April 19th, 2010 | By Paul Cherner
On April 15, 2010, President Obama signed a law extending unemployment compensation benefits. Included in that bill was a provision extending the eligibility date for the COBRA subsidy under the ARRA.
Eligible employees who are involuntarily terminated on or before May 31, 2010 can now apply for the 65% COBRA premium subsidy in the event that they exercise their right to continued health insurance coverage under COBRA (or pursuant to a similar state law that provides for coverage continuation). The US Dept. of Labor has issued a new “Fact Sheet” that should be consulted with respect to any questions that you may have regarding this subject.
A number of questions have arisen concerning what impact, if any, the new Health Care Reform Act may have with respect to COBRA and the COBRA ARRA subsidy law. The US Dept. of Labor has also issued a publication of ”Frequently Asked Questions” about this issue.
April 8th, 2010 | By Paul Cherner
On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment (“HIRE”) Act. This Act contains two new tax benefits that are available to employers who hire certain previously unemployed workers (“qualified employees”). The IRS has issued some preliminary guidance on the application of this new law. We expect further guidance from the IRS on the interpretation of this law as issues and questions arise in the future.
The following summary is based on our review of the relevant provisions of the HIRE Act and the IRS’s preliminary guidance:
1. Employers -
Taxable and tax-exempt employers are eligible for these tax benefits if they hire “qualified employees ” and meet the other requirements of the HIRE Act. Public employers, with the exception of public colleges and universities, are not eligible for these tax benefits.
2. ”Qualified Employees” -
a.) In order to qualify for the tax benefits under the Hire Act, an employer must hire an employee (after February 3, 2010 and before January 1, 2011) who has been unemployed or employed for less then 40 hours during the 60 day period ending on the date that the new employment begins.
b.) Family members and certain employees related to the employer do not qualify.
c.) A qualified employee must sign a sworn affidavit stating that they meet the qualification with respect to the 60 day period. The IRS has prepared an affidavit form [form W-11] to be used for this purpose. This form is to be retained by the employer and not filed with the IRS.
d.) The payroll tax exemption benefit does not apply to an employee hired to replace an existing worker, unless the existing worker terminated employment voluntarily or was terminated for cause. [Note: special rules may apply to employees hired to replace laid off employees].
3. Payroll Tax Exemption –
a.) An employer who hires a “qualified employee” during the relevant time period will be entitled to a Payroll Tax Exemption (“PTE”) on all wages paid to that “qualified employee.” The PTE is an exemption from the employer’s 6.2% share of social security taxes on all wages paid to the “qualified employee(s)” from March 19, 2010 through December 31, 2010,
b.) The PTE does not apply to Medicare tax or any other tax withholdings. It also will not impact on the amount of social security benefit that the “qualified employee” may eventually be entitled to receive.
c.) The IRS is developing forms and guidance with respect to how to handle the PTE for the first calendar quarter of 2010, which will allow appropriate credit to be taken when the employer pays taxes due for the second calendar quarter of 2010.
4. Business Retention Tax Credit Benefit –
a.) There is also a general business tax credit for qualified employers to retain new hires. An employer may claim this credit for each “qualified employee” it hires for purposes of the PTE and who remains an employee for 52 consecutive weeks (a “retained worker”). The “retained worker’s” pay may not significantly decrease during the second half of the 52 week period.
b.) The Business Retention Tax Credit (“BRTC”) is the lesser of $1,000 or 6.2% of the wages paid to the retained worker during the 52 week period.
c.) Caveat: Employers who are eligible for the more generous Work Opportunity Tax Credit (“WOTC”) must opt out of HIRE if they want to continue receiving the WOTC credit.
Note: The preceding summary highlights the key portions of this new law. However, specific situations and questions should be referred to legal counsel and tax advisors, rather then relying on this general summary. Additionally, the IRS will be issuing further guidance and forms which need to be taken into account with respect to the application of the provisions of this new law.
IRS Tax Advice Compliance Disclosure: To ensure compliance with the regulations governing the issuance of advice on Federal tax issues, we advise you that any tax advice in this communication (and any attachments) is not written with the intent that it be used, and cannot be used, to avoid penalties that may be imposed under the Internal Revenue Code
February 5th, 2010 | By Paul Cherner
The U.S. Dept. of Labor has been updating its website on a weekly basis offering additional information re the COBRA Subsidy (65% of COBRA premium) under the ARRA and should be referred to if you have any questions about administering this benefit.
