Judge strikes down parts of DOL's emergency paid leave regs


Dive Brief:

  • Several features of the U.S. Department of Labor (DOL)'s regulations implementing the paid-leave provisions of the Families First Coronavirus Response Act (FFCRA) exceeded the agency's authority under federal law, a federal judge has ruled (State of New York v. U.S. Department of Labor, et al., No. 20-CV-3020 (S.D.N.Y. Aug. 3, 2020)).
  • Among the struck-down DOL regulations are: the final rule's work-availability requirement; its definition of "health care provider" for the purposes of excluding certain healthcare sector employees from emergency leave benefits; its requirement that an employee secure employer consent for intermittent FFCRA leave; and its requirement that documentation be provided by an employee before taking FFCRA leave.
  • The federal judge permitted the outright ban on intermittent leave for certain qualifying reasons — specifically, intermittent leave based on qualifying conditions that correspond with an increased risk of infection — as well as the substance of the final rule's documentation requirement to stand. The court, the judge said, "sees no reason that the remainder of the Rule cannot operate as promulgated in the absence of the invalid provisions."
Dive Insight:

The ruling is an important one for the nation's first-ever federal paid leave law for private-sector workers. New York originally filed the suit in April following the release of DOL's FFCRA implementation guidance earlier in the month. Shortly before the lawsuit's filing, Congressional Democrats criticized DOL's final rule in a letter to Secretary of Labor Eugene Scalia that said the agency's guidance either deviated from the FFCRA's statute or did not have a basis in it.

Asked about the letter, a DOL spokesperson told HR Dive in April that the agency took "quick action to implement paid sick leave and expanded paid family and medical leave provides necessary support for America's workforce in uncertain times."

The federal judge said in the ruling that DOL faced "considerable pressure" in promulgating its final rule. "This extraordinary crisis has required public and private entities alike to act decisively and swiftly in the face of massive uncertainty, and often with grave consequence," the judge noted. "But as much as this moment calls for flexibility and ingenuity, it also calls for renewed attention to the guardrails of our government. Here, DOL jumped the rail."

Management-side attorneys expect the ruling to be appealed, Bloomberg Law reported. The decision applies nationally, creates uncertainty for employers who experienced pandemic-related shutdowns or reductions in force and requires healthcare employers to "re-examine whether they must provide paid leave" to certain employees, Sami Assad, partner at FordHarrison LLP and chair of the firm's Home Healthcare Practice Group, wrote in an article.

The FFCRA applies to U.S. employers with fewer than 500 employees, but those with fewer than 50 employees may be exempt from two of the law's paid-leave requirements. An authorized officer of the business must use a three-prong test to determine whether the employer may claim an exemption. Also, the IRS has published guidance detailing how small businesses can receive 100% reimbursement for paid leave pursuant to the FFCRA.

SOURCE: Golden, R. (04 August 2020) "Judge strikes down parts of DOL's emergency paid leave regs" (Web Blog Post). Retrieved from https://www.hrdive.com/news/new-york-judge-strikes-down-dol-emergency-paid-leave-reg/582856/


Benefits Consideration for Onboarding Furloughed and Laid Off Employees

As the COVID-19 pandemic continues to create obstacles for the workplace, many professionals are still having to continue with their day-to-day work lives which include having hard discussions with furloughed and laid-off employees. Read this blog post to learn helpful tips on re-enrolling employees into their benefits.


COVID-19 continues to throw us curveballs. While some states that were continuing on their path to recovery are having to backtrack, others have managed to temporarily halt the progression of COVID-19 and are proceeding as planned.

Amidst all this uncertainty, one thing is certain: human resource professionals continue to face overwhelming obstacles. Below, we outline issues that human resource professionals are likely to face as they onboard furloughed and laid-off employees.

Onboarding Furloughed Employees

HEALTH AND WELFARE PLANS

For employees enrolled in one or more employer sponsored health and welfare plans and receiving coverage during the furlough period:

  • Payroll deductions for required employee contributions for the plan generally resume upon return from furlough, subject to any changes in employment status that may affect eligibility.
  • To the extent repayment of employee contributions advanced during the furlough period is required, consider how to collect the employee contributions (e.g., through payroll deduction or otherwise), keeping in mind state law requirements related to payroll deductions.
  • Consider the extent to which election changes may be made upon return from furlough.

For employees not enrolled in an employer-sponsored health and welfare plan during the furlough period (or enrolled in COBRA continuation coverage):

  • Determine when eligibility for the plan resumes in accordance with plan terms (e.g., immediately or after a waiting period), subject to any impact on eligibility due to changes in employment status.
  • Consider the process for enrolling employees and the extent to which election changes may be made upon return from furlough, including any HIPAA special enrollment rights.

In addition:

  • Evaluate the impact of the furlough on employees' full-time status under the Affordable Care Act's (ACA's) lookback measurement period and stability period requirements.
  • Evaluate the impact of return from furlough on participation in wellness program activities and eligibility for wellness program incentives.
  • To the extent employees will have staggered work schedules, consider entitlement to benefits based on reduced hours (full time/part time) or new job requirements and whether any plan amendments are needed.

