HRCI & SHRM Pre-Approved Webinar | Association Health Plans – Is There a Pathway Forward?

Posted May 21, 2019 by Megan DiMartino

For supporters of “Association Health Plans (AHPs),” it has been a year-and-a-half roller coaster. It all started with excitement over President Trump’s Executive Order in October 2017, culminating in proposed Department of Labor (DOL) regulations issued in January 2018. Once the DOL regulations were finalized in June 2018, a good number of organizations immediately took steps to establish AHPs in accordance with the final rules (known as Pathway #2 AHPs), which kicked off coverage starting January 1, 2019. All was going well in the AHP-world!

Enter stage left…a DC District Court ruling invalidating the final AHP regulations on March 28. In the wake of District Court ruling, the AHP-world has crumbled, aided by the Department of Justice’s (DOJ’s) decision not to request a “stay” of the ruling, which prompted the DOL to issue guidance informing existing Pathway #2 AHPs that they cannot expand their coverage to new participants, and existing participants may not re-enroll in their AHP plan for the 2020 coverage year. The DC Circuit Court of Appeals is not scheduled to uphold or overturn the District Court ruling in September or October of this year, with the Supreme Court’s consideration waiting in the wings. Meanwhile, AHPs that are formed under the DOL’s guidance issued prior to the release of the final AHP regulations (referred to as Pathway #1 AHPs) are unaffected by the District Court ruling, which means Pathway #1 AHPs can still be formed in most States with the State’s permission.

Join us for this HRCI* and SHRM** pre-approved, complimentary, one-hour webinar as Christopher E. Condeluci, Principal and Sole Shareholder of CC Law & Policy, discusses in-depth about Pathway #1 and Pathway #2 AHPs, the DOL’s recent non-enforcement and Pathway #1 clarifying guidance, recent State activity, and the DC Circuit Court’s review of the District Court ruling.

Webinar details:

  • Thursday, May 30, 2019
  • 2:00pm – 3:00 pm EDT
  • No cost to attend
  • This webinar is open to all HR and Finance Professionals – but not to brokers, agents, TPAs and PEOs

Register Now


*The use of this seal confirms that this activity has met HR Certification Institute’s® (HRCI®) criteria for recertification credit pre-approval.

**AP Benefit Advisors, LLC is recognized by SHRM to offer Professional Development Credits (PDCs) for SHRM-CP or SHRM-SCP. This program is valid for 1 PDC for the SHRM-CP or SHRM-SCP. For more information about certification or recertification, please visit shrmcertification.org.


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

Reminder: PCORI Fees Last Installment Due this July*

Posted May 17, 2019 by Megan DiMartino

*Note-this is the final year for 2018 calendar year plans.  Plans that end between Jan 1, 2019 and October 1, 2019 will owe again, next year.  Please see our multi-year reference chart here.

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 31.

PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). The applicable PCORI fee you pay each July is based on when your plan year ended.

  • $2.26 for plan years ending between January 1, 2017 – September 30, 2017
  • $2.39 for plan years ending between October 1, 2017 – September 30, 2018
  • $2.45 for plan years ending on/after October 1, 2018, but before October 1, 2019
  • Please see our multi-year reference chart here

As a reminder, the PCORI fees are based on the average number of covered lives under the plan or policy. This ordinarily includes employees and their enrolled spouses and dependents. Individuals who are receiving continuation coverage (such as COBRA coverage) must also be included in the number of covered lives under the plan in calculating the fee. Plan sponsors of self-insured health plans must use one of the following three methods to determine the average number of lives covered under a plan for the plan year:

  1. 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.
  2. 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.
  3. 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.

HRAs and Health FSAs
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:

  1. 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.
  2. 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. 

