3 ways gamification can improve your team’s well-being
Original post benefitsnews.com
What does a big, fancy word like “gamification” mean anyway? Simply put, it’s the idea that game-like rules and rewards make the hard stuff fun. And smart leaders now use it to engage and motivate their employees.
Well-known game designer Jane McGonigal says “living gamefully” helps people bring curiosity, passion and balance into their lives. It gives them a higher purpose so they keep moving forward in their mission even when obstacles block their vision.
Gamification is the reason fitness apps work. When the buzzer signals that you hit 10,000 steps, you win. Even performance reviews contain elements of game design – when your employees exceed all their goals and move to the next career level, you both win.
Let’s go for that big win. Help your employees achieve their goals and improve their health by introducing these gamification strategies.
3 gamification strategies to implement:
1. Wellness quests. As noted above, wearable technology makes tracking exercise so much easier. But gamification for health doesn’t require that level of sophistication — you can make a game out of almost anything when you keep score by pencil. Challenge your team members to sneak extra exercise into their day. Have them jot down a checkmark every time they take a stretch break. Heat up competition by posting results on a whiteboard for all to see. Add rules or creative complexities as time goes on and the activities become easier. The more quests employees complete, the healthier they’ll be.
2. Social communities. We all need a little help from our allies. We crave support from one another, and we’re willing to dig in deeper when we know others are rooting for us. So it’s no surprise that social interactions and competitions help employees stay motivated and happy. Hook your employees into healthy activities with team vs. team challenges, photos, comments, nudges and cheers. Recognize accomplishments in ways that best fit your company’s culture – whether that’s sending around leader-board rankings each week or letting peers nominate each other for special badges.
3. Power-ups. The journey to well-being is never over — but it’s nearly impossible to keep going if you don’t hit milestones. This is when you need to activate “power-ups” — the quick tasks that feel like small wins. Remember how satisfying those power-ups were in your video games of childhood? Encourage your employees to take baby steps toward their goals. For instance, they may not have time for a lunchtime workout, but can they sneak in a few jumping jacks before every meeting? How about simply standing up for two minutes? Or taking a mid-meeting plank break? Achievements like these provide a burst of feel-good energy and intrinsic motivation to help us stick with lofty commitments.
15 tips to improve employee engagement
A great deal of time is spent making sure the communication between you and your consumer is on point. But what about the communication between you and your employees?
Gary Grates, a globally renowned, recognized, and respected expert in employee engagement, wrote in a 2004 PRSA Strategist article, "“Employees want to know what the company believes in and what it will fight for — its mission, vision and values; its foundational principles. They will commit or not commit, engage or disengage, on the basis of that foundation.”
Engaged employees are involved, enthusiastic and committed to their work. Their engagement can determine the outcome of a project.
However, engaged employees are not the norm according to Gallup's 15 years of research. Employee engagement has consistently averaged less than 33 percent in the United States. Worldwide it's even lower at just 13 percent.
So, what can you do as an employer to change that trend?
Behan Communications put together this list of 15 ways to improve internal engagement.
- Be clear and concise:
Overwriting and using technical jargon will lead to confusion and misunderstanding. - Set the tone at the top:
CEOs and senior leaders need to set the tone. They need to be visible and accessible, and they need to understand that there’s a correlation between strategic employee communications and the achievement of organizational goals. - Understand your employees:
You may need to communicate differently with different audiences. For custodians who don’t use computers at work, e-mail is ineffective. To determine your employees’ needs and perceptions, consider surveying them regularly: Are they getting the information they need? - Use many channels:
Most people need to hear or see a message multiple times, in multiple ways, to understand it completely. Distribute your messages electronically, in writing, face-to-face and at forums and meetings. Your message should be consistent across all of these channels. - Provide context:
Employees need to hear information at multiple levels. Provide context (what external factors are at play?); explain strategy (why did we decide to respond this way?); and make it personal (how will this affect me?) - Be timely: make employees first!
