Employee Benefits – Page 3 – Setnor Byer Insurance & Risk

Now What? Preparing for the New FLSA White Collar Overtime Exemptions

On December 1, 2016, it will be more expensive for employers to take advantage of the Fair Labor Standards Act’s (FLSA) so-called white collar overtime exemptions. Since FLSA violations have always been expensive, employers should begin the process of determining whether and to what extent they will be affected by the new overtime exemption regulations .

The new rules focus primarily on the minimum salary and compensation levels needed to qualify for the FLSA’s executive, administrative, professional, and computer employee overtime exemptions. Employers can ask the following questions to determine the potential impact of the new overtime rules.

Are there any employees classified as exempt under one of the FLSA’s white collar overtime exemptions? If no, you should not be affected by the higher standard salary levels under the new rules. If yes, move on to the next question.

Do any of these employees ever work more than 40 hours in a workweek? If no, you should not be affected by the higher standard salary levels under the new rules. If yes, move on to the next question.

Do any of these employees earn a salary of less than $913 per week? (This works out to $1,826 biweekly, $1,978 semimonthly, $3,956 monthly or $47,476 annually.) If no, you should not be affected by the higher standard salary levels under the new rules. If yes, exemption classifications and compensation practices will need to be adjusted before December 1, 2016 to avoid violating the new rules.

Various adjustments can be made to ensure compliance under the new rules. However, the most appropriate adjustment(s) will likely depend on each employer’s specific circumstances, such as the number of newly-nonexempt employees, their salaries, how often they work overtime and how much overtime they work.

Depending on their circumstances, employers may implement one or more of the following adjustments.

Increase Salaries. The obvious adjustment, and the one likely envisioned by those enacting the new rules, would be to increase the salaries of exempt white collar employees to no less than $913 per week. Though this may be the simplest and least disruptive adjustment, it may also be the most unrealistic. Though salary increases for some employees may be nominal, they can be more than double for others.

[Remember, employees are not exempt simply because their salaries satisfy the increased salary levels under the new rules. Their primary job duties must also involve the kind of work associated with the specific white collar exemption. Employees must satisfy the minimum salary level requirement and the applicable “standard duties test” to be exempt.]

Pay Newly-Nonexempt Employees Overtime Compensation. The alternative to increasing salaries is to re-classify these exempt white collar employees as overtime-eligible employees. If they work more than 40 hours in a workweek, they must be paid one and a half times their regular rate. As with other nonexempt employees, employers must track the number of hours worked each day and the total hours worked each workweek by newly-nonexempt employees. For many, this will be an entirely new experience and will take some getting used to.

This may not be a problem for employees who rarely work or who work very little overtime. These employees can continue working the same number of hours. Though employers will pay more for occasional overtime work, they may still be paying substantially less than $913 per week. The same cannot be said about employees who regularly work or who work a lot of overtime. The cost of paying time and a half to these employees could be very high, and may even approach $913 per week.

Prohibit Overtime. Newly-nonexempt employees can be prohibited from working overtime. If no overtime is worked, no overtime compensation is required. This option may be simple, but it may not be easy. Exempt employees typically work more than 40 hours in a workweek because they have more than 40 hours of work to do. This work must still get done, but someone else will have to do it.

Adjust Personnel, Schedules or Assignments. Those who prohibit overtime may have to make various operational adjustments. For example, workload distribution and workforce scheduling may need to be adjusted to compensate for the loss of overtime work. In some cases, new employees may need to be hired to make up for any lost productivity.

Adjust Wages. If newly-nonexempt employees are allowed to continue working overtime as always, employers will end up paying more money for the same amount of work. Reallocating regular wages and overtime compensation is a way to keep the hours worked by and the amount paid to newly-nonexempt employees largely the same. However, employers may not reduce an employee’s hourly wage below the highest applicable minimum wage (federal, state, or local) or continually adjust wages each workweek in order to manipulate the regular rate.

Employers cannot wait too long to begin planning for the upcoming change. It takes time to properly implement organizational adjustments to exemption classifications and compensation practices, particularly if they are substantial or complex. With all the publicity surrounding the new white collar overtime exemption rules, it’s probably safe to assume that violations will be noticed not only by those employees who are affected by the new rules, but by the Department of Labor too.

