25 Commentaries On Taxes

April 15 is fast approaching, so we thought we would share some of our favorite tax commentaries. Some funny, some serious. All have a bit of truth to them...

Be wary of strong drink. It can make you shoot at tax collectors... and miss.

Robert A. Heinlein

It would be a hard government that should tax its people one-tenth part of their income.

Benjamin Franklin

I owe the government $3,400 in taxes. So I sent them two hammers and a toilet seat.

Michael McShane

Every dollar the Federal Government does not take from us, every decision it does not make for us will make our economy stronger, our lives more abundant, our future more free.

Ronald Reagan

If you put the federal government in charge of the Sahara Desert, in 5 years there would be a shortage of sand.

Milton Friedmann

Worried about an IRS audit? Avoid what's called a red flag. That's something the IRS always looks for. For example, say you have some money left in your bank account after paying taxes. That's a red flag.

Jay Leno

It's income tax time again, Americans: time to gather up those receipts, get out those tax forms, sharpen up that pencil, and stab yourself in the aorta.

Dave Barry

There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.

Robert A. Heinlein

[On completing tax returns]. This is too difficult for a mathematician. It takes a philosopher

Albert Einstein

The point to remember is that what the government gives it must first take away.

John S. Coleman

Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay.

Milton Friedman

The avoidance of taxes is the only intellectual pursuit that carries any reward.

John Maynard Keynes

There is no such thing as a good tax.

Winston Churchill

The income tax has made more liars out of the American people than golf has.

Will Rogers

We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Winston Churchill

We don't have a trillion-dollar debt because we haven't taxed enough; we have a trillion-dollar debt because we spend too much.

Ronald Reagan

If Thomas Jefferson thought taxation without representation was bad, he should see how it is with representation.

Rush Limbaugh

The difference between death and taxes is death doesn't get worse every time Congress meets.

Will Rogers

When there's a single thief, it's robbery. When there are a thousand thieves, it's taxation.

Vanya Cohen

Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.

Ronald Reagan

Any tax is a discouragement and therefore a regulation so far as it goes.

Oliver Wendell Holmes, Jr.

I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents...

James Madison

I love America, but I can't spend the whole year here. I can't afford the taxes.

Mick Jagger

If you get up early, work late, and pay your taxes, you will get ahead -- if you strike oil.

J. Paul Getty

The government deficit is the difference between the amount of money the government spends and the amount it has the nerve to collect.

Sam Ewing

COBRA Theft

That is how one of our clients titled an email to us when they were asking us if they had to pay 65% of the cost of COBRA for employees who were terminated.

We understand their frustration. As an employer, you agree to pay a certain portion of the insurance premium. Then you have an employee that leaves and the government changes the rules and you find you are responsible for paying a greater portion of their medical premium than when they were employed. Yeah, you get it back from the federal government, but it may not be immediate - or easy. As one source described it: “…the employer (or, in some cases, the plan or insurer) is then reimbursed by the federal government for the other 65% of the COBRA premium, through a credit or refund of an overpayment of payroll taxes. There is a phased-in recapture of premium assistance provided for taxpayers whose income exceeds $125,000 ($250,000 for a joint return)...”

Yeah, that sounds easy enough.

Don’t expect quick and definitive answers from anyone. Insurance carriers, accounting firms, COBRA service companies, and payroll service companies are all scrambling to get ahead of the legislation. Even the Department of Labor and Internal Revenue Service are still making changes as they sort through this.

But here is some good news. There are a couple of good web sites to help you understand the legislation a bit better. Two of them are from the Department of Labor and they are FAQs for the employer and for the employee. We suggest you review both sites if you are charged with the need to know any of this. There is good information on both sites and they are not mutually exclusive to the employee and employer.

FAQs for the employer:
http://www.irs.gov/newsroom/article/0,,id=204708,00.html
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html

FAQs for the employee:
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html

If you are an employer and have questions about the new notices that are required (and have not taken us up on our offer to provide you with COBRA compliance software), here is a website (courtesy of the DOL again) that gives you the new model notices required by the new legislation:

http://www.dol.gov/ebsa/COBRAmodelnotice.html

Bottom line: The cost of compliance will likely be more than you expect, but the cost of non-compliance could be a lot worse. Make sure you get good advice throughout the process. And document, document, document.

