3 alternative ways clients can use an HSA
HSAs get hailed as a boon to retirement savers, offering rare triple-tax advantage status to dollars deposited within. But these accounts, offered in tandem with high-deductible health insurance coverage, are far more versatile than they get credit for.
Typically thought of and discussed primarily as a way to help clients meet medical bills today or in their future retirement, HSAs can provide assistance beyond this narrow scope, with funds eligible for use to pay Medicare or COBRA premiums, long-term care, and non-medical expenses — all without jeopardizing that special tax treatment.
Medicare and COBRA premiums
Once clients enroll in Medicare they can no longer contribute to their HSA, but they can do something they could never do on a high-deductible plan: use the money they’ve already stashed in it to cover their premiums.
HSA funds can pay for Medicare Parts A, B and D as well as copays for Part D. Medicare HMO, Medicare Advantage, and MAPD plan premiums are also eligible expenses for reimbursement. However, HSAs cannot help with Medicare Supplement Plan or Medigap premiums, says Paul Fronstin, director of the Employee Benefit Research Institute's health research and education program.
Married couples may run into trouble when they go to reimburse themselves for such premium expenses if the account owner isn’t also the spouse who is going onto Medicare or they are not yet 65, warns Roy Ramthun, founder and president of HSA Consulting Services and a former health care policy advisor for President George W. Bush. That’s because, while HSA’s can normally be used to pay expenses incurred by the account owner’s spouse or dependent, Medicare premiums aren’t considered an eligible expense unless the account holder is 65. This means couples with any age gap need to consider whose name the HSA should be under or each open their own HSA so that the older partner doesn’t have to wait until the younger turns 65 to take advantage of this rule. (Opening two separate HSAs will also allow clients age 55 or older to make duel $1,000 catch-up contributions on top of the usual annual limits.)
Clients who reach Medicare age but opt to delay enrolling because they’re still working can also use their HSA money to pay for their employer-sponsored health care as well as continue funding an HSA. They can do this even if their spouse is on Medicare, as long as they’re on a HDHP.
And finally, clients who lost their jobs this year will likely be relieved by another HSA premium exception. If a person has health care continuation coverage, such as with COBRA, or is collecting unemployment compensation under federal or state law then they can use their HSA to pay the premiums for their health insurance, says Fronstin.
“HSA funds will frequently be used by clients to pay premiums in situations where there are little or no alternatives,” says Justin Rucci, a financial planner at Tustin, California-based Warren Street Wealth Advisors. “In a situation where a client was laid off from work, has a hefty HSA balance, and has expensive COBRA premiums, this could be a prime candidate. Alternatively, a wealthy client with a large HSA balance beyond what they would use for out of pocket medical expenses can be a good candidate for this.”
Long-term care
Like with Medicare and COBRA, HSA funds can be used to cover premiums for purchasing long-term care insurance — if it’s the right policy.
To qualify, a policy must provide coverage for only long-term care services and kick in if you need assistance with at least two daily living activities or if you suffer cognitive impairment.
“Honestly, I don’t know how many policies do not meet these requirements,” says Ramthun. “But there may be some out there and clients will want to make sure it is the right kind or else they’re going to have a bad day when they find out it isn’t.”
If your client is unsure, have them verify with their insurer that their policy is tax-qualified before considering such a move or else they could be on the hook for income tax and a penalty.
The amount a client can take from the HSA to pay the premium depends on their age. For 2019, clients 40 or younger can withdraw $420 annually to pay this expense, but those between 41 and 50 can direct almost double, $790, to their long-term care insurance policy. Those between 51 and 60 can withdraw $1,580; 61 to 70 year-olds can take out $4,220 and people 71 and older can withdraw $5,270. (The IRS has not released the limits for 2020, but they usually rise slightly each year. Ramthun expects the new figures will be out in January.)
Alternatively, clients who do purchase long-term care insurance but pay premiums out of their own pocket each year can save those receipts and then withdraw a sum equal to that annual permitted outlay at any time in the future.
Those who would prefer to go without insurance and self-fund possible long-term care costs can tap HSA assets to pay for such expenses as they occur, allowing them to better take advantage of the potential tax-free growth that comes with saving in an HSA. However, not all long-term care costs are reimbursable, warns Ramthun.
Typically long-term services that are needed to handle daily functions if you’re chronically ill or disabled count, as do those required by a plan of care prescribed by a doctor. But those who require help with more maintenance tasks like laundry or cleaning to stay in their home can’t usually use HSA funds as they aren’t considered a medical service. Nursing home costs can also be tricky for this reason as certain medical care or assistance provided at the facility may be eligible for reimbursement but other associated expenses, like room and board or meals, often are not, even at the highest level of dependent care, says Ramthun.
Non-medical expenses
While clients may have the best intentions to save their HSA funds for future medical expenses in retirement, a year like 2020 can derail such plans. If someone needs additional funds, for, say, living expenses after a job loss or an unexpected car repair, they can withdraw funds from their HSA without triggering taxes or a penalty. The catch? They must have unreimbursed past healthcare expenses.
