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Significant Shift in Immigration Policy

Trump has been vocal about his stance on immigration in regard to deportation and illegal immigration. He also seeks to strengthen U.S. jobs, wages, and security through the nationwide use of E-Verify. Trump plans to work with Congress to strengthen and expand the use of E-Verify as currently less than half the states require employers to use E-Verify; however, more than 16.4 million cases were run through E-Verify in fiscal year 2016 by employers in every industry, state, and U.S. territory. E-Verify ensures a legal workforce, protects jobs for authorized workers, deters document and identity fraud, and works seamlessly with Form I-9. Employers may also look to the changes in the Form I-9 effective January 21, 2017 designed to make the form more user-friendly and alleviate mistakes, although this was established prior to Trump’s presidency.

Paid Leave for New Mothers

Although the specifics are unclear right now, Trump has proposed six weeks of paid maternity leave to new mothers. These payments would come from recapturing fraud and improper payments in the U.S. unemployment insurance system. Trump has also discussed allowing parents to enroll in tax-free dependent care savings accounts for their children (read in-depth analysis of paid family leave from our own in-house expert Laura Kerekes). According to the National Partnership for Women and Families, employers can expect paid leave to improve worker retention, reduce turnover costs with increased worker productivity, and increase employee loyalty.

Tax Reform

Trump has advocated for significant tax cuts “across the board” by increasing the standard deduction to $30,000 for joint filers (from $12,600), and simplifying the tax code. Trump plans to collapse the seven tax brackets to three with low-income Americans at an income tax rate of 0 percent. Trump’s tax plan also seeks to lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. Proponents of lowering business taxes assert that it creates jobs in the United States rather than overseas, encourages investment in our infrastructure, and because the United States has the highest corporate income tax rates, businesses are at a significant disadvantage. Trump intends to apply this lower rate to all business, both small and large. Additionally, according to Trump’s tax plan, businesses that pay a portion of an employee’s childcare expenses would be permitted to exclude those contributions from income. Employees who are recipients of direct employer subsidies would not be able to exclude those costs from the individual income tax and the costs of direct subsidies to employees could not be used as a cost eligible for the credit.

Repeal of the Affordable Care Act

The Affordable Care Act will be challenged under Trump’s administration. Trump seeks to remove healthcare exchanges and replace them with tax-free health savings accounts for people with high-deductible insurance plans. Trump has also advocated state-based high-risk pools for people with medical conditions that make it hard to get coverage on their own. He also seeks to allow companies to sell insurance across state lines to boost competition and drive down prices.

What’s Next for Employers

Interestingly, the largest impact of a Trump presidency may not be from his stance on these issues but may be seen when it comes time to naming the next U.S. Supreme Court Justices as he will likely appoint four justices during his term in office. Experts predict four because the average age of retirement for a Supreme Court justice has been approximately 78.7 years old, and currently three of the eight justices range in age from 78 – 83. The fourth open seat remains unoccupied since Justice Antonin Scalia’s death in February.

Understandably, there are opposing views to these presented issues, and neither candidate provided many details about how their plans for these issues would be financed or implemented. ThinkHR will follow the changes in labor and employment laws and will provide information and tools to help employers make sense of the changes that impact American businesses.

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On October 18, 2016, the Social Security Administration (SSA) announced the maximum amount of earnings that are subject to the Social Security payroll tax will increase in 2017 to $127,200. This adjustment is effective as of January 1, 2017 and equates an $8,700 increase from the maximum for years 2015 and 2016, which was $118,500. According to the SSA, of the estimated 173 million workers who will pay Social Security taxes in 2017, about 12 million will pay more because of the increase in the taxable minimum.

How does Social Security work?

The SSA uses the Social Security taxes that workers pay into the system to pay Social Security benefits and these taxes are based on workers’ earnings, up to a certain amount. As of January 2017, that amount is $127,200.

This adjustment, done annually, is based on the increase in average wages. Subsequently, by January 1 of each year employers must adjust payroll systems to account for the potential for a higher taxable wage (per SSA determination) and if there is an adjustment, impacted employees should be notified of the hit to their paycheck. So for your employees whose compensation exceeds the previous maximum ($118,500), this new amount means they will see a decrease in their take-home pay without an annual raise to account for the larger payroll tax. Keep in mind, Social Security is a retirement benefit but also works toward aiding older Americans, workers who become disabled, and families when a spouse or parent dies.

This increase not only impacts workers, it impacts employers as well because as the employee contributes so does the employer. The Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) tax rate for wages paid in 2017 is set by statute at 6.2 percent, for both employees and employers. So, an individual with wages equal to or larger than $127,200 would contribute $7,886.40 to the OASDI program in 2017, and his or her employer would contribute the same amount (the OASDI tax rate for self-employment income in 2017 is 12.4 percent).