The Myth Of The 46 Million Uninsured

The following is excerpts from an article by Philip Klein:

Whether it's in political speeches, commentary, newspaper features, or hard news stories, the statistic of 46 million uninsured is one of the most-widely cited numbers in the health care debate. It promotes the idea that nearly one out of every six Americans does not have access to health care and it plays into the arguments of those calling for massive expansion of government to fix the problem. Yet the ubiquitous figure is highly misleading.

To be clear, the statistic is not pulled out of thin air. It comes from an annual report by the Census Bureau, which most recently pegged the number of uninsured at 45.7 million for 2007. But the problem lies in the way the statistic is commonly cited and understood.

For starters, the statistic does not mean that there are "46 million uninsured Americans." Just a quick look inside the Census Bureau data shows that 9.7 million of the uninsured are not citizens of the United States.

But this doesn't fully convey the problematic nature of the 46-million statistic. As even the authors of the Census Bureau report themselves acknowledge, "health insurance coverage is likely to be underreported" in the Current Population Survey from which the health insurance data is derived.

"[T]he estimate of the number of people without health insurance," according to the report, "more closely approximates the number of people who are uninsured at a specific point in time during the year than the number of people uninsured for the entire year."

In reality, a person who goes without coverage for a few months while between jobs is in a completely different boat from somebody who is permanently without insurance. But the broad citation of the headline figure would have you believe that there are literally 46 million people who never, ever, have coverage.

Another problem with citing the 46-million figure is that many of those who are identified as uninsured are actually eligible for existing government programs but simply never bothered to enroll.

In addition, some of the 46 million could theoretically afford health coverage, but chose not to purchase any. In fact, as Sally Pipes notes in the Top Ten Myths of American Health Care: A Citizen's Guide, those making more than $75,000 per year are part of the fastest growing segment of the uninsured population.

The Census figures also show that 18.3 million of the uninsured were under 34. Some in this age group may have simply determined that they are young and healthy and thus can do without coverage.

When all of these factors are put together, the 2003 BlueCross BlueShield study determined that 8.2 million Americans are actually without coverage for the long haul, because they are too poor to purchase health care but earn too much to qualify for government assistance. Even being without insurance still doesn't mean they won't have access to care, because federal law forbids hospitals from denying treatment to patients who show up at the emergency rooms.

This exercise isn't about downplaying the problems facing the American health care system, but a necessary part of devising the proper remedies.

Would You Opt Out Of Social Security?

Given the fact that the Social Security system is so deeply in debt, the only thing that surprises us about the table below is that more people did not say they would opt out of Social Security if given the chance. They are either eternal optimists or uninformed as to the state of the system.

(Click on image to see a larger version)

Source: Sun Life Financial

10 Surprising Facts About American Health Care

Despite the constant drumbeat to reform our health care system, the U.S. system has a lot of good points to consider. Here are a few...

Fact No. 1: Americans have better survival rates than Europeans for common cancers.

• Breast cancer mortality is 52 percent higher in Germany than in the United States and 88 percent higher in the United Kingdom.
• Prostate cancer mortality is 604 percent higher in the U.K. and 457 percent higher in Norway.
• The mortality rate for colorectal cancer among British men and women is about 40 percent higher.

Fact No. 2: Americans have lower cancer mortality rates than Canadians.

• Nine of 10 middle-aged American women (89 percent) have had a mammogram, compared to less than three-fourths of Canadians (72 percent).
• More than half of American men (54 percent) have had a PSA test, compared to less than 1 in 6 Canadians (16 percent).
• Nearly one-third of Americans (30 percent) have had a colonoscopy, compared with less than 1 in 20 Canadians (5 percent)

Fact No. 3: Americans have better access to treatment for chronic diseases than patients in other developed countries.

Fact No. 4: Americans have better access to preventive cancer screening than Canadians.

Fact No. 5: Lower income Americans are in better health than comparable Canadians.

Fact No. 6: Americans spend less time waiting for care than patients in Canada and the U.K.