Legislation is pending in the House and will be introduced in the Senate to extend the current deadline that employees must be involuntarily separated on or before Feb. 28, 2010 in order to be eligible for this subsidy. The current House version extends the date to June 30, 2010, while President Obama’s recent federal budget submission suggested extending the date to December 31, 2010. Given continued high unemployment rate reports, it is likely that an extension will be enacted this month.
March 20th, 2009 | By Paul Cherner
The U.S. Department of Labor has issued updated information for employers on complying with the new COBRA subsidy provisions that were contained in the Economic Stimulus Plan. You can review this information at the DOL web page on this subject.
There are model notices which must be sent to former covered employees (and their qualified beneficiaries) who were involuntarily terminated after September 1, 2008, whether or not they previously elected COBRA coverage. Individuals who were not eligible for COBRA, but were eligible for continuation of health care coverage under state or local law are also entitled to this subsidy and must also be sent an appropriate notice.
A notice must also be given to all covered employees (and their qualified beneficiaries) who are involuntarily separated from February 17, 2009 through December 31, 2009. For a detailed discussion of this subsidy see our posting of March 5, 2009. The DOL webpage also provides links to Frequently Asked Questions about this subsidy from the DOL and the IRS, as well as from the House Ways & Means Committee.
On March 24, 2009 at 11:30 (EDT), the DOL will be presenting a webcast about compliance with these new rules. You may register online for this free webcast.
March 10th, 2009 | By Paul Cherner
The Employee Free Choice Act (EFCA) was introduced today in the House and the Senate with much fanfare and rhetoric.
In our January 19, 2009 post, we set out the key provisions of this legislation from the prior effort to pass it in Congress. This bill will essentially allow unions to organize workers on the basis of the workers signing union authorization cards and will, in effect, obviate the usual process of the NLRB holding a secret ballot election on the issue of union representation. Additionally, the original bill set a short timetable for bargaining the first union contract and provided for binding arbitration when the parties had not reached an agreement within the proscribed time limits.
This new legislation contains essentially the same provisions of the prior EFCA bill. There will be a vigorous campaign within Congress by unions and employers over this legislation. It is too early to predict what will be contained in the final version of this important piece of legislation.
In the coming months you will be reading about this legislative battle in the papers and hearing about it from the broadcast media, since it is a “hot button” topic for many interest groups.
It is currently expected that the process of trying to enact this legislation may take until sometime this summer before it goes to a final vote. However, Senate leadership has announced that they intend to try to have it voted on after the Easter recess. We will keep you advised of further significant developments.
March 5th, 2009 | By Paul Cherner
In our February 19, 2009 post, we alerted you to new COBRA rules that have been passed as part of the Stimulus Plan.
The U.S. Department of Labor (“DOL”) is required to provide guidance and a model notice to be used by no later than March 19, 2009. In the interim, the DOL has issued some preliminary guidance, including a COBRA Premium Reduction Fact Sheet, Frequently Asked Questions About COBRA Continuation for Employers, and Frequently Asked Questions for Workers and Their Families. The House Ways and Means Committee of the U.S. House of Representatives has also issued a list of Frequently Asked Questions about the provisions of this law.
The Internal Revenue Service (“IRS”) has issued an expanded list of Questions and Answers pertaining to the mechanism of funding the government subsidy for COBRA through a credit on the employer’s quarterly federal tax report.
Please click on any of these highlighted items and you will be directed to these documents on the government’s website on the COBRA subsidy issues.
All employers covered by COBRA need to promptly begin reviewing which former employees may be covered under this subsidy program, including which may need to be offered a “second chance” to elect COBRA at the subsidized rate. Within the next two weeks, there should be additional guidance and a model notice form issued by the DOL.
February 19th, 2009 | By Paul Cherner
The American Recovery and Reinvestment Act of 2009 (a/k/a “the stimulus plan”) contains several provisions intended to assist unemployed workers maintain their health insurance coverage pursuant to their COBRA rights. Essentially, the law provides that unemployed workers will only have to pay 35% of the cost of their COBRA coverage, with the remaining 65% to be subsidized by the federal government. This subsidy can last for a period of up to 9 months, unless certain specified events shorten the time period.
These provisions apply to almost all unemployed workers who are involuntarily terminated between September 1, 2008 and December 31, 2009. A “second chance” is provided to those individuals who were terminated during that time period but may have declined COBRA. These workers are allowed 60 days after receiving a new notice of these enhanced rights to decide to take COBRA coverage at the subsidized rate. It is very important that these workers receive a detailed “enhanced notice” about their rights under this new law as soon as possible. The Secretary of Labor is directed to issue a model enhanced notice by March 19, 2009 and employers must send an enhanced notice by April 18, 2009. All COBRA notices issued after February 17, 2009 must also include an explanation of the rights granted under this new law.