What should an employer do now?

Take the time to adjust your payroll system to support the new dollar amounts, and while assessing your annual budget account for the increased tax amount and the impact on affected employees.

Of note, other adjustments from the SSA that are effective January 2017 are a 0.3 percent cost-of-living adjustment, which increases the monthly Social Security and Supplemental Security Income (SSI) benefits. The 60 million Social Security beneficiaries will see the benefit increase in January 2017 and the 8 million SSI beneficiaries will see the increase on December 30, 2016.

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Taxation of Identity Protection Services | Ohio Employee Benefits

Categories: Health Insurance, IRS, Taxes, Team K Blog
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uba0426According to the IRS, identity theft has been the number one consumer complaint to the Federal Trade Commission for 15 consecutive years. The Bureau of Justice Statistics estimates that 17.6 million people were victims of identity theft in 2014. Organizations at every level are trying to protect employee and customer personal information from computer hacking that can disclose sensitive information to identity thieves. As a protective measure, some businesses are providing identity theft protection services in the hopes of preventing and mitigating damage from a data breach. Some insurance carriers are now also offering identity protection services to their customers at no additional cost. Questions were posed to the IRS concerning the taxability of identity protection services provided at no cost to customers, employees, or other individuals whose personal information may have been compromised in a data breach.

The taxation of this identity protection benefit/service was considered by the IRS in 2015 and again in early 2016. Originally, the IRS determined that an individual whose personal information may have been compromised in a data breach does not have to include the value of such an identity protection service in his or her gross income. Similarly, the IRS had ruled that an employer providing such data protection services to employees whose personal information may have been compromised in a data breach of the employer’s recordkeeping system (or employer’s agent or service provider) does not have to include the value of such service in the employee’s gross income or wages. The value does not have to be reported on an individual’s W-2. (See IRS Announcement 2015-22.)

But what about identity theft protection services that are offered as a precautionary measure before a breach occurs? Blue Cross Blue Shield, for example, is now offering identity protection services to all eligible BCBS members on an opt-in basis as of January 1, 2016. The offering includes credit monitoring, fraud detection and fraud resolution support. After the IRS elicited comments on Announcement 2015-22, it decided to extend the same tax treatment to identity protection services provided to employees or other individuals before a breach occurs, similar to that offered by Blue Cross Blue Shield. (See Announcement 2016-02.) The reasoning behind this ruling is that providing identity protection services to employees and others before a data breach occurs will foster earlier detection of a data breach and may minimize the impact of a breach on operations.

While this tax treatment does not apply to cash received in lieu of the identity protection service or proceeds received under an identity theft insurance policy, it is a benefit that is worthwhile to flag for your clients at a time when identity theft continues be a growing problem in the United States.

Originally published by United Benefit Advisors – Read More

IRS Reporting Tip: Check the Right Boxes on Your Cover Sheet | Ohio Employee Benefits

Categories: Compliance News, General News, IRS, Taxes, Team K Blog
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0406UBAUnder the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees.

In order for the Internal Revenue Service (IRS) to verify that (1) individuals have the required minimum essential coverage, (2) individuals who request premium tax credits are entitled to them, and (3) ALEs are meeting their shared responsibility (play or pay) obligations, employers with 50 or more full-time or full-time equivalent employees and insurers will be required to report on the health coverage they offer. Similarly, insurers and employers with less than 50 full time employees but that have a self-funded plan also have reporting obligations. All of this reporting is done on IRS Forms 1094-B, 1095-B, 1094-C and 1095-C.

Final instructions for both the 1094-B and 1095-B and the 1094-C and 1095-C were released in September 2015, as were the final forms for 1094-B, 1095-B, 1094-C, and 1095-C.

Form 1094-C is used in combination with Form 1095-C to determine employer shared responsibility penalties. It is often referred to as the “transmittal form” or “cover sheet.” IRS Form 1095-C will primarily be used to meet the Section 6056 reporting requirement, which relates to the employer shared responsibility/play or pay requirement. Information from Form 1095-C will also be used in determining whether an individual is eligible for a premium tax credit.

