Agencies Propose Revised SBC Template and Uniform Glossary
Original post shrm.org
The federal agencies overseeing the Affordable Care Act announced a 30-day comment period ending on March 28, 2016, regarding proposed revisions to the Summary of Benefits and Coverage (SBC) and related documents that employers must provide to eligible employees for each of their health plans, following the Feb. 26 publication of an official notice in the Federal Register.
The revisions could be effective for employer-provided plan years beginning with the second quarter of 2017.
On Feb. 25, the Departments of Labor (DOL), Treasury, and Health and Human Services (HHS) released the proposed revised SBC template and revised uniform glossary, along with revised instructions for group plans. Under the Affordable Care Act, SBCs and the uniform glossary must be given to new hires and to employees during open enrollment.
The agencies had issued a final rule regarding SBCs and related documents in June 2015. However, revisions to the SBC template and the uniform glossary were delayed to allow the agencies to complete consumer testing and receive additional input from the public and stakeholders.
Providing Plan Details
In an analysis posted at the Health Affairs Blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, VA., noted that among the proposed changes the revised documents would:
• Better identify services covered before the deductible applies.
• Disclose whether the plan has “embedded” deductibles and out-of-pocket limits (under which enrollees in family coverage can meet individual deductibles or out-of-pocket limits before the family limits are met).
• Disclose more information on tiered networks in relation to coverage of common medical events.
Though it may not provide the clarity employers and employees are looking for, "on the whole, the proposed revised SBC is a distinct improvement over the current SBC,” commented Jost.
DOL Narrows Independent Contractor Classification
Originally posted by Allen Smith on July 16, 2015 on shrm.org.
More workers may be entitled to overtime due to July 15, 2015, Department of Labor (DOL) guidance that defines “independent contractor” narrowly enough for many previously classified as independent contractors to now be properly classified as employees.
This narrowing of the definition of independent contractor is due partly to the DOL deemphasizing the degree to which a business controls an individual’s work, and focusing instead on the economic realities test, which looks at whether the worker is economically dependent on the employer or in business for him or herself.
“This is part and parcel of the Obama administration’s push to give America a raise,” said Allan Bloom, an attorney with Proskauer in New York City, who added, “There certainly have been companies that have misclassified workers.”
He remarked that the latest guidance is important because “the DOL significantly downplays the ‘control test,’ which has long been the guide many businesses consider when determining whether or not a worker is truly an ‘employee’.” Bloom recommended that, “Businesses worried about staying under the DOL radar on this issue should make sure that they are doing business with established independent service providers if they intend to pay on a 1099 basis.”
Matthew Disbrow, an attorney with Honigman in Detroit, said, “The subjective nature of the DOL’s interpretation, and its narrow focus on ‘economic dependence,’ creates substantial challenges for companies who wish to maintain their independent-contractor relationships. Furthermore, although the elements of the ‘economic realities’ test may appear understandable at first blush, a careful reading of the DOL’s guidance reveals that there are no bright-line rules upon which to rely. The same person could be considered an independent contractor or an employee simply based on the business at issue.”
He added that the administrator’s interpretation [AI] “arguably restricts the use of independent contractors to very few specific situations.” Disbrow explained, “Because no factor is determinative, and the AI rejects any ‘mechanical’ application of the test, inside counsel or other executives will not always know what factor the DOL or a reviewing court might find most important. Such ‘fuzzy’ multifactored tests usually create more problems than they solve."
Six Factors
In conducting an economic realities test, an employer should look to six factors, the DOL noted:
- The extent to which the work performed is an integral part of the employer’s business.
- The worker’s opportunity for profit or loss depending on his or managerial skill.
- The extent of the relative investments of the employer and the worker.
- Whether the work performed requires special skills and initiative.
- The permanency of the relationship.
- The degree of control exercised or retained by the employer.
“In undertaking this analysis, each factor is examined and analyzed in relation to one another, and no single factor is determinative,” the DOL noted. “The ‘control’ factor, for example, should not be given undue weight.”
“The factors should not be applied as a checklist, but rather the outcome must be determined by a qualitative rather than a quantitative analysis,” the DOL stated.
“The subjective nature of such a test is a slippery slope and provides no practical, objective criteria on which businesses can rely,” Disbrow said.
Under the department’s analysis of the six factors, positions frequently considered as independent contractors—such as carpenters, construction workers, cable installers and electricians—aren’t necessarily independent contractors if they don’t satisfy the factors.
Suppose, the department hypothesized, a highly skilled carpenter provides carpentry services for a construction firm. But the carpenter does not exercise his skills in an independent manner. He does not determine the sequence of work, order additional materials or think about bidding for the next job, but instead is told what work to perform where. “In this scenario, the carpenter, although highly skilled technically, is not demonstrating the skill and initiative of an independent contractor (such as managerial and business skills),” the DOL emphasized. “He is simply providing his skilled labor.”
