Also visit our Health Care Reform Resource Page, the Retirement Plans Resource Page, the Wellness Resource Page and the Workplace Flexibility Resource Page.
For links/summaries to some of the best external compensation /benefits stories on the web, see below.
Small Employers Plan Bigger Bonuses than Last Year
About 55 percent of small businesses surveyed by payroll services company SurePayroll are planning to hand out year-end bonuses this year, up from 38 percent in 2012, reports Bloomberg BusinessWeek.
Eighty percent of those bonuses would be equal to or greater than last year’s payouts, respondents said.
- Strong sales and flat payrolls have left business owners with enough cash to reward employees.
Too Much Discretion With Respect to Annual Bonuses May Cause Deferral of the Employer’s Deduction
Many accrual basis taxpayers have operated under the belief that so long as discretionary bonus amounts are paid within 2½ months following the end of the plan year, the amounts are fully deductible for the prior year. However, for bonus plans based on subjective performance criteria, the IRS may challenge the timing of the bonus deduction under the reasoning in a recent memorandum, reports Leonard, Street and Deinard.
- For those plans which required an assessment in determining the level or amount of bonus payable to the employees post-year end, the IRS found likewise that the “all events test” had not been satisfied at year end. The Service’s reasoning was that the tax accrual cannot take place any earlier than the date that the employee’s performance appraisal is completed.
401(k)s: Time for a Checkup
A balanced 401(k) menu offers a variety of funds. But such menus can be quite long in practice, and just as in a restaurant, the sheer number of choices can be overwhelming. The continuing trend in plan design, therefore, has been: keep it simple, reports CFO Magazine.
- Research indicates that participants appreciate having a more manageable number of choices to choose from, and increasingly plan sponsors are consolidating fund options. Does a company really need two large-cap value funds? Pick one.
The Shape of 401(k) Plans to Come—
and Why They're Changing
The biggest change will be a new emphasis on retirement readiness, rather than simply getting workers to join a plan and contribute. The idea is to focus on actual retirement outcomes, and it reflects apprehension about the large number of Americans who are approaching retirement unprepared. If that's something you're worried about, it turns out your boss shares your concern, reports Reuters.
- For employers it raises the prospect of workers staying on the job past the point where they are productive, not to mention higher healthcare costs.
'SHOP' Small Business Exchange Delayed One Year
The Obama administration this week announced plans to further delay a key part of the Affordable Care Act meant to help small businesses obtain health plans for themselves and their workers. Small employers won't be able to buy plans under the provision, an online marketplace known as the Small Business Health Options Program, or SHOP, until November 2014, the Department of Health and Human Services said the day before Thanksgiving, reports the Wall Street Journal.
- The rollout was previously delayed in April, when officials said businesses using the exchange for coverage in 2014 would only be able to offer one plan to their workers. While employers can still browse plans on the site, none will be available for at least another year. Instead, they are being told purchase government-approved coverage from insurers, agents and brokers.
(To learn more, see the SHRM Online article "‘SHOP’ Small Business Exchange Pared Back Further.")
Large Employers Cite ‘Cadillac’ Tax in Reducing Health Benefits
Large U.S. employers often cite the health care "Cadillac" excise tax on high-value health plans, to take effect in 2018, when making benefit cuts, reports CNBC.com.
Five years down the road, plans that cost more than $10, 200 for individuals and $27,000 for families will face an excise tax of up to 40 percent. For 75 million Americans who get their insurance through large companies, the Affordable Care Act is a mixed bag.
- A survey by the International Foundation of Employees Benefits Plans (IFEB) released in August found that 16.8 percent of respondents had already started to redesign their health plans to avoid the tax and 40 percent said they were considering action. A survey of Fortune 1000 companies by Towers Watson found a much higher number: 60 percent of the these major companies said the looming excise tax was already having a "moderate" or "significant" influence on benefits decisions for 2014 and 2015.
U.S. Supreme Court to Review ACA Provisions on Contraception Coverage
The U.S. Supreme Court accepted an appeal of a ruling that employers must provide contraception coverage to employees under the Affordable Care Act (ACA), reports CNN and ABCNews.com.
The justices agreed to review provisions in the ACA requiring employers of a certain size to offer insurance coverage for birth control and other reproductive health services without a co-pay. At issue is whether private companies and non-profits can refuse on the claim it violates their religious beliefs.
- Oral arguments would likely be held in March with a ruling by late June.
Premium Surcharges on Smokers Could Backfire
"Tobacco surcharges are not proven to help tobacco users quit and there are major concerns that they will prevent people from getting health care coverage," the American Lung Association's (ALA) Jennifer Singleterry said, reports FoxNews.com.
The ALA supports the Affordable Care Act, as does the American Cancer Society, but both oppose the tobacco penalty because they believe it makes insurance unaffordable for smokers. "Charging tobacco users more in health insurance premiums, sometimes thousands of dollars more, studies have shown, will price smokers out of the market," said Singleterry.
- Eleven states stepped in to prevent the surcharge, but a majority have not. In those, insurance providers will decide the surcharge.
Supreme Court Asked to Clarify Company Stock Issues
in 401(k) Plans
The appeal of company stock as an investment option in defined contribution plans could dim considerably if the Department of Labor succeeds in having the U.S. Supreme Court revisit the issue of fiduciary prudence in managing that option, reports Pensions & Investments.
- The DOL's petition to the Supreme Court, filed Nov. 12, seeks to take advantage of a recent split in judicial circuits that could make it easier for participants to challenge employers when company stock loses value.
Small-Group Plans' Cost Increases
Far Outpace Large Plans
While employers with fewer than 50 workers don't have to provide health coverage under the Affordable Care Act (ACA), if they do they are required to comply with the same essential benefit mandates, age rating changes, and pre-existing condition reforms the individual market faces, reports Health Care Policy and Marketplace Review.
These mandates are translating into significant cost increases for small employers. One Maryland broker with 90 small-group accounts reports his smallest plan cost increase for 2014 was 15 percent, his largest was 69 percent, and most are in the 30-40 percent range. By comparison, Mercer announced the average large employer health care cost increase for 2014 will be 5.2 percent, meaning small groups could have reasonably expected an increase under 10 percent without the ACA. The biggest rate increases are generally going to those employers with the youngest groups the most impacted by the new "age compression" rules.
