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Health care reform passed late last month, signaling many upcoming changes for employers, insurers and individuals over the course of the next several years. Countless media outlets have reported on the big-ticket items, many of which do not take effect until 2014. However, the more than 2,500 pages comprising health care reform contain a bevy of effective dates beginning with the date each bill was signed into law. Following is a review of those key policies and plan updates that employers need to consider this year, as well as some tax and refund opportunities available to certain employers.

Steps to take now

Federal law now requires employers with 50 or more employees to provide nursing mothers with a “reasonable break time” and a private place to express milk, other than a public restroom. Oregon law already contains a similar requirement for employers with 25 or more employees; however, employers with 50 or more employees are subject to both laws and will need to update their policies where the federal law is more generous.

In particular, employers should examine any limits they place on the amount of time a nursing mother may break from work to express milk and the facilities they make available to these mothers because federal law is arguably more generous on each of these points.

Steps to take this year

A number of the plan updates and changes required by the health care bills are effective for plan years beginning six months after the date the legislation was enacted (March 23). Most health plans operate on a Jan. 1 to Dec. 31 plan year. For these plans, the requirements in this section will be effective on Jan. 1, 2011; however, plans with plan years ending after Sept. 23, 2010 but before Dec. 31, 2010 will need to comply before the end of 2010.

The legislation exempts or “grandfathers” collectively bargained health plans and those that had at least one active participant as of March 23. This means that employers will not need to amend their existing plans to offer free coverage of preventive services or to meet the new nondiscrimination requirements. However, employers will need to take the following steps:

• Extend dependent care coverage to age 26. Plans offering dependent care coverage will be required to allow unmarried individuals to stay on their parents’ health plans until age 26. However, until 2014, this requirement applies only to dependents not offered their own coverage through an employer. Be careful to draft plan updates to include only employees’ dependents. The legislation is vague, and carelessness could result in coverage of dependents’ dependents.
• Check annual and lifetime limits to ensure compliance. New restrictions will begin to limit the lifetime and annual limits a plan may impose. Beginning in 2014, such limits will be entirely prohibited.
• Comply with new notification rules. Employers must notify employees of any planned material modifications at least 60 days before such modifications will take effect. The legislation does not address the specifics of what constitutes a “material modification,” but regulations on this point may arise in the future.
• Communicate new tax advantages to employees. The legislation amends the Internal Revenue Code to allow employees to avoid income tax on expenses for a dependent up to age 27. This means that employees may now use their cafeteria plans to cover expenses for dependents until they reach age 27.

Communicate changes to the HSA distribution tax. The HSA distribution tax on purchases not constituting qualified medical items has been increased from 10 percent to 20 percent.

Reimbursements and tax credits

• Reimbursement for coverage for early retirees: Effective June 21, employer plans offering coverage for retirees (age 55 to 64) and their families can seek reimbursement for 80 percent of the cost of benefits provided per enrollee. This reimbursement applies only to costs in excess of $15,000 but below $90,000.
• Small Business Tax Credit: Effective this year, if an employer has fewer than 25 employees and total wages average less than $50,000 per employee, it may be eligible to receive a tax credit of up to 35 percent of contributions toward employee health insurance premiums. Tax-exempt entities are eligible to receive a credit of up to 25 percent of their contributions toward employee health insurance premiums.

While the new requirements may initially seem daunting in their scope, with good planning and an organized approach, employers can ensure both continuing compliance and the opportunity to take advantage of valuable tax credits and reimbursements.

Iris Tilley is an attorney at Barran Liebman LLP, where she focuses on ERISA compliance and compensation advice. Contact her at 503-276-2155 or [email protected].