Over the past several weeks employers have received a bill from the NYS Department of Labor Unemployment Insurance Division. The notice is a bill for interest, which may at first strike the reader as strange. Here’s the story.

The recent national recession led to record high levels of unemployed workers receiving unemployment insurance benefits. As a result, since 2009 New York State has borrowed over $3 billion from the federal Unemployment Insurance (UI) Trust Fund. The American Recovery and Reinvestment Act (also known as the Recovery Act) provided interest-free loans to New York and other states with insolvent Trust Funds during calendar years 2009 and 2010. Thus far, Congress has not extended the interest-free loan provisions into 2011. As it stands now, New York must pay approximately $95 million in interest on these loans to the federal government by September 30, 2011.

To pay the interest due for 2011 on these federal loans, New York State is required by state law to assess a temporary charge on employers, called an Interest Assessment Surcharge (IAS). If Congress extends the interest-free loan provision, the DOL will either credit employer accounts or refund the money paid.

New York’s Interest Assessment Surcharge rate for 2011 is 0.25%. Each employer’s surcharge amount is determined by multiplying the total taxable wages in the most recently completed payroll year (October 1, 2009 through September 30, 2010) by the IAS rate of 0.25 percent. Therefore, the maximum amount that most employers will be assessed is $21.25 per employee.

Payment of the IAS is due by August 15, 2011.

If you have any questions, please call the Employer Accounts Adjustment Section of the NYS Department of Labor’s UI Division at 1-888-899-8810, or your MBL Benefits Consultant.

Source: http://www.labor.ny.gov/ui/employerinfo/interest-assessment-surcharge.shtm

Resources:

IRS Notice 2011-28, http://www.irs.gov/irb/2011-16_IRB/ar08.html

Wells Fargo newsletter article on IRS Notice 2011-28,  https://wfis.wellsfargo.com/NewsIndustryInfo/Legislative%20Updates/Documents/040111PSb_Leg_Alert_W-2_Reporting.pdf

Law firm McDermott Will & Emery blog on IRS Notice 2011-28, http://www.employeebenefitsblog.com/2011/03/articles/health-and-welfare-plans/irs-releases-interim-guidance-on-reporting-cost-of-employersponsored-coverage-on-w2/

Business Insurance, article on IRS Notice 2011-28, http://www.businessinsurance.com/article/20110329/BENEFITS03/110329903

If you would like to talk to an MBL Benefits Consultant about your 403(b) plan needs, please contact

• Marc Levy at (212) 560-4676, or mlevy@mblbc.com

or

• Ronnie Don at (212) 560-4689, rdon@mblbc.com

The National Labor Relations Board has long held that employees have a right to criticize their management in conversations with one other. This is part of what the NLRB considers an employee’s right under the law to participate in concerted activity. (The right does not extend, however, to statements that are insulting, or obscene personal attacks on a supervisor, though what is insulting or obscene varies significantly based on the surrounding circumstances.) The right extends both to union and nonunion employees.

The interpretations of this right were developed when employee group communications occurred around the water cooler or during breaks or at lunch. But how do those interpretations apply in a socially networked world? That question is about to be answered. On October 27, 2010, the NLRB’s acting general counsel, Lafe Solomon, filed an action against an employer for having fired an employee after the employee complained about her supervisor on Facebook.

The employee of a Connecticut emergency response company was asked to prepare an investigative report about a customer complaint concerning the employee. She reacted via a Facebook post complaining about her supervisor, which resulted in an on-line conversation among the company’s employees. She was then terminated for violating two company policies: one that prohibited employees from making disparaging remarks when discussing the company or supervisors, and another policy that prohibited employees from depicting the company in any way over the internet without company permission.

The NLRB’s complaint asserts that the employee was wrongfully discharged and that the company’s policy unlawfully interfered with employees in the exercise of their right to engage in protected concerted activity. The NLRB’s hearing is set for January 25, 2011.

While the NLRB action and possible appeals of the resulting NLRB decision are pending, employers are advised to review their blogging policies with their legal and human resources advisors to assess the risk posed by using these policies to discipline employees.