As long as the client had an open HSA when they incurred the medical expense and hasn’t yet tapped it to cover that cost, an amount equal to that bill can be withdrawn at any time and used for any purpose they want. Clients can claim back funds for expenses dating all the way back to 2004, when HSAs were first introduced, provided they had an account. Receipts should be on hand to prove their story in case the IRS comes checking.
One thing that can trip up clients planning to use this feature is a low or empty current HSA balance. That’s because if the account balance remains at zero for 18 months, the IRS considers the HSA closed and any medical expenses you incurred before that time will no longer be reimbursable, even if you open and fund a new HSA. “
“They essentially lose that original HSA establishment date,” says Ramthun.
Financial institutions may also act before the IRS rule kicks in, closing zero balance accounts after 15 months or earlier, again negating the ability to claim back any previous medical expenses.
Clients who move off high-deductible health plans or change employers and can no longer fund an HSA are most likely to fall victim, Ramthun adds, as a withdrawal for a medical cost or fees may empty the account without them being able to do anything to rectify it.
In desperation, clients may opt to pull more from their HSA than they have in past medical bills, but this move will cost them dearly, triggering income tax and a 20% penalty on the amount unmatched to those unreimbursed health care expenses.
Turning age 65, however, lessens this pain, as withdrawals no longer need to be paired with a medical expense to avoid that 20% tax penalty. Income tax, however, will still be owed on any funds removed for non-healthcare expenses, similar to how distributions from a traditional IRA or 401(k) are treated.
SOURCE: Renzulli, K. (04 December 2020) "3 alternative ways clients can use an HSA" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/3-alternative-uses-for-an-hsa-include-cobra-premiums-long-term-care-non-medical-expenses
4 benefits of positive recognition to boost employee engagement
As both employers and employees are facing difficult times both in their work-life and home life due to the circumstances that the coronavirus pandemic has brought into the world, it's important that the negativity does not take place of the positivity needed. Positivity is powerful and can play a critical role in the workplace. Read this blog post for four benefits of positive recognition.
With all that’s happening, it’s easy to become overwhelmed with the negativity in the world. Our emotional state is important at work. Positive emotions transform our minds and increase our ability to bounce back from hard times.
The power of positivity should not be overlooked, and recognition plays a critical role in generating these emotions in a modern workplace. Open acknowledgement and expressed appreciation for employees’ contributions can go a long way.
Improve employee retention
The first benefit of positive employee recognition is improving employee retention. In fact, according to industry analyst Josh Bersin, companies that build a recognition-rich culture actually have a 31% lower voluntary turnover rate.
Gallup research on recognition also shows that employees who don’t feel recognized at work are twice as likely to quit within a year. In today’s current environment where many organizations are driving more productivity with fewer employees, leaders need to ensure that they’re not forgetting to focus on employee retention. You’d be hard-pressed to find an organization that isn’t concerned about retaining top talent right now; top performers will find new opportunities even when they’re hesitant to move.
Creating a workplace where people want to stay isn’t just beneficial for employees; it’s also good for the bottom line. Turnover cost can be difficult to compute, but I challenge you to consider the costs of recruiting, onboarding, training, and the lost institutional knowledge that comes with poor retention.
Increase employee engagement
The second benefit that is particularly important right now is increased employee engagement. Our own research showed that 84% of highly engaged employees were recognized the last time they went above and beyond at work compared with only 25% of actively disengaged employees. We also found that while 71% of highly engaged organizations recognize employees for a job well done, only 41% of less-engaged organizations did so.
Positive recognition is powerful and has a clear tie to engagement. Yet, many organizations still do not adequately measure engagement. When was the last time you measured engagement with your own team? How much opportunity is there to improve through recognition?
Boost employee morale
The third benefit of positive recognition is boosted morale. I already mentioned the transformative effect of positivity, but the simple act of thanking people can make a tremendous difference. When employees were asked about their experience at work,70% said that motivation and morale would improve “massively”with managers saying thank you more.
How did you feel last time you were recognized?
Positivity has an important impact on employees, but it also pays literal dividends to companies that have figured out how to encourage it. Research from author Shawn Achor shows that happiness raises sales by 37% and productivity by 31%. Consider ways you can encourage your team to recognize each other more often.
Leverage peer recognition
It turns out that peer recognition massively outperforms top-down recognition. Peer recognition occurs when individuals give and receive recognition from their peers, managers, and direct reports.
Being recognized by colleagues is incredibly powerful for employees, especially when it’s done publicly. Peer recognition is 36% more likely to have a positive impact on financial results than manager-only recognition, according to SHRM. Managers can’t see every positive action that occurs, so think about how to encourage everyone to participate in recognition of great work across the entire organization.
SOURCE: Crawford-Marks, R. (14 September 2020) "4 benefits of positive recognition to boost employee engagement" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/list/4-benefits-of-positive-recognition-to-boost-employee-engagement
Employers Consider Child Care Subsidies
Working parents have been put into situations that are causing them to almost choose between their careers and their children due to the coronavirus pandemic bringing families home and requiring work to be done virtually. Employers are now seeking ways to help employees with taking care of their children. Read this blog post to learn more.