Please see the following IRS resources for more information on the ACA’s PCORI Fees:
IRS Notice 2018-85 (released 11/5/2018)
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’ Multi-Year PCORI Fee Reference Chart


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

Is Transparency Coming to Big Pharma? More after these messages…

Posted May 15, 2019 by Megan DiMartino

Author: Scott Mayer, Director of Data Analytics at AP Benefit Advisors

HHS Secretary, Alex Azar, informed the public this week that starting sometime during the summer of 2019, pharmaceutical companies will have to include pricing information in their television advertisements. This rule applies for any medication where the manufacturer set pricing is greater than $35 for one-month’s supply.

Johnson & Johnson has even been proactive, complying with the regulations on ads for their brand drug “Xarleto” starting this year. Here’s what their advertisement looks like: https://www.ispot.tv/ad/IXmo/xarelto-selective-cost

If this advertisement is any indication, then the new regulations will prove to be much ado about nothing. Just examine the image from the advertisement that includes the pricing disclosure and you will see why:

First and foremost, looking at this screen, is there really an indication of the cost of the medication to a specific member? The list price apparently is $448, yet most patients will pay between $0 and $47? What’s the difference and what’s my cost? That depends on my PBM arrangement, my plan design, my pharmacy or specialty pharmacy, possibly my provider, etc. There are so many variables and the manufacturers will be able to exploit this intentional opacity to provide no real clarity or insight into medication costs for the consumer.

Now take a look at Xarelto claims from a one-week period in AP Benefit Advisors’ book of business:

The ingredient costs are very much in line with the $448 disclosed in the advertisement, but member-paid amounts range from as low as $0 to as high as $441.47. The fact is, much like hospitals being required to publish their “chargemasters,” this disclosure of information is essentially worthless to the consumer with no additional context.

Hopefully, disclosing the list pricing will give the public some insight into the “true” cost of some of these medications compared to their actual out-of-pocket expenses. This may work to enhance the value perception that people have when it comes to their prescription drug benefits. And yes, perhaps this information will foster a growing push to come up with ways to better manage and possibly regulate prescription drug pricing practices. However, it is also possible that these disclosures will end up being just like the fast talk, ignored, unintelligible disclosures that we hear after car ads, financial planning ads, and so many others where we have already tuned out waiting for the TV program to resume.

Source: Scott Mayer | Is Transparency Coming to Big Pharma? More after these messages…


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

HHS 2020 Benefit Limits and Updates

Posted May 9, 2019 by Patrick Haynes

HHS 2020 Benefit Limits and Updates

The Department of Health and Human Services (HHS) has released final regulations with the benefit and payment parameters for plan years beginning on or after January 1, 2020, along with a few other insurance market and Exchange-related final regulations. Although largely aimed at insurers and state regulators, the regulations include provisions of interest to employers and their advisors. Here are two key highlights.

A.  Annual Cost-Sharing Limits. HHS has increased the maximum annual limitation on cost-sharing for 2020 to $8,150 for self-only coverage and $16,300 for other than self-only coverage (up from $7,900 and $15,800 for 2019).

HHS finalized a proposed change to the way it calculates this adjustment that takes into account increases in individual health insurance premiums, acknowledging that the change will result in higher cost-sharing limits. The final limits for 2020 are less than the proposed limits because data inputs used in the formula were updated after publication of the proposed regulations. This formula also affects adjustments to employer shared responsibility penalties under Code § 4980H.

B. Generic Drugs.Health plans are not required to count drug manufacturer coupons toward the annual limit on cost-sharing when a medically appropriate generic equivalent is available.

  • However, HHS declined to finalize a proposal that would have allowed plans that cover both a brand-name prescription drug and its generic equivalent to consider the brand-name drug to not be an essential health benefit.
  • Also not finalized was a proposal to create an exception to the prohibition on midyear coverage modifications that would have allowed midyear prescription-drug formulary changes.
  • Note: The provision on coupons is intended to discourage providers and patients from choosing expensive brand-name drugs when a less expensive and equally effective alternative is available.

There were additional updates about the Exchange & SHOP Enrollment and the so-called “Silver Loading” – a state-level practice that allows insurers to increase premiums on silver-level Exchange plans to compensate for reduced federal reimbursements.  Those details can be found in the Fact Sheet linked below.