When you prioritize your communications, always think of your internal people first. Your employees should hear it from you before they hear it from anyone else — they shouldn’t be surprised by a media report. - Be forthcoming and be continuous:
Always communicate, and communicate both good and bad news. If you are honest and candid in sharing bad news, your good news is more credible. - Match actions with words:
If you say you will address a situation in a certain way, do it. If you don’t, you’re undermining your credibility. - Emphasize face-to-face communications:
Although today’s employees may be more tech-savvy than ever, nothing beats human interaction: Most employees want to hear news and information from their supervisors. Managers need to be trained in how to communicate, and they need to have the right tools at hand. If you are expecting your managers to help explain a complicated change to the organization’s pension plan, you’d better provide them with talking points and handouts. - Create an organizational habit for communications:
You know you need to communicate about policies; health and safety; benefits; and how a job should be carried out. But remember that you also need to share information about your organization — what our your objectives? How are you performing? What are your plans and prospects? How can employees help? - Plan:
Be systematic and strategic. Have an editorial calendar that spells out what you’ll say, when you’ll say it, where you’ll say it and how you’ll say it. Develop a checklist of what needs to be communicated. - Measure effectiveness:
Set some objectives and be prepared to assess whether you have met them, whether they are employee engagement goals or perception goals. You might want to regularly assess engagement levels and ask employees whether the organization has communicated its strategy well. Do they understand how their daily work helps the organization meet its goals? - Facilitate two-way conversation:
One-way communication is a thing of the past. Individuals are empowered to talk back, and feeling “listened to” enhances feelings of trust. There are many ways to facilitate two-way communication, including face-to-face meetings; “town hall” meetings; interactive video interviews; Twitter questions; employee surveys; Q-and-A features on the employee intranet; and anonymous suggestions via e-mail or suggestion boxes. - Be objective:
Don’t “spin,” or try to dictate or assume how people should feel about the news you’re sharing. - Say “thank you” as much as possible:
If an employee feels appreciated, she’s more likely to feel engaged.
The Dish with Deborah Miller
February's Dish serves up Saxon's Deborah Miller's favorites. For the nights you want to stay in, Miller suggests Chicken Parmesan. On the nights Miller heads out to eat, you can find her at The Eagle.
Chicken Parmesan
- Flour
- Scrambled eggs
- Bread crumbs
- Chicken breast
- Mozzarella cheese
- Marinara sauce
Pre heat oven to 350.
Put into separate bowls flour, scrambled eggs, and bread crumbs.
Dip the chicken breast into the flour, then the eggs, then the bread crumbs making sure the chicken breast is well coated.
Place the chicken in a pan with hot oil and let it fry for a few minutes on each side.
After the chicken has fried place it into a baking pan with your favorite marinara sauce in the bottom of the pan.
Then, place mozzarella cheese on it and more marinara sauce.
Place the chicken in the oven for about 20 minutes until the chicken has cooked through and the cheese has melted.
Serve with spaghetti and garlic bread.
The Eagle
1342 Vine St.
Cincinnati, OH 45217
The Eagle has the best fried chicken and macaroni and cheese in the city! The wait can be a few hours, but it is well worth the wait especially on a nice evening.
Audit: What should I expect from a Department of Labor audit?
Original post by shrm.org
Employers should keep in mind that the U.S. Department of Labor (DOL) can audit employers at any time, although the most common reason for a DOL audit is a complaint from an employee.
The DOL has also targeted employers in low-wage industries for wage and hour violations, particularly in the areas of agriculture, day cares, restaurants, garment manufacturing, guard services, health care, hotels and motels, janitorial services, and temporary help. By understanding the audit process and following the guidance below, employers will be better prepared to handle a DOL audit.
- The DOL typically provides little advance notice of an audit. However, you can request time to gather records. Typically, the amount of time an employer will have will depend on the auditor.
- Contact the auditor to find out specific information about the audit. Key questions to ask are the focus of the investigation (e.g., overtime pay compliance, exempt vs. nonexempt classification, minimum wage compliance), the time period for records the auditor wants to view, and the names of any employees that may be interviewed.
- Gather the records in accordance with guidance provided by the auditor. Be prepared to provide documentation related to the company compensation policies and procedures. Keep track of exactly what information was provided. Do not provide records other than what the auditor requests.
- Designate one or two company representatives to work with the auditor. Some employers choose to designate their company’s legal counsel; other employers will designate senior managers. The representatives will have the duty to provide documents requested, arrange for any additional records to be provided to the auditor (if necessary) and coordinate employee interviews.
- During the audit, be courteous to and cooperative with the auditor. It is a good practice to provide a quiet area for the auditor to work in.
