Employee Benefits – Setnor Byer Insurance & Risk

When do employers need a Summary Plan Description?

By Anita Byer, Setnor Byer Insurance & Risk

If you are an employer sponsoring an employee group health plan, you must have an ERISA-compliant Summary Plan Description. The federal Employee Retirement Income Security Act (ERISA) is designed to protect plan participants by setting minimum disclosure standards for covered plans. An ERISA-covered group health plan is an employment-based plan that provides medical care coverage, including hospitalization, sickness, prescription drugs, vision or dental. Administrators of these plans, which often includes the employer/plan sponsor, are required to provide important plan information in writing in the form of a Summary Plan Description (SPD).

The Summary Plan Description is used to disclose and communicate important information about an employer’s employee benefit plan. It provides information about the plan, what benefits are available under the plan, the rights of participants and beneficiaries under the plan, and how the plan works. SPDs must be furnished to employees without charge within 90 days after the employee becomes a participant or within 120 days of the plan’s adoption date. SPDs must also be provided within 30 days of being requested.

Pursuant to ERISA regulations, the SPD must:

identify the plan name, plan number and employer identification number;
describe the type of plan (i.e., employee welfare benefit plan, employee benefit plan);
describe the type of plan administration;
provide contact information for the plan administrator and service of process;
describe the plan’s eligibility requirements;
describe circumstances which may result in disqualification, ineligibility, denial, loss, forfeiture, suspension or reduction of benefits;
state the date of the plan’s fiscal year;
describe the procedures governing claims for benefits, applicable time limits and remedies if claims are denied;
describe provisions governing termination of the plan; and
include a statement of rights available to plan participants under ERISA.

The SPD must also explain various aspects of the benefits being provided, such as the plan’s:

cost-sharing provisions, including costs of premiums, deductibles, coinsurance and co-payment requirements;
annual or lifetime caps or limits on benefits;
coverage for preventive services;
coverage for drugs, medical tests, devices and procedures;
the use of network providers, the composition of provider networks and whether, and under what circumstances, coverage is provided for out-of-network services;
conditions or limits on the selection of primary care providers or providers of specialty medical care; and
conditions or limits applicable to obtaining emergency medical care.

Since comprehension is the key, SPDs must follow strict style and formatting requirements. For example, SPDs must:

be written in a manner calculated to be understood by the average plan participant;
be sufficiently comprehensive to apprise participants of their rights and obligations under the plan;
not be formatted in a way that misleads or misinforms plan participants;
present the plan’s advantages and disadvantages without exaggerating the benefits or minimizing the limitations; and
ensure that the plan’s exceptions, limitations, reductions or restrictions are not minimized, rendered obscure or otherwise made to appear unimportant (style, caption, printing type and prominence must be the same as that used to describe plan benefits).

Plan administrators must consider the level of comprehension and education of typical plan participants and the complexity of the terms of the plan. In most cases, this requires limiting or eliminating technical jargon and long, complex sentences. It may also require the use of clarifying examples, illustrations, clear cross references and a table of contents.

Unlike these general descriptions, ERISA’s SPD requirements are highly technical and very specific. Employers must ensure strict compliance with all applicable rules. Given ERISA’s relative complexity, employers may need to consult licensed professionals to avoid the potentially severe consequences that can result from violations. In addition to having an ERISA fidelity bond to protect against losses due to fraud or dishonesty by persons handling funds, employers should also carry employment practices liability insurance.

Please contact us about affordable group health plan options and ways to limit the accompanying liabilities.

COVID national emergency ends, COBRA says what?

By Anita Byer, Setnor Byer Insurance & Risk

The COVID national emergency is officially over. On April 10, 2023, House Joint Resolution 7 was signed into law, ending the national emergency declared back in March 2020 due to the COVID-19 pandemic. (The COVID public health emergency, which was declared separately, is scheduled to end May 11, 2023.) The end of the national emergency will have significant implications for employer-provided group health plans, particularly when it comes to dealing with the Consolidated Omnibus Budget Reconciliation Act a/k/a COBRA.