Links:

Employee Benefit – New Jersey Updates – Mandates, Reporting & Transit

Posted May 9, 2019 by Patrick Haynes

The Garden State has indeed been busy.  Here’s what you need to know.

Individual Mandate in NJ: 

  • It is identical to the federal requirement—and NJ created it to make a state-based penalty for NJ Taxpayers that don’t have coverage.  Just like taxpayers in Massachusetts, NJ taxpayers will have to have health coverage or pay the applicable tax (fine).
  • Should the federal government and/or the current administration succeed with repealing the Affordable Care Act, the NJ and MA state-level-individual mandates would still be in place.
  • Details about the Shared-Responsibility Payments can be found here.

Employer Mandate in NJ:

Transportation in NJ:

  • Employers with 20 or more NJ employees need to offer employees the ability to defer pre-tax monies under a Section 132 plan.  Fines begin in 2020 and will be $250/qtr.

For more details on the last update, please continue reading.

 

NJ Pre-Tax Transit Plans Now a Must

Federal Background:  Qualified transportation fringe benefits under Section 132(f) of the Internal Revenue Code (IRC)  allow an employer to provide commuter and transit benefits to their employees that are tax-free up to a certain limit. This employer-provided voluntary benefits program allows employees to effectively reduce their monthly commuting or transit costs. In 2019, the monthly limit is $265 for any commuter benefit or transit pass. While such benefits provide a tax benefits to employees, under the 2017 Tax Cuts and Jobs Act, employers are no longer allowed a federal income tax deduction for qualified transportation fringe benefits. The Act also requires tax-exempt employers to pay unrelated business income taxes on such benefits.

Garden State Action: On Friday, March 1, 2019, New Jersey Governor Phil Murphy signed S1567 into law, requiring certain employers to offer a pre-tax transportation fringe benefit to their employees. New Jersey employers with at least 20 employees will be required to offer this benefit to employees who are not currently in a collective bargaining agreement.

It appears that “covered employers” means employers with at least 20 employees, regardless of whether they all work in the State of New Jersey; however, clarification from the regulators on this would be helpful.

“Many residents of New Jersey use mass transit or other forms of transportation to commute daily to and from work,” said Governor Murphy. “Providing this pre-tax benefit to commuters throughout our state will reduce the financial burden of fares and parking costs, resulting in significant savings. By signing this bill, my Administration is taking another step toward creating the fairer and more customer-friendly transportation system that our commuters deserve.”

An employee under the new law is identified as anyone hired or employed by the employer and who reports to the employer’s work location, and mirrors the definition used in the unemployment compensation law. Certain temporary or limited exceptions exist for employees covered by a collective bargaining agreement and those employed by the federal government.

Some of the details regarding implementation of the program are still outstanding and the Commission of Labor and Workforce Development will adopt rules and regulations concerning the administration and enforcement of the benefit.

A pre-tax benefit will allow an employee to set aside a certain portion of pre-taxed wages, which could be made available for specified transportation services while reducing the employee’s federal taxable income.

The New Jersey Department of Labor and Workforce will adopt rules and regulations concerning the administration and enforcement of the pre-tax benefit.  Civil penalties will apply for non-compliance with this new law. For the first violation, the penalty is not less than $100 and not more than $250. An employer has 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program before the civil penalty is imposed.  After 90 days, each additional 30 day period in which an employer fails to offer a pre-tax transportation fringe benefit is a subsequent violation subject to a $250 civil penalty.  The civil penalty is to be imposed only once in any 30 day period.  The Commissioner of Labor and Workforce Development is required to ensure that eligible employers provide the pre-tax transportation fringe benefit and is authorized to issue citations for noncompliance.

When does this take effect?