401(K) PLANS

Generally, employee and company contributions resume upon return from furlough; however, changes in job titles or positions may affect eligibility:

  • Determine whether employee and company contributions will resume immediately upon return from furlough based on elections in place immediately before the furlough period or whether new elections will be required.
  • Determine the extent to which legally required notices relating to plan participation must be provided.
  • Address the treatment of loan repayments upon return from furlough.
  • Determine the extent to which the period of furlough must be counted for purposes of plan eligibility, vesting and the right to allocation of contributions.

PENSION PLANS

  • Consider whether changes in job titles or positions may affect eligibility for continued participation upon return from furlough.
  • Review plan terms to determine the extent to which the period of furlough must be counted for purposes of plan eligibility, vesting and benefit accrual.

OTHER BENEFITS

  • Consider the impact of return from furlough on any commuter benefits (parking and transit).
  • Consider the impact of return from furlough on vacation and holiday accrual.

Onboarding Laid-Off Employees

HEALTH AND WELFARE PLANS

  • Treat rehired employees who have been laid off as new hires who must complete new hire paperwork for health and welfare plan eligibility.
  • Consider the impact of the termination of employment and rehire on the employee's status as a full-time employee under the ACA's lookback measurement period and stability period requirements.

QUALIFIED RETIREMENT PLANS

  • Defer to plan terms and break-in-service rules for purposes of determining the impact of the layoff on plan eligibility, vesting and benefit accrual.
  • Review plan terms and procedures for enrolling rehired employees in a 401(k) plan, including application of the plan's auto-enrollment feature, if any.

SOURCE: Pepper, T. (29 July 2020) "Benefits Consideration for Onboarding Furloughed and Laid Off Employees" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/benefits-consideration-for-onboarding-furloughed-and-laid-off-employees.aspx


Overview of COVID-19 Law and Guidance for Health and Welfare Plans

The business operations of many small and large companies have been significantly affected due to the coronavirus pandemic. During this time, health and benefit plans are also being affected. Read this blog post to learn more.


The COVID-19 pandemic has significantly affected the business operations of small and large employers alike. To mitigate the harm from the pandemic to employers, the government has enacted major legislation and issued numerous guidance in the past few months pertaining to COVID-19, including rules that address various aspects of employee benefits.

This article provides an overview of significant COVID-19 legislation and guidance related to employer-sponsored health and welfare benefit plans that has been enacted or issued to date.

Some of these changes are mandatory for group health plans. Other are optional. Employers should carefully review these rules to determine any compliance obligations as well as any opportunities to benefit their businesses and respective employees.

Mandated Coverage of COVID-19 Testing (Mandatory)

Effective March 18, 2020 and until the end of the national emergency period for COVID-19, the Families First Coronavirus Response Act (FFCRA) requires group health plans to cover:

  • COVID-19 diagnostic testing.
  • Certain items and services that result in an order for, or administration of, the testing.

Plans must provide this coverage without imposing any requirements for cost-sharing, prior authorization, or medical management.

CARES ACT

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed into law on March 27, 2020, amended the FFCRA's coverage mandate to:

  • Expand the scope of COVID-19 diagnostic tests that must be covered.
  • Include rules regarding the rate at which a plan must reimburse a health care provider for the mandated services.
  • Require coverage of preventive services and vaccines for COVID-19 as of 15 days after such a service or vaccine is given an "A" or "B" rating in a recommendation by the U.S. Centers for Disease Control and Prevention (CDC) or U.S. Preventive Services Task Force.

ADDITIONAL GUIDANCE

On April 11, 2020, the FFCRA and CARES Act FAQs provided additional information about this COVID-19 mandate. Items included details on required coverage of COVID-19 antibody tests, rules regarding required disclosures of the new coverage to plan participants, and which items and services related to COVID-19 testing must be covered by a plan.

Continuation of Health Benefits During Certain Leaves of Absence (Mandatory)

The FFCRA also requires (with some exceptions) employers with fewer than 500 employees to provide certain paid sick leave and family and medical leave related to certain COVID-19 reasons, as follows:

  • Paid sick leave. An applicable employer must provide two weeks of emergency paid sick leave (EPSL) to an employee who is unable to work (or telework) due to certain reasons related to COVID-19. Reasons include quarantining of an employee (due to a Federal, state or local order or advice from a health care provider) experiencing COVID-19 symptoms, caring for an individual who is quarantined, and caring for a child under age 18 whose school or child care provider is closed.
  • Family and medical leave. The employer must also provide up to twelve weeks of expanded Family Medical and Leave Act (FMLA) leave (ten of which is paid) for an employee who has been employed for at least 30 days and who is unable to work (or telework) due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

During FMLA leave, an employer is required to allow the employee to continue his or her group health coverage at the same premium rate as that of active employees. The DOL has also issued FAQs stating that employers must continue employees' coverage during EPSL, as well. Note, there are also implications for retirement plans under the FFCRA and CARES Act. Although those retirement plan rules are not discussed in this article, some of the CARES Act rules are conceptually similar for retirement plans (e.g., 401(k) plans may allow participants to take "Coronavirus-related" 401(k) plan distributions due to certain COVID-19 reasons).

