Is Your Organization Ready for Health Care Reform?

March 23, 2010 marked the beginning of health care reform with the signing of the Patient Protection and Affordable Care Act (PPACA).  The short- and long-term cost implications for employers stretch a far as 2018 and it is important for employers to prepare for reform in order to avoid costly “surprises” later on.   Some health care reform provisions have already begun. The PPACA will require changes in many company’s health benefits, accounting systems, as well as reporting, controls and compliance systems.

According to Deloitte CFO Insight, due to “PPACA’s complexity, the need for regulation, and the lengthy design/cost planning cycles…. employers should begin working on their health reform now—2010!” It will be necessary for organizations to adjust accounting and disclosure practices. They will also be expected to collaborate with human resources in order to successfully and cost-effectively transition and comply with the new health care regulations. Communication with employees is also vital and can greatly impact the structure of plans the company offers in later years.

The PPACA timeline effectively began as early as June of this year (2010). A temporary $5 billion federal reinsurance pool specifically reserved for pre-65 retirees was created. The June regulations also forces employers to apply for coverage. This pool expires in 2014 or when the allocation is exhausted, further stressing the need to be aware of PPACAs timeline. This PPACA provision has potential financial benefits for employers as it provides medical benefits for early retirees. This is just one example of the many reform provisions which will continue as far as 2018.

It is vital for employers in both large and small organizations to know the timeline of the PPACAs regulations. In order to minimize the potential financial impact, click here for the full report form Deloitte CFO Insight for timeline and resulting implications. Do not stall in initiating the necessary changes. If employers do not begin initiating change now, their transitions will be rushed, ineffective, and costly. It is central for companies that a smooth transition takes place in these upcoming years of employer health care reform.

HIRE Act Employee Affidavit Form (W-11) Now Available

The IRS just posted a new form--W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit--along with answers to frequently-asked questions about the HIRE Act.

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).

The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.

In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

The IRS explained in an alert issued on 4/7/2010 that the new law requires "employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period.  Employers can use Form W-11 to meet this requirement."

Employers Get Two New Tax Breaks

Posted by HR Watchdog on  March 19, 2010

Employers can now take advantage of two new tax benefits when hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today.

1. Employers who hire unemployed workers after Feb. 3, 2010 and before Jan. 1, 2011 may qualify for a 6.2-percent payroll tax incentive.
2. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

Employees newly-hired to fill existing positions also qualify but only if the workers they replace left voluntarily or for cause. Family members and other relatives do not qualify.
In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement. For full information, read the IRS' press release.