Since the Final Rule is sure to bring a level uncertainty and confusion, employers may benefit from having Employment Practices Liability Insurance to protect against various employment-related claims. Limited coverage for wage and hour claims may be available.

Please contact us if you would like to learn more about complying with the FLSA’s new white collar overtime exemption rules.

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New White Collar FLSA Overtime Rules Are Here! Will You Be Ready By The Effective Date?

They’re heeeere. No, not a poltergeist, though for many they may be just as unsettling. We’re talking about the new minimum wage and overtime exemption regulations for white collar employees under the Fair Labor Standards Act (FLSA). The long-awaited Final Rule has been released and is scheduled for publication on May 23, 2016.

The Final Rule focuses primarily on salary and compensation levels for the executive, administrative, professional, outside sales and computer employee exemptions, which are the FLSA’s so-called white collar exemptions. Since the Final Rule is not identical to the proposed rule published on July 16, 2015, let’s look at some of the differences.

Effective Date: The effective date of the Final Rule is December 1, 2016. This gives employers more time than initially expected since the Solicitor of Labor previously indicated that the effective date would be 60 days after publication.

Minimum Salary: The Final Rule sets the initial standard salary level for the white collar exemptions at $913 per week or $47,476 annually. [The current salary level is $455 per week or $23,660 annually.] This is lower than expected because it’s calculated using Census data from the lowest-wage region (currently the South), rather than nationwide Census data.

Highly Compensated Employees (HCEs): The Final Rule sets the total annual compensation requirement for HCEs at $134,004, which is the annual equivalent of the 90th percentile of full-time salaried workers nationally. Under current regulations, the minimum salary requirement for HCEs is $100,000 annually.

Automatic Adjustments: Under the Final Rule, salary and compensation levels will automatically be adjusted every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption. The proposed rule provided for annual adjustments.

Duties Test: The proposed rule requested comments on whether changes need to be made to the duties test currently used to determine eligibility for the white-collar exemptions. However, the Final Rule did not make any changes to the standard duties test.

Though not included in the proposed rule, the Final Rule allows nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement. For example, bonuses for meeting set production goals, retention bonuses and commission payments based on a fixed formula. By contrast, discretionary bonuses are awarded at the employer’s sole discretion and not in accordance with any preannounced standards.

Under the Final Rule, if an employee does not earn enough in nondiscretionary bonuses and incentive payments in a given quarter to retain their exempt status, employers can make a “catch-up” payment at the end of the quarter. Employers have one pay period to make up for the shortfall (up to 10 percent of the standard salary level for the preceding 13 week period). Payments can only be allocated to the prior quarter, not the quarter in which it was paid. If an employer chooses not to make a catch-up payment, the employee would be entitled to overtime pay for any overtime hours worked during the quarter. Employers cannot use nondiscretionary bonuses or incentive payments to satisfy the salary requirement for HCEs.

Despite legislative efforts to nullify the Final Rule, like the Protecting Workplace Advancement and Opportunity Act, employers should begin planning now to make sure they are ready to comply with the Final Rule beginning on December 1, 2016. Since the Final Rule is sure to bring a level uncertainty and confusion, employers may benefit from having Employment Practices Liability Insurance to protect against various employment-related claims. Limited coverage for wage and hour claims may be available.

Please contact us if you would like to learn more about protecting your business with employment practices liability insurance.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Automatic Deadline Extensions Now Available for Affordable Care Act Information Reports

For the first time, all applicable large employers must comply with the Affordable Care Act’s annual healthcare reporting requirements. Employers that averaged at least 50 full-time or full-time equivalent employees in 2014 must report specific 2015 healthcare information to the Internal Revenue Service. Reports for the calendar year 2015 are due in early 2016, so time is running out. Or is it?

The IRS recently amended Form 8809–Application for Extension of Time to File Information Returns–so applicable large employers can now request an automatic 30-day extension to file the following forms with the IRS:

Form 1095-C (Employer-Provided Health Insurance Offer and Coverage); and
Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns).

