Businesses Can Defer Part of Their Payroll Tax Until Next Year

Employers are responsible for withholding Social Security and Medicare payroll taxes from their employees’ paychecks and paying these taxes along with the employer’s share to the IRS each month.  The Social Security tax is 12.4% total, with 6.2% withheld from the employee’s wages and the employer paying 6.2%.  The Medicare tax is 2.9%, with 1.45% withheld from the employee’s wages and the employer paying 1.45%.

As part of aid to businesses provided in the Coronavirus Aid, Relief and Economic Security Act (CARES Act), employers can defer depositing the employer’s share of Social Security taxes until December 2021. For payroll periods starting March 27th through the end of this year, employers may defer their share of the Social Security tax (6.2%) and not deposit it with the IRS. Instead of depositing the usual amount of payroll tax, employers can simply hold back their portion of the Social Security tax each month and use it for other operating expenses.  *Please note this only applies to the employer’s portion of the Social Security tax.  Employers may not defer the employee’s part of the Social Security tax, and employers must still deposit both the employee’s and the employer’s portion of the Medicare tax each month.

Employers who decide to defer their part of the Social Security tax have until the end of next year to start depositing the amount they deferred. Half of the deferred payroll tax amount must be deposited with the IRS on December 31, 2021, with the other half due by December 31, 2022.

All employers may take advantage of this payroll tax deferral, including employers who have received a Paycheck Protection Program (PPP) loan.

For more information from the IRS about payroll tax deferral, please click here.

This payroll tax deferral is not the same as the payroll tax credits that employers may take for providing paid leave to employees or the employee retention credit. The IRS has detailed information about these credits here.

Article originally posted on FUBA.org.

 

New Law Provides Flexibility on PPP Loan Forgiveness

Under a new federal law effective June 5, 2020, the requirements for PPP loan forgiveness have been relaxed in favor of small businesses.

What is included in the bill?

The bill, which passed with a bipartisan vote, makes the following amendments to the PPP to provide relief to borrowers:

  • Loan repayment terms—The bill extends the minimum loan term for unforgiven PPP loans from two years to five years.
  • Payroll costs vs. nonpayroll costs— For forgiveness eligibility, the bill reduces the portion of PPP funds that must be spent on payroll costs from 75% to 60%, and raises the nonpayroll cost limitation from 25% to 40%.
  • Covered period extension—The bill extends the covered period during which borrowers must spend the PPP funds to be eligible for forgiveness from eight weeks to 24 weeks from the date of origination of the loan.
  • Payroll tax deferment—The bill permits borrowers to defer payroll taxes without being penalized while still remaining eligible for loan forgiveness.
  • Extension of rehiring safe harbor—The bill extends the rehiring safe harbor by six months to provide borrowers with additional time to restore payroll levels or rehire employees without facing a reduction in the amount of forgiveness for which they are eligible. The original date was June 30, 2020, and the new date is Dec. 31, 2020.

In addition to the provisions above, the bill provides loan forgiveness eligibility exemptions for borrowers that are not able to rehire an employee or a replacement. There are also exemptions for loan forgiveness eligibility for borrowers that are not able to return to the same level of business due to complying with COVID-19-related orders or circumstances.

What’s next?

Borrowers should review the bill carefully and speak to their lender should they have any questions. In addition, borrowers should direct any questions regarding their PPP loan to their lender.

We will continue to monitor any additional developments regarding the PPP and deliver updates as necessary.

 

COVID-19 Workers’ Compensation Resources

Due to the nature of the COVID-19 pandemic, rules and regulations are constantly changing. You should be prepared to change your business practices if needed to maintain critical operations. Below are links to resources on how to keep your business, employees and customers safe.

Workers’ Compensation and COVID-19: What Employers Need to Know

The Covid-19 global pandemic changed how Americans work, seemingly overnight. As many offices transitioned their teams to remote work, others in industries deemed essential scrambled to procure PPE and prepare their workplaces for new socially distant norms. Now that non-essential workers are beginning to return to their workplaces, a common question for employers becomes, “What happens if an employee is exposed to Covid-19 on the job? Is this a workers’ compensation issue?”

That depends, says Paul Hughes, president of Orlando-based Libertate Insurance Services, which provides workers’ compensation coverage to professional employer organizations, including XMI.

Normally, a communicable disease that could be contracted during the ordinary course of life (like the cold or flu) is excluded from workers’ compensation coverage. But several states have already amended their workers’ compensation laws to include Covid-19 “presumption” clauses.

To date, 26 states have added presumptions to their workers’ compensation laws (Tennessee is not one of them).

To read the full article, please click here. This was originally published on XMI’s website.

Regulators and Lawmakers Introducing Workers’ Comp to COVID-19

By Jim Sams, April 20, 2020

Sympathetic state lawmakers and regulators in states both red and blue promise to make COVID-19 a major cost driver for workers’ compensation insurers.

The governors of Kentucky, Arkansas, North Dakota and Florida and state regulators in Illinois, Washington, Michigan and Missouri have issued executive orders or amended rules to expand eligibility for workers’ compensation.

