J&D Benefits Perspective

IRS Releases COBRA Subsidy Guidance

Jody Lee, Compliance Manager, Johnson & Dugan

The IRS released Notice 2009-27, which provides guidance in the form of 58 Questions and Answers with corresponding examples. Topics covered in the Notice include:

• The definition of "involuntary termination"
• Directions for calculating the premium reduction, including severance pay scenarios
• Explanation of what coverage is eligible for the subsidy
  
• Determination of the coverage periods.

The Notice provides welcome guidance in a number of areas. Employers should review the information to ensure that their COBRA Subsidy procedures are in compliance. Contact your Johnson & Dugan team for more information or assistance.

COBRA Subsidy - What Employers Can Do Now

Jody Lee, Compliance Manager, Johnson & Dugan

Employers are anxious to comply with the March 1, 2009 effective date of the COBRA Subsidy that was included in the American Recovery and Reinvestment Act signed by President Obama on February 17, 2009. The deadline for the Department of Labor (DOL) to publish the model notices is right around the corner, and employers as well as Assistance Eligible Individuals (AEI) patiently await the guidance these will notices offer. Although there are still many unanswered questions, some things are clear.

Specific deadlines have been set. Here is a timeline of important dates for employers and AEI's:

Date	Action
February 17, 2009	American Recovery and Reinvestment Act signed into law
March 1, 2009	COBRA Subsidy takes effect (pending model notice - subsidies may take effect retroactively)
March 19, 2009	Deadline for the DOL to publish model notices
April 18, 2009	Deadline for employers to provide notice to AEIs
Date of Notice + 60 days	Deadline for individuals to elect Second Chance COBRA per the special COBRA election period

Given the above dates, employers should prepare their compliance plan:

• Identify all terminations back to 9/1/08, including individuals involuntarily terminated. The Notice should go to all employees that lost coverage, although only those involuntarily terminated are eligible for the subsidy. Individuals will have the right to apply, and their request can be denied. A claim appeal process is included in the law.
• Once the model notices have been published, notifications must be distributed.
• Companies that outsource COBRA Administration should coordinate the identification and notification process with their vendor.
• Coordinate with payroll vendor to understand the mechanics of reporting and claiming the tax credit. (This will not apply to small employers subject to CalCOBRA rules.)

Johnson & Dugan will be providing clients with the model notices when they become available. We will also continue to distribute updates that clarify compliance rules when available. Contact your Johnson & Dugan team if you have any questions.

New Bills Will Greatly Affect Discrimination Claims, Health Benefits

President Barack Obama kicked off his first few weeks in office by signing a pair of bills that will significantly affect benefits compliance and discrimination lawsuits against employers.

Obama’s first significant bill, the Lilly Ledbetter Fair Pay Act of 2009, likely will make it easier for employees to sue employers for pay discrimination.

The bill overturns a 2007 Supreme Court ruling that stated that a worker, in order to meet the statute of limitations, had to file a discrimination claim within 180 days from the company’s initial decision to pay that worker less than another employee doing the same job.

The new law, however, removes any statute of limitations, meaning each paycheck can be a possible instance of discrimination.

Healthy San Francisco 2009

Jody Lee, Compliance Manager, Johnson & Dugan

San Francisco employers should be aware of the upcoming deadline to submit the Annual Reporting form for the Health Care Security Ordinance (Healthy San Francisco) to the Office of Labor Standards Enforcement (OLSE). For-profit employers with 20 or more employees and nonprofit organizations with 50 or more employees must submit the form by April 30, 2009 to report the minimum health care expenditures for covered employees.

2009 changes:
•    Employees are eligible when working only 8 hours per week, after completion of 90 calendar days of employment.
•    2009 expenditure rates are $1.23/hour for a Medium Business Size (20-99 employees) or $1.85/hour for a Large Business Size (100+ employees). These rates should be used to calculate the minimum expenditure for the first quarter of 2009.
•    The annual salary exemption limit has increased to $80,397 or $38.65/hour. A manager, supervisor or confidential employee earning above the limit will be exempt from coverage under the ordinance.