High-Deductible Health Plans and Health Savings Accounts (Optional)

IRS GUIDANCE

IRS Notice 2020-15 (March 11, 2020), which was issued prior to passage of the FFCRA and CARES Act, provided that a high-deductible health plan (HDHP) will not lose its HDHP status if it covers COVID-19 testing and treatment before the statutory minimum HDHP deductible is met. Therefore, the plan can cover those COVID-19 related services without causing participants to be ineligible to contribute to a health savings account (HSA). IRS Notice 2020-29 (May 12, 2020) clarified that the provisions in Notice 2020-15 apply to an HDHP's reimbursement of expenses incurred on and after January 1, 2020.

CARES ACT

The CARES Act amended the HSA rules to provide that, for plan years before December 31, 2021, an HDHP does not lose its HSA-eligible status if it covers telehealth and other remote healthcare services before the HDHP deductible is met. This CARES Act provision is broader than the IRS Notices, as it provides that an HDHP can cover telehealth services regardless of whether the services are related to COVID-19. The CARES Act also allows participants to use their HSAs, health flexible spending accounts (FSAs), and health reimbursement arrangements (HRAs) to pay for certain over-the-counter drugs without a prescription as well as certain menstrual care products.

Extended Form 5500 Filing Deadline for Certain Plans (Optional)

IRS Notice 2020-23 (April 9, 2020) extended certain deadlines for a plan to file the required annual Form 5500. Under Notice 2020-23, the Form 5500 deadline was extended to July 15, 2020 for any plan whose plan year ended in September, October, or November 2019 (or any plan that was given a filing extension between April 1 and July 15, 2020). Ordinarily, a plan must file its Form 5500 (absent an extension) by the last day of the seventh month following the end of the plan year.

Relief for Certain Disclosures Required by ERISA (Optional)

EBSA Disaster Relief Notice 2020-01, which was issued by the DOL on April 28, 2020, extended the deadlines for plans to provide certain notices and disclosures under Title I of the Employee Retirement Income Security Act of 1974 (ERISA). Under Notice 2020-01, a plan will not be treated as violating ERISA if it fails to timely furnish a notice, disclosure, or document required by Title I of ERISA between March 1, 2020 and 60 days after the announced end of the national emergency declaration for COVID-19. The plan fiduciary, however, must act in good faith to furnish the notice, disclosure, or document as soon as administratively practicable. For this purpose, a plan fiduciary can meet the "good faith" standard by furnishing a document electronically if it reasonably believes that the recipient has access to electronic communication.

Extensions of Certain Plan Deadlines (Mandatory)

A joint notice issued by the DOL and IRS (published May 4, 2020) required group health plans to extend certain timeframes for participants during the "outbreak period" (defined as the period from March 1, 2020 until 60 days after the announced end of the national emergency for COVID-19). Those plans are required to disregard the outbreak period for purposes of determining the following periods and dates:

  • The 30-day/60-day special enrollment period under the Health Insurance Portability and Accountability Act (HIPAA).
  • The 60-day deadline for a qualified beneficiary to elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
  • The deadlines for a COBRA qualified beneficiary to pay his or her required COBRA premiums.
  • The deadline for an individual to notify the plan of COBRA certain qualifying events (e.g., divorce).
  • The deadlines for a participant to file benefit claims, appeals, and external review requests with the plan (or to perfect an external review request).

Because of this joint notice, a group health plan must essentially "pause" the above deadlines during the outbreak period. For example, if an individual experienced a COBRA qualifying event on March 1, 2020, the individual would have until 60 days after the end of the outbreak period (rather than 60 days after March 1) to elect COBRA coverage. This is because the joint notice requires a group health plan to pause the 60-day timeframe for COBRA elections during the outbreak period. Also, because the joint notice was issued on May 4 and is retroactive to March 1, plans may be required to re-process previous claim denials that were based on a participant's failure to meet one of the above deadlines between March 1 and May 4.

Cafeteria Plans and Flexible Spending Accounts (Optional)

2020 MIDYEAR ELECTION CHANGES

IRS Notice 2020-29 (May 12, 2020) relaxed the rules regarding cafeteria plan pre-tax elections in light of the COVID-19 pandemic. Under Notice 2020-20, employers may (but are not required to) amend their cafeteria plans to allow participants to make the following mid-year, pre-tax election changes in 2020:

  • An election to enroll in the health plan by an eligible employee who previously declined coverage (e.g., someone who waived coverage during open enrollment).
  • An election to change plan options (e.g., from an HMO to a PPO) or add dependents.
  • An election to drop coverage by a participant.
  • An election to enroll in or drop health FSA or dependent care FSA coverage or to increase or decrease health FSA or dependent care FSA contributions.

