K A N S A S TAX LAW CHANGES G U E S T A R T I C L E BY A M B E R G O E R I N G, B B A, C PA

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1 Bright and Carpenter Consulting, Inc. LEGISLATIVE UPDATE Volume 5, Issue 8 S E P T E M B E R 1 0, I N S I D E T H I S I S S U E : Kansas tax law changes Post-primary election round-up What does this mean for the Statehouse in January? Legislative Coordinating Council sets interims August revenues down KanCare waiver submitted New KanCare website ACA: Defining essential benefits What ever employer needs to know about ACA 2012 RNC platform on immigration K A N S A S TAX LAW CHANGES G U E S T A R T I C L E BY A M B E R G O E R I N G, B B A, C PA When Governor Sam Brownback took office, one of his most pressing goals was to change the tax landscape for the state of Kansas. He recognized that the tax code was complicated and needed to be simplified and streamlined to attract new business start ups and to allow Kansas families to keep more of their hard earned dollar. The initiative originally included plans to move from three income tax brackets to two, eliminate individual income tax on non-wage business income, and increase the standard deduction for head of household filers. The changes were to be paid for by holding the sales tax rate steady at 6.3%, eliminating the two year severance tax exemption on new pool oil and gas wells. eliminating itemized deductions and utilizing future excess revenues to reduce corporate and individual income tax rates. In an interesting turn of events, the Senate initially passed their version of the bill with the intention of keeping the debate alive and negotiating a less costly tax cut package in a joint House-Senate conference committee. The House was concerned negotiations would fail and passed the original, larger tax cut legislation originally proposed by the Senate. Once the bill reached Governor Brownback s desk, despite encouragement from him to the House and Senate to reach a compromise, neither body would do so. The bill was signed into law. Because of the atypical passage of the bill, Brownback s desired pay-fors did not make it into the law. Changes that did make the signed version and are effective January 1, 2013 are: Lower income tax brackets for individuals, with the highest rate reduced to 4.9% instead of the current 6.45%.. Continued on page 2

2 Page 2 Volume 5, Issue 8 G U E S T ART I C L E: KANSAS TAX LAW CHANGES Elimination of income tax on non-wage business income from the following entities - LLC s, Partnerships, S Corporations, Estates, Trusts and Farm Activities. It is important to note here that because income from these entities will not be taxable; neither will the losses be deductible. Furthermore, several items deductible for Federal tax purposes will be added back to Kansas adjusted gross income. Self-employment taxes; deductions taken for pension, profit sharing and annuity plans of selfemployed persons; deductions for self-employed health insurance and any domestic production activity deductions will be add-backs. The homestead property tax refund will only be available to persons who own their home Many tax credits allowed to individuals are now repealed, the most notable being the food sales tax rebates, adoption expenses, child day care expenses and disabled access expenditures. There are a couple of missteps that will need to be adjusted to fix the law. The bill did not amend the original language that eliminated itemized deductions, but it is the intent of the legislature that itemized deductions continue to be available. A slightly more complicated unintentional oversight was that an entity s basis for Kansas purposes will now essentially be frozen in time until the disposition of the entity. Recognizing that this could create significant tax liabilities resulting from gains on the sales of these entities or from annual cash distributions from them, the legislature plans to add language specifically stating that Kansas basis would equal Federal basis. Some businesses are considering if they should restructure their incorporated business in order to fully benefit from these state tax changes. However, many CPA s are cautioning from moving to hastily as there could be federal tax repercussions that outweigh the state benefits, especially with the uncertainty of tax policy at the federal level. faster pace. These things, along with controlled state spending, will all need to happen to counteract the revenue lost by the enactment of the bill. It is expected any tweaks needed to the new tax law will be on the Governor s agenda for the 2013 session. About the Author: Amber is a tax manager in public practice in Shawnee, KS. As a professional accountant for more than 13 years, Amber dedicates her energies to helping small businesses and individuals. She focuses on tax planning/strategy, consulting, and tax preparation. Highlights of Amber s Professional and Community Service Member of the American Institute of CPAs and Kansas Society of CPAs with service on the KSCPA board of directors, legislative executive committee, political action committee and member growth task force. Graduate of KSCPA 20 up to 40 leadership program and named 2010 AICPA-KSCPA Emerging Leader Woman to Watch. Member of Western Johnson County Rotary Club with service as Treasurer. It is the hope of many that this law will encourage business to relocate to and choose to open businesses in the state of Kansas. Research shows the states with zero income tax rates significantly outperform those with the highest personal income tax rates (in terms of gross state product), experience larger than average population growth and boost state tax revenues at a Amber received her BBA in accounting from Belmont University and holds a permit to practice as a CPA in Kansas.

