Hiring and firing and the latest legalities along the way

In the HR world, two activities demand a lot of your time and attention – bringing new people on board, and letting people go. And not surprisingly, the recent recessionary crunch and temperamental job market have led to some legal changes that affect your hiring and firing practices. Here are some of the latest legal considerations – and the paperwork you need to stay on track.

Hiring – Claiming the payroll tax exemption under the HIRE Act

In a move to encourage recession-weary employers to hire again, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010. Under HIRE, qualified employers will receive two important tax breaks for hiring and holding onto previously unemployed workers:

A payroll tax exemption — An exemption from the 6.2% share of Social Security tax on wages paid to qualifying employees from March 19, 2010 through December 31, 2010

A new hire retention credit — A general business tax credit, up to $1,000, for each qualified employee retained for at least a year

You can now use the recently issued “HIRE Act Employee Affidavit,” or “Form W-11” to claim the payroll tax exemption. The main purpose of this form is to get qualified employees to state, by a signed affidavit and under penalties of perjury, that they have not been employed for more than 40 hours during the 60 days prior to beginning employment with you.

Take advantage of this exemption for newly hired, eligible employees with our Downloadable Form W-11.

For more information about the HIRE ACT, check out our HIRE Act FAQs.

Firing - Another short-term COBRA subsidy extension is in effect

In a now-familiar move with the COBRA subsidy, President Obama pushed out the eligibility date again. The bill extends the 15-month, 65% federal premium subsidy to employees laid off from April 1 through May 31, 2010. (The previous extension expired March 31.)

At the same time, President Obama urged lawmakers to pass legislation that would extend the COBRA premium subsidy to eligible individuals through the end of the year. While the Senate has cleared such a measure (Tax Extender Act of 2009), the House has not yet acted on it.

Inform employees of their COBRA rights with our Downloadable ComplyRight™ Initial Notification.

Hiring and firing and the latest legalities along the way

Making COBRA available for domestic partners, too

Losing a job is difficult enough. But even more disruptive is losing your health coverage. That’s why many people opt for COBRA to maintain their coverage after termination – protection and peace of mind for you, your spouse and your dependent children.

But what if you’re in a gay relationship? Under current COBRA law, continuation coverage would not apply to your same-sex spouse or partner, even if you worked for a company that offered this level of health coverage.

Senator Barbara Boxer of California wants to do something about that. She recently introduced legislation – the Equal Access to COBRA Act of 2010 - that would allow many domestic partners the same access to COBRA health coverage that married couples currently have.

COBRA coverage would apply to those companies that already offer health benefits to domestic partners and their children. (Currently, that amounts to more than half of Fortune 500 companies.) Domestic partners could also tap into the 65% COBRA premium subsidy that has been extended a couple of times under the Obama administration.

On her website, Barbara Boxer states:

“This is a question of fairness: Every family deserves access to health insurance, especially in this tough economy. This bill ensures that domestic partners and their families will have equal access to health coverage after a job loss.”

Boxer’s proposed bill is now with the Senate Committee on Health, Education, Labor and Pensions.

Making COBRA available for domestic partners, too

COBRA subsidy extended once again

It keeps going … and going ... and going.

The House recently passed legislation to extend the 15-month, 65% COBRA premium subsidy another month, until April 30, as well as emergency unemployment insurance benefits until May 5. (In early March, President Obama signed the Temporary Extension Act of 2010, which extended the COBRA subsidy until March 31 and unemployment insurance benefits until April 5.)

In the meantime, the Senate has passed a more comprehensive bill – the Tax Extender Act of 2009 - that would push these benefits out to year’s end, which the House is expected to pass. But if the vote comes after these latest deadlines have passed, another “stopgap” extender bill may be necessary.

Are you keeping your involuntarily terminated employees informed of these extensions, and their possible eligibility?

The Department of Labor (DOL) has released recommended language for communicating the COBRA extension to your employees. To keep things simple (and legally compliant!), check out our COBRA poster, employee notices and other recordkeeping resources.

COBRA subsidy extended once again

Under new proposal, COBRA premium subsidy would be extended again

As part of its proposed federal budget for fiscal year 2011, the Obama administration is recommending another extension to the COBRA health insurance premium subsidy – a move that Congress will most likely support.

If approved, employees laid off from March 1 through December 31, 2010, would be eligible for the 65% premium subsidy for up to 12 months. (Currently, employees who are involuntarily terminated from September 1, 2008, through February 28, 2010, can receive the premium subsidy for up to 15 months.)

“As long as unemployment remains at high levels and access to health insurance coverage remains spotty, the willingness to extend COBRA assistance will remain strong and persistent,” says Frank McArdle, a consultant with Hewitt Associates Inc. in Washington. workforce.com

More and more employees are opting for COBRA as a result of the 65 percent premium subsidy – part of a broad economic stimulus package Congress approved nearly one year ago. In fact, Hewitt discovered in a survey of 200 large employers that the number of employees choosing COBRA more than doubled to 39 percent during a nine-month period last year.