An employer that wishes to adopt any of all of the above cafeteria plan changes must disclose the changes to employees and amend its cafeteria plan by no later than Dec. 31, 2020 (i.e., an amendment is not required in advance of making the changes).

EXTENDED GRACE PERIOD TO INCUR FSA CLAIMS AND INCREASE OF MAXIMUM HEALTH FSA CARRYOVER AMOUNT

Notice 2020-29 also permits employers to amend their health and dependent care FSAs to allow employees to incur eligible claims through the end of the 2020 calendar year for any FSA plan year (or for any FSA grace period that ends in 2020). For example, if a health FSA has a grace period until March 15, 2020 for a participant to incur eligible claims for the 2019 plan year, the FSA can allow participants to incur expenses through 2020 and use their 2019 elections to pay for those expenses.

This change does not apply to FSAs with a carryover provision. IRS Notice 2020-33 (May 14, 2020), however, provides for a permanent FSA carryover increase based upon annual indexing. For the 2020 plan year, employers may amend a cafeteria plan with carryover provision to allow participants to carry over up to $550 in unused health account balances in the 2021 plan year. An employer that adopts the extended FSA grace periods or the increased carryover limit must amend its cafeteria plan or FSA (as applicable) by no later than December 31, 2021.

Tax-Free Payment of Employees' Student Loans (Optional)

The CARES Act amended Section 127 of the Internal Revenue Code (education assistance programs) to permit employers to pay up to $5,250 of an employee's student loans on a tax-free basis. This provision applies from the date of enactment of the CARES Act (March 27, 2020) through the end of 2020. The payment must be for either the principal or interest of a qualifying education loan incurred by the employee, and the employer can make payment either directly to the lender or as a reimbursement to the employee.

Takeaways for Employers

As employers grapple with the impact of the COVID-19 pandemic and return to normal business operations, it is important for them to be aware of their compliance obligations under the FFCRA, CARES Act and other guidance issued by governmental agencies. Employers should also carefully review the guidance and legislation for potential avenues of benefit for their business and employees.

Additional guidance for both mandatory and optional items is likely forthcoming as well, and COVID-19 continues to have a major impact on both companies and individuals as new infections spike in numerous states. Accordingly, employers would be well-advised to keep a close eye out for new legislation and guidance in the coming months and periodically evaluate their benefits programs for compliance and competitive considerations.

SOURCE Tyler Hall, A.; Schillinger, E. (16 July 2020) "Overview of COVID-19 Law and Guidance for Health and Welfare Plans" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/overview-of-covid-19-legislation-and-guidance-for-benefits-plans.aspx


The Saxon Advisor - January 2020

Compliance Check

what you need to know


Form W-2s are due January 31, 2020. January 31 is the deadline for employers to distribute Form W-2s to employees. Large employers – employers who have more than 250 W-2s – must include the aggregate cost of health coverage.

Form 1099-Rs are due January 31, 2020. Employers must distribute Form 1099-Rs to recipients of 2019 distributions.

Form 945 Distributions. Form 945s must be distributed to plan participants by January 31, 2020, for 2019 non payroll withholding of deposits if they were not made on time and in full to pay all taxes that are due.

Section 6055/6056 Reporting. Employers must file Forms 1094-B and 1095-B, and Forms 1094-C and 1095-C with the IRS by February 28, 2020 if they are filed on paper.

Form 1099-R Paper Filing. Employers must file Form 1099-R with the IRS by February 28, 2020 if they are filed on paper.

CMS Medicare Part D Disclosure. Employers that provide prescription drug coverage must disclose to the CMS whether the plan’s prescription drug coverage is creditable or non-creditable.

Summary of Material Modifications Distribution. Employers who offer a group health plan that is subject to ERISA must distribute a SMM for plan changes that were adopted at the beginning of the year that are material reductions in plan benefits or services

In this Issue

  • Upcoming Compliance Deadlines
  • Traditional IRA, Roth IRA, 401(k), 403(b): What’s the Difference?
  • Fresh Brew Featuring Scott Langhorne
  • This month’s Saxon U: What Employers Should Know About the SECURE Act
  • #CommunityStrong: American Heart Association Heart Mini Fundraising

What Employers Should Know About the SECURE Act

Join us for this interactive and educational Saxon U seminar with Todd Yawit, Director of Employer-Sponsored Retirement Plans at Saxon Financial Services, as we discuss what the SECURE Act is and how it impacts your employer-sponsored retirement plan.

Traditional IRA, Roth IRA, 401(k), 403(b): What's the Difference?

Bringing the knowledge of our in-house advisors right to you...


If you haven’t begun saving for retirement yet, don’t be discouraged. Whether you begin through an employer sponsored plan like a 401(k) or 403(b) or you begin a Traditional or Roth IRA that will allow you to grow earnings from investments through tax deferral, it is never too late or too early to begin planning.

