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Volume 11, Issue 1 A publication of Employee Management Services Keeping our Clients Connected

As Congress takes a ”time out” from health reform and President Obama urges lawmakers not to give up on legislation stalled in the House and Senate, employers are wondering what lies ahead for their businesses and their benefits plans. Both the House and Senate have ap-proved versions of a comprehensive health care overhaul that would significantly affect all employers, including those who already offer workers health care coverage. What remains is for Congress to reconcile the two bills and send a compromise measure to the President to be signed into law.

The prospect of timely health reform, however, seems more uncertain now than ever. The upset victory of Re-publican candidate Scott Brown in the special election in Massachusetts to succeed the late Senator Edward Ken-nedy has been a game-changer: Senate Democrats no longer enjoy a filibuster-proof 60-vote majority.

This means the Senate probably won’t be able to pass any legislation written exclusively by the Democratic Congres-sional leadership. Also, several centrist Democratic sena-tors, eyeing the message sent by Massachusetts voters, seem reluctant now to vote again for a new government entitlement that could cost in excess of $1 trillion over ten years.

Health Care Reform Legislation: So Near, Yet So Far

Benefits

continued on page 2

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Unemployment

Unemployment Taxes Will Rise in 2010

Businesses hit hard by the recession during the past two years are in for the tax system’s version of a follow-up sucker punch in 2010. In 35 states, the rate for unemployment taxes will rise (automatically, in most cases) due to the heavy toll absorbed by the state trust funds for the payment of unemployment benefits. Their trust fund balances and current rates of tax are insufficient to cover their ongoing costs for unemployment compensation (UC). Because the UC benefits constitute a legal entitlement, the states must continue to pay the benefits even if they don’t have the money.

The states collected an aggregate of $31.0 billion in state unemployment taxes in federal fiscal year 2009. During the same time period they spent more than double that amount—approximately $75.0 billion on regular UC benefits and $4.1 billion on extended UC benefits. To meet their UC benefit obligations, half the states are already borrowing from the Federal Unemployment Account (FUA) within the federal government’s Unemployment Trust Fund (UTF). These states owe more than $26 billion to the account as of December 29, 2009. They will continue to rack-up more debt in 2010, and several additional states will join them in borrowing from the FUA during the coming year. States with loan balances outstanding as of December 29, 2009 are: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Virgin Islands, Virginia, and Wisconsin.

Increase in state unemployment tax rates. Ultimately the states will have to pay the piper. Not only will the states have to repay the FUA, they must continue to pay ongoing UC benefits, too. Increasing the state unemployment tax on employers is the only way to achieve this. In most states, the tax increases automatically as a result of the reduced trust fund balances. The higher rates will remain in effect (in most cases for a number of years) until the federal funds are paid back and the state trust funds have been adequately replenished. continued on page 6

to states that are trying to curb the problem. He says both the Department of Labor and Treasury Department are pursuing a joint proposal that eliminates incentives in law for employers to misclassify their employees and enhances the ability of both agencies to penalize employers who misclassify.

The misclassification of employees as independent contractors has been topic as of late. Obama says the practice deprives workers of overtime and unemployment benefits. Employers have used the practice to cut labor costs and save on taxes.

In general, two tests are used to determine whether a worker is an independent contractor or employee. One is the “reasonable basis” test, which provides a “safe harbor” to employers based on existing government or court classifications of workers in a particular business or industry and was mandated by the Revenue Act of 1978 (P.L. 95-600, Sec. 530).

The second test is the “common law test.” To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties.

In addition, some workers who do not meet the reasonable basis or common-law tests for independent contractor sta-tus may still be classified as such by operation of law (i.e., statute).

Source: hr.blr.com

continued from “Unemployment Taxes Will Rise in 2010,” page 1

Increases due to experience rating. Some businesses will feel the effects of a double-whammy. In addition to an across-the-board increase in the state rate, they will be hit with an experience rating adjustment that will increase their taxes even more. State unemployment tax rates are “experience-rated,” meaning that employers pay a higher or lower tax rate based on the experience they have with former employees making UC claims. The employers attributed with a higher percentage of UC claimants relative to the number of employees they have are subject to the higher rates. If a business has laid-off a higher than normal percentage of its employees in the recent past, it is likely to be hit with an experience rating increase. In many states, an employer can have a dramatic increase in the rate of unemployment tax as the result of a bad year in which layoffs were made.