Form 1094-C contains information about the ALE, and is how an employer identifies as being part of a controlled group. It also has a section labeled “Certifications of Eligibility” and instructs employers to “select all that apply” with four boxes that can be checked. The section is often referred to as the “Line 22” question or boxes. Many employers find this section confusing and are unsure what, if any, boxes they should select. The boxes are labeled:

  1.  Qualifying Offer Method
  2.  Qualifying Offer Method Transition Relief
  3.  Section 4980H Transition Relief
  4.  98% Offer Method

Different real world situations will lead an employer to select any combination of boxes on Line 22, including leaving all four boxes blank. Practically all employers except a mid-size employer that did not qualify for transition relief should select Box C, and corresponding with that, most employers will enter letter either “A” or “B” in Part III Column (e) of the 1094-C. Very few employers will be able to select Box D unless they offer minimum value, minimum essential, affordable coverage to all employees. Employers who do not use the federal poverty level safe harbor for affordability will never select Box A or Box B, and corresponding with that, will never use codes 1A or 1I on Line 14 of a 1095-C form.

To fully understand each box, including plain language explanations of the form instructions, request UBA’s ACA Advisor, “IRS Reporting Tip: Form 1094-C, Line 22”.

Originally published by United Benefit Advisors – Read More

When it comes to the “Cadillac” tax, there’s no escaping death and taxes | Ohio Employee Benefits Advisors

Categories: General News, Special Interest, Taxes, Team K Blog
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ubablog0323The 2015 UBA Health Plan Survey data reveals who will not escape the 40% excise tax to take effect in 2020. The “Cadillac” tax, now called the excise tax, was originally set to start in 2018, but legislation passed the end of 2015 delayed the start date by two years.

The Patient Protection and Affordable Care Act (ACA) mandated that plans providing coverage that exceeds a threshold value, currently set at annual premiums of $10,200 or more for single coverage or $27,500 for other than single coverage, would be subject to this excise tax of 40%. The thresholds will need to be adjusted for inflation for 2020.

The excise tax was originally intended to be based on ”richer” benefit plans, however, industry experts have been quick to point out that premiums have little to do with the benefit plan design. The age, claims history, geography, and other demographics of group members are more relevant to premium cost.

For example, more remote locations will have higher insurance premium costs due to higher transportation (ambulance, either land or air) claims. Due to their location, 87% of plans in Alaska will be facing the excise tax as of 2020. That state’s current average deductible is more than $1,900, and the current out-of-pocket maximum is just under $4,700. Similarly, 71% of Wyoming employers will also be facing the excise tax, with a current average deductible of $2,125 and a maximum out-of-pocket cost of almost $5,000. Conversely, for New Mexico employers, with a current average deductible of $250, and an average out-of-pocket maximum of less than $1,900, only 33% of their groups will be facing the excise tax.

Health insurance premiums are also directly related to the cost of medical care. Employers with an aging workforce face an uphill battle as there is little they can do to directly affect their premiums without strong nurse coaching and care management programs. The same is true for a group with higher than average claims. Industries that are aging faster than others face steep excise taxes as seen below.

 Industry Plans Subject to
Cadillac Tax in 2020
Current Average
 Fitness and Recreational Sports Centers 32% $2,222
 Insurance Agencies and Brokerages 34% $2,000
 Banking/Financial 47% $1,535
 Nonprofits/Civic/Community Organizations/Unions 50% $1,487
 Schools – Elementary/Secondary/Colleges/Universities 52% $1,258
 Offices of Lawyers 56% $1,647
 Government/Police/Fire/Political Subdivisions 59% $1,332
 Cemeteries/Funeral Homes 72% $1,264
 Dry Cleaning/Laundry 82% $1,993
 Bus and Other Motor Vehicle Transit Systems/Other
Urban Transit Systems/Commuter Rail
93%   $900


Cemeteries and funeral homes, as well as dry cleaners and laundries, representing mostly small ”Main Street America” companies, will likely drop their coverage, as 72% and 82%, respectively, face the excise tax as of 2020. This gives new meaning to the expressions “there’s no escaping death and taxes” and “getting taken to the cleaners!” Small business employers typically have fewer than 50 employees, so there is no penalty if they drop coverage. Many in these industries will likely add to the rolls of citizens across the country claiming advanced premium tax credits on the insurance Marketplaces, adding to the cost of the ACA for other taxpayers.

Larger companies will also face the dilemma of paying the fines for not offering coverage versus paying premiums and the excise taxes. The table below shows several applicable large employers (ALEs) that would benefit from dropping coverage and paying the per-person fine. The excise taxes on the first example are higher than the employer dropping the coverage and paying the employer shared responsibility per-employee penalty, which is likely to be approximately $3,000 in 2020 (depending on adjustments for inflation).

 State No. of
 Industry 2020
 Wisconsin 85  Civic & Social Organization $18,827 $64,021 $5,000 $6,350
 Alaska 120  Real Estate Credit $16,937 $50,165 $6,350 $6,350
 Ohio 80  Other Individual & Family Services $15,426 $47,821 $4,000 $6,350
 Virginia 200  Trucking $11,047 $36,479 $2,000 $4,500


These employers want to retain good workers and provide medical insurance benefits, but at some point may not be able to keep up with the cost of coverage.