“A major trend we see is that if people don’t have an advisor to meet with, they tend to invest too conservatively, because they are afraid of making a mistake,” said Kevin Hagerty, a Financial Advisor at Saxon Financial.

Advice from Kevin

Fresh Brew Featuring Scott Langhorne

“Pay close attention to detail.”


This month’s Fresh Brew features Scott Langhorne, an Account Manager at Saxon.

Scott’s favorite brew is Bud Light. His favorite local spot to grab his favorite brew is wherever his friends and family are.

Scott’s favorite snack to enjoy with his brew is wings.

Learn More About Scott

This Month's #CommunityStrong:
American Heart Association Heart Mini Fundraising

This January, February & March, the Saxon team and their families will be teaming up to raise money for the American Heart Association Heart Mini! They will be hosting a Happy Hour at Fretboard Brewing Company Wednesday, January 29, from 4 p.m. - 7 p.m. to raise money.

Are you prepared for retirement?

Saxon creates strategies that are built around you and your vision for the future. The key is to take the first step of reaching out to a professional and then let us guide you along the path to a confident future.

Monthly compliance alerts, educational articles and events
- courtesy of Saxon Financial Advisors.


The Mega Backdoor Roth IRA and Other Ways to Maximize a 401(k)

Did you know: Numerous 401(k) retirement plans allow after-tax contributions. This creates financial planning opportunities that are frequently overlooked. Read this blog post for more information on maximizing your 401(k) plan.


The most popular workplace-sponsored retirement plan is far and away the 401(k) — a plan that can be both simple and complex at the same time. For some of your clients, it functions as a tax-deductible way to save for retirement. Others might see its intricacies as a way to maximize lifetime wealth, boost investments and minimize taxes. One such niche area of 401(k) planning is after-tax contributions, an often misunderstood and underutilized area of planning.

Before we jump into after-tax contributions, we need to cover the limits and the multiple ways your clients can invest money into 401(k) plans.

Employee Salary Deferrals and Roth

The most traditional way you can contribute money to a 401(k) is by tax-deductible salary deferrals. In 2019, employees can defer up to $19,000 a year. If they’re age 50 or older, they can contribute an additional $6,000 into the plan. In 2020, these numbers for “catch-up contributions” rise to $19,500 and $6,500 respectively.

Someone age 50 or over can put up to $25,000 into a 401(k) in 2019 and $26,000 in 2020 through tax-deductible salary deferrals. Additionally, the salary deferral limits could instead be used as a Roth contribution, but with the same limits. The biggest difference is that Roth contributions are after-tax. And as long as certain requirements are met, the distributions, including investment gains, come out income tax-free, whereas tax-deferred money is taxable upon distribution.

Employer Contributions

Employers often make contributions to a 401(k), with many matching contributions. For instance, if an employee contributes 6% of their salary (up to an annual indexed limit on salary of $280,000 in 2019 and $285,000 in 2020), the company might match 50%, 75%, or 100% of the amount. For example, if an employee earns $100,000 a year and puts in $6,000 and their employer matches 100%, they will also put in $6,000, and the employee will end up with $12,000 in their 401(k). Employers can also make non-elective and profit-sharing contributions.

Annual 401(k) Contribution Cap

Regardless of how money goes into the plan, any individual account has an annual cap that includes combined employee and employer contributions. For 2019, this limit is $56,000 (or $62,000 if the $6,000 catch-up contribution is used for those age 50 and over). For 2020, this limit rises to $57,000 ($63,500 if the $6,500 catch-up contribution is used for those age 50 and over).

Inability to Max Out Accounts

If you look at the limits and how people can contribute, you might quickly realize how hard it is to max out a 401(k). If a client takes the maximum salary deferral of $19,000 and an employer matches 100% (which is rare), your client would only contribute $38,000 into the 401(k) out of the maximum of $56,000. Their employer would need to contribute more money in order to max out.

Where After-Tax Contributions Fit In

Not all plans allow employees to make after-tax contributions. If the 401(k) did allow this type of contribution, someone could add more money to the plan in the previous example that otherwise maxed out at $38,000.

After-tax contributions don’t count against the salary deferral limit of $19,000, but they do count toward the annual cap of $56,000. After-tax contributions are what they sound like — it’s money that’s included into the taxable income after taxes are paid, so the money receives all the other benefits of the 401(k) like tax-deferred investment gains and creditor protections.

With after-tax contributions, clients can put their $19,000 salary deferral into the 401(k), get the $19,000 employer match, and then fill in the $18,000 gap to max out the account at $56,000.

Mega-Roth Opportunity

If the plan allows for in-service distributions of after-tax contributions and tracks after-tax contributions and investment gains in separate accounts from salary deferral and Roth money, there’s an opportunity to do annual planning for Roth IRAs.