Most of those decrees ease the path for benefits only for healthcare workers and first responders, but an emergency order by the Illinois Workers’ Compensation Commission creates a presumption that work is the cause of COVID-19 if contracted by any “frontline worker” identified in Gov. J.B. Pritzker’s March 20 stay-at-home order. That includes workers at grocery stores, laundries, banks and hardware stores, among other businesses.

Kentucky Gov. Beshear issued a similarly broad executive order that created a COVID-19 presumption for workers in grocery stores, child-care centers, domestic violence shelters and rape crisis centers, in addition to first responders and healthcare workers.

In the meantime state legislators are also pushing to expand benefits for COVID-19. Earlier this month, Alaska Gov. Mike Dunleavy (R), Wisconsin Gov. Tony Evers (D) and Minnesota Gov. Tim Walz (D) signed into law bills that create a COVID-19 presumptions for first responders and some healthcare workers.

Bills to create presumptions for COVID-19 have been introduced in the New York, New Jersey, Pennsylvania, Ohio and Utah state legislatures.

Steamroller

Philadelphia defense attorney Cliff Goldstein said he saw the avalanche of presumption bills coming as soon as heard the first reports of the disease spreading into the United States.

“I don’t think there’s any way to stop that steamroller,” he said.

Data from the California Division of Workers’ Compensation bears him out. As of Thursday, 1,527 claims coded for COVID-19 on claims notices had been filed, according to agency spokeswoman Erika Monterroza.

Goldstein is not the only defense attorney predicting a flood of COVID claims.

“There will likely be many workman compensation claims because of the ease of filing, there is no requirement to prove negligence, and for many people their greatest contact with others, and hence the greatest chance of contracting the virus, is at work,” David Boies, managing partner of Boies Schiller Flexner LLP in New York, told Bloomberg News.

Goldstein said presumption legislation promises to be a boon for claimants’ attorneys, who will take a percentage of any permanent disability benefits awarded.

“You are just dangling meat in front of hungry lions,” he said.

Goldstein said his office — Chartwell Law in Valley Forge — has already received a handful of claims, some of them death claims. He said employers should resist any kind-hearted urge to quickly approve such claims based on the employee’s job category. Instead, each claim must be individually investigated, he said.

COVID-19 claims that require admission to an intensive care unit will likely run into the six figures for medical costs alone, he said. What’s more, employers will be taking full responsibility for whatever complications arise from a coronavirus infection far into the future.

Goldstein said Congress passed a pair of relief bills in March that should make it easier for employers to delay acceptance of a claim. The legislation requires employers with fewer than 500 employees to grant up to 80 hours of sick leave to workers sickened by the new coronavirus, which will be reimbursed with tax credits. Gov. Gavin Newsom issued an executive order Thursday that requires the same benefit from employers with more than 500 workers.

For workers who lose their jobs because of coronavirus, the federal emergency law also allows up to 16 weeks of unemployment insurance benefits at rates ranging from $875 to $1,500 per week, depending on the state, Goldstein said.

Vulnerable Occupations

Claimants’ attorney Julius Young in Oakland, Calif. said those benefits won’t make workers whole. Usually workers lose their health insurance if they lose their job, which makes workers’ comp a vital benefit for employees who were made sick because of their exposure to the public while at work. Also, some workers may be permanently disabled by COVID-19.

He said presumption bills make sense for workers who can’t avoid constant contact with the public.

“A lot of these people in vulnerable occupations shouldn’t have to go through this roulette-like maze wondering whether they are going to be covered,” Young said.

Young said the federal benefits will help in the short-term. He said state regulators should start thinking about whether and how any federal benefits paid can be offset from workers’ compensation awards.

Medical research indicates that there is a real possibility of permanent disability from COVID-19.

According to Science Magazine, the lack of oxygen and widespread inflammation caused by COVID-19 can damage kidneys, liver, heart, brain and other organs. Studies show that severe pneumonia caused by other diseases sometimes lead to scarring that causes long-term breathing problems. Pneumonia also increases the risk of future illnesses, including heart attack, stroke and kidney disease.

In one study of 138 patients hospitalized in Wuhan, China due to pneumonia from COVID-19, 20 percent suffered acute respiratory distress syndrome.

A separate study published by the New England Journal of Medicine in 2011 Regulators and Lawmakers Introducing Workers’ Comp to COVID-19found that of 109 survivors of ARDS, 51% suffered physician-diagnosed depression, anxiety or both. Perhaps more relevant to workers’ comp, that study found that just 77 percent of the 83 patients who survived throughout the study period had returned to work five years after being treated. The study found that only 39% of patients were able to walk the distance expected for their age group in six minutes five years later, suggesting a high degree of physical impairment.

As of yet, none of the major workers’ compensation rating organizations has released any projections on the potential impact of COVID-19 on workers’ comp loss costs.