The premiums in these examples assume a 6% annual increase and only count the actual premium dollars, not any other account-based benefits offered. At this time, proposed regulations for the excise tax would also include flexible spending account (FSA) contributions by employees, health reimbursement arrangement (HRA) contributions by employers, and health savings account (HSA) contributions by either the employer or the employee. Several of the employers in the examples above offer one or more account-based benefits to help offset the high out-of-pocket maximums on their plans. The account-based plans will be the first benefits cut if the excise tax remains in effect. These citizens will be hurt financially, as the account-based plans may be their only way to help fund those high out-of-pocket costs.

Health insurance is expensive because health care is expensive. Until we can truly tackle rising health care and prescription costs, insurance premiums will continue to rise faster than general inflation. With more and more people taking monthly prescriptions which cost thousands or even tens of thousands of dollars each month, health insurance premiums will continue to be driven upward, and the number of employers facing the excise tax will grow even faster. The cost of healthcare must be addressed first and foremost, with transparency of costs being a key factor, in order to make any strides on leveling out premium increases.

Download the UBA Health Plan Executive Summary for comprehensive findings on health plan costs. To compare your health plan costs against those in your industry, region and size bracket, request a custom benchmark report from your local UBA Partner.


Originally published by United Benefit Advisors – Read More

Potential Employer Penalties under the Patient Protection and Affordable Care Act | Ohio Benefits Broker

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By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Employers that do not meet the requirements of the Patient Protection and Affordable Care Act (PPACA) need to be concerned about several potential penalties. Two significant penalties include the excise tax, which can be as much tax lawas $100 per affected individual per day, and the penalties that larger employers must pay if they do not meet their employer-shared responsibility/play or pay obligations.

Excise Tax Penalties

The excise tax penalties apply to all plans, regardless of size. Since 2010, the IRS has said that employers and plan administrators should self-report any failure to comply with various group health plan requirements, including requirements related to COBRA, HIPAA, Mental Health Parity, and the comparable contribution requirement for health savings accounts (HSAs), using IRS Form 8928. With the passage of PPACA, numerous additional compliance responsibilities apply. Employers and plan administrators are now expected to self-report these compliance failures, too, using Form 8928. Historically enforcement of the filing requirement and collection of the excise tax has been light, but the IRS is now indicating that it expects employers to report failures and pay fines as applicable.

For a complete list of the potential COBRA, HIPAA and PPACA violations that may result in an excise tax (plus information on how they can be avoided), view UBA”s PPACA Advisor, “Potential Employer Penalties under the Patient protection and Affordable Care Act”.

Employer-Shared Responsibility/Play or Pay Penalties

Large employers will owe penalties if they do not meet the employer-shared responsibility/play or pay requirements. The IRS has recently issued a helpful Q and A that answers many questions about the potential play or pay penalties.

To avoid penalties, beginning in 2015 large employers (generally those with 100 or more full-time or full-time-equivalent employees in their controlled group) must offer health benefits to employees who work an average of 30 or more hours per week, or 130 hours per month. If an employer has a non-calendar year plan and can meet certain transitional rules, it can delay offering health benefits until the start date of its 2015 plan year.

Mid-size employers (those with 50 to 99 full-time or full-time equivalent employees in their controlled group) do not have to meet the play or pay requirements until 2016 as long as they keep their headcount, eligibility requirements, benefit levels, and employer contribution amount or percentage at essentially the same level it was on February 9, 2014. Employers taking advantage of this delay must certify to the IRS that they have met these requirements. Provided they meet certain transitional rules, if an employer has a non-calendar year plan, it may delay meeting the play or pay requirements until the start of its 2016 plan year.

For comprehensive information on how large employers can avoid penalties, plus the difference between the “A” and the “B” penalties, view UBA”s PPACA Advisor, “Potential Employer Penalties under the Patient protection and Affordable Care Act”.

Topics: PPACA Affordable Care Act, Play or Pay, excise tax, employer shared responsibility, IRS Form 8928

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Think 2014 tax forms are bad? Here come the 1094 and 1095 for 2015! | Ohio Employee Benefits

Categories: Taxes
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By Bill Olson, Chief Marketing Officer at United Benefit Advisors

Our recent blog reviewed the highlights of the new employer and insurer reporting requirements. UBA has created this quick reference chart to help you sort out who should use which form, and when:


For comprehensive information on coverage requirements, due dates, special circumstances, controlled groups and how to complete the forms—including sample situations—request UBA’s PPACA Advisor, “IRS Issues Final Forms and Instructions for Employer and Individual Shared Responsibility Reporting Forms”.

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