to provide earnings protection to the lowest paid 900 employees. They requested that BIDMC find as many savings as possible so as to protect the lower wage earners from losing their jobs. This group would be financially impacted most significantly by any layoffs. Some cost savings measures implemented include:
· Temporary discontinuance of the employer match in the 401(k) plan.
· Suspension of earned time for six weeks, including no cash out option;
· Elimination of Blackberry and cell phone expense reimbursements;
· Elimination of the company barbeque;
· Executives voluntarily implemented pay reductions;
· Eliminated 70 positions based on structure changes and performance and suspended filling the 100 open positions.
By inviting employees to attend town meetings and collecting feedback from his blog, Paul Levy was able to achieve his goal for BIDMC. Through this process, employees appreciated feeling informed and invested in the future of the hospital.
In many ways this will be a milestone era for our country, companies and Human Resources. Roller coaster gas prices, a historic presidential election and unprecedented financial turmoil have created an atmosphere of uncertainty that most of us have never experienced. Through it all, we should remain strong and committed to providing our employees with honesty and compassion.
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