Working parents have borne the brunt of the pandemic's impact on employees, as many must juggle their job responsibilities with overseeing their children's remote educations and overall well-being while quarantined. Some have had no choice but to quit their jobs or decided not to seek new employment when their jobs were eliminated due to the downturn, so that they could focus on caring for their kids.
In fact, an August survey by Care@Work of 1,000 working parents with children under the age of 15 showed that 73 percent were considering making major changes at work, such as revising their schedules (44 percent), looking for a different job (21 percent) or leaving the workforce entirely (15 percent).
One approach that is gaining steam among employers seeking to help employees with children is to provide child care subsidies. These typically are employer-provided spending accounts or bonuses designed to help cover the costs, in full or partially, of day care and pandemic-related educational expenses.
"Subsidizing professional child care arrangements for an organization's employees makes sound business sense because it potentially reduces the stress and anxiety that working parents might regularly experience while worrying about their children during their normal work hours," said Timothy Wiedman, a retired associate professor of management and human resources at Doane University in Crete, Neb. "And that stress and anxiety might well divert a parent's full attention from their assigned duties."
Making Sure It's Fair
To be sure, many companies have not considered offering any type of child care subsidy to working parents. A major reason often cited is that single employees, as well as those who are married without children or who have grown children, will feel slighted by an employer that offers a benefit they can't access.
"There is always that fairness doctrine that comes into play when you offer a subsidy to one employee because they have a special need that some other employee may not have or need," said Carol Kardas, SHRM-SCP, founding partner at KardasLarson, an HR consulting firm in Glastonbury, Conn. "Some may consider this a discriminatory practice, and [it] could be a cause for lower morale or productivity."
Some organizations overcome that issue by providing a different benefit instead to offset those perceptions. Wiedman suggested reviewing benefit allotments for such employer-paid offerings as elder care, the deductible required by the company-provided health care plan, the annual contribution to 401(k) retirement plans, health savings accounts, life insurance coverage (or additional disability insurance) and tuition reimbursement. The allotments can vary based on whether the employee also receives a child care subsidy.
Another option is to explain that by providing assistance to their colleagues, the workload will remain balanced and not fall more heavily on employees who don't have child care duties.
"Working parents who have to use paid time off to spend time with their children when no other arrangements can be made may also call out at the last minute, since arrangements can be canceled abruptly," Kardas said.
Alleviating Stress and Costs
Working parents who can't afford child care and don't receive a subsidy "are often interrupted by children wanting to share their toys or get a hug from dad," said Laura Handrick, an HR consultant in Phoenix. "I see the stress on parents' faces in Zoom meetings. It's too much to manage a full-time paid job and a full-time unpaid job [parenting] at the same time. The stress affects the worker's mental health, employee productivity and family relationships."
Offering child care subsidies can increase employee satisfaction and engagement, she said. "[Managers] earn employee loyalty and increased productivity from grateful employees who aren't ridiculously stressed by constant kid interruptions while working," Handrick said.
There is a financial benefit as well: Employers that supply child care subsidies can take advantage of an annual tax credit of up to $150,000 if they use it for qualified child care facilities and services. According to the IRS, "the credit is 25 percent of the qualified child-care facility expenditures, plus 10 percent of the qualified child-care resource and referral expenditures paid or incurred during the tax year." To receive the tax credit, employers must complete Form 8882.
Handrick said a company can start a child care subsidy program with flexible spending accounts (FSAs).
"The benefit of providing a child care subsidy to employees in the form of an FSA is that the employer contributes pretax dollars, reducing its payroll taxes," she said. "The employee can choose how much or how little to contribute. Those who prefer to send their children to a more expensive program can fund and pay for it through the FSA using pretax dollars."
Kardas said if workplaces hire essential workers, they could utilize government-run programs in their states, such as Connecticut's CTCARES for Child Care Program for first responders, grocery workers, state facility employees, and child care and group home workers. They could also tap into an employee assistance program (EAP) to help employees find or pay for child care, she said.
Another idea is to grant every employee a certain amount of personal time that can be used in special circumstances, such as when child care is closed or a child is sick or unable to attend a child care program on a given day.
"This type of personal time could also be given to and used by those who do not have children for attending appointments or other obligations that can't be done after work," Kardas said. "This time may not solve the issue of employees being absent, but the fact that all would share equally may help."
As workplaces reopen physical locations, HR can look for child care facilities in the immediate area and work with them to offer a discount to employees, Kardas recommended.
"Single moms and working parents rarely have an extra room at home to carve out a home office," Handrick said. "That means they're likely working from the kitchen or dining room with children at home demanding attention. Toddlers want to play, [and] school-age kids need help with online classes."
Larger employers and those with deeper resources may even consider establishing an onsite child care facility for employees and charging less than a typical child care facility, which experts agree would dramatically boost appreciation among working parents who could then visit their children during each workday.
SOURCE: Lobell, K. (22 September 2020) "Employers Consider Child Care Subsidies" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/many-workplaces-consider-child-care-subsidies.aspx
Three Communication Tips to Raise Productivity
Communication is often the key to success especially within the workplace and during team projects. If communication expectations are laid out and shown to employees, the chance of higher productivity is more common. Read this blog post for helpful tips.