Michelle’s Law – Coverage for College Students on Medical Leave of Absence

Jody Lee, Compliance Manager, Johnson & Dugan

Both the federal government and the State of California have passed “Michelle’s Law”, allowing college students to continue coverage on a parent’s group health plan if they are required to take a medical leave of absence from school. The laws are similar, but each takes effect on a different date. California Legislation, SB1168, took effect on January 1, 2009 and the Federal law, HR2851, will take effect on the first day of the Play Year on or after October 9, 2009.

IRS Publications for 2008 Tax Filing

The IRS has released Publication 502 Medical and Dental Expenses and Publication 503 Child and Dependent Care Expenses for the 2008 tax filing year. These publications are specific to tax filing, but can be used as general guidelines for Healthcare and Dependent Care Flexible Spending Account plans. The Plan Administrator is the final source for determination of flex plan rules.

Contact your Johnson & Dugan team for additional information on Flexible Benefit Plans.

Mandatory Workplace Posters for 2009

Jody Lee, Compliance Manager, Johnson & Dugan

California employers are required to display posters in the workplace that explain workers’ rights to employees. Several changes will take effect in 2009 that will make current posters out of date. These changes include:

• Modifications to FMLA notice requirements as a result of final regulations taking effect on January 16, 2009
• California Employment Development Department (EDD) employee notice change in 2009
• Mandatory change to Equal Employment Opportunity (EEO) poster language

New posters can be ordered from various HR communication vendors, or from the California Chamber of Commerce (http://www.calbizcentral.com). In addition to the poster update, many required employee pamphlets will also be changing. Johnson & Dugan will be sending out an update to clients with these new employee materials. Johnson & Dugan clients should also be on the lookout for the annual Legislative Update, with details on new laws affecting employer benefit plans. The 2009 Legislative Update will include new California and Federal legislation, Qualified Retirement Plan limits, HSA and HDHP limits and employer notice requirements.

Please contact your Johnson & Dugan team if you have any questions.

Annual Imputed Income Reminder

NOTE: This alert will apply to you if your benefit package includes an employer paid life insurance benefit in excess of $50,000 and/or domestic partner coverage.

IRS Section 79 – Group-Term Life Insurance

The first $50,000 of Group-Term Life Insurance is excluded from gross income pursuant to Section 79 of the IRS Code. Any Group-Term Life Insurance coverage in excess of that amount is taxed as imputed income under Table I of the section 79 regulations. The first Table I was published in 1966 and has been subsequently revised in 1983, 1988 and 1999.

Below is the current Table I rate schedule.

2009 Indexed Figures for Qualified Retirement Plans

Qualified Retirement Plans must take various dollar limits into consideration. Some of these are indexed and can therefore change on occasion. Below are the new figures for 2009, as well as the figures for 2008.

LIMITS	2008	2009
401(k) Deferral Contribution Limit (Calendar Year)	$15,500	$16,500
401(k) Catch-up Contribution Limit (over age 50)	$5,000	$5,500
Annual Contribution Limit Sec. 415 (Defined Contribution Plans)	$46,000	$49,000
Plan Compensation Limit	$230,000	$245,000
Social Security Wage Base	$102,000	$106,800
Definition of Highly Compensated Employee	$105,000	$110,000

2009 HSA and HDHP Limits

Contribution limits for Health Savings Accounts (HSAs) and deductible and out-of-pocket expense limits for HSA-qualified High Deductible Health Plans (HDHPs) will change effective January 1, 2009.

2009 HSA:

• $3,000 maximum contribution individual self-only HDHP coverage ($2,900 in 2008)
• $5,950 maximum contribution family HDHP coverage ($5,800 in 2008)
• Catch-up contribution is $1000 for individuals age 55 or older ($900 in 2008)

2009 HDHP:

    * $1,150 minimum annual deductible self-only HDHP coverage ($1,100 in 2008)
    * $2,300 minimum annual deductible family HDHP coverage ($2,200 in 2008)
    * $5,800 maximum annual out-of-pocket expense self-only HDHP coverage ($5,600 in 2008)
    * $11,600 maximum annual out-of-pocket expense family HDHP coverage ($11,200 in 2008)

Contact your Johnson & Dugan Account Executive for details about HSA plans. For additional information about Health Savings Accounts, including answers to frequently asked questions, related IRS forms and publications, technical guidance, and links to other helpful web sites, see the Treasury Department website: http://www.treas.gov/offices/public-affairs/hsa/