Rethinking How We Define and Track Workforce Diversity

Courtesy of Dana Theus, SmartBrief

Diversity is now reported to be the No. 1 recruiting trend for 2018 for businesses. However, despite decades of trying to improve workforce diversity in the workplace, the commercial sector has yet to make much progress. Even though there are few signs of statistical progress, the workforce diversity discussion seems to be moving on and evolving anyway.

Specifically, it is exploring the question of why diversity matters at all, and what kind of diversity matters most when it comes to building an effective workforce.

Evolving the workforce diversity discussion

It’s worth stepping back to look at what “diversity” means in the 21st century. “I’ve always defined diversity as ‘any differentiation between one person and another,’” says Michael Hyter, managing partner of the Korn Ferry Washington, D.C., office. “We’re all a stew of experiences and talents. To leverage those different talents, companies must be inclusive of these differences.”

Hyter makes the point that these differences don’t always break out into a few neat categories. For example, “[g]enerational differences cut across all other categories. The way a 25-year-old black woman views the world and the way a 45-year-old black woman views the world are completely different.” Along with his leadership responsibilities in the D.C. office, Hyter manages Korn Ferry’s diversity and inclusion practice.

In part to recognize these kinds of differences, diversity discussions founded decades ago in social justice objectives have evolved beyond simple categories. Diversity explorations have also expanded as research has found strong correlations between improved business results and diversity on teams, in leadership and in the workplace at large.

Such research underlies a strong business case for continuing to seek ways of building diverse workforces, not just because hiring women and minorities is “the right thing to do,” but also because it’s “good for business.” As the reasons for building a diverse workforce expand, so does the idea of what kind of diversity produces such improved results. Together, these trends generate new and better ways of thinking about diversity overall.

Traditional definitions of diversity stem from the civil rights movement’s benefits of a workforce with diverse external characteristics like race, ethnicity and binary gender expression. Newer ways of examining the workforce diversity question, however, still reference these demographic categorizations but are more motivated by the demands for employee populations to be innovative in order to keep up with the speed of disruption. This has given birth to new definitions of diversity itself, including experiential, age and cognitive (or thought)diversity.

New voices (especially millennials) in the diversity discussion have noticed that groupthink and undynamic work cultures can persist even in externally diverse groups, potentially dampening an organization's’ potential to respond creatively and quickly to external market changes. Thus the question has been raised, regardless of what the people around the table look like on the outside, is a team’s potential to respond innovatively more affected by what each participant carries on the inside? And does the company culture invite these inner strengths forward or shut them down (i.e., force people to “cover” aspects of themselves)?

Should we expand our definition of workforce diversity?

In researching the wisdom of including aspects of personality, experiential and cognitive endowments in our workforce planning dialogs, I’m truly divided on whether and how to start adding these new dimensions of diversity into the discussion.

The upside of an expanded definition of diversity seems obvious if it can lead us to find sound business reasons to be even more inclusive of people who have been shut out of the system due to unconscious bias. It gives us reasons to encourage budding trends towards greater inclusion for people regardless of military work history, marital status, genetic proclivities, personality type, gender expression and dis/ability status1.

As the research showing business benefits indicates, evolving our concept of diversity provides individual leaders an expanded lens through which to examine their own leadership style and potential for unconscious bias. It provides sound business reasons to invite everyone on the team (regardless of their race, gender or extrovertism) to participate fully in conversation and problem-solving. For organizations, it provides a new challenge for us to grow our leaders to become more aware of their biases and give them tools to challenge themselves to grow beyond them.

As Hyter advises, “Effective leadership has always been about managing each individual based on what they’re interested in and what they bring. Even when your employees look the same, good leaders don’t manage them as though they are the same.”

On the other hand, and this is my major hesitation about expanding definitions of diversity, I am concerned that such an evolution has the potential to water down, if not shut down, efforts to pursue the social justice that is inherently buoyed within genuinely multicultural and gender-equal groups. I worry that by shifting the conversation to what we carry inside that makes us diverse, we may decide we no longer need to measure and strive for a workforce that looks diverse on the outside.

In redefining what a diverse workplace looks like, I worry that it will give the leaders who’ve made the least progress, and who are unwilling to be introspective, an excuse not to take unconscious bias and workplace discrimination head-on.

In short, I am afraid that headlines like “demographic diversity isn’t the whole picture” could be read by some as a reason to step away from efforts toward workplaces that aspire to simple civil rights for their employees.

Hyter agrees. “Representation of women and people of color in the C-suite is embarrassingly low. No executive gets a pass on race and gender diversity in favor of abstract ideas of diversity such as cognitive or personality differences. We can’t let core definitions of diversity become collateral roadkill in our pursuit of truly diverse business cultures.”

It’s far too early to allow such collateral damage to be done to traditional metrics of diversity. For one thing, our access to data even in these basic race/gender categories is seriously lagging. In addition, says Hyter, “Even these basic categorical differences can be enlightening when you look at more granular data than number of people interviewed or employed.”

According to Hyter, when you look for race, gender and veteran statistics in analyses such as employee engagement, customer complaints, interview-to-hire ratio and employee turnover you can see some very dramatic trends that show you where you can improve. “As I told one CEO, ‘If you’d kept every black and brown person you’d ever hired over the last few years, we wouldn’t be having this conversation,’” Hyter shared wryly.

As we reframe the workplace diversity we seek, we must be vigilant and ensure that the discussion is an expansion, instead of an excuse to leapfrog, the harder cultural problems that obscure unconscious bias, racism, sexism and discrimination against all kinds of people in our workplaces today.

1Employment is up in all these sectors, though it’s unclear whether the generally positive employment environment is simply lifting all boats.

By Dana Theus, president and CEO of InPower Coaching. An executive coach and thought leader on change, she cracks the code on personal power in the workplace. In addition to her private practice, Theus helps organizations bring emotionally intelligent coaching services to middle management through facilitation, consulting and group coaching. Follow her on Twitter @DanaTheus and on LinkedIn.

DOL’s New Disability Plan

Courtesy of Seyfarth Shaw

The Department of Labor’s new regulations governing disability claims and appeals published on December 19, 2016 will go into effect on April 1, 2018, as announced by the DOL on January 5, 2018.

The stated purpose of the new regulations is to strengthen the current disability claims rules under ERISA primarily by adopting certain procedural protections and safeguards applicable to group health plans under the Affordable Care Act. The new regulations were originally effective as of January 18, 2017, but were intended to apply only to disability claims filed on or after January 1, 2018. After a short delay by the DOL, the regulations now will apply to claims filed on or after April 1, 2018. The DOL announced that comments received during the delay did not establish that their “final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.” This clearly establishes the April 1, 2018 effective date and there is unlikely to be another extension.

What Do the Final Rules Require?

The final regulations make several substantive changes to the existing regulations applicable to disability claims and appeals:

  • To ensure the independence and impartiality of claims and appeals decision-makers, any decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical expert) must not be made based on the likelihood that the individual will support a denial of benefits.
     
  • Adverse benefit determinations must:
    • Include a discussion of the decision, with the basis for disagreeing with the views or decisions of any treating health care professionals, vocational experts, or other payers of benefit who granted the claimant’s similar claims (including disability determinations by the SSA);
    • Include the plan’s specific internal rules, guidelines, protocols, standards, or other similar criteria relied upon in making the adverse determination or, alternatively, a statement that such plan rules, guidelines, protocols, standards or other similar criteria do not exist;
    • Include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim (previously, this statement was only required for adverse determinations at the appeals stage);
    • Be provided in a culturally and linguistically appropriate manner; and
    • Describe (in addition to the claimant’s right to bring an action under ERISA §502(a)) any applicable contractual limitation period that applies to the claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires.
       