If you're looking for ways to bump productivity, rescue slumping performers or improve teamwork, start with your expectations. These subtle—but very powerful—elements of your leadership toolkit can produce lasting results.
Raising your expectations doesn't require you to adopt a perpetual cheery optimism, but it does require you to make a brutally realistic assessment of current conditions. If productivity is low, cycle time is horrible and/or quality is poor, you need to acknowledge the facts—or you'll never be able to improve performance. And part of that brutal assessment requires looking in the mirror. Perhaps, without realizing it, your underlying beliefs are contributing to the performance situations you see around you.
Three components make up the messages you send: the words you use, the way you say them and your nonverbal cues.
Words
Here are some examples of how to frame your expectations for performance improvement in three different situations.
- If productivity is down, you might say: "Well, as we look at productivity, we can see that it's 2 percent below where it was last year. I know we can get back to where we were—and eventually beyond—because we have the horsepower right in this room to do it." In selecting these words, you've acknowledged where performance is and expressed confidence about improvement.
- If you're making progress in an area—but more progress is required—the message might be: "While we're making progress on quality, it's still not where it needs to be. I know we can get to where we need to be by continuing our Six Sigma efforts. Let's look and see where we need to put our resources next."
- If performance is good and you want to boost it more, the message should be: "Cycle time is good, never been better. Let's look at how to cut it even further. I know we can do it if we work together to figure out how."
In each example, your words describe the present situation in simple and direct terms and also express confidence in moving to further improvement.
Verbal Intonations
The tone of your voice is the second element of your message. Everyone has experienced situations where the words sent one message and the tone of voice sent another. When there's a conflict, most people believe what is conveyed by the tone of your voice. So, make sure that your tone matches the positive message of your words. Not only should you avoid the obvious mismatch, but also the unintentional mismatch—those occasional situations where your words say one thing and your tone of voice says another.
Nonverbal Cues
The bulk of the meaning lies here. You can say the words, and your tone of voice can match the words. But if you're looking around, tapping your fingers, shaking your head "no" or doing any one of the hundreds of other seemingly little things that say, "I don't believe in you," you're not going to get the performance you want. Here are five categories to check yourself against:
1. Body position. If your arms are crossed, your legs are crossed away from the person you're communicating with or you're giving the "cold shoulder," then you're sending negative messages. On the other hand, if your body position is open—you're facing the person rather than looking away—you communicate honesty, warmth and openness. If your posture is erect rather than slumping, you communicate positive beliefs. And if you're leaning slightly forward, you demonstrate interest in the other individual.
2. Hand gestures. Avoid tapping your fingers ("I'm impatient"), hiding your mouth ("I'm hiding something"), wagging your finger (the equivalent of poking someone with your finger) and closed or clenched hands ("I'm upset"). These gestures all conflict with an "I believe in you" message. Instead, use open hands with palms up ("I'm being honest with nothing to hide") or touching your hands to your chest ("I believe in what I'm saying"). Both of these emphasize a positive message.
3. Head. If your head is shaking back and forth or tilted off to one side, you're sending a message of disbelief. On the other hand, if your head is facing directly toward someone and you're nodding up and down, you're delivering a nonverbal message of belief and confidence.
4. Facial expressions. Smile, and keep your mouth relaxed. Show alertness in your face and act like you're ready to listen. Do these regularly and you'll have created an open communication pattern with someone who will believe in your sincerity. On the other hand, if you're tight-lipped, are clenching your jaw muscles and have only a grim smile, no smile at all or a frown, you'll send a message that says: "No way can you possibly succeed at this project."
5. Eyes. Maintaining good eye contact is one of the most important nonverbal signals you can send. It conveys the message, "I'm interested in you and when I say I believe in you, I really do." Making sure that your eyes are open wide is also helpful. Squinting can deter the recipient. Worse yet is looking around, paying attention to other things and not paying attention to the person or topic at hand.
Communicate high expectations well enough and you may even have to step aside to avoid getting run over by a team of committed players whose performance is accelerating.
SOURCE: Connellan, T. (29 September 2020) "Three Communication Tips to Raise Productivity" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/people-managers/pages/three-communication-tips-to-raise-productivity.aspx
5 ways HR can help millennials be smarter than their parents about retirement
Getting younger employees to save for retirement is right up there with getting a finicky child to eat their vegetables. Sure, it's good for them, but it's not always what they want.
Participation rates and average deferral rates in voluntary enrollment plans for workers younger than 35 are well below those of other age groups, indicating that HR teams may need to take extra steps to reach this segment of their employee base, according to data from Vanguard, a leading 401(k) provider.
HR professionals are uniquely positioned to best assist younger workers. The best tack for HR experts to take with millennials in regard to retirement saving is to point out some of the mistakes their parents' generation has made in that area.
Help employees understand the destination
When it comes to saving for retirement, a lot of older workers are clearly lost. Younger workers have an opportunity to do a better job of staying on track.
Vanguard’s data show the average 401(k) participant within 10 years of retirement age (i.e., between ages 55 and 64) has a plan balance of just $69,097.
That may not provide much help over a retirement of 10 or 20 years.