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Additional Resources

NLRB News Alert: “Complaint alleges Connecticut company illegally fired employee over Facebook comments” (November 2, 2010), http://www.nlrb.gov/About_Us/news_room/template_html.aspx?file=http://www.nlrb.gov/shared_files/Press Releases/2010/R-2794.htm

Law Firm Proskauer Rose Analysis: “NLRB “De-Friends” Employers in Its First Complaint Based on Employee’s Social Network Comments” (November 10, 2010) http://www.proskauer.com/publications/client-alert/nlrb-de-friends-employers-in-its-first-complaint/

Law Firm Littler Analysis: G. Appleby and P. Gordon, “NLRB Posts Frightening Message in Facebook Case”, http://www.littler.com/PressPublications/Lists/ASAPs/DispASAPs.aspx?id=1553

Venable LLP Law firm: “Does your Company’s Internet Policy Comply with Labor Law?”, http://www.venable.com/files/Publication/8457cb29-35af-4854-808f-8c9cc7e3b564/Presentation/PublicationAttachment/c43f4e63-2e8d-4733-98cd-97be5557dccc/Internet_Policy_Labor-Employment_11-10.pdf.

IR-2010-108, Oct. 28, 2010

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2011. In general, these limits will either remain unchanged, or the inflation adjustments for 2011 will be small. Highlights include:

• The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan remains unchanged at $16,500.

• The catch-up contribution limit under those plans for those aged 50 and over remains unchanged at $5,500.

• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in  an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000.

• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.

• The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $56,500 for married couples filing jointly, up from $55,500 in 2010; $42,375 for heads of household, up from $41,625; and $28,250 for married individuals filing separately and for singles, up from $27,750.

Below are details on both the unchanged and adjusted limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Commissioner annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

The limitations that are adjusted by reference to Section 415(d) generally will remain unchanged for 2011. This is because the cost-of-living index for the quarter ended Sept. 30, 2010, while greater than the cost-of-living index for the quarter ended Sept. 30, 2009, is less than the cost-of-living index for the quarter ended Sept. 30, 2008, and, following the procedures under the Social Security Act for adjusting benefit amounts, any decline in the applicable index cannot result in a reduced limitation. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) will be $16,500 for 2011, which is the same amount as for 2009 and 2010. This limitation affects elective deferrals to Section 401(k) plans, Section 403(b) plans, and the federal government’s Thrift Savings Plan.

Effective Jan. 1, 2011, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) remains unchanged at $195,000. Pursuant to section 1.415(d)-1(a)(2)(ii) of the Income Tax Regulations, the adjustment to the limitation under a defined benefit plan under section 415(b)(1)(B) is determined using a special rule that  takes into account that the cost-of-living indexes for the quarter ended Sept. 30, 2009, and for the quarter ended Sept. 30, 2010, were both less than the cost-of-living index for the quarter ended Sept. 30, 2008, and that the cost-of-living index for the quarter ended Sept. 30, 2010, is greater than the cost-of-living index for the quarter ended Sept. 30, 2009. For a participant who separated from service before Jan. 1, 2010, the participant’s limitation under a defined benefit plan under section 415(b)(1)(B) is unchanged (i.e., the adjustment factor is 1.0000). For a participant who separated from service during 2010, the limitation under a defined benefit plan under Section 415(b)(1)(B) for 2011 is computed by multiplying the participant’s 2010 compensation limitation by 1.0118 in order to reflect changes in the cost-of-living index from the quarter ended Sept. 30, 2009, to the quarter ended Sept. 30, 2010.

The limitation for defined contribution plans under Section 415(c)(1)(A) remains unchanged for 2011 at $49,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2011 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $16,500.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) remains unchanged at $245,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $160,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period remains unchanged at $985,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $195,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $110,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $360,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $16,500.

The compensation amounts under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $95,000. The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $195,000.

