IRS Form 8928 – Employers are now required to self report COBRA Administration Compliance Failures

October 27th, 2010 | 6 Comments |
Category: COBRA, Compliance and Regulatory, Health Care Reform, IRS, Uncategorized

If the American Recovery and Reinvestment Act wasn’t enough to make employers reexamine their trust relationship with their COBRA administrator, the IRS Form 8928 reporting requirements should certainly do so.  Beginning with the 2010 Plan or taxable year, employers are now required to self-report their failures to comply with COBRA, HIPAA, and other health plan regulations to the IRS on Form 8928 and pay excise taxes and penalties for these compliance failures.  If you’re not familiar with Form 8928, the instructions for the Form can be found on the IRS website here www.irs.gov/pub/irs-pdf/i8928.pdf, and the Form itself can be found here www.irs.gov/pub/irs-pdf/f8928.pdf. While the penalties for failing to comply with COBRA have always been there, now employers can’t cross their fingers and wait for a potential IRS audit or lawsuit to uncover them – they have to self-report them.   Furthermore, interest begins accruing on all excise taxes and penalties the moment they are due if they are not paid on time, so a failure to report failures to comply will start to become very expensive quickly.

What does this mean for employers who outsource their COBRA compliance administration to a professional administrator?  It means employers better have a way to effectively review and audit the work performed on their behalf, and it better be a “real time view.”  The old fashioned “black box” method of providing outsourced COBRA administration where employers report Qualifying Events to their administrator by fax or file and then hope that the administrator does their job is no longer a viable model.  Employers should have real-time access to all QB records including access to the letters their administrator has sent to each QB.  Employers should also have access to real-time reports detailing letters sent to verify that all new hires and new Qualified Beneficiaries reported to the administrator resulted in the appropriate letters being sent and sent in a timely fashion.  Only through this kind of transparent view into their administrator’s world can any employer confidently report on their Form 8928 that they have had no compliance failures.  Waiting for paper reports at the end of the month simply does not provide employers the data they need in the time frame needed to ensure their compliance.  If you are an employer or group health plan sponsor who must comply with COBRA and your COBRA administrator is not providing you real-time, secure (always remember PHI) web-based access to your QB records and the reports you need, it is time (right now) to find a new COBRA administrator who will. For assistance you can reach us at cobrasupport@amben.com or call your account manager.

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SIMPLE Cafeteria Plans Provide a “Safe Harbor” from Non-discrimination Testing.

October 26th, 2010 | No Comments |
Category: Compliance and Regulatory, FSA, Flexible Spending, Health Care Reform, Uncategorized

The good news is that the new SIMPLE cafeteria plan regulations provide for a “safe harbor” from non-discrimination testing requirements for small employers that allow employees to contribute to health insurance premiums on a pre-tax basis.

Eligible Employers

Employers with an average of 100 or fewer employees on business days during either of the two preceding years are eligible for the simple cafeteria plan.

  • An employer that was previously eligible will remain so for each subsequent year until they exceed an average of 200 or more employees for the prior year.
  • For new businesses, eligibility is based on the number of employees the business reasonably expects to employ for the current year.

Employee Eligibility

All employees who worked at least 1,000 hours during the prior plan year must be eligible to participate in the plan and be able to elect any benefit available under the cafeteria plan the same terms and conditions.

An employer can exclude the following from the eligibility requirement:

  • Employees under age twenty-one prior to the end of the plan year
  • Employees with less than one year of service
  • Employees covered under a collective bargaining agreement
  • Non-resident aliens

Employer Contribution Requirements

Regardless of whether a qualified employee makes any salary reduction contribution, the employer must make a contribution under the plan on behalf of each qualified employee in an amount equal to:

  • a uniform percentage (not less than 2 percent) of the employee’s compensation for the plan year, or
  • an amount that is not less than the lesser of:
    – 6 percent of the employee’s compensation for the plan year, or
    – twice the amount of the salary reduction contributions of each qualified employee (the rate of matching contribution for HCE or key employees cannot be greater than the rate for NHCEs).
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New York may enact mandatory 132 Transit Benefit Program

October 20th, 2010 | No Comments |
Category: Compliance and Regulatory, Flexible Spending, State Legislation, Taxes, Transit and Parking Section 132, Uncategorized

New York State is considering similar legislation for employers with fifty or more employees to establish a qualified transportation fringe benefit program consistent with section 132 of the internal revenue code (IRS).

Three years ago the City and County of San Francisco passed groundbreaking legislation that mandates companies with 20 or more employees to offer transit benefits to their employees. The most striking aspect of this mandate was that it had the support of the business community.  Business groups like the San Francisco Chamber of Commerce, the Golden Gate Restaurant Association and the Building Owners and Managers Association (BOMA) saw the inherent benefit for their members to participate in a program that saves payroll taxes, income tax for their employees, reduces traffic congestion, and lessens air pollution.

Now New York State is considering similar legislation for employers with fifty or more employees to establish a qualified transportation fringe benefit program consistent with section 132 of the internal revenue code (IRS). According to the content of the bill they believe that by “requiring large employers to offer this program, this bill will encourage the use of mass transit. For those employees who already commute to work using mass transit, it will offer significant tax savings.  Participating employers will also reduce their tax burden.”

With the bill passed by the State Assembly and it is now up to the hands of the Senate. The bill has been put on the calendar for a floor vote #767. However, even though it is on the calendar there is no guarantee that it will pass through the Senate.

If you are a New York state employer, it is important to let your State Senator be made aware of your interest in seeing this legislation pass. If every larger employer in the State of New York offers the same transit benefit program that you currently offer, the results will be visible: Higher transit usages, less roadway congestion, and cleaner air. Saving employees on income tax could not be more timely in these tight economic times. With all the discouraging environmental news we receive, this is a chance for you to promote a beneficial solution.

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IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers

October 19th, 2010 | 2 Comments |
Category: Compliance and Regulatory, Health Care Reform, IRS, Taxes, Uncategorized

WASHINGTON — The IRS today issued a draft Form W-2 for 2011, which employers use to report wages and employee tax withholding. The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.  The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

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