The American Recovery And Reinvestment Act And Company Payrolls
The announcement of The American Recovery and Reinvestment Act
, which was signed on February 17, 2009 by President Barack Obama, forced many changes in America's economic system. One area in which the impact of this historic signing is present is company payrolls. The first change that this bill makes in payroll is the "Making Work Pay" tax credits. The "Making Work Pay" credit is 6.2 percent of a the earned salary of a given tax payer and maxes out at $800 for a married couple filing jointly and $400 for all other taxpayers.
The importance of this is that it is being issued through the payroll taxes of employers. This measure is perhaps the one that brings the most satisfaction among Americans as it puts more money in people's pockets. The Making Work Pay credit is only valid for the years of 2009 and 2010. The next few measures in the American Recovery and Reinvestment Act address another extremely important area of the economy and that area is health care.
Any individuals who are eligible for COBRA continuation health coverage or anything similar under state law have access to a 65% premium subsidy. This means that employees are only required to pay 35% of the premium and that employer is to recover the subsidy by taking the subsidy as a credit on his or her employment tax return.
It is important to note that none of this can happen without the employee first paying 35% of the coverage premium.
On April 15, 2010 the president also signed The Continuing Extension Act of 2010 which allows for individuals who were terminated through no fault of their own through May 31, 2010 to receive a COBRA subsidy. Unfortunately, individuals that have been involuntarily terminated from that point on and into the future are ineligible to take advantage of this act.
As if the job of a payroll manager was not complex enough as it was, The American Recovery and Reinvestment Act makes it more difficult in many ways. One additional difficulty is that payroll managers must monitor how much money employees contribute to their COBRA plans very carefully now in the event that they are laid off or involuntarily terminated. To make things more convenient, it would be wise for employers to outsource payroll administration to reduce the pressure upon the organization to do everything and make sure it is done correctly for employees.