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MARCH 14, 2015

IRS CLARIFIES AND PARTIALLY DELAYS PROHIBITION ON INDIVIDUAL HEALTH PLAN PREMIUM REIMBURSEMENTS

FEBRUARY 19, 2015

FSA, HSA, AND 401(K) CONTRIBUTION LIMITS INCREASE IN 2015

 

NOVEMBER 18, 2014

OHIO EMPLOYERS TO PAY EXTRA FUTA TAXES ON THE 4TH QTR. 2014 FEDERAL FORM 940

 

2015 OHIO BUREAU OF WORKERS’ COMPENSATION BILLING CHANGES

 

OHIO MINIMUM WAGE INCREASE

 

AUGUST 14, 2014

ALERTS:  IRS REITERATES PROHIBITION OF AND PENALTY FOR PRE-TAX EMPLOYER REIMBURSEMENT FOR HEALTH PREMIUMS

 

TRENDS: HOW ARE MOBILE DEVICES & CLOUD SOFTWARE AFFECTING PAYROLL?

JUNE 19, 2014

BUREAU OF WORKERS’ COMPENSATION PROPOSED CHANGES BEGINNING IN THE FALL OF 2014

 

MARCH 14, 2015

 

IRS Clarifies and Partially Delays Prohibition on Individual Health Plan Premium Reimbursements


The IRS recently issued a notice that provides transitional relief to small employers who provide reimbursements for their employees to purchase individual health insurance on the marketpla-e. With that relief, however, the IRS also clarified that the new interpretation disallowing reimbursements is broader than many realized.
 
Background
For the last 50 years or so, based on IRS guidance, employers who did not want to provide group health insurance to their employees had the option of reimbursing the employee for the cost of purchasing an individual plan. Most employers did this by setting up Employer Payment Plans (EPPs), such as FSAs, which allowed these amounts to be reimbursed on a pre-tax basis. In 2013, however, the IRS issued a notice that those EPPs that reimburse employees for substantiated health care premiums would be considered group plans under the Affordable Care Act (ACA), and thus would be subject to the ACA’s market reforms. Since these plans impose an annual benefit limit (the amount of the reimbursed premiums) they do not satisfy the ACA requirements, and thus would be subject to a penalty in the form of an excise tax of over $36,000 per employee covered by the non-compliant plan.
 
Scope of New Interpretation
The notices and guidance on these post-ACA interpretations made it clear that pre-tax reimbursements through EPPs were no longer allowed. The treatment of post-tax reimbursements, on the other hand, was still unclear. While the guidance talked about reimbursements generally, the context led many people to believe that it likely only applied to pre-tax reimbursements. This latest IRS notice has dispelled that notion. When discussing the reimbursement arrangements, the IRS notes: “The arrangement is subject to the market reform provisions of the Affordable Care Act applicable to group health plans without regard to whether the employer treats the money as pre-tax or post-tax to the employee.” So, we now know definitively that any reimbursements to more than one employee for health insurance that the employee purchases, whether on a pre-tax or post-tax basis, will violate the ACA provisions.
 
Transitional Relief
In this latest notice, the IRS provides some transitional relief from the excise tax that will apply to reimbursements that would otherwise cause the employer to violate the group plan rules of the ACA with one of these EPPs. This relief is limited both in time and scope. In order to qualify for this relief, the employer must have fewer than 50 Full Time Equivalent employees, and the relief from liability will only extend through June 30, 2015. After that date, all employers will be subject to the steep excise tax imposed on EPPs that reimburse health care premiums for an employee’s individually purchased insurance.
 
Next Steps
Given the IRS’s continued reminders and clarifications on this particular topic, it is unlikely that this interpretation disallowing reimbursements for individually purchased plans will be reversed. We recommend that employers with 50 or more Full Time Equivalent employees immediately review any EPPs to ensure they do not contain reimbursement for premiums and cease any post-tax reimbursement practices they have in place. Small employers will need to conduct a review as well and stop any individual premium reimbursements by June 30.

 

FEBRUARY 19, 2015

FSA, HSA, and 401(k) Contribution Limits Increase in 2015
Several of the most common benefit plans and account types have an increased allowance for contribution limits in 2015. The IRS has announced that it will raise the annual dollar limit on contributions for health care flexible spending accounts (FSAs), health savings accounts (HSAs), and 401(k) accounts based on cost of living adjustments (COLAs). These limits are reviewed annually by the IRS.
 