COBRA generally requires covered group health plans to provide a temporary continuation of group health coverage that would otherwise be lost due to the occurrence of certain qualifying events, like termination of employment. To give individuals more time to elect and pay for COBRA coverage during the pandemic, the Department of Labor (DOL), IRS and other federal agencies issued multiple notices stating that the following time periods and dates must be disregarded when determining COBRA deadlines:

the 60-day period to elect COBRA continuation coverage;
the 45-day period to make the initial COBRA premium payment;
the 30-day grace period to make monthly COBRA premium payments;
the date for individuals to notify the plan of a qualifying event; and
the date for plans to provide COBRA election notices to qualified beneficiaries.

The disregarded periods, which cannot exceed one year, are scheduled to end sixty days after the announced end of the COVID national emergency (the “Outbreak Period”). In other words, the COBRA time periods and dates were extended until one year from the date a participant or beneficiary was first eligible for relief, or the last day of the Outbreak Period, whichever is earlier. All COBRA extensions will end as of the last day of the Outbreak Period, but unfortunately, the actual date on which this is supposed to happen remains uncertain.

The uncertainty stems from the fact that the national emergency ended a month earlier than expected. The planned end date was May 11, 2023, which would have made July 10 the last day of the Outbreak Period (60 days from May 11), but things did not go according to plan. And while determining the actual end of the Outbreak Period should be simple (60 days from April 10), somehow it isn’t. You see, the DOL relied on the original plan when preparing a series of FAQs and examples to help the public navigate the end of the COBRA extensions, all of which assumed that the Outbreak Period would end July 10. Despite not being technically correct, the DOL has hinted that it plans to keep using July 10 as the last day of the Outbreak Period. Hopefully, additional guidance will be provided soon.

While the last day of our ‘COBRA extension adventure’ has yet to be determined, it is coming up fast. Affected employers should prepare in advance to avoid missteps along the way. The DOL’s FAQs are a good place to start, though some employers may require professional guidance to ensure compliance. Employers should also carry Employment Practices Liability Insurance to protect against mistakes that always seems to accompany significant legal and regulatory changes.

No one should expect the process of unwinding three years of COBRA extensions to be simple or seamless, but there is simple and obvious silver lining. Once the Outbreak Period ends, so do all the COBRA extensions. Please contact us to learn more about EPLI coverage.

ACA’s affordability threshold will be lower in 2023

By Anita Byer, Setnor Byer Insurance & Risk

The IRS announced that the Affordable Care Act’s affordability threshold for employer-sponsored group health plans will be 9.12 percent in 2023. Employers with 50 or more full-time or full-time equivalent employees (Applicable Large Employers or ALEs) must recognize that next year’s affordability threshold will be lower than this year’s, which is 9.61 percent. This means that a group health plan that was affordable in 2022 may be unaffordable in 2023, despite being exactly the same. Many ALEs will need to adjust their group health plan contribution requirements to avoid potential ACA penalties in 2023.

ALEs are generally required to offer full-time employees “affordable” minimum essential health care coverage to avoid the ACA’s employer shared responsibility (pay-or-play) penalty. Affordability is calculated as a percentage of household income. To be affordable in 2023, an employee’s required contribution for the lowest-cost, self-only coverage option offered by their employer (regardless of which coverage option is actually selected) cannot exceed 9.12 percent of that employee’s household income.

Since employers typically do not know their employees’ household incomes, ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, let’s assume Jordan works 40 hours per week for 52 weeks, earning $10 per hour. The most Jordan can be required to pay for the lowest-cost, self-only coverage option offered by Jordan’s employer in 2023 is:

$158.08 per month (W-2 Safe Harbor Method);
$118.56 per month (Rate of Pay Safe Harbor Method); or
$103.28 per month (Federal Poverty Line Safe Harbor Method—2022).

If Jordan earned $15 per hour, Jordan’s required contribution for the lowest-cost, self-only coverage option cannot exceed:

$237.12 per month (W-2 Safe Harbor Method; “Box 1”);
$177.84 per month (Rate of Pay Safe Harbor Method); or
$103.28 per month (Federal Poverty Line Safe Harbor Method—2022).

The affordability threshold for group health plans beginning in 2023 is only a fraction of a percent lower than 2022’s threshold, but the consequences for ALE’s that fail to adapt accordingly can be substantial. To ensure compliance with the ACA’s affordability requirement in 2023, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about affordable group health plan options for 2023.

What can employers do to help employees with surging inflation?