3 Page 3 Volume 5, Issue 8 P OST-PR IMARY ELECTION ROUND-UP The 2012 primary elections in August saw a sweep of conservative Republicans defeating more moderate challengers and changing the balance of power in Kansas Senate. After an historic Kansas Supreme Court decision that redrew all legislative district boundaries, the Governor, the Kansas House and now the Kansas Senate will all now lean conservative. The conservative Republican sweeps across the state will set up a change in power in the Senate as well as set up several interesting general elections. The Republican caucus in the Senate will next session be run by conservatives who will choose committee chairs, members and control the flow of legislation to the floor for debate. For the past four years, conservatives generally haven t chaired committees, except for Sen. Susan Wagle, R-Wichita, leading Senate Commerce; Sen. Pat Apple, R-Louisburg, leading the Senate Energy/Utilities Committee; and Sen. Les Donovan, R-Wichita, heading the Tax Committee. Key races included: Conservative Rep. Jim Denning, R-Overland Park, defeated Sen. Tim Owens, R-Overland Park. Conservative Jeff Melcher, R-Leawood, defeated Rep. Pat Colloton, R-Leawood, the moderate GOP heir to the Senate seat being retired by Sen. John Vratil, R-Leawood. Jacob LaTurner, R-Pittsburg, defeated Sen. Bob Marshall, R-Fort Scott. LaTurner is from the population center of the district Pittsburg. Conservative Rep. Forrest Knox, R-Altoona, defeated moderate Rep. John Grange, R-El Dorado, in a battle of 4-term House members moving to the Senate. Conservative Sen. Jeff King, R-Independence, defeated moderate 3-term Sen. Dwayne Umbarger, R- Thayer. Conservative Rep. Greg Smith, R-Overland Park, defeated moderate Joe Beveridge, R-Lenexa, in the newly created 21st Senate District in Johnson County. Conservative Bob Reader, R-Manhattan, defeated 2- term moderate Sen. Roger Reitz, R-Manhattan. One-term conservative Rep. Tom Arpke, R-Salina, defeated 3-term moderate Sen. Pete Brungardt, R- Salina. Conservative Michael O Donnell, R-Wichita, defeated moderate 3-term Sen. Jean Schodorf, R-Wichita. Conservative Rep. Dan Kerschen, R-Garden Plain, defeated one-term pretty-conservative Sen. Dick Kelsey, R-Goddard. Conservative Rep. Mitch Holmes, R-St. John, defeated 3-term moderate Sen. Ruth Teichman, R-Stafford. One-term conservative Sen. Steve Abrams, R- Arkansas City, defeated moderate challenger Miranda Allen, R-Kiowa, who in early returns was leading in the primary-only election. Moderate Senate President Steve Morris, R-Hugoton lost to conservative challenger Rep. Larry Powell, R- Garden City. Moderate Republicans did hold on to some seats including Sen. Vicki Schmidt, R-Topeka, who narrowly held off conservative challenger Rep. Joe Patton, R-Topeka; Rep. Kay Wolf-R-Mission Hills, who strongly held off a conservative challenger and moves onto the Senate seat held by retiring Sen. Terrie Huntington; Sen. Carolyn McGinn, R- Sedgwick, who held off conservative Gary Mason who moved into the district to run; and Sen. Jeff Longbine, R- Emporia, who also held off a conservative challenger from the House. The Kansas House also saw many conservative victories, particularly in new districts where there were no incumbents, ensuring that the House will remain under conservative leadership for the 2013 Session. What does this mean? Many of the Governor s initiatives that were stymied by the moderate Senate will see support and new life next session. These issues include tax legislation, education finance reform, and Medicaid reform legislation. We will also see many new faces. The House will have at least 45 new members in January a turnover rate of 36% in the 125-member chamber. The minimum turnover in the Senate will be 32%, with 13 newcomers among the 40 seats. The final numbers could be greater if incumbents are dismissed by Republican or Democratic challengers three months from now in the November general election. The first order of business, however, is getting to know the many new House and Senate members and educating them about issues that are important to many Kansans.

