FEBRUARY 2016 - In This Issue:
Now is the time of the year that your 401(k) plan annual reporting is due. Traditional 401(k) plans are subject to annual testing to assure that the amount of contributions made by highly compensated employees (as defined by the IRS) is in appropriate proportion to contributions made by non-highly compensated employees. Your TPA or recordkeeper does this testing for you. If you have not received any communication regarding your year-end testing, please contact your Lincoln Insurance representative.

Understanding your responsibilities when it comes to COBRA compliance is the best way to prevent expensive mistakes. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that requires certain-sized employers with group health plans to offer employees, their spouses, and their dependents a temporary continuation of health coverage if they lose coverage due to certain specified events.  

If you need a refresher, the following are five key points
  1. COBRA generally applies to group health plans maintained by employers with at least 20 employees on more than 50% of typical business days in the prior year. Each part-time employee counts as a fraction of a full-time employee, equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time.
  2. Only qualified beneficiaries are entitled to COBRA continuation coverage. Generally, qualified beneficiaries include employees, their spouses, and their dependent children who are covered under a group health plan on the day before a qualifying event. In addition, any child born to or placed for adoption with a covered employee during a period of COBRA coverage is automatically considered a qualified beneficiary.
  3. Qualifying events are events that cause an individual to lose group health coverage. Voluntary or involuntary termination of a covered employee (other than for gross misconduct) or a reduction in hours of work are qualifying events for the employee and his or her spouse and dependent child. Additional qualifying events for a spouse and dependent child include the covered employee's death, divorce, or entitlement to Medicare.
  4. The type of qualifying event determines the amount of time the plan must offer qualified beneficiaries COBRA continuation coverage. When the qualifying event is the covered employee's termination of employment (other than for gross misconduct) or reduction in hours of work, qualified beneficiaries must be provided 18 months of continuation coverage. (In certain circumstances, this period may be extended due to disability or the occurrence of a second qualifying event.) For other qualifying events, qualified beneficiaries must be provided 36 months of continuation coverage.
  5. Group health plans must provide qualified beneficiaries with specific notices explaining their COBRA rights. One way to avoid mistakes is to use the Model General Notice and the Model Election Notice provided by the U.S. Department of Labor, filling in the blanks with your plan information. Other notices, such as the Notice of Unavailability of Continuation Coverage and the Notice of Early Termination of COBRA Coverage, should be sent to qualified beneficiaries as necessary. COBRA rights must also be described in the plan's summary plan description (SPD).
Keep in mind that many states have enacted what are commonly referred to as "mini-COBRA" laws, which typically require continuation of group health plan coverage provided by employers with fewer than 20 employees. Employers of all sizes should check to see if a state mini-COBRA law applies to their plans and if so, how the law differs from federal COBRA. Be sure to consult with a trusted employment law attorney or benefits advisor if you have any questions as to how COBRA and/or mini-COBRA apply to a particular plan or your obligations under the law.

IRS guidance on how to apply the retroactive increase for monthly transit benefits in 2015 is now available for employers. As announced in December, the monthly exclusion for combined commuter highway vehicle transportation and transit passes was increased from $130 to $250 (equal to the exclusion for qualified parking), retroactive to January 1, 2015.
The guidance provides a special administrative procedure for certain employers that treated "excess transit benefits"--i.e., in excess of $130 and up to $250--as wages and did not yet file their fourth quarter Form 941 for 2015. Employers that already filed the fourth quarter Form 941, or that have not repaid or reimbursed employees prior to filing the fourth quarter Form 941, must use Form 941-XAdjusted Employer's Quarterly Federal Tax Return or Claim for Refund, and normal procedures (described in the guidance) to make an adjustment or claim a refund for any quarter in 2015.
The guidance explains both the special administrative and normal procedures in more detail, and provides employer instructions for Form W-2.


U.S. Department of Labor has issued new guidance  concerning joint employment under the federal Fair Labor Standards Act (FLSA). Under the FLSA, it is possible for a worker to be employed by two (or more) joint employers who are both responsible for compliance. This is because joint employment is included in the law's definition of "employment," which was written to have as broad an application as possible.

Determining When Joint Employment Exists
The most likely scenarios for joint employment are:

  • Where the employee has two (or more) technically separate but related or associated employers. Joint employment exists where two or more employers benefit from the employee's work and they are sufficiently related to or associated with each other. The focus of this type of joint employment--sometimes called horizontal joint employment--is the degree of association between the two (or more) employers.
  • Where one employer provides labor to another employer and the workers are economically dependent on both employers. Joint employment also exists where a worker is, as a matter of economic reality, economically dependent on two employers: an intermediary employer (e.g., a staffing agency) and another employer who engages the intermediary to provide workers. The focus of this type of joint employment--sometimes called vertical joint employment--is the employee's relationship with the other employer (as opposed to the intermediary employer).
Responsibilities of Joint Employers
  • Joint employers (whether vertical or horizontal) are responsible, both individually and jointly, for compliance with the FLSA.
  • Each of the joint employers must ensure that the employee receives all employment-related rights under the FLSA (including payment of at least the federal minimum wage for all hours worked and overtime pay at not less than one and one-half the regular rate of pay for hours worked over 40 in a workweek, unless an exception or exemption applies).
  • Joint employers must combine all of the hours worked by the employee in a workweek to determine if the employee worked more than 40 hours and is due overtime pay.
Additional resources, including Fact Sheets and Q&As, are available on the DOL's website.
Thank you for selecting Lincoln Insurance Services! As always, if any questions should arise, feel free to contact us.

Your Lincoln Insurance Services Team:
Doug Dalziel, Mary Stoddard, Leslie Holm, Deanna Cipriani, Lil Ignacio,
Maureen Thomas, Edna Burgos, Grant Horn, and Jerrie Walton.

(877) 433-2097 | lis@lincolnis.com | www.lincolnis.com