- The most common means by which small groups are avoiding the big increases, at least for the first year, is through the early renewal strategy. Most states and health plans have allowed employers to change their renewal date to late in 2013 thereby allowing them to keep the old health plans for about another year. "But this is a stay of execution, not a solution. Their old plans are toast when they next renew," the report states.
Decode Your 401(k) Plan’s Jargon
MoneyWatch columnist Jim Philips encourages employers to "decode" the jargon in their r 401(k) plans that confounds many employees. Examples:
- How about the term "deferral"? To the extent that it has any meaning at all to most people, it's probably something that you put off until later. That sends kind of a mixed message to people who are hearing that they need to be saving for retirement right now. "Deferral" is the same thing as "contribution,” which really means payroll-deduction deposit.
- "Asset allocation models" and "model portfolios" can be very useful tools to help people get it right with regard to their 401(k) investments. They are simply managed accounts or investment baskets.
- Many 401(k) plans offer a choice between "pretax" and "Roth" deposits. With no disrespect intended to the late Senator William Roth, after whom this feature was named, it isn't a very intuitive label. How about calling the two options "pretax, deposits and earnings taxed when withdrawn" and "after-tax, deposits and earnings withdrawn tax-free"? Isn't that more clear?
Private Exchanges Rise as Health Care Option
"A relatively small but growing number of midsize and larger companies that already offer insurance to employees are now shifting to private exchanges--perhaps the most significant change employees have seen in a while," reports the New York Times.
One consulting firm estimates that one million people will enroll in private exchanges this year, but that number could grow to 40 million by 2018. So far, the exchanges seem to appeal to companies that have a range of employees at varying pay levels because employers can offer more options in plan design.
- One challenge: the troubled rollout of the federal health insurance marketplace has given the word “health exchange” a bad name among employees.
(To learn more, see the SHRM Online articles "On Private Health Exchange, Choice Drives Satisfaction" and "Time for Defined Contribution Health Benefits?")
Transitional Policy for Canceled Plans Affects Small Group Market
President Obama’s Nov. 14 announcement that health insurance issuers would be permitted—pending approval by state regulators—to renew certain canceled health insurance policies has raised new questions for small group market plans, reports consulting and actuarial firm Milliman.
So far, Rhode Island, Vermont, Minnesota, and Washington have said they will not allow noncompliant policies to be renewed, while Florida, North Carolina, Ohio, Kentucky, Texas, and Oregon have said they will. Other states have said they need more time to decide.
- Nongrandfathered policies in the individual and small group markets that were in effect as of Oct. 1, 2013, and have received or would otherwise receive a cancelation or termination notice from the issuer could be eligible for restoration. No new sales of these exempted policies are allowed. A letter issued by CMS allows policies to be renewed for an additional policy year. However, it also suggests that the government will consider extending the transitional policy beyond this time frame.
More on the likely ramifications for the small group market from Crowell & Moring LLP., which notes: "Even if the states are willing to "play ball," insurers are under no obligation to continue these policies. Insurers will have to take into account significant business and logistical considerations in deciding how to proceed."
IRS Finalizes Rules on Suspending Contributions to Safe Harbor 401(k) Plan
A new IRS regulation deals with suspending contributions to safe harbor 401(k) plans during the year. Plan sponsors with a safe harbor 401(k) plan, under which they are required to contribute 3 percent of compensation per year (i.e., the safe harbor nonelective contribution), may want to make a change to the employee notice that must go out this month, advises law firm Ferenczy & Paul LLP.
The IRS did something unexpected. Rather than removing the business hardship requirement from the nonelective safe harbor suspension rules, it added the requirement to matching safe harbor contribution plans, effective for 2015. Current rules permitting suspension without limitation will continue through 2014.
- Furthermore, it changed the “substantial business hardship” requirement to require that the company be operating at a loss for the plan year. While the phrase “operating at a loss” is assumed to means that, on the company’s financial statements for the year to date, expenses exceed income.
Microsoft, GE and Stack Ranking
Manyy reported stories and opinion pieces (and reported stories that sound like opinion pieces) have followed Microsoft's announcement last week that it's ending "stack ranking" for appraising and rewarding employeesn.
Fortune via CNNmoney.com, in Microsoft, GE and the Futility of Ranking Employees, reports that "The 'rank and yank' system that he popularized results in workers being pitted against their peers to avoid being labeled as losers. Those workers who ended up on the wrong side of the ranking curve were penalized, usually by a denial of merit raises or bonuses, and sometimes by losing their job." The comments section to this article contains a lively back and forth about stack ranking, including "these kinds of systems are quite horrible. They only 'work' inasmuch as a person successfully manipulates the political environment at their work. They invariably result in sabotaging fellow co-workers," to "Everyone isn't a top performer. You have to assess performance somehow. Ranking at least provides a tool to improve human capital over time."
Jack Welch: Pay Differentiation Isn't 'Rank and Yank'
Criticism of "stack ranking" performance appraisals of company workers has abounded in light of Microsoft's decision to change its performance grading system. Former General Electric CEO Jack Welch has responded with a strong defense of pay differentiation, writing in the Wall Street Journal (subscription may be required), and summarized at moneynews.com.
All the talk about rank and yank "makes me want to scream," wrote Welch. "Because most experienced businesspeople know that 'rank and yank' is a media-invented, politicized, sledgehammer of a pejorative that perpetuates a myth about a powerfully effective real practice called (more appropriately) differentiation."
One criticism of differentiation is that it devalues teamwork. Welch responded, "Nonsense. If you want teamwork, you identify it as a value. Then you evaluate and reward people accordingly. You'll get teamwork, I guarantee it."
Businesses Cut Full-Time Workers to Meet ACA Mandate, Study Says
A study of small businesses found that many are cutting full-time workers or worker hours to comply with the Affordable Care Act (ACA). Franchises are making the biggest cuts, reports the Christian Science Montior.
The survey by Public Opinion Strategies found that some 31 percent of franchise businesses and 12 percent of non-franchise businesses say they have already reduced worker hours because of the law.
