Growing Magazine - January, 2013
Regulatory Issues Facing Growers in 2013
During the coming year, growers will encounter new regulations, as well as expected changes to a number of current rules.
High school and college students, family members and Mexican immigrants work side by side with Art King at his Valencia, Pa., farm to bring in the harvest.
Photo by Bob Ferguson.
Top, Tamar Jacoby, president and CEO of ImmigrationWorks USA, strives to educate the public and bring foreign workers more realistically in line with the country's labor needs.
Photo court esy of ImigrationWorks USA.
Middle, The Produce Marketing Association's vice president of government relations and public affairs, Kathy Means, directs their information and education efforts on a wide range of produce issues.
Photo courtesy of the Produce Marketing Association.
Bottom, Robert Guenther, senior vice president of public policy, leads policy development efforts for the United Fresh Produce Association.
Photo courtesy of the United Fresh Produce Association.
While many of the provisions of the Affordable Care Act come into play in 2014, some of the new rules mandate requirements for certain employers in 2013. In addition, several of the changes to health care that will be implemented in 2014 demand planning or decision-making in 2013.
The Food and Drug Administration's (FDA) Food Safety Modernization Act (FSMA) made sweeping reforms to the food safety laws. These affect production, handling, transport and tracing. On January 4, 2013, the FDA announced proposals of the rule for standards for growing, harvesting, packing and holding of produce, as well as the rule on good manufacturing practice and hazard analysis and risk-based preventive controls.
The shortage of agricultural workers, coupled with the H-2A rules and E-Verify requirements of numerous states, has continued to hamper production and harvesting. However, many feel that the time is right for immigration reform in 2013.
Health care reform changes
Signed by President Obama on March 23, 2010, the new health care policies of the Patient Protection and Affordable Care Act affect individual growers and their employees. The law is also known as Obamacare and the Affordable Care Act (ACA).
Among the centerpieces of the ACA are the health exchanges, designed as online marketplaces to shop for health insurance by comparing costs and coverage, and to apply for tax subsidies. The time to begin the open enrollment, according to the Department of Health and Human Services (HHS) chart (www.healthcare.gov/law/timeline), is in fall 2013, with the health exchanges operational by January 2014. Twenty-five states have opted to default to the federal exchange and seven have decided to plan for a partnership exchange with the federal government. Eighteen states and the District of Columbia have declared for a state-based exchange. Of those, nine states and D.C. plan a quasi-governmental exchange, while nine states are planning to operate the exchange. The Kaiser Family Foundation provides information on the states at www.statehealthfacts.org. Mandated health insurance is enforceable in 2014.
The Internal Revenue Service (IRS) administers the tax law provisions. The ACA requires employers that provide health care to employees to report the cost of that health coverage. For the 2012 W-2 forms provided to employees in January 2013, this requirement is optional for employers who filed fewer than 250 W-2 forms for calendar year 2011. However, employers who filed 250 or more W-2 forms in 2012 for 2011 must include on the 2012 W-2 forms both the employer cost of the employee health care and the portion paid by the employee. IRS instructions state to report it in box 12, code DD. IRS Notices 2010-69, 2011-28 and 2012-9 set forth these requirements, and IRS instructions for 2012 Form W-2 detail how to report. The IRS has additional tools, including a YouTube video, W-2 Health Insurance Reporting (www.youtube.com/watch?v=TFepqFnEj5I).
For the 2013 and 2014 tax years, small businesses can claim a tax credit. To be eligible, the business must cover at least 50 percent of the cost of single health care coverage for each employee. The employer must also have fewer than 25 full-time equivalent employees and pay average wages of less than $50,000 per year. For 2013 the maximum rate is 35 percent; an enhanced rate will be in effect in 2014. Additional guidance is available in IRS Notices 2010-44 and 2010-82.
Top, Kristi Boswell, director of congressional relations, specializes in labor matters for the American Farm Bureau Federation.
Photo courtesy of the American Farm Bureau Federation.
Bottom, Western Growers Assurance Trust's compliance counsel Jon Alexander shares his expertise on health care reform with a significant portion of the fresh produce industry.