Clients can convert after-tax contributions from a 401(k) plan into a Roth IRA, without having to pay additional taxes. If a plan allows in-service distributions of after-tax contributions, the money can be rolled over to a Roth IRA each year. However, it’s important to note that any investment gains on the after-tax amount would still be distributed pro rata and considered taxable. Earnings on after-tax money only receive tax-deferred treatment in a 401(k); they aren’t tax free.

Clients can roll over tens of thousands of dollars a year from a 401(k) to a Roth IRA if the plan is properly set up. They can even set up a plan in such a way so the entire $56,000 limit is after-tax money that’s distributed to a Roth IRA each year with minimal tax implications. This strategy is referred to as the Mega Backdoor Roth strategy.

Complexities Upon Distribution of After-Tax Contributions

What happens to after-tax contributions in a 401(k) upon distribution? This is a complex area where you can help clients understand the role of two factors:

  1. After-tax contributions are distributed pro-rata (proportional) between tax-deferred gain and the after-tax amounts.
  2. Pre-tax money is usually considered for rollover into a new 401(k) or IRA first, leaving the after-tax attributed second. The IRS provided guidance on allocation of after-tax amounts to rollovers in Notice 2014-54.

Best Practices for Rollovers

Help your clients navigate the world of rollovers with after-tax contributions by following best practices. If a client does a full distribution from a 401(k) at retirement or separation of service, they can roll the entire pre-tax amount to a new 401(k) or IRA and separate out the after-tax contributions to roll over into a Roth IRA. The IRS Notice 2014-54 previously mentioned also provides guidance for this scenario.

You can help your clients understand after-tax contributions by envisioning after-tax money in a 401(k) as the best of three worlds. These contributions enter after taxes and give your client tax-deferred money on investment growth, allow them to save more money in their 401(k) while also giving them the opportunity to roll it over into a Roth IRA at a later date.

After-tax contributions build numerous planning options and tax diversification into retirement plans. Before your clients allocate money toward after-tax contributions, it’s important they understand what their plan allows and how it fits into their overall retirement and financial planning picture.

SOURCE: Hopkins, J. (17 December 2019) "The Mega Backdoor Roth IRA and Other Ways to Maximize a 401(k)" (Web Blog Post). Retrieved from https://www.thinkadvisor.com/2019/12/17/the-mega-backdoor-roth-ira-and-other-ways-to-maximize-a-401k/


4 End-of-Life Documents and Why You Need Them?

While the majority of people would prefer not to think about the end of life, it is important to discuss the need for and understanding of end-of-life planning documents. What are these documents and why do you need them? Read this blog post to learn more.


Most of us aren’t keen to think about the end of life–especially our own. But discussing the need for and understanding end-of-life planning documents is important for all of us. So, what are these documents and why do you need them? Here’s a summary:

1: Durable power of attorney. This appoints another person to transact business, legal and financial matters for you until you die.

Why do you need it? Let's say you are incapacitated by an accident or illness, it allows the person you’ve chosen to act for you—and quickly. That can help you avoid a lot of problems, including hard-to-get guardianship and conservatorship rights. (If you are unsure of what either of these two terms means, this article makes it clear.)

2: Appoint a health-care representative. As with the first document, this allows someone to act on your behalf to make health-care decisions if you’re unable. It allows them to review health records, authorize admission to or discharge you from a hospital and make decisions about life-sustaining medical procedures.

Why do you need it? You’ll have peace of mind knowing that your wishes will be fulfilled as you intended, especially when it comes to life-sustaining medical procedures. It also helps avoid family arguments about who should have the final say.

3: Advance care directives or living will. This puts in writing the decisions you have made about your health care—instructions, if you will, for your doctor—so that your wishes are followed if you are unable to articulate them.

Why do you need it? It ensures, for example, that you receive the treatment you’ve decided on beforehand if you are terminally ill or permanently unconscious. It helps make sure that the treatments you receive in a terminal or permanently unconscious situation are in keeping with your wishes and provides guidance to your health-care representative.

4: A will or revocable living trust. This puts in writing who will inherit your assets when you die, and in what manner. These two documents can help eliminate, avoid or postpone taxes that are payable when you die. An attorney can help you decide which of these documents is better for you.

Why do you need these? If you do not have a will or a revocable living trust, basically the government will be able to decide how and to whom your assets are distributed, and it may not be to those you intended.

These legal documents require the guidance of a qualified legal advisor to ensure they meet the requirements of your state of residency, and if you already have these but have moved to a new state, they should be reviewed to ensure they comply with the laws of your state.

SOURCE: Feldman, M. (10 December 2019) "4 End-of-Life Documents and Why You Need Them?" (Web Blog Post). Retrieved from https://lifehappens.org/blog/4-end-of-life-documents-and-why-you-need-them/


DOL updates FLSA regular rate rule

With the New Year right around the corner, it's important to know what rules are being updated. The U.S. Department of Labor has updated the "regular rate of pay" to calculate overtime pay. This standard is used to calculate overtime pay under the Fair Labor Standards Act (FLSA). Read this blog post for more information on this final rule.