By contrast, “a highly skilled carpenter who provides a specialized service for a variety of area construction companies (for example, custom, handcrafted cabinets that are made to order) may be demonstrating the skill and initiative of an independent contractor if the carpenter markets his services, determines when to order materials and the quantity of materials to order, and determines which orders to fill,” the DOL stated.
Monitor Classifications
“While the human resources function clearly ‘owns’ employee issues in corporate America, many companies do not monitor their independent contractor relationships,” said Michael Droke, an attorney with Dorsey and Whitney in Palo Alto, Calif., and Seattle.
“Companies should make clear which department within the organization is responsible to understand the law, know which contractors have been engaged and monitor compliance. Often, the human resources or finance department is put in charge,” he noted.
“Employers should maintain basic records on the independent contractor determination process, and the facts used to make that determination. For example, they should keep records of business licenses, business cards, contractor tax records, project work plans showing limited engagements and correspondence from the contractor,” according to Droke.
For Disbrow, some main takeaways from the guidance are:
- The DOL believes most work should be performed by employees. So, independent contractors should be used sparingly.
- Entering into independent contractor agreements or hiring a business entity (rather than a person) does not necessarily protect you from liability under the Fair Labor Standards Act.
- A careful review of the type and scope of work being performed should be completed before engaging the services of any nonemployee.
- When entering into agreements with other service providers, ensure that you obtain appropriate indemnification provisions to protect the company from the wage and hour claims of the service provider’s workers.
“Companies should avoid giving contractors rights or access that cut against contractor determination. For example, contractors should not have internal e-mail accounts, should not be given server access and should not be invited to employee functions,” Droke observed. “The DOL guidance reminds employers to periodically audit existing contractors to make sure they have not inadvertently slipped from contractors to employees. If an otherwise-valid contractor arrangement becomes economically dependent on the work, then the relationship may convert to an employee entitled to overtime.”
This guidance is Administrator’s Interpretation No. 2015-1.
ACA Cost-Sharing Limits for 2016
Originally posted by Laura Kerekes on June 4, 2015 on thinkhr.com.
The Affordable Care Act (ACA) requires nongrandfathered group health plans to limit the total cost-sharing (deductibles, co-pays, and co-insurance) paid by participants for in-network essential health benefits in a plan year. For the 2015 plan year, the ACA cost-sharing limits are $6,600 if self-only coverage or $13,200 if other than self-only coverage (i.e., family coverage). Often referred to as “out-of-pocket maximums,” the limits are subject to change for inflation each year.
For 2016, two important changes will take effect. First, the cost-sharing limits will increase to $6,850 and $13,700, respectively. Secondly, the self-only limit of $6,850 will apply to each covered person regardless of whether enrolled for self-only coverage or family coverage.
FAQ XXVII, released jointly by the Departments of Labor, Health and Human Services, and the Treasury, provides that:
- ACA cost-sharing limits apply to nongrandfathered group health plans, including “small” or “large” group policies and self-funded health plans.
- Deductibles, co-pays, and co-insurance, paid by the participant, must be counted toward the annual cost-sharing limits (out-of-pocket maximums). However, plans are not required to count amounts paid for nonessential health benefits, services not covered by the plan, or services received from out-of-network providers.
- For plan years beginning in 2016, the self-only cost-sharing limit applies to each person regardless of whether they have self-only or family coverage. The FAQ provides the following example:
“Assume that a family of four individuals is enrolled in family coverage under a group health plan in 2016 with an aggregate annual limitation on cost sharing for all four enrollees of $13,000 (note that a plan is permitted to set an annual limitation below the maximum . . . aggregate $13,700 limitation for coverage other than self-only for 2016). Assume that individual #1 incurs claims associated with $10,000 in cost sharing, and that individuals #2, #3, and #4 each incur claims associated with $3,000 in cost sharing (in each case, absent the application of any annual limitation on cost sharing). In this case, because, under the clarification discussed above, the self-only maximum annual limitation on cost sharing ($6,850 in 2016) applies to each individual, cost sharing for individual #1 for 2016 is limited to $6,850, and the plan is required to bear the difference between the $10,000 in cost sharing for individual #1 and the maximum annual limitation for that individual, or $3,150. With respect to cost sharing incurred by all four individuals under the policy, the aggregate $15,850 ($6,850 + $3,000 + $3,000 + $3,000) in cost sharing that would otherwise be incurred by the four individuals together is limited to $13,000, the annual aggregate limitation under the plan, under the assumptions in this example, and the plan must bear the difference between the $15,850 and the $13,000 annual limitation, or $2,850.”
Note that the current ACA cost-sharing limits, and the changes for 2016, only affect plans with high out-of-pocket maximums. Many plans are not affected because they have out-of-pocket maximums that are much lower than the amounts allowed by the ACA, or because they already apply reasonable individual maximums for both single and family coverage plans. Group policies issued in certain states also may be subject to lower limits due to state insurance laws. Therefore, many plans may not be affected by the ACA changes for 2016. On the other hand, high deductible health plans (HDHPs) that are designed for compatibility with health savings accounts (HSAs), are likely to be affected by the changes.
