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Health Care Reform For Small Business – Professional Employer Organizations (PEOs) To the Rescue

Professional Employer Organizations offer a one-stop solution for companies averaging 5 to 100 employees. They provide HR consulting, employee benefits, payroll, workers comp insurance, and many other employer-related services. As more regulations are created, and managing them becomes more difficult for employers, the PEO value proposition become more attractive.
2010
A� Small business tax credit – This tax credit is applicable for businesses with less than 25 full-time employees with an average wage below $50,000. The maximum credit equals 35 percent of the employer’s contribution to health insurance premiums, but it is unlikely the maximum credit will be applied. Calculating exactly what an employer qualifies for is an extremely sensitive process.
How PEOs help:
PEOs proactively consider whether their clients qualify for the credit and pass the total amount directly to the client. Since most PEOs manage their clients’ payroll and insurance plans, calculating the credit amount is much easier.
2011
A� W-2 provision – Employers must report the aggregate cost of employer-provided coverage on employees’ W-2s for informational purposes.
How PEOs help:
PEOs manage all aspects of their clients; payroll and benefits, so complying with this provision is synergistically efficient – the amount will be shown on all PEO work-site employees’ paychecks.
A� Wellness Grants are available for businesses with fewer than 100 employees to assist in implementing employee wellness programs. There is $200 million dollars that will be distributed over a five year period.
How PEOs help:
Since many PEOs partially self-insure their health insurance policies, they have always had a vested interest in proving their clients’ employee easy access to wellness programs. Most PEOs have long offered robust wellness programs that help employees live healthier lives, and consequently, make less medical claims – which is cheaper for everyone.
In 2013
A� FSA limits – all employee contributions to the FSA or Flexible Spending Account are limited to $2,500 per year. The penalty for using Flexible Spending Accounts incorrectly will be an increase from 10 percent to 20 percent.
How PEOs help:
PEOs manage all aspects of FSA administration for their clients – all FSAs offered to client employees will be adjusted seamlessly to comply with this provision.
A� Tax increases – Medicare payroll tax increase of 0.9% on self-employed individuals and employees with respect to earnings and wages received during the year above $200,000 for individuals above $250,000 for joint filers will go into effect. The new tax does not change the employer’s tax obligations, but self-employed individuals are not permitted to deduct any portion of the additional tax. In addition, there will be a new 3.8% Medicare contribution on certain unearned income from individuals with AGI over $200,000 ($250,000 for joint filers).
How PEOs help:
Professional Employer Organizations are responsible for deducting and filing all payroll taxes to the appropriate governing body. Unlike a payroll service, PEOs are often responsible and liable for calculating and deducting the proper amounts.
A� Notices & Fines
1. Plan sponsors must supply participants at enrollment or re-enrollment a new form of plan summary that must include information on benefits, exclusions, and cost-sharing requirements. Those that do not comply with this provision are subject to a noncompliance fee of $1,000 for each failure.
2. Employers must provide a written notice regarding the existence of the Insurance Exchange and that the employee might qualify for subsidies by March 1, 2013.
3. Plan sponsors will be required to provide an annual statement to the government and covered individuals reflecting the months during the calendar year for which the individual had “minimum essential coverage”. Those that do not comply with this are subjected to a noncompliance penalty of $50 for each missed statement to an employee to a maximum of $100,000.
How PEOs help:
PEOs are often the plan sponsor for all their clients’ healthcare, unless they “carve out” benefits, which would mean they are not the plan sponsor, and the client maintains their own health insurance. Should a client be receiving healthcare through a PEO sponsored plan, each of these mandates falls squarely on the shoulders of the PEO. Notice the trend, due to co-employment, many of the additional requirements put forth by health care reform are burdens for the PEO.
2014
A� State-based insurance exchanges open – State-based insurance exchanges are planned to pool employers together into one large group much like PEOs have done for years in order to reduce overall premiums. However the exchange program has been attempted in other states and has not had the same success that PEOs have had. As with many public programs, cost-efficiency and timely service is inferior to that offered by private entities. We don’t foresee this principle changing.
How PEOs help:
PEOs have long pooled employers together for cooperative purchases of many items including health insurance, the result is lower cost. There is …