In this issue:

  • Benefits of Offering Group Coverage
  • IRS Announces $500 FSA Rollover Allowance
  • Employers in 14 States to See FUTA Tax Increases for 2013
  • State Minimum Wage Increases for 2014

Benefits of Offering Group Coverage

With the opening of the Individual Exchanges/Marketplaces on October 1, 2013, we recognize that many employers have questions about the benefits of retaining group coverage. Here at HRi, we believe there are numerous advantages to retaining group coverage. Listed below are employer and employee advantages of having a group plan as well as the disadvantages of discontinuing group coverage.

Employer Advantages of Offering a Group Plan

  • Offering group benefits supported by a benefit professional allows for on-going consultation and evaluation of current offerings as well as strategic planning that incorporates current benefit trends and concepts. This allows employers to provide robust benefits to remain competitive in the marketplace and to retain and obtain quality employees.
  • An employer’s benefit plan is often an important reflection of the company’s culture. Removing the offering of a benefit plan can have an adverse effect on morale and culture as well as employee retention.
  • The group market model offers better support for employees, removing the administrative burden from the employer.
  • Significant tax advantages: Pre-tax employee contributions (with Premium Only Plan) and reduced employer payroll tax

Employee Advantages of Purchasing Coverage through a Group Plan

  • The group market is the only place you can buy insurance with pre-tax dollars. Premiums are paid on a pre-tax basis (premium is not subject to federal or state tax, where applicable), providing tax savings to the employee
  • Employer contribution is offered towards medical premiums, these contributions will be lost
  • Employer benefit offerings are typically more robust with less out-of-pocket expenses than those offered in the individual market
  • Claims support and customer advocacy services available

Employer Disadvantages of Discontinuing Group Coverage

  • Advantages of employer payroll tax savings eliminated, increasing the overall cost of payroll
  • After January 1, 2014, there will be restrictions on HRAs and other employer-based arrangements such as defined contribution plans for tax advantage funding of healthcare. These plans were previously used to allow employees to set aside wages pretax to purchase individual market insurance products
  • Loss of productivity from employees who will be shopping for and purchasing individual products for the first time or working through claims issues, etc. This can cause frustration, stress and distraction as employees devote time to navigating these issues
  • Not all employees/individuals will qualify for a subsidy
  • Some employees may not buy coverage at all
  • HRA and HSA contributions will have to be discontinued if not integrated with a group plan
  • Potential loss of “small business tax credit”
  • Rates are predicted to rise in the Individual Market starting in 2015 and, as a result, individuals will more than likely want to return to a group plan

If you have any questions or concerns about your current group health offering, please contact Chris Rutzebeck, Benefits Consultant at 443-321-7738 or

IRS Announces $500 FSA Rollover Allowance

In October 2013, the US Department of the Treasury and the IRS issued a notice modifying the longstanding “use it or lose it” rule for health flexible spending arrangements. Participants now can carry over up to $500 of their unused balances remaining at the end of a plan year.

Effective immediately, employers that sponsor a health FSA may choose to allow employees to carry over unused amounts of up to $500 to reimburse medical expenses incurred during the following year. Employers may choose to allow employees either the $500 rollover or a grace period of up to two and a half months (though employers are not required to allow either). However, a health FSA, cannot have both a rollover and a grace period. The guidance does not impact dependent care FSAs.

This change is a positive step in the right direct toward repealing the “use it or lose it” regulation in its entirety. In the short term, it gives employees more control over their funds, encourages enrollment in this cost-savings plan, and simplifies the process by not requiring employees to predict the exact cost of future medical expenditures during enrollment.

For more information, please view the fact sheet regarding the health FSA and the new guidance. If you have further questions, please contact Chris Rutzebeck, Benefits Consultant at 443-321-7738 or

Employers in 14 States to See FUTA Tax Increases for 2013

The US Departments of Labor and Treasury released the list of states in which employers will pay increased FUTA (Federal Unemployment Tax Act) taxes as a result of continuing Title XII UI debts. The number of states is reduced from 2012 due to steps taken to eliminate outstanding debt. The total FUTA tax in these states will be the base rate of 0.6% plus the amount represented by the credit reduction below.

Employers in the following states will be subject to a reduction in FUTA credit on their IRS Form 940 for 2013:

These states had Title XII advance balances on January 1 of at least two consecutive years and on November 10, 2013, and did not qualify for credit reduction avoidance.

The above chart and other FUTA data is available on the Department of Labor’s website here. If you have questions about your Federal Unemployment Tax responsibilities, please contact Julie Kramer, PHR, Risk Manager at 443-321-7712 or

State Minimum Wage Increases for 2014

As 2013 comes to a close, small business owners across the country should prepare themselves for minimum wage increases set to go into effect as early as December 31, 2013.

According to the Department of Labor, under the Fair Labor Standards Act (FLSA) the current federal minimum wage is $7.25/hr effective July 24, 2009. Many states also have minimum wage laws. In the case where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage. Please note that minimum wage rates for states not listed remain at $7.25/hr as of 12/20/13.

2014 State Minimum Wage Table

For more information regarding the 2014 State Minimum Wage Increases, please visit the Department of Labor’s website here.

Did You Know?

This time of year many people are using ladders to decorate their homes. However, many are not aware of the dangers involved. In addition to cautioning about falls, the Center of Construction and Research (CCR) warns to watch out for electrocution hazards from overhead powerlines and wiring.

This pocket guide from the CCR provides tips for inspecting, positioning, and using a ladder.

Download the guide here.