Summer Vacations Are Upon Us! Are Your PTO Policies Up-to-Date?
Posted June 26, 2018 by Megan DiMartino
Summer is here and that means summer vacations! Your employees will begin requesting more time off for vacation, so this is a good time to review your vacation policies and procedures to ensure they are legally compliant and work with your business needs.
For the most part, employees aren’t promised paid vacations unless employers agree to provide paid vacation through a policy, practice or contract. Exceptions include some state or local paid sick leave laws. But once an employer decides to offer paid vacation then there are important factors that need to be considered when addressing their vacation policy:
- Use of vacation time – There should be guidelines and restrictions when it comes to the use of vacation times. Such things as advanced notice, management approval, and scheduling conflicts. If these guidelines are not set in place then too many employees could take vacations at the same time and not leave enough coverage at the workplace.
- Approving and denying vacation requests – Vacation requests should be upheld to a nondiscriminatory approval/denial process so as not to show any form of favoritism. A good way of doing so would be approving/denying by seniority or by timing of the notice.
- No working during vacation – In any circumstance that a non-exempt employee is called upon for any work (be it through telephone calls, text message or email on their mobile device), they are to be compensated for the work in lieu of their vacation time.
- Accrual limits – Place a limit on the amount of vacation time that can accrued if employees are allowed (or entitled by state law) to roll over their vacation time from year-to-year.
- Comply with state laws – Ensure compliance with state laws: (1) prohibit forfeiture of accrued and unused vacation, (2) require employers to provide a reasonable opportunity for employees to take vacation, or (3) require payment of accrued and unused vacation upon termination.
- Allowing vacation advances – If allowing advancement on paid vacation that has yet to be accrued, provide precise guidance on doing so as not to allow employees to take advantage of such advances. Paid vacation time taken before being accrued can make it difficult to deduct advances from wages or an employee’s final pay upon termination.
- Other guidance – Provide guidance on whether employees may or may not receive pay in lieu of vacation, whether vacation time must be taken in specified increments, if vacation time will not continue to accrue during unpaid leaves of absence, whether an employee who becomes ill during vacation leave can treat the period of illness as sick leave instead, and whether a holiday that falls during a vacation period will be treated as a vacation day.
- Leave laws – Fully explain the use of vacation time in conjunction with the Family Medical Leave Act (FMLA) or any other leaves laws, including equivalent state laws.
Source: Foley & Lardner, LLP | Summer (and with it, summer vacations) is coming!
For more information, contact info@apbenefitadvisors.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.
PCORI Fees are Due Soon
Posted June 12, 2018 by Megan DiMartino
Applies to: Self-Insured Health Plans, including HRAs & FSAs
Employers who sponsor self-insured health plans must pay their annual Patient-Centered Outcomes Research Institute (PCORI) fees by July 31st!
PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). The applicable PCORI fee you pay this year, by July 31, 2018, is based on your plan year end date in 2017:
- $2.26 for plan years ending between January 1, 2017 – September 30, 2017
- $2.39 for plan years ending between October 1, 2017 – December 31, 2017
- Please see our multi-year reference chart, here.
- Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.
- Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates, if an equal number of dates is used in each quarter) during the first, second or third month of each quarter, and dividing that total by the number of dates on which a count was made.
- Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.
Health Reimbursement Arrangements (HRAs) and health Flexible Spending Accounts (FSAs) are not completely excluded from the obligation to pay PCORI fees. However, two special rules apply for plan sponsors that provide an HRA or health FSA. Under these special rules:
- If a plan sponsor maintains only an HRA or health FSA (and no other applicable self-insured health plan), the plan sponsor may treat each participant’s account as covering a single life. This means that the plan sponsor is not required to count spouses or other dependents.
- An HRA is not subject to a separate research fee if it is integrated with another self-insured plan providing major medical coverage, provided the HRA and the plan are established and maintained by the same plan sponsor and have the same plan year. This rule allows the sponsor to pay the PCORI fee only once with respect to each life covered under the HRA and other plan. However, if an HRA is integrated with an insured group health plan, the plan sponsor of the HRA and the issuer of the insured plan will both be subject to the research fees, even though the HRA and insured group health plan are maintained by the same plan sponsor.