While the ordinance takes effect immediately, it will not be enforced until final rules and regulations are released. The earliest enforcement is anticipated to be March 1, 2020, but is subject to change. Employers should determine whether their current employee demographic would require these benefits to be offered to their employees. Employers currently offering transportation fringe benefits to employees should review their current program to ensure compliance with the final rules and regulations in New Jersey once those are released.

Links:

EEOC’s Breakdown of Workplace Discrimination in FY 2018

Posted May 1, 2019 by Megan DiMartino

The U.S. Equal Employment Opportunity Commission (EEOC) released a detailed breakdown of the 76,418 charges of workplace discrimination they received in the fiscal year (FY) 2018, which ended September 30, 2018. The EEOC posted the breakdown of charges by state on their website.

The EEOC’s numbers for FY 2018*:

  • 90,558 charges of discrimination resolved
  • $505 million secured for victims in the private sector, state and local government, and federal workplaces
  • 19.5% reduction in the agency’s charge workload (achieved through deploying new strategies to more efficiently prioritize charges with merit, more quickly resolve investigations, and improve the agency’s digital systems)
  • 519,000 calls to the agency’s toll-free number
  • 34,600 emails
  • 200,000+ inquiries in field offices

“The EEOC had a remarkable year working on behalf of those who came to the agency having experienced discrimination in their workplaces, ” said EEOC Acting Chair, Victoria A. Lipnic. Also adding, “Our fiscal year 2018 final statistics reflect significant recoveries for individuals through our administrative enforcement and our litigation program. The statistics also indicate the EEOC has been handling its workload in a more efficient manner, expanding tools to provide better timelier service to the public while sharpening our focus on meritorious charges and those that advance the public interest.”

The EEOC’s breakdown of charge numbers for FY 2018*:

  • Retaliation: 39,469 (51.6% of all charges filed)
  • Sex: 24,655 (32.3%)
  • Disability: 24,605 (32.2%)
  • Race: 24,600 (32.2%)
  • Age: 16,911 (22.1%)
  • Sexual Harassment: 7,609 (13.6% increase from FY 2017, and $56.6 million in monetary benefits for the victims)
  • National Origin: 7,106 (9.3%)
  • Color: 3,166 (4.1%)
  • Religion: 2,859 (3.7%)
  • Equal Pay Act: 1,066 (1.4%)
  • Genetic Information: 220 (0.3%)

*These numbers and percentages add up to more than the charges filed and more than 100 percent because some charges allege multiple bases.

Source: EEOC | EEOC Releases Fiscal Year 2018 Enforcement and Litigation Data

Links:


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

AP Benefit Advisors’ Webinar – HRCI & SHRM Pre-Approved | J-Codes: Your Healthcare Plan’s Biggest Enemy

Posted April 17, 2019 by Megan DiMartino

In case you missed it…

“J-Codes” and “medical specialty pharmacy” claims are going to be one of the top two procedure categories in terms of cost within your health plan. Knowing the amount of waste and abuse can give you insight into how you can develop strategies to drive more cost-effective utilization of the plan, and even enhance the benefits to the plan members for that efficient behavior. By identifying these specific issues within your plan and implementing targeted, value-based strategies to address them, you could eliminate tremendous costs without any adverse effects to your population.

Join us for this HRCI* and SHRM** pre-approved, complimentary, one-hour webinar as our Senior Healthcare Data Analyst, Virak Nhek, talks about the financial perils and pitfalls of “J-Codes” within an employer-sponsored health plan, and how the power of data can unlock the secrets to managing its spend.

Topics include:

  • What J-Codes are, how they differ from pharmacy claims and how plans bill for them
  • How providers negotiate reimbursements through the medical benefit and how it differs from the pharmacy benefit
  • The role of channel management, site of care, manufacturer assistance programs and others

Webinar details:

  • Thursday, April 25, 2019
  • 2:00pm – 3:00 pm EDT
  • No cost to attend
  • This webinar is open to all HR and Finance Professionals – but not to brokers, agents, TPAs and PEOs

Register Now


*The use of this seal confirms that this activity has met HR Certification Institute’s® (HRCI®) criteria for recertification credit pre-approval.