  • A plan’s disability claims procedures must:
    • Allow a claimant to review the claim file and present evidence and testimony as part of the claims and appeals process;
    • Provide that the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan (or at the direction of the plan) in connection with the claim. Such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to give the claimant a reasonable opportunity to respond before that date; and
    • Provide that before a plan administrator can issue an adverse benefit determination on review based on a new or additional rationale, the plan administrator must provide the claimant, free of charge, with the rationale. Such rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to give the claimant a reasonable opportunity to respond before that date.
       
  • Failure to establish or follow claims procedures consistent with the new (and existing) requirements will result in the claimant being deemed to have exhausted the administrative remedies under the Plan and entitled to pursue any available remedies under ERISA §502(a). When this occurs, the claim or appeal will be deemed to have been denied on review without the plan fiduciary exercising any discretion, unless the violation is de minimisDe minimis errors are those that:
    • Do not cause, or are not likely to cause, prejudice or harm to the claimant;
    • Were violations for good cause or due to matters beyond the control of the plan;
    • Occurred in the context of an ongoing, good faith exchange of information between the plan and claimant; or
    • Are not part of a pattern or practice of violations by the plan.


In the event of any error, the claimant may request a written explanation from the plan, including a specific description of the plan’s bases, if any, for asserting that the error is de minimis and should not result in deemed exhausting of administrative remedies. The Plan must provide this written explanation, if requested, within 10 days. The claimant may then decide whether or not to pursue remedies under ERISA §502(a). If a court rejects a claimant’s request for immediate review on the basis that the Plan’s error was de minimis, the claim shall be considered as re-filed on appeal upon the Plan’s receipt of the court’s decision, and the plan must provide the claimant with notice of the resubmission within a reasonable period of time.

  • The term “adverse benefit determination” will include any rescission of disability coverage with respect to a participant or beneficiary (whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time.) For this purpose, rescission means a cancellation or discontinuance of coverage that has retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.

Impact on Employee Benefit Plans

These regulations will change the manner in which disability claims and appeals are processed with respect to both disability welfare plans and retirement plans.

Welfare

If your long-term disability plan is fully insured, the insurer will be incorporating the new regulatory requirements into their processes. For those sponsors with self-funded long-term disability plans, the third party administrator will similarly have to modify its internal processes to incorporate the new regulations. (Note that short term disability plans are not generally subject to these regulations as they are typically an exempt payroll practice, not subject to ERISA.)

Retirement

Retirement plans may also be impacted by the final regulations if, upon a disability, the plan either pays a distribution inservice or vests accrued benefits. In these cases, a determination must be made as to whether the participant has incurred a disability within the meaning of the plan. Where the plan relies on a definition of disability as a determination made by the Social Security Administration or the plan sponsor’s long-term disability insurer, then the retirement plan administrator does not have a concern. However, if the determination of disability resides with the retirement plan administrator, the retirement plan must be amended to reflect the standards in the new regulations and administration must also be adjusted accordingly.

Action Items:

  • Employers who handle disability claims and appeals internally will need to re-evaluate their existing procedures and tailor them to the new requirements. Even employers who utilize third-party administrators for disability claims and appeals will need to work with their third-party administrators to ensure that any necessary changes are incorporated into existing procedures.
  • All plan sponsors will need to review their plan documents and update as appropriate to reflect these new regulations.
  • Plan administrators will need to ensure that summary plan descriptions reflect the new regulatory requirements.

By Diane V. DygertBrian W. Barrett

8 Questions Employees Are Still Asking About ACA 1095s

Courtesy of International Foundation of Employee Benefit Plans

For the third year in a row, the Affordable Care Act (ACA) 1095 forms are ready and going out to employees. This form still confuses many employees. You’re going to get questions.

With the individual mandate disappearing this year as a result of the Tax Cuts and Jobs Act, employees may be more confused than ever. If you’re the one in charge of providing the answers, remember the best offense is a great defense. You’ll want to answer the most common questions before they’re even asked.

We’ve put together a list of some basic things employees will want to know about the 1095s they receive, along with sample answers. Tweak these Q&As as needed for your organization. Once you’ve assembled them, push them out to employees using every channel you can (mail, e-mail, employee meetings, company website, social media, posters). Tell employees how to get more detailed information if they need it.

Employee questions about the 1095s

  1. What is this form I’m receiving?
    A 1095 form is a little bit like a W-2 form. Your employer or insurer sends one copy to the Internal Revenue Service (IRS) and one copy to you. A W-2 form reports your annual earnings. A 1095 form reports your health care coverage throughout the year. 
  2. Who is sending it to me, when, and how?
    Your employer or health insurance company should provide one to you either by mail or in person. They may send the form to you electronically if you gave them permission to do so. You should receive it by March 2, 2018. 
  3. Why are you sending it to me?
    The 1095 forms will show that you and your family members either did or did not have health coverage during each month of the past year. Because of the Affordable Care Act, in 2017 every person had to obtain health insurance or pay a penalty to the IRS. 
  4. I thought the Affordable Care Act requirement to have health insurance was repealed. Do I still need this form?
    The Affordable Care Act was in effect for the entire year of 2017. IRS tax forms will still require you to report whether or not you had health coverage in 2017. 
  5. What am I supposed to do with this form?
    Keep it for your tax records. You don’t actually need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not you had health insurance for each month of 2017. The Form 1095-B or 1095-C shows if you had health insurance through your employer. Since you don’t actually need this form to file your taxes, you don’t have to wait to receive it if you already know what months you did or didn’t have health insurance in 2017. When you do get the form, keep it with your other 2017 tax information in case you should need it in the future to help prove you had health insurance. 
  6. What if I get more than one 1095 form?
    Someone who had health insurance through more than one employer during the year may receive a 1095-B or 1095-C from each employer. Some employees may receive a Form 1095-A and/or 1095-B reporting specific health coverage details. Just keep these—You do not need to send them in with your 2016 taxes. 
  7. What if I did not get a Form 1095-B or a 1095-C?
    If you believe you should have received one but did not, contact the Benefits Department by phone or e-mail at this number or address. 
  8. I have more questions—Who do I contact?
    Please contact Chris Freitas  at chris@KBIBenefits.com. You can also go to our website and find more detailed questions and answers. An IRS website called Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) covers most of what you need to know.

By Lois Gleason, Manager, Reference/Research Services at the International Foundation

Chronic Dispute: What The Sessions Marijuana Memo Means For Employers

Courtesy of Fisher Phillips

Attorney General Jeff Sessions issued a one-page memorandum yesterday rescinding Obama-era guidance that had allowed states to legalize medical and recreational marijuana with marginal federal interference, eliminating any doubt about his position against the trend towards legalization. The bad news is that the current state of the law regarding the legality of marijuana use remains confusing, to say the least: it is dependent on the state you are in, and while the legislatures and courts across the country continue to revisit and shape the laws at issue, marijuana continues to be classified as an illegal Schedule I drug pursuant to the Federal Controlled Substances Act. 

The good news for employers: yesterday’s memorandum doesn’t seem to have impacted your approach to the issue from a workplace law perspective. Where state law had permitted you to take a zero tolerance approach to those testing positive for marijuana, you can continue on the same course. And if you took a more relaxed approach—whether due to state law or your own company philosophy—you can likely carry on with business as usual. But there could be turbulence ahead, so you will want to get up to speed on the latest and pay close attention to the upcoming developments on this topic.

How Did We Get Here?

Currently, 29 states allow some form of medical marijuana use, while eight states and the District of Columbia permit recreational use. These numbers continue to grow each year, as public support for loosening restrictions on the drug continues to grow. For example, when California became the first state to vote in favor of legalizing cannabis for medical purposes in 1996, it passed with only 55 percent of the vote; when Florida became one of the most recent states to legalize medical marijuana in 2016, it passed with 71 percent. 