Microsoft Abandons 'Stack Ranking' of Employees
Microsoft Corp. is abandoning major elements of its controversial "stack ranking" employee-review and compensation system, the latest blow against a once-popular management technique, reports the Wall Street Journal (subscription required) and the Seattle Times, and commented about in a Forbes blog posting.
The company will no longer require managers to grade employees against one another and rank them on a scale of one to five. The rankings were a key factor in promotions and in allocating bonuses and equity awards, but many employees complained the system resulted in power struggles among managers and unhealthy competition among colleagues.
- Microsoft said it is dumping the numerical rankings in favor of more frequent and qualitative employee evaluations. The change took effect immediately.
(To learn more, see the SHRM Online article "Integrating Performance Management and Rewards at Microsoft.")
If You Like Your Employer Plan, Can You Keep It?
"If you're one of the 80 percent of Americans who is insured or covered through an employer plan…there is no change for you except for an increase in benefits that everyone receives as a result of the Affordable Care Act," White House spokesman Jay Carney said, reiterating President Obama's promise, reports CBS.com.
However, employers are already altering plans in anticipation of the 'Cadillac tax' that takes effect in 2018. The 40 percent excise tax on employee benefits exceeding $10,200 for individuals and $27,500 for families will cause those employers offering generous plans to pare back benefits, according to health care analysts.
• The impact of the tax also is concerning to unions, which that have fought with employers for generous benefits.
What’s Next for Retiree Health Care?
Companies have been cutting back on retiree health benefits for years. The latest survey by the Kaiser Family Foundation found that among large firms with employee health coverage, just 28 percent offer some form of retiree benefits, down from 66 percent in 1988. Among smaller firms, help is even scarcer, reports CNNMoney.com.
For retirees younger than age 65, if the Affordable Care Act's public exchanges succeed, firms that offer pre-Medicare coverage may give these ex-workers funds to purchase a policy on the public exchanges.
• For retirees age 65 and older, about a third of Medicare recipients have supplemental coverage from a former employer. Several major companies are shifting retirees 65 and older from company-run plans to private exchanges operated by benefit consultants and insurance brokers.
Consumers Not Buying Health and Wellness Mobile Apps
According to a report by the IMS Institute for Healthcare Informatics, of the 40,000+ health care apps now available for download on the U.S. Apple App Store, over 50 percent of them get downloaded fewer than 500 times, reports the Extend Health Blog.
The problem may be that there are just too many apps and there is no way to tell the good apps from the bad ones. Also, the vast majority of these apps are disconnected from consumers' health care providers and systems.
• Some doctors warn that apps are supplements and not replacements for in-office care, with most of their benefit coming from encouraging good behavior.
Administration Looks to Give Labor Unions Health Tax Relief
The Obama administration is signaling it intends to exempt some union health plans from one of the Affordable Care Act's substantial taxes, reports NPR.org.
Buried in rules issued last week is the disclosure that the administration will propose exempting "certain self-insured, self-administered plans" from the law's temporary reinsurance fee in 2015 and 2016. That's a description that applies to many Taft-Hartley union plans that act as their own claims processor.
• The transitional reinsurance fee, otherwise to be assessed against both insured and self-funded group health plans effective from 2014 through 2016, starts at $63 per insurance plan member next year. Over three years starting in 2014, the tax has been expected to raise $25 billion.
If You Like Employer Health Plan, Can You Really ‘Keep It?’
Embroiled in controversy over the veracity of his pledge that if Americans like their existing health insurance they can keep it, President Obama has responded in the main by saying that the “vast majority” of health plans aren’t changing. The White House argument is this: The employer-based plans that cover most working Americans (and 49 percent of the total population) are remaining in place, reports the Christian Science Monitor.
But critics of the Obama administration say this isn’t the case. Employer-sponsored insurance is also changing at least in part because of the Affordable Care Act's coverage requirements.
• As of 2018, per Obamacare, employers will face a new tax on “Cadillac” health plans. That could nudge employers to scale back the generosity of their plans and to shift more costs to employees.
Workers Face Coverage Changes During Open Enrollment
The health law requires plans to cover dependent children up to age 26, and most plans cover spouses too. But employers continue to try to minimize those costs by making it financially less attractive to employees to cover their family members, reports Kaiser Health News, citing a Towers Watson survey and other soruces.
They may charge separately for each child on a plan, for example, or add a surcharge for covering a spouse who is also offered insurance through his or her own job. Some, such as UPS,have moved to cut off coverage entirely to spouses that have access to insurance through their own jobs.
• Increasingly, employers also are incorporating the financial rewards linked to wellness programs into the premium itself rather than giving employees a cash payment for completing a health risk questionnaire, for example, says Chris Renz, a partner at Mercer.
Some Factories Stick with Old Health Plans
Some small manufacturers facing soaring costs for employee health insurance say they are likely to continue coverage for their workers, even though they won't be required to under the Affordable Care Act, reports the Wall Street Journal.
They are wary of discontinuing coverage and sending their employees to new insurance exchanges to obtain their own insurance. They say the problem-filled rollout of the federal government's online insurance market has raised further doubts about whether their employees would have access to sufficient coverage at lower costs.
• Small employers also are uncertain if they will be able to purchase less expensive small group plans through the new Small Business Health Options Program, also known as the SHOP Marketplace. These health-insurance exchanges for employers with 50 or fewer employees were supposed to begin accepting online applications Oct. 1. After delays due to a tech problem, the SHOP exchanges are now slated to open by the end of November.
State & Local Governments Limit Part-Timers' Hours to Avoid Health Law Mandate
Some school districts and state and local governments are limiting part-time workers’ hours or letting them go to comply with the Affordable Care Act (ACA), reports the Philadelphia Inquirer (via Kaiser Health News).
This month in Delaware, which has embraced the health law, officials decided to limit all casual and seasonal employees, including substitute teachers, to fewer than 30 hours a week to save on health insurance. About 376 workers from education, corrections, and homeland security agencies could be affected. In Pennsylvania, at least 10 school districts have slashed hours or outsourced their workers, including bus drivers, food service workers, and instructional aides. In New Jersey, the Burlington City school board is outsourcing paraprofessionals and substitute teachers to a Cherry Hill firm.
• In 2015, the ACA will require all employers with 50 or more full-time workers to provide health insurance. It set the full-time-employee threshold at 30 hours per week, or 130 hours each month. Employers must decide to offer coverage to these workers or keep them from working more.