- At the end of the audit, ask the auditor to provide a summary of the results of the investigation. This information will help an employer review options for resolutions if any violations are found. If violations are found, employers are encouraged to consult legal counsel before any settlements are reached with the DOL.
To be proactive, employers should consider a self-audit, which consists of the following steps:
- Review job descriptions.
- Understand the differences between federal and state laws and ensure that the laws are correctly applied to employees.
- Ensure that FLSA classifications are correct.
- Keep accurate payroll records.
- Apply policies consistently.
- Make sure all records are complete and work to resolve any inconsistencies.
- Determine how to address any areas of concern identified via the self-audit.
Here are the top 10 most costly U.S. workplace injuries
Original post lifehealthpro.com
Workplace injuries and accidents are the near the top of every employer’s list of concerns.Here is the countdown of the top 10 causes and direct costs of the most disabling U.S. workplace injuries. The definitions and examples can be found at the BLS website.
- Repetitive motions involving micro-tasks
Some of these tasks may include a word processor who looks from the computer monitor to a document and back several times a day or the cashier at the local grocery store who is scanning and bagging groceries for several hours at a time.
- Struck against object or equipment
This category of workplace injury applies to workers who are hurt by forcible contact or impact, for example, an office worker who bumps into a filing cabinet or an assembly line worker who stubs a toe on stacked parts.
- Caught in or compressed by equipment or objects
These workplace injuries result from workers being caught in equipment or machinery that’s still running as well as in rolling, shifting or sliding objects.
Picture the scene in a movie in which wine barrels topple over, catching the bad guy beneath them, only in this case, it’s the employee whose job it may be to stack the barrels. Perhaps it’s the experienced worker who removes a machine guard to dislodge material that’s stuck and gets a finger caught when the machine starts moving again.
- Slip or trip without fall
Occasionally, workers do slip or trip without hitting the ground. Think of the employee entering the workplace who slips on icy stairs but is able to grab the handrail to prevent hitting the ground. But the action of grabbing the handrail may cause the employee to injure his shoulder or wrench her knee.
- Roadway incidents involving motorized land vehicle
The worker may be the driver, a passenger or a pedestrian, but the cause of the injury is an automobile, truck or motorcycle.
- Other exertions or bodily reactions
These motions include bending, crawling, reaching, twisting, climbing or stepping, according to the BLS. Consider, for example, a roofing contractor’s employees who are continually climbing up and down ladders.
- Struck by object or equipment
This category covers a range of possible injuries, from being struck by an object dropped by a fellow worker to being caught in a swinging door or gate. Picture the construction worker on a scaffold dropping a hammer on the worker below.
- Falls to lower level
The roofer could fall to the ground from the roof or ladder, or an office worker standing on a stepstool, reaching for a heavy file box, could fall to the floor.
- Falls on same level
The second most costly workplace injury, surprisingly, is a fall on the same level. Picture the employee who is walking through the office and falls over an uneven floor surface or someone leaning too far back in an office chair and toppling over.
- Overexertion involving an outside source
The BLS explains that overexertion occurs when the physical effort of a worker who lifts, pulls, pushes, holds, carries, wields or throws an object results in an injury.
The object being handled is often heavier than the weight that a worker should be handling or the object is handled improperly. For example, lifting from a shelf that’s too high, or in a space that’s cramped. Within the broad category of sprains, strains, and tears caused by overexertion, most incidents resulted specifically from overexertion in lifting.
Risk managers should work with their carriers and workplace safety specialists to minimize injuries, lost work days and workers’ compensation costs.With a little effort, employers can understand more about the causes of accidents and injuries in their organizations, identify the appropriate actions to reduce the number of injuries and minimize employee disabilities from workplace accidents.
4 retirement trends to watch in 2016
Original post benefitspro.com
The Institutional Retirement Income Council has announced the top four retirement industry trends to watch in 2016.
- Financial wellness plans.
According to IRIC, financial wellness will be a big one.
Employers are expected to significantly expand wellness programs that currently focus on physical wellbeing so that they also include features focusing on financial wellbeing.
With all the financial challenges faced by employees—including medical expenses, credit card debt, college expenses, and retirement planning—financial wellness programs have been growing increasingly popular, with that trend expected to continue in the year ahead.
A 2014 Society for Human Resource Management survey reported that 70 percent of HR professionals predicted that baby boomers would likely participate in a financial wellness program if their employer offered one.