HSA-Compatible High Deductible Health Plans
HDHPs that qualify as permissible coverage in connection with an HSA — called HSA-compatible HDHPs — must comply with IRS rules for minimum deductible amounts and maximum out-of-pocket amounts. Most HSA-compatible HDHPs are nongrandfathered health plans, so they are subject to the ACA cost-sharing limits or the IRS maximum out-of-pocket amounts, whichever is less.
For 2016, the maximum out-of-pocket amounts for a HSA-compatible HDHP will be:
- $6,550 if self-only coverage, or
- $13,100 if family coverage.
If, however, the 2016 HDHP is a nongrandfathered health plan, the maximum out-of-pocket amount foreach individual with family coverage will be limited to $6,850 with respect to in-network essential health benefits. For many HDHPs, this will be a significant change for 2016.
Summary
The guidance provided in FAQ XXVII does not affect grandfathered health plans or any plans for plan years before 2016. For nongrandfathered plans, including HSA-compatible HDHPs, employers and benefit advisors are encouraged to review the guidance to ensure compliance with the ACA cost-sharing limits for 2016.
New Guidance on Preventive Services Required Under the Affordable Care Act
Originally posted by www.simandlhrlaw.com
Recently, the Departments of Labor, Health and Human Services, and Treasury jointly issued guidance on the coverage of preventive services required under the Affordable Care Act (ACA). By way of background, the ACA requires that non-grandfathered group health plans provide preventive services, such as screenings, immunizations, contraception, and well-woman visits, without cost-sharing requirements. The preventive services are based upon recommendations of the United States Preventive Services Task Force (USPSTF) and comprehensive guidelines supported by the Health Resources and Services Administration (HRSA). The new guidance is outlined in Part XXVI of the series FAQs About Affordable Care Act Implementation and clarifies the coverage of preventive services specifically related to:
- Contraceptives;
- BRCA Testing;
- Gender-Specific USPSTF Recommendations; and
- Pregnancy Care for Dependents.
Contraceptive Coverage
Prior guidance issued by the Departments required that women have access to the full range of FDA-approved contraceptive methods without cost-sharing. However, the guidance also provided that health plans were permitted to use reasonable medical management techniques to control costs such as imposing cost-sharing on brand name drugs to encourage the use of generic equivalents. The new FAQs provide further guidance on the scope of coverage required for contraception and what constitutes "reasonable" medical management techniques.
The individual FAQs on contraception clarified the following requirements:
- Health plans must cover without cost-sharing at least one version of all the contraception methods identified in the FDA Birth Control Guide. Currently, the guide lists 18 forms of contraception including, but not limited to: oral contraceptives; intrauterine devices; barriers; hormonal patches; and sterilization surgery.
- Plans may use reasonable medical management such as imposing cost-sharing on some items and services to encourage individuals to use other items or services within the contraception method. For example, a plan may impose cost-sharing (including full cost-sharing) on brand name oral contraceptives to encourage use of generics or impose different copayments to encourage the use of one of several FDA-approved intrauterine devices.
- If the health plan is using medical management to control costs within a specified contraception method, the plan must have an exception process that is "easily accessible, transparent and sufficiently expedient" and that is not unduly burdensome on the individual, provider or individual acting on the individual's behalf. Also, the plan is required to defer to the determination of the individual's attending provider. Thus, the plan must cover an item or service without cost-sharing if a treating physician deems it medically necessary.
- Plans that try to offer coverage for some - but not all - FDA-identified contraceptive methods will not comply with the health care reform law and its rules. For example, plans cannot cover barrier and hormonal methods of contraception while excluding coverage for implants or sterilization.
BRCA Testing
The preventive services required under the ACA include screening for women who have a family member with breast, ovarian, tubal or peritoneal cancer to identify a family history that may be associated with an increased risk related to the breast cancer susceptibility genes - BRCA 1 or BRCA 2. Prior guidance clarified that women with positive screening results should receive genetic counseling and, if indicated after counseling, BRCA testing. However, there was confusion as to whether or to what extent the recommendation applied to a woman with a personal history of cancer that was not BRCA-related.
The new guidance clarifies that the USPSTF recommendation applies to women with a history of non-BRCA related cancer. Thus, a plan or issuer is required to cover without cost-sharing preventive screening, genetic counseling, and if deemed appropriate by her treating physician, BCRA tests for such women. The new guidance further clarifies that these preventive services must be provided regardless of whether a woman is exhibiting any symptoms and even if she is currently cancer-free.
Coverage of Preventive Services Based on Gender Identity
A number of the preventive services required by the ACA are gender-specific such as mammograms and BRCA testing for women and prostate exams for men. The new guidance clarifies that non-grandfathered health plans cannot limit coverage of preventive services based on an individual's sex assigned at birth, gender identity, or gender recorded by the plan. Rather, if the individual otherwise satisfies the criteria under the recommendation or guideline and is eligible under the terms of the plan, the plan must provide the preventive services that the individual's provider determines are medically appropriate. This means, for example, providing without cost-sharing a mammogram for a transgender man who has residual breast tissue.