The U.S. Department of Labor (DOL) has issued a final rule updating the "regular rate of pay" standard used to calculate overtime pay under the Fair Labor Standards Act (FLSA), according to a notice to be published in the Federal Register Dec. 13.

In the rule, DOL clarifies when certain employer benefits may be excluded when calculating overtime pay for a non-exempt employee, including bona fide meal periods, reimbursements, certain benefit plan contributions, state and local scheduling law payments and more. The rule also clarifies how employers may determine whether a bonus is discretionary or nondiscretionary.

The rule will take effect Jan. 12, 2020.

The rule will likely result in employers taking a closer look at their benefits packages, Susan Harthill, partner at Morgan Lewis, told HR Dive in an emailed statement.

A number of employer advocates that submitted comments on DOL’s Notice of Proposed Rulemaking (NPRM), including the Society for Human Resource Management, supported excluding employee benefits like gym memberships, tuition assistance and adoption and surrogacy services from regular rate calculations. Gym memberships and tuition assistance are generally excludable, according to DOL, but the agency said only some forms of adoption assistance would be excludable and that most surrogacy assistance payments would not be​.

Employers also inquired about public transportation and childcare subsidies. In the final rule, DOL said public transportation benefits would not be excludable, noting that the agency "has long acknowledged that employer-provided parking spaces are excludable from the regular rate but commuter subsidies are not." But it did add clarifying language around childcare, saying that while "routinely-provided childcare" must be included in the regular rate, emergency childcare services — if those services are not provided as compensation for hours of employment and are not tied to the quantity or quality of work performed — may be excluded.

DOL also offered additional details about its treatment of tuition reimbursement and education-related benefits. As it stated in the NPRM, the agency said that as long as tuition programs are offered to employees regardless of hours worked or services rendered are "contingent merely on one’s being an employee," such programs qualify as "other similar payments" excludable from the regular rate. This includes payment for an employee's current coursework, online coursework, payment for an employee’s family member’s tuition and certain student-loan repayment plans, DOL said.

HR teams should respond by performing audits of the pay codes for benefits that would be impacted, Tammy McCutchen, shareholder at Littler Mendelson, told HR Dive in an interview: "This is a good time to get your calculations correct." McCutchen suggested that employers conduct audits first before deciding whether to expand benefits options in light of the rule. She added that it's an employer's responsibility to notify payroll providers of any changes to exemptions.

Employers also will need to check state laws and consult with counsel ahead of implementing changes to employees' regular rates, as those laws may differ from DOL's new rule, Harthill said. Moreover, "[t]his is an interpretive rule and it remains to be seen whether courts will defer to DOL's interpretation of the rule or if any resultant exclusions are challenged," she added.

SOURCE: Golden, R. (12 December 2019) "DOL updates FLSA regular rate rule" (Web Blog Post). Retrieved from https://www.hrdive.com/news/dol-updates-flsa-regular-rate-rule/568954/


Employees want year-round benefits instead of holiday parties

Are employees willing to trade holiday celebrations for better benefits? According to research from Reward Gateway, more than half of employees would skip the parties and celebrations for rewards and bonuses. Read the following blog post from Employee Benefit News for more information.


Tis’ the season to head to the holiday party and celebrate with coworkers, but more employees are willing to swap the festivities for better benefits and year-long recognition from their employers.

More than half of employees would skip the holiday party if it meant rewards and recognition throughout the year, according to a new survey by Reward Gateway, an employee engagement platform. Additionally, 58% of recent graduates said they would give up an end-of-year bonus for more frequent rewards.

“Being the holiday season, all parts of the workforce are trying to prioritize their flexibility and collaboration and their shared purpose,” says Robert Hicks, group HR director at Reward Gateway. “Employers could do more, and there is a growing trend of more frequent benefits that align to your purpose, mission and values.”

The office holiday party has long been a mainstay of work culture, and 76% of companies plan to throw a party in 2019, up 11% from last year. Additionally, 24% of companies plan to give performance-based bonuses to select employees, while just 9.6% plan to give bonuses to all employees, according to a survey from recruiting firm Challenger, Gray & Christmas.

Employees are seeking value in a culture of recognition throughout the year instead, and want more consistent collaboration and communication with employers. Going hand-in-hand with that sentiment is financial assistance through their benefits offerings.

“This can come in two core ways, the first being perks that can help you reduce your overall spending.” Hicks says. “Employees are also looking for a really strong recognition culture, and on top of that, adding in financial rewards throughout the year.”

With unemployment at a 50-year low, the quest to attract and retain top talent should push employers to encourage a workplace that doesn’t just celebrate successes once a year.

“Everybody knows it’s a really competitive market place, and your number one response needs to be what can we do to be a really great workplace for people to stay and for people to join,” Hicks says. “Organizations that prioritize listening to their people and delivering continuous rewards and recognition can create an environment where employees are more engaged and excited about where they work all year — not just during the holidays.”

