September is National Flood Preparedness Month

If flood insurance isn’t required as a condition of your mortgage, you’re not obligated to carry it; however it may be a good investment. Consider five factors as you decide whether or not you need this type of insurance coverage.

1. Do you live in an area with a high flood risk? If so, you definitely want flood insurance coverage. That’s because your home, located near a river, stream, lake or flash-flood zone, faces a high threat of flooding. Protect your home and its contents when you buy a flood insurance policy.
2. Do you live in a low flood risk zone? Consider that the local sewer system or nearby storm drain could overflow and cause extensive damage. Because a flood insurance policy typically costs less for customers who live in low-risk areas, purchasing a policy makes sense even if you don’t live near a major body of water or in a flood zone.
3. Do you rent your home? Most landlord insurance policies cover the buildings only. They do not insure your home’s contents. Consider flood insurance that replaces any possessions that are damaged by flooding.
4. Do you have a mortgage? Check with your lender about flood insurance requirements. If you live in a flood zone, you will most likely need to carry this coverage and prove that you’ve purchased a policy before you can sign the loan documents.
5. Do you own any possessions? In just a few inches of water, your appliances, furniture and other belongings can be damaged beyond repair. So, if you own any possessions, consider flood insurance that provides financial reimbursement and allows you to replace items that are damaged by excessive water.

Before discounting flood insurance, talk to your Cleary Insurance Representative. He or she will answer your questions and help you decide if coverage is a wise investment for you. In many cases, the coverage is invaluable.

Concerned about your personal insurance coverage? At Cleary, our experienced Personal Lines department will work with you to evaluate your insurance needs, identify exposures, and create a customized insurance portfolio. Give us a call today at 617-723-0700

The U.S. Court of Appeals for the DC Circuit has dealt a serious blow to the Obama Administration today with a decision that calls into question the structural integrity of the “pay-or-play” mandates under the Affordable Care Act (“ACA”).

Background:

The plain language of the Affordable Care Act states individuals purchasing coverage from a state exchange are eligible for the federal subsidy. The ACA, on its face, does not provide for a subsidy on the federal exchanges. The Internal Revenue Service (IRS) addressed this in May 2012 through a regulation, providing that an individual could obtain a subsidy if he or she “is enrolled in one or more qualified health plans through an Exchange.” In the same regulation, the IRS defined an exchange to include both state and federal exchanges. In other words, the IRS sought, by regulation rather than by amending the law, to clarify that the ACA provides the subsidy on both state and federal exchanges.

What Does This Mean To Employers:

This is significant to employers because one of the triggers for assessment of a penalty against an employer under the ACA is that a full-time employee has obtained subsidized coverage on an exchange. Any employer based in a state with federally-run exchanges could be free from the employer mandate ($2,000 and $3,000 penalties effective in 2015). This applies to a majority of the states across the country and could have an even greater impact on the enforceability of the ACA.

What Does This Mean for Your Planning Under the ACA:

This is far from the final word on this issue and just 2 hours later, a Richmond, VA appeals court reached the opposite decision and upheld the IRS rule stating the law covers both state and federally run exchange subsidies. The decision could be reviewed by the full DC Circuit Appellate Court, which has a majority (seven) of its active judges appointed by Democratic presidents and four appointed by Republicans. It may eventually be decided by the US Supreme Court, but that may be a long way off. There is also a chance that this could result in overdue bi-partisan discussions in Congress to address this and other ACA issues. At this point, however, it is clear that at least one high-level federal court has suggested that the entire pay–or-play approach may be in jeopardy in a majority of states.

Unfortunately for employers, it is likely that your renewal planning and implementing the benefits program in time for the start of your 2015 plan year might have to continue without clear direction if the employer mandate will be enforced if you are in a state with a federally run Exchange. The Obama administration stated it will appeal the decision and said people would continue to receive the subsidies during the appeal, which is the only way an employer would receive a penalty.

Background on the Court Decision:

In Halbig v. Burwell, the Appeals Court for the District of Columbia Circuit, sitting in Washington, DC, sided with the plaintiffs and against the Obama Administration today when it held that the ACA, by its terms, does not allow for subsidies for individual coverage in exchanges established by the federal government. This means that, at least according to this court, individuals purchasing insurance coverage on the federally-run exchanges will not be eligible for federal subsidies when they purchase insurance.

In Halbig, the plaintiffs challenged the IRS’s ability as a regulator to, in the plaintiffs’ perspective, rewrite the statute. The district court agreed with the Obama Administration, finding that the context of the ACA supported the IRS’s clarification. The appellate court disagreed, however. In a 2-1 decision, the appeals court found that there was no basis to support the contextual reading and effectively found that the IRS had exceeded its regulatory authority.

Next Steps and Webinar:

Stay tuned as more information is clarified. We are hosting several webinars over next 2 weeks due to an overwhelming request for support. Register at the link below and state your date/time preference:

The webinar will last 1 hour and we will take any questions/requests prior to and throughout the presentations. If there are additional topics you’d like to see, please let us know and we’ll accommodate your request as much as possible. The presentation will cover the following information:

• Who is subject to the employer mandate in 2015?
• How do you measure your variable hour employees to determine if they are required to be offered coverage to avoid penalties in 2015?
• How do you avoid any litigation pitfalls inherent with ACA implementation?
• What are the next steps to ensure compliance?
• How might the latest court ruling affect me?

If you prefer to receive our written guidebook in lieu of the webinar, please contact us for a copy. If you have any questions on your current program, please contact us at your earliest convenience.

Business owners may not understand when to classify an individual as an employee versus an independent contractor. Proper classification of a worker as an independent contractor may save a company money and benefits, such as group health insurance. However misclassification can result in significant liability.

