The Recovery Act’s Impact on HR

A colleague consulting firm of ours (Brockman, Coats and Gedelian in Akron, Ohio) has sent the following and asked that we alert our clients to the HR implications embedded in the Federal Recovery Act provisions. We are passing this along in case you are unaware of these implications.

The Recovery Act's Impact on HR

On Tuesday, President Obama signed into law the American Recovery and Reinvestment Act (the Recovery Act). This act will have immediate and possibly long term impact on businesses and their HR functions. One of the areas addressed is the extension of unemployment benefits. The current program that offers an additional seven weeks of unemployment benefits has been extended by nine months. 

In addition, the Recovery Act includes temporary changes to the COBRA law. The Act includes a program that offers employees that were involuntarily terminated between September 1, 2008 and December 31, 2009 assistance in paying their benefit premiums.  Qualified individuals will receive a 65% subsidy for their COBRA premiums. Employers will pay for this subsidy initially and then be reimbursed through a credit against their payroll taxes. This assistance will be available for the first nine months of the usual 18 month benefit.

These changes will impose a considerable administrative burden. Employers and their COBRA administrators will need to implement significant changes in a short timeframe. The following are some of the administrative processes that will have to be reviewed for potential change:

• Employers or their COBRA administrator will need to craft a specific Qualifying Event Election Notice to send to all employees who terminated employment since September 1, 2008. These employees will then have 60 days to elect COBRA with the new premium subsidy.


• Employers or their COBRA administrator will need to notify existing COBRA participants of the new premium subsidy and their new premiums going forward.


• Administrative procedures must be implemented to manage the changes (e.g., new premium rates @35%, new notices, and calculating the amount of the subsidy actually utilized each month so the proper amount can be credited against the employer's payroll taxes).


• A new COBRA Event Notice must be created to inform COBRA participants when they reach the maximum subsidy limit, and that their premium will revert to the full cost of the health coverage.


• The existing COBRA Initial Notice and Qualifying Event Notice will need to be modified to include the new subsidy rules going forward.

At this point, the subsidy provisions apply only to terminations through December 31, 2009. After that date the Notices and tracking will have to be changed again, to go back to previous rules.

About the Author
Jim Coats is a manager in the firm's human resources consulting practice, under its affiliate, BCG Resources, Inc. His specialized expertise gives our clients customized, cost-effective solutions to human resource-related projects and issues. With over 13 years of related experience, Jim's extensive HR background includes work as an HR manager in both the manufacturing and construction industries. Jim holds the SPHR (Senior Professional in Human Resources) certification and earned a BSBA in Management from The University of Akron. He is an active member of the national and local chapters of the Society for Human Resources Management (SHRM) and is chairman of the Governmental Affairs Committee for Akron SHRM and is also a member of the Business Development Committee with the Medina Chamber.

The Recovery Act’s Impact on HR

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Upcoming Webinar Series - Strategic Alliances

Strategic Alliances: 

Managing Decision Making Around an
Increasingly Likely Strategic Option for Nonprofits
4-Part Webinar Series

We are very pleased to announce that we will be conducting a four-part webinar series on Strategic Alliances for the American Network of Community Options and Resources (ANCOR). ANCOR is a nonprofit trade association representing and advocating on behalf of the more than 800 private providers of services and supports for nearly 500,000 Americans with disabilities that employ over 400,000 direct support staff in 49 states and Washington, D.C.

Dates: March 5, March 19, April 2, April 16
Time: 1:00 pm - 2:30pm Eastern
Presenters: Jane Arsenault, MBA, Principal, & Anne Yurasek, MBA, Principal, FIO Partners, LLC
Intended audience: Executive Directors, Emerging Leaders, and other interested agency staff

This four session course based on a case study will take decision makers through a strategic management framework that will examine the need for a variety of alliance models as tools to cope with an increasingly hostile environment. As leadership choices within the case unfold, the course will explore the options which are right for an organization and clearly define the roles and responsibilities of all members of nonprofit board and staff in planning and implementing an alliance. The FIO Partners Strategic Management framework provides a clear and useful conceptual framework for managing a nonprofit agency that can respond to increased accountability and rapid change. The model defines the four key tasks as: (1) consensus on vision, mission, values and agreement on strategic management tasks; (2) designing or redesigning the organization’s core; (3) safeguarding and supporting the core; and, (4) improving the core. As organization leadership moves through the steps of framing a plan, opportunities to work with other organizations will arise. Nonprofit leaders will learn to use collaboration as a strategic tool to enhance, rather than undermine, mission. This course will explore the various options for collaboration and consolidation and will provide insight into issues that may arise as a member of an alliance.  The course will also include an online learning community throughout the eight weeks to encourage knowledge exchange in between webinar sessions.

If you are interested in pricing and registration, click here.  If you would like to learn more about FIO Partners Strategic Management Framework, check out this article (free with registration). 

Ask FIO: Merger Liabilities

This is the first Ask FIO column, where FIO Partners responds to YOUR questions - it comes from an organization in California that is considering a merger.

"First, our potential merger partners have been told that a merger may reopen their 501c3 to being re-evaluated by the IRS. Second, they are afraid that they may be held responsible for any unknown future liabilities although we have declared all existing liabilities which we are committed to resolving before the asset transfer. I'm unsure how to proceed on these two issues. Any insights you could offer would be much appreciated."

Both of the issues you name are legitimate concerns…that is, they are not far fetched or impossible events.  That said, risk is part of life and risk management is often the best we can do.  Re: 501c3 status…if the missions of the two organizations are close, this shouldn't be a problem and a review is improbable.  If such a review did occur, your merger partner would be vulnerable if some part of their or your activities is not within the scope of the IRS definition for 501c3 status.  Is there cause for concern?  Have your auditors or theirs ever flagged this as a concern?  At worst, that part of the activities would be viewed as UBIT...unrelated business income and would become taxable.   To my knowledge, the IRS is not known for pulling 501c3 status outright unless there is flagrant abuse.

Re: future liabilities:  the largest areas of potential future liabilities are likely to be personnel and personal injury/negligence claims, with professional liability issues a distant third.  I assume you have insurance…your current coverage should extend to claims filed after the merger, if the events occurred during the time when the policy was active.  Check with your insurer(s) to make sure this is the case.   Your merger partner should be looking at your turnover rate, employee grievances filed, firings in the last few years, any charges of human rights violations, etc.  If there are no such incidents, then the possibility of something like that coming up is greatly reduced.  Similarly with negligence, personal injury, or professional liability incidents.  You should be obligated to disclose any such incidents that are not resolved as well as any that have occurred so your partner can determine if you had a habit of acting irresponsibly.  Again, no such incidents, and the risk of their having to deal with something is greatly reduced.

Essentially, there isn't a way for them to entirely eliminate any risk, but you should be able to build a base of information that allows them to clearly determine how much risk they actually have.  In the end, how risk aversive they are will determine what they do.

I hope that is helpful.

Jane

Got a question? If you have a question that you would like answered by FIO - just send it over to info@ fiopartners.com!