Such programs will likely include not just ways to manage debt and better save for retirement, but also how to calculate a spend-down plan once in retirement and how to incorporate Social Security into one’s overall strategy.
- Out of plan or in plan?
Next is the trend that pits out-of-plan income solutions against in-plan solutions.
In their quest to be sure that retirement savings will provide a regular source of income throughout retirement, participants have been looking outside of their retirement plans to find ways to translate a lump sum into a monthly check.
However, the Department of Labor’s expected implementation of a fiduciary rule will have a major effect on out-of-plan advisors, as well as in-plan options.
The release of a Center for Retirement Research study that showed IRAs’ rate of return a poor substitute for that of defined benefit plans will, according to IRIC, “make it all the more difficult for advisors to recommend moving out of a defined contribution plan to those eligible to keep their assets in the plan.”
As a result, it expects that participants will be more likely to leave their assets in a retirement plan rather than rolling them over.
- In-plan retirement income solutions.
The move to keeping assets inside retirement plans, IRIC said, “should cause an increase in participant interest in investment vehicles that provide solutions to the draw-down, rather than accumulation, of retirement assets.”
As a result, revisiting in-plan retirement income solutions will become a major focus for plan sponsors in 2016.
IRIC said that plans that have not considered this will be under pressure from participants to “consider new solutions to address the risks of retirement income sustainability, longevity risk, market timing risk and in-plan distribution options.”
- In-plan distribution flexibility.
Plan sponsors will have to consider the question of which distribution options will be available to terminated participants.
If a plan only offers two options—complete lump-sum distribution or keeping the entire balance in the plan—it’s likely that sponsors will want to explore the possibility of offering periodic withdrawal opportunities, so that they can encourage terminated participants to keep their assets in the plan—which can provide benefits not only to the participants, but also to the plan itself in the form of reduced administration and fee costs.
What employees need to know now to file tax forms for PPACA
Original post benefitspro.com
The Patient Protection and Affordable Care Act (PPACA) reporting deadlines are rapidly approaching, presenting a major administrative burden for employers who face penalties for failing to report in a timely and accurate manner.
While there has been significant discussion of employer roles and responsibilities, employees have been largely left out of the equation.
However, many employees will soon be receiving new forms that are critical to their ability to file their tax returns and to their employers’ ability to accurately fulfill their own reporting requirements. Among these are Forms 1095-A, 1095-B, and 1095-C.
With this in mind, it is important for employers to educate individual taxpayers on what they are required to do and when and how to complete these requirements in the easiest and most efficient manner.
1095-C
The most commonly received form will be the new 1095-C, which millions of Americans will be receiving for the first time this year.
This new government form is used to tell the Internal Revenue Service that you were eligible for insurance coverage under the Affordable Care Act and whether you took advantage of or waived this coverage.
This form will be sent by employers no later than March 31 to all eligible full-time employees who worked for a company with a total of 100 or more full-time or full-time equivalent employees in 2015. For the purposes of this form, full-time is any employee working 30 or more hours per week or 130 hours in a calendar month.
According to the IRS guidance, Form 1095-C helps to determine whether both the employer and the employee have complied with the “shared responsibility” clause of the ACA.
The form also determines whether an individual or family qualifies for the Premium Tax Credit, which reduces the burden of purchasing health insurance.
Anyone who does not have coverage elsewhere and chose to decline employer-sponsored health care coverage will be required to pay a penalty for not carrying coverage--this penalty will be assessed on their tax return.
For 2015, the penalty for declining all health care coverage is $325 per uninsured adult and $162.50 per uninsured child or 2 percent of household income, whichever is greater up to a family maximum of $975.
The penalty will increase to $695 per uninsured adult and $347.50 per child or 2.5 percent of household income up to a family maximum of $2,085 in 2016, and will continue to rise with inflation year-over-year.
However, the IRS offers special exemptions based on income, circumstance and membership in certain groups, so those without coverage should research their options or consult a tax professional. (The most common exemption is for those who declined employer-sponsored coverage that would have cost more than 8 percent of their total household income.)
Health care exemptions can be claimed by filing IRS form 8965 with your taxes. As previously noted, the form also determines who may be eligible for premium credits to help defray the expense of coverage.
Employers are required to submit insurance coverage information, along with social security numbers and other identifying employee information to the IRS, and employee failure to disclose a waiver of coverage may result in an audit and penalties greater than the ACA individual mandate penalty.