The deadline to request an extension is the due date of the ACA form for which an extension is being requested. In other words, employers cannot request an extension after missing the original IRS filing deadline. For the calendar year 2015, the deadline to file Forms 1095-C and 1094-C with the IRS is February 29, 2016 (March 31st if filed electronically), so this is also the deadline to request an IRS filing extension. To avoid missing the deadline, employers should request an extension as soon as they realize more time is needed.

However, Form 8809 only extends IRS filing deadlines, not deadlines to furnish copies to recipients. Applicable large employers must furnish the calendar year 2015 Form 1095-C to each full-time employee by February 1, 2016. Form 8809 cannot be used to extend this deadline. Instead, employers must request an extension by submitting a letter to the IRS. These extension requests are not automatically approved and must include an explanation.

There are other nuances to requesting an IRS filing extension, such as:

Form 8809 can be filed on paper, online or electronically through the IRS’s FIRE system.

No explanation is necessary.

The automatic extension is 30 days from the original due date.

Employers may request a second 30-day extension before the end of the first extension period by submitting a second Form 8809; however, these requests are not automatically granted and generally require a showing of extenuating circumstances.

IRS previously stated that employers making a good faith effort to comply with the ACA’s information reporting requirements for the calendar year 2015 will not be penalized for incomplete or incorrect information reports filed with the IRS or furnished to employees in 2016. However, employers will not be able to show a good faith effort if they fail to timely file information returns with the IRS or furnish statements to employees. Though incorrect reports may be forgiven by the IRS, late reports will not.

In addition to other valuable resources, Setnor Byer Insurance &Risk has an online tool to help clients complete their ACA information reports. If you have any questions or would like to discuss how we can help you navigate the constantly changing healthcare landscape, please contact us.

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Is Telemedicine Right For You?

Telemedicine generally refers to the practice of using telecommunications technologies (phone, Internet, etc.) to diagnose and treat patients, and in case you haven’t noticed, it’s come a long way. Consider this:

The Centers for Medicare & Medicaid Services describes telemedicine as a cost-effective alternative to providing medical care.
The American Medical Association says telemedicine is a key innovation that can maintain patient safety, improve access to health care and control costs.
Industry analysts expect significant growth in the telemedicine market over the next few years.

Employers are taking notice of the benefits of telemedicine. According to a recent survey, 22% of large U.S. employers currently offer telemedicine services to employees as a low-cost alternative to doctor office visits for non-serious medical issues; 37% expect to begin doing so in 2015.

A primary benefit of telemedicine is fewer unscheduled absences by employees needing to see or take their child to a doctor for non-serious medical issues. Research shows that a majority of doctor visits are unnecessary. A cough, for example, can often be treated safely and effectively with telemedicine. (According to the Centers for Disease Control and Prevention, the most frequent reason for going to the doctor is…a cough.)

Employers offering telemedicine services also benefit from:

Healthier employees
Fewer employee sick days
Increased productivity
Measureable reduction in health care (insurance) costs

Telemedicine service plans are typically structured as discount card programs. These plans are not insurance and should not be considered a substitute for health insurance. Employers considering a telemedicine program should work with a reputable broker to find the right plan and avoid those trying to take advantage of a rapidly growing market.

At Setnor Byer Insurance & Risk, we make it easy to:

Evaluate options
Find the best solution
Obtain competitive pricing
Implement and integrate a new plan into existing benefit programs

If you would like more information, please contact us.

Understanding Excepted Benefits Under the Affordable Care Act

Many employers offer benefits packages that provide employees with more than just health insurance coverage. Though some of these benefits, like pre-paid legal service plans, are clearly not health-related, others may provide employees with some health-related benefits. Does this mean they are subject to the Affordable Care Act’s health insurance market reforms? Not necessarily.

Certain types of benefits, due to their nature, are not subject to a number of health-related laws, including the Affordable Care Act, the Health Insurance Portability and Accountability Act, the Mental Health Parity Act and the Genetic Information Nondiscrimination Act. These are known as excepted benefits.

There are four categories of excepted benefits.