By Anita Byer, Setnor Byer Insurance & Risk

Inflation. Inflation. Inflation. That seems to be what everyone is talking about these days, and with good reason. According to the Bureau of Labor Statistics, the year-over-year consumer price index jumped 9.1 percent in June 2022. This is the largest 12-month increase in over 40 years, which is particularly significant for employers. You see, a substantial portion of today’s U.S. workforce has never experienced anything like this before. Many are expecting their employers to respond.

While employers aren’t necessarily required to respond to or otherwise address inflation with their employees, it may be something worth considering The Great Resignation has left many employers struggling to maintain adequate staffing levels, and employees concerned about money are more likely to leave in search of higher pay. So, addressing concerns about inflation may prevent defections from an already depleted workforce. Here are a few things employers have been doing.

Employee Benefits. Some employers are altering their benefits offerings to help mitigate the effects of rising inflation. For example, employers are offering options like daycare subsidies and student loan repayment assistance to help employees with budgeting and expenses at a time when prices are high and employees are looking for ways to cut costs.

Remote Work. Continuing to offer remote and hybrid work schedules is another way employers are coping with soaring inflation. Employees can repurpose cash that would otherwise be spent on gas or other travel-related expenses. It can also help decrease the cost of day-to-day things, like buying lunch or coffee at work.

Reevaluating Compensation. Though not always feasible, many employers are considering pay increases to offset record inflation rates. Bonuses are another option. Some employers are providing gift cards for food, gas or groceries to help employees make ends meet. Make sure any compensation changes comply with applicable wage and hour laws.

Maintaining Benefit Costs. Health care costs are also rising with inflation, but now may not be the best time to increase the employees’ share for health benefits. Employers looking to attract and retain top talent are avoiding raising copayments, deductibles and other out-of-pocket costs for employees. This allows employees to save money and allocate it to other essential needs.

Offering Retirement Benefits. Some employers are increasing education efforts surrounding retirement options. Retirement plans are often quick to be cut during times of financial difficulty, so employers who are promoting those benefits are likely to be viewed more favorably by current and future employees. Heightening the conversation around retirement options is a great way prove to employees that an employer cares.

In times of financial uncertainty, employees value employers that make an effort to ensure their stability. Responding to employees’ concerns about inflation can help employers retain their existing employees and even make it easier to recruit new employees.

The Case for Employment Practices Liability Insurance

By Anita Byer, Setnor Byer Insurance & Risk

The case for employment practices liability insurance (EPLI) has never been stronger. Businesses are operating in a rapidly changing environment that keeps producing unprecedented, previously unimaginable challenges. COVID-19, #MeToo, gig workers, remote workers, medical marijuana, CDC guidance, quarantines, vaccines, Zoom meetings—the list goes on. Every business with employees is at risk. Yet, far too many businesses go without EPLI. Sure, they have their reasons, but most of them are actually myths. Let’s look at a few.

None of my employees would ever sue me. Let’s assume this is true (even though it’s not). Equal employment opportunity laws, like Title VII of the Civil Rights Act, protect applicants. They also protect new employees starting day one. How do you know what they will do? It’s also hard to predict what a desperate employee might do, regardless of how long they’ve been employed. Relying on the charity of others is not an effective risk management strategy.

Our organization complies with all employment laws. Virtually all businesses make a good faith effort to comply with applicable employment laws, but this isn’t always enough. Mistakes happen.

We are too small to worry about employee lawsuits. Every business with employees is at risk, regardless of size. In fact, smaller businesses tend to operate casually and informally, which may increase the likelihood of a claim. And, smaller businesses often lack the resources to have HR professionals or legal counsel on staff to prevent or respond to employment-related claims.

We have an excellent HR department. That’s great! Large businesses have them too, and they get sued all the time. This reason also ignores the fact that HR policies and directives do not always filter down to the entire workforce.

EPLI is too expensive. This can be a legitimate reason, but it’s usually not. Instead of focusing on the policy premium, businesses need to consider the cost of not having EPLI. If you think the premium is expensive, just wait until that first bill from your attorney arrives. Remember, defense lawyers don’t accept contingency fees; they are paid by the hour. It’s also worth noting that EPLI policies are competitively priced, so the premiums are relatively low.