Employees who previously elected COBRA, if eligible for this subsidy, will be entitled to reimbursement or a credit for the 65% of COBRA premiums that they may pay for the period beginning February 17, 2009. High income individuals are not eligible for this subsidy.
There are many additional details included in these provisions and the Secretary of Labor will also be issuing regulations to further define these rights and obligations and the procedures to follow. Employers should consult with legal counsel or a knowledgable COBRA administrator as to how to proceed to implement these new requirements.
Pursuant to IRS requirements, you are hereby informed that this information is not intended to be tax advice that should be relied upon for purposes of avoiding taxes and/or penalties.
January 28th, 2009 | By Paul Cherner
On January 27, 2009, the House and Senate reconciled their versions of the Lilly Ledbetter Fair Pay Act of 2009 and send the agreed bill to President Obama, who signed it into law on January 29, 2009.
The final version of this law is substantially broader than newspaper accounts, which often refer to it as being necessary to allow female employees to be able to proceed with respect to their claims of unequal pay. This law covers all categories of prohibited discrimination under Title VII, as well as under the ADA, ADEA and the Rehabilitation Act. Additionally, the law refers to decisions which may discriminatorily impact upon benefits and other forms of compensation. This latter provision may result in additional challenges with respect to benefit payments that are based upon compensation decisions that were made many years ago.
The law is intended to have a retroactive effect and apply to all charges that were pending on or after May 28, 2007.
January 19th, 2009 | By Paul Cherner
There has been a substantial amount of debate concerning the proposed federal legislation entitled the Employee Free Choice Act (“EFCA”).
In 2007, EFCA was passed by the U.S. House of Representatives, but failed to win a cloture vote to end a filibuster in the Senate. Labor unions have listed the passage of EFCA as one of their top priorities. There has been fierce debate about this legislation, often accompanied by statistics supporting either the necessity or the lack of necessity for passing this law.
This law is intended to expedite the process by which unions can organize workers. For the past 60 years, unions were recognized as the collective bargaining representative of a group of employees by either an employer voluntarily agreeing that a majority of their employees wanted the union as their representative (usually through a “card check”) or by the NLRB conducting a secret ballot election. Initially, employees sign union authorization cards, which are then used by a union to obtain voluntary recognition or to petition the NLRB to conduct a secret ballot election. In an overwhelming majority of the situations involving union organizing, the NLRB conducts a secret ballot election.
EFCA would allow a union to have the NLRB certify them as the representative of a group of employees based solely on a card check, which would determine whether a majority of employees in the group have signed cards. This proposed change would have the practical effect of obviating the need (or opportunity) for an NLRB secret ballot election and would expedite the procees of unionization.
According to the NLRB ’s 2008 Operations Report, it conducted elections within 56 days after a petition was filed in 95% of the cases. Where there were post-election matters to consider, the NLRB finalized these elections within 100 days after the petition was filed in 84% of their cases. The unions argue that undue delay has allowed employers to coerce employees into voting against the union. In contrast, employers argue that a secret ballot election is needed to allow employees to weigh the pros and cons of union representation and permit them to vote in privacy without coercion.
EFCA would also expedite the first collective bargaining process by providing a short time (10 days) for the parties to meet and then 90 days to reach an agreement. If an agreement is not reached at that time, either party may request an FMCS Mediator, who has an additional 30 days to persuade the parties to reach an agreement. If a contract has not been agreed to within that time period, the dispute would be submitted to an FMCS Arbitration Panel, which has the authority to resolve the dispute and impose the resolution on the parties for a 2 year period. There would also be enhanced penalties and fines in this new law to protect employees against discrimination during the organizing period until the first contract is entered into.
It will be interesting to see what happens to this legislation during the next Congressional term given the current state of the economy.
January 12th, 2009 | By Paul Cherner
On October 9, 2009, the U.S. House of Representatives also passed the “Paycheck Fairness Act” (“PFA”), which proposes to make several changes to the Equal Pay Act of 1963 (“EPA”). The EPA prohibits discrimination in compensation on the basis of gender for equal work. The EPA sets forth the criteria for determining whether the work performed is “equal” and defenses to such a claim.
The PFA is intended to substantially toughen the EPA, by more narrowly defining the circumstances of a defense to an equal pay claim. It also adds provisions for nonretaliation, compensatory damages and, in cases of malice or reckless indifference, punitive damages. The bill specifically permits the filing of an “opt-in” class action. The damages and class action provisions appear to also apply to other violations of the FLSA.
The PFA is a companion bill to the Fair Pay Act, which the House passed on the same day, and they are likely to be considered together by the Senate.