1095-B
Form 1095-B essentially serves the same purpose as form 1095-c, but is used by and sent to employees of companies with fewer than 100 employees.
It may also be sent directly by an insurer to certify that individuals/families had non-employer sponsored coverage in place in 2015. This coverage may have come from:
- Government health care plans such as Medicare Part A, Medicare Advantage, Medicaid, the Children's Health Insurance Program, and Tricare for military members, veterans’ medical benefits and plans for Peace Corps volunteers.
- Health coverage purchased through the "Marketplace" -- Web-based federal and state insurance markets set up under the Affordable Care Act.
- Any individual health insurance policy in place before the Affordable Care Act took effect.
Depending on the way a health care plan is structured, some employees may receive both a 1095-B and a 1095-C.
1095-A
Form 1095-A is only applicable to those who purchased their health care coverage through ACA’s health care exchanges.
This form plays a critical role in reconciling the Advanced Premium Tax Credits (also known as APTCs)--a yearly stipend based on modified adjusted gross income designed to help lower-income individuals and families defray the cost of purchasing exchange-based health insurance--for 2015 and in determining future credits for 2016.
Per IRS and ACA requirements, any excess APTC received in the previous year must be repaid through income tax.
What to do with these forms
Like the more familiar W-2 or 1099 forms, the 1095-A, B, and C will be needed to file a 2015 tax return for anyone who receives it.
Those using a tax preparer will need to bring it with them along with their other filing documents, and those doing their own taxes or using tax preparation software will need to keep this document with their tax records in case of any further inquiry /audit by the IRS.
Help is available
Of course, this is just one important factor in gaining a more thorough understanding of the complexities of the ACA. While the IRS has worked to streamline the process as much as possible, many employers and employees are struggling to understand and keep pace with changing requirements.
However, for quick questions, there are many good resources available to both employers and employees. One of the best is the IRS website.
As in all tax-related issues, the most important factors in handling ACA reporting for all groups are to know what’s coming, prepare in advance, keep excellent records, take note of deadlines and avail yourself of helpful resources.
The Affordable Care Act's reporting requirements
These new reporting obligations require employers and other entities to report information to assist the IRS with enforcing the individual mandate (i.e., the requirement for individuals to maintain minimum essential health care coverage) as well as the employer mandate (i.e., penalties that are imposed on certain employers if minimum health insurance coverage is not offered by the employer).
In order to monitor compliance with both the individual and employer mandates, the ACA requires reporting by employers and insurers. To understand these reporting obligations, one must understand the general manner in which both the individual mandate and the employer mandate operate.
If an individual does not have minimum essential coverage, the IRS will collect a tax penalty from him or her. The monthly tax penalty is equal to 1/12th of the greater of:
- For 2015: $325 per uninsured adult in the household (capped at $975 per household) or 2.0 percent of the amount by which the household income exceeds the filing threshold (e.g., single person making more than $10,150 in 2015 must file a tax return).
- For 2016: $695 per uninsured adult in the household (capped at $2,085 per household) or 2.5 percent of the amount by which the household income exceeds the filing threshold.
- 9.5% of an employee’s W-2 wages (such wages amount being net of any salary reductions under a 401(k) plan or cafeteria plan)
- 9.5% of an employee’s monthly wages (hourly rate x 130 hours per month)
- 9.5% of the Federal Poverty Level for a single individual
- Name of each individual who has minimum essential coverage (including covered spouse and dependents);
- Name and address of the “responsible person” through whom the individual has coverage (generally the primary participant, employee, or applicant);
- Taxpayer identification number (TIN, which is generally the Social Security Number) for each covered individual, including covered spouse and dependents; and
- Calendar months for which each individual was covered during the calendar year.
- Name, address and employer identification number (EIN) of the ALE;
- Name and telephone number of a contact person;
- Calendar reporting year;
- Certification as to whether the ALE offered its full-time employees and their dependent children the opportunity to enroll in minimum essential coverage by calendar month;
- Number of full-time employees for each month in the calendar year;
- For each full-time employee, the months for which minimum essential coverage was made available;
- For each full-time employee, the employee’s share of the lowest-cost monthly premium for “employee-only” coverage providing minimum value, by calendar month; and
- Name, address and TIN for each full-time employee, and the months, if any, for which the full-time employee was covered under an employer-sponsored plan. (This information would be the same as data provided for Section 6055 reporting.)