The same analysis applies to health FSAs that do not qualify as excepted benefits.
Please contact your AssuredPartners’ Sales Executive or Account Manager for any further questions or assistance.
Final Regulations on the PCORI Fees
PCORI Fee Overview Page
PCORI Fee: Questions and Answers
IRS Form 720 and Instructions
PCORI Fee Due Dates and Applicable Rates
Chart of Health Coverage and Arrangements Subject to PCORI Fee
AP Benefit Advisors Webinar Series | HRCI & SHRM Pre-Approved – Total Rewards Strategies: Getting the Most from Your Rewards Dollars
Posted June 8, 2018 by Megan DiMartino
Total rewards is an approach and framework for managing the elements of the employment interface between the organization and its workforce. As a strategy, it provides a vehicle for:
- Identifying value-added employment-related factors;
- Prioritizing the organization’s human resource investment;
- Rationalizing different components of the employment interface; and
- Communicating the alignment between rewards and business strategy.
Please join us for this HRCI* and SHRM** pre-approved, complimentary, one-hour webinar as Dan Ripberger, Managing Director of RSC Advisory Group, discusses total rewards in the context of business strategy and employment value proposition. RSC Advisory Group is a management advisory and consulting firm specializing in pay performance. The RSC team has worked with clients in a multitude of market sectors and geographic areas. Their work has spanned start ups, high-performing organizations and those going through re-invention – all who need advice and guidance specific to their situation.
Participants will learn a top-down approach to developing a reward framework that is aligned with short- and long-term business and mission needs. After participating in this webinar, participants will be able to:
- Define the difference between and integration of employment value proposition and total rewards strategy;
- Understand how business drivers influence total reward strategy; and
- Begin to determine which reward elements have the greatest impact on specific people and reward objectives.
Webinar Details:
- Thursday, June 21, 2018
- 2:00pm – 3:00pm EDT
- No cost to attend
- This webinar is open to all HR and Finance Professionals – but not to brokers, agents, TPAs and PEOs
For more information contact info@apbenefitadvisors.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.
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*The use of this seal confirms that this activity has met HR Certification Institute’s® (HRCI®) criteria for recertification credit pre-approval. | ||
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New Jersey Becomes the 2nd State to Enact an Individual Health Insurance Mandate Tax
Posted June 7, 2018 by Patrick Haynes
On Wednesday, May 30th, NJ Governor, Phil Murphy, signed into law a bill that will require all New Jersey residents to have health coverage or pay a tax (penalty), making NJ the second state to enact an individual health insurance mandate.
Massachusetts, the first state to enact such a mandate, began taxing its citizens in 2006, and their approach served as a model for PPACA (aka “The Affordable Care Act”). Massachusetts reports, as of the end of 2016, that 97% of its residents were insured for that year, and they had the lowest percentage of uninsured in the United States. By contrast, the US Census reflects that 92% of NJ residents were insured in 2016.
Meanwhile, NJ Democratic lawmakers drafted the bill, NJ A3380 (18R), in response to Congress’ decision to repeal the federal mandate established under the Affordable Care Act (ACA). The repeal, the New Jersey lawmakers feared, would drive healthier people out of the state’s Healthcare.gov marketplace and cause premiums to spike.
“The individual market would descend into a death spiral if not for this legislation,” said State Sen. Joe Vitale (D-Middlesex), the prime sponsor. “This helps to keep people insured and keeps that market healthier.”
Will Vermont join their ranks?
Vermont Gov. Phil Scott, a Republican, signed a bill on May 28th that would establish an individual mandate, but the details, including the financial penalty and enforcement mechanisms, will be determined during the 2019 legislative session. The Vermont mandate won’t go into effect until January 1, 2020.
When will this new tax (NJ Mandate) take effect? And, how much will it be?