Coverage for Dependents of Preventive Services Related to Pregnancy
Traditionally, a group health plan was able to restrict coverage for maternity care to employees and employees' spouses. However, under the ACA those benefits must now be provided to an eligible dependent. The new FAQs clarify that to the extent the maternity care is a preventive service under the ACA, the plan must provide prenatal benefits and other services intended to assist with healthy pregnancies to an eligible dependent without cost-sharing. The guidance further clarifies that an eligible dependent must be provided all other age appropriate women's health services without cost-sharing.
Action Steps
This recent guidance is a clarification of the existing preventive services required under the ACA rather than a modification. Accordingly, there is no delayed effective date typically applied to changes in preventive services. Employers and plan sponsors should review their plan documents and their administrative practices to ensure the plan is providing coverage of preventive services in accordance with the new guidance. Failure to provide the preventive services as required by the ACA could subject the employer to penalties of up to $100 per day per participant.
IRS Clarifies Prior Guidance on Premium Reimbursement Arrangements; Provides Limited Relief
Originally posted February 24, 2015 by Daimon Myers, Proskauer - ERISA Practice Center on www.jdsupra.com.
Continuing its focus on so-called “premium reimbursement” or “employer payment plans”, the Internal Revenue Service (IRS) released IRS Notice 2015-17 on February 18, 2015. In this Notice, which was previewed and approved by both the Department of Labor (DOL) and Department of Health and Human Services (collectively with the IRS, the “Agencies”) clarifies the Agencies’ perspective on the limits of certain employer payment plans and offers some limited relief for small employers.
Prior guidance, released as DOL FAQs Part XXII and described in our November 7, 2014 Practice Center Blog entry, established that premium reimbursement arrangements are group health plans subject to the Affordable Care Act’s (ACA’s) market reforms. Because these premium reimbursement arrangements are unlikely to satisfy the market reform requirements, particularly with respect to preventive services and annual dollar limits, employers using these arrangements would be required to self-report their use and then be subject to ACA penalties, including an excise tax of $100 per employee per day.
Since DOL FAQs Part XXII was released, the Agencies’ stance has been the subject of frequent commentary and requests for clarification. With Notice 2015-17, it appears that the Agencies have elected to expand on the prior guidance on a piecemeal basis, with IRS Notice 2015-17 being the first in what may be a series of guidance. The following are the key aspects of Notice 2015-17:
- Wage Increases In Lieu of Health Coverage. The IRS confirmed the widely-held understanding that providing increased wages in lieu of employer-sponsored health benefits does not create a group health plan subject to market reforms, provided that receipt of the additional wages is not conditioned on the purchase of health coverage. Quelling concerns that any communication regarding individual insurance options could create a group health plan, the IRS stated that merely providing employees with information regarding the health exchange marketplaces and availability of premium credits is not an endorsement of a particular insurance policy. Although this practice may be attractive for a small employer, an employer with more than 50 full-time employees (i.e., an “applicable large employer” or “ALE”) should be mindful of the ACA’s employer shared responsibility requirements if it adopts this approach. ALEs are required to offer group health coverage meeting certain requirements to at least 95% (70% in 2015) of its full-time employees or potentially pay penalties under the ACA. Increasing wages in lieu of benefits will not shield ALEs from those penalties.
- Treatment of Employer Payment Plans as Taxable Compensation. Some employers and commentators have tried to argue that “after-tax” premium reimbursement arrangements should not be treated as group health plans. In Notice 2015-17, the IRS confirmed its disagreement. In the Notice, the IRS acknowledges that its long-standing guidance excluded from an employee’s gross income premium payment reimbursements for non-employer provided medical coverage, regardless of whether an employer treated the premium reimbursements as taxable wage payments. However, in Notice 2015-17, the IRS provides a reminder that the ACA, in the Agencies’ view, has significantly changed the law, including, among other things, by implementing substantial market reforms that were not in place when prior guidance had been released. The result: the Agencies have reiterated and clarified their view that premium reimbursement arrangements tied directly to the purchase of individual insurance policies are employer group health plans that are subject to, and fail to meet, the ACA’s market reforms (such as the preventive services and annual limits requirements). This is the case whether or not the reimbursements or payments are treated by an employer as pre-tax or after-tax to employees. (This is in contrast to simply providing employees with additional taxable compensation not tied to the purchase of insurance coverage, as described above.)
- Integration of Medicare and TRICARE Premium Reimbursement Arrangements. On the other hand, although the Notice confirms that arrangements that reimburse employees for Medicare or TRICARE premiums may be group health plans subject to market place reforms, the Agencies also provide for a bit of a safe harbor relief from that result. As long as those employees enrolled in Medicare Part B or Part D or TRICARE coverage are offered coverage that is minimum value and not solely excepted benefits, they can also be offered a premium reimbursement arrangement to assist them with the payment of the Medicare or TRICARE premiums. (The IRS appropriately cautions employers to consider restrictions on financial incentives for employees to obtain Medicare or TRICARE coverage.)