Unknown Health Costs Worry Employers
Confusion over how the Affordable Care Act will work and an evolving set of rules make it difficult to plan ahead, some employers say. Much of their misgiving centers on health care costs that might not be known for months, reports the Baltimore Sun.
Despite concerns over both the looming excise tax and next year's predicted 5.2 percent increase in health care costs, many companies likely will hold off on making benefits changes for the next couple of years.
• Private exchange models are gaining favor with employers. A privately run exchange contracts rates for specific groups with insurers. Employers give their workers money to buy coverage, leaving the employee to pick a plan based on his or her needs and employer contribution.
(To learn more, see the SHRM Online article "On Private Health Exchange, Choice Drives Satisfaction.")
More Large Companies Offer Transgender Workers
From Apple to General Mills, nearly one fourth of Fortune 500 companies cover medical expenses associated with transgender care, according to gay and transgender rights group Human Rights Campaign. That's up from 19 percent last year. When the group began tracking transgender benefits in 2002, no Fortune 500 companies offered them, reports the AP via the San Jose Mercury News.
• Corporate America's outreach to transgender workers points to the increasing visibility of a group once relegated to society's fringes. Recently, more than a dozen states revised anti-discrimination laws to include transgender people. Meanwhile, transgender officials have raised the group's profile by winning elected office and landing appointments in President Obama's administration.
Sued Over Pay, Condé Nast Ends Internship Program
Condé Nast, whose publications include The New Yorker, Vanity Fair and Vogue, is closing down its internship program after two formers interns sued the company, claiming they had been paid below minimum wage for their summer jobs. The case is one of several recent lawsuits filed by low-paid and unpaid interns in the media field, reports the New York Times.
Several former and current Condé Nast interns said sacrificing the internship program seemed too extreme a response, not least because it meant that hundreds of fledgling and prospective journalists would be denied an invaluable launching pad.
• A media reporter at Politico who interned at The New Yorker said going into an internship knowing it paid little or nothing and then suing seemed “disingenuous.” Beyond earning school credit, he said, he learned tools of the trade and received job recommendations.
Many of ACA's Health Co-ops Could Collapse
Under the Affordable Care Act (ACA), Congress established a network of nonprofit insurance companies aimed at bringing competition to the marketplace dominated by major insurers. But these co-ops, started as a great hope for lowering insurance costs, are already in danger of insolvency, reports the Washington Post.
An HHS inspector-general audit found that 11 co-ops had projected start-up expenditures that exceeded their start-up funding — and that there was “little evidence” of critical private support for 16 co-ops.
• Their failure would leave taxpayers potentially on the hook for nearly $1 billion in defaulted loans. If they become insolvent, policyholders in at least half the states where the co-ops operate could be stuck with medical bills.
Looming Tax on ‘Cadillac’ Plans Cause Worry
Starting in 2018, the Affordable Care Act requires self-insured companies to pay a 40 percent excise tax on the value of group health benefits—the total cost of coverage including both the employer’s and employees’ shares—that exceeds a threshold amount. The tax applies to group plans offered by fully insured employers as well, but the law requires insurers to pay it, reports CFO.com.
Sheldon Blumling, an attorney with Fisher & Phillips who advises companies on health-care matters, notes that many experts in the field believe that either the Cadillac tax’s thresholds will be raised or it will be removed from the law altogether before 2018.
• “All the corporate people I’ve talked to have said they’re waiting to make decisions around this,” says Blumling. “Worrying about an excise tax that’s four-plus years out is alarmist, as is much of what you read about health-care reform. There’s a reason that provision was pushed so far out, which is that it’s not very palatable politically.”
N.J. Becomes 14th State to Recognize Same-Sex Marriage
Same-sex weddings have begun in New Jersey, which on Oct 21 became the 14th state (plus the District of Columbia) to recognize nuptials between same-sex partners, reports my9nj.com.
Gov. Chris Christie ordered his administration to withdraw an appeal of a state Supreme Court ruling allowing gay marriages, removing uncertainty about the future of same-sex marriage in the state.
• Employers in New Jersey are advised to now treat married same-sex couples as they do married opposite-sex couples. To learn more, see the SHRM Online article "IRS Recognizes All Same-Sex Marriages for Pretax Benefits."
Americans Flummoxed by Health Plan Options
Like our self-directed retirement saving system, the new health care system is one that requires consumers with varying degrees of expertise and knowledge to make important decisions for themselves, reports Reuters.
Researchers from several universities asked a national cross-section of Americans to choose exchange policies that would be cost-efficient for them. The vast majority—80 percent—failed to choose the best plan, resulting in average annual overspending of $611.
• "Most people had trouble combining the policy premium, co-pay and deductible to understand their total likely cost," said Eric Johnson, director of the Center for the Decision Sciences at Columbia Business School and co-author of the study.
Debt Deal Leaves ACA Unscathed
The bipartisan agreement to fully reopen the federal government and raise the government’s borrowing authority approved by Congress Wednesday night made no major changes to the Affordable Care Act (ACA), reports Business Insurance.
Earlier, lawmakers floated a proposal that would have delayed an ACA provision — now set to go into effect next year — that initially imposes a $63 fee per plan participant on self-funded employers and other plan sponsors. The proposal, which would have delayed the fee until 2015, is not part of the accord. Another proposal that was floated but not adopted would have delayed or repealed a new tax on medical devices.
• The bill includes one minor change to the health law sought by Republicans, setting new procedures to verify the incomes of some people receiving government subsidies for health-insurance costs, reports the Journal of Accountancy.
Surge of Employer Health Exchanges Is No ‘Passing Fad’
More than 30 employers, including Petco and Kinder Morgan KMI are the latest to turn to a new concept of giving their workers money to buy health benefits via private online marketplaces known as exchange, reports Forbes.
Mercer, a large employee benefits consultancy, said this week that Petco and Kinder Morgan are among 33 employers that will join the “Mercer Marketplace” exchange. Aon Hewitt announced that Walgreen and another 17 large employers would join its corporate health exchange.
• The private exchanges work with each employer in the exchange deciding on the subsidy or “credit” that each worker will get to purchase coverage offered by the employer. Then, the employees take to the private exchange to select their coverage. The subsidy will vary from employer to employer
(To learn more, see the SHRM Online article "Time for Defined Contribution Health Benefits?")