The Mandate is really a tax and it closely mirrors the federal ACA tax structure. So, when a NJ resident files his/her state income tax return, the resident will owe a penalty for themselves, their spouse and each of their dependent children that is uninsured (or has coverage that doesn’t meet federal MEC (Minimum Essential Coverage) guidelines).
The tax will be the greater of:
- $695 per adult, and half of that ($347.50) per child; OR
- 2.5% of the taxpayer’s income
New Jersey’s mandate is scheduled to take effect January 1, 2019, which gives state officials seven months to get the word out to residents about the new requirement.
For more information, contact info@apbenefitadvisors.com. The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.
Threats to Health Care Consumerism & What to Do About Them
Posted June 5, 2018 by Patrick Haynes
Healthcare consumerism has come a long way.
According to a recent large-employer survey, 72% of large employers will offer a consumer directed health plan (CDHP) by 2019, up from just 20% a decade earlier.
And, there are even bolder predictions elsewhere. The 2018 Large Employers Health Care Strategy & Plan Design Survey suggests that 97% of large employers will offer consumer-driven health plans (CDHP) by 2020, and that in 2018 39% of large employers will only offer CDHPs.
But, for all that, things aren’t entirely rosy. While many employers now offer consumer-driven plans, uptake by employees isn’t phenomenal with only around a third of eligible employees enrolled in a CDHP.
So what’s going wrong?
Barriers to entry
Healthcare consumerism was founded on one basic assumption: That if people were better informed and had greater involvement in their healthcare funding (including financial incentives and repercussions) they would make better decisions.
And, as the past several decades have demonstrated, that assumption is completely true. People enrolled in well-constructed CDHPs consistently make better health decisions and are far less likely to overpay for healthcare services.
There’s just one problem: Persuading people to enroll in CDHPs in the first place. And, in trying to address this problem, there are three primary hurdles to overcome:
1) Lack of understanding
A high proportion of average Americans have a disturbingly low level of fluency, not just with CDHPs, but with healthcare funding in general.
According to the Alegeus 2018 Health & Financial Fluency Report (soon to be released to the market), 59% of consumers claim to be confident in their knowledge of healthcare terms and concepts, BUT:
- Only 15% knew what a deductible was,
- Only 31% understood out-of-pocket maximums, and;
- Only 48% could explain coinsurance
And, when the lens is narrowed to consider healthcare consumerism specifically, things get worse. Just 19% of the general public can pass a basic true or false proficiency quiz on HSAs, compared to 29% for FSAs.
But, those numbers are higher for individuals currently enrolled in those plans, surely?
Yes, but not much higher. For individuals currently enrolled in HSAs and FSAs, the pass rate rises to just 35% and 37% respectively.
All this mounts up to a huge problem for healthcare consumerism. In order for average Americans to understand the benefits of CDHPs over traditional plans, they are first going to need to have a reasonable understanding of basic healthcare funding.
Until that happens, uptake of CDHPs will be severely hindered.
2) Care avoidance
A huge issue for healthcare consumerism, care avoidance is a routine consequence of individuals being under-insured. Specifically, this term refers to households which spend more than 10% of their income on out-of-pocket healthcare costs, not including premiums, or have a deductible that exceeds 5% of their income.
In 2016, 48 million people were under-insured in the US. For context, that is more than a quarter of people aged 19-64.
So why is this such a problem? Simple: Under-insured people make terrible decisions. Of those under-insured in high-deductible health plans (HDHPs) with a deductible of $3000 or more:
- 47% delayed or skipped appointments, tests, or prescriptions, and;
- 40% had problems paying (or debt from) medical expenses
And, what does all this care avoidance lead to? Preventable, expensive visits to the emergency room, which are bad for everybody. Put another way, it leads to more cost and worse health outcomes.
It’s important to understand that while CDHPs are attractive in part because they can offer lower monthly premiums, if individuals don’t make regular contributions, the higher deductibles can easily fuel the care avoidance cycle.