- Transition Relief for Small Employers and S Corporations. Although many comments on the prior guidance concerning employer payment plans requested an exclusion for small employers (those with fewer than 50 full-time equivalent employees), the IRS refused to provide blanket relief. The IRS notes that the SHOP Marketplace should address the small employers’ concerns. However, because the SHOP Marketplace has not been fully implemented, no excise tax will be incurred by a small employer offering an employer payment plan for 2014 or for the first half of 2015 (i.e., until June 30, 2015). (This relief does not cover stand-alone health reimbursement arrangements or other arrangements to reimburse employees for expenses other than insurance premiums.) This is welcome relief to small employers who adopted these arrangements notwithstanding the Agencies’ prior guidance that they violated certain ACA marketplace provisions.
- In addition to granting temporary relief to small employers, the IRS also provided relief through 2015 for S corporations with premium reimbursement arrangements benefiting 2% shareholders. In general, reimbursements paid to 2% shareholders must be included in income, but the underlying premiums are deductible by the 2% shareholder. The IRS indicated that additional guidance for S corporations is likely forthcoming.
The circumstances under which premium reimbursement arrangements are permitted appears to be rapidly dwindling, and the IRS indicated that more guidance will be released in the near future. Employers offering these arrangements should consult with qualified counsel to ensure continuing compliance with applicable laws.
DOL Updates Definition of Spouse in FMLA Regulations
Originally posted February 24, 2015 by Rick Montgomery, JD on ThinkHR.com.
On June 26, 2013, in U.S. v. Windsor, 570 U.S. 12, 133 S. Ct. 2675 (2013), the U.S. Supreme Court struck down section 3 of the Defense of Marriage Act (DOMA) as unconstitutional under the Due Process Clause of the Fifth Amendment. Immediately following the decision in Windsor, the U.S. Department of Labor (DOL) announced what the then-current definition of “spouse” under the Family and Medical Leave Act (FMLA) allowed, given the decision: Eligible employees could take leave under the FMLA to care for a same-sex spouse, but only if the employee resided in a state that recognized same-sex marriage. This has been commonly referred to as the “state of residence” rule.
In order to provide FMLA rights to all legally married same-sex couples consistent with the decision in Windsor, the DOL issued a Final Rule on February 25, 2015, revising the definition of spouse under the FMLA. The Final Rule amends the definition of spouse in 29 C.F.R. §§ 825.102 and 825.122(b) to include all individuals in legal marriages, regardless of where they live. More specifically, the definition of spouse is now a husband or wife as defined or recognized in the state where the individual was married (“place of celebration”) rather than where the individual resides, and specifically includes individuals in same-sex and common law marriages. The Final Rule also defines spouse to include a husband or wife in a marriage that was validly entered into outside of the United States if it could have been entered into in at least one state.
The Final Rule goes into effect on March 27, 2015.
To assist employers, the DOL has released a Fact Sheet and Frequently Asked Questions about the Final Rule.
OSHA’s New Reporting and Recordkeeping Rule Goes into Effect on January 1, 2015
Source: ThinkHR.com
On September 11, 2014, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) announced a final rule which updates the reporting and recordkeeping requirements for injuries and illnesses, found at 29 C.F.R. 1904. The rule goes into effect on January 1, 2015.
Changes to recordkeeping requirements
Under OSHA’s recordkeeping regulation, certain covered employers are required to prepare and maintain records of serious occupational injuries and illnesses using the OSHA 300 Log. However, there are two classes of employers that are partially exempt from routinely keeping injury and illness records:
- Employers with 10 or fewer employees at all times during the previous calendar year; and
- Establishments in certain low-hazard industries.
The new rule maintains the exemption for employers with fewer than 10 employees. However, the new rule has an updated list of industries that will be partially exempt from keeping OSHA records. The previous list of partially exempt industries was based on the old Standard Industrial Classification (SIC) system and injury and illness data from the Bureau of Labor Statistics (BLS) from 1996, 1997, and 1998. The new list of partially exempt industries in the updated rule is based on the North American Industry Classification System (NAICS) and injury and illness data from the Bureau of Labor Statistics (BLS) from 2007, 2008, and 2009. As a result, many employers who were once exempted from OSHA’s recordkeeping requirements are now required to keep records. A list of newly covered industries can be found at www.osha.gov/recordkeeping2014/reporting_industries.html.
Changes to the reporting requirements
In addition to revising the recordkeeping requirements, the new rule expands the list of severe injuries and illnesses that employers must report to OSHA. Under the previous rule, employers were required to report the following events to OSHA:
- All work-related fatalities.
- All work-related hospitalizations of three or more employees.
Under the new rule, employers must report the following events to OSHA:
- All work-related fatalities.
- All work-related in-patient hospitalizations of one or more employees.
- All work-related amputations.
- All work-related losses of an eye.
For any fatality that occurs within 30 days of a work-related incident, employers must report the event within eight hours of finding out about it.
For any in-patient hospitalization, amputation, or eye loss that occurs within 24 hours of a work-related incident, employers must report the event within 24 hours of learning about it.
