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NEWSLETTERS
NEWSLETTERS
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In this issue
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CWCAs find reserve error and help bank control Mod
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Economic stimulus provisions affect employers
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The effects of the economy on workplace safety
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CWCAs find reserve error and help bank control Mod
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Insured
The insured is a large community bank with 30 branches, 400 employees, and assets in excess of $850 million.
Situation
A 12-year client, the bank had a comprehensive Workers Comp program and an excellent claims history, with an Experience Mod that averages between .80 and .85. Based on a verification process that included reviewing Experience Mod worksheets, the 2007 Experience Mod was expected to be .838 with a manual premium of $35,000. Yet, it was much higher than what had been projected, showing instead a .239 increase to the Mod, the equivalent of a premium increase of $8,365.
Assessment
Through the efforts of Certified WorkComp Advisors (CWCAs), it was determined that a large claim that had previously been settled was still showing as active. The carrier neglected to remove the reserve of $25,000 from the claim, resulting in Mod and premium increases.
Solution
Recognizing that there was no reason for the increase, CWCAs investigated and discovered the error, called the insurance carrier and had them file a corrected report.
Result
Through the CWCAs efforts, the Mod reduced to the projected .836, saving the client $8,365 or 23% of premium.
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Economic stimulus provisions affect employers
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Although the American Recovery and Reinvestment Act of 2009 (ARRA) signed into law by President Obama on February 17, 2009 is aimed at revitalizing a staggering economy, it does contain several provisions affecting the workplace that impact the way employers manage payroll and COBRA benefits. These include:
Consolidated Omnibus Budget Reconciliation Act (COBRA) Continuation of Coverage:
Individuals who have been involuntarily separated from employment between September 1, 2008 and December 31, 2009 can elect to pay 35% of COBRA coverage and have it treated as paying the full amount for the first nine months. While the former employer will pay the remaining 65%, it will receive a credit against federal withholding and FICA taxes for the cost of the subsidy. If an employer's claims for the COBRA subsidy payments exceed the amount of wage withholdings or the FICA payroll taxes that the employer reports, the employer is entitled to direct reimbursement by the Treasury for the excess amount.
The subsidy would terminate upon offer of any new employer-sponsored health care coverage or Medicare eligibility. Income and other limitations apply. The subsidy is limited to tax payers and their families whose income is less than $125,000 for individuals or $250,000 for couples.
The law also extends the window of opportunity to qualified individuals and their qualified beneficiaries, who were laid off September 1, 2008 or after and did not elect to have COBRA coverage by giving them 60 days to sign up.
The law allows group health plans to provide a special enrollment right allowing eligible individuals to elect different coverage under the plan when electing COBRA continuation coverage. An individual may elect any health plan option that the former employer offers to any of its employees so long as the premium of the option the individual elects is the same or lower than the individual's premium for the health coverage the individual had when he or she was employed.
COBRA notices must include information on the availability of the premium assistance. Model notices will be available from the Department of Labor. Plan administrators must also alert those who have already elected COBRA and those who are eligible for the discount but have not elected COBRA of their rights under ARRA.
The IRS offers guidance for employers, including an updated Form 941, on its website.
Plan sponsors will bear the brunt of administering this new provision and must be prepared to ensure compliance.
HIPAA
The Act contains unexpected modifications to HIPAA's Privacy and Security Rules. The Act requires business associates to comply directly with many of HIPAA's rules and subjects business associates to HIPAAs civil and criminal penalties. The Act increases the penalties for various HIPAA violations and dramatically expands other remedial actions (such as increasing federal government audits; granting attorneys fees in some HIPAA lawsuits; and allowing a method for individuals to recover penalties under HIPAA). The changes are significant to all covered entities; covered entities will need to modify their business associate agreements and business associates will be subject to statutory requirements as well as contractual requirements. They will need to consider the documentation necessary to comply with the security changes.
Health Information Technology
The ARRA also includes $19 billion to accelerate the adoption and use of health information technology (IT) by doctors and hospitals. The legislation establishes a process led by the federal government to develop standards by 2010 that allow for the secure nationwide electronic exchange of health information. The law also expands current federal privacy and security protections for health information.
Making Work Pay Credit
The ARRA creates a refundable tax credit of up to $400 per person, $800 per couple during 2009 and 2010. This tax credit is calculated at a rate of 6.2% of earned income, and phases out at a 2% rate for taxpayers with adjusted gross income over $150,000 for couples filing jointly and $75,000 for single filers. Taxpayers will receive this benefit through a reduction in the amount of income tax that is withheld from their paychecks, or through claiming the credit on their tax returns. The employers share of FICA, or its 6.2% equivalent remains unchanged.
Excluded from coverage are nonresident aliens, individuals who may be claimed as dependents under Section 151 of the Code, and estates or trusts.