3) Poor financial behaviors
In order to recognize the benefits of CDHPs, it is vital that average Americans understand basic financial issues. Unfortunately, evidence seems to suggest that many Americans lack the financial literacy – or at least the financial habits – to manage their healthcare plan.
To give you an idea:
- 46% of Americans have less than $400 in savings
- Only 39% could pay an unexpected expense of $1000
- More than half of employers see less than 40% of their employees contributing to their HSAs, and finally;
- Medical costs are the single greatest cause of personal bankruptcy in the US
Notice how the first three points lead inexorably to the fourth. Many Americans display an extremely poor ability to manage their money, and as a result are woefully unprepared to cope with medical emergencies.
From a healthcare consumerism perspective, this is a problem for two primary reasons. First, if Americans lack the financial knowledge to understand the benefits of CDHPs, they are unlikely to switch away from traditional plans. And, second, even if they do switch to CDHPs, they are likely to manage their plans poorly, leading to greater expense and worse health outcomes.
The solution: good plan design
Clearly, there are a number of issues that need to be addressed here. More employers than ever are offering CDHPs (which is great) but there are a number of issues standing in the way of increased employee uptake (which is not so great).
And, while there are plenty of ways to address these underlying issues, good plan design should be right at the top of the list. Why? Because good plan design incentivizes individuals to make better decisions about their healthcare funding.
So, what are the characteristics of a strong consumer-driven plan?
First, good plans are easy to understand. For those of us in the industry, it can be easy to forget how daunting healthcare plans can seem. And as we’ve already seen, many average Americans have significantly less understanding of basic healthcare funding terminology than they like to think. Simply put, good plans are those where the benefits are easy to see.
A simple way to do this is to construct CDHPs to provide equal value to the most popular traditional plan. This helps employees see that employers aren’t simply trying to shift costs, but rather to offer an alternative to the traditional model. At the same time, it’s helpful to set the out-of-pocket maximum on par with the most popular traditional plan, as employees often place great importance on this variable. With these concerns out of the way, it will be much easier to convey the benefits of a consumer-driven plan.
Second, well designed plans encourage contributions. For starters, CDHPs utilize tax-advantaged accounts and high deductibles, both of which incentivize contributions. And that’s great, but more can be done to further the cause. Most notably, employer funding of accounts has been shown to increase enrollment in HSAs and CDHPs, and increase year-over-year employee contributions. And, as we’ve already noted, more contributions mean less care avoidance and ultimately better outcomes for everybody.
Finally, strong plans encourage greater engagement in the selection of care. It’s easy to forget that high deductibles plans aren’t the only ways to incentivize individuals to care about how much their healthcare service cost. Once an individual has gone beyond their deductible, they will act differently depending on the structure of their plan. For instance, if they have a co-pay plan, which is based on them paying a fixed amount, they will be less interested in the total cost of their care than if they have a co-insurance plan which requires them to pay a percentage of remaining costs.
Plans that adhere to these guidelines will naturally overcome all of the barriers listed above: The will be easy for employees to understand, minimize care avoidance, and encourage individuals to invest (and spend) their money wisely.
The future of healthcare consumerism
Ultimately, while there are some significant barriers to increased CDHP adoption, the healthcare consumerism model is clearly gaining ground. As employers increasingly offer CDHPs in place of traditional plans, more employees will come to understand the value of taking an active role in their consumption of healthcare.
But, if the healthcare consumerism movement is to be truly successful, we need more than increased adoption. We need individuals to take full advantage of their plans and to make better healthcare decisions.
And, quite simply, the only way that’s going to happen is if, as a movement, we consistently do two things:
- Offer high quality plans, and;
- Educate individuals on key issues, e.g., the importance of making regular contributions
If we can do that over the long term, there’s no doubt healthcare consumerism will overtake traditional plans in the not-too-distant future.
Please contact your AssuredPartners Sales Executive or Account Manager for more information.
Reference Link: HSA, HRA, FSA – which product is best for my company’s needs