Employers do not have to report an event if the event:
- Resulted from a motor vehicle accident on a public street or highway, except in a construction work zone; employers must report the event if it happened in a construction work zone.
- Occurred on a commercial or public transportation system (airplane, subway, bus, ferry, street car, light rail, train).
- Occurred more than 30 days after the work-related incident in the case of a fatality or more than 24 hours after the work-related incident in the case of an in-patient hospitalization, amputation, or loss of an eye.
Employers do not have to report an in-patient hospitalization if it was for diagnostic testing or observation only. An in-patient hospitalizationis a formal admission to the in-patient service of a hospital or clinic for care or treatment.
Employers do have to report an in-patient hospitalization due to a heart attack, if the heart attack resulted from a work-related incident.
What to report
Employers reporting a fatality, inpatient hospitalization, amputation, or loss of an eye to OSHA must report all of the following information:
- The name of the establishment.
- The location of the work-related incident.
- The time of the work-related incident.
- The type of reportable event (i.e., fatality, inpatient hospitalization, amputation, or loss of an eye).
- The number of employees who suffered the event.
- The names of the employees who suffered the event.
- The contact person and his or her phone number.
- A brief description of the work-related incident.
How to report
Employers can use the following three options to report an event:
- Call the nearest OSHA Area Office during normal business hours.
- Call the 24-hour OSHA hotline (800-321-OSHA or 800-321-6742).
- Report an incident electronically (OSHA is developing a new means of reporting events electronically, which will be released soon and will be accessible on OSHA’s website).
Conclusion
It is recommended that employers familiarize themselves with the final rule and train personnel accordingly. All employers under OSHA jurisdiction, even those who are exempt from maintaining injury and illness records, are required to comply with the new severe injury and illness reporting requirements.
Government releases Form 5500 changes
Originally posted December 17, 2014 by Mike Nesper on Employee Benefit Advisor
The government recently announced changes to the Form 5500 and the Form 5500-SF. The changes, released by the IRS, Employee Benefits Security Administration and the Pension Benefit Guaranty Corporation, are listed on the Department of Labor’s website. They include:
- DOL Form M-1 compliance information. The MEWA Form M-1 compliance information that was filed as an attachment for 2013 now appears as three new questions on the Form 5500.
- Signature and date. The Form 5500 and Form 5500-SF instructions for “signature and date” have been updated to caution filers to check the filing status. If the filing status is "processing stopped" or “unprocessable,” the submission may not have had a valid electronic signature, and depending on the error, may be considered not to have been filed.
- Active participant information. Filers are now required to provide the total number of active participants at the beginning of the plan year and at the end of the plan year on both forms.
- Terminated participant vesting information. Form 5500-SF filers now must provide the number of participants that terminated employment during the plan year with accrued benefits that were not fully vested.
- Multiple-employer plan information. In accordance with the Cooperative and Small Employer Charity Pension Flexibility Act, the Form 5500 and Form 5500-SF now require multiple-employer pension plans and multiple-employer welfare plans to include an attachment that generally identifies each participating employer, and includes a good faith estimate of each employer's percentage of the total contributions during the year.
- Schedule H. The instructions for line 1c(13) have been enhanced to set out what is an investment company registered under the Investment Company Act of 1940.
- Schedule MB. New Line 4f requires plans in critical status to indicate the plan year in which a plan is projected to emerge from critical status or, if the rehabilitation plan is based on forestalling possible insolvency, the plan year in which insolvency is expected.
- Schedule SB. Line 3 has been modified so that the funding target is reported separately for each type of participant (active, retired, or terminated vested). Line 11b has been split into two parts: the calculation based on the prior year’s effective interest rate, and the calculation based on the prior year’s actual return. Line 15 instructions have been expanded to address situations in which the AFTAP was not certified for the plan year. Line 27 and related instructions have been modified to reflect funding changes under the CSEC Act for defined benefit pension plans impacted by the act.
United States: You've Acquired A New Qualified Retirement Plan? Time For A Compliance Check
Originally posted October 20, 2014 by Nancy Gerrie and Jeffrey M. Holdvogt of Mondaq Business Briefing, on www.ifebp.org.
In connection with a merger or acquisition, an acquiring company may end up assuming sponsorship of a tax-qualified retirement plan that covers employees of the acquired company. Basic due diligence on the plan likely was done during the acquisition. But if the plan will continue to be maintained following the acquisition, this is the perfect time to establish procedures to ensure that the numerous administrative and fiduciary requirements involved in maintaining a qualified retirement plan will continue to be met on an ongoing basis. Following is a brief summary of some key issues that a company should focus on after it assumes a new qualified retirement plan.