Unemployment Compensation
ARRA continues the emergency unemployment compensation program through December 31, 2009, providing up to 33 weeks of extended unemployment benefits to workers exhausting their regular benefits. Weekly unemployment benefits are increased by $25 through December 31, 2009. For taxable year 2009, the first $2,400 of unemployment benefits will not be subject to federal taxation. Funding for these extended benefits is through the U.S. Treasury general fund rather than the Federal Unemployment Tax Act (FUTA).
Incentives to Hire Unemployed Veterans and Disconnected Youth
While the work opportunity tax credit (WOTC) is currently available on an elective basis for employers hiring individuals from one or more of nine targeted groups, the ARRA creates two new categories of individuals eligible for the credit: unemployed veterans and disconnected youth who begin work for the employer in 2009 or 2010.
An individual is an unemployed veteran if he or she was discharged or released from active duty from the Armed Forces during the five-year period prior to hiring and received unemployment compensation for more than four weeks during the year before being hired. An individual is a disconnected youth if he or she is between ages 16 and 25, has not been regularly employed or attended school in the six months before being hired, and is not readily employable by reason of lacking a sufficient number of basic skills. It is intended that a low level of formal education may satisfy this requirement.
The proposal is effective for individuals who begin work for an employer after December 31, 2008.
Trade Adjustment Assistance (TAA)
The ARRA reauthorizes all TAA programs through December 31, 2010 and extends the job assistance to service sectors hit by international trade and to workers who lose their jobs during offshoring moves to any countrynot just to nations with which the United States has signed free trade agreements.
Executive Compensation
Existing law had already provided that employers participating in the Troubled Assets Relief Program (TARP) were subject to certain standards for executive compensation under Section 162(m)(5) of the Code. The Act expands the standards significantly and provides that these standards apply in any period during which an obligation arising from TARP assistance is outstanding. There are strict new pay caps, bonus restrictions and golden parachute prohibitions. The Act also requires each TARP recipient to establish a Board Compensation Committee, comprised entirely of independent directors, for the purpose of reviewing employee compensation plans and establishing a company-wide policy regarding excessive or luxury expenditures. Finally, each TARP recipient must submit executive compensation to an annual, non-binding shareholder vote during the period of TARP assistance.
H-1B visas
Organizations that receive funds under TARP or certain federal loans are prohibited from obtaining H-1B visas for two years unless they have taken good faith steps to recruit U.S. workers for the job in which the H-1B is sought. |
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The effects of the economy on workplace safety
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Companies spend about $170 billion a year on costs associated with workplace injuries and illnesses and almost $1 billion every week to injured employees and their medical providers, according to Warren K. Brown, president of the American Society of Safety Engineers (ASSE).
So, as the downturn in the economy forces companies to deal with declining revenue, layoffs, and tight to non-existent credit problems, workplace safety becomes collateral damage to the economic crisis. One safety specialist expressed it this way, This sudden economic crisis will have many effects on workplace safety
mostly negative.
Its important for employers to remember that they are not alone in the turmoil, that insurance providers are also cutting back on staff and resources, thereby shifting the increased responsibility for workplace safety.
A myriad of problems are arising as the economy continues to tighten. Layoffs force fewer people to do more work, while always thinking in the back of their minds, Am I next? As a result, focus shifts from attention to detail and workplace injuries are likely to increase.
Concern for job security means workers are reluctant to report safety infractions or near misses because they dont want to be perceived as troublemakers, and thus, one step closer to the door. From the employers standpoint, safety training takes a budget hit, and accidents are not reported in order to keep insurance premiums down.
Another area that warrants concern is the machinery and equipment workers use daily. In good times, companies could stroll into a bank and with little effort draw on funds needed to purchase or update aging equipment. But current conditions force the extension of the life of equipment by re-tooling parts to save money, increasing the chance of breakdowns and possible mishaps. Other companies find themselves forced to move from their current location to smaller buildings that may not be as safety-friendly.
With all this being said, now is the one time we cant afford to move away from workplace safety, especially with payrolls running lean, we need people on the job more than ever.
First, companies need to know right off the bat that they will be receiving less support from their service providers. Accept that fact and move on. Now that you have taken on that added responsibility, the next step is to make sure you dont cut safety resources. A discretionary view of safety puts both your employees and your company in harms way. As ASSEs Warren K. Brown points out, A companys reputation is at risk should a disaster or incident occur. Employers face a damaged reputation and brand when employees are injured, especially if the incidents are preventable.
It is equally important to bring employees into the loop, to let them know the message from top management is clear: We will never compromise safety! They have to be taught to watch out for each other, and believe, through your example, that there is truly a were all in this together mentality within the organization.
Companies are under pressure. Insurance companies are under pressure. And certainly, safety professionals are under pressure. But all three must be united in a common bond of staying safe on the job. Because investing in safety is not only investing in a safe working environment, but also in a companys bottom line.
In an address to the American Gas Associations Safety Leadership, then U.S. Secretary of Labor Elaine L. Chao, probably summed up the situation best. Safety and health programs in the workplace are not only an employers legal responsibility, it also makes good business sense, said Ms. Chao. No price can be placed on the most important benefit, and that is to see that every worker returns home safely to their loved ones at the end of each work day.
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