However, while the states continue to pass laws changing the legal status of marijuana use, the federal government has not. Marijuana has remained a Schedule I drug since 1970 when the Controlled Substances Act was signed into law by President Nixon. Since 1972, there have been repeated attempts to remove it from this classification, but none have been successful. In other words, while someone may be able to use marijuana legally for recreational use in Colorado, or for medical use in Pennsylvania, those who do are technically subject to federal penalties for violating the Controlled Substances Act. 

This direct conflict has made many employers wary of condoning marijuana use, regardless of their state law. Under President Obama, Deputy Attorney General James Cole issued guidance in August 2013 to all federal law enforcement personnel indicating that the government would take a fairly relaxed approach when it came to the conflict between federal and state law. The “Cole Memo” essentially concluded that the federal government would not focus its attention on enforcing marijuana related cases, but would instead focus on preventing distribution to minors, preventing marijuana revenue from being used to fund criminal enterprises (such as gangs or cartels), and preventing marijuana from moving into states where it is not legal. Congress followed suit by prohibiting the Justice Department from spending funds to prosecute marijuana patients and providers who are acting lawfully under state laws. Thus, under the Cole Memo and subsequent Congressional action, the federal government essentially agreed not to go after marijuana users.

This hands-off attitude no doubt prompted many states to feel more comfortable passing laws that permitted the legal use of the drug. Moreover, under this relaxed atmosphere, an entire industry of cannabis purveyors sprung up, especially in the states that passed recreational marijuana laws.

But with the election of President Trump, many wondered whether this hands-off policy would change. Even though President Trump indicated a support of state laws governing and permitting medical marijuana during the election campaign, his choice for Attorney General has been repeatedly vocal about his own opposition to all marijuana use. For example, Attorney General Sessions previously referred to marijuana as a “real danger” and “not the kind of thing that should be legalized,” and also stated that “good people don’t smoke marijuana.” It thus came as little surprise that in April 2017 Attorney General Sessions ordered his Justice Department to review the Cole Memo and make recommendations for possible changes. This lead to the issuance of the January 4, 2018 Sessions Memo. 

The Sessions Memo Means The Cole Memo Is Up In Smoke

The Sessions Memo was released just four days after California’s recreational marijuana law took effect, restoring the ability of federal prosecutors to enforce federal marijuana laws and effectively rescinding the Cole Memo. The Sessions Memo now allows U.S. Attorneys to use “well-established prosecutorial principles” and “investigative and prosecutorial discretion” to decide whether or not to enforce federal marijuana law, regardless of state legalization laws.

The Sessions Memo does not directly call for a crackdown on the prosecution of marijuana laws or indicate that the Department of Justice intends to do so in the future, but it reaffirms the Controlled Substances Act and reminds top federal authorities that marijuana is a “dangerous drug” and “marijuana activity is a serious crime.” Without more, the Sessions Memo simply rejects the special treatment of marijuana initially established by the Cole Memo, indicating a shift in the Department of Justice’s marijuana policy—and adding increased uncertainty as to the ongoing tug-of-war between state legalization and federal criminalization.

Employers Do Not Appear To Be Affected By Sessions Memo

The Sessions Memo will not likely have much of an effect on current state marijuana programs. In states where marijuana is unlawful, the Sessions Memo has no impact. In states where marijuana is legal, it is too early to tell how federal prosecutors will react to the Sessions Memo, but federal authorities are not likely to suddenly prioritize federal marijuana enforcement. Several state attorneys general have already released statements indicating that they will continue with the status quo despite the Sessions Memo.

Because of this, the Sessions Memo should not change your overall approach regarding how to deal with marijuana in the workplace. The Memo does not alter employer marijuana policies already in place, and does not impact employment marijuana policies in states where marijuana is legal. So far, courts have generally not required employers to accommodate marijuana use, and although there are some significant exceptions (most notably a July 2017 victory for medical marijuana users in Massachusetts), yesterday’s news does not alter that. And in those states that offer employment protections to medical marijuana users, yesterday’s Memo does little to change things. Employers should not feel emboldened to take a stricter approach against applicants or employees in those states because of this potential shift in federal prosecutorial discretion.

Marijuana Law Compliance Best Practices

But because this is an area of the law that will continue to be tested in the courts, particularly in states with statutes protecting employees who engage in “lawful” off-duty conduct, you should consult with counsel when developing personnel policies and when deciding whether to take action regarding a specific incident. Moreover, there are some key things you can do to ensure compliance with state and federal marijuana laws.

  1. Understand Your State Marijuana Laws. It is important that you understand your rights and obligations—and those of your employees—under any state-specific marijuana laws in place where you do business. Each state has different requirements, and by keeping yourself up to date on the constantly changing laws, you can avoid surprises down the line.
  2. Implement A Drug-Free Workplace Policy. Although every state is different, courts generally allow you the right to require a drug-free workplace and enforce zero tolerance policies. You may generally take consistent adverse employment actions against employees for violations of your drug policy, even in states where recreational marijuana is legal, and even in situations when an employee uses marijuana outside of work but comes to work under the influence of the drug. Be careful, however, if your state law includes specific protections for medical marijuana users, or offers protections for lawful off-duty conduct.

You should carefully consider your unique needs when determining what type of drug free workplace policy is appropriate:

  • Mandatory drug testing. Some employers require drug testing as a condition of employment. Employers who do so need to ensure they follow the specific state law with regard to any disciplinary action taken based on positive tests. Some states forbid discipline for positive tests unless the employee was impaired at work. However, employers that require mandatory drug testing may have a difficult time recruiting and finding employees that comply with the drug-free requirements. If that is a concern, you may want to consider another option.
  • Policy against use, possession, and impairment. Employers that wish to forego mandatory drug testing should instead have strong policies in place that prohibit the use and possession of marijuana at the worksite and prohibit impairment during work hours. Employers who choose to use these types of policies instead of requiring mandatory drug testing may still be able to require an employee take a drug test after the occurrence of a workplace incident, or if there is reasonable suspicion that the employee is impaired at while at work. Again, the specific requirements vary by state.
  1. Consider Reasonable Accommodations. Generally, most courts have held that employers need not accommodate medical marijuana in the workplace. However, some courts have recently indicated that reasonable accommodations may be appropriate in certain situations, and employers in those states should at least engage their employees in the interactive process.
  2. Have Policies For Safety-Sensitive Positions. As explained in more detail on our firm’s Workplace Safety and Health Law Blog, you will want to take special consideration in mind when it comes to those jobs with safety-sensitive components (or where federal law provides mandatory enforcement of certain policies).

Conclusion

There continues to be a chronic dispute between federal law and state law on the issue of marijuana, and yesterday’s Sessions Memo amplified the conflict. The increasing number of states that allow medical or recreational marijuana use indicates a societal shift towards acceptance of marijuana, but the federal government continues to persist with the steadfast belief that marijuana is an illegal drug. This conflict does not appear to be on the verge of resolution anytime soon.

However, if you follow these simple guidelines as they relate to marijuana and the workplace, you should be in a good position when it comes to labor an employment law. Our advice at this point: stay up to date on state specific marijuana laws, develop state-appropriate policies for all applicants and employees, and apply your marijuana policies in a uniform fashion.

 

By Howard A. Mavity, Lisa A. McGlynn, and Nicole E. Stenoish of Fisher Phillips

Federal Employment Law Updates

Courtesy of ThinkHR

WHD Revises Test for Unpaid Internships

On January 5, 2018, the U.S. Department of Labor’s Wage and Hour Division (WHD) released a Field Assistance Bulletin (FAB No. 2018-2) establishing that the primary beneficiary test, rather than the six-point test, will determine whether interns at for-profit employers are employees under the federal Fair Labor Standards Act (FLSA).