The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2011 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $33,500 to $34,000; the limitation under Section 25B(b)(1)(B) is increased from $36,000 to $36,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $55,500 to $56,500.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $25,125 to $25,500; the limitation under Section 25B(b)(1)(B) is increased from $27,000 to $27,375; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $41,625 to $42,375.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $16,750 to $17,000; the limitation under Section 25B(b)(1)(B) is increased from $18,000 to $18,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $27,750 to $28,250.

The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,000.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $89,000 to $90,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) remains unchanged at $56,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $167,000 to $169,000.

The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $167,000 to $169,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $105,000 to $107,000.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under section 430(c)(2)(D) has been made is increased from $1,000,000 to $1,014,000.

Related Item: Revenue Procedure 2010-40 contains certain inflation adjusted tax items for tax year 2011.

With ballots still being counted in some districts, political analysts already declare that the Republicans, nearly all of whom ran in opposition to the Affordable Care Act, have taken control of the House of Representatives but not the Senate.

Still Senate Minority Leader Mitch McConnell promised to pass a wholesale repeal of the ACA and, if unsuccessful, to repeal the law part by part. If repeal is vetoed, McConnell indicated that health care regulatory efforts will be de-funded. For his part, at his press conference on November 3, President Obama indicated a willingness to look at ACA changes proposed by the Republicans.

Analysts have begun to scrutinize the election’s impact on health care reform. As a practical matter, outright repeal is unlikely with the Republicans having a mere majority in the House and a minority in the Senate. Even if some Senators cross the aisle in the Senate to join the Republicans on a repeal vote, neither house boasts the two-thirds supermajority needed to override a presidential veto.

The type of bill which theoretically could become law is one that both parties agree would make needed technical adjustments to the ACA and perhaps changes deemed most troublesome by the electorate.

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Additional Resources

U.S. Constitution, Article I, section 7, clause 2, http://www.house.gov/house/Constitution/Constitution.html

Text of November 3, 2010 White House Press Conference: http://www.whitehouse.gov/the-press-office/2010/11/03/press-conference-president

From ABC News: K. Carollo, “Will Health Care Overhaul Survive Republican Control of the House?”, http://abcnews.go.com/Health/Health_Care/2010-vote-elections-health-care-overhaul-survive/story?id=12045125&page=1

From CNN: “Boehner says Obama health plan on the block after GOP wins”, http://www.cnn.com/2010/POLITICS/11/03/election.main/index.html

From FOX News:  “Senate GOP Leader Takes Aim at Health Law”, http://www.foxnews.com/politics/2010/11/04/senate-gop-leader-takes-aim-health-law/ and http://video.foxnews.com/v/4402016/mitch-mcconnell-on-gop-gains-in-the-senate?playlist_id=86918

The Society of Human Resource Managers (SHRM) alerted its membership to begin preparing employees for the demise of the Bush-era tax cuts. Originally enacted in 2001 and causing revision of withholding tax tables in July of that year, these tax cuts are set to expire in 2011.

SHRM published the following chart comparing the current (Bush-era) tax brackets with those that are likely to resume on January 1 as well as the currently expected adjustments to be proposed by the Obama administration for passage later in the year.

* High-income filers are generally defined as taxpayers with adjusted gross income of more than $250,000 as joint filers and $200,000 for individuals. The Obama administration would retain the current tax rates for lower and middle income individuals.

SOURCE: L. Pettus and T. DiLorenzo “Here Today, Gone Tomorrow: Planning for the expiring Bush tax cuts” (October 20, 2010) http://www.shrm.org/LegalIssues/FederalResources/Pages/HereTodayGoneTomorrow.aspx.

It is possible that the lame-duck session of Congress could see continuation of the current rates, but it is prudent to prepare your workforce to enable them to begin planning for the possible shrinkage in take-home pay at the beginning of 2011.

If you are interested in more information on the change in withholding tables, please contact your MBL Benefits consultant or the author at jwoehlke@mblbc.com.

COO / General Counsel, MBL Benefits Consulting Corp.

On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010, H.R. 5297. Sec. 2112 of the law, “Rollovers from Elective Deferral Plans to Designated Roth Accounts,” permits 401(k) and 403(b) plan participants to convert their pre-tax accounts into after-tax Roth accounts. The plan document must provide the option to participants. Plans without Roth features will need to be amended to include them.