Employers are often tempted to classify workers as Independent Contractors because they don’t have to pay the employer share of taxes or provide benefits to those workers. The Affordable Care Act’s (ACA) upcoming employer mandate makes this type of arrangement even more tempting. Under the employer mandate, which will go into effect in 2015, employers with 50 or more full-time or full-time equivalent employees will have to provide healthcare insurance to at least 95% of their full-time workforce or face fines. Even if they provide coverage, they could be fined if that coverage does not meet the ACA’s standards.

Who is counted as an “employee”

Under the common-law standard, an individual is an employee if a legal employer and employee relationship exists. Generally, that relationship exists when the company “has the right to control and direct the individual” regarding “the details and means by which” the individual’s work is performed for the company. There are several factors that are considered under the common-law standard, including the right to discharge, the furnishing of workspace or tools, the source of the individual’s employment wages, etc. The determination depends on the particular facts and circumstances of the relationship.

Ultimately, the determination of whether an individual is an employee or independent contractor is based on a holistic analysis of the relationship between the business professional and the company. It should be noted that just because a company classifies and pays a business professional as an independent contractor, it does not always mean that the business professional is truly an independent contractor under the law. Courts typically focus on the substance of the relationship over its form.

The rules tell us little more than that an employer’s ACA obligations extend to every person who is its “common law employee.” For health care reform, “employee” is defined using the common-law standard found in 26 CFR § 31-3401(C)-1(b). The IRS uses a 20-factor “right to control” test to determine whether a common law employment relationship exists. No one factor determines the result, but if an employer can tell a worker what to do, when to do it and how to do it, then, generally speaking, the worker is that employer’s common law employee.

What is an independent contractor?

An independent contractor, also known as a 1099 contractor, refers to a worker who contracts their services out to a business or businesses. An independent contractor is considered to be self-employed, not an employee of the business or businesses with which they work. “1099” refers to the IRS form that an independent contractor must receive to state their income from any given business in a given tax year.

Why Does It Matter?

Misclassification of an individual as an independent contractor may have a number of costly legal consequences.

If your independent contractor is discovered to meet the legal definition of an employee, you may be required to:

• Reimburse them for wages you should’ve paid them under the Fair Labor Standards Act, including overtime and minimum wage
• Pay back taxes and penalties for federal and state income taxes, Social Security, Medicare and unemployment.
• Pay any misclassified injured employees workers’ compensation benefits
• Provide employee benefits, including health insurance, retirement, etc.
• Pay ACA penalties if the misclassification results in increasing the number of employees to 50 or more.

Penalty and Claim Examples

The California Legislature enacted Senate Bill 459, which imposes hefty fines for each “willful misclassification” of a worker. The penalties are not less than $5,000, nor more than $15,000 for each violation of the statute. Employers may also face penalties ranging from $10,000 to $25,000 for each violation if the employer engaged in a “pattern or practice” of such misclassification.

In May 2014, Lowe’s agreed to pay $6.5 million to settle a class action lawsuit that accused the company of misclassifying over 4,000 installers, and hundreds of businesses, as independent contractors.

Defining Employee for Health Care Reform

If an IRS audit reveals that an employer misclassified workers and reclassifying those workers as W-2 employees puts the employer over the 50-employee threshold, they could be subject to the fine for failing to offer healthcare coverage. That fine is $2,000 per full-time employee if even one employee obtains insurance through The Marketplace with government subsidies. If they do offer coverage, but that coverage doesn’t meet the ACA’s standards for minimum coverage and affordability, the employer could pay $3,000 for each employee who goes to The Marketplace for coverage and obtains a government subsidy.

The info graphic, embedded below, created by payroll software company ZenPayroll, provides a flowchart to walk you through determining whether you need to be classifying a worker as an employee or a contractor.

Assumptions to Avoid in Classifying Workers

A hiring firm should not assume it is safe to classify a worker as an independent contractor simply because:

• The worker wanted, or asked, to be treated as an independent contractor
• The worker signed a contract
• The worker does assignments sporadically, inconsistently, or is on call.
• The worker is paid commission only
• The worker does assignments for more than one company.

IRS Form SS-8 can be used to request a determination of the status of a particular individual. The IRS will use the information provided on the form, as well as any other information that can be obtained from the parties involved to determine whether an individual is covered under the payroll tax laws. The IRS determination does not necessarily indicate worker classification under other employment-related laws.

Conclusion

It is important for businesses to understand difference between and employee vs. independent contractor, especially in today’s ACA climate. Correctly classifying workers before they perform services can save a business confusion, difficulties, and possible fines down the road.

At Cleary, we know how important a comprehensive benefits package can be to your continued success. Give us a call today at 617-723-0700 and we will work with you to create a plan that meets your business objectives, takes into account state and federal laws, and capitalizes on incentives and innovative solutions now being offered.

We are pleased to welcome Justin Yurchenko to the Cleary Insurance team! Justin is the newest member of our sales force.

He was hired to evaluate and analyze potential loss exposure for any type of company, including both for-profit and nonprofit organizations. Justin works directly with the board of directors, CEO’s, presidents, owners, and or trustees to develop and implement risk management strategies that can serve to be an effective way to monitor and hopefully mitigate potential loss.

When Justin is not working he enjoys playing hockey or golf, depending on the weather!

This Spring we are pleased to spotlight our client Charles River Aquatics.  They are an organization committed to helping children develop life skills through swim lessons.  Their main objective is to provide an atmosphere conducive to development and personal growth for individuals of all ages.  They teach water safety, foster sportsmanship and fair play.

The Charles River Aquatics teaching philosophy is designed to introduce children (ages 3 and up), to the thrill of learning how to swim efficiently and promoting a healthy lifestyle through aquatic activities.

Please click here to read more about Charles River Aquatics.