Caution young staff members that one reason older workers are so badly behind in retirement saving is that they haven't checked first to see where they're going.
A MoneyRates retirement plan survey finds that 71% of workers within 20 years of retirement age still have not done a calculation of how well their savings will hold up over their retirement years.
Encourage your workforce to determine what enough savings is. Inform your staff that it only takes a few minutes to use a retirement calculator to see how much to put aside to meet savings goals. That way, your employees will know where their retirement plan is heading.
Educate employees on how to get debt under control
Saving for retirement is undermined when employees are also building up debt at the same time.
Stress that debt costs more than retirement investments are likely to earn, a dollar in debt can more than counteract the benefit of a dollar in savings.
According to the Federal Reserve's Survey of Consumer Finances, the typical household still has $69,000 in debt by the time the head of that household is within 10 years of retirement.
Notice that this figure almost exactly matches the previously-mentioned amount that the average 401(k) participant in that age group has. In other words, debt can effectively wipe out a person's 401(k) savings.
So, your team’s first step toward educating workers about building a more secure retirement should be to do something many in their parents' generation failed to do: get debt under control.
Teach employees how to spread savings to make the burden lighter
Retirement saving is a big job, but younger workers have something very important on their side: time. Emphasize that spreading retirement savings out over 25 to 40 years makes the job much easier.
It gets tougher if young workers do what many of their parents' generation have done--wait and then try to catch up in the last ten years or so until retirement.
The golden rule: Don't leave free money on the table
When employers provide a 401(k) match, all staff should understand there's a direct financial incentive to start saving now. Every time employees put money into their 401(k) plan, the employer kicks in some on their behalf.
If employees don't contribute money into the plan, they don't get this money from the employer. There's no going back in future years and reclaiming that extra money the employer would have put in on the worker’s behalf.
The only way not to miss out on this free money is to contribute each and every year— and to contribute enough to get the maximum employer match available.
Show employees the benefits of saving
A dollar saved today can equal $10 at retirement age.
Saving money is hard work, but HR professionals can show their employees that it gets easier when they let their investments do the work for them.
The investment returns earned become much more powerful when compounded over a long period of time. Compounding means earning a return not just on the original money invested, but also on the returns earned in other years.
Younger workers must recognize that a dollar invested today could be worth much more than a dollar invested toward the end of their career.
There are many people of older generations who would be a lot better off today if they absorbed each of these five lessons when they were younger.
SOURCE: Barrington, R. (14 October 2020) "5 ways HR can help millennials be smarter than their parents about retirement" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/ways-hr-can-help-millennials-be-smarter-than-their-parents-about-retirement
New financial benefits give small business employees early wage access
Mandatory quarantines and business closures during the coronavirus pandemic have taken a particularly large financial toll on small businesses, forcing many employers to reduce wages and health coverage.
Sixty-five percent of small businesses said they were either extremely concerned or very concerned about how the coronavirus will affect their business, according to a survey by Freshbooks. In addition to financial pressure, small business employers are also tasked with providing benefits that will support struggling employees.
“COVID-19 just exacerbated what was going on in the market and put even more pressure on small companies and their employees,” says Emily Ritter, head of product marketing at Gusto, a payroll and employee benefits platform for small businesses. “Employees across America are living paycheck-to-paycheck and the stress of that can be expensive for households.”
Gusto has launched a new set of health and financial wellness benefits to provide employees with early access to earned wages, medical bill reimbursement and a savings account.
These financial tools are especially beneficial as healthcare costs drive many employees into debt, Ritter says. According to a Salary Finance survey, 32% of American workers have medical debt, and 28% of those who have an outstanding balance owe $10,000 or more on their bills.
“Financial health and health coverage is so inextricably linked, which has come into the limelight with COVID-19,” Ritter says. “We're seeing that small group health insurance is something that is really important, so if we can help small businesses help their employees with health bills, that's another component of financial health.”
Gusto’s new benefit offering allows employers to contribute to employees’ monthly health insurance costs. Contributions can vary from $100 to amounts that would cover an employee’s entire premium. The contributions are payroll-tax-free for the business and income-tax-free for employees, and employers also have the flexibility to adjust their contribution at any time.
“A large portion of American workers say that they wouldn't be able to handle the financial implications of a large injury or illness, and of course illness is top of mind in the midst of a global pandemic,” Ritter says. “So it was really important for us to show up with these solutions.”
Additionally, Gusto has launched Gusto Cashout, which gives workers early access to earned wages without any fees, helping them avoid having to turn to payday loans, overdraft fees or credit card debt between paychecks. With a new debit card function and cash accounts — which also provide interest — workers can put aside savings straight from their paychecks, helping them better navigate short-term emergencies and unexpected expenses.
Even before coronavirus, less than half of adults living in the U.S. had enough savings to pay for a $1,000 emergency expense, according to a Bankrate.com study, and 50% of employees said they live paycheck to paycheck, a CareerBuilder survey found.
“We're really trying to help people be prepared in those rainy day moments and avoid the debt cycle that happens,” Ritter says. “Because this product is free [for our clients’ employees] and the wages come out of their paycheck on payday, there is no continuous debt cycle that happens with a payday loan.”