None of these reasons will protect against employment-related claims like an employment practices liability insurance policy. There is a world of difference between dealing with (and paying for) the defense of an employment practices lawsuit and filing a claim under an EPLI policy. One option is not only cheaper, but it provides a peace-of-mind that allows the organization’s focus to remain on the continued successful operation of the business. Needless to say, the alternative is much, much worse.

Please contact us to discuss the true cost and value of employment practices liability insurance.

Largest Minimum Wage Increase in Florida History is Less than Six Months Away

When Florida enacted its own minimum wage in 2005, the minimum hourly wage went up $1. Despite going up every year since, this is still the largest single increase in Florida history…for now. On September 30, 2021, Florida’s minimum wage will go from $8.65 to $10, an increase of $1.35 per hour. In other words, Florida employers have less than six months to prepare for the largest minimum wage increase ever.

Depending on workforce make-up, the resulting increase in payroll expense may be minimal for some and substantial for others.

The upcoming increase is required by the $15 Minimum Wage Ballot Initiative (Amendment 2), which was approved by Florida voters in November 2020. Amendment 2 increases Florida’s minimum wage incrementally over a period of years until it reaches $15 per hour. The first (and largest) increase will occur September 30, 2021. It will then increase annually on September 30^th per the following schedule.

2021 $10.00

2022 $11.00

2023 $12.00

2024 $13.00

2025 $14.00

2026 $15.00

2027 Annual adjustments for inflation resume.

As of September 30, 2021, a minimum wage employee working full-time will need to be paid an additional $54 per week. Depending on the workforce make-up, the resulting increase in payroll expense may be minimal for some and substantial for others. Employers should start planning now to avoid unintentional, unnecessary and costly wage and hour violations. These plans should extend beyond this year’s record-breaking increase. There will be five more increases under Amendment 2, each of which is large enough to tie the current record for largest single increase in Florida history.

To reduce the likelihood of costly mistakes, employers should provide wage and hour training to managers and supervisors. Employers should also carry Employment Practices Liability Insurance with limited coverage for wage and hour claims. Contact us to learn more about protecting your business with Employment Practices Liability Insurance.

Affordable Care Act Update: IRS Extends ACA Reporting Deadline and Good-Faith Relief from Penalties

Setnor Byer Insurance & Risk

This seemingly endless year is almost over…finally. That means it’s time for Applicable Large Employers (ALEs) to start focusing on the Affordable Care Act’s annual information-reporting requirements. Fortunately, the Internal Revenue Service extended the deadline for ALEs to furnish 2020 information statements to employees. However, the deadline for ALEs to file information returns with the IRS has not been extended.

Applicable Large Employers, which are generally employers with 50 or more full-time or full-time equivalent employees in the previous year, must do the following to comply with the ACA’s annual reporting requirements.

Furnish Information Statements to Employees. The IRS extended the deadline to furnish 2020 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to employees from January 31, 2021 to March 2, 2021. This is the sixth consecutive year the IRS has extended this deadline.

File Information Returns and Transmittals with the IRS. Each 2020 Form 1095-C must also be filed with the IRS on or before February 28, 2021 (March 31, 2021, if filed electronically). The IRS did NOT extend this filing deadline. However, employers may request an automatic 30-day extension by filing Form 8809 before the ACA filing deadline.

The IRS also extended the good-faith relief from penalties that may be levied against ALEs for failing to comply with the ACA’s filing and furnishing requirements, which can be up to $280 per form. To be eligible for this relief, employers must make a good-faith effort to comply. In determining good faith, the IRS will consider whether reasonable efforts were made to prepare the required reports.

It’s important to note that this relief applies to forms with missing or inaccurate information. ALEs that fail to timely file or furnish the required reports are not eligible. According to the IRS, this is the last year they intend to provide good-faith relief from the ACA’s penalties.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act: Will Your Group Health Plan be Affordable in 2021?

The Affordable Care Act’s affordability threshold for employer-sponsored group health plans will increase to 9.83 percent in 2021. The affordability threshold is currently 9.78 percent. The impending increase primarily affects employers with 50 or more full-time or full-time equivalent employees. The ACA generally requires these Applicable Large Employers (ALEs) to offer full-time employees “affordable” minimum essential health care coverage; otherwise, they may have to pay the ACA’s employer shared responsibility (pay-or-play) penalty.