Health Care Flexible Spending Accounts (FSA)- The maximum allowed amount that an employee can contribute to an employer-sponsored health care FSA is $2,550 in 2015 which is a $50 increase from the previously allowed amount of $2,500.
 
Health Savings Accounts (HSA)The maximum allowed contribution amount for individuals to a Health Savings Account increases by $50 for 2015 going from $3,300 to $3,350. The limit for contributions for a family also increases in 2015 going from $6,550 to $6,650, an increase of $100.
 
401(k) Accounts- In 2015, employees may contribute up to $18,000 for the year to their 401(k) account. This is a $500 increase from 2014. This increase also applies to several other types of retirement accounts such as 403(b) accounts and profit-sharing plans.
 
Employers that offer FSA, HSA and 401(k) accounts should ensure that they have communicated these increases to their employees if the employer decides to adopt the higher limits for 2015. These increases may also require changes and revisions to existing written employer communications and to open enrollment materials.


NOVEMBER 18, 2014

IMPORTANT INFORMATION AFFECTING YOUR BUSINESS CASH-FLOW

OHIO EMPLOYERS TO PAY EXTRA FUTA TAXES ON THE 4TH QTR. 2014 FEDERAL FORM 940

This week the Department of Labor announced the FUTA credit reduction states which included Ohio. Ohio’s FUTA credit has been reduced by 1.2% retroactive for the entire year 2014, increasing the FUTA rate for Ohio employers from 0.6% to 1.8% on the first $7,000 of employee wages.  This is an increase from $42 per employee to $126 per employee. 

Under the joint federal/state unemployment insurance system, states with a high rate of unemployment and difficulty meeting their benefit obligations can borrow money from the FUTA Account to pay benefits. If a state has outstanding loan balances on January 1 for two consecutive years, and does not repay the full amount of its loans by November 10 of the second year, the FUTA credit rate for employers in that state will be reduced until the loan is repaid, with the extra FUTA taxes paid being applied against the state’s outstanding loan balance.  Each year the loan remains unpaid, the credit reduction increases by 0.3%; this is Ohio’s fourth year with a loan balance unpaid.  The FUTA credit-reduction tax liability is due in January.


2015 OHIO BUREAU OF WORKERS’ COMPENSATION BILLING CHANGES

Ohio BWC is coming in-line with how insurance companies collect money for services in advance of extending coverage. The calculations of the amount invoiced will be based on what the history reveals with BWC claims and accidents in the past.

Heading into 2015, don’t forget to report your payroll and pay your premium for the July 1 through Dec. 31, 2014 period as normal – due March 2, 2015. (Please note: the final 50/50 payment date was moved to May 1, 2015.)

In May 2015, you will receive a notice of estimated premium along with a certificate of coverage. This certificate will be somewhat different from your previous certificate, because it will not guarantee coverage. The only way to guarantee coverage is by paying your premium at the appropriate time. The notice of estimated premium will show you what Ohio BWC has calculated your premium to be, based upon the most recently completed year.

Ohio BWC will provide an eight-month transition credit to you. However, in order to receive the transition credit, your policy must be in good standing and you must submit your payroll report for the January - June payroll period due August 31, 2015 (no payment due with this payroll report). Upon completion of the payroll report, BWC will credit your policy with the transition credit. If your policy is in a lapsed status, you are not in good standing and must rectify this situation prior to July 1, 2015.

You will receive an invoice from Ohio BWC for your September and October premium. This invoice will be due by Aug. 31, 2015.

                Summarized

March 2, 2015: July 1 – Dec. 31, 2014 Payroll report and payment due

August 31, 2015: January – June 30, 2015 Payroll report due (no payment due for payroll report)

August 31, 2015: Policy year 2015 installment payment due for the Sept. and Oct. 2015 premium. 

In the first prospective year, BWC will require employers to follow a bi-monthly (six installment) payment schedule.  In subsequent years, employers will have the option to make up to 12 installments.

 

OHIO MINIMUM WAGE INCREASE

Ohio Department of Commerce announced recently that Ohio’s minimum wage will increase by 15 cents to $8.10 per hour for non-tipped employees and 7 cents to $4.05 per hour for tipped employees starting January 1, 2015. 

Based on a constitutional amendment passed by Ohio voters in 2006, minimum wage is required to increase on January 1st of each year by the rate of inflation.  The Consumer Price Index rose 1.6 percent between September 2013 and August 2014.