• Canadian and British patients wait about twice as long - sometimes more than a year - to see a specialist, to have elective surgery like hip replacements or to get radiation treatment for cancer.
• In England, nearly 1.8 million people are waiting for a hospital admission or outpatient treatment.

Fact No. 7: People in countries with more government control of health care are highly dissatisfied and believe reform is needed. More than 70 percent of German, Canadian, Australian, New Zealand and British adults say their health system needs either "fundamental change" or "complete rebuilding."

Fact No. 8: Americans are more satisfied with the care they receive than Canadians.

Fact No. 9: Americans have much better access to important new technologies like medical imaging than patients in Canada or the U.K. The United States has 34 CT scanners per million Americans, compared to 12 in Canada and eight in Britain.

Fact No. 10: Americans are responsible for the vast majority of all health care innovations.

• The top five U.S. hospitals conduct more clinical trials than all the hospitals in any other single developed country.
• Since the mid-1970s, the Nobel Prize in medicine or physiology has gone to American residents more often than recipients from all other countries combined.
• In only five of the past 34 years did a scientist living in America not win or share in the prize. Most important recent medical innovations were developed in the United States. See the table below.

So while the U.S. has its problems with our health care system, it is obvious we have the most advanced system and our access to care is superior to any other country. And that is one of the major keys in my opinion. I think one of the main questions that so often gets overlooked when we discuss changes to our health care system - especially a government run health care system is this: Are the American people willing to give up the QUICK ACCESS to QUALITY care they now enjoy. Think of the lines like you experience at the DMV in your doctor's office or hospital. You use the Postal Service to mail your letters (when you don't email someone), but to whom do you go to to mail a package? The Postal Service? Or perhaps FedEx or UPS?

(Click on image to see a larger version)

Source: National Center for Policy Analysis

New COBRA Notices Required by ARRA Legislation

The following is part of a communication from our preferred COBRA vendor OnQue Technologies, Inc. It attempts to summarize the notices required of an employer in response to the American Recovery and Reinvestment Act of 2009 (ARRA).

If you want more information on OnQue Technologies and how you can receive their services FREE OF CHARGE, contact us via our profile page.

PLEASE NOTE: Be aware that this information is subject to change as we receive guidance from the regulatory agencies.

...We begin by summarizing the new notice requirements and deadlines, because those issues are foremost in the minds of our customers.

Notifications Summary
Let’s begin this discussion with a note about notification deadlines (covered in detail below). The deadlines are driven by the status of the recipient, not by the type of notice. We have read that three, even four notices are required by ARRA. But there are only two, and neither must be delivered “immediately” as some publishers have stated. (There is also an “alternative notice” that may be developed by the regulatory agencies, but it does not exist at this time.)

Neither of the new notices are identified by name in the legislation. For the purposes of this document and moving forward until we receive guidance from the U. S. Department of Labor (DOL), we will refer to them as the “Notice of Premium Assistance Rights” and the “ARRA Second Election Notice” (to differentiate it from the existing “TAA Second Election Notice”).

Notice of Premium Assistance Rights
You will use this notice to inform assistance eligible individuals of the availability of premium assistance and of the option to enroll in different coverage, if applicable. The notice requirement may be met by amending the existing qualifying event (QE) notice or by creating a separate document that will be attached or included with the QE notice.

ARRA Second Election Notice
This notice informs individuals of their rights to a second 60-day election opportunity. Those individuals were involuntarily terminated on or after September 1, 2008, but were not covered under COBRA on February 17, 2009, the date ARRA was enacted.

