The latest healthcare reform bill just passed the House. But making it through the Senate will be even harder as a few rough edges still need some smoothing.

Three things both the House and Senate do agree on:

• Requiring most people to carry health insurance or pay a penalty
• Providing “affordability credits” to lower-income individuals, and
• Expanding Medicaid by reducing thresholds for eligibility.

But that’s pretty much where the similarities end. There’s still a lot to be resolved in both bills.

Three must-watch points of contention:

Public option

The House bill includes the creation of a government-run insurance plan, which is meant to spark competition with private insurers.

The Senate is working to combine two different proposals — one from the Senate Finance Committee and one from the Health Education, Labor and Pension Committee — into a single bill.

And while the exact provisions of the merged bill are being kept under wraps, it is also expected to include a public option — but it could allow individual states to opt out.

Cost

$1.1 trillion – that’s what the House version is expected to cost over 10 years. The Senate version is expected to be less expensive.

President Obama has already said he’d like reform to cost no more than $900 billion, which could improve the Senate bill’s chances.

Funding

The House wants to impose a 5.4% income surcharge on individuals with an adjusted gross income of more than $500,000 a year and on couples with more than $1 million.

The Senate Finance Committee has proposed charging an excise tax on high-end health plans – “Cadillac Plans” – and charge new annual fees to various industry sectors.

The fees would look something like this:

• $6.7 billion from insurance companies
• $4 billion from manufacturers of medical devices, and
• $2.3 billion from drug makers.

Info: Click here to view a side-by-side comparison of the House and Senate proposals.

DHS formally withdrew its Social Security no-match regulation — first presented in 2007 — as of October 7.

The no-match regulation was the source of  “safe harbor”  rules for employers who received letters from the Social Security Administration stating that an employee’s Social Security Number didn’t match the agency’s records. The safe harbor rule required employers to follow procedures and three-month deadlines to resolve the discrepancy, or face legal penalties.

Shortly after being issued in 2007, the regulation was challenged in a federal district court in San Francisco and was held up by an injunction. The reg never was implemented, and DHS and the White House finally decided to drop it altogether.

A DHS statement announcing the rescission of the rule said the agency will “focus its enforcement efforts relating to the employment of aliens not authorized to work in the United States on increased compliance through improved verification, including participation in E-Verify, ICE Mutual Agreement Between Government and Employers (IMAGE), and other programs.”

Expect the Obama administration to make an especially strong push for mandatory E-Verify for all employers, not just for the federal contractors it covers now. Also, the Social Security Administration will maintain some of its processes for checking SSNs.

An executive order signed earlier this month by President Obama forbids federal employees from sending text messages while behind the wheel. The rule applies to employees in federal vehicles and to those using a government-issued phone while driving their own cars.

The order was signed at the end of  a two-day meeting on distracted driving. The feds are also encouraging all federal contractors to create a similar policy for their employees.

The new ban won’t require a change in behavior for many federal workers — on-the-road texting is already illegal in Washington, D.C., as well as 18 states. To see the laws for your and other states, visit the Governors’ Highway Safety Association.

In addition to the executive order, U.S. Transportation Secretary Ray LaHood announced plans to enact a nationwide wide ban on texting in the car.

One proposed bill would force states to pass their own bans, or sacrifice 25% of their highway funding.

With more courts holding companies liable for car accidents caused by employees, experts recommend private employees take the government’s lead and enact stricter driving policies before the law requires it.

Companies can be held liable when an employee causes an accident while “under the scope of employment.” That could include an employee who’s making deliveries, driving to an off-site meeting or having a work-related conversation while running personal errands.

To limit the risk, lawyers recommend creating policies that:

• prohibit talking, texting and e-mailing while behind the wheel (whether the employee has a hands-free headset or not)
• require phones to be turned off while driving to avoid distracting incoming calls, and
• remind employees — and their bosses — that they aren’t expected to make calls and do other work while driving.

While Obama was speaking to students at Wakefield High School in Arlington, VA, a 9th-grader asked him for some tips on how to become president.

