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Health Care Reform - Is Your Company Ready?

The waiting is finally over, and the Supreme Court of the United States has ruled that the individual mandate and the Patient Protection and Affordable Health Care Act is legal under the constitution.

This ruling came as a big suprise to many. Despite an early warning in our blog entitled “Want to Repeal Health Insurance Reform … Not Likely”. The majority of employee leasing companies, professional employer organizations, and small and midsized employers are just starting to learn all the aspects of the law, and understand how it pertains to their particular situation.

Kathyrn Mayer, a staff writer for BenefitsPro, www.benefitspro.com has written an excellent article to guide you through some of the changes. She quotes employee benefits specialist, Tony Tilelli, who works with the Sihle Insurance Group.

• Be aware that states currently making no attempt to implement the state exchange will get a plan administered by the federal government.

• Businesses with 50 or more employees cannot fall into the trap of thinking that on Dec. 31, 2013, they can just reduce their employee roster to 49 FTE (full time equivalent). The IRS will be watching.

• Review your health plan documents. You should have a binder containing all of the information you need to legally administer your health benefits plan, and you should thoroughly review that data to guide you in the steps you now need to take.

• Be ready for health plan audits. They will become more popular under the new law.

• Beginning in 2013, depending on the size of your group, you will be required to report the value of your employee’s health plan premium on their W2s.

• You must have your benefits summaries in all of the languages spoken by your employees. This means that if you have employees whose first language is not English, you need to provide a benefit summary in their primary language.

• Be careful of what is called work force realignment. In the past, employers have attempted to skirt compliance by reducing the hours of some illness-prone employees to part-time status. Downsizing to avoid providing benefits is a violation of the Employee Retirement Income Security Act (ERISA).

• Review the cost of your health plan. Make sure you have a health plan that does not cost your employee more than 9.5 percent of his or her income.

This is only a small portion of what to expect to come from health care insurance reform. Stay tuned for more information in the weeks to follow. As always, your comments are welcome.


Employers, Healthcare and PR - Personal Responsibility

Can Employers Promote Personal Responsibility? Should They?

Business owners, CFO’s and HR executives across the country are troubled over the escalating costs of providing health insurance for their employees. Unfortunately, the statistics for the future look grim. Some estimate that the United States health-care system will cost $4.6 trillion dollars, (that’s Trillion with a T) by the year 2020. However, buried deep down among all of the statistics, may be a shining ray of light.

Bloomberg Businessweek Chairman Norman Pearlstine invited a panel of health care industry experts to address the question “How do we fix health care?”. The discussion revealed many of the issues that contribute to the cost of providing medical care in America. The most enlightening facts were not how much medical care in the US costs, but who is actually using the care … and why.  

Click here to view the panel discussion.

The Ten Percent (10%) Solution

Dr. Ralph De La Torre, Chairman and CEO of Steward Health Care System reported Medicare data which indicates that twenty to thirty percent (20% - 30%) of patients utilize eighty percent (80%) of our medical resources. Dr. Greg Curfman, Executive Editor for the New England Journal of Medicine drilled down even deeper. He states “The numbers are very clear. Ten percent (10%) of the population consumes sixty three percent (63%) of the total health-care dollars in this country. One percent (1%) consumes twenty percent (20%) of the health-care dollars. Fifty percent (50%) of them consume nothing at all. So this is the issue, and we have to get a better handle on the ten percent (10%).”

The answer seems clear, identify the ten percent (10%) of Americans that are utilizing more than sixty percent (60%) of the nation’s medical resources, then control or eliminate the causes. If we can cut the ten percent (10%) in half through lifestyle changes, patient advocacy and therapy, America’s health care costs can be reduced by thirty percent (30%).

Lower Company Medical Costs with PR

Is it the responsibility of business owners and corporations to promote personal responsibility? What can an organization gain by motivating employees to exercise, eat a healthy diet, and to get 7-8 hours of sleep? Studies have shown that improvements in mental and physical fitness contributes to a more cognitive, effective, and productive workforce. How can employers’ start to reduce their medical costs, and lower health insurance premiums?

Today, it is easy and inexpensive for companies to improve employee engagement and identify your ten percent (10%) at the same time. With no more effort than clicking on a website, anyone can discover their projected longevity. Individuals with medical conditions - present and future can receive a personalized health care protocol designed specifically for them.

Benjamin Franklin, one of the nation’s founding fathers, inventor and statesman is quoted as saying “An ounce of prevention … is worth a pound of cure”. I think it’s time America took his advice.

Here are a few ways that employers can take the lead.

The Real Age Test

A calculation of your body’s health age. Created by top doctors, including Dr. Mike Roizen and Dr. Mehmet Oz. It uses the latest medical research to develop personalized tips and action plans based on one’s answers. By linking behaviors to increasing or decreasing your age, the approach allows anyone to compare different lifestyle factors and prioritize their efforts.