Photo courtesy of the Western Growers Association.
Starting in 2014, rules will be in force on whether employers provide minimum value to their employees' health plans. These affect both the tax credit and the employer shared responsibility payment (a penalty). IRS Notice 2012-31 notes that an employer with over 50 workers may be liable for an assessable payment. While this notice discusses methods of calculating minimum value, final regulations had not been issued by press time.
The IRS website includes the Affordable Care Act Tax Provisions page (www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions), which provides further links on the minimum value, information reporting, small business tax credit and other information, such as the health flexible spending arrangements and prescription drugs.
Many of these rules are complicated. In addition, some of the regulations are interim, particularly for those applicable in 2014. Farm organizations, such as the American Farm Bureau Federation (AFBF), have been commenting on the temporary rules, particularly with respect to the unique position and needs of seasonal workers. At issue is the calculation of seasonal workers as full-time equivalent with mandated employer-provided health care. The AFBF's goal is for the regulations to have minimal impact on farm employers.
The Western Growers Association provides health care plans for its members and tracks the ACA's regulations. The association's website, www.wga.com, highlights this issue and others that impact the produce industry. A November 26 webinar, led by the Western Growers Assurance Trust's compliance counsel, Jon Alexander, detailed the reporting requirements of IRS for the W-2 forms. Outlining the nuances of the requirements, Alexander discussed flexible spending accounts, calculation methodologies such as the COBRA premium, and situations such as whether or not W-2s are required for midyear retirees. He directed participants to the IRS guidelines at www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage. Watch the recorded webinar and access the PowerPoint slides here: http://bit.ly/VTF2Od.
The FSMA, signed on January 4, 2011, was designed to emphasize prevention rather than regulation. Even so, implementation will require numerous rules that encompass the entire food chain.
As noted, the FDA announced two proposed rules on January 4, 2013. One covers the safety standards for growing, harvesting, packing and holding of fruits and vegetables. It focuses on areas of risk for microbial contamination, including agricultural water, biological soil amendments, worker training on health and hygiene, domesticated and wild animals, equipment, tools and buildings, and measures for growing sprouts.
The other proposed rule, on preventive controls, applies to facilities that manufacture, process, pack or hold human food. This proposed rule requires a written food safety plan to include hazard analysis, risk-based preventive controls, monitoring procedures, corrective actions, verification and record-keeping.
Both rules are scheduled to be published in the Federal Register on January 16, 2013. The rule-making process provides for comments - which the FDA encourages - due 120 days after publication in the Federal Register. Both rules are accessible on the Federal Register website, www.federalregister.gov. Searches using the keywords "produce" and "good manufacturing practice" should access the lengthy rules.
In addition, the FDA will schedule at least three public meetings on the rules in various geographic locations prior to the end of the comment period. At this writing, the locations and dates have not yet been announced.
Michael R. Taylor, FDA deputy commissioner for foods and veterinary medicine, has noted that preventive controls involve striking the right balance between specificity and flexibility. He said, "We know one-size-fits-all rules won't work. We've worked to develop proposed regulations that can be both effective and practical across today's diverse food system."
The proposed rules provide a qualified exemption and modified requirements for farms of certain sizes with qualified end users. Also, the rules provide for exclusion of certain low-risk foods that are rarely consumed raw, and of produce that receives commercial processing such as canning. The FDA can withdraw exemptions, however, in an outbreak investigation or if food safety conditions warrant.
The Produce Safety Alliance (PSA), with the FDA and the USDA, has been developing nationwide curricula on preventive controls. With its 10 working committees, the PSA and several other sources will conduct educational outreach programs, including webinars. Betsy Bihn, PSA director, said, "The attention should not be on the regulation, but on the importance of produce safety and how every farmer who grows fresh produce can be actively engaged in reducing risks on the farm so they can put effective practices in place."
The produce industry has long supported efforts to enhance food safety. Kathy Means, vice president of government relations and public affairs for the Produce Marketing Association, said, "Our members support produce safety, and we want a level playing field to ensure it. The produce rule needs to be workable and have science-based, scalable standards and risk assessments."
