Recent changes in benefits administration law have made outsourcing payroll even more attractive to companies.
The American Recovery and Reinvestment Act of 2009, commonly referred to as the Economic Stimulus Bill, was signed into law on February 17, 2009 by President Obama This law contains several significant changes which will directly affect employers and how their benefits are administered.
First, a Temporary COBRA Premium Assistance has been included in The American Recovery and Reinvestment Act. This COBRA Premium Assistance provides a subsidy of 65% of the cost of COBRA coverage for nine months to certain individuals. The subsidy’s provisions are effective immediately and plan sponsors must comply with them now. The number of participants in COBRA plans will dramatically increase over the next 24 months for the following reasons: 1) Unemployment rates are now at 7.6% and growing 2) The new stimulus act helps pay a significant portion of the employee COBRA contributions. The IRS has made reacting to the much more onerous COBRA provision contained in the new law a top priority. As the number of participants grow, more businesses may be interested in choosing to outsource this as the work and liability tied to it will increase exponentially.
Some larger national payroll processing services companies administer COBRA, while most local ones don’t. Utilizing your payroll services COBRA administration has certain advantages over using your health carrier’s: a health care provider may just provide COBRA for their specific health plan, but not include other eligible services, such as Dental. By choosing your payroll outsourcing services provider to administer your COBRA benefits, you will eliminate the burden of administering ALL eligible COBRA benefits, not simply health. In addition, some larger or multi-state companies may have several health insurance choices; relying on your payroll outsourcing services provider to administer COBRA eliminates this conflict.
Second, The American Recovery and Reinvestment Act contains a “Making Work Pay” Tax Credit, which will be achieved through payroll deductions: 1) The credit amount will be the lesser of $400 for an individual worker ($800 for married couples) or 6.2% of earned income 2) The credit would phase out for taxpayers with adjusted gross incomes in excess of $75,000 ($150,000 for married couples filing jointly) 3) The IRS indicates that the credit will be achieved via a early to mid year change to withholding tax tables 4)The credit will be in effect for tax years 2009 and 2010
By: Suzanne Burnham
© 2010 Administration Jobs
