Higher health insurance costs, new 1099 regulations, and now increased payroll taxes?

That’s the latest expectation from President Obama’s proposed budget, set for unveiling next week.  The big news for small businesses: the budget is expected to replenish states’ dwindling unemployment funds by increasing payroll taxes.  This will happen by raising the amount of unemployment-taxable wages to $15,000—more than double the $7,000 which has held steady since 1983.  This plan, which would take effect with other new tax laws in 2014, stands to increase payroll taxes by over $100 billion over the next decade.

But is this plan merely borrowing from Peter to pay Paul, at a time when the Obama administration is trying to improve relations with business groups?  Keep in mind, unemployment insurance is a joint federal-state program.  State governments must pay the first 26 weeks of unemployment benefits and have had to borrow heavily from the feds to meet this requirement.  To bridge last year’s gap, more than 40 states had to increase their unemployment-insurance payroll taxes.  What will happen to the tax rates under the new plan is up to the individual states and is anyone’s guess.  One thing is for certain—it appears rebuilding the unemployment fund will fall squarely on the backs of businesses.

Health care changes are afoot—lots of them.   We’ve all heard about the health care reform passed by the Obama administration, dubbed “ObamaCare.”  Such reform includes sweeping changes like mandatory health coverage, extended dependent coverage, and limited spending on flexible spending accounts, to name just a few.  But what do all these changes really mean for your small business?

To start, by 2014, small-business owners and their employees must purchase a government-approved health insurance policy that offers unlimited lifetime and unlimited annual coverage.  New guidance issued by the administration mentions a potential waiver for businesses whose compliance would result in a significant increase to premiums or decrease in service availability.  Still, according to Obama administration estimates, these mandates could increase health premiums by seven percent.

The impending health care changes not only affect employees, but also employees’ children.  Under the new system, coverage must be provided to dependent and nondependent children up to age 26, regardless of children’s employment or marital status.  One estimate figures this mandate could cause a two-percent increase to premiums, if not more for small-business owners.

And what if the small-business owners switch health plans are no longer grandfathered?  Then the owners and their employees must bear the entire cost of preventative-services coverage.  This mandate is expected to increase premiums by roughly 1.5 percent; however, the administration is considering allowing employers to shop for less expensive health plans without penalty.

What’s more, by 2012, employers must begin reporting the cost of employer-sponsored health coverage on their employees’ W-2s.  These amounts aren’t taxable, but reporting them could put a tax on your payroll department!

These mandates are just a sample of changes expected for health care in the coming years.

To combat rising premiums, under the reformed health care system, small businesses that pay at least 50 percent of their employees’ health insurance premiums may qualify for a tax credit.  In 2010, the maximum credit is 35 percent of employers’ contributions to health insurance premiums.  By 2014, the maximum credit increases to 50 percent.  However, by 2016, businesses may no longer claim the tax credit and must shoulder the health care changes alone.

With so many health care changes on the way, who’s to say what these new mandates will cost, what additional insurance benefits must be provided, or even what kinds of insurance will be available to provide those benefits?  As a small-business owner, you’re already juggling so much paperwork.  Don’t get lost in the shuffle.  GHRO is here to guide you through the health care changes as they happen.  As the ultimate partner for HR outsourcing, we’ll help you make smart decisions for your small business.  We can even reduce your employee benefits costs by customizing the right package at the right price for your small business.  To discover a complete solution to your employee benefits needs, call GHRO at 888-308-0338.

President Barack Obama has signed legislation that extends the COBRA subsidy program until May 31, 2010..

Before the extension, involuntary terminations that occurred after March 31, 2010, didn’t qualify for subsidies for COBRA continuation coverage.

With the extension, workers who are or were involuntarily terminated between September 1, 2008 and May 31, 2010 are eligible for 65 percent COBRA subsidies. Workers can receive the subsidies for up to 15 months.

The extension also includes a provision that allows workers who were involuntarily terminated after March 31 but before passage of the extension to qualify for the subsidies.

Given the latest extension, employers will have to update their COBRA notices. HR.BLR.com and Compensation.BLR.com will post revised notices once the Department of Labor updates its model notices.

The COBRA subsidy program was created by the American Recovery and Reinvestment Act of 2009 (ARRA). The Senate has approved legislation that would extend the program through the end of 2010. However, the House has yet to give its approval.