Benefits Excepted In All Circumstances

The following benefits, or any combination thereof, are considered excepted benefits in all circumstances:

Coverage only for accident (including accidental death and dismemberment)
Disability income coverage
Liability insurance, including general liability and automobile insurance
Coverage issued as a supplement to liability insurance
Workers’ compensation or similar coverage
Automobile medical payment insurance
Credit-only insurance (for example, mortgage insurance)
Coverage for on-site medical clinics

Limited Excepted Benefits

A number of benefits may be considered excepted benefits if they are provided under a separate policy, certificate or contract of insurance. They can also qualify as a limited excepted benefit if they are not an integral part of a group health plan, which means that participants may decline coverage or that claims for benefits are administered under a separate contract than claims for any other benefits under the plan.

One or more of the following benefits may qualify as a limited excepted benefit:

Limited-scope dental benefits
Limited-scope vision benefits
Long-term care benefits
Health flexible spending arrangements
Employee assistance programs (EAPs)

Noncoordinated Excepted Benefits

Coverage for only a specified disease or illness, such as a cancer-only policy, may qualify as a noncoordinated excepted benefit. Hospital indemnity or other fixed indemnity insurance may also qualify if it pays a fixed dollar amount per day (or per other period) of hospitalization or illness regardless of the amount of expenses incurred.

To qualify as a noncoordinated excepted benefit:

Benefits must be provided under a separate policy, certificate or contract of insurance;
There is no coordination between the benefits provided and an exclusion of benefits under any group health plan maintained by the same employer; and
Benefits are paid regardless of whether benefits are provided under any group health plan maintained by the same employer.

Supplemental Excepted Benefits

The following benefits may qualify as supplemental excepted benefits if they are provided under a separate policy, certificate or contract of insurance:

Medicare supplemental health insurance (Medigap or MedSupp insurance);
Coverage supplemental to the managed health care program established by the Department of Defense (TRICARE); and
Similar supplemental coverage specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles, but which does not include coverage that becomes secondary or supplemental only under a coordination-of-benefits provision.

Excepted benefits must satisfy a number of specific requirements set forth in the federal regulations. Employers should consult a knowledgeable and licensed professional before taking action or making changes to their benefits packages.

If you would like more information about excepted benefits or would like to see how Setnor Byer Insurance & Risk can help with your employee benefits package, contact us.

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Employee Assistance Programs under the Affordable Care Act

Employee Assistance Programs (EAPs) are designed to help employees prevent, identify and resolve various personal issues and matters. Many employers include EAPs in their benefits packages to enhance employee effectiveness and maintain workplace productivity. In addition to providing benefits like pre-paid legal, crisis intervention or professional development services, EAPs commonly provide health-related benefits, such as mental health, substance abuse and wellness services. Does this mean that they must comply with the Affordable Care Act?

According to final regulations issued by the Departments of Labor, Treasury and Health & Human Services on October 1, 2014, the answer is…maybe.

If an EAP qualifies as an excepted benefit, it will generally be exempt from the ACA’s requirements. Otherwise, the EAP must incorporate the market reforms mandated by the ACA, such as no lifetime or annual limits. Under the final regulations, an EAP must satisfy four requirements to qualify as an excepted benefit.

The EAP cannot provide significant benefits in the nature of medical care.

The amount, scope and duration of services are considered when determining whether an EAP meets this requirement. For example, an EAP that provides only limited, short-term outpatient counseling to substance abusers without requiring prior authorization or review for medical necessity, will not be considered an EAP that provides significant benefits in the nature of medical care. Alternatively, EAPs providing disease management services (lab testing, counseling, prescription drugs, etc.) for chronic conditions, such as diabetes, do provide significant benefits in the nature of medical care.

The Departments may provide additional clarification in the future regarding when a program provides significant benefits in the nature of medical care.

Benefits provided by the EAP cannot be coordinated with benefits under another group health plan.

This requirement has two elements:

Participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a “gatekeeper”) before becoming eligible for benefits under the other group health plan.
Eligibility for EAP benefits must not be dependent on participation in another group health plan.

Employee premiums or contributions cannot be made a condition of participation in the EAP.
The EAP cannot impose any cost-sharing requirements (co-pay, etc.).

These final regulations apply to group health plans with plan years beginning on or after January 1, 2015. Until then, the Departments will consider EAP benefits meeting the conditions of the 2013 proposed regulations or these final regulations to qualify as excepted benefits.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the ACA’s market reforms. Check back with us periodically for future informational updates about the Affordable Care Act.