- Information Technology – to ensure that all the required data is accessible;
- Finance – to budget and allocate compliance resources needed;
- Legal – to interpret and apply the regulations;
- Human Resources – to make decisions regarding employee scheduling and monitoring hours over 30 hours per week;
- Payroll – to track hours (to identify full-time employees) and calculate affordability; and
- Benefits – to develop plan design, eligibility, and communications to employee
Overcoming small business retirement plan hurdles
Original post Stephen Miller, shrm.org
Just one-third of U.S. companies with fewer than 20 employees offer retirement benefits, compared to nearly 98 percent of companies with 5,000 or more workers, according to Retirement Savings Trends, a research report by ADP, a payroll and benefits services firm.
Those findings dovetail with those in a new report by the Pew Charitable Trusts, Who’s In, Who’s Out, which revealed that only 22 percent of workers at organizations with fewer than 10 employers have access to a workplace savings plan, compared with 74 percent at organizations with 500 or more workers.
Earlier this week, the Obama administration announced its commitment to a series of proposals—some old, and some new—to help small businesses to provide their employees with access to retirement savings plans. But one of the largest roadblocks preventing smaller employers from offering retirement benefits is their own mistaken belief about the feasibility of doing so.
Small Business Misconceptions
“Part of the hurdle for small businesses is the myth that they have to be a large company to offer a retirement plan,” said Joe DeSilva, senior vice president and general manager of ADP retirement services in Florham Park, N.J. But “the benefits offered through a retirement plan, whether it’s a SIMPLE IRA or a 401(k) plan, can be realized regardless of company size,” he noted.
For small organizations, “their No. 1 concern is cash flow,” DeSilva said. “The thought of a 401(k) or similar plan brings on what I call a misperceived burden—that it’s going to cost them a lot of money. They worry about the incremental costs of maintaining the plan, and whether the compliance components will put them at risk.”
Often overlooked, “because it’s somewhat qualitative and not quantitative, is an employer’s ability to attract and retain talent by making available a benefit that competitors in the same market space may not offer.”
As they become better informed, small business owners may begin to see the advantage of providing retirement benefits with pre-tax dollars, and that the administrative burden is less than they might have thought.
DeSilva noted that ADP found the number of small businesses (in this instance, defined as those with under 50 employees) offering a retirement plan option rose 14 percent last year, with much of that growth occurring with SIMPLE IRAs, which is an option aimed at small employers.
Reaching Younger Workers
Both the Pew Charitable Trusts and the ADP reports revealed that younger workers—the Millennials—often aren’t taking advantage of workplace retirement plans when they are available.
Participation in 401(k) or other defined contribution plans was at 41.1 percent for employees ages 20 to 24, but rose to 65.6 percent for employees ages 55 and older, ADP reported. “The gap between access and participation proved largest among the youngest workers, many of whom face savings challenges even when they have access to retirement plans,” Pew found.
Millennials in their 20s are grappling with student loans and debt, and they’re holding off on saving. “For them, retirement is far away,” DeSilva said. “At the end of the day, you [should] combat that with overall education, driving awareness that saving early on and harnessing the power of compound interest in those low-income years when they’re entering the workforce is critical. Employers need to be telling that story.”
Automatic enrollment helps bring younger workers into a savings plan, but even when they do become participants, the level of their contributions is low. Automatic escalation—increasing the rate of salary deferral each year and requiring participants to affirmatively opt out of that increase if they so choose—can help. But while there is a high level of awareness around auto enrollment among plan sponsors, awareness of the value of auto escalation is much lower.
“Data suggests when you do auto-escalate, employees end up at retirement with larger nest eggs,” DeSilva noted.
IRS clarifies FSA carryover and HRA coverage issues
Original post by Stephen Miller, shrm.org
Confusion about carrying over unused funds from year to year in health care flexible spending accounts (FSAs) has received some clarification under IRS Notice 2015-87, issued in December. The guidance also limits the use of health reimbursement arrangements (HRAs), including by an employee’s family members who are not enrolled in the employer’s group health plan.