As a general rule, contributions to Roth accounts are made with “after-tax” dollars, that is, there is no deferral for contributions, but withdrawals from the accounts occur without a tax impact. The income earned in a Roth account, therefore, ordinarily is never taxed.

Making the conversion from an after-tax account to a Roth account IS a taxable event; however, the early withdrawal penalty is not imposed. The law permits conversions occurring in 2010 to result in tax either (a) payable solely in 2010 or (b) spread equally over 2011 and 2012.

If you are interested in adding a Roth feature to a plan or a feature to permit in-plan conversions, please contact your MBL Benefits consultant.

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Additional Resources

From the Proskauer Rose law firm, http://www.proskauer.com/publications/client-alert/in-plan-conversions-under-the-small-business-jobs-act/

The Patient Protection and Affordable Care Act (the ACA*) was enacted on March 23, 2010. The ACA includes a requirement that employers are to report the cost of an employee’s group health care on the employee’s annual wage statement, the W-2 form. While the ACA originally required this reporting on W-2’s issued in 2011, on October 12, the IRS made compliance in 2011 voluntary and deferred the requirement until 2012.

The draft form W-2 for 2011, the voluntary compliance year, includes codes for reporting health care costs if the employer so chooses.

The IRS News Release also attempts to debunk an Internet urban legend that reporting health care coverage causes it to be no longer exempt from taxes. Specifically, the release states:

This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.

If you have questions about the new W-2 reporting requirement, please contact your MBL Benefits consultant or the author at jwoehlke@mblbc.com.

* For simplicity, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are collectively referred to as the Affordable Care Act, or ACA.

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Additional resources

IRS Notice 2010-69: http://www.irs.gov/pub/irs-drop/n-2010-69.pdf

IRS News Release: http://www.irs.gov/newsroom/article/0,,id=228881,00.html

IRS news summary: http://www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6

Article: P. Marathas, Jr., “Setting the Record Straight on the W-2 Panic”, Employee Benefit News Legal Alert, http://ebn.benefitnews.com/news/setting-the-record-straight-on-the-w-2-panic-2684258-1.html

Rev. 10/27/2010.

The Patient Protection and Affordable Care Act (the ACA*) was enacted on March 23, 2010. The ACA includes a requirement that preventive care specifically identified in regulations is to be provided at no cost to participants. Cost-sharing may be imposed on other preventive care. This is not a requirement imposed on grandfathered plans. The Administration issued guidance on this requirement in the form of interim final regulations on July 19, 2010.

The regulations define preventive care with reference to those recommendations from the

• United States Preventive Services Task Force which were believed to have the greatest beneficial effect (for evidenced-based items, those rated A or B).
• Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention.
• Health Resources and Services Administration

The current list of recommendations and guidelines required to be covered under the regulations is posted at www.healthcare.gov/center/regulations/prevention.html. (In the first category above, there are 45 procedures.) It is expected that these groups will augment their recommendations from time to time; and, health plans will need to expand (or decrease) coverage accordingly.

The regulations address what is to occur when preventive care is provided but not separately billed, if, for instance, a preventive care procedure is administered as part of a routine office visit, which otherwise requires a co-pay.

If you have questions about the new preventive care requirements, please contact your MBL Benefits consultant or the author at jwoehlke@mblbc.com.

* For simplicity, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act are collectively referred to as the Affordable Care Act, or ACA.

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Additional resources available at

Official publication of interim final regulations on preventive care coverage: http://federalregister.gov/a/2010-17242

From Proskauer Rose law firm, http://www.proskauer.com/publications/client-alert/health-care-reform-preventive-services-final-rules/.

From Venable LLP law firm, http://www.venable.com/files/Publication/cf848032-4911-4da3-b0e1-887f65921899/Presentation/PublicationAttachment/28f6dabc-8c97-4c04-9134-8d07c170586c/Preventive-Care-Coverage-Rules_8-30-10.pdf

Rev. 8/30/2010.