4 Page 4 Volume 5, Issue 8 W H AT DOES THIS MEAN FOR THE STATEHOUSE IN JANUARY? No matter what happens in the November general election, Republican primary voters earlier this month guaranteed there will be big changes when the Legislature returns to Topeka in January changes that could range from how the state picks judges to how children are educated. Below is a list of issues House Republican leadership say conservatives plan to take the state in the next year. Courts Lawmakers will probably move quickly to change the way the state picks its appeals court judges. At present, Kansas uses a merit-based system in which nominations are made by a commission made up of five lawyers elected by the Kansas Bar Association and four members appointed by the governor. The commission forwards three nominees to the governor, who makes the final selection. The House passed a bill last year to allow the governor to appoint appeals court judges with Senate confirmation, but the bill was blocked by moderates in the Senate. Some lawmakers say the current system results in judges that are too liberal and activist. Lawmakers and the governor can change the appeals court judicial selection process on their own, but would need to go to voters to change the process of selecting Supreme Court justices because it is written into the state constitution. Taxes The Legislature is not expected to take up tax reform again after this past year s landmark tax bill exempting many types of businesses from state income taxes. Any changes will probably be technical in nature if the Department of Revenue needs to tweak something in implementation. Smoking There probably will be a move to overhaul a law passed in 2010 that banned indoor smoking in most public places. The notable exception to the ban has been casinos that are owned by the state lottery. The Legislature could take one of two courses, either banning smoking in casinos which analysts say would cut profits and hence state income or look at allowing smoking in bars and other businesses that, like casinos, don t allow minors. Immigration The House could pass a bill repealing the law allowing in-state tuition for undocumented immigrants. The House passed the in-state tuition bill in 2010 only to have it rejected in the moderatecontrolled Senate. It is also anticipated that a variation of E-verify will return, as well as legislation allowing police to check the immigration status of something they stop. Health care Many of the incoming conservative Republicans used the federal Affordable Care Act to help defeat more moderate senators. Since the legislative session ended, the U.S. Supreme Court has ruled the ACA to be constitutional, so there s not much state lawmakers can actually do to stop it. However, lawmakers could pass resolutions opposing the plan and encouraging federal lawmakers to repeal it, or put an equally nonbinding state constitutional amendment on the ballot for voters to weigh in. The state could also refuse to set up a health exchange where people could compare and buy insurance policies, although the federal government has indicated it will set up the exchanges in states that don t do it themselves....continued on page 4 Looking to the general... Now that the August primaries have decided the shift in policy and both chambers of the Legislature are dominated by conservatives, the November election will decide how big that margin will be between the Republicans and Democrats. Democrats are hoping to pick up the moderate Republican vote for the Democratic candidates and Republicans are planning to continue to ride the conservative tide through November. Each party has strong candidates in some areas and has the potential to overtake a seat. It all now depends on who campaigns the hardest and who gets out to vote.