If you have specific questions about the ACA or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Counting Employees under the Affordable Care Act’s Pay-or-Play Provisions

Employers subject to the Affordable Care Act’s Employer Shared Responsibility provisions may be assessed a penalty if they do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents. Whether an employer is subject to these pay-or-play provisions depends on the number of people it employs. When counting employees, however, there are specific rules that must be followed.

An employer is generally considered an “Applicable Large Employer” subject to the pay-or-play provisions if it employed an average of at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. To determine whether an employer is considered an Applicable Large Employer for a calendar year:

Add the total number of full-time employees for each calendar month in the preceding calendar year, and the total number of Full Time Equivalent employees for each calendar month in the preceding calendar year.
Divide the sum by 12.
If the result is not a whole number, round it down to the next lowest whole number

If the result of this calculation is less than 50, the employer is not considered an Applicable Large Employer for the current calendar year. If the result is 50 or more, the employer is an Applicable Large Employer for the current calendar year.

[Note that transition relief was provided to qualifying employers with an average of 50-99 full-time and full-time equivalent employees on business days during 2014, so that they will not be assessed a penalty in 2015.]

The first step to counting employees is identifying full-time and full-time equivalent employees. A full-time employee, with respect to a calendar month, is an employee who works an average of at least 30 hours per week, or 130 hours in a calendar month. A full-time equivalent employee isn’t an actual person. Rather, it’s a term used to describe the combination of all non-full-time employees who are counted as the equivalent of a full-time employee.

The number of FTEs for each calendar month in the preceding calendar year is determined by calculating the aggregate number of hours of service for that calendar month for non-full-time employees (but not more than 120 hours of service for any employee) and dividing that number by 120. Fractions may be rounded to the nearest one hundredth.

For example, assume that during each calendar month of 2015, Employer W has 25 employees averaging 35 hours of service per week and 40 employees each of whom averages 90 hours of service per calendar month. Each of the 25 employees averaging 35 hours of service per week count as one full-time employee, so Employer W has 25 full-time employees for each calendar month in 2015.

To determine the number of FTEs for each calendar month, combine the hours of service of the 40 non-full-time employees (40 employees x 90 hours) and divide that number by 120. This calculation (40 x 90 = 3,600, and 3,600 / 120 = 30) shows that Employer W has 30 FTEs for each calendar month in 2015. Since Employer W had 55 full-time and full-time equivalent employees during each calendar month in 2015, Employer W will be considered an Applicable Large Employer for 2016.

The regulations contain a number of specific rules, methods and exceptions that must be considered when counting employees. For example, in some cases an employer may not have to include seasonal workers when counting employees. Given the complexity of some of these rules, methods and exceptions, employers should consult with an attorney to make sure they’ve counted correctly.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Health Care Reform: What are SHOPs?

To help small businesses provide health insurance to their employees, the Affordable Care Act created Small Business Health Options Programs, or SHOPs. Starting in 2014, SHOPs will be available to eligible businesses with up to 100 employees—although states can limit participation to businesses with up to 50 employees until 2016.

Once up and running, it is anticipated that SHOPs will help small businesses by:

Simplifying Choices. SHOP plans will provide essential health benefits like those covered by a typical employer health plan. These plans will be placed in four “tiers” depending on the coverage provided. SHOPs will provide side-by-side comparisons of available plans, with information about benefits, premiums, and quality. SHOPs will also enroll employees and consolidate billing.
Expanding Options. SHOPs will allow eligible employers to offer a variety of Qualified Health Plans from several insurers. These employees will then be able to choose a plan that best fits their needs and budget.
Preserving Control. Small businesses will be able to decide whether and when to participate in SHOPs, to choose their own level of employee contribution and to make a single monthly payment to the SHOPs rather than to multiple plans.
Lowering Costs. SHOPs will be designed to save money by spreading insurers’ administrative costs across more businesses. Additionally, small businesses using SHOPs may be eligible for tax credits.

Since SHOPs will be a part of the Affordable Insurance Exchanges, states have flexibility in determining how they will be structured. Until decisions are made and Exchanges are implemented, we will not know if these SHOPs will accomplish everything they are designed to do.

At Setnor Byer Insurance & Risk, we are committed to guiding you through what is sure to be a bumpy ride. Check back with us periodically for future informational updates. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.