Model Notices
The DOL is required to provide model notices not later than March 19, 2009, (30 days after enactment of ARRA).
______________________________________
Recipients and Deadlines for Notification
Four types of involuntarily terminated employees must be notified of certain rights under ARRA:
____________
1. Individuals Who Did Not Elect COBRA. Involuntarily terminated on or after September 1, 2008, and before February 17, 2009. This group includes qualified beneficiaries who assertively waived their rights or let their election periods expire.
Notices: ARRA Second Election Notice and Notice of Premium Assistance Rights (These notices may be merged and presented as one.)
Model Notice Deadline: March 19, 2009
Delivery Deadline: April 18, 2009 (No later than 60 days after the enactment date.)
____________
2. Individuals Who Were In Their 60-day Election Period On February 17. Involuntarily terminated on or after September 1, 2008, and before February 17, 2009.
Notices: ARRA Second Election Notice and Notice of Premium Assistance Rights (These notices may be merged and presented as one.)
Model Notice Deadline: March 19, 2009
Delivery Deadline: April 18, 2009 (No later than 60 days after the enactment date.)
____________
3. Those Who Elected COBRA Coverage And Remain Covered. Involuntarily terminated on or after September 1, 2008.
Notice: Notice of Premium Assistance Rights
Model Notice Deadline: March 19, 2009
Delivery Deadline: As Soon As Reasonably Practicable

The Act does not specify a time frame for notification of assistance eligible individuals who are currently covered under COBRA. However, because premium payment assistance will begin on March 1 for most employers, you should deliver this notice in a reasonable time frame following enactment of the law.

Comment: Because many March premium payments were in the mail when this law was enacted, many will be for 100% of the total premium. You are required to reimburse the qualified beneficiary for the 65% overpayment, either in single payment or as a credit to the QB’s premiums receivable account. The details of how to handle such overpayments are presented in the paragraph entitled “Premium Overpayments.”
____________
4. Those who were or will be involuntarily terminated between February 17 and December 31, 2009.
Notice: Notice of Premium Assistance Rights. Sent with the Qualifying Event (QE) Notice. (These notices may be merged and presented as one.)
Model Notice Deadline: March 19, 2009
Delivery Deadline: 44 Days After The Termination Date

For eligible individuals terminated after ARRA’s enactment, the normal notification delivery rules apply. Qualified beneficiaries must be notified of their COBRA election rights, including their new rights under ARRA, no later than 44 days after the qualifying event date. (30 days for the employer to notify the plan administrator, 14 days for the plan administrator to furnish the notice. 44 days when the employer is also the plan administrator.)

Comment: Contrary to information provided by some sources, the Act does not say that these qualified beneficiaries must be notified of their premium assistance rights “immediately.” The paragraph in question references ERISA section 606(a)(4), which specifies COBRA notification requirements. Thus, the delivery requirement defaults to the normal COBRA notification rules.

With all of these different notices and deadlines, maybe now you understand why we recommend you use OnQue to help you administer your COBRA. And if it has not sunken in yet, contact us and we will tell you how you can get their service FOR FREE.

Finally, we cannot stress this enough: BE AWARE THAT THIS DOCUMENT IS SUBJECT TO CHANGE AS WE RECEIVE GUIDANCE FROM THE REGULATORY AGENCIES.

COBRA Provisions in the American Recovery and Reinvestment Act

We have probably received more calls on the recent legislation and how it affects COBRA, as any topic in the last year. A bit of background: Congress recently passed the American Recovery and Reinvestment Act (the Act), and the Act has been signed by President Obama. Part of the act includes a subsidy of the COBRA premiums for certain individuals. We are going to summarize the Act and the provisions in the Act that affect COBRA continuation coverage, as well as similar state continuation coverage.

What is this all about?
The COBRA changes in the Act affect both the federal COBRA provisions and the Public Health Service Act program that provides similar extension benefits for public programs. In addition, however, the subsidy provisions apply to state continuation coverage that is comparable to federal COBRA. That would include so-called "mini-COBRA" state laws that cover groups below the 20 employee threshold for COBRA, and that includes Virginia. To comply with the law, the state continuation law must allow the individual to continue substantially similar coverage as was provided under the group health plan at a monthly cost that is based on a specified percentage of the group health plan's cost of providing such coverage. our reference to "COBRA" also refers to the state programs that meet those requirements.

The Act is effective February 17, 2009, the day that President Obama signed the bill. All of the COBRA provisions that have a time frame will date from that day. As for calendar monthly billed programs, the effective date is March 1, 2009.