Review Compliance with Coverage and Nondiscrimination Testing
In order for the plan to retain its tax-qualified status, the Internal Revenue Code requires that a qualified retirement plan be tested periodically to ensure that it does not discriminate in favor of highly compensated employees. Two of the most important tests to be monitored are: (i) the coverage test, to ensure that the plan covers a stated minimum number of non-highly compensated employees on a controlled group (employer-wide) basis, and (ii) the nondiscrimination test, to ensure that the formula for determining the amount of contributions and benefits a particular participant receives does not discriminate in favor of highly compensated employees. Advance planning should be done to determine the impact of the acquisition on these tests, both for the new plan and any existing plans within the controlled group. Different rules may apply for determining which employees are highly compensated, depending on the type of transaction.
Become Familiar with the Plan's Investments and Investment Policy
The acquiring company, or more typically a committee appointed by the acquiring company, will have fiduciary responsibility for selecting the plan's investments, including the investment funds offered under a 401(k) or other individual account retirement plan. Plan fiduciaries, who likely will be newly appointed following the acquisition, must familiarize themselves with the fund lineup, obtain information to evaluate the funds and document how they monitor and select funds to ensure compliance with U.S. Department of Labor requirements. Plan fiduciaries also should familiarize themselves with the plan's written investment policy or guidelines, refer to the investment policy or guidelines when meeting to discuss changes to plan investments and update the policy or guidelines, as needed.
Understand Plan Fees and Revenue Sharing
New plan fiduciaries should carefully review any revenue-sharing arrangements related to the plan and understand the plan's use of so-called "12b-1 fees" and other revenue-sharing payments. Plan fiduciaries must understand the formula, methodology and assumptions used to determine the respective share of any revenue generated from plan investments by the plan's service provider. Plan fiduciaries also must monitor the arrangement and the service provider's performance to ensure that the revenue owed to the plan is calculated correctly and that the amounts are applied properly (for example, for payment of proper plan expenses or for reallocation to participants' plan accounts).
Review Consultant, Investment Manager and Service Provider Agreements
Qualified retirement plan fiduciaries typically have agreements with various consultants, investment managers and service providers that carry over following an acquisition. This is a good time to review these agreements, both to understand the service providers (and whether they are still needed) and to make sure plan fiduciaries are set up to properly monitor and select new service providers, as needed. In particular, plan fiduciaries should understand whether the consultant or advisor represents itself to be a fiduciary or co-fiduciary of the plan, whether the consultant or advisor maintains adequate insurance coverage, whether fees are reasonable and whether any conflicts of interest exist.
Ensure the Plan's Eligibility Provisions Reflect the New Controlled Group
The plan document will specify precise rules for employee eligibility. Following an acquisition, the acquiring company often must update the plan's eligibility provisions to reflect the new controlled group. In addition, with new administrators and new human resources personnel likely to be looking at the plan, this is an ideal time to make sure the plan is following the eligibility and enrollment rules set forth in the plan document, including: (1) eligibility for or exclusion of part-time employees; (2) proper classification of independent contractors; (3) adherence to hours-of-service counting rules or the elapsed-time alternative; (4) re-enrollment of rehired participants; and (5) for automatic enrollment plans, proper automatic enrollment for eligible employees on a timely basis.
Check the Plan's Definition(s) of Compensation
A plan's definition of compensation is used for a variety of important purposes, including the calculation of an employee's allocation in a defined contribution plan or benefit accruals in a defined benefit plan, adherence to limitations on allowable compensation and performing nondiscrimination testing. The plan document must specify precise definitions for applicable compensation for each purpose. Problems frequently arise following an acquisition because the payroll provider may change or key personnel who understood how compensation was applied under the plan may be gone. Also, the transaction agreement may require the continuation of certain benefit levels for a period of time, which in practice may require that the plan continue to apply the same definition of eligible compensation as before the transaction. Plan administrators should review payroll codes against the plan's definition of compensation and make adjustments to either the plan or the payroll codes, as needed.
Review the Distribution Paperwork
The acquiring company will usually update the plan's summary plan description and employee communications to reflect the new employer. However, distribution paperwork, including benefit election and rollover forms that the employee must complete, as well as descriptions of optional forms of benefits and other required disclosures, is often overlooked in the due diligence and transition process. If election forms are not periodically reviewed and updated, the plan may fail to provide all the correct options (for example, installments, annuities and lump sums, where available) or fail to require spousal consent for distributions, where it is required under plan rules.
Update ERISA Fidelity Bonds and Fiduciary Insurance Coverage
One of the most common failures noted by the Department of Labor during audits is a plan's maintenance of an Employee Retirement Income Security Act (ERISA) fidelity bond. ERISA generally requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan be bonded (for at least 10 percent of the amount of funds he or she handles, subject to a $500,000 maximum per plan for plans that do not hold employer securities) to protect from risk of loss due to fraud or dishonesty on the part of persons who "handle" plan funds or other property. The period after an acquisition is an excellent time to make sure the plan maintains appropriate bonds, as well as to make sure the company is adequately protected with fiduciary insurance coverage, which may be with the same insurer as the fidelity bond.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Employers face crackdown over worker misclassification
Originally posted September 29, 2014 by Michael Giardina on https://ebn.benefitnews.com.