The minimum-wage increases apply to employees of businesses with annual gross receipts of more than $297,000 per year.  For employees at smaller companies ($297,000 or less per year after January 1, 2015) and for 14– and 15-year olds, the state minimum wage is $7.25 per hour.  For these employees, the state wage is tied to the federal minimum wage of $7.25 per hour, which requires an act of Congress to change.

 

AUGUST 14, 2014

HR ALERTS & TRENDS

ALERTS: IRS REITERATES PROHIBITION OF AND PENALTY FOR PRE-TAX EMPLOYER REIMBURSEMENT FOR HEALTH PREMIUMS

Recently, the IRS issued a Frequently Asked Questions (FAQ) list that reiterates earlier guidance disallowing pre-tax employer reimbursements for employee health care premiums. The FAQ also calls attention to the $100 per day, per employee penalty for non-compliance.

The initial guidance from last fall indicated that pre-tax employer reimbursements for healthcare premiums would be categorized as group health plans and, thus, would not be permissible as they would not comply with the requirements for group health plans under the Affordable Care Act. Since that time, however, many people have attempted to find alternate solutions in order to continue the practice of reimbursing employee premiums in lieu of providing a full health plan.

This latest FAQ and penalty announcement clarifies that the IRS is serious about disallowing this arrangement. We recommend that employers who still utilize a pre-tax health care premium reimbursement benefit discontinue this practice. Any advice that employers have heeded with regard to these benefits still being allowed, should be carefully reexamined in light of this most recent guidance and penalty reminder.

 

TRENDS: HOW ARE MOBILE DEVICES & CLOUD SOFTWARE AFFECTING PAYROLL?

Only 25 years ago, small companies were manually managing their payroll and even large companies were still hand signing checks.  Today, with changes in technology, more and more companies are relying on their mobile phones, tablets or online portals to process payroll and run reports.

The ability to access payroll and run payroll anytime, anywhere, across multiple devices is becoming the standard.  A contributing factor is that businesses are becoming more comfortable moving their data from a local desktop to an online or cloud-based service.  The cloud-based system provides an additional efficiency towards becoming a paperless society; direct deposit and e-filing services save employers time and money.

All in all, the goal of these technology changes are to reduce the amount of time required to process payroll and allow business owners more time to run their business.  The past few years have required an investment to hardware and software changes, to create such a platform.  The demand for innovation was driven to create a better, faster and more seamless, user experience.  The next step will be integrating with applications, such as HR tools, accounting software and core business applications. 

 

The complexity of payroll will continue to grow, with changes in a flexible workforce that requires more 1099 contractors and work-at-home employees, and compliance with the mounting list of local, state and federal regulations.  Increasing compliance requirements for payroll reporting, quarterly filings, year-end filings, etc. will continue to plague business owners.  We at Service 1st Payroll are happy to answer your payroll needs, and that is why we are excited to offer our own new cloud-based program, Service1stExpress.  

 

JUNE 19, 2014

BUREAU OF WORKERS’ COMPENSATION PROPOSED CHANGES BEGINNING IN THE FALL OF 2014

We at Service 1st Payroll are currently looking into how the changes in the Ohio Bureau of Workers’ Compensation (BWC) will effect reporting.  As part of the “Billion Back” campaign, BWC has announced the following changes beginning in the fall of 2014.  BWC will be transitioning to a billing system that will provide a modernized perspective billing system that is more flexible for employers while reducing overall system costs, and will align BWC with standard industry practice of allowing the collection of premiums before extending coverage.

Transition is effective:

July 1, 2015 for Private employers
January 1, 2016 for Public employers

Changes to Expect as Transition Takes Place:

·         Earlier deadline to sign up for incentive program.

·         One-time credit - in July 2015 will be equal to 8 months of premiums.  BWC will cover 6 months or retrospec­tive premiums for January to June 2015 as well as the premiums for July and August 2015.

·         New payment schedule - employers may choose as many as 12 installments.

·         True-up process - in August 2016 the employer will report actual payroll and the amount owed will be com­pared to the estimated prepaid amount.  Employers will receive a refund if overpaid or an assessment of what they owe.

Benefits of Prospective Payment:

·         More flexible payment options (monthly, quarterly, yearly) and possible discounts for those who pay in advance.

·         Better ability to anticipate budgetary impacts to Workers’ Compensation coverage.

·         More options for BWC to provide quotes online or via phone.

·         Less costly for employers who either don’t pay premiums on time or have workers injured without coverage that are mutualized among employers in good standing.

·         Increases BWC’s ability to detect employer non-compliance and fraud

 

 

 
Last modified on Saturday, 14 March 2015 18:57
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