According to the Society for Human Resource Management (SHRM), only laid-of workers who could not get coverage under another group health plan (such as a spouse’s plan or Medicare) would be eligible for the subsidy. In addition, premium assistance is only available for individuals with incomes under $145,000 and families filing jointly with incomes under $290,000.

If you’re a little bewildered about the various extensions and how to communicate them to employees, you’re not alone.

"… as originally passed, the subsidy was provided for a period up to nine months. In December 2009, the period was extended to a total of 15 months, and under the latest proposal it would be 12 months," says Karen Frost, health and productivity solutions leaders at Hewitt Associates in Chicago. "That's three different time frames and three different provisions." shrm.org

As far as what this means to you as an employer, Frost suggests that the hardest part – adjusting to the original subsidy – is over.

"For the first extension, we just had to modify what we were already doing in terms of the subsidy. And the efforts around a second extension would be very similar. It's a modification; it's not a brand new game."

Until a possible second extension is approved, G.Neil recommends that you display a poster informing employees of their COBRA subsidy benefits to date.

Under new proposal, COBRA premium subsidy would be extended again

IRS answers more pressing COBRA questions

If you’re an employer struggling with COBRA questions, the Internal Revenue Service (IRS) has published added guidance on the federal premium subsidy to help answer some of the most common issues.

The new COBRA regulations, which were part of President Obama’s American Recovery and Reinvestment Act of 2009, contain specific changes to COBRA health benefit requirements that affect former employees, their employers and COBRA coverage providers.

Under the subsidy, involuntarily terminated employees must pay 35 percent of the COBRA premium and employers must front the money for the remaining 65 percent. After paying insurers directly, employers can then claim the payment as an offset against payroll tax liabilities using the updated Form 941.

The IRS published information earlier this year to answer major questions from the public regarding eligibility for the COBRA subsidy. Information has been added to the question-and-answer style document as new questions develop.

Last week, the IRS updated the online document with additional information including guidance on whether an employee who is a reservist would be eligible for the subsidy if called to active duty.

Q. Does an involuntary termination of employment occur if a member of a military Reserve unit or the National Guard who is employed by a civilian employer is called to active duty?

A. Yes. This is the case regardless of whether the civilian employer otherwise treats the employee’s absence as a termination of employment or a leave of absence.

The IRS also added information in response to questions regarding elected officials and employees hired for a limited period of time.

Q. In the case of an employee who is hired only for a limited period, such as a seasonal worker, or a teacher hired only for one school year, can the end of employment at the end of the period be considered an involuntary termination?

A. Yes. Under Notice 2009-27, Q&A-1, an involuntary termination may include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services. Thus, if an employee hired for a limited period works to the end of the period, is willing and able to continue employment, and terminates employment because of the failure of the employer to offer additional work, an involuntary termination occurs for purposes of the premium subsidy.

For more answers to questions on COBRA continuation health coverage read the IRS FAQs for employers.

IRS answers more pressing COBRA questions

DOL issues model COBRA notices for employers

Late last week the Department of Labor (DOL) issued four model notices that employers can use to explain federal premium subsidies available under COBRA.

As part of the economic stimulus plan President Obama signed into law in February, employees who were involuntarily terminated between September 1, 2008, and December 31, 2009, are eligible to retain their group health coverage for a period of up to nine months by paying a portion of the COBRA premium.

Involuntarily terminated employees must pay 35 percent of the COBRA premium and employers must front the money for the remaining 65 percent. Employers will pay the insurer directly, then claim it as an offset against payroll tax liabilities. Payroll will then report any subsidies and take the offset on an updated Form 941.

"Our action today gives workers and their families useful information on their right to receive the COBRA subsidy and makes it easier for employers and plans to meet their notice obligations. Given the current economic situation facing dislocated workers and their families, it is very important that individuals do not lose their group health coverage," said Alan D. Lebowitz, deputy assistant secretary of labor for the department's Employee Benefits Security Administration (EBSA).

Employers can send the DOL’s model notices to COBRA beneficiaries advising them of the subsidy and how they can enroll for coverage.

Designed to fit different situations, the four COBRA model notices include:

• A general or “full” notice to be given to beneficiaries who lost group coverage between September 1, 2008, and December 31, 2009.
• An abbreviated general notice that would be for beneficiaries who are currently receiving unsubsidized COBRA.
• An alternative notice explains the right of individuals working in states with continuation coverage laws, or “mini-COBRA” laws, which apply to employers with fewer than 20 employees.
• A notice of extended election periods for eligible individuals who lost their jobs before the stimulus plan was signed into law, between September 1, 2008 and February 16, 2009, and declined or discontinued COBRA coverage at the time.

Each package includes information of the premium reduction provisions, a series of questions and answers, and which forms to use in requesting the premium reduction or COBRA coverage.

More information on the COBRA subsidy:

• Stimulus plan subsidizes COBRA, expands unemployment insurance
• IRS releases info to help employers claim COBRA credit

DOL issues model COBRA notices for employers