Employer taxes are on the rise again — and the expected result is deeper cuts into benefits and comp budgets.

What’s happening? Due to high jobless rates, states’ unemployment funds are drying up. And to replenish the coffers, several states are raising employer taxes.

36 states will get hit

In total, businesses in 36 states are getting slapped with a higher tax bill.

The lucky ones will end up paying only a few dollars more per worker. Others will pay nearly $1,000 more.

The impact on benefits, comp

By taking more money from employers’ payroll budgets, economists predict this will spell even more trouble for employee compensation and benefit levels.

Some even fear that the hikes will contribute to further joblessness.

Where — and how much

Here’s what some states are getting hit with:

• the average tax for businesses in Pennsylvania will increase to $432 per worker (up from $384)
• Virginia employers will pay $171 per worker (up from $95), and
• employers in Hawaii face a gigantic increase to $1,070 per worker (up from $90 per worker).

More bad news: You don’t have to be in a state where the unemployment fund’s gone bankrupt to see an increase.

Even employers in states where unemployment funds are still in the black face tax hikes.

Example: Texas has increased the average tax on employers to $165 per worker (up from $89).

The Department of Labor’s released new proposed regs on providing advice to participants in individual retirement plans.

The proposed investment advice rules are intended to make sure that workers receive unbiased advice about how to invest in 401(k)-type plans.

The DOL will be accepting comments on the regs until May 5, and the regs are expected to be effective 60 days after publication of the final rule.

Here’s a quick look at some of the key provisions.

According to the proposed rules, investment advice can be given under the Pension Protection Act’s statutory exemption from liability (which allows employers to hire outsiders to provide investment advice to plan participants), but only if the advice is provided in two ways:

• through a financial advisor who is compensated on a “level-fee” basis, or
• through the use of a computer model that is certified as unbiased.

Level fees

The financial services company has to charge a flat fee schedule — in other words, fees don’t change depending on what investment options participants choose.

Computer models

If the rules are adopted, computer models used to offer advice would have to be certified in advance as objective and unbiased by an independent expert.

To comment on the proposed rules, click here.

Another effect of the lagging economy: Recent research shows cash-strapped employees are cutting back on preventive healthcare measures.

More people are trading nutrition for processed and fast foods, and scaling back the amount of time they spend exercising.

So now’s a great time to refocus on preventive health care. If your company already has a wellness program (or is thinking of starting one), it’s a good idea to consider adding these features:

Claims checks and on-site screenings

Some wellness programs pinpoint at-risk employees by relying solely on the employees’ honesty in responding to health assessments. But let’s face it, employees aren’t always honest with themselves when it comes to their health. As a result, their answers on health assessments aren’t exactly accurate.

A better way to gauge workers’ health: Use a combination of data to determine who is at risk for chronic conditions. Example: Some companies use on-site health screenings and past claims history to assess if an employee is at-risk.

This approach has been found to significantly increase the amount of at-risk employees who are spotted.

Wellness consultants

Wellness program consultants are assigned to a company to help develop its wellness strategy, plan promotions, interpret reports and gauge the overall success of the wellness program.

Benefit: By keeping a close eye on a company’s wellness program, consultants can tweak and fix problems before they become out-of-control cost drivers.

Cross-trained coaches

Wellness coaches take a big-picture approach to helping employees with various lifestyle-related health issues.

Example: Smoking. There are a significant number of people who won’t try to quit smoking simply because they’re concerned about gaining weight.

But a cross-trained coach will help an employee quit smoking, while also making sure he or she makes smart nutritional choices to avoid the all-to-common weight gain that immediately follows kicking the habit.

What’s worked to improve your company’s wellness program lately? Let us know in the Comments Box below.

The White House’s new health plan could lead to sweeping changes to reform — and one provision offers a ray of hope to employers.

On Monday, President Obama released a new health reform blueprint that attempts to bridge the gap between the bills the Senate and House passed last year.

And around the time you read this, Obama will present the proposal at a bipartisan meeting of congressional leaders.

Here’s what some of the key provisions in proposal look like heading into the meeting.

Employer mandate

Like the Senate bill, Obama’s new plan does not impose a mandate on employers to provide health insurance.

But it does make one significant change for businesses with more than 50 employees.

As you may remember, under the Senate bill businesses with over 50 employees would have to pay a $750 penalty multiplied by the number of full-time employees if any of their employees use taxpayer money to obtain health insurance.

Well under Obama’s new plan, businesses could deduct 30 workers from their penalty. So a company with 51 full-time workers, for instance, would multiply the penalty by only 21. But the new proposal raises the $750 penalty to $2,000.

Rate hike check-ups

One change employers may be able to get excited about: Obama’s new plan calls for giving the feds the authority to block insurers from making exorbitant premium-rate increases.

A new Health Insurance Rate Authority would be created to lay out what it views as reasonable rate increases, and those considered unreasonable could be blocked.

That could be good news for employers struggling to keep healthcare premiums down.

What to keep your eye on

The estimated cost of Obama’s new plan is $950 billion over 10 years. That’s more than the Senate’s bill but less than the House’s.

Other key changes in the plan:

• The tax on high-end health plans (so-called Cadillac plans) would be delayed for all workers until 2018. Plus, the threshold for the tax would be raised to plans valued at $27,500 and above for a family of four. Under the Senate bill, only plans valued at $23,000 and above would be affected.
• The plan does not include a government-run public health option.
• It also eliminated a highly unpopular provision in the Senate bill — called the “Cornhusker Kickback” by many Republican opponents — which would exempt Nebraska from paying increased Medicaid expenses.