5 Legislative Update Page 5 W H AT DOES THIS MEAN C O N T I N U E D F R O M P A G E 3 Environmental regulations It is expected that the Legislature will attempt to repeal environmental standards beyond what the federal government requires because many believe the regulations as they are now enforced stifle businesses. Education Lawmakers want to ensure schools are getting better outcomes for the amount of money the state is giving to education. Public policy will be tied to the money. Some of those policies might include a more rigorous program for teacher evaluation and a bigger emphasis on reading in early grades so that more students are capable of reading for information by fourth grade. The Legislature may also move to give charter schools more independence from local school boards. In addition, the school finance formula continues to be a topic of debate. In August, a three-judge panel heard arguments from both sides of a school funding lawsuit brought by a coalition of districts across the state against the Kansas Legislature. It is expected that the panel will not have a decision for several months and it will then be appealed. Labor Last session, senators blocked a series of proposals from Secretary of Labor Karin Brownlee that aimed to help businesses deal with unemployment and workers compensation cases. These issues will be readdressed. One of those issues would be a bill to replace the existing committee that nominates administrative law judges, who rule on workers compensation appeals, with a panel that more closely represents the make-up of the Kansas workforce. S TATE BUDGET CUTS LOOMING State agency chiefs have been told to prepare Fiscal Year 2014 budgets with 10% spending cuts. Fiscal Year 2014 starts July 1, The 10% cut basement budget is the sharpest spending reduction goal in recent memory handed to agencies by an administration. Governors typically have agencies draw up at least three possible budgets, one with reductions, another with stable revenues and another that includes funding for new initiatives. There is no information about whether agencies will be tasked to prepare other budget submissions with less than 10% in spending cuts. This does not necessarily mean a 10% cut in school finance or Medicaid or transportation budgets spending that the Governor says he intends to protect. But the spending cut goal does require agencies to comb through expenses, looking at ways to fulfill their missions with less money. The concept is for state agencies to prepare for what could be bad revenue news or changes in the state s economy that might make a 10% level of spending cut necessary. That 10% cut budget may also make it easier for the governor to see which programs might be sharply cut or eliminated under the plan and challenge agency chiefs to prioritize programs. Those reduced resources budgets which agencies will present to the state budget office which will scrutinize them, make suggestions and then in some cases have private hearings in which agencies make their case for proposed spending are a long way from the governor s final budget. Governors typically have programs or initiatives they want, and put money in their budgets for them or reallocate money among agencies to finance those initiatives. Governors typically put the finishing touches on their budgets in mid- to late-december, weeks ahead of the opening of the legislative session.

6 Legislative Update Page 6 LEGISLATIVE COORDINATING COUNCIL SETS INTERIMS The Legislative Coordinating Council earlier this month approved 62 days of interim committee hearings leading up to the 2013 Legislature 10 days of which are for the Joint Legislative Budget Committee as the state moves into a period of reduced resources due to last session s tax cut bill. The LCC, the administrative body for the Legislature, also today appointed Raney Gilliland, a legislative employee since 1979, as the Director of Legislative Research, a job he s held on an interim basis since February when former KLRD director Alan Conroy resigned to become chief of KPERS. The heart of the meeting, though, was determining the number of days for interim committees, which will have 13 members each, 8 from the House, 5 from the Senate. Most of those members will be the same ones appointed last year. The LCC approved 62 interim meeting days, 5 fewer than last year, and 10 fewer than committee leaders requested. Here are the joint interim committees and the number of meeting days approved: Special committees: Elections (ballot explanations), 1 day Financial Institutions and Insurance (Securities Commission, insurance holding companies), 1 day Rural Broadband, 1 day Taxation (real property definitions), 2 days Transportation (passenger rail), 1 day Standing joint committees: Administrative Rules and Regulations, 5 days (2 have already been used) Arts and Cultural Resources, 1 day Corrections and Juvenile Justice, 3 days Energy and Environmental Policy, 3 days Health Policy Oversight, 3 days Home and Community Based Services Oversight, 3 days Information Technology, 4 days Kansas Security, 1 day Legislative budget, 10 days Legislative Educational Planning Committee, 3 days Pensions, Investments and Benefits, 1 day Special Claims Against the State, 3 days State Building Construction, 4 days (one already used) Other committees: LCC, 3 meetings; Post Audit, 3 days; Capitol Preservation, 2 days; Confirmation Oversight, 2 days; State Employee Pay Plan Oversight Committee, 2 days (one already used). The LCC also authorized the start of planning for the scheduled Dec. 3-4 new member orientation for lawmakers, with dozens of new members expected after the November general election. A U GUST REVENUES D OWN According to the Kansas Department of Revenue, Kansas tax-only receipts were down nearly $15 million, or 3.3%, from estimates for August. Most stunning drop was in individual income taxes, where the $191 million in individual tax withholding receipts were $18.9 million, or 9%, below the estimate of $210 million. August individual income tax receipts were $6.2 million, or 3.1%, less than the state received from that source in Only other significant variation from estimates was the $190.4 million in sales tax receipts, $6.4 million, or 3.5%, above estimates of $184 million. The August sales tax receipts were $13.2 million, or 7.5%, more than the $177.2 million received last August. August s shortfall was tempered by above-estimated receipts in July, first month of Kansas Fiscal Year For the first two months of this fiscal year, tax-only revenues are $12.2 million, or 1.3%, down from estimates. Kansas is $23.7 million, or 2.7%, above year-to-date collections for last year.