“First of all,” he answered, “I want everybody here to be careful about what you post on Facebook,” because “it will be pulled up again later somewhere in your life.”

There are a lot of job candidates who probably wish they’d followed similar advice. According to a recent CareerBuilder survey, 35% of managers say they’ve turned down someone for a job because of what they found on social networking Web sites.

Just before President Obama appeared at the AFL-CIO convention in Pittsburgh, Specter promised union officials that by year’s end Congress would pass his new EFCA, and that it would be  “totally satisfactory to labor.”

Here’s an outline of Specter’s current bill:

• Dropped from the original bill: the controversial card-check option allowing workers to organize by getting their co-workers to sign pro-union cards, instead of having to hold secret-ballot elections in the workplace.
• Added: A provision limiting the time between organizers’ declaration that they have enough support to call an election and the day of the vote, to reduce the potential for employer intimidation, according to Specter and others bill supporters.
• Organizers would get guaranteed access to workers if employers held mandatory anti-union meetings on company time. And the penalties for employers convicted of breaking labor law rules would be triple what they are now.
• Mandatory  “last best offer arbitration” if labor and management can’t decide on a contract. In that type of arbitration,  a mediator has to pick one labor’s offer or management’s offer, but can’t “split the difference.” That means neither side can make an unreasonable offer as a bargaining ploy and hope that an arbitrator settles on some half-way measure to make everyone happy.

The bill would need 60 votes to break a filibuster, and Specter predicted that number is reachable, since conservative Democrats have hinted that they’d vote for a bill that didn’t include the card-check provision.

Don’t be surprised if you’re inundated with calls from employees confused about President Obama’s plan to “force” them to save for retirement through payroll deductions while living paycheck to paycheck.

The Administration’s latest initiative would expand automatic enrollment in 401(k)s and other retirement savings plans to make it easier for companies – especially those smaller and midsize firms lagging behind their larger counterparts – to sign up their workers and decide whether and how much they should save for retirement.

Under these plans, employers deposit a set percentage of each employee’s paychecks into his or her retirement account – unless the worker opts out, or chooses to invest a different amount. President Obama’s initiative will make it easier for employers of all sizes to adopt automatic enrollment by allowing them to rely on pre-approved language issued by IRS. Currently, plan sponsors typically must first get the agency’s written approval to amend their plans.

Here are two more features that may cause employee concern:

1. “Escalator” contributions. Employers will be able to gradually increase employees’ contributions over time, according to the plan design. Companies can set the increase amount, which will probably send unhappy workers scurrying to HR’s door to opt out, once they notice their paychecks shrinking. The just-released Revenue Ruling 2009-30 explains this so-called escalator feature.

2. Conversion of unused leave time into 401(k) contributions. Employers can set up plans to allow workers to convert certain leave time (e.g., current employees with expiring leave or those terminating with unused time) into contributions – and still comply with the complex plan regs. (See Revenue Ruling 2009-31 and Revenue Ruling 2009-32. ) The guidance also discusses when the amounts should be included in the former worker’s gross income. While this conversion option may appeal to higher-ups who can afford to save more, many rank-and-file employees leaving their jobs would probably still rather receive substantial cash payments.

So why the changes?
While these ideas may not excite cash-strapped workers, recent research has found automatic enrollment programs go a long way toward helping the nearly 78 million Americans who don’t have a retirement savings plan at work. The Administration says there’s a clear need because fewer than 10% of those without a plan at work formally save for retirement on their own.

For example, a 2009 survey by the Vanguard Group released last month found that automatic enrollment boosts participation dramatically. In fact, plans that offered the option had an overall participation rate of 84% last year, compared with 60% for plans that didn’t offer it. An earlier study by Hewitt Associates yielded similar results.

You can look here to read the Treasury and IRS rulings and materials, including more info on other savings options such as using federal tax refunds to purchase savings bonds.

President Obama’s plans for healthcare reform could have some nasty tax consequences for employees.

