Tuesday, March 27, 2012

A Cobra Exemption...

Employers who had fewer than twenty full-time employees on fifty percent of the business days in the previous calendar year are exempt from the federal requirements of COBRA. Based on your company size, you may need to annually review your need to comply with COBRA in each calendar year.

All full-time and part-time employees are counted when determining if an employer had at least twenty employees in the previous calendar year. Part-time employees are counted as fractions of full-time employees based on the number of hours worked by full-time employees in that business. For example, if a full-time employee normally works a 6-hour day, then two part-time employees working three hours a day equal one full-time employee. Additional guidance and rules apply.

-- Claim Problems --

Insurance carrier claim processors all too often look for reasons to deny a claim. At TransparentRx the mindset is different. We look for ways to get claims paid; thereby, satisfying your employees with the outcome. We don’t win every dispute, but we are successful much of the time. We encourage you or your employees to contact your broker if you’re experiencing claim difficulties.

-- Dropping Coverage in Anticipation of Divorce --

Q: If an employee drops coverage on his spouse during open enrollment and the reason he is dropping her is in anticipation of a divorce, what are the requirements of the plan offering her COBRA coverage? Are there employer obligations regarding dropping the spouse’s coverage?

A: Yes. If coverage is reduced or eliminated in anticipation of a COBRA qualifying event, and the individual whose coverage was previously terminated or reduced is considered eligible for COBRA at least as of the qualifying event, the spouse must be offered the coverage, effective at least from the date of the qualifying event, which in this case is the divorce.

The final COBRA rules note that if an employee cancels a spouse’s coverage in anticipation of divorce or legal separation, “Upon receiving notice of divorce or legal separation, a plan is required to make COBRA continuation coverage available, effective on the date of the divorce or legal separation (but not for any period before the date of the divorce or legal separation).

-- Small Business Health Care Tax Credits --

The new health reform law gives a tax credit to certain small employers beginning with the 2010 tax year. To be eligible for the credit, an employer must be a “qualified employer”. This means you must:

1. Provide qualified health insurance to employees.
2. Employ fewer than 25 full-time equivalent employees (FTE).
3. Have average annual wages of less than $50,000 per full-time equivalent employee.
4. Contribute a uniform percentage (not less than 50%) of the cost of single coverage.

The maximum credit is 35% of the employer’s share of the premium cost in 2010-2013. Employers with more than 10 FTEs and/or average wages in excess of $25,000 begin to proportionally lose the tax credit.

In 2014 the tax credit is 50% and can be claimed for any two years. In 2014 and beyond, the tax credit is contingent upon dropping existing coverage and purchasing group coverage from a newly created exchange (government created purchasing co-op).

TransparentRx thinks it is important for employers to study and understand this section of the code, since some planning opportunities exist that could help them qualify for the maximum credit available. The availability of the Small Employer Tax Credit may encourage some employers to proceed with additional layoffs or terminations and to halt any plans to add employees in order to maximize their tax credit.

Below is a link to the IRS Website regarding the Small Business Tax Credit:
http://www.irs.gov/newsroom/article/0,,id=220839,00.html

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