The primary beneficiary test requires an examination of the economic reality of the intern-employer relationship to determine which party is the primary beneficiary of the relationship. The following seven factors are part of this test:

  1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee — and vice versa.
  2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
  3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
  4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
  5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
  6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
  7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job after the internship.

According to the WHD, under the primary beneficiary test, no one factor is dispositive and every factor is not required to be fulfilled to conclude that the intern is not an employee entitled to the minimum wage. The primary beneficiary test is a distinct shift in analysis because per the six-part test every intern and trainee would be an employee under the FLSA unless his or her job satisfied each of six independent criteria. Courts have held that the primary beneficiary test is an inherently “flexible” test and whether an intern or trainee is an employee under the FLSA necessarily depends on the unique circumstances of each case.

The WHD announced it will conform to the federal court of appeals’ determinations and use the same court-adopted test to determine whether interns or students are employees under the FLSA.

Read the field bulletin

Increased Penalties for Federal Violations

On January 2, 2018, the U.S. Department of Labor (DOL) announced in the Federal Register that penalties for violations of the following federal laws have increased for 2018:

  • Black Lung Benefits Act.
  • Contract Work Hours and Safety Standards Act.
  • Employee Polygraph Protection Act.
  • Employee Retirement Income Security Act.
  • Fair Labor Standards Act (child labor and home worker).
  • Family and Medical Leave Act.
  • Immigration and Nationality Act.
  • Longshore and Harbor Workers’ Compensation Act.
  • Migrant and Seasonal Agricultural Worker Protection Act.
  • Occupational Safety and Health Act.
  • Walsh-Healey Public Contracts Act.

These increases are due to the requirements of the Inflation Adjustment Act, which requires the DOL to annually adjust its civil money penalty levels for inflation by no later than January 15.

These increased rates are effective January 2, 2018.

Read the Federal Register

OSHA Penalties Increased

On January 2, 2018, the U.S. Department of Labor announced in the Federal Registerthat Occupational Safety and Health Administration (OSHA) penalties will increase for 2018 as follows:

  • Other-than-Serious: $12,934
  • Serious: $12,934
  • Repeat: $129,336
  • Willful: $129,336
  • Posting Requirement Violation: $12,934
  • Failure to Abate: $12,934

These increases apply to states with federal OSHA programs; rates for states with OSHA-approved State Plans will increase to these amounts as well; State Plans are required to increase their penalties in alignment with OSHA’s to maintain at least as effective penalty levels.

These new penalty increases are effective as of January 2, 2018 and apply to any citations issued on that day and thereafter.

Read the Federal Register

Agencies Release Advance Copies of Form 5500 for Filing in 2018

The Employee Benefits Security Administration (EBSA) the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released the advance informational copies of the 2017 Form 5500 and related instructions. For small employee benefit plan reports, advance short form copies of 2017 Form 5500-Short Form (SF) and 2017 Instructions for Form 5500-SF were also released with supplemental materials including schedules and attachments.

Read about and download the Form 5500 Series

By Lisa DeShantz-Cook, Content Editor, ThinkHR

Understanding W-2 Reporting Under the ACA

Courtesy of UBA Benefits

The ACA requires employers to report the cost of coverage under an employer-sponsored group health plan. Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.

Employers that provide "applicable employer-sponsored coverage" under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). Federally recognized Indian tribal governments are not subject to this requirement.

Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of Form W-2, with Code DD to identify the amount. There is no reporting on Form W-3 of the total of these amounts for all the employer's employees.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart from the IRS' webpage and its questions and answers for more information.

The chart illustrates the types of coverage that employers must report on Form W-2. Certain items are listed as "optional" based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28). Future guidance may revise reporting requirements but will not be applicable until the tax year beginning at least six months after the date of issuance of such guidance.

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

New Guidance from CMS on Accommodation Revocation Notices under the Contraception Mandate Exemption

Courtesy of UBA Benefits

Two tri-agency (Internal Revenue Service, Employee Benefits Security Administration, and Centers for Medicare and Medicaid Services) Interim Final Rules were released and became effective on October 6, 2017, and were published on October 13, 2017, allowing a greater number of employers to opt out of providing contraception to employees at no cost through their employer-sponsored health plan. The expanded exemption encompasses all non-governmental plan sponsors that object based on sincerely held religious beliefs, and institutions of higher education in their arrangement of student health plans. The exemption also now encompasses employers who object to providing contraception coverage on the basis of sincerely held moral objections and institutions of higher education in their arrangement of student health plans. Furthermore, if an issuer of health coverage (an insurance company) had sincere religious beliefs or moral objections, it would be exempt from having to sell coverage that provides contraception. The exemptions apply to both non-profit and for-profit entities.

The currently-in-place accommodation is also maintained as an optional process for exempt employers, and will provide contraceptive availability for persons covered by the plans of entities that use it (a legitimate program purpose). These rules leave in place the government's discretion to continue to require contraceptive and sterilization coverage where no such objection exists. These interim final rules also maintain the existence of an accommodation process, but consistent with expansion of the exemption, the process is optional for eligible organizations. Effectively this removes a prior requirement that an employer be a "closely held for-profit" employer to utilize the exemption.

On November 30, 2017, the Centers for Medicare and Medicaid Services (CMS) released guidance on accommodation revocation notices. Plan participants and beneficiaries must receive written notice if an objecting employer had previously used the accommodation and, under the new exemptions, no longer wishes to use the accommodation process. The Interim Final Rules required the issuer to provide written revocation notice to plan participants and beneficiaries. CMS' recent guidance clarifies that the employer, its group health plan, or its third-party administrator (TPA) may provide written revocation notice instead of the issuer.

CMS' guidance also clarifies the timing of the revocation notice. Under the Interim Final Rules, revocation is effective on the first day of the first plan year that begins on or after 30 days after the revocation date. Alternatively, if the plan or issuer listed the contraceptive benefit in its Summary of Benefits and Coverage (SBC), then the plan or issuer must give at least 60 days prior notice of the accommodation revocation (SBC notification process). CMS' guidance indicates that, even if the plan or issuer did not list the contraceptive benefit in its SBC, the employer is permitted to use the 60-day advance notice method to revoke the accommodation as long as the revocation is consistent with any other applicable laws and contract provisions regarding benefits modification.

Further, if the employer chooses not to use the SBC notification process to notify plan participants and beneficiaries of the accommodation revocation and if the employer instructs its issuer or TPA not to use the SBC notification process on the employer's behalf, then the employer, its plan, issuer, or TPA must send a separate written revocation notice to plan participants and beneficiaries no later than 30 days before the first day of the first plan year in which the revocation will be effective.

Unlike the SBC notification process, which would allow mid-year benefit modification, if an employer uses the 30-day notification process, the modification can only be effective at the beginning of a plan year.

Employers that object to providing contraception on the basis of sincerely held religious beliefs or moral objections, who were previously required to offer contraceptive coverage at no cost, and that wish to remove the benefit from their medical plan are still subject (as applicable) to ERISA, its plan document and SPD requirements, notice requirements, and disclosure requirements relating to a reduction in covered services or benefits. These employers would be obligated to update their plan documents, SBCs, and other reference materials accordingly, and provide notice as required.

Employers are also now permitted to offer group or individual health coverage, separate from the current group health plans, that omits contraception coverage for employees who object to coverage or payment for contraceptive services, if that employee has sincerely held religious beliefs relating to contraception. All other requirements regarding coverage offered to employees would remain in place. Practically speaking, employers should be cautious in issuing individual policies until further guidance is issued, due to other regulations and prohibitions that exist.