Increase due to federal credit reduction. If you are unfortunate enough to be in a state that has not paid back the FUA in a timely fashion, you may pay an even higher unemployment tax rate. Michigan is the only state in this situation currently, but others may follow later in 2010. If a state does not repay the entire balance of its FUA loans by November 10 following the second consecutive January 1 on which the state has an outstanding balance, then the federal tax credit is reduced for employers in the state. The credit is reduced retroactively to the preceding January 1. That means employers will pay increased amounts of federal unemployment tax (FUTA). Normally, employers pay 0.8 percent net FUTA because of the 5.4 percent credit allowed for state unemployment tax paid. However, each consecutive year a state is late in repaying funds borrowed from the FUA, the credit is reduced by 0.3 percent, thus increasing the net FUTA payable for the year by 0.3 percent.

All in all, employers thinking that the painful impacts of the recession on employment are in the rearview mirror may have another thing coming. The impact will be felt for a long time to come in higher unemployment tax rates as a result of automatic rate increases caused by reduced trust fund balances, experience rating increases resulting from higher than normal layoffs, and increases in FUTA resulting from states’ inability to repay loans from the FUA in a timely fashion.

Source: www.completetax.com

Obama Targets Employers that Misclassify Workers as Independent Contractors

Payroll

President Barack Obama’s federal budget proposal for fiscal year 2011 includes $25 million for an initiative targeting the misclassification of employees as independent contractors.

Obama says the additional funds would be used to hire 100 additional enforcement personnel and to provide grants

Tips for Keeping Employees Motivated During Tough Economic Times

HR

Layoffs, furloughs, and pay cuts negatively affect the workplace. Managers can boost worker morale and productivity during tough economic times by uses these strategies.

Honest & frequent communication1. – Keep employees notified of economic impacts through regular meetings where employees can ask questions and stay informed. Being honest with employees also means not being afraid to say the answer is not yet known.Recognize signs of stress2. – Good managers and supervisors regularly look for signs of stress in their employees. Some signs include: headaches, difficulty concentration, low morale, and job dissatisfactionPlan work tasks ahead to reduce stress3. – Supervisors can help employees by planning work tasks ahead and sharing weekly due dates. Remember, employee who already had a pay cut, are awaiting news on their job future, or are working a reduced schedule may have a more difficult time completing tasks.Distributing workloads effectively4. – Some employees have more difficulty multitasking under stress. Encourage overwhelmed employees to break large projects into smaller, manageable tasks or share responsibilities with other co-workers.

Source: Julie Rizzardo, www.human-resources-management.suite101.com

Benefits

Striking a Balance: Health Plans and Wellness

Each year, companies try to strike a balance between providing benefits for their employees, and trying to keep costs low enough to satisfy their budget. Though this can be a challenge, there are positive ways to meet this challenge and have a genuine impact. One way is to be open to offering different plans than you have in previous years.

Many companies are transitioning to High Deductible Health Plans, or have already made the switch. If you aren’t familiar with this type of plan, as the name implies, the deductible is higher than some plans, but once the deductible is met, there is usually low or no charge for most procedures. This can be especially helpful if an employee or their dependents have a history of meeting/ exceeding plan deductibles, or if they know they will be facing a costly procedure in the coming year.

Most companies know careful shifting of a small percentage of company contribution to employees can also help offset insurance increases, but current economy may require thinking ‘outside the box’. One way to do this is to consider Wellness Programs. Establishing a Wellness

Program can do many positive things for both the employee and the company:

Encouraging healthy habits benefits the employee 1. now and in future with improved health, less absenteeism, improved mood and alertness during the work day.Improved habits can contribute to decreased illness 2. and usage of medical insurance. This could result in lower rates and/or better plan options for your future Open Enrollments.Incentives can be customized to fit your company’s 3. culture and goals. These may include such things as small prizes for employees, or the offering of a small decrease in health deductions if goals set out are accomplished. Some suggested areas to measure wellness may include Smoking Cessation, Weight Loss, or Team Exercise Challenges.

This is a great way to express more personal interest in employees. This can be especially important if employees are feeling insecure due to company lay offs and terminations, or in larger company environments. If you are wondering if your employees would be interested in supporting this type of program, consider this: a recent review of the most frequent New Year’s Resolutions on WebMD’s website shows that over half of the resolutions were related to health. These include:

Lose weight1. Improve diet2. Quit smoking3. Reduce stress overall and/or at work4.