7 Page 7 Volume 5, Issue 8 K ANC AR E WAIVER SUBMITTED In early August, Governor Brownback s administration announced it had resubmitted to the federal government its proposal to overhaul the Kansas Medicaid program. Under the proposal, called KanCare, more than 350,000 Kansans will receive health care services through manage care plans run by three private insurance companies. It is expected to save approximately $1 billion in five years and provide better health outcomes. The administration had submitted its proposal for the Section 1115 Medicaid waiver to the Centers for Medicare and Medicaid Services in April. But it withdrew the application to consult with two Native American health centers. The administration still hopes to implement KanCare by January 1, In August, state officials held informational meetings on the KanCare plan throughout the state. The meetings were aimed at people currently receiving Medicaid services, their family members and friends, service providers, advocacy groups and others interested in the various services that would be offered under KanCare, ranging from nursing home care for the elderly to in-home services for the physically disabled or mentally ill. Officials at the federal Centers for Medicare and Medicaid Services are now taking public comments on the proposal, as part of reviewing the waiver application. The public comment period extends through September 20. To view the application or provide comments, go to Information/By-Topics/Waivers/1115/publiccomments.html. In anticipation of the new Medicaid system in Kansas, the state has signed KanCare contracts with three managed care companies Amerigroup Kansas, Inc., Sunflower State Health Plan, which is a subsidiary of Centene, and United Healthcare of the Midwest. New KanCare website The Department of Health and Environment and the Department for Aging and Disability Services announced a new website for KanCare, the state's managed care Medicaid reform proposal. The site, kancare.ks.gov/, includes separate portals for health care consumers and providers under the heading "Reinventing Medicaid for Kansas." In bold blue letters, the site offers a link to an explanation of the reform proposals, titled "What is KanCare," next to a consumer information phone number (866) "The website we're announcing today can help Kansas families, doctors, Community Developmental Disability Organizations and individual service providers make informed decisions about their participation in Kan- Care," KDHE Secretary Robert Moser said. "In 2013, once KanCare is under way, the site will serve as the launching pad for all Medicaid-related content and applications in Kansas."

8 Page 8 Volume 5, Issue 8 AFFORDABLE CARE ACT: DEFINING KANSAS ESSENTIAL BENEFITS The Kansas Insurance Department held a public hearing on September 5 in Topeka to collect input on what basic benefits should be included in the health insurance plans that will be available through the state s insurance exchange after Jan. 1, 2014, as required by the Affordable Care Act. KID officials distributed an actuarial firm s analysis of what might have to be added to existing plans to meet the essential health benefits requirement in the federal ACA and what the added benefits might cost. Under the ACA, states are allowed to define the essential health benefits that insurance companies will be required to include in their exchanges individual and small-group plans. of the nine were sufficient to meet the broader federal requirements and that the cost difference between the most and least expensive was less than 1%. In order to meet federal guidelines, the state would need to add pediatric vision care, pediatric oral health care and habilitative services to whatever existing plan it chose as its essential benefits benchmark. There is no generally accepted definition of habilitative services. States are not required to design an essential benefits package from scratch. Instead, they re free to go with one of the three largest small group plans, one of the three largest state employee health plans, one of the three largest plans for federal employees or the largest non-medicaid HMO plan operating in the state. Now Insurance Commissioner Sandy Praeger will prepare a proposal for Gov. Sam Brownback, who will have final say on the essential health benefits that the state will submit for federal review. Praeger s recommendation is due to the governor on or before Sept. 24. Governor Brownback has said his administration would do nothing to implement the law until the outcome of the November general elections is known. GOP presidential candidate Mitt Romney has pledged to see the law repealed as one of his first official acts should he be elected. Benchmark plan Under the Affordable Care Act, a state s so-called benchmark plan is required to include at least 10 basic benefits: Ambulatory patient services. Emergency services. Hospitalization. Maternity and newborn care. Mental health and substance abuse treatment. Prescription drugs. Laboratory services. Preventive and wellness services and chronic disease management. Habilitative and rehabilitative services and devices. Pediatric services, including oral and vision