For complete background on the rollback of the contraception mandate, view UBA’s ACA Advisor, “Contraception Mandate Rolled Back for Employers”.

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

Advance Informational Copies of 2017 Form 5500 Annual Return/Report

Courtesy of UBA Benefits

The U.S. Department of Labor's Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2017 Form 5500 annual return/report and related instructions.

Specifically, the instructions highlight the following modifications to the forms, schedules, and instructions:

  • IRS-Only Questions. IRS-only questions that filers were not required to complete on the 2016 Form 5500 have been removed from the Form 5500 and Schedules.
  • Authorized Service Provider Signatures. The instructions for authorized service provider signatures have been updated to reflect the ability for service providers to sign electronic filings on the plan sponsor and Direct Filing Entity (DFE) lines, where applicable, in addition to signing on behalf of plan administrators on the plan administrator line.
  • Administrative Penalties. The instructions have been updated to reflect that the new maximum penalty for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report has been increased to up to $2,097 a day for penalties assessed after January 13, 2017, whose associated violations occurred after November 2, 2015. Because the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 requires the penalty amount to be adjusted annually after the Form 5500 and its schedules, attachments, and instructions are published for filing, be sure to check for any possible required inflation adjustments of the maximum penalty amount that may have been published in the Federal Register after the instructions have been posted.
  • Form 5500-Plan Name Change. Line 4 of the Form 5500 has been changed to provide a field for filers to indicate that the name of the plan has changed. The instructions for line 4 have been updated to reflect the change. The instructions for line 1a have also been updated to advise filers that if the plan changed its name from the prior year filing or filings, complete line 4 to indicate that the plan was previously identified by a different name.
  • Filing Exemption for Small Plans. The instructions indicate that for a small unfunded, insured, or combination welfare plan to qualify for the filing exemption, the plan must not be subject to the Form M-1 filing requirements.

Be aware that the advance copies of the 2017 Form 5500 are for informational purposes only and cannot be used to file a 2017 Form 5500 annual return/report.

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

IRS Updates Guidance on Play-or-Pay Penalty Assessments

Courtesy of UBA Benefits

Beginning in 2015, to comply with the Patient Protection and Affordable Care Act (ACA), “large” employers must offer their full-time employees health coverage, or pay one of two employer shared responsibility / play-or-pay penalties. The Internal Revenue Service (IRS) determines the penalty each calendar year after employees have filed their federal tax returns.

In November 2017, the IRS indicated on its “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act” webpagethat, in late 2017, it plans to issue Letter 226J to inform large employers of their potential liability for an employer shared responsibility payment for the 2015 calendar year.

The IRS’ determination of an employer’s liability and potential payment is based on information reported to the IRS on Forms 1094-C and 1095-C and information about the employer’s full-time employees that were received the premium tax credit.

The IRS will issue Letter 226J if it determines that, for at least one month in the year, one or more of a large employer’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the employer did not qualify for an affordability safe harbor or other relief for the employee).

Letter 226J will include:

  • A brief explanation of Section 4980H, the employer shared responsibility regulations
  • An employer shared responsibility payment summary table that includes a monthly itemization of the proposed payment and whether the liability falls under Section 4980H(a) (the “A” or “No Offer” Penalty) or Section 4980H(b) (the “B” or “Inadequate Coverage” Penalty) or neither section
  • A payment summary table explanation
  • An employer shared responsibility response form (Form 14764 “ESRP Response”)
  • An employee premium tax credit list (Form 14765 “Employee Premium Tax Credit (PTC) List”) which lists, by month, the employer’s assessable full-time employees and the indicator codes, if any, the employer reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C
  • Actions the employer should take if it agrees or disagrees with Letter 226J’s proposed employer shared responsibility payment
  • Actions the IRS will take if the employer does not timely respond to Letter 226J
  • The date by which the employer should respond to Letter 226J, which will generally be 30 days from the date of the letter
  • The name and contact information of the IRS employee to contact with questions about the letter

If an employer responds to Letter 226J, then the IRS will acknowledge the response with Letter 227 to describe further actions that the employer can take.

After receiving Letter 227, if the employer disagrees with the proposed or revised shared employer responsibility payment, the employer may request a pre-assessment conference with the IRS Office of Appeals. The employer must request the conference by the response date listed within Letter 227, which will be generally 30 days from the date of the letter.

If the employer does not respond to either Letter 226J or Letter 227, then the IRS will assess the proposed employer shared responsibility payment amount and issue a notice and demand for payment on Notice CP 220J.

Notice CP 220J will include a summary of the employer shared responsibility payment, payments made, credits applied, and the balance due, if any. If a balance is due, Notice CP 220J will instruct an employer how to make payment. For payment options, such as an installment agreement, employers should refer to Publication 594 “The IRS Collection Process.”

Employers are not required to make payment before receiving a notice and demand for payment.

The ACA prohibits employers from making an adverse employment action against an employee because the employee received a tax credit or subsidy. To avoid allegations of retaliation, as a best practice, employers who receive a Letter 226J should separate their employer shared responsibility penalty assessment correspondence from their human resources department and employees who have authority to make employment actions.

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

Climate Leave: PTO for When the Wind Blows

Courtesy of UBA Benefits

This year, much of the United States had some form of major natural disaster—hurricanes, wildfires, floods, tornados—and millions of people were either directly affected, or had a family member or close friend who was affected. This life-changing disruption often meant that people couldn’t, or weren’t able to, go to work. While many companies were understanding and granted people the time they needed to take care of their issues, only a handful of those businesses kept paying their employees. Even worse, some businesses insisted that their employees report for work or risk termination.

In article titled “Add this to a list of job demands: Paid vacation for extreme weather” in Employee Benefit News, many employers either pressured employees, or downright insisted that they come to work during Hurricane Irma despite an evacuation order from Florida’s governor. On the plus side, many businesses are taking notice of their employees’ concerns and are looking at adding “climate leave” as part of their benefits package.

This means that if there’s an extreme weather event that keeps an employee from reporting for work, or if a state of emergency is declared, then the company will continue to pay those affected employees for a specific number of days. While the determination may be on a case-by-case basis, at least it’s reassuring for an employee to know, rather than hope, that he or she will be covered by their employer. By putting the benefit in writing, especially in disaster-prone states, it also adds an enticement for employee recruiting and retention.

Absence management is a hot topic right now, and employees are acutely aware of which companies are offering the best benefits that fit their needs. Employers are equally aware that employees are actively seeking out organizations with a wide range of voluntary benefits. Regardless of whether or not a business might decide to fire an employee during a natural disaster if he or she doesn’t show up for work, that employee still needs to pay the bills. Add the stress of a natural disaster, losing a home, loved one, pet, family member, etc. and it’s easy to see how the “climate leave” benefit has a certain appeal.

By Bill Olson, VP, Marketing & Communications at United Benefit Advisors

Latest IRS ACA Round Up

Courtesy of UBA Benefits

Recently, the Internal Revenue Service (IRS) issued the instructions for Forms 1094/1095 for the 2017 tax year, announced PCORI fees for 2017-18, and announced cost-of-living adjustments for 2018. The IRS provided additional guidance on leave-based donation programs' tax treatment and released an information letter on COBRA and Medicare. Here’s a recap of these actions for your reference.

IRS Announces Cost-of-Living Adjustments for 2018

The IRS released Revenue Procedures 2017-58 and Notice 2017-64 to announce cost-of-living adjustments for 2018. For example, the dollar limit on voluntary employee salary reductions for contributions to health flexible spending accounts (FSAs) is $2,650, for taxable years beginning with 2018.