Negotiators Might Delay ACA Reinsurance Fee One Year
[Update: The final accord voted by Congress did not include the proposal to delay the ACA's Transitional Reinsurance tax.]
Under the Affordable Care Act's Transitional Reinsurance Program, nearly all health insurance plans are charged $63 per enrollee annually or $5.25 per member per month, beginning in 2014 and continuing through 2016. But some Senate debt-limit negotiators had proposed a one-year delay in collecting this fee, according to the Washington Post's Wonkblog.
The Senate proposal wouldn't have delayed the reinsurance program altogether. Instead, it would have delayed collection of the fee for one year. The reinsurance plan would have run from 2014 through 2016 -- but fees would have been collected from 2015 through 2017.
• Negotiations are fluid and this proposed fee delay disappeared as quickly as it surfaced. For now.
Companies that Auto-Enroll into 401(k)s Have Lower Matches
Companies that automatically place employees in 401(k) plans contribute less money to workers’ retirement accounts than companies that don't automatically enroll employees, reports the Los Angeles Times, citing a new study by the Center for Retirement Research at Boston College.
At companies with automatic enrollment, 77 percent of employees are in 401(k)s, according to the study. It’s 67 percent at companies without auto-enrollment. But the employer's matching contribution at companies without auto-enrollment is 3.5 percent versus 3.2 percent at companies with auto-enrollment. That might not sound like much of a difference, but it’s statistically significant, according to the study.
• Why the lower rate? Because companies are trying to hold down their overall 401(k) costs, the study suggests.
Ohio State Employees Lambaste Health Survey
As at Penn State earlier this year, a health risk assessment survey of workers at Ohio State University—and financial incentives tied to it—has drawn criticism from faculty and other employees, reports the Columbus Dispatch.
• "Successful programs should motivate workers to care about their health, not just their pocketbooks," a benefit expert advised. "Otherwise, these programs are going to be viewed as punitive." Especially in academia, it seems.
Vacation Leniency Pays Off
Writing in Forbes, Craig Malloy, CEO of tech firm Bloomfire, wonders why employees don't get more vacation for good performance, like annual pay increases or stock grants. And why Paid Time Off (PTO) programs end up encouraging people to come into work when they're ill.
"At Bloomfire, we decided to avoid the drama and the bureaucracy and offer a Free Time Off (FTO) policy, which means that we trust our employees to take the time off they need, as much as they need," writes Malloy.
• "What happens at our company is that employees take the time off that they need and they make sure the work gets done. And I think they respect and like the fact that I treat them like the responsible, mature adults they are."
'Probable' Pension Plan Limits for 2014
The IRS generally releases the official 401(k) and other retirement plan limits for the coming year during the third week of October, but expect a delay this year due to the federal government shutdown, reports 401khelpcenter.com, which has posted a chart providing estimated 401(k) plan limits for 2014.
The projections are based on the IRS formula to adjust limits in accordance with the consumer price index and are deemed "probable," but they are only projections and not official numbers.
• With that caveat, the analysts see 401(k) elective deferrals remaining at $17,500 with the catch-up contribution limit staying at $5,500; the annual contribution limit from all sources rising to $52,000 from $51,000; the annual compensation limit rising to $260,000 from $255,000; and the highly compensation employees limit remaining at $115,000.
Drug Spending Cap Begins Jan. 1
A provision in the Affordable Care Act that which takes effect Jan. 1 will limit spending on prescription drugs to about $6,000 for individuals and $12,000 for families, but only for those enrolled in grandfathered plans, reports USA Today.
• The coverage will be helpful for those taking expensive specialty drugs for a serious or chronic condition, as these drugs could total as much at $100,000 a year for some patients. In these cases, claims costs paid by insurers and self-funded plan sponsors would rise.
ACA Expected to Boost Adoption of High-Deductible Plans
The Affordable Care Act (ACA) will cause a major expansion of high-deductible health plans (HDHPs), according to a perspective published in the New England Journal of Medicine. Employers could facilitate contributions to health savings accounts (HSAs), especially for vulnerable people. The accumulation of funds over time could reduce barriers to care and protect vulnerable people from major medical expenses. State exchanges should attempt to offer HSA-eligible plans.
Moreover, employers are increasingly turning to HDHPs to avoid the excise tax on high-value health plans that takes effect in 2018, reports Plansponsor.com. As costs in health care rise, plan sponsors will feel squeezed as they work harder to avoid hitting that cost threshold for providing a plan.
• Plan sponsors will likely advise their plan participants to stow their savings on premiums in the HSA against future medical costs—but often this advice goes unheeded.
Who Gains from 401(k) Lawsuits?
Lawsuits by workers who are fed up with paying excessive 401(k) fees are beginning to pay off -- for some people, at least, reports Bankrate's Retirement Blog.
It's ironic that employees of large companies are suing their employers, because large companies tend to offer the cheapest plans, according to an analysis by Bankrate on the breakdown of 401(k) plan costs.
• Plaintiffs' law firms are targeting large plans because if there is an allegation of a fiduciary breach, the loss suffered by the plan as a consequence of the breach would be bigger, which would necessarily result in a bigger settlement—but not so much for plan participants once legal fees are paid and the balance gets evenly distributed.
(To learn more, see the SHRM Online article "International Paper Settles 401(k) Fee Lawsuit for $30 Million.")
Changes Coming for Small Business Health Care Tax Credit
For tax years 2010 through 2013, eligible small employers are entitled to a 35 percent tax credit for health insurance premiums they pay for employees. Tax-exempt entities are eligible for a 25 percent credit, explains a tax alert from McGladrey LLP.
In 2014, the credit will continue to be available, but with significant modifications. Employers will only be eligible for the credit if they purchase health insurance through the new Small Business Health Options Program (SHOP). The SHOP is one component of the online public health insurance exchanges that launched, fitfully, on Oct. 1.
• The credit is only available for two consecutive tax years after 2013, but it can be carried back or carried forward.
Costliest 1% Account for 21% of U.S. Health Spending
The costly cohort battling multiple chronic illnesses who consumed 21 percent of the nearly $1.3 trillion Americans spent on health care in 2010, at a cost of nearly $88,000 per person, reports Kaiser Health News.
