Resources

Health Care Reform Update: New W-2 Requirements

By Scott Lyon, health insurance expert for the Small Business Association of Michigan (SBAM)

 


I recently wrote about new requirements in the health care law regarding 1099-MISC reporting. Today there is news about W-2s. If you have employees, then you also have some new rules to think about.

 


The new law requires employers to calculate and report the aggregate cost of employer sponsored health insurance plans on employee’s W-2 beginning on Jan. 1, 2011. While most W-2s will be issued in early 2012 for the tax year 2011, your payroll system must be updated no later than Feb. 1, 2011 in case someone leaves your employ and requests a W-2 early.

 


What must be included in the calculation? It must include

 


  • Medical Plans
  • Prescription Plans
  • Medicare Supplement Plans
  • Employee Assistance Plans
  • Costs for on-site clinics or executive physicals
  • Dental and Vision plans (unless they are stand alone plans)

 


Health Savings Account and Flexible Spending Accounts for Health are not included, nor are any costs for specific disease or hospital/fixed indemnity style plans.

 


While the regulations are not yet out, the laws seems to require that you have these costs calculated on a monthly basis. Also, the reports are required for employees, but they are also required for former employees who are provided health coverage (think COBRA, early retirees, surviving spouse, etc.). If you have anyone that falls into these categories, they may not have previously needed a W-2 because maybe they didn’t earn any wages in the tax year. But going forward you will apparently need to generate a W-2 for them.

 


Again the regulations are not yet written, but, I am pretty sure I am right. Between now and the end of the year, make sure your payroll administrator and/or payroll staff is up to speed and ready for the new requirement.

 


(Use the social networking links at the bottom of this story to forward to your friends and colleagues.)

Round-Up of Legislative News: May 10 - 14

House Committee Debates New Tax
SBAM Opposes Bill That Would Crack Down on Mis-Classified Independent Contractors
Alma Wheeler Smith Drops out of Governor’s Race
Election 2010

 

House Committee Debates New Tax



There is a new tax proposal that would allow local governments to assess up to a 50 cent per drink tax on alcoholic beverages.

The legislation, which was not reported from committee, would allow local units of government to submit ballot proposals that would allow the local community to vote on the liquor tax.

Much of the business community is opposed to the legislations as it could drive business to neighboring communities that would not assess the tax.

Local government groups support the proposal.  SBAM opposes the new tax scheme and we will keep you updated on its progress.


SBAM Opposes Bill That Would Crack Down on Mis-Classified Independent Contractors



The House Labor Committee is taking up bills that would institute harsh penalties for those in the construction and trucking industries who fail to properly classify independent contractors as employees.

The bill concerns an issue that has long been a concern of unions and business.  Even the sponsor of the bill admits that existing law in this area is vague.  The legislation doesn’t really address the ambiguity in the law but proposes heavy-handed penalties for violations.

For knowingly violating the law the business owner could be subject to a felony punishable by imprisonment for not more than 18 months or a fine of not more than $15,000, or both, for a first offense, and imprisonment for not more than seven years or a fine of not more than $30,000, or both, for a second or subsequent offense.

Those who unintentionally violate the law could face a misdemeanor punishable by imprisonment for not more than six months or a fine of not more than $2,500, or both, for a first offense, and imprisonment for not more than one year or a fine of not more than $5,000, or both, for a second or subsequent offense.

In addition, the Director of the Worker’s Compensation Agency could issue a stop-work order requiring the cessation of all business operations within 72 hours should they determine that a violation had occurred.  The stop-work order would remain in effect until the director releases it or until the mis-classified employees are properly classified.

SBAM finds these proposed penalties extraordinarily harsh, especially for what could be an innocent mistake on the part of the employer.  We will continue to monitor these bills.


Alma Wheeler Smith Drops out of Governor’s Race



With the deadline for candidates to file with the Secretary of State’s office for inclusion on the ballot now past, the Democrats find themselves with only two candidates for this year’s gubernatorial election.

This week State Representative Alma Wheeler Smith withdrew her name from consideration.  That leaves Speaker of the House Andy Dillon and Lansing Mayor Virg Bernero as the two candidates left standing to compete for the Democratic nomination for Governor. 