care. Milliman Inc. prepared an analysis for the insurance department that considered the possible benchmark plans that the Governor could choose from to meet the state s essential benefits requirement. It concluded that none The health reform law stipulates that the federal government will run the insurance exchanges in states that choose not to create their own and will have them up and running by Jan. 1, Likewise, in states where governors decline to choose the models for essential benefits offered through the exchanges, the federal government will do so. Federal officials have set a Sept. 30 deadline for hearing from governors on their benchmark plan choices. KID has said if the federal government chooses the benchmark plan for Kansas, it could be one that is less affordable than a plan selected by those more familiar with the Kansas market. More than 100 people attended the public hearing Wednesday. About a dozen offered comments and several more gave written testimony. Several of those who spoke urged selection of a benchmark plan that would provide comprehensive dental and vision care for children. The Kansas Chamber and several other speakers testified at the hearing, asking that the benchmark plan not be too rich in benefits because that would drive up the cost of premiums and likely push many employers from providing coverage. Nov. 16 deadline for partnership exchange If there is to be a partnership exchange that would include policy-setting roles for both the state and federal governments, the governor has until Nov. 16 to submit a blueprint to HHS. Otherwise, the Kansas insurance exchange will be run by the federal government, assuming the health reform law stays on the books.

9 Page 9 Volume 5, Issue 8 W H AT EVERY EMPLOYER NEEDS TO KNOW ABOUT THE AFFORDABLE CARE ACT Nearly two months after the Supreme Court upheld the health care reform law, it s time to focus on the new mandates and requirements that will go into effect in the next few months. A big one is the new uniform summary of benefits and coverage or SBC. The government issued comprehensive regulations on SBCs earlier this year, and there are a lot of details in the rules. What is an SBC? The SBC is a new disclosure requirement for insurers and group health plans, mandated by the health care reform legislation. It is a 4-page summary of a plan s coverage, set out in a standard format. The idea is that individuals should be able to quickly compare different coverage options by looking at the SBC for each option. When do these new rules apply? For employees enrolling during open enrollment, the rules apply to the first open-enrollment period that begins on or after September 23, For other enrollees (e.g., new hires and special enrollees), the obligation to provide an SBC does not apply until the first plan year beginning on or after September 23, For example, in a calendar-year plan, a new hire enrolling as of October 1, 2012 does not need to be provided with an SBC in connection with the initial enrollment, but if the same plan holds open enrollment for 2013 in November 2012, an SBC must be provided in connection with that open-enrollment period. Who is required to provide the SBC and who is entitled to receive it? In an insured plan, both the insurer and the plan administrator are obligated to provide If you have up to 25 employees, pay average annual wages below $50,000, and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-profits) to offset the cost of your insurance. This will bring down the cost of providing insurance. Under the health care law, employer-based plans that provide health insurance to retirees ages can now get financial help through the Early Retiree Reinsurance Program. This program is designed to lower the cost of premiums for all employees and reduce employer health costs. Starting in 2014, the small business tax credit goes up to 50% (up to 35% for non-profits) for qualifying businesses. This will make the cost of providing insurance even lower. Employers with fewer than 50 employees are exempt from new employer responsibility policies. They don t have to pay an assessment if their employees get tax credits through an Exchange. the SBC, although compliance by either of them will be treated as compliance by both. In a self-funded plan, the plan administrator must provide the SBC (or contract with someone else to provide it). The SBC for a benefit package generally must be provided to each participant and beneficiary (e.g., eligible spouse or dependent) who is eligible for that benefit package, although a single SBC may be provided for all participants and beneficiaries who reside at the same address. When must the SBC be provided? If a participant is required to enroll for coverage or has the opportunity to make coverage or enrollment changes, the SBC must be provided at the time written (including electronic) enrollment materials are distributed. If there are no written enrollment materials, the SBC must be provided by the first date on which the participant is eligible to enroll. If coverage is automatic, the SBC generally must be provided at least 30 days before the beginning of the plan year. In the case of a special enrollee, the SBC must be provided within 90 days after enrollment. An SBC must be provided as soon as possible (no later than 7 business days) after it is affirmatively requested....continued on page 10

