The Good, the Bad and The Ugly of EOBRs

truck at weigh stationA professional trucker for 30 years, Dick Pingel usually hauls sausage and cheese out of his home state of Wisconsin. He’s covered three and a half million miles in his career and never had a chargeable accident – and he’s pretty unhappy about the EOBR mandate.

Quoted in The Atlantic magazine’s article, Haulin’ Data: How Trucking Became the Frontier of Work Surveillance, he says, “They’re forcing me to put something in that’s not gonna help me any. And they keep saying, ‘Well, it saves you time…’ You know, I can do a lot. I can write up a log book in the same amount of time that it takes me to program what I’m doing into the EOBR.”

Pingel’s not alone. The move toward mandating EOBRs (a.k.a. electronic logging devices or ELDs) ranks high in the top five problems of both owner/operators and fleet-owners, according to polls by Overdrive Magazine and the American Transportation Research Institute.

The problems revolve mostly around their use being required by law and less around the devices themselves, which record driving time, manage HOS log data, and support driver log inspections.

The Bright Side of EOBRs

But unhitch the devices from the aggravation around the mandate, and it’s possible they could be a force for good, improving fuel efficiency, productivity and making logging a little easier. In the same Atlantic article, another thirty-year veteran of trucking makes the case for EOBRs. Cliff Downing claims that the device has benefitted him financially.

“My gross revenues have been up year over year, each year since using electronic logs,” he says. “Now is it due to electronic logs? Not the machine itself, it’s the efficiency that’s been forced onto us by the machine.”

Detention Time Leverage for Drivers?

Acknowledging his own resistance to the EOBR mandate lemons, owner-operator Henry Albert thinks drivers could make lemonade from the rule.

He believes that the FMCSA envisioned the fourteen-hour rule as a way to combat the detention issues that drivers face at the dock. The agency has no authority over shippers and realizes that detention time is a major fatigue issue. Albert guesses that FMCSA’s thinking is that if drivers had more limited ability to make up for delays caused by shippers and consignees, the practice of detaining drivers would be eliminated.

So far that hasn’t panned out, but Albert thinks EOBRs will further force drivers to watch their time – under penalty of law – which may finally force shippers and dispatchers to better respect drivers’ time.

Imagining a world where EOBRs are in virtually every truck, he says, “shippers would be calling dispatch wondering where their shipments are. Dispatchers would be calling drivers and asking, ‘Why didn’t you make it to your destination?’ Here’s the beauty…the driver would simply respond to dispatch saying ‘I was out of hours.’”

Who Does the EOBR Mandate Affect?

Drivers who must file a record of duty status (RODS) are subject to the rule as it currently stands. That totals  3.4-million drivers, including 1.7-million owner-operators according to this article on FleetOwner.com.

Where the Legislation Stands

There’s been no mandate finalized, but the FMCSA is expected to re-publish the rule in early 2014, after taking input on how to protect drivers from pressure to work in violation of safety regulations. Industry insiders anticipate a one- or two-year grace period before enforcement begins.

EOBR Options for Drivers and Fleets that Want to Get Ahead of the Mandate

By combining wireless technology and cloud computing software (software that’s accessed via the Internet instead of being installed on your computer), companies are now able to develop products that are much less expensive. On-board computers are no longer necessary, and special hardware can be replaced by a driver’s smartphone or tablet.

Versus the two to three hours installation used to take, it’s now done in five minutes. Christian Schenk, VP of market development and product marketing for XRS Corp predicts that when the new rule hits, there won’t be enough qualified techs to install the number of traditional onboard computers needed to handle all the demand. A brief install will be a nice advantage.

After the initial software purchase (which for example is $600 for the Turnpike product from Xata), monthly fees can be as low as $30. Qualcomm and XRS Corp also offer logs that can be used on smart phones and tablets.

Pitfalls to Look Out For

Certification – With the law mandating a device for such a large industry, the number of companies competing for the business will likely skyrocket – and a few years is a short time to have EOBR solutions ready to supply that will be truly compliant and meet massive demand.

How many of those companies will be able to manufacture a device that actually serves drivers and fleet owners in following the law remains to be seen. Whether or not the government gets into the business of certifying these devices, companies will need to do their homework on a vendor. “The key component is the company behind the device. The software is the easy part; the hard part is staying up on the regulations and changing rules.”

Data Transfer – How will electronically-logged data be transferred to law enforcement during an inspection? Transferring via a wireless connection is one option, or handing the device to the officer and letting him read it off the screen. Some suppliers are considering a USB stick, or sending info via the telematics provider, where the data would be transmitted to the provider’s server and then transferred to the enforcement agency’s system and then back down to the patrol car.   But all this is dependent on what’s compatible with law enforcement systems.

Steve Keppler, executive director of the Commercial Vehicle Safety Alliance: “Agencies don’t have a lot of money around to buy the newest technologies…The rule needs to be able to account for the differing levels of technology in the field.”

 

How Will Health Care Reform Affect You and Your Taxes?

This guest blog post comes from Esta Klatzkin, a tax and financial consultant who specializes in providing tax accounting and financial services to Owner/Operators, contract haulers, and other long-distance truck drivers in the transportation industry. Learn more about Esta and her company, kNOw TAXES, by clicking here.

It’s massive, and it’s complicated. At more than 2,400 pages, the Affordable Care Act (ACA for short) has left businesses and individuals confused about what the law contains and how it affects them.