Request UBA’s 2018 desk reference card with an at-a glance summary of the various limits.

IRS Announces PCORI Fee for 2017-18

The IRS announced the Patient-Centered Outcomes Research Institute (PCORI) fee for 2017-18. The fee is $1.00 per covered life in the first year the fee is in effect. The fee is $2.00 per covered life in the second year. In the third through seventh years, the fee is $2.00, adjusted for medical inflation, per covered life.

For plan years that end on or after October 1, 2016, and before October 1, 2017, the indexed fee is $2.26. For plan years that end on or after October 1, 2017, and before October 1, 2018, the indexed fee is $2.39.

For more information, view UBA’s FAQ on the PCORI Fee.

IRS Provides Additional Guidance on Leave-Based Donation Programs' Tax Treatment

Last month, the IRS provided guidance for employers who adopt leave-based donation programs to provide charitable relief for victims of Hurricane and Tropical Storm Irma. This month, the IRS issued Notice 2017-62 which extends the guidance to employers' programs adopted for the relief of victims of Hurricane and Tropical Storm Maria.

These leave-based donation programs allow employees to forgo vacation, sick, or personal leave in exchange for cash payments that the employer will make to charitable organizations described under Internal Revenue Code Section 170(c).

The employer's cash payments will not constitute gross income or wages of the employees if paid before January 1, 2019, to the Section 170(c) charitable organizations for the relief of victims of Hurricane or Tropical Storm Maria. Employers do not need to include these payments in Box 1, 3, or 5 of an employee's Form W-2.

IRS Releases Information Letter on COBRA and Medicare

  • The IRS released Information Letter 2017-0022 that explains that a covered employee's spouse can receive COBRA continuation coverage for up to 36 months if the employee became entitled to Medicare benefits before employment termination. In this case, the spouse's maximum COBRA continuation period ends the later of: 36 months after the employee's Medicare entitlement, or 18 months (or 29 months if there is a disability extension) after the employment termination.

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

Agencies Issue Proposed Rules and Plans

Courtesy of UBA Benefits

October was a busy month in the employee benefits world. President Trump announced a new Acting Secretary for the U.S. Department of Health and Human Services (HHS). Eric Hargan fills the position vacated by Tom Price, who resigned in late September 2017. The U.S. Department of Labor (DOL) issued a proposed rule to delay a disability claims procedure regulation's applicability date and HHS released its proposed rule on benefits and payment parameters for 2019. The U.S. Department of the Treasury (Treasury) issued its Priority Guidance Plan for projects it intends to complete during the first half of 2018.

DOL Proposes Delay to Final Disability Claims Procedures Regulations' Applicability Date

The DOL issued a proposed rule to delay the applicability date of its final rule that amends the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits. The DOL's Fact Sheet contains a summary of the final rule's requirements.

The DOL is delaying the applicability date from January 1, 2018, to April 1, 2018, to consider whether to rescind, modify, or retain the regulations and to give the public an additional opportunity to submit comments and data concerning the final rule's potential impact.

CMS Releases 2019 Benefits Payment and Parameters Proposed Rule

The Centers for Medicare & Medicaid Services (CMS) released a proposed rule and fact sheet for the 2019 Benefit Payment and Parameters. The proposed rule is intended to increase individual market flexibility, improve program integrity, and reduce regulatory burdens associated with the Patient Protection and Affordable Care Act (ACA) in many ways, including updates and annual provisions to:

  • Essential health benefits
  • Small Business Health Options Program (SHOP)
  • Special enrollment periods (SEPs)
  • Exemptions
  • Termination effective dates
  • Medical loss ratio (MLR)

CMS usually finalizes the Benefit Payment and Parameters rule in the first quarter of the year following the proposed rule's release. November 27, 2017, is the due date for public comments on the proposed rule.

Almost all the topics addressed in the proposed rule would affect the individual market and the Exchanges, particularly the Small Business Health Options Program (SHOP) Exchanges.

Of interest to small group health plans, CMS proposes to change how states will select essential health benefits benchmark plans. If CMS keeps this change in its final rule, then it will affect non-grandfathered small group health plans for benefit years 2019 and beyond.

Treasury Issues its Priority Guidance Plan

The Treasury issued its 2017-2018 Priority Guidance Plan that lists projects that it intends to complete by June 30, 2018, including:

  • Guidance on issues related to the employer shared responsibility provisions
  • Regulations regarding the excise tax on high cost employer-provided coverage ("Cadillac tax")
  • Guidance on Qualified Small Employer Health Reimbursement Arrangements (QSE HRAs)

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors

The Perk of Pets

Courtesy of UBA Benefits

Companies on the leading edge of employee benefits, especially those that want to stand out within an industry, will offer such pet-friendly perks in order to attract top talent. But what exactly are these benefits?

According to an article titled, “Pet-Friendly Perks” in Human Resource Executive Online, employers are offering benefits such as pet insurance, paid pet bereavement leave, pet parental leave, paid leave to take care of a new pet, an on-site dog park, and the ever-popular bring your pet to work day. Most of these would have been unheard of even a few years ago.

On the website of Workforce, their infographic titled, “By The Numbers: Pet-friendly Workplaces,” shows how the popularity of these benefits has skyrocketed, as evidenced by the fact that one in three Fortune 500 companies offer pet insurance. So, why are pet-related perks so popular now?

As mentioned in the Human Resource Executive Online article, the bond between pets and humans appears to be stronger these days. Individuals are placing a greater amount of importance on their pets and spending a significant amount of their disposable income on them. Employers have taken notice of this and even acknowledged that pets can have a positive impact in the workplace.

The Workforce infographic shows that seven out of 10 people say that pets make a positive impact on office dynamics and morale, and bringing a dog to work is preferred three to one over table tennis and foosball tables. Yet, even with those strong statistics, only seven percent of employers allow pets in the workplace.

Obviously, while some job candidates are thrilled with pet-related benefits, others may cringe at the thought of working side-by-side with someone’s dog or cat. They may have allergies, a fear of animals, or some other issue that makes them pet averse.

Employers need to find a balance if they decide to implement a pet-friendly work policy that takes into account everyone’s opinions. Details need to be set in clear language and managers should be made aware of what is and is not allowed. If this trend continues, you may be lucky enough to have a furry, four-legged co-worker sitting next to you.

By Geoff Mukhtar, Communications Manager at United Benefit Advisors

Contraception Mandate Rolled Back for Employers

Courtesy of UBA Benefits

Two tri-agency (Internal Revenue Service, Employee Benefits Security Administration, and Centers for Medicare and Medicaid Services) Interim Final Rules were released and became effective on October 6, 2017, and will be published on October 31, 2017, allowing a greater number of employers to opt out of providing contraception to employees at no cost through their employer-sponsored health plan. The expanded exemption encompasses all non-governmental plan sponsors that object based on sincerely held religious beliefs, and institutions of higher education in their arrangement of student health plans. The exemption also now encompasses employers who object to providing contraception coverage on the basis of sincerely held moral objections and institutions of higher education in their arrangement of student health plans. Furthermore, if an issuer of health coverage (an insurance company) had sincere religious beliefs or moral objections, it would be exempt from having to sell coverage that provides contraception. The exemptions apply to both non-profit and for-profit entities.

The currently-in-place accommodation is also maintained as an optional process for exempt employers, and will provide contraceptive availability for persons covered by the plans of entities that use it (a legitimate program purpose). These rules leave in place the government's discretion to continue to require contraceptive and sterilization coverage where no such objection exists. These interim final rules also maintain the existence of an accommodation process, but consistent with expansion of the exemption, the process is optional for eligible organizations. Effectively this removes a prior requirement that an employer be a "closely held for-profit" employer to utilize the exemption.