Congress is looking for ways to raise more than $1 trillion in new tax revenues to finance health care for the uninsured. At the top of the list: several proposals that would cut employees’ take-home pay 9% to 14%, depending on their household income and tax situation. Several of the plans under consideration would require Payroll to treat as taxable income:

• health insurance premiums
• dental premiums
• vision premiums
• flexible spending account deposits, and
• health reimbursement arrangement contributions.

Right now, employees don’t pay taxes on these benefits because they’re deducted from their paychecks on a pre-tax basis.

Specifically, the proposals the Employer Council on Flexible Compensation reports are under consideration include:

• capping this proposed group health tax exclusion at $6,800 for individuals and $17,240 for group coverage in 2013
• imposing the cap on all workers with group coverage, or
• imposing the cap only on those earning more than $100,000 per year (married couples, more than $200,000) per year.

For more info
To see how the proposals might affect your own paycheck, go to www.nohealthbenefitstax.com and click on “Worksheet: How the health tax impacts your paycheck” on the right-hand side of the screen.

You’ll enter data such as income and tax status; employer’s benefit contributions; and pre- and post-tax benefit contributions. The spreadsheet will show your take-home pay (as entered) as of today, then calculate how much it could decline under each of the proposals. Another chart shows the increase in employer FICA, based on the values entered.

Health care
Labor leaders in general are in favor of passage of Obama’s healthcare initiatives. They want to kick around some of the specifics:

They oppose enacting a tax on employee-provided health benefits to help finance healthcare reform. Fact is, a lot of union members get their health coverage through their employers, so organized labor isn’t keen on taxing the benefit.

They support the so-called public option for health coverage, in which a government entity offers insurance and competes with private providers.

Employee Free Choice Act
The original proposal sought to make unionization easier by offering a “card check” provision instead of a vote. The bill has hit a speed bump because supporters haven’t been able to rustle up 60 votes in the Senate to overcome a filibuster, and the seating of liberal Democrat Al Franken isn’t seen as the tipping point for getting passage.

All of that has forced union organizers to look at alternatives and compromises. They’ll be looking to the President for encouragement and ideas.

Bottom line: The card-check provision of EFCA may be dead, but the bill isn’t — yet.

The reason: Fraudulent income tax returns and and annual wage reports are costing the federal and state treasuries millions annually.

In theory, more frequent reporting would allow the IRS and states to match wage and withholding data to workers’ tax returns – a difficult, if not impossible, task right now.

Think about it: Companies submit W-2s to SSA and the states mid-tax season. So, by the time their file arrives at the agency, identity thieves have had weeks to create false W-2s and tax refund requests – plenty of time to file, collect and spend a fraudulent tax refund.

Two problems with the current structure:

• Even states with updated processing technology don’t have time to cross-check the data before the tax season begins, and
• Many states require electronic filing, but not all do. Specifically, about 63% of states with income taxes require electronic W-2 filing.

States have been including ever-smaller employers under such mandates, but these numbers still leave a lot of room for paper filing.

For this proposal to work, far more employers would have to e-file their data, or the SSA would need to share electronic W-2 data sooner.

Should the idea move forward, “The Administration will work with the states so that the overall reporting burden … is not increased,” the Administration’s May 2009 Budget Overview suggests.

The plans that would be affected would be those that exceed the value of the standard plan offered to federal employees (currently about $13,000 a year for a family of four). An employer-provided plan worth less than that level would remain tax-free,  while any benefit exceeding the cap would be taxed as part of an employee’s compensation.

Such a tax, if adopted, would likely be phased in over the course of several years.  A higher tax threshold and exemptions for unions would make the tax more politically viable but would diminish the amount of  revenue it would raise to provide coverage for the uninsured.

Last month, a congressional committee discussed repealing the tax deduction allowed for certain large medical expenses or creating a tax on flexible savings accounts and health reimbursement accounts . A more dramatic proposal — taxing half of all employer-provided health premiums -was also discussed but is unlikely to get out of committee.

Meanwhile, President Obama  has suggested a limit on the value of itemized tax deductions for families earning more than $250,000 a year.

Democrats in both the House and Senate have pushed for government-sponsored insurance for people who have trouble finding coverage through an employer or individually. The idea is adamantly opposed by most Republican legislators.