**AP Benefit Advisors, LLC is recognized by SHRM to offer Professional Development Credits (PDCs) for SHRM-CP or SHRM-SCP. This program is valid for 1 PDC for the SHRM-CP or SHRM-SCP. For more information about certification or recertification, please visit shrmcertification.org.


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

Maryland Minimum Wage to Increase to $15 an Hour

Posted April 15, 2019 by Megan DiMartino

On March 28, 2019, Maryland’s legislature overrode Republican Governor Larry Hogan’s veto to raise the state’s minimum wage limit to $15.00 per hour from the current minimum wage of $10.10 per hour. This now makes them the sixth state to increase their minimum wage. The other states include California, Illinois, Massachusetts, New Jersey and New York.

The new minimum wage will not take effect immediately, but rather on a yearly increase schedule. Large employers, with at least 15 employees, will start their increases on January 1, 2020, to reach the end goal of $15.00 by January 1, 2025. And for small employers, with fewer than 15 employees, will have an extra year to reach the new minimum wage.

Large employer increased minimum wage schedule:

Date Minimum Wage
January 1, 2020 $11.00
January 1, 2021 $11.75
January 1, 2022 $12.50
January 1, 2023 $13.25
January 1, 2024 $14.00
January 1, 2025 $15.00

Small employer increased minimum wage schedule:

Date Minimum Wage
January 1, 2020 $11.00
January 1, 2021 $11.60
January 1, 2022 $12.20
January 1, 2023 $12.80
January 1, 2024 $13.40
January 1, 2025 $14.00
January 1, 2026 $14.60
July 1, 2026 $15.00

For businesses with employees under the age of 18 may pay them a minimum wage equal to 85% of the state’s minimum wage.

Tipped Employees

Also under the new legislation, Commissioner of the Maryland Division of Labor and Industry (DLI) will adopt regulations requiring restaurant employers to provide wage statements to employees per pay period. These wage statements must show the employees’ hourly tip rate (derived from employer-paid cash wages) plus all reported tips (for tip credit hours) worked each workweek.

Source: Jackson Lewis | Maryland Approves Minimum Wage Increase to $15 an Hour


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

Judge Strikes Down Association Health Plan Rule

Posted April 1, 2019 by Megan DiMartino

By now you have probably seen or heard the news that the new rules governing association health plans (AHPs) have been struck down. Although true, this is not yet in effect. The judge in this case has remanded the final rule back to the DOL to consider whether two specific provisions of the rule can be severed from the rest of the regulations. The remainder of the rule is still valid.

Background

The final rule governing AHPs was created by the Department of Labor (DOL) to comply with an executive order issued by President Trump in October 2017. As directed by the executive order, the DOL was tasked with issuing regulations that would permit more employers (as well as sole proprietors) to form AHPs, thus expanding access to more affordable, high-quality health coverage. The DOL was specifically instructed to consider expanding the conditions that must be satisfied to form an AHP that is treated as a single plan under the Employee Retirement Income Security Act (ERISA).

The final rule allows AHPs to offer coverage to some or all employers in a state, city, county or multi-state metro area, or to businesses in a common trade, industry, line of business or profession in any area, including nationwide. In addition, the final rule allows working owners without other employees, such as sole proprietors and other self-employed individuals, to join AHPs.

So, What Happened?

On Thursday, March 28, U.S. District Judge John Bates struck down the Trump administration’s new regulations governing AHPs stating they are “clearly an end-run around the ACA.” Specifically, the court struck down two parts of the final rule:

  • The provision allowing any association of disparate employers to be considered a “bona fide group,” and
  • The provision allowing working owners, without employees, to become members of an association.

The lawsuit against the DOL was brought by eleven states and the District of Columbia, which contend the final rule was intended to “end run” the requirements of the ACA, and that the bona fide association and working owner provisions of the rule are “unreasonable interpretations of ERISA.”