Fifty-one percent of Americans feel at least somewhat anxious about their financial situation following the coronavirus outbreak, according to a recent survey from NextAdvisor, and nearly three in 10 Americans’ financial situation (29%) has been negatively impacted since the pandemic began.
Providing employees with financial wellness resources and other support can help small business owners build a more efficient and competitive business, despite the challenges faced during COVID, Ritter says.
“It's a win win for their employees and for their business,” Ritter says. “When employees are more financially stable, they're able to show up more effectively at work.”
SOURCE: Nedlund, E. (13 October 2020) "New financial benefits give small business employees early wage access"(Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/new-financial-benefits-give-small-business-employees-early-wage-access
Employees work an extra 26 hours a month when remote
Only months ago, a growing number of businesses were experimenting with or adopting a four-day workweek, but remote work policies imposed by the coronavirus pandemic have pivoted this trend in the opposite direction.
Full-time employees are working an extra 26 hours a month when remote, adding nearly an extra day of work to the week, according to a new report from Owl Labs, a video conferencing technology company.
Employees may also be filling in the time they spent commuting with more time at work. The report found employees were spending an average of 40 minutes daily on their commute.
“Everybody's situation is different, but I was commuting roughly two to three hours per day, which is 10-15 extra hours per week,” Weishaupt says. “Now I have a lot more flexibility in terms of when my workday starts and ends, and I don't have to give that time to the commute — but can actually give it to work.”
But along with increased work hours are increased levels of stress. Almost 1 in 2 employees are worried that staying remote could negatively affect their career, according to the findings. During the coronavirus pandemic, 91% percent of employees say they’ve experienced moderate to extreme stress while working from home, according to a survey by Ginger, a mental health benefits platform.
Despite these challenges, the flexibility of working remotely has helped many employees achieve better work-life balance. Overall, the report found that workers were benefiting from the perks of remote work, and named avoiding their commutes and having more time with their families as top reasons to continue working remotely.
“When you look at the overwhelming data, it shows that employees are much happier, which is a bigger indication of what this change has meant for people,” Weishaupt says. “Yes, people are working significantly more, but they're not having to sacrifice their personal lives to work. People are happier and feel just as productive, if not more [when working remotely].”
SOURCE: Nedlund, E. (21 October 2020) "Employees work an extra 26 hours a month when remote" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/employees-work-an-extra-26-hours-a-month-when-remote
Steer Clear of Misconceptions About FFCRA Tax Credits
As employers learn about the paid-leave requirements under the Families First Coronavirus Response Act (FFCRA) and corresponding tax credits, misconceptions have arisen related to such details as when to claim the credits and which employers are eligible to claim them.
The FFCRA requires employers with fewer than 500 employees to provide up to 80 hours of emergency paid sick leave and up to 12 weeks—10 of which are paid—of Emergency Family and Medical Leave Expansion Act time off to employees who can't work for specific reasons relating to the COVID-19 pandemic. "Under the FFCRA, the federal government will reimburse employers for the cost of this leave by way of refundable tax credits," said Jim Paretti, an attorney with Littler's Workplace Policy Institute in Washington, D.C.
Eligible employers can claim refundable tax credits under the FFCRA for all or part of the cost of providing qualified paid-sick or family leave taken from April 1 through Dec. 31, noted Dasha Brockmeyer, an attorney with Saul Ewing Arnstein & Lehr in Pittsburgh.
When to File
Some employers believe they must wait until the end of the quarter or end of the year to claim the credits, said Asel Lindsey, an attorney with Dykema in San Antonio.
Eligible employers claim the FFCRA tax credit by retaining payroll taxes—federal income taxes and Social Security and Medicare taxes—that would otherwise be deposited with the IRS, she said. If the retained payroll taxes are insufficient to cover the full amount of the tax credit, employers can file a request with the IRS on Form 7200 for an accelerated payment. Form 7200 can be filed before the end of the month following the calendar quarter in which the qualified sick- or family-leave payments were made.
Nonetheless, the form may not be filed later than the date on which the employer files the Form 941 for the fourth quarter of 2020, which generally is due Jan. 31, 2021, she said.
"If an eligible employer receives tax credits for qualified leave wages, those wages will not be eligible as payroll costs for purposes of receiving loan forgiveness under the CARES [Coronavirus Aid, Relief, and Economic Security] Act," said Carrie Hoffman, an attorney with Foley & Lardner in Dallas.
Additional common misconceptions concern the eligibility for or availability of the FFCRA paid-leave tax credits, according to Robert Delgado, KPMG's principal-in-charge of tax compensation and benefits in San Diego, and Katherine Breaks, KPMG's tax principal in Washington, D.C. They include these incorrect assumptions:
- The group aggregation rules for determining whether an employer is eligible for the paid-leave tax credits under the FFCRA are the same for determining employer eligibility for other COVID-19-related relief, such as the employee retention credit under the CARES Act. While some employers assume that the group aggregation rules used to determine eligibility for the paid-leave tax credits are driven by tax rules, they actually are defined by the labor rules and outlined in U.S. Department of Labor guidance, as the tax credit is secondary to the requirement to provide paid leave. Under these rules, a corporation is typically considered to be a single employer but must be aggregated with another corporation if considered joint employers under the Fair Labor Standards Act rules with respect to certain employees or if they meet the integrated employer test under the Family and Medical Leave Act (FMLA).