 The Prevention Plan

    The Prevention Plan Includes:
  • Annual subscription to The Prevention Plan web-based program
  • Comprehensive online Health Risk Assessment
  • Extensive blood panel at a Quest Diagnostics® Patient Service Center including 25 results* for cholesterol (heart), fasting blood glucose (diabetes), liver, kidney and thyroid function, bones, and fluids and electrolytes.
  • Personalized Prevention Plan that explains and prioritizes your health risks and recommends the steps you should take to improve your health.
  • Recommended prevention screenings, schedule and alerts based on age, gender and risks.
  • Personal Prevention Score roadmap to track your progress and motivate you over time
  • 24/7 Nurse Line …. and much more.

We welcome your comments and contributions. Let us know how you are engaging your employees and promoting personal responsibility among your workforce.


Employee Leasing for Franchise Business Owners

PEOs Offer Employee Management Solutions for Franchise Owners

While attending the 2012 Franchise Expo South at the Miami Convention Center, I was amazed to see all the new and exciting franchise opportunities that were present this year. Every aisle featured a wide array of franchise enterprises offering almost every category of business and consumer products and services. The Expo represented a who’s who of the franchise industry.

Exhibitors included well known veteran operators like Baskin-Robbins Ice Cream and Sign-A-Rama, as well as two new entrants from Palm Beach County, FL. The Original Brooklyn Water Bagel Company and Hurricane Grill and Wings, were rolling out fresh new restaurant concepts with delicious and original menu items that are sure to please the entire family.

A variety of personal service concepts were on hand, from accounting and financial services to health care, home care, and personal security, to beauty services and spas. There was one common theme throughout—the franchise industry was alive and well despite a weak economy and tight credit environment.

The Advantages to Owning a Franchise

The advantages that successful franchise systems offer are numerous. First time business owners acquire a franchise system’s time-tested formula. Individuals willing to invest their time and money can purchase a recognized brand within a protected territory from an organization that provides training, marketing support, and a proven business model.

There is no shortage of potential franchise business owners either. The economic downturn and high unemployment has created a large pool of potential entrepreneurs yearning to operate their own business. Thousands of returning American Veterans can take advantage of special financing and training programs from over 400 franchise systems who participate in the International Franchise Association’s VetFran (www.vetfran.org) program.

Leading franchisors help entrepreneurial servicemen and women, and inexperienced business owners to hit the ground running by offering a “turn-key” operation. The franchise team supplies all the required expertise, guidance and support, beginning with site selection through vendor relations, making certain that every new franchisee is generating revenue from day one.

Congratulations Franchise Owner - Now What?

Most franchise systems help franchise owners get up and running. They provide the model and the franchisee operates the business. However, many franchised business models can’t operate without employees, and many owners have never recruited, trained or managed a workforce before. Fortunately, small business owners can turn to HR outsourcing companies, called professional employer organizations, which can pick-up where the franchise system leaves off. PEOs or staff-leasing firms assume many of the employment responsibilities that franchise owners must contend with.

The majority of new franchise operators are unaware of the myriad of Federal and State laws imposed on small businesses today. Failure to comply with labor and wage and hour rules, submitting timely payroll reports and tax payments can result in severe penalties and fines. Defending your firm against a wrongful termination, independent contractor dispute, or sexual harassment can lead to expensive litigation, and have a catastrophic effect on your bottom line. All too often, a business owner hires a ‘bad apple’ whose behavior causes accidents, costly claims, and disrupts your ability to maintain an engaged and productive workforce.

PEO - Not Just a Payroll Company

Just as a successful franchise system provides a “One Stop” solution for operating a business, employee leasing and PEO companies are the answer to managing franchise employees. They are true HR companies providing comprehensive human resource services to employers under a co-employment agreement. Franchise owners operate the business, while the HRO or PEO acts as the administrative employer of record.  Employment-related reporting, HR compliance, payroll administration, workers compensation and workplace safety are handled by an experienced staff of HR and payroll professionals. Highly trained safety engineers and risk managers are assigned to examine and evaluate any worksite for potential hazards.

Another advantage employee leasing and professional employer organizations share with the franchise industry is that they both achieve economic efficiencies by bringing together large numbers of subscribers. By serving thousands of small business owners, many PEOs offer franchise operators a wide range of discounted insurance programs, employee benefit plans, and workers’ compensation coverage at significant savings to small business group rates. Franchisees gain a high level of HR and safety expertise, valuable employee benefit and incentive programs, and the latest HRIS technology at one low cost. Outsourcing your tedious and non-productive employee administration responsibilities to a comprehensive HR company is a win-win for the franchise owner and franchise employee alike.

For additional information click here.


Independent Contractors and Co-Employer Agreements

 Can PEOs Protect Against Misclassified Independent Contractors?

There are many questions surrounding Independent Contractors these days. Do services rendered by an individual for your company constitute an act of employment, or are they truly services being provided by an independent party? What types of occupations are clearly recognized as independent contractors in the eyes of the Internal Revenue Service? How can I protect my business when paying independent contractors? What are my risks for misclassification?