Even if your company decides not to engage in a formal Wellness Program, there are other creative ways to encourage employees towards a healthier lifestyle. Some ideas are:

Post nutritional information of nearby restaurants 1. employees may frequent for lunch. Most fast food or chain restaurants have listings available on-line.Direct employees to web sites they can review outside 2. work to encourage their healthy lifestyle changes. These can include nutritional sites, such as www.calorieking.com, or sites that encourage exercise, such as www.workoutbox.com.Request vending companies begin stocking your 3. machines with lower fat/calorie choices.Encourage partnering among employees for walking 4. during lunch breaks, or after work. Or form a company sports team, such as Baseball, Basketball, Volleyball, or Soccer. Know what services for preventative care are low or 5. no cost through your Medical Plan, and make sure employees are aware of what’s available.

To summarize, healthy employees make a healthy company, and the sky is the limit when it comes to ways to encourage improvements in your company. A small investment of time and effort may yield a large return.

For assistance in establishing a Wellness Program, energizing your present plan, or to enquire about joining available EMS High Deductible Health Plans, please contact your EMS Human Resources Representative.

QuickTips for Preventing Cold- Related Injuries and Illnesses

Safety

A work environment hazard that is prevalent this time of year is cold-related injuries and illnesses. Below is information from OSHA on how to prevent these cold- related injuries and how to protect employees who work in the cold temperatures.

OSHA’s “Cold Stress Pocket Card” provides recommendations on protecting workers in cold environments. Some examples include:

Taking frequent short breaks in warm dry shelters to • allow the body to warm up. Select proper clothing for cold, wet and windy • conditions. Layer clothing to adjust to changing environment temperatures. Perform work during the warmest part of the day.• Avoid exhaustion or fatigue because energy is needed • to keep muscles warm.

Learn the signs and symptoms of cold-induced illnesses/injuries and what to do to help the employee. Electronic copies can be downloaded from the agency’s publications page, or printed copies can be ordered online or by calling 202.693.1888.

Source: www.osha.gov

Schaefer Box & Pallet Company is an employee-owned company located near Ross, Ohio. They are located on a 10-acre site which houses two steel enclosed buildings, each approximately 9,000 square feet, and two steel shelters with loading docks that are approximately 7,500 square feet each. Since the company’s beginning in 1968, the focus has been on designing and building custom wood pallets, skids, boxes, and crates to satisfy their customers’ specific packaging needs. Schaefer Box & Pallet utilizes a software program developed by Virginia Tech University called the Pallet Design System, or PDS, to ensure the design of the pallet or skid.

The company maintains a large stock of raw materials, which allows for quicker manufacturing and delivery to our customers. Schaefer delivers product with its own fleet of trucks and boasts a 99.3% on-time delivery rate. Schaefer’s fleet of trucks consists of three tractor trailers, one flat bed, one box van, and twelve trailers.

Schaefer Box & Pallet Company joined EMS in 1996 to improve their safety practices and worker’s compensation rate and to offer a competitive benefit package to the employees.

If you would like to learn more about Schaefer Box & Pallet, please visit their website www.schaeferboxandpallet.com.

Schaefer Box & Pallet Co.Client Spotlight

Client Spotlight

As the winter months set in, some people may notice that they feel more tired, experience weight gain, or struggle to get out of bed in the morning. Most people who experience these symptoms may have nothing more than the “winter blues,” but some likely suffer from a potentially debilitating condition known as Seasonal Affective Disorder (SAD). SAD, an extreme form of common seasonal mood cycles, can be associated with mild, moderate or severe depression.

Some of the symptoms associated with SAD include depression, mood swings, severe lack of energy, increased need for sleep, difficulty concentrating, exaggerated weight gain, sadness, hopelessness and thoughts of suicide. The exact cause of SAD is unknown. However, most experts attribute the condition to an imbalance of two chemicals in the brain, melatonin and serotonin. With longer periods of darkness during the winter months, levels of melatonin may increase and levels of serotonin may decrease. This imbalance can create the biological conditions that lead to depression. Depression affects almost 19 million Americans a year, and SAD affects about 6 percent of American adults. With such a large portion of the population affected, many employers will have employees who suffer from this condition in their workplaces.

Before brushing off an employee who complains of SAD as one who is just sad that summer is over, employers should consider whether the employee has a disability protected by law, particularly in light of the recent amendments to the Americans with Disabilities Act (ADA), which expanded the reach of the ADA.