The National Council of Compensation hopes to release next week an analysis of potential claim costs under a variety of scenarios, said Executive Director Jeff Eddinger. For example, one scenario project costs if a large percentage of workers who contract COVID-19 file claims and 100 percent are found to be compensable. He said the analysis will make projections for a variety of infection and claim-acceptance rates.

Eddinger said NCCI does not yet have any data on how many claims have been filed. He said insurers don’t report their losses until six months after the policy period expires. But he said there is some data available. For example, the Centers for Disease Control and Prevention reported that between 10 percent to 20 percent of COVID-19 cases were healthcare workers.

The California Workers’ Compensation is working on similar projections, said President Alex Swedlow.

 

Want to learn more about how COVID-19 affects your company? Give us a call at 305-495-5173, or email us at sreynolds@libertateins.com.

AM Best Assigns Credit Rating to Clear Spring Property and Casualty

Congrats to Clear Spring and the recent AM Best rating!

Press Release – AUGUST 14, 2019

AM Best Assigns Credit Ratings to Clear Spring P&C Co.; Downgrades Ratings of Lackawanna Casualty Co. and Other Subsidiaries


CONTACTS:
Jeffrey Stary
Financial Analyst
+1 908 439 2200, ext. 5689
jeffrey.stary@ambest.com

Robert Raber
Associate Director
+1 908 439 2200, ext. 5696
robert.raber@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com


FOR IMMEDIATE RELEASE

OLDWICK – AUGUST 14, 2019
AM Best has assigned a Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” to Clear Spring Property and Casualty Company (Clear Spring). Concurrently, AM Best has removed from under review with negative implications and downgraded the FSR to A- (Excellent) from A (Excellent) and the Long-Term ICRs to “a-” from “a” of Lackawanna Casualty Company and its subsidiaries, Lackawanna American Insurance Company and Lackawanna National Insurance Company. The outlook assigned to these Credit Ratings (ratings) is stable. Clear Spring is domiciled in Dallas, TX, while the three Lackawanna companies are domiciled in Wilkes-Barre, PA. The companies are collectively referred to as Lackawanna Insurance Group (Lackawanna).

The ratings reflect Lackawanna’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The ratings assigned to Clear Spring reflect the company’s role as a member of the group. Factors supporting this relationship include common ultimate ownership and management. Explicit support is provided through Clear Spring’s participation in the inter-company pooling agreement.

The rating downgrades reflect a revision in AM Best’s assessment of the group’s operating performance to adequate from strong. This rating action is in response to less favorable comparisons with peer companies assessed as having strong operating performances over the most recent five-year period in metrics such as loss and loss adjustment expense ratio and operating ratio. This places the group more in line with companies in the composite assessed as having adequate operating performances. The assessment also takes into consideration the execution risk associated with the blending of the distinct lines of business and geographic delineation of the member companies, which may affect prospective operating performance.

Negative rating actions would occur with a decline in the group’s risk-adjusted capitalization, operating performance well outside expected ranges, or business profile modifications that fail to gain traction.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’sRecent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

Delaware Workers’ Comp Rates Decline December 1st

Employers in Delaware will experience another decrease in workers compensation rates effective Dec. 1.

Comp rates will decline an average of 7.3% for the residual market and about 10% for the voluntary market, according to a statement by Delaware Insurance Commissioner Trinidad Navarro on Monday.

“I am delighted to approve yet another decrease in workers’ compensation rates in Delaware and even happier to see a double-digit average decrease in the voluntary market,” he said in the statement.

For the second year in a row, all actuaries reviewing the comp rate filing agreed that another rate drop was warranted, he added.

Original Article 

 

Workers’ Comp Drug Spend Continues to Drop, According to CompPharma’s 14th Annual Survey of Prescription Drug Management

MAGGIE VALLEY, N.C.–(BUSINESS WIRE)–CompPharma’s 14th Annual Survey of Prescription Drug Management in Workers’ Compensation showed an average 11 percent reduction in payers’ pharmacy spend, driven by a 13.3 percent reduction in opioid cost. The survey analyzed the 2016 pharmacy cost data of 23 workers’ compensation insurance carriers, third-party administrators, self-insured employers, and state funds.

Working with their pharmacy benefit managers, payers cut one of every six dollars in opioid spend, which the report called a “truly remarkable result.” In contrast, across all payer types, pain medication use declined by a scant 1 percent (Quintiles IMS).

“Clearly the efforts of workers’ comp regulators, payers, desk-level staff, PBMs and prescribers have paid off,” said Joseph Paduda, president of CompPharma, LLC. “While we have much left to do, this represents a dramatic improvement in the lives of thousands of patients.”

Payers are far from complacent, with all respondents expressing grave concerns about the risk of opioid addiction or dependency. Most are continuing to refine and improve programs to help patients address pain while minimizing use of opioids, relying on physician and/or pharmacist review of claims, early identification of potentially risky prescribing, and increased use of drug testing.

In contrast, compound drug utilization and spend has dropped dramatically and is no longer of great concern to payers.

A complimentary copy of the 2016 survey can be downloaded from https://tinyurl.com/CP2017RxSurvey.