Affordability is calculated as a percentage of household income. In 2021, the amount an employee must pay (required contribution) for the lowest-cost, self-only coverage option offered by their ALE cannot be more than 9.83 percent of the employee’s household income. If it is, the employee’s offer of health coverage is not considered affordable and the ALE may be assessed a penalty under the ACA.

ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, if Sam earned $12 per hour in 2021 and worked 40 hours per week for 52 weeks, Sam’s monthly required contribution for coverage under the ALE’s 2021 calendar year group health plan cannot exceed:

— $204.46 per month, if using the W-2 Safe Harbor Method;
— $153.35 per month, if using the Rate of Pay Safe Harbor Method; or
— $104.53 per month, if using the Federal Poverty Line Safe Harbor Method.

Even though the affordability threshold for group health plans beginning in 2021 is only .05 percent higher than the year before, the difference can be consequential. To ensure compliance with the ACA’s affordability requirement in 2021, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plan options for 2021.

FLSA Update: New Regulations Clarify Wage & Hour Calculation for Perks and Benefits

New Fair Labor Standards Act regulations should make it easier for employers to offer perks and benefits to employees. The Department of Labor updated the regulations to clarify the distinction between payments that must be included in an employee’s “regular rate” and payments that may be excluded. Since the “regular rate” is used to calculate a non-exempt employee’s overtime rate, this relatively subtle distinction can have substantial implications.

All remuneration must generally be included in an employee’s “regular rate,” unless it is specifically excluded under the FLSA. If money given as a birthday gift, for example, had to be included in an employee’s regular rate, that employee’s overtime rate for the week would be higher than normal. Fortunately, sums paid as gifts on special occasions can be excluded from the “regular rate.” The ability to exclude certain payments from an employee’s regular rate, makes it easier for employers to provide various perks and benefits to their employees.

The new regulations, which became effective January 15, 2020, clarify various perks and benefits that may be excluded from an employee’s “regular rate,” such as:

the cost of providing certain parking benefits, wellness programs, gym access, fitness classes, certain tuition benefits and adoption assistance;
payments for unused paid leave, including paid sick leave or paid time off;
payments of certain penalties required under state and local scheduling laws;
reimbursed expenses (cellphone plans, credentialing exam fees, membership dues, travel), even if not incurred “solely” for the employer’s benefit;
the cost of office coffee and snacks to employees as gifts;
discretionary bonuses (clarifying that labels do not determine the discretionary nature of a bonus); and
contributions to benefit plans for accident, unemployment, legal services or other events that could cause future financial hardship or expense.

Calculating an employee’s regular rate under the FLSA is a highly nuanced, detailed and fact-specific process. The consequences for improper wage and hour calculations can be severe. Employers should take advantage of the FLSA’s “regular rate” exclusions, but should do so cautiously, preferably with the assistance of legal counsel. Fortunately, insurance is available to protect against various employment-related liabilities in case something goes wrong. Please contact us to learn more about employment practices liability insurance.

Affordable Care Act: Annual Reporting and Filing Deadlines Are on the Horizon

The deadlines for large employers to comply with the Affordable Care Act’s annual information reporting requirements are almost here. Employers have been given an extension of time to furnish 2018 information statements to employees, but the deadline to file information returns with the Internal Revenue Service has NOT been extended.

Applicable Large Employers, which are generally those with 50 or more full-time or full-time equivalent employees in the previous year, must do the following to comply with the ACA’s 2018 annual reporting requirements.

Furnish Information Statements to Full-Time Employees. The IRS extended the deadline to provide Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to full-time employees from January 31, 2019 to March 4, 2019. This is the third consecutive year that the IRS has extended this deadline.

File Information Returns and Transmittals with the IRS. Every Form 1095-C along with Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) must be filed with the IRS on or before February 28, 2019 (April 1, 2019, if filed electronically). The IRS did NOT extend this filing deadline. However, employers may request an automatic 30-day extension by filing Form 8809 before the ACA filing deadline.

For 2018, the IRS also extended the good-faith relief from penalties that may be levied against employers for failing to properly file or furnish these forms, which can be $270 per form. The maximum penalty can be $3,275,500.

This relief only applies to employers that make a good-faith effort to comply. It does not apply to those that fail to file or furnish forms by the due dates. This means that incomplete or incorrect forms may be better than no forms at all.

Please contact us if you would like to learn more about ACA-compliant group health plans.