SOURCE: Place, A. (13 December 2019) "Employees want year-round benefits instead of holiday parties" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/employees-want-year-round-benefits-instead-of-holiday-parties


A health insurance primer for your employees during Open Enrollment

The end of open enrollment season is quickly approaching. During open enrollment, employees have the chance to choose a benefits plan or change from the plan they currently have. Read this blog post for a few things employees should consider when choosing a plan.


Now is the time to choose the best health plan for you and your family. During open enrollment season, employers and the Health Insurance Marketplace (or Exchange) let you choose a plan or change from the plan you have. Making the right choice can impact your health and your wallet.

Even if your current coverage seems satisfactory, your employer or the Exchange may offer new options that better suit your needs. It is important to compare costs and to understand differences in benefits, networks and other rules. In some states, plans available outside the official Marketplace offer attractive, low premiums but may have dollar limits on benefits, or may not provide coverage for childbirth, mental health and other services mandatory for plans that qualify under the Affordable Care Act (the “ACA” or “Obamacare”). Review and compare such plans’ terms carefully.

The time for your decision is limited. Employers generally provide a month or more to make your selection. Open enrollment for the federal Marketplace runs only from November 1, 2019, to December 15, 2019. Exceptions may be made for life changes like the birth of a child or loss of coverage under a spouse’s plan, but if you miss open enrollment season, you will probably have to wait another year to enroll. Here are some things to think about when choosing a plan.

Costs

The first cost to consider is the premium — the payment, usually monthly, to maintain coverage. If you get your plan through your job, your employer may pay all or part of the premium. If you choose a Marketplace plan, you may qualify for a premium tax credit to reduce the premium.

Other insurance costs are known as cost sharing, because you share the cost of care with your plan. They may take the form of a copay (a fixed dollar amount for each service), coinsurance (a set percentage of the cost of a service) or a deductible (the amount you must pay before your plan starts paying for services). If you select a Marketplace plan, you may qualify for cost-sharing reductions to lower those expenses.

In principle, it would be nice if all the costs were as low as possible. But usually, low-cost sharing comes with a high premium. High-deductible health plans may offer lower premiums but you will pay more out-of-pocket before your insurance pays anything.

In shopping for a health plan, consider how high a premium you are willing to pay for the level of cost sharing you would like. For example, if you or a family member have a chronic illness, you may need regular treatment and may be at risk for hospitalization. In that case, you may be willing to pay a higher premium for low-cost sharing. But if you are a healthy, young, single adult who rarely sees a doctor, you might accept a high deductible in exchange for a low premium.

Bear in mind that if you have a high-deductible health plan, you might be eligible to set up a health savings account (HSA). An HSA provides tax savings that stretch the dollars you contribute to the account to help pay for qualified medical expenses.

Choice of Doctors

If you like your current doctors and want to keep seeing them, make sure they and their facilities belong to the network of providers who have contracted with the plan you are considering. Check the plan’s online provider directory to make sure those doctors and their facilities are listed in its network. Even if you do not have a regular doctor, make sure the network includes providers close to where you live and work.

If you want to choose freely among many providers, a plan with a broad network might be for you. That may be more expensive than a plan with a narrow network, which may cost less but has a more limited choice of providers.

Out-of-Network Coverage

As good as a plan’s network might be, you may still wish to consult providers outside the network from time to time. If so, consider a Preferred Provider Organization (PPO) or Point of Service (POS) plan; each provides out-of-network benefits. With such plans, you will still spend more for out-of-network than in-network care, but at least you will have some coverage. Two other types of plans, Health Maintenance Organization (HMO) and Exclusive Provider Organization (EPO), typically will not pay for out-of-network care except for emergencies.

Who’s in Charge of Your Care?

In HMO and POS plans, you choose a primary care physician (PCP) who acts as a form of “gatekeeper” for your care. Unless it is an emergency, when you need medical treatment, you go to the PCP first. The PCP either treats you personally or refers you to specialists in your network. If you like having a PCP’s guidance, this arrangement might work for you. But if you prefer choosing specialists directly, you might opt for a PPO or EPO.

ACA-Compliant versus Association and Short-Term Plans

Whatever plan you choose, it is important to consider whether it covers all the types of healthcare you might need and whether it limits the dollar amount of your coverage. Plans that comply with the ACA are comprehensive because they have to cover 10 essential health benefits. Short-term, limited-duration (STLD) health plans, do not have to cover all those benefits. They may, for example, not cover childbirth, mental health or prescription drugs. If you end up needing care that is not covered, you will have to pay the whole cost yourself.

AHPs and STLD plans differ from ACA-compliant plans in other ways. For example, STLD plans can impose annual or lifetime dollar limits on coverage. If your care costs more than those limits, you have to pay the excess amount.

SOURCE: Gelburd, R. (5 December 2019) "A health insurance primer for your employees during Open Enrollment" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/a-health-insurance-primer-for-your-employees-during-open-enrollment