RELATED: IRS releases final rule on premium tax credits, notice addressing employer coverage
Flexibility for Flex Plans
Since 2013, there have been two options for health FSA extensions that employers can adopt:
- If a health FSA plan has a carryover feature, participants can roll over up to $500 of unused FSA dollars to the next year but will forfeit any excess over $500 at year-end.
- Alternatively, an optional grace period can give employees an additional two-and-a-half months to incur new expenses using prior-year FSA funds. At the end of the grace period, all unspent funds must be forfeited to the employer.
Plans can offer either the carryover or a grace period, but not both, or they can offer neither. These options apply to FSAs for general purpose health care including prescription drug expenses, and to limited-scope FSAs for dental and vision care. Dependent care FSAs may offer a grace period but not a carryover option.
“One of the key reasons the IRS issued new FSA guidance was to clarify that employers can place some restrictions on the carryover feature,” said Mary V. Bauman, a member of law firm Miller Johnson in Grand Rapids, Mich., and co-author of an analysis of Notice 2015-87.
“Employers were concerned that if they opted to provide the carryover, they might have to maintain small account balances over long periods of time, and that would raise their administrative fees,” added Bill Sweetnam, legislative and technical director at the Washington, D.C.-based Employers Council on Flexible Compensation, which represents employers that sponsor tax-advantaged benefit programs.
Notice 2015-87 gives employers two tools to address concerns over keeping an employee on the FSA plan books when that employee isn’t otherwise an active FSA participant, Bauman explained:
- Employers can limit the carryover feature to only those employees who elect to make their own contributions for the following plan year.
- The employer can limit the carryover to only one plan year. “For example, consider an employee with a carryover of $300 for plan year one who doesn’t elect to contribute for plan year two,” said Bauman. “At the end of plan year two, if the entire $300 isn’t used, the employer’s plan can provide that the balance will be forfeited.”
COBRA and Carryovers
The notice provides that a health FSA that allows employees to carry over amounts from one plan year to the next must also allow those who elect COBRA under the FSA to carry over amounts to the next year. Amounts carried over cannot be used by employers in determining the amount of the FSA plan premium charged to former employees who elect COBRA.
“What to charge former employers for the COBRA premium [on their FSA plan] had been questionable,” Sweetnam said. “The guidance makes clear that you can’t base the premium charge on the amount of funds carried over.”
HSAs and FSAs Can’t Overlap
The notice affirms prior guidance stating that employees are not allowed to contribute to a health savings account (HSA) if they contributed during the same year to a general-purpose health FSA, although they may contribute to both an HSA and a limited-scope FSA covering dental and vision care expenses.
“An employee enrolled in a high-deductible health plan who has a carryover at the beginning of that plan year will be HSA-ineligible for the entire year, even if he or she spends down the balance right away,” said Bauman.
“If you have an HSA, you cannot contribute new funds to a general-purpose health FSA in the same year,” and carrying over funds from the prior year is seen as a contribution, said Sweetnam.
HRA Coverage Restricted
Notice 2015-87 also affirms prior guidance holding that an HRA cannot reimburse active employees for the cost of premiums for nongroup health insurance they might purchase on their own, unless those purchased policies cover only “excepted benefits” (such as dental or vision insurance policies).
“Some third-party administrators were making tortured interpretations of the prior guidance and promoting arrangements that the IRS didn’t think were allowable,” Sweetnam noted. “The IRS here is addressing that and putting a stop to it.”
The guidance reiterates that retiree-only HRAs can still reimburse retirees for the cost of premiums for nongroup health insurance policies, whether bought through the private market or on an Affordable Care Act exchange.
“But there was one new issue [in the notice] that is key,” said Bauman. “If an employer provides an HRA with its group health plan, it can only reimburse the uninsured expenses of an employee’s spouse and children if they also are enrolled in the employer’s group health plan.”
Employers with HRAs in place as of Dec. 16, 2015, when Notice 2015-87 was issued, have until the first day of their 2017 plan year to amend the HRA to address this requirement, Bauman noted.
“Since family members not on the group health plan can’t be covered by the HRA, it will require employers to update their systems,” said Sweetnam. Beginning in 2017, “If a charge is made to the HRA for a prescription, for instance, you have to look to see who the prescription is for. If it’s for the employee’s spouse and the employee has self-only coverage, that’s no longer permitted under these rules. It adds a little bit of administrative complexity.”
The new guidance creates some complexity, while in other areas it gets rid of some complexity, Sweetnam said.