The aim of the law is to provide affordable, quality health care for all Americans. To reach that goal, the law requires large companies to provide health insurance for their employees starting in 2015, and uninsured individuals must get their own health insurance starting in 2014. Those who fail to do so face penalties.

Insurance companies must also deal with new requirements. For example, they cannot refuse coverage due to pre-existing conditions, preventative services must be covered with no out-of-pocket costs, young adults can stay on parents’ policies through age 26, and lifetime dollar limits on health benefits are not permitted.

The law mandates health insurance coverage, but not every business or individual will be affected by this requirement. Here’s an overview of who will be affected.

For Businesses – It’s all in the numbers

  • Fewer than 50 employees

Companies with fewer than 50 employees are encouraged to provide insurance for their employees, but there are no penalties for failing to do so. A special marketplace will be available for these businesses, allowing them to buy health insurance through the Small Business Health Options Program (SHOP).

  • Fewer than 25 employees

Small companies that pay at least 50% of the health insurance premiums for their employees may be eligible for a tax credit for as much as 35% of the cost of the premiums. To qualify, the business must employ fewer than 25 full-time people with average wages of less than $50,000. For 2014, the maximum credit increases to 50% of the premiums the company pays, though to qualify for the credit, the insurance must be purchased through SHOP.

  • 50 or more employees

For companies with 50 or more full-time employees, the requirement to provide “affordable, minimum essential coverage” to employees has been delayed for one year and is not required until 2015. Originally, employers had been required to file information returns that reported details about the health insurance they provided, with penalties to apply if the insurance did not meet standards. Companies complained that they needed more time to meet the reporting obligations, and in response the IRS made the reporting requirement optional for 2014. Without the reporting, the IRS could not determine penalties, so the penalties also were postponed for a year.

Bottom line: the IRS is encouraging companies to comply in 2014 even though there are no penalties for failure to do so.

  • The business play or pay penalty

Starting in 2015, companies with 50 or more employees that don’t offer minimum essential health insurance face an annual penalty of $2,000 times the number of full-time employees over a 30-employee threshold. If the insurance that is offered is considered unaffordable (it exceeds 9.5% of family income), the company may be assessed a $3,000 per-employee penalty. These penalties apply only if one or more of the company’s employees buy insurance from an exchange and qualify for a federal credit to offset the cost of the premiums.

For Individuals – It’s all about coverage

Currently, attention is focused on the health insurance exchanges or “Marketplace” that opened for business on October 1. Confusion about the Affordable Care Act has left many people thinking everyone has to deal with the exchanges. The fact is that if you are covered by Medicare, Medicaid, or an employer-provided plan, you don’t need to do anything.

Also, if you buy your health insurance on your own and are happy with your plan, you can keep your coverage. However, the only way to get any premium-lowering tax credits based on your income is to buy a plan through the Marketplace.

  • The Exchanges (Marketplace)

Each state will either develop an insurance exchange (Marketplace) or use one provided by the federal government. The Marketplace will allow those seeking coverage to comparison shop for health plans from private insurance companies.

There will be four types of insurance plans to choose from: Bronze, Silver, Gold, and Platinum. The more expensive the plan, the greater the portion of medical costs that will be covered. The price of each plan will depend on several factors including your age, whether you smoke, and where you live.

Many individuals will qualify for federal tax credits which will reduce the premiums they actually pay. Each state’s Marketplace will have a calculator to assist individuals in determining the amount, if any, of their federal tax credit.

  • The individual play or pay penalty

If you’re one of the 45 million or so Americans without health insurance, you will need to get coverage for 2014 or pay a penalty of $95 or 1% of your income, whichever is greater. Low-income individuals may qualify for subsidies and/or tax credits to help pay the cost of insurance.

The penalty increases to $325 or 2% of income for 2015 and to $695 or 2.5% of income for 2016. For 2017 and later years, the penalty is inflation-adjusted. Those who choose not to be insured and to pay the penalty instead will still be liable for 100% of their medical bills.

Note: If you will be shopping for health insurance on the Marketplace, be aware that there’s no need to rush to enroll; the enrollment period runs from October 1, 2013, through March 31, 2014. Take the time you need to review your options and select what’s best for you and your family.

More About the Law and Your Taxes

In addition to the penalties required by the Affordable Care Act, the law made other tax changes that could affect you. Among them are the following:

  • Annual contributions to flexible spending accounts are limited to $2,500 (indexed for inflation).
  • The 7.5% adjusted gross income threshold for deducting unreimbursed medical expenses increases to 10% for those under age 65. Those 65 and older can use the 7.5% threshold through 2016. The additional tax on nonqualified distributions from health savings accounts (HSAs) is 20%, an increase from the previous 10% penalty.
  • The payroll Medicare tax increases from 1.45% of wages and self-employment income to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. This rate increase applies only to the employee portion, not to the employer portion.
  • A 3.8% Medicare surtax is imposed on unearned income (examples: interest, dividends, capital gains) for single taxpayers with income over $200,000 and married couples with income over $250,000.

The Affordable Care Act may be one of the most complicated and confusing laws ever passed, but one thing is very clear: the law will affect the taxes of most Americans. In order to manage your tax bill, you will have to factor the new health care rules into your overall personal and business tax planning. For guidance, contact our office at (818) 345-7456.

To begin checking out your state’s exchange (Marketplace), start at www.healthcare.gov – the federal government’s website on the Affordable Care Act.

NOTE: This Memo is intended to provide you with an informative summary of the tax issues connected with the Affordable Care Act. This massive package of legislation contains varying effective dates, definitions, limitations, and exceptions that cannot be summarized easily.