What is the subsidy for COBRA beneficiaries?
The Act provides for a subsidy for certain COBRA beneficiaries. The subsidy is 65% of the COBRA continuation coverage premiums for eligible individuals for up to 9 months. The COBRA beneficiary will pay only 35% of the overall COBRA premium for that period. The period expires on the earlier of (a) nine months, (b) the date the individual becomes eligible for major medical group coverage or Medicare or (c) the end of the maximum required period of continuation under COBRA. Part of the Act that is not getting much attention is the fact that the beneficiary must notify the employer in writing if they become eligible for coverage under a major medical group health plan or Medicare. If they do not, they are subject to penalties for failing to do so (110% of the subsidy amount). Enforcement of this provision is not addressed in the Act.

If an individual does not receive a subsidy but believes they should, they may appeal to the Department of Labor (for private plans) or to the Department of Health and Human Services (for public plans covered under the Public Health Services Act). The relevant agency is required to rule on the appeal within 15 business days. Individuals whose appeal is denied may sue under ERISA.

Who is eligible for the subsidy?
The subsidy is available to individuals (and their dependents) who were involuntarily terminated from their employment and became eligible for COBRA beginning September 1, 2008 through December 31, 2009. Persons who elected prior to the enactment of the Act (but on or after September 1, 2008) will be eligible to receive the subsidy prospectively from the date of enactment through the maximum nine-month period. Otherwise eligible persons who did not elect COBRA between September 1, 2008 and the date of enactment will have the opportunity to elect COBRA on a prospective basis with the maximum duration of the coverage dating from the date that they could have first elected COBRA.

Employers or plans will have to provide notice to these groups of individuals. In addition, a group health plan or insurer must refund the individuals any COBRA premiums that subsidy-eligible persons paid on or after the date of enactment in excess of 35% of the premium. This may be in the form of a reimbursement payment or credit against future premium payments due.

Is eligibility for the subsidy based on income?
Yes, the subsidy is adjusted based on income. Joint filers with $250,000 or more of modified adjusted gross income and all other filers with $125,000 or more of modified adjusted gross income are not eligible for the full subsidy. The subsidy is phased out completely for persons with modified adjusted gross incomes of $290,000 joint or $145,000 for other filers. The subsidy is not considered income as long as the beneficiary meets the income tests. Excess amounts of subsidy over the amount the person is entitled to by income will be added to the person's tax on the person's federal tax return. The employer will not have to be concerned about the taxable effect on COBRA beneficiaries although a COBRA beneficiary may request that the employer not provide any subsidy.

How does the premium subsidy work?
The Act requires that the relevant entity that is collecting the 35% premium simply not collect the remaining 65% and, instead, obtain reimbursement from the federal government (Good news for the individual, bad news for the employer). There are exceptions for multi-employer plans, self-funded employer plans, and plans not subject to federal COBRA laws, but they are beyond the scope of this discussion.

Can an individual make a different COBRA selection?
Yes, with certain limits. An employer may allow a COBRA-subsidy eligible individual to change his or her health insurance coverage option when making a COBRA election. The new plan option must be made within 90 days of receipt of the COBRA election notice, must have the same or lower premiums and must be available to non-COBRA active employees under the plan.

Can you explain the notice requirements and election period(s)?
Employers must provide modified election notices or provide separate supplemental notices to all persons who became entitled to elect COBRA continuation coverage during the period beginning on September 1, 2008 and ending on December 31, 2009.

The new forms should notify the individual about the subsidy and, if applicable, the right to change to different benefits options. Time frames are still being worked out. The Department of Labor, Treasury and Health and Human Services are supposed to work together to provide a model notice within 30 days of enactment.

Notices are required to be sent to subsidy-eligible persons who became qualified beneficiaries before the date of enactment within 60 days of enactment. (The Act does not affect the timing of notices sent to individuals who become qualified beneficiaries on or after the date of enactment.) The election period for those beneficiaries who became eligible before the date of enactment will begin on the date of enactment and end 60 days after the date the plan administrator provides the required notice.

Are there penalties for non-compliance?
Yes. Failure to provide the notices would be a COBRA violation and subject to the standard COBRA penalties of up to $110 a day under ERISA. Additionally, there could be adverse tax consequences under the Internal Revenue Code, which can impose excise taxes of $100 per day per notice on the plan administrator.

Questions? Feel free to contact us.