In This Issue:

Remaining Questions Before the Employer Mandate Begins

January 1, 2015 marks the date when the employer mandate of the Affordable Care Act will apply – and employers should not expect a delay this year.

In the run-up to the employer mandate due date, more guidance has been provided to clarify which plans don’t meet the law’s minimum value threshold. Employers are asking questions about part-time employees, variable employees, seasonal employees, and also about steps they can take between now and the new year to address whether these workers must be treated like full-time employees.

Meeting Adequate Coverage

The Departments of Health and Human Services (HHS) and the Treasury clarified in Notice 2014-69 on November 4, 2014, that large employer medical plans without hospitalization coverage do not meet the law’s minimum value threshold. However, plans without hospital coverage are give a one-year reprieve if rolled out before November 4, 2014 and if the plan year begins no later than March 1, 2015.

In other words, plans need to include both minimum health coverage, such as check-ups and vaccinations, as well as catastrophic health care.

By not being considered to be minimum value plans for premium subsidy purposes, even if individuals are offered this coverage, they could go to a marketplace and get a premium tax credit or subsidy. In turn, that could subject an employer to a pay-or-play penalty (the $3,000 annual “unaffordable” coverage penalty applicable to plans that are either not affordable or fail to provide minimum value), as the plan will not provide minimum value.

Steps to Take

One step some employers are taking to comply with the ACA’s employer mandate is making sure the premium for single health coverage does not exceed 9.5% of each of their employees’ salaries. This kind of “staggered premium schedule” is more complex and can create additional administrative attention, but it works within the safe harbor created for determining if the premium for single coverage exceeds 9.5% of family income.

Another step employers can take at this point is determining all of their full-time employees, and using the “measurement period” to determine if a variable-hours employee must be treated as a full-time employee. If part-time, seasonal, or variable employees reach 130 hours a month, they should be offered coverage.

If you have questions or concerns about your current health plan and whether it is in compliance with the Affordable Care Act, please contact Chris Rutzebeck, Benefits Consultant by phone (443-31-7738) or by email (

Maryland Minimum Wage Increase

Governor Martin O’Malley signed legislation on May 5, 2014 that will gradually raise Maryland’s minimum wage to $10.10 an hour.

The minimum wage bill will begin raising the current $7.25 an hour minimum wage in January 2015. The Maryland law will phase in the increase, raising the minimum wage from its current $7.25 to $8.00 on January 1, 2015 and to $8.25 on July 1, 2015. Subsequent increases will bring it to $8.75 on July 1, 2016, $9.25 on July 1, 2017, and finally to $10.10 on July 1, 2018.

Maryland joins 21 other states that, along with the District of Columbia, have set a rate above the federal minimum wage.

If you have questions or concerns about how this new law may affect you and your business, please contact Michael Lanham, Client Services Manager, by phone (443-321-7726) or by email (

Last Minute Ways to Maximize Your FSA

There are approximately 35 million account holders who made tax-advantaged contributions to their Flexible Spending Accounts (FSAs) for 2014; approximately 51% of those account holders wait until December to use their FSA dollars.

Plan Options

Although employers have offered FSAs as part of their benefit plans since the 1970s, in 2013, the US Treasury Department and the IRS made FSAs a bit more flexible. Under the new regulations, employers can consider a menu of FSA plan options to extend that one-year deadline, giving employees more time and flexibility. These options include:

    • Carry-over or Rollover: If an FSA plan has been amended to include this option, employees can carry over up to $500 of unused FSA savings to the next year. Employers determine the carry-over amount.
    • Grace Period: If a plan includes a grace period option, employees have an additional 2.5 months beyond December 31 (until March 15) to spend unused FSA dollars. Plans may not offer both the $500 carryover and the grace period; it’s one or the other, or neither.
    • Run-out Period: If a plan includes a run-out period, employees have additional time beyond the year-end deadline to submit reimbursement requests for eligible expenses – but only if those expenses were incurred during the plan year. The run-out period is usually 90 days, which would make March 31, 2015, the last day to submit receipts and reimbursement requests.

Spending Tips

Once employees know the deadlines for spending their FSA funds, they can focus on using their accounts to purchase eligible expenses that make sense for them and their families. For instance, sharing these three spending tips can help FSA participants stay in control of their FSA dollars:

    • Know What is FSA-Eligible: Check your plan guidelines regarding which products and services are FSA-eligible allowing them to be purchased with pre-tax FSA dollars, including co-pays, deductibles, and co-insurance for different medical services.
    • Keep Track of Your FSA Account Balance: If your employer offers an account tracker or calculator, take advantage of it so all of your available FSA dollars are used before deadlines.
    • Use Your FSA Debit Card online or in person. FSA money will automatically be deducted when using your card, so there’s no waiting for reimbursement for out-of-pocket expenses when you incur.

If you have questions about your FSA or to how implement an FSA for your company, please contact your Client Services Specialist by phone at 410-451-4202.

2014 FUTA Tax Rates – Credit Reductions and BCR

When a state’s unemployment insurance (“UI”) trust fund becomes insolvent, the state has an opportunity to borrow from the federal government in the form of “Title XII” loans to pay unemployment benefits to claimants. These Title XII loans can increase federal unemployment (“FUTA”) tax rates for employers in the affected states.

In general, the net FUTA tax rate is 0.6% (6.0% gross FUTA tax rate – 5.4% standard FUTA credit) on an annual taxable wage base of $7,000. However, for employers operating in states that continue to borrow from the federal government, this net FUTA tax rate is potentially increased by the following:

  • FUTA Credit Reduction Add-On: This add-on is applicable following a state’s second consecutive January 1 with an outstanding Title XII loan. Employers in an impacted state lose 0.3% of the 5.4% standard credit for each year the Federal Title XII loan remains outstanding (ie. 0.3%, 0.6%, 0.9%, 1.2%, 1.5%, etc.). The FUTA credit reduction add-on can be waived the US Department of Labor based on attainment of certain criteria.
  • 2.7% Add-On: This add-on is applicable following a state’s third consecutive January 1 with an outstanding Title XII loan. The 2.7% add-on cannot be waived by the Department of Labor.
  • Benefit Cost Rate/Ratio (BCR) Add-On: This add-on is applicable in states following their fifth consecutive January 1 with an outstanding Title XII loan. States can request a waiver by submitting a request to the Department of Labor by July 1 of each respective year. Should a waiver be granted, a state may still be subject to the 2.7% add-on.

On November 10, 2014, the US Department of Labor issued final FUTA tax rates for employers in states with outstanding Title XII loans. The table below contains a summary of the effective FUTA tax rates for calendar year 2014:

*South Carolina applied for and received a waiver for both the BCR add-on and the basic FUTA credit reduction by repaying a sufficient amount of their outstanding Title XII loans.

If you have questions or concerns about how the 2014 FUTA Tax Credits may affect your business, please contact your Client Services Specialist at 410-451-4202.

Did You Know?

Alison Mahowald, founder of Active Minds, and an HRi client was recently interviewed by Brian Williams on the NBC Nightly News.

Click here to watch the interview.