Five percent of patients accounted for 50 percent of all health-care expenditures. By contrast, the bottom 50 percent of patients accounted for just 2.8 percent of spending that year, according to a recent report by the federal Agency for Healthcare Research and Quality.
• In addition to a patient's medical and mental health needs, efforts to more effectively manage the 1 percent involve focus on the social determinants of health including income, education and community support, low levels of which often trigger unnecessary readmissions.
Coverage for Breast-Feeding Services Lags Behind the Law
Despite the Affordable Care Act, many new mothers have found it nearly impossible to get timely help for their breast-feeding problems since Jan. 1, when health insurers began updating their coverage, reports the New York Times.
While a 2011 Surgeon General's report hailed lactation consultants as important specialists, few insurers have added them to their networks. Some insurers simply point women to pediatricians not necessarily trained in lactation.
• Just as the health care act doesn’t specify what kind of breast pump insurers have to furnish, it doesn’t say who qualifies as a “trained provider” of lactation counseling.
U.S. Justices to Hear Case on Whether Severance Is
Subject to FICA Tax
The Supreme Court has agreed to consider whether severance pay in an involuntary layoff can be subject to federal payroll FICA taxes in a case the Obama administration says could affect $1 billion in refund claims, reports Reuters.
The administration asked the justices to hear the case after losing a dispute with agricultural retailer Quality Stores Inc. The company wanted a tax refund for just over $1 million in payroll taxes it paid when laying off workers.
• Both a federal judge and an appeals court said the company was not required to pay the taxes because it was ceasing operations. Therefore the payments were categorized as supplemental unemployment benefits, which are not taxable.
(To learn more, see the SHRM Online article "Supreme Court to Consider Tax Treatment of Severance Payments.")
Health-Care Overhaul Pushes Small Firms
to Lock in Lower Rates
With major provisions of the federal health overhaul set to take effect Jan. 1, many U.S. insurers are prodding small-business customers to renew their current coverage early, to lock in lower rates, reports the Wall Street Journal.
With all of the changes coming up in 2014, we want to provide you with options that allow you to make the right decision for you and your employees," said a recent letter from one major insurer, Blue Shield of California, which has made the pitch to all of its small-business customers, who can keep their 2013 rates if they act to renew existing plans by Oct. 14.
• Such offers come at a time when many business owners fear their costs will rise sharply next year.
(To learn more, see the SHRM Online article "Early Renewals Under the ACA: Right For You?")
Health Exchanges Scramble as Opening Day Nears
Tuesday is the long-awaited kickoff of President Obama’s signature health care law, when millions of Americans can start signing up for new insurance options. Yet across the country, officials are issuing warnings that their new insurance exchanges — online markets where people can shop for health plans and see if they qualify for federal subsidies — will not be fully operational for weeks or even months, reports the New York Times.
• Many of the 16 directors of state-run exchanges are describing October as a “soft launch” period, when Americans can start exploring their coverage options — but on Web sites that may be incomplete, vulnerable to glitches and perhaps not ready for an onslaught of customers.
(To learn more, see the SHRM Online article "Exchanges Launch: For Employers, How Significant Is Oct. 1?")
HHS Delays SHOP Web Enrollment Launch
The U.S. Department of Health Human Services (HHS) is pushing the launch of the federal small-group public exchange Web enrollment system back to November, reports LifeHealthPro.
The delay in the Small Business Health Options Program (SHOP) online enrollment system start affects only the states in which HHS will be running federally facilitated exchanges (FFEs).
• States that are running their own state-based exchanges can still get their web-based SHOP enrollment systems going Oct. 1, the official launch date for the new public health insurance exchange system. The delay will have no direct effect on the FFE individual exchange program.
(To learn more about SHOP, see the SHRM Online article "Some States to Offer Employee Choice for Small Businesses.")
Some Employers Need to Start ACA Measurement Periods
The employer shared responsibility provisions, sometimes referred to as pay-or-play, of the Affordable Care Act (ACA) will take effect on Jan. 1, 2015, but in order to be ready to comply, some employers need to take action now, advises an alert from Perkins Coie LLP.
Now is the time to determine controlled group makeup and to make sure that 2014 records will capture all of the necessary information to identify full-time employees. The measurement period can be three to 12 months, with a subsequent stability period that generally cannot be shorter than six months or, if longer, the length of the measurement period. An administrative period can be scheduled at the end of the measurement period, to allow the employer to process the measurement period numbers and offer coverage to full-time employees.
• Many employers plan to use 12-month measurement and stability periods, to minimize recordkeeping requirements and to match the stability period for ongoing employees with the plan year. An employer that sponsors a calendar year plan will need its measurement period to be complete before its open enrollment period for the coming plan year.
Lawmaker Seeks Restrictions on Wellness Questionnaires
Rep. Louise M. Slaughter (D-N.Y.) is seeking additional federal regulation of health risk assessment questionnaires used in employer-provided wellness programs, reports the New York Times. Rep. Slaughter is the author of the Genetic Information Nondiscrimination Act (GINA) that prevents wellness programs from inquiring about family medical history.
Rep. Slaughter charged that the lack of federal guidelines on the design of such questionnaires could put employees at risk for discriminatory practices, and provided hypothetical examples of how this might occur.
• The Equal Employment Opportunity Commission held a special meeting in May on wellness programs, in which its legal expert concluded that the agency should issue guidance on applying federal antidiscrimination laws and compliance requirements to wellness programs. Rep. Slaughter said she was “deeply upset with the EEOC” for not yet having done so.
(To learn more on this topic, see the SHRM Online article "Guidance Sought on Wellness Efforts and Anti-Discrimination Laws.")
Swapping COBRA for Obamacare: A Possible Windfall
for Self-Insured Firms
Health-law provisions taking effect next year could save U.S. employers billions of dollars in expenses now paid for workers who continue medical coverage after they leave the company, reports Kaiser Health News.
Because COBRA coverage is expensive, only people who know they’ll use the insurance are likely to sign up. That means participants are typically sicker than average and use half again as much in benefits as they pay in premiums, causing losses for large corporations that pay their own medical claims.