- Employers must choose between claiming tax credits for paid leave under the FFCRA or for wages paid to employees under the employee retention credit, but they may not claim both. In fact, eligible employers may receive tax credits available under the FFCRA for required paid leave, as well as the employee retention credit, but not for the same wage payments. Similarly, employers can provide both qualified sick-leave wages and qualified family-leave wages and claim a tax credit for both, but not for the same hours. Employers may not receive a double benefit by claiming a tax credit under Section 45S taking into account the same qualified leave wages.
Other Myths
Delgado and Breaks stated that other misconceptions include the following:
- The tax credit is limited to the qualified wages an employer must pay to an employee under the FFCRA for emergency paid sick leave and expanded FMLA. In fact, the tax credit is generally equal to 100 percent of the qualified wages an employer must pay under the FFCRA for emergency paid sick leave and expanded FMLA increased by the employer's share of Medicare owed on the wages, as well as any qualified health plan expenses.
- An employer may not receive tax credits for FFCRA-required paid leave if it receives a Small Business Administration Paycheck Protection Program loan. Actually, an employer may receive tax credits for paid leave under the FFCRA, as well as a Small Business Administration Paycheck Protection Program loan, but the qualified wages are not eligible as payroll costs for the purposes of loan forgiveness.
- Employers can exclude the amount of the paid-leave tax credit from gross income. In fact, employers must include the full amount of the credits in gross income—that is, qualified leave wages plus any allocable qualified health plan expenses and the employer's share of the Medicare tax on the qualified leave wages. But employers may deduct the amount paid for emergency paid sick leave and expanded FMLA as an ordinary and necessary business expense in the taxable year paid or incurred, including wages for which they expect to take a tax credit.
"If an employer fails to claim a paid-leave tax credit on their Form 941 for the applicable quarter in which the leave wages are paid, the employer can submit a Form 941-X to reflect the corrections, including eligibility for the credit," Delgado and Breaks also noted.
SOURCE: Smith, A. (13 November 2020) "Steer Clear of Misconceptions About FFCRA Tax Credits" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/coronavirus-misconceptions-ffcra-tax-credits.aspx
Justices Seem Unlikely to Strike Down Entire Affordable Care Act
The U.S. Supreme Court appears hesitant to invalidate the Affordable Care Act (ACA) in its entirety, based on questions the justices posed during oral argument Nov. 10.
The ACA requires that most Americans either maintain a minimum level of health care coverage or pay a specified amount to the Internal Revenue Service. In a 2012 opinion written by Chief Justice John Roberts Jr., the Supreme Court upheld this mandate as a legitimate exercise of Congress' taxing power. In 2017, and effective in 2019, Congress amended the ACA to set the penalty to zero, making the individual mandate provision unenforceable.
In two consolidated cases, California v. Texas and Texas v. United States, the Supreme Court has been asked to decide whether reducing the penalty to zero rendered the minimum-coverage provision unconstitutional—and, if so, whether the rest of the ACA can remain enforceable without it.
"The justices seem to be leaning toward, at a minimum, finding the individual mandate severable and preserving the remainder of the law," observed Benjamin Conley, an attorney with Seyfarth Shaw in Chicago. The most notable takeaway from the arguments, he said, was that Roberts and Justice Brett Kavanaugh "all but stated that they believe the individual mandate is severable."
Questions Before the Court
The court will first consider whether the plaintiffs have standing to challenge the ACA, then it will move to the merits of the case. Texas and other states that challenged the ACA argued that "Congress may not use its power to regulate interstate commerce to order Americans to buy health insurance" and that the only reason the individual mandate survived a legal challenge was because it was "fairly possible" to read the ACA's mandate as a tax trigger. "Because the mandate raises no revenue, it can no longer be read as a tax," they wrote in a brief to the Supreme Court.
The U.S. House of Representatives and a group of Democrat-led states are fighting to keep the ACA intact. If Texas successfully challenges the ACA, "more than 20 million Americans could lose their health care coverage, 130 million Americans with pre-existing conditions could lose protections, and drug costs could skyrocket for seniors," House Speaker Nancy Pelosi tweeted Nov. 10.
In December 2019, the 5th U.S. Circuit Court of Appeals sided with Texas, holding that the mandate is unconstitutional since there is no longer a penalty for people who fail to buy health insurance.
But the Supreme Court justices raised doubts about that argument. "I think it's hard for you to argue that Congress intended the entire act to fall if the mandate were struck down when the same Congress that lowered the penalty to zero did not even try to repeal the rest of the act," Roberts said during oral argument. "I think, frankly, that they wanted the court to do that. But that's not our job."
Justice Amy Coney Barrett, the court's newest justice and sixth conservative on the bench, has previously raised concerns with the Supreme Court's 2012 ruling. "Justice Barrett has criticized Justice Roberts' decision to uphold the ACA," said Sage Fattahian, an attorney with Morgan Lewis in Chicago. "The general view is that her vote may be the deciding vote in invalidating the ACA, but all of that remains to be seen."