There’s no telling what’ll happen next, but Republicans have said they plan to carry their own ideas into the meeting with congressional leaders. And White House aides have acknowledged they are willing to fold Republican ideas into the new plan.

But White House Dems have stated they have no intention of throwing the plan out and starting from scratch — as Republicans have demanded.

Many older employees now plan to work years past the traditional retirement age to recoup lost savings. And as the age of your workforce increases, so do workers’ health problems. Two ways to keep costs under control:

1. Plan for their future

As employees age, health factors can become an ever-increasing barrier to productivity.

So the sooner you introduce your employees to wellness programs, the more productive they’ll be in their later years.

Employers with well-established wellness programs are seeing lower rates of diabetes and heart disease among their older workers than other comparable organizations’ 40-and-over employees.

2. Tell them to speak up

Older workers are less likely to suffer workplace injury (usually because they are taken off the front line and given safer jobs). But when they do get hurt, they recover slower, create costlier claims and are less likely to return to work.

That means employers must place a heavy emphasis on early identification and intervention. Encourage employees to seek treatment as soon as any symptoms of injury or illness are discovered.

The key to getting workers to take action: Assure them they won’t be discriminated against when they become ill.

One thing to be aware of: Shortly after getting this message of prevention out to workers, odds are the level of reported injuries and illnesses will increase. But don’t worry, this trend will reverse itself in time.

Hope your people are getting used to the extra paperwork and headaches associated with the COBRA subsidy — because it looks like another extension may be on its way.

The Obama administration has proposed the 65% health insurance premium subsidy be extended yet again.

The latest extension is tucked inside the administration’s proposed federal budget for fiscal year 2011. Under the proposal, employees laid off from March 1, 2010 through Dec. 31, 2010 would be eligible for the subsidy for up to 12 months.

Currently, employees laid off from Sept. 1, 2008 through Feb. 28, 2010 can receive the subsidy for up to 15 months. The latest extension would not affect those workers.

What do you think of this latest proposal? Let us know in the Comments Box below.

The feds may soon require you to give employees the ability to enroll in individual direct-deposit retirement savings accounts.

At a recent meeting of the Middle Class Task Force, President Barack Obama and Vice President Joe Biden (the chairman of the task force) laid out their plan to help middle-class individuals and their families save more for retirement.

Here are the details of the task force’s plan, as reported by Investment News:

• Employers who don’t offer retirement plans would have to enroll their employees in direct-deposit IRAs automatically — but employees would be given the option to opt-out
• New tax credits would help pay employer administrative costs, and
• The smallest companies will be exempt.

No timetable has been set for when the proposed plan could take effect. We’ll keep you posted.

Do you think forcing employers to set up direct-deposit IRAs is a good idea? Let us know in the Comments Box below.

Could healthcare reform cure the ailing job market? One group is saying “yes.”

In its report New Jobs Through Better Health Care, the Center for American Progress predicts that healthcare reform (if passed as it stands currently) would create 250,000 to 400,000 jobs this decade.

How? According to the report, reform will lower health costs for employers so they’ll be able to spend more on payroll and operations.

The report’s formula says that 120,000 jobs are added for every 10% reduction in health costs.

What will generate that kind of savings? The report claims health reform will spark higher quality, lower cost care — a position that’s challenged by opponents of the reform proposal.

Regardless, the report says reform would:

• reduce the occurrence of, and expenses related to, high-cost illnesses via better coordination of care
• lower the cost of various healthcare services that are more expensive in the U.S. than other developed countries, and
• streamline excessive administrative costs.

Of course healthcare reform is still taking shape and things could change very quickly.

Do you agree with this report? Let us know in the Comments Box below.

Sure, you pay a lot for employees with cancer and heart disease. But those aren’t the ones who cost employers the most in healthcare coverage.

A major study in the Journal of Occupational and Environmental Medicine found these are the five most expensive health conditions on a dollar-for-dollar basis:

• depression
• obesity
• back and neck pain
• arthritis, and
• anxiety.

Where some companies miss the mark

Odds are when tracking your company’s healthcare costs, you primarily consider factors such as:

• single and family coverage premiums
• doctor and hospital costs
• prescription drug costs
• the cost of wellness and/or employee assistance programs (EAPs), and
• absenteeism or disability costs.

And when companies look solely at these factors, cancer and heart disease do appear to cost employers the most money each year.

But when it comes to chronic problems, the study found that employees who are in poor health, but not sick enough to miss work, cost employers significantly more.

How much more?

For every $1 spent on doctor and drug expenses for the chronically ill, the study found companies lose $2.30 in lost productivity for the ones who come into work when they are in poor health.

The study also revealed that wellness programs, EAPs and disease management programs pay for themselves in helping contain indirect costs and long-term direct costs.

While there’s no doubt wellness programs have their benefits, little has been made of their drawbacks and hidden costs.

Three pitfalls to watch out for in wellness programs:

1. You get what you pay for

By and large, the cost savings from a wellness program will be driven by how much you’re willing to spend. Generally, you get what you put into them — both in time and money.

In addition, the program has to be tailored to your specific needs. What works for one company may not be right for you.

2. Tough to administer in-house

Many employers find it’s more effective to outsource wellness. Two reasons:

• Employee trust. Many employees are more cooperative with a wellness program if they don’t fear their employer is watching their every move.
• Legal protection. Outsourcing helps insulate you from later claims that the company discriminated against or fired an employee specifically because of his or her health risks.

3. Tax trouble

Some of the most popular incentives offered to employees for living healthier lifestyles (e.g., partially paid gym memberships) are taxable as compensation.

If you offer wellness participants discounts on their health premiums, the Internal Revenue Service caps the incentive at 20% of the total cost of coverage. Anything beyond that has to be considered taxable income.