• The average COBRA member cost his former employer 54 percent more — $3,800 —than the average active worker. At one company in five, COBRA participants cost more than twice as much as active workers.
(To learn more, see the SHRM Online article "Exchanges Offer Choices Beyond COBRA.")
Most Big Employers Will Meet Exchange Notice Deadline
Most large employers plan to send out exchange notices by October 1, in compliance with the Patient Protection and Affordable Care Act, according to findings from a poll conducted Sept. 13-18, 2013.
The ERISA Industry Committee (ERIC) polled its members and found 94 percent of respondents were planning to provide an exchange notice to employees by the October 1 deadline. Only 6 percent said they would not meet the deadline or were undecided, and most of those companies planned to provide the notice later in 2013.
• The poll also found that 92 percent of the companies planned to use the model notice created by the Department of Labor for exchange-reporting purposes. Thirty-six percent of companies were planning to make few changes to the notice, while 56 percent were planning to omit the “optional” information.
(To learn more, see the SHRM Online article " DOL Says No Fine for Not Providing Exchange Notices.")
Home Depot to End Health Coverage for
20,000 Part-Time Workers
Home Depot Inc. plans to end health care coverage for about 20,000 part-time employees and will direct them to government insurance exchanges, saying the Affordable Care Act precludes the company from offering the limited liability plans that part-time workers are receiving, reports nasdaq.com.
• The company will continue to offer part-time workers dental, vision, critical illness and disability coverage.
When Parents Should Kick Adult Children Off
Their Health Plan
Many families are crunching the numbers on various scenarios, now that the Affordable Care Act (ACA) presents young adults in particular with more health-insurance options than they had before, reports MarketWatch.com.
Generally, for a two-parent family with at least one child under 26, keeping the young adult on the family plan is the best option in terms of both price and quality—-sometimes even if the child can get coverage through a job, insurance experts say.
• But some young adults might get a better deal buying health insurance through the exchanges that open Oct. 1, especially if they qualify for a government subsidy. If employers charge extra for each dependent, as 15 percent say they will do next year, that could tip the scale in favor of an exchange plan.
Employers Cutting Coverage for Spouses
As health costs keep rising, more firms are deciding not to provide coverage to employee spouses who work for other companies with their own job-based insurance, reports NPR.org. Others are imposing a surcharge for spouses who could get coverage at their own jobs.
• It costs more to insure the typical spouse than the typical employee, one analyst says. Employers are trying to make sure they're running their health benefits programs as leanly as possible.
Walgreen Shifting Employees to
Private Health Care Exchange
Walgreen Co., the nation's largest drugstore chain, announced it will send workers to a private health insurance exchange run by benefits consultant Aon Hewitt, where they will pick from as many as 25 plans instead of having the company give them two to four options, reports the Associated Press. Walgreens's shift affects about 160,000 workers.
Defined contribution health insurance involves giving employees a set amount of money and then letting them pick their own coverage through a private marketplace or exchange that helps them sort out the choices. The switch can make the employer's health care costs more predictable. Several private exchanges for employee coverage have launched over the past year.
• The employer's contribution to coverage purchased on these exchanges may cover a greater or smaller portion of the insurance bill than the worker is accustomed, depending on the plan selected.
(To learn more on this topic, see the SHRM Online article "Time for Defined Contribution Health Benefits?")
Health Information Security Regs Take Effect Sept. 23
Health care technology has put more employers in contact with their employees’ private health information, and an update to federal privacy and security regulations concerning those records goes into effect on Sept. 23. As a result, many firms will soon be treated with the same stringency as a hospital when it comes to maintaining health data security, reports the Washington Post.
changing regulations, which apply to the Health Insurance Portability and Accountability Act, or HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or HITECH. Costly violations can stem from mistakes that are seemingly easy to make.
• The security rules also apply to companies that self-insure all or a portion of their employee health insurance coverage and collect protected health information from their employees.
(To learn more on this topic, see the SHRM Online article "A To-Do List for Open Enrollment HIPAA Action Items." Also see HHS-Provided Model Notice of HIPAA Privacy Practices.)
Under 50 Employees? Consider the SHOP Exchange
With the Oct. 1 launch of the Small Business Health Options Program (SHOP), which is part of the new government-run exchanges, small employers with less than 50 full-time equivalent employees can purchase insurance for their workers, reports Forbes.
Most states will have only one insurance option available through the SHOP exchange. The goal is to have multiple insurance options available starting in 2015. Given this lack of choice in 2014, it may make purchasing insurance through SHOP much less desirable this year. However, employers who do not currently provide insurance should still consider the option.
• Those small businesses that currently provide health insurance should compare what they are currently providing with coverage available on their state's SHOP exchange.
(For more on this topic, see the SHRM Online article "Some States to Offer 'Employee Choice' for Small Businesses")
Public Sector Workers' Pay and Benefits
Outpace Private Sector
On average, government jobs pay more than their private sector counterparts, reports Cleveland.com, citing employee compensation data released recently by the U.S. Department of Labor.
Employees in private industry received an average of $29.11 per hour in total compensation in June. That included $20.47 in salary and $8.64 in benefits. State and local government workers averaged $42.09 per hour in compensation. That included $27.16 in salary and $14.93 in benefits.
• The data also reveal that hourly compensation in private industry was highest in the Northeast, followed by the West and the Midwest. Compensation was lowest in the South.
U.S. Consumer Bureau Warns Employers on
Payroll Debit Cards
The federal government's consumer watchdog warned that employers cannot require workers to be paid using prepaid payroll cards, which are used as an alternative to traditional paychecks or directly depositing wages, reports Reuters.
• Employers and banks must disclose fees associated with the cards, allow employees to check their account balances and help fix any errors, the Consumer Financial Protection Bureau said.
(To learn more on this topic, see the SHRM Online article "Keeping Pay Cards Viable in the Face of Legal Challenges.")
How Open-Plan Cubicles Kill Productivity
Despite their popularity with cost-conscious employers, workers who toil in open-plan cubicles have greatly reduced productivity compared with workers who have offices with doors, reports the Wall Street Journal, citing new research.
Employees in cubicles are interrupted 29 percent more often than those in private offices, and error rates skyrocket after interruptions. "Two seconds is long enough to make people lose the thread," said Erik Altmann, a psychology professor at Michigan State University and the study's lead author. It takes more than 25 minutes, on average, to resume a task with full concentration after being interrupted.