Seyfarth Shaw's Conley noted that votes from Roberts and Kavanaugh, plus the three liberal justices—Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor—would be enough to preserve the remainder of the law.
"The most interesting questions and comments, for me, came from Justice Kavanaugh," Fattahian observed. At oral argument, Kavanaugh said he thinks there is "a very straightforward case for severability" under Supreme Court precedent.
"Chief Justice Roberts also asked questions that seemed to indicate that the proper remedy in this case would be to sever the individual mandate from the rest of the ACA," Fattahian said. "This would mean that the ACA's plan mandates and employer mandate, along with ACA reporting requirements, would all remain intact."
Employer Takeaway
So what will a ruling in the case mean for employers? "While a ruling striking down the entire law could definitely have an impact in the long term, we don't think any short-term action is required," Conley said.
Even if, for instance, the Supreme Court invalidates the provision of the law allowing dependents to remain on their family's plans until age 26, an employer could certainly continue to offer such coverage even if it is no longer required. "So any plan-driven changes resulting from the ruling would be more incremental and long term," Conley added.
A decision in the case is not expected until June 2021. "In the meantime, employers should note that the health care law remains fully in effect during the litigation, including all coverage obligations and reporting requirements," said Chatrane Birbal, vice president of public policy for the Society for Human Resource Management. If there are changes to the health care law, employers should be aware that the changes will not take effect immediately, she noted.
Fattahian said, "Employers should continue down the path of compliance. Should the ACA be held to be unconstitutional, it will remain to be seen how it will all unwind and what, if anything, will take its place."
A step-by-step guide to helping your employees combat financial stress
Finances are often one of those lingering thoughts that can be detrimental to an employee's productivity, during these times of the coronavirus pandemic, those thoughts may not just be lingering anymore. Read this blog post to learn more.
With the virus dominating everyone’s thinking and many employers concentrating on keeping their businesses afloat, it may be hard to focus on your employees’ financial future. Even before COVID-19, employers saw the link between financial stress and decreased workforce productivity. With COVID-19 creating business pressures, it’s imperative that your workforce meet the needs of your customers, and they can’t do that effectively if they are worried about their own or their family’s finances.
Millions of Americans are struggling due to the economic backslide stemming from the pandemic. The first months of the COVID-19 pandemic largely wiped out three years of financial gains in the United States, with more than half of Americans reporting their financial health has been compromised, according to Prudential’s 2020 Financial Wellness Census. While some are focused on making it day-to-day, the economy has also shaken others who considered their finances stable for the future. Although your employees still have a job, you must not lose sight of the fact that their spouse or partner may have lost their job or been furloughed, reducing their incomes by half, which can set any family back.
No matter how bleak things may look right now, you can still help your employees plot a path back to being financially well. Here are four steps to help restore your employees’ financial confidence.
1. Help them build a strong foundation
Employees must take stock of the money that is still coming in and create a budget. Many employers offer budgeting tools as part of their financial wellness program, so consider ramping up your email communications to remind employees of these tools, which can help them categorize expenses as essential or discretionary. If you offer any form of debt management support you can remind them to take advantage of that too. You may also want to provide them with education on how to create a will, something many people overlook. Finally, encourage employees to designate beneficiaries on insurance and financial accounts.
2. Use open enrollment season to protect them against income and expense shocks
Open enrollment season, which is underway for many companies right now, is the perfect time to reinforce non-health workplace benefits, like life insurance, long-term disability insurance, hospital indemnity insurance, critical illness insurance and accident insurance. Emphasize your paid family leave policy too, if you have one. This is especially timely right now for workers who are without childcare options, but must return to the office after months of remote working.
3. Assist them in planning for their future and retirement
Some employers who have implemented financial wellness programs have partnered with providers to create financial wellness assessments so they can understand how their employees are faring. If you have this tool and notice that your employees have the basics down, they should be comfortable expanding their financial safety net. Consider encouraging them to increase their retirement contributions and use email campaigns to empower them to take advantage of the company match, if you offer one. If your employees have access to Health Savings Accounts, Flexible Spending accounts and Dependent Care Accounts to help manage healthcare and childcare expenses, be sure to emphasize their importance in your open enrollment email communication campaigns and virtual open enrollment education sessions.
4. Educate your employees on how to secure their financial future
Once employees have rebuilt their financial base, it’s time to help them strengthen the protections they’ve created. Consider hosting virtual webinars to educate them on how to protect themselves from market volatility by maximizing the options in their retirement savings plans. Common options include target date funds or other asset allocation tools as well as in-plan retirement income options and other retirement draw-down strategies. If your financial wellness program includes financial advising or counselling, encourage them to leverage an advisor or financial planner to minimize their non-mortgage debts and calibrate their life insurance coverage to create lifetime income for their surviving dependents.
SOURCE: Schmitt, S. (02 November 2020) " A step-by-step guide to helping your employees combat financial stress" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/list/a-step-by-step-guide-to-helping-your-employees-combat-financial-stress