IRS enforcement actions against small and midsize corporations for misclassifying employees are on the rise, and the penalty for non-compliance can be substantial. Employers who have misclassified workers are responsible for the payment of all back taxes. This includes not only the employers 7.65% share of federal taxes for Medicare and Social Security, but a portion of the employee’s share of FICA as well. Now add state and local unemployment taxes then compound for 3 or 4 years. When your finished, multiply this figure by 5 or 10 employees and it’s easy to see why so many business executives are concerned when confronting this issue. With the stakes so high, many companies are seeking ways to eliminate this exposure.

Professional Employer Organizations and Independent Contactors

There are several strategies that employers are using to insulate themselves from exposure to the IRS. Some business owners and HR executives have turned to outsourcing the payroll and administration of their independent contractors to administrative employers, employee leasing companies, professional employer organizations, and staffing companies.

The mere fact that a third party handles a company’s payroll administration does not absolve them from their obligation for collecting and paying employment taxes. The decision whether an individual performing a service on behalf of your company is an employee usually comes down to control. Who controls whom, how, where, when and what work is performed. While it is only one of several factors considered by the Internal Revenue, in most cases it is the determining factor.

Engaging the services of a professional employer organization is a matter of contract law. Most of the contracts from the country’s leading PEOs have language in their co-employer agreements which specifically exclude independent contractors. Some PEO’s and many employee leasing companies will provide payroll and administrative services for companies who employ independent contractors, however they are not the employer.

Most co-employment agreements spell out the terms of shared responsibility for employment related functions between the PEO and client company, and assigns responsibilities for each party to the contract. The PEO acts the administrative employer of record. The client or co-employer is the work site employer who assigns where each employee reports, hours they work, and job function. Payroll, employee leasing companies, or professional employers cannot protect employers if audited by the IRS for misclassified employees, the burden of proof and liability is with the business and the employer.

IRS Guidelines for Hiring Independent Contractors

Facts that provide evidence of the degree of control and independence fall into three categories:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

 Don’t Guess - Ask the IRS

If an employer or employee is unsure, either party can submit Form SS-8 to the IRS. They will make a final determination and notify you of the worker’s status.

Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the form.  

Contact us for additional information on independent contractors and HR outsourcing.



PEO Clients - Did you claim your tax credit?

US Treasury Report - Health Care Tax Credits for PEO Clients Go Unclaimed

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act were signed into law in March 2010.  Among the credits contained in this legislation was the Small Business Health Care Tax Credit.  The credit was designed to encourage small employers to offer health care insurance. It is available only to small employers who pay at least one-half the cost of health insurance coverage for their employees.

The Congressional Budget Office estimated the credit would cost $37 billion over 10 years and that taxpayers would claim up to $2 billion of Credit for Tax Year 2010. However, in a recent report by the US Treaury Inspector General, as of mid-May 2011, just more than 228,000 taxpayers had claimed the credit for a total amount of more than $278 million. An audit to determine whether the IRS adequately implemented and processed the credit found that while their efforts were mostly successful, some improvements are needed since the number of claims for health care tax credits has been much lower than anticipated.

“The Small Business Health Care Tax Credit is an important credit for both small business employers and their employees,” said TIGTA Inspector General J. Russell George in a statement. The IRS sent postcards to businesses that might potentially qualify for the credit to make sure they were aware of it, the IRS did not have ready access to data that would allow it to determine which of these businesses actually offered health insurance to their employees or otherwise qualified for the credit. He believes the report’s recommendations, once adopted, should improve the IRS’s ability to verify claims for this credit.”

Report - Professional Employers Should Identify Clients

While some businesses, such as companies that only process payroll and file tax returns on behalf of other businesses, disclose similar arrangements to the IRS, this is generally not the case for the PEOs. Other arrangements, where one business acts as an agent for another business, are disclosed on the forms for Employer/Payer Appointment of Agent (Form 2678) and the Allocation Schedule for Aggregate Form 941 Filers (Schedule R (Form 941)).  However, the PEO business model is premised on the PEO’s view that it is a legal employer, not the agent of the client business.

The PEO, acting as the employer of the leased employees, files employment tax returns under its own Employer Identification Number, and the client businesses where the employees work claim other employment-related expenses and the related deductions and credits (as long as these were paid by the client business) under their (different) Employer Identification Numbers. One remedy the report recommends is to have the Commissioner, Small Business/Self-Employed Division track PEO relationships by inputting cross-referenced Employer Identification Numbers on the client business tax accounts.

Is your small business using the services of a professional employer organization. Are you the owner of a small firm who is providing health insurance for your employees and paying at least 50% of the premium? Then you may qualify for the “Small Business Health Care Tax Credit”. We suggest you contact the employee benefits department at your employee leasing company or professional employer, or you can click on this link.