Seasonal Affective Disorder and the Americans with Disabilities Act

If an employee with SAD has symptoms of depression or another medical condition, he or she may be disabled under the ADA (and state laws). To be disabled under those statutes, an employee must be substantially impaired in a major life activity as compared with most people in the general population. If an employee with SAD has depression and, as a result, is substantially impaired, the employee is entitled to protection from discrimination, and may also be entitled to a reasonable accommodation if he or she needs one to perform the essential functions of the job. That means that an employer should take seriously an employee’s request for some assistance to deal with his or her SAD in the workplace. As with any disability, an employer is required to engage in an interactive process with an employee who makes known a need for reason-able accommodation to try to arrive at a solution that will

Seasonal Affective Disorder - It Can Be More Than the Winter Blues

enable the employee to perform the essential functions of the job without causing an undue hardship for the employer.

The U.S. Court of Appeals for the Seventh Circuit recently addressed this issue. The court reversed summary judgment in favor of a school district on a claim brought by a teacher with SAD, who alleged that the district had violated the ADA by not accommodating her.3 After the teacher was transferred to a classroom with no exterior windows, she requested an accommodation of moving to a classroom with natural light. The school district refused. The Seventh Circuit noted that the school district was obligated to provide the requested accommodation to the teacher unless the transfer would impose an undue hardship, which the evidence did not support.

Depending on the severity of the employee’s SAD, possible accommodations may include:

relocating the employee’s workspace to an area with • an increased flow of daylight (i.e., near a window) permitting the employee to spend a portion of each • day outside (extended breaks, walks, etc.) allowing a light box to be placed in the employee’s • office modifying the employee’s schedule and shift • arrangements, and/or permitting an employee to take leave for treatment.•

Seasonal Affective Disorder and the Family and Medical Leave Act

An employee with SAD also may be entitled to leave under the Family and Medical Leave Act (FMLA). Depression is a condition which, under certain circumstances, can qualify an individual as having a serious health condition under the FMLA. If the employee’s SAD constitutes a serious health condition, he or she would be entitled to up to twelve weeks of leave for treatment, doctors’ appointments and other medical reasons. Further, an employer cannot discriminate or retaliate against an employee who requires FMLA leave due to his or her SAD.

Bottom Line: Take SAD Seriously

If an employee advises an employer that he or she is suffering from SAD and needs a reasonable accommodation under the ADA and/or an FMLA leave, the employer should address the employee’s request seriously. Depending on how it affects an individual em-ployee, SAD can be a serious medical condition.

Sources: www.pepperlaw.com, www.emedicinehealth.com, Duda v. Board of Educ., 133 F.3d 1054 (7th Cir.1998); Olson v. General Elec. Astrospace, 966 F. Supp. 312 (D.N.J. 1997); Wilson v. Lemington Home for the Aged, 159 F. Supp. 2d 186 (W.D. Pa. 2001), Ekstrand v. School Dist. of Somerset, No. 90-1853 (7th Cir. 10/6/09).

continued from “Healthcare Reform Legislation,” page 1

In his State of the Union address, President Obama laid to rest any doubt that he intends to keep working on health care reform. He wants legislation that will bring down premiums and the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses. It’s now up to the Democratic Congress to provide an acceptable solution to fix the country’s broken health care system. It won’t be easy. About 70 percent of employers believe that the currently proposed legislation would actually bump up their costs for employer-based benefit programs, and 35 percent say health reform will lead to fewer employers offering subsidized benefits, according to recent studies by Towers Watson and the National Business Group on Health.

The Congressional Budget Office has said that the Senate-approved legislation would do little to reduce insurance premiums over time — one of the original purposes of health care reform legislation.

What Would Reform Mean for Employers? There are some provisions in both bills that Congress might be willing to take a closer look at and even eventually pass, even if it’s outside a comprehensive, sweeping health reform bill. These provisions would:

Give employers with fewer than 25 employees and • average annual wages less than $50,000 a tax credit when they purchase employee health insurance. Provide affordable credits to individuals with salaries • up to 400 percent of the federal poverty level.

What’s most at stake right now, however, are those provisions that have been hotly debated by both parties. These include:

The creation of health insurance exchanges • allowing individuals to shop for insurance. While there is wide support for exchanges, the big issue is whether to have a single national exchange, as proposed in the House bill, or 50 separate state exchanges, as proposed in the Senate bill. A tax on high-cost health plans, called “Cadillac” • plans, for individuals and families. A surcharge on individuals with annual incomes • above $500,000 or families with incomes above $1 million. Expansion of Medicaid coverage for individual just • above the federal level. The House called for 150 percent above the level; the Senate, 133 percent.

With rising health costs and a still-struggling economy, many employers are wondering just what will happen next, including whether health care reform will fail.

Sources: www.wellsfargo.com, www.ceridian.com