Employers that object to providing contraception on the basis of sincerely held religious beliefs or moral objections, who were previously required to offer contraceptive coverage at no cost, and that wish to remove the benefit from their medical plan are still subject (as applicable) to ERISA, its plan document and SPD requirements, notice requirements, and disclosure requirements relating to a reduction in covered services or benefits. These employers would be obligated to update their plan documents, SBCs, and other reference materials accordingly, and provide notice as required.

Employers are also now permitted to offer group or individual health coverage, separate from the current group health plans, that omits contraception coverage for employees who object to coverage or payment for contraceptive services, if that employee has sincerely held religious beliefs relating to contraception. All other requirements regarding coverage offered to employees would remain in place. Practically speaking, employers should be cautious in issuing individual policies until further guidance is issued, due to other regulations and prohibitions that exist.

For comprehensive background on the contraception mandate as well as information on who could object and how, please view UBA’s ACA Advisor, “Contraception Mandate Rolled Back for Employers”.

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Benefit Plan Design: Charging Employees Different Premiums

Courtesy of UBA Benefits

Employers who are designing a health and welfare benefit plan for their employees often wonder about the rules relating to setting premiums for employees. Employers generally have significant flexibility in this part of their plan's design. Common structures contemplated by employers include, but are not limited to:

  • Charging all employees a flat amount for their health plan
  • Charging employees a percentage of the premium for the health plan, with the percentage changing as employees move between tiers (self, self plus one, self plus family)
  • Giving employees a set dollar amount that they can use to offset the cost of whatever plan and plan tier they enroll in

Employers are also interested in setting different contribution structures for different groups of employees. Sometimes this is due to a geographic difference between employees, job types, staff versus management, and more. Employers may wish to give lower-paid employees more employer-provided money; sometimes employers wish to give managers or executive staff more employer-provided money.

Employers should be aware that there are different nondiscrimination requirements to consider.

Generally, under HIPAA non-discrimination rules, employers have discretion when structuring their benefits plans and may make distinctions among employee populations regarding access to and the level of benefits offered. Plans may differ among employees only on "bona fide employment-based classifications" consistent with the employer's usual business practice. Examples that would satisfy this requirement include salaried, hourly, full-time, part-time, type of job, geographic location, date of hire, division, subsidiary, business unit, and profit center distinctions.

If an employer's proposed structure meets these basic HIPAA requirements, then the employer needs to review the applicable nondiscrimination requirements under Internal Revenue Code Section 125 (for cafeteria plans) and Section 105(h) (for self-funded plans). If the employer's plan is subject to these rules, at a most basic level, the plan cannot favor highly compensated individuals. Sometimes an innocent plan design can lead to an employer failing the nondiscrimination requirements under Section 125 or 105(h) without the employer intentionally favoring the highly compensated employees. Many employers also erroneously assume that none of their employees fall into the "highly compensated" category, so the rules do not apply to them. As a best practice, any time an employer has a plan design with different levels of employer contributions, the employer should run the applicable testing to ensure its plan is compliant.

Under Section 125, benefit plans cannot discriminate in favor of highly compensated individuals or key employees. For definitions of highly compensated and key employees, as well as the consequences of violating HIPAA nondiscrimination rules and failing section 125 or 105(h) nondiscrimination tests, request UBA’s Compliance Advisor, “Benefit Plan Design: Charging Employees Different Premiums”.

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

President Trump Ends ACA Cost Sharing Reductions

Courtesy of UBA Benefits

On the evening of October 12, 2017, President Trump announcedthat cost sharing reductions for low income Americans in relation to the Patient Protection and Affordable Care Act (ACA) would be stopped. The Department of Health and Human Services (HHS) has confirmed that payments will be stopped immediately. While there is no direct impact to employers at this time, UBA will continue to educate employers about changes in the law and its Health Plan Survey will continue to track group health plan rates over time as insurance companies potentially seek to recoup lost revenue. It is anticipated at least some state attorneys general will file lawsuits to block the ending of the subsidy payments, with California Attorney General Xavier Becerra stating he is prepared to file a lawsuit to protect the subsidies.

Background

Individuals with household modified adjusted gross incomes (AGI) in excess of 100 percent but not exceeding 400 percent of the federal poverty level (FPL) may be eligible for cost-sharing reductions for coverage purchased through health insurance exchanges if they meet a variety of criteria. Cost-sharing reductions are limited to coverage months for which the individual is allowed a premium tax credit. Eligibility for cost-sharing reductions is based on the tax year for which advanced eligibility determinations are made by HHS, rather than the tax year for which premium credits are allowed. In 2015, cost-sharing subsides reduced out-of-pocket (OOP) limits:

  • Less than 100 percent but not exceeding 200 percent of FPL: OOP limits reduced by two-thirds
  • Greater than 200 percent but not exceeding 300 percent of FPL: OOP limits reduced by one-half
  • Greater than 300 percent but not exceeding 400 percent of FPL: OOP limits reduced by one-third

After 2015, the base percentages were shifted based on a percentage of average per capita health insurance premium increases. The cost-sharing reduction is paid directly to the insurer, and is automatically applied when eligible individuals enroll in a silver plan on the Marketplace or Exchange.

The cost-sharing reduction is not the same as the "advance premium tax credit" which is also available to individuals with household modified AGIs of at least 100 percent and not exceeding 400 percent of the FPL.

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Executive Order on Healthcare

Courtesy of UBA Benefits

On October 12, 2017, the White House released an Executive Order, signed by President Trump, titled "Promoting Healthcare Choice and Competition Across the United States."

It is important to note that the Executive Order (EO) does not implement any new laws or regulations, but instead directs various federal agencies to explore options relating to association health plans, short term limited-duration coverage (STLDI), and health reimbursement arrangements (HRAs), within the next 60 to 120 days.

The Department of Labor is ordered to explore expansion of association health plans (AHPs) by broadening the scope of ERISA to allow employers within the same line of business across the country to join together in a group health plan. The EO notes employers will not be permitted to exclude employees from an AHP or develop premiums based on health conditions. The Secretary of Labor has 60 days to consider proposing regulations or revising guidance.

Practically speaking, this type of expansion would require considerable effort with all state departments of insurance and key stakeholders across the industry. Employers should not wait to make group health plan decisions based on the EO, as it will take time for even proposed regulations to be developed.

The Department of the Treasury, Department of Labor, and Department of Health and Human Services (the agencies) are directed to consider expanding coverage options from STLDI, which are often much less expensive than Marketplace plans or employer plans. These plans are popular with individuals who are in and outside of the country or who are between jobs. The Secretaries of these agencies have 60 days to consider proposing regulations or revising guidance.

Finally, the EO directs the same three agencies to review and consider changing regulations for HRAs so employers have more flexibility when implementing them for employees. This could lead to an expanded use of HRA dollars for employees, such as for premiums. However, employers should not make any changes to existing HRAs until regulations are issued at a later date. The Secretaries have 120 days to consider proposing regulations or revising guidance.

To benchmark your current HRA plan with other employers, request UBA’s special report: How Health Savings Accounts Measure Up or download our Fast Facts on HSAs vs. HRAs.

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Employee's Financial Health

Courtesy of UBA Benefits

The importance of health and wellness in the workplace is more apparent than ever. It’s obvious why healthy individuals make better employees and the positive impact this has on your bottom line. When thinking about building a program to improve the well-being of your employees, don’t forget about the importance of their financial health.

In recent years, studies show that employees have a wide range of financial concerns that affect their work. Some financial issues are widespread, impacting a large number of employees, while others may be more unique based on an employee’s specific circumstances.