On the Republican side all of the announced candidates filed petition signatures to be included on the ballot.  They are Attorney General Mike Cox, Congressman Pete Hoekstra, Oakland County Sherriff Mike Bouchard, Ann Arbor business executive Rick Snyder, and State Senator Tom George.

A number of these candidates have confirmed that they will participate in a forum at SBAM’s annual meeting next month.  Go to www.sbam.org for ticket information.

Election 2010



In other election news a record

SBAM’s 2010 Entrepreneurship Score Card Finds Michigan’s Entrepreneurial Climate is Heating Up a Bit

The Small Business Foundation of Michigan’s sixth annual Entrepreneurship Score Card finds that the state is making progress in supporting an entrepreneurial climate that helps nurture job-creating small enterprises.

Update: click here to see coverage in Crain's Detroit Business (subscription required)


The Score Card ranks and rates the entrepreneurial economies of all fifty states. It is published by the Small Business Foundation of Michigan, a foundation operated in connection with the Small Business Association of Michigan (SBAM). The Score Card is available for download here. Printed copies may be requested by calling (800) 362-5461.

“This 2010 Entrepreneurship Score Card is an important benchmark that can give us insights into how well Michigan is tilling the ground for economic gardening and propelling a new economic direction for the state,” says SBAM’s President and CEO Rob Fowler. “As in previous years, we aim the Entrepreneurship Score Card at helping policymakers understand how entrepreneurship is faring in an overall Michigan economic environment that continues to struggle for traction.”

There are some positive developments to report. The 2009-2010 Score Card finds that:

 


  • Metrics relating to the state’s Entrepreneurial Climate continue to improve
  • In entrepreneurial measures, Michigan this year is outperforming most Great Lakes States
  • The concept of “economic gardening” is being embraced by more Michigan thought leaders

On the negative side, by all indicators second stage companies (defined as dynamic, growth oriented small firms) should be outperforming the general economy. However, second stage growth appears to be lagging further than it should. Note: this finding is based on 2008 data. Upcoming data from 2009 could show improvement.

This Year’s Score Card Findings

 


The Scorecard uses three primary measures to describe the condition and direction of the entrepreneurial economy of the state:

  • Entrepreneurial Change (the amount of entrepreneurial growth or decline in an economy over the recent three years)
  • Entrepreneurial Vitality (the level of entrepreneurial activity – pace and robustness of entrepreneurial activity)
  • Entrepreneurial Climate (the capability of an economy to foster entrepreneurship)

A fourth measure – Entrepreneurial Dynamism – is a compilation of these three drivers

Here’s Michigan’s performance on Entrepreneurial Change, Vitality and Climate in national ranking (with 50 being worst among all states) and on a five-star ratings scale (five stars being best.) Entrepreneurial Dynamism is reported as a national ranking only.

 


 Current National Ranking
Current Rating
2007 Rating
2005 Rating
Entrepreneurial Change
    48
    *
    **
    *
Entrepreneurial Vitality
    31
    *
    **
    *
Entrepreneurial Climate
    44
    *
    *
    **

   

Here’s how Michigan ranks among all 50 states on Entrepreneurial Dynamism.

 

 Current Ranking
2

SBAM in the News: Video on economic gardening and propelling a new economic direction for Michigan

SBAM President and CEO Rob Fowler was recently interviewed by Chris Holman on the Mid-Michigan Business Beat video report. Rob discusses the importance of economic gardening in growing more Michigan jobs.

 


Chris also talked with SBAM’s Vice President David Palsrok about SBAM’s legislative efforts toward  propelling a new economic direction for Michigan.

 


Watch the video here.

 

 


SBAM welcomes Disney Institute to East Lansing on June 7 and Ann Arbor on June 29

It doesn't take any training to recognize that the world's economy has taken a significant downturn. It does take effective and proven professional development training to guide impacted organizations back to the summit.

 


A one-day local workshop, Disney’s Approach to Business Excellence program is a rare and affordable opportunity to learn best business practices from Disney insiders. Organizations from across the nation have learned proven philosophies and implemented effective processes to reap the rewards of improvements in leadership, management, service, and brand loyalty.