Robert Guenther, senior vice president of public policy, United Fresh Produce Association, said, "We want a fair produce rule with balance in practices and risk assessment. It's a big challenge. How it is implemented will be significant."
The FSMA also mandates effective product tracing throughout the supply chain. Pilot studies, contracted through the Institute of Food Technologists, were submitted to the FDA in June 2012. The FDA chose to study fresh tomatoes and a frozen kung pao-style dish containing chicken, red pepper spice and peanut products, plus jarred peanut butter and a packaged peanut/spice product. Scheduled for January 2013, the FDA's proposed rule on traceability has not yet been announced at this writing. That rule-making will also require the comment period and public meetings.
Forthcoming FDA rules will also require importers to verify that their imported food is produced in accordance with the U.S. requirements on preventive controls and produce standards. Although the FDA may use third-party certification, a foreign supplier safety assurance program is mandated.
Updates on the FSMA can be accessed at www.fda.gov/fsma.
Labor and immigration
Growers and agricultural groups have been clamoring for a workable, legal solution to agriculture's labor situation for years. The domestic workforce has not filled the need for seasonal workers, regardless of high unemployment and the various programs put in place. Put simply, growers say that migrant labor is essential to perform the agricultural chores of planting, harvesting and packing.
The AFBF estimates that 60 to 70 percent of the agricultural labor force is undocumented.
E-Verify, a program of the Department of Homeland Security, U.S. Citizenship and Immigration Services and the Social Security Administration, allows employers to determine the eligibility of their employees to work in the U.S. via the Internet. Several bills have been introduced in the U.S. Congress to make the program mandatory, but they have not been enacted.
Several states have passed restrictive E-Verify legislation. Even documented seasonal workers have avoided those states, resulting in considerable crop losses. Nineteen states have some form of E-Verify requirements. The National Conference of State Legislatures' website (www.ncsl.org) details the history and extent of the state actions.
Growers report that neither E-Verify nor the H-2A program has provided relief. Administered by the Department of Labor (DOL), H-2A allows employers to admit foreign workers on a temporary visa basis for agricultural work. However, employers charge that the program is cumbersome, costly and unworkable. Kristi Boswell, an AFBF director of congressional relations, states, "It appears that DOL has made it a priority to investigate growers using the H-2A program." Growers report being subjected to extensive investigations and audits not directly related to the program.
Boswell said, "Agriculture has unique needs. It needs a legal, stable labor force." Moreover, she emphasized, "Agriculture needs a legislative solution - by statute." She's now more hopeful of positive change, and pointed out that various agricultural groups that have been split in the past are now working together for a flexible, market-based solution for all of agriculture.
Tamar Jacoby, president and CEO of ImmigrationWorks USA, agreed that the present rules and programs work poorly. She said that mandatory E-Verify will not work unless we fix the immigration system to get workers legally. She added that for a decade, there was some momentum to tackle the whole problem of seasonal labor shortage and obtain some relief, but she said, "If it was a big package, it failed."
She suggests that it may be more effective to use the emerging new model of rectifying immigration reform in a series of small pieces to solve some problems and eventually move to the bigger piece.
"For years, groups were divided. They were in different camps. It was like a blood feud - even to the extent of taking out full-page newspaper ads attacking each other," Jacoby said. "They all had the same problem of getting workers, just different ideas on how to make changes to the system and handle implementation. Animosity was not a good answer."
Jacoby is encouraged by the current political debate about agricultural labor and by greater unity in the agricultural community. "It sets the stage well," she said.
To the big question of when Congress will resolve immigration reform, she replied, "There's a good chance in the coming year."
The author is a writer/researcher specializing in agriculture. She currently resides in central Pennsylvania.
Editor's note: "All Hands on Deck: A look at seasonal labor options" in our February 2012 issue highlighted the experiences of growers nationally. Read it online at: www.growingmagazine.com/article-7791.aspx.
Updates on the issues in this article will be posted online at www.growingmagazine.com.