10 Page 10 Volume 5, Issue 8 EMPLOYERS NEED TO KNOW ABOUT ACA...CONTINUED FROM PAGE 9 What must be included? There is a standard format for the SBC that must be used. There are 12 categories of required content, including things like cost sharing, limitations and exclusions, continuation coverage, provider networks, formularies, examples, and a link to a uniform glossary of common terms. Premium information is not required to be included. A template for the SBC, along with detailed instructions and a sample completed SBC, is available on the DOL website at ebsa/healthreform, under the heading Summary of Benefits and Coverage and Uniform Glossary. In general, the template format must be used. What if there are changes in plan coverage? If there is any material modification in plan coverage during the plan year and that modification affects the information disclosed in the SBC, a notice of modification generally must be provided at least 60 days in advance of the effective date of the change. Material modifications include both reductions in coverage and enhancements to coverage. How must the SBC be provided? Like most disclosure rules, the regulations contemplate that the SBC will be provided in hard copy, but there are some exceptions. An SBC may be provided electronically in connection with online enrollment or renewal of coverage. In addition, for individuals already covered under a plan, the SBC may be provided electronically under the same standards that apply to electronic distribution of other plan materials, such as the SPD, and for individuals who are not already covered under a plan, the SBC may be provided electronically if the format is readily accessible. In all cases, individuals must have the right to receive a paper copy of the SBC upon request, free of charge. As a general rule, the SBC must be provided as a stand-alone document. It is permissible to include the SBC with an SPD, but only if (1) the SBC is placed at the beginning of the SPD, and (2) the SPD is distributed at least as frequently (and in the same manner) as the SBC is required to be distributed. Is there a penalty for failing to comply? The law imposes a specific penalty of up to $1,000 for each willful failure to provide an SBC to an individual. The SBC rules also are part of the broader group of health care reform mandates that are subject to a $100 per day, per failure penalty under the tax code. The IRS and DOL are expected to provide further guidance on how these two penalties will be coordinated, but the IRS has said it will enforce the $100 per day penalty until further notice.

11 Legislative Update Page PLATFORM ON IMMIGRATION ADOPTED BY REPUBLICAN NATIONAL COMMITTEE Republicans are attempting to balance their party's disparate opinions on immigration by taking a tough stance on illegal immigrants in the United States while at the same time calling for a new temporary foreign worker program. The Republican National Committee's 2012 platform on immigration, adopted on August 21, calls for a "legal and reliable source of foreign labor through a new guest-worker program." The proposed temporary worker program has come under criticism before by critics who say that illegal immigrants are taking jobs from Americans. Businesses, like those who are part of the Kansas Business Coalition, dispute that statement, saying there are many jobs (like roofing, fruit-picking and meat-packing) that Americans won't do. The Republican platform also seeks longterm detention for "dangerous but undeportable aliens" and proposes to make gang membership a deportable offense. The inclusion of a guest-worker program in the GOP platform marks a victory for business-oriented Republicans who are worried that a strict "enforcement-only" approach to immigration will ruin certain industries, such as agriculture, which relies heavily on undocumented immigrant labor. "We are a party that recognizes that illegal means illegal," said Kansas Secretary of State Kris Kobach, a platform committee member and outspoken immigration hardliner who was behind Arizona's tough immigration law. "If you want to open a job tomorrow, you can remove an illegal immigrant today." Kobach's considerable influence was on display at the Republican platform committee meeting, as he shot down several suggestions from other members who questioned the necessity of mandating electronic verification of workers or asked for market-based quotas on foreign workers. At Kobach's request, the committee added language to the platform calling for mandatory electronic verification of workers, a border fence, and an end to "sanctuary cities" and in-state tuition for illegal immigrant college students. Bright & Carpenter Consulting, LLC. 825 S Kansas Ave. Ste. 502 Topeka, KS Many business leaders want more than a guest-worker program. Texas has advocated work visas for undocumented immigrants who are already in the country. But that idea goes too far for GOP members who are squeamish about giving any legal status to illegal aliens.