Financial stress in the workplace influences productivity, absenteeism, physical health, emotional well-being, and the overall happiness of employees. Nearly 25 percent of employees confirm personal finance issues are a distraction at work and 39 percent say they spend three hours or more each week at work dealing with personal financial issues.1

Some of the biggest financial stressors impacting employees today include:

  • Student loan debt – 2 million Americans collectively owe $1.3 trillion in student loans – that’s more than credit card and auto loan debt, and second only to mortgage debt 2
  • Retirement savings – 56 percent of Americans have less than $10,000 in retirement savings 3
  • Emergency funds – 46 percent are unable to cover a $400 emergency 4
  • Other debt – 48 percent of Americans have more credit card debt than savings 5

Unfortunately, financial stress can go unnoticed because it is usually not as openly discussed or addressed. Discussing personal finance with co-workers and even family members is still considered difficult for many. This makes it even more important to have a program in place to educate and empower your employees to make positive financial decisions.

There are a wide variety of financial wellness programs and services available. When developing a program, be sure that you include both educational resources and tools that support behavioral change.

  • Educational resources – Education is the backbone to any financial wellness program. Remember, financial issues can impact anyone in your company and not everyone learns the same way. Offer a variety of resources including workshops, seminars, books, online courses and access to financial consultations. It’s important to assure employees that they are in a safe environment where they can learn and feel comfortable asking questions and seeking more information.
  • Empowering behavioral change – Financial wellness doesn’t stop with education. Worksheets, budgeting tools, financial consultants, loan repayment plans and retirement savings plans are all tools that aid employees in making long-term behavioral changes that improve their financial health. Celebrating the small successes early on will help employees commit to making more long-term changes. Be sure to have programs in place that offer the tools and resources needed for employees to set goals, change their behavior and celebrate their success.

Consult with your Employee Assistance Program about resources they may have to help you develop a financial wellness program and empower your employees to get on the path to financial health.

1 PricewaterhouseCoopers, “Employee Financial Wellness Survey,” 2014, page 11

2  Friedman, Zack, “Student Loan Debt in 2017: A $1.3 Trillion Crisis,” Forbes.com, February, 21, 2017, https://www.forbes.com/sites/zackfriedman/2017/02/21/student-loan-debt-statistics-2017/#6d7983a05dab

3 GOBankingRates, “How Much Americans Have Saved for Retirement Survey,” 2016

4 Board of Governors of the Federal Reserve System, “Report on the Economic Well-Being of U.S. Households in 2015,” May 2016, p. 22.

5 Bankrate, “Bankrate Financial Security Index,” 2017

By Nancy Cannon, LCSW, LMHP, CEAP, EAP Manager, Workplace Solutions
Mutual of Omaha Insurance Company, a UBA Strategic Partner

 

ACA Reporting - Draft Forms and Instructions for 2017

Courtesy of UBA Benefits

Under the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees.

Reporting is required by employers with 50 or more full-time (or full-time equivalent) employees, insurers, or sponsors of self-funded health plans, on health coverage that is offered in order for the Internal Revenue Service (IRS) to verify that:

  • Individuals have the required minimum essential coverage,
  • Individuals who request premium tax credits are entitled to them, and
  • ALEs are meeting their shared responsibility (play or pay) obligations.

2017 Draft Forms and Instructions

Draft instructions for both the 1094-B and 1095-B and the 1094-C and 1095-C were released, as were the draft forms for 1094-B1095-B1094-C, and 1095-C. There are no substantive changes in the forms or instructions between 2016 and 2017, beyond the further removal of now-expired forms of transition relief.

In past years the IRS provided relief to employers who make a good faith effort to comply with the information reporting requirements and determined that they will not be subject to penalties for failure to correctly or completely file. This did not apply to employers that fail to timely file or furnish a statement. For 2017, the IRS has unofficially indicated that the “good faith compliance efforts” relating to reporting requirements will not be extended. Employers should be ready to fully meet the reporting requirements in early 2018 with a high degree of accuracy. There is however relief for de minimis errors on Line 15 of the 1095-C.

The IRS also confirmed there is no code for the Form 1095-C, Line 16 to indicate an individual waived an offer of coverage. The IRS also kept the “plan start month” box as an optional item for 2017 reporting.

Employers must remember to provide all printed forms in landscape, not portrait.

When? Which Employers?

Reporting will be due early in 2018, based on coverage in 2017.

For calendar year 2017, Forms 1094-C, 1095-C, 1094-B, and 1095-B must be filed by February 28, 2018, or April 2, 2018, if filing electronically. Statements to employees must be furnished by January 31, 2018. In late 2016, a filing deadline was provided for forms due in early 2017, however it is unknown if that extension will be provided for forms due in early 2018. Until employers are told otherwise, they should plan on meeting the current deadlines.

All reporting will be for the 2017 calendar year, even for non-calendar year plans. The reporting requirements are in Sections 6055 and 6056 of the ACA.

For an at-a-glance chart of all reporting requirements, as well as information on penalties for failure to file, 6055 requirements and instructions for certain boxes/lines on 1095C, request UBA’s ACA Advisor, “IRS Releases Draft Forms and Instructions for 2017 ACA Reporting."

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

 

Wellness Programs Update

Courtesy of UBA Benefits

On August 22, 2017, the United States District Court for the District of Columbia held that the U.S. Equal Employment Opportunity Commission (EEOC) failed to provide a reasoned explanation for its decision to adopt 30 percent incentive levels for employer-sponsored wellness programs under both the Americans with Disabilities Act (ADA) rules and Genetic Information Nondiscrimination Act (GINA) rules.

The court declined to vacate the EEOC's rules because of the significant disruptive effect it would have. However, the court remanded the rules to the EEOC for reconsideration.

Based on the recent court decision to require the EEOC to reconsider its wellness program rules, does this mean that the EEOC rules no longer apply to employer wellness programs? No. For now, the current EEOC rules apply to employer wellness programs. However, employers should stay informed on the status of the EEOC's reconsideration of the wellness program rules so that employers can change their wellness programs' design, if necessary, to comply with new EEOC rules.

According to UBA’s free special report, “How Employers Use Wellness Programs,” 67.7 percent of employers who offer wellness programs have incentives built into the program, an increase of 8.5 percent from four years ago. Incentives are the most prevalent in the Central U.S. (76.1 percent), among employers with 500 to 999 employees (83.2 percent), and in the finance, insurance, and real estate industries (74.7 percent). The West offers the fewest incentives, with only 48.3 percent of their plans having rewards.

Across all employers, slightly more (45.4 percent) prefer wellness incentives in the form of cash toward premiums, 401(k)s, flexible spending accounts (FSAs), etc., versus health club dues and gift cards (40 percent). But among larger employers (500 to 1,000+ employees) cash incentives are more heavily preferred (63.2 percent) over gift certificates and health club dues (33.7 percent). Conversely, smaller employers (1 to 99 employees) prefer health club-related incentives (nearly 40 percent) versus cash (25 percent).

Download our free (no form!) special report, “How Employers Use Wellness Programs,” for more information on regional, industry and group size based trends surrounding prevalence of wellness programs, carrier vs. independent providers, and wellness program components.

For comprehensive information on designing wellness programs that create lasting change, download UBA’s whitepaper: “Wellness Programs — Good for You & Good for Your Organization”.

To understand legal requirements for wellness programs, request UBA’s ACA Advisor, “Understanding Wellness Programs and Their Legal Requirements,” which reviews the five most critical questions that wellness program sponsors should ask and work through to determine the obligations of their wellness program under the ACA, HIPAA, ADA, GINA, and ERISA, as well as considerations for wellness programs that involve tobacco use in any way.

By Danielle Capilla, Chief Compliance Officer at United Benefit Advisors