Since the onset of the recession, there has been a surge in worker misclassification litigation and enforcement against employers that are trying to effectively manage their finances, but are incorrectly classifying their workers. There is also concern around the Affordable Care Act’s employer mandate, which may make misclassifications a tempting alternative to offering group health coverage.
The Department of Labor and the Internal Revenue oversee the federal Fair Labor Standards Act, which establishes minimum wage and overtime pay standards and how much private and public employers should pay their employees. At the state level, there are also a slew of regulations that can make any HR professional or benefit plan sponsor concerned.
Linda Doyle, trial partner at international law firm McDermott Will & Emery, says many employers with large teams of individuals in one category – such as trainers in the tech world or sales representatives in product and promotion businesses – have asked how they could come under the ACA’s coverage limits. This has been an area she’s been docking a lot of analysis in.
“There are benefits, but there are also huge costs and potential liabilities if you get this wrong,” says Doyle. “You know saving health insurance money is a way to avoid the teeth of the Affordable Care Act; it may be a laudable goal, but you may be just putting off extensive liability down the line.”
It doesn’t help that many employers are still trying to climb out from the recession.
“Particularly after the last recession, which I think we are technically are still in, there was a lot of headcount management,” Doyle explains. While noting that “‘temporary’ doesn’t necessarily mean ‘independent contractor’, or ‘work-from-home’ doesn’t mean ‘independent contractor’,” she says “there are really some employers that just don’t understand this is a category – even if the employee or individual agrees to it.”
Nancy Vary, director of the Knowledge Resource Center for Buck Consultants at Xerox, explains the ACA, and employee benefits needs in general, is an influence in these decisions.
“It all factors in, because if you’re an independent contractor, typically you’re not in a situation where you will not be receiving any kind of employee benefit,” Vary says.
In 2012, the National Employment Law Project stated that 10-30% of employers, or even more, misclassify their employees as independent contractors. This equates to millions of misclassifications and billions in revenue losses for state and federal governments. Because employers with independent contractors or other exempt employees are not tied to benefit and payments requirements levied by federal, state and local agencies, this is the conundrum, says Jeff Phelps, chief operating officer at Nelson Compliance, a consultant firm that helps employers figure out their contingent workforces.
“The problem is with independent contractors is, of course, employers are not contributing to the tax base for those individuals,” says Phelps. “That’s the No. 1 driver, that’s why you see the legislation and regulation getting tougher and more enforcement. They want to go after the misclassification issue, because they want to recover taxes that have not been made as well as [future] taxes.”
Phelps adds that typical employee protections afforded to employees such as the FLSA, Title VII of the Civil Rights Act of 1964 and the Family and Medical Leave Act are not offered to independent contractors.
The current severity of misclassification cases and costs, which employment lawyers will tell you rival what was seen in the dot-com era – especially after Microsoft agreed to pay the IRS $97 million to settle a benefits suit that included its independent contractors that were not allowed access to the company’s stock purchase plan.
“If you are an employer and you get this wrong, you have tax liability,” says Doyle. “You also have the problem that Microsoft faced years ago, if you call someone an independent contractor but they are really an employee, and your benefit plans give employees certain buckets of benefits, then you owe them those benefits.”
Under Employee Retirement Income Security Act plans, or state insurance plans, employees cannot waive their rights to benefits, says Doyle, even if they agreed to the exemption. She says a lot of employers rewrote their benefits plans in order to address the issue. But now, as 10 states enacted worker misclassification laws in 2012 and more than 14 regions did so in 2013 – including the District of Columbia – the topic is top of mind for employers.
Meanwhile, the Consolidated Appropriations Act of 2014, enacted in January, was authorized for just this purpose and the DOL has plans to award $10.2 million to fund worker misclassification detection and enforcement activities in 19 state unemployment insurance programs. “This is one of the many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” says Thomas E. Perez, the U.S. secretary of labor.
“The DOL has engaged in quite a bit of outreach over the best few years but its focus in many respects has been on educating the workers, educating the employees and providing them assistance in filing complaints,” says Buck Consultants at Xerox’s Vary. But, “you get a sense where the DOL’s head is, and that’s not that different from many government agencies. They are, after all, in the enforcement business.”
Because each state regulation may vary, with some state laws being more strict than those at the federal level, Phelps says the independent contractor classifications, and misclassifications in general, are being labeled as “an unfair business practice.”
“All of those costs that an employer would have satisfy within the W-2, they don’t have to satisfy as a 1099,” Phelps explains.
But all employers want to know whether there will be some reprieve or clarification. According to Doyle, the DOL’s broad strokes of intervention, essentially audit programs and education programs, may help some uninformed organizations. Meanwhile, Vary adds that compliance audit of pay practices and time sheets can help employers skirt some of the liability going forward.
Because misclassifications are neither a function of HR departments or upper management, it’s a puzzle that has not been solved and will likely not be for a while, Phelps says.
“I don’t see anything coming down in terms of regulation that’s going to make this simpler,” says Phelps, who has spent more than 30 years in the human capital management industry. “All we’re seeing is greater enforcement.”