What Does This Mean?

This ruling does not impact associations comprised of related employers, those in the same industry, as they will continue to be considered a “bona fide group” for AHP purposes. However, unrelated employers and business owners, without employees, that have already joined an AHP or are considering it, should review how they may be affected if this ruling stands.

AssuredPartners will be closely monitoring all developments related to this ruling and will communicate any new information as soon as it is known.

Should you have any questions or concerns, please contact your AP Benefit Advisors’ Account Executive or Account Manager.

Links:
State of New York v. U.S. Department of Labor


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.

DOL Issues New Proposal on Overtime Exemptions

Posted March 27, 2019 by Megan DiMartino

On March 7, 2019, the Department of Labor (DOL) issued a proposed rule that would change the salary thresholds for certain exempt employees. Under the proposal, the minimum salary level for the “white collar” overtime exemptions would increase from $455 to $679 per week ($35,308 per year). This is significantly lower than the $913 minimum weekly salary level that the DOL set in its 2016 final rule (which never took effect due to a federal court injunction).

The proposal would allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10 percent of the standard salary level. The proposed rule would also increase the salary level for the “highly compensated employee” exemption from $100,000 to $147,414 per year (an increase from the 2016 final rule’s annual threshold of $134,004).

Action Steps

These changes will not take effect until after a final rule is issued. Employers are not required to comply with the proposal, but should become familiar with it and begin identifying which employees may be affected.

Background

The Fair Labor Standards Act (FLSA) requires virtually all employers in the United States to pay overtime wages to employees who work more than 40 hours in a workweek. The FLSA contains certain exemptions to the overtime payment requirements. Among these are the “white collar” exemptions for executive, administrative or professional (EAP) employees and for highly compensated employees (HCEs). In general, an employee may qualify for a white collar exemption if he or she satisfies all three of the following:

  • The “salary basis test” – The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
  • The “salary level test” – The employee’s salary amount must be at least as much as the standard salary level or the HCE salary level set by the DOL.
  • The “duties test” – The employee must primarily perform EAP duties. If an employee’s total annual salary is at least as much as the HCE salary level, the employee may meet the duties test if he or she performs at least one of the duties of an exempt EAP employee.

The DOL set the currently enforced amounts for the salary level test in 2004. On May 23, 2016, the DOL issued a final rule that would have significantly increased both the standard and HCE salary levels, starting in December 2016. In addition, the 2016 final rule would have further increased those amounts through automatic adjustments every three years. On November 22, 2016, however, a federal court ruled that the 2016 final rule was unenforceable. Therefore, the final rule never took effect, and the DOL has continued enforcing the 2004 salary levels.

New Proposed Rule

In the 2019 proposed rule, the DOL proposed to update both the minimum weekly standard salary level and the total annual compensation requirement for “highly compensated employees” to reflect growth in wages and salaries. The DOL is also proposing revisions to the special salary levels for employees in the motion picture industry and certain U.S. territories. The DOL is not proposing any change to the duties test, despite speculation that it would do so.

The following are key provisions of the proposed rule:

  • Increase the standard salary level to $679 per week (the equivalent of $35,308 annually for a full-year worker), up from the currently enforced level of $455 per week.
  • Increase the total annual compensation requirement needed to exempt HCEs to $147,414 annually, up from the currently enforced level of $100,000 annually.
  • Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level, provided that these payments are made of an annual or more frequent basis. The DOL also invited comments on whether the proposed 10 percent cap is appropriate, or if a higher or lower cap is preferable.

The proposed rule does not provide for any automatic adjustments to the salary thresholds. Instead, the DOL is asking for public comments on the proposed rule’s language for periodic review to update the salary threshold. Any future update would continue to require notice-and-comment rulemaking.

Source & Links:


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.

AP Benefit Advisors’ webinar and website resources are designed for U.S.-based organizations. Our privacy and GDPR policy should be reviewed here. Please opt-out if you do not agree to these terms and conditions.