IMPORTANT: Please use the Small Business Association promotional code SBAMMBE to receive $50 OFF PER GUEST when registering. Additional group discounts are available.

TO LEARN MORE ABOUT THE EAST LANSING EVENT AND REGISTER GO TO: www.KeysLansing.com.

TO LEARN MORE ABOUT THE ANN ARBOR EVENT AND REGISTER GO TO: www.KeysAnnArborMI.com.

No prerequisite training required.

 


An ugly surprise for small businesses in the Health Care Reform Law

(By Scott Lyon, SBAM’s small business health care expert)

SBAM promises to keep you informed about health care reform as we learn about issues that will impact the small business community. We will report to you the good, the bad and the downright ugly. Today, I am reporting on the ugly.

As I have written before, health care reform that does not get at the root cause of the problem – cost – is not reform. If that is not bad enough, there is a provision buried in the law that, unless it gets corrected, will all but overwhelm many small businesses. This provision has nothing to do with the way Americans get health care or buy and pay for health insurance. This hidden “gem” has to do with 1099 tax forms.

 


Section 9006 of the law makes a couple of changes to how 1099s are issued. These changes will end up requiring businesses to distribute millions of additional 1099s each year; no wonder the IRS says it will need an extra 16,000 agents to deal with our new health care laws! The two changes that go into effect on Jan. 1, 2012 expand the scope of 1099s by using them to track payments not only to individuals, but now also to corporations, and it expands the use from services to include tangible goods. So, beginning in 2012, all companies must issue a 1099 to any individual or corporation if they buy more than $600 a year in goods and services from that person or corporation.

Think about what this change could mean for your business on both the sending and receiving end of 1099s. Here are a couple of examples from my end at SBAM. We lease the software that drives our COBRA administration program, so we will have to send this vendor a 1099. COBRA administration generates letters, bills and notices. Keeping our customers informed of what is going on and reminding COBRA participants that they owe premium, etc., ends up in a lot of paperwork which, in turn, requires printer ink, paper and envelopes. Thus, OfficeMax and a few local vendors will get a 1099 from us. I travel back and forth to Washington a few times a year; we will have to issue 1099s to Delta Airlines, and because I generally stay in the same hotels, the Hilton and Westin Hotel chains will get a 1099 from us.

By now you may be asking the usual questions of and why is this necessary and how did it end up in the health care bill? All good questions with one basic answer: follow the money.

During the health care debate, President Obama put a hard cap of $1 trillion on the legislation. At the end of the day, the bill was scored by the Congressional Budget Office (CBO) at just under that amount. But to get under $1 trillion, some tricks of the trade were used by the folks in Washington. I have previously written about a few of these including: the annual fees on pharmaceutical companies starting at about $2.5 billion a year, insurance carriers tax of $8 billion a year, and changes to flexible benefit plans limiting the amount a family can put away in a Section 125 plan, among others. 1099s seem to be another “revenue generator” for Washington to keep the costs of reform under $1 trillion by capturing unreported income to help offset the costs. Policymakers focused their attention on this revenue-raising measure that would, in effect, help pay for the tax cuts headed toward small businesses.

What happens next? First, the IRS needs to issue the regulations – the rules – and that isn’t expected until sometime next year. Second, Rep. Dan Lungren (R-Calif.) introduced legislation (H.R. 5141) to repeal this portion of the new health care law that will place an unnecessary and expensive paperwork burden on small businesses. Several staff and volunteers from SBAM will be traveling to Washington later this month. You can bet we will be talking with the Michigan delegation and urging support for Rep. Lungren and H.R. 5141.

Read more

SBAM in the News – Grand Rapids Press article suggests a new tactic for creating jobs in Michigan: 'Economic gardening'

An article today in the Grand Rapids Press and Mlive.com says that economic gardening -- helping local businesses grow -- could provide a richer, more stable source of jobs for the state.

 


Excerpt:

 


“Michigan shouldn't abandon efforts to bring new companies to Michigan, said Rob Fowler, president of the Small Business Association of Michigan. "We don't think it should be either/or," he said. "But 60 to 80 percent of the state's economic development efforts should be put into economic gardening."

 


Read the entire article here:


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