• There's a range of compensating behaviors by employees. Some try to remain focused by wearing headphones. Others invent "do-not-disturb" signals like wearing hats or armbands, or stretching yellow barricade tape around their cubicles.
Trader Joe's To Drop Health Coverage for Part-Time Workers Under Obamacare
After extending health care coverage to many of its part-time employees for years, Trader Joe's has told workers who log fewer than 30 hours a week that they will need to find insurance on the Obamacare exchanges next year, reports the Huffington Post.
In the memo to staff dated Aug. 30, Trader Joe's CEO Dan Bane said the company will cut part-timers a check for $500 in January and help guide them toward finding a new plan under the Affordable Care Act. The company will continue to offer health coverage to workers who carry 30 hours or more on average.
• With low-wage workers eligible for tax subsidies to buy health insurance next year, the company apparently calculated that offering medical coverage to part-timers who work 18 hours or more is no longer worth the cost.
Millions May Opt for Obamacare
Over Employer Coverage
As many as 37 million Americans who receive health coverage through employers may be better off with the government-subsidized insurance plans that will be offered next year, according to a study done by researchers at Stanford School of Medicine and published in the journal Health Affairs, reports Reuters.
The analysis suggests employees may choose to dump the coverage they receive at work, and that up to 30 percent of employers would consider terminating health coverage for their workers within the first few years of "Obamacare."
• Roughly "37 million people would be financially better off switching to the exchange" from employer-sponsored insurance, said Dr. Jay Bhattacharya of Stanford School of Medicine, who led the study.
IBM, GE and Time Waraner Shift Retiree Health Benefits to Private Exchanges
America’s biggest employers, from GE to IBM, are increasingly moving retirees to insurance exchanges where they select their own health plans, an historic shift that could push more costs onto U.S. taxpayers, reports Bloomberg.
• The shift is an indication that private health exchanges will play a bigger role as companies move coverage down the path taken by many pensions, paying employees and retirees a fixed sum to manage their own care.
(To learn more, see the SHRM Online articles "Employers Drop Coverage, Retirees Turn to Private Exchanges," and "Time for Defined Contribution Health Benefits?")
IRS Proposed Rules to Reduce PPACA Reporting Burden
The IRS issued proposed rules aimed at easing the requirements for companies and insurers when they report employees' health coverage information to comply with the Patient Protection and Affordable Care Act (PPACA), reports Reuters.
The proposed regulations are a key element of the employer mandate portion of the law. Implementation of the rules had been delayed while the government attempted to simplify them to address concerns of employers.
• "We will continue to consider ways, consistent with the law, to simply the new information reporting process," said Mark Mazur, assistant treasury secretary for tax policy.
An analysis of the new rules is provided by Prof. Timothy Jost, writing at the Health Affairs Blog.
401(k) Plans Add More Personalized Advice
Few retirement savers take advantage of the professional advice offered in their 401(k) plans. Advice providers are trying to change that, reports the Wall Street Journal.
While it can be tough persuading workers to pay closer attention to their workplace savings plans, research has shown that retirement savers who embrace professional help typically end up saving more.
• The Plan Sponsor Council of America found that fewer than one in five workers with access to investment advice via a workplace savings plan is taking advantage of it. "The underlying reason for those who didn't take it was without a doubt that they didn't want to pay the cost," said Jack VanDerhei, research director of the Employee Benefit Research Institute.
Employer Help on Funding 529 Plans?
As college costs and student debt soar, offering to help parents contribute to a 529 plan can help a company attract and retain competitive talent, reports the Wall Street Journal. Still, this perk isn't likely to be common.
Some financial advisers are trying to persuade companies to offer 529 payroll deductions and matching contributions to employees, but most employers have been resistant to the idea, citing the difficulties in harmonizing tax and other issues. Many states, for example, offer tax benefits for residents who use the home-state 529 plan, which complicates matters for companies with workers in multiple states.
• A matching contribution for 529 plans may sound similar to an employer match to 401(k) contributions, but the tax implications are very different. For matches in a 401(k) plan, the employer contribution isn't taxed as current income for the employee. However, for 529 plans, a match counts as income and is taxed on federal and sometimes state returns.
(To learn more, see the SHRM Online article "More Employees Saving for Kids’ College.")
Workplace Stretching Programs Expand
Many companies have started stretching programs in recent years to reduce the number of workplace injuries. But the trend comes at a time when the merits of stretching to prevent sports injuries is under debate, reports the Minneapolis Star-Tribune.
As part of the Mall of America's "Stretch It Out" program, each department takes a turn leading the morning stretch and choosing the music. Mall executives have been known to conduct “sweeps” of the office around stretch time to make sure everyone is participating.
• Some critics question whether workplace stretching programs are cost-effective, noting the time employees spend each day stretching instead of working.
More Employers Provide Workers with Dollar Contributions to Purchase Health Policies Online
This fall, tens of thousands of U.S. workers will learn that they're getting their health benefits next year in a radical new way: Their employers will give them a fixed sum of money and let them choose their plan from an online private exchange, reports the Wall Street Journal. The private exchanges for employers are separate from the government-operated marketplaces that are being created in each state under the federal health law.
The approach has the most momentum among small and midsize employers. But interest is growing among companies of all sizes, research shows.
• Employers hope the exchanges will trim costs and make their health spending more predictable. But some experts say workers could be squeezed by the fixed-sum approach if the dollars allotted each year don't keep up with the rising cost of coverage. In general, health insurance marketplace operators said, they have seen employers provide annual increases that were approximately in sync with premiums.
(To learn more, see the SHRM Online article "Time for Defined Contribution Health Benefits?")
Obamacare vs. Romneycare: The Labor Impact
From a tax perspective, the Affordable Care Act is in a different league than the Massachusetts health reform law passed in 2006, according to the New York Times Economix Blog.
The Massachusetts health reform law increased the tax rates on labor by under one half of one percent, whereas the federal Affordable Care Act adds nearly 5 percentage points to marginal tax rates on labor.
• Economist Casey Mulligan writes that adding, on average, five percentage points to marginal tax rates will noticeably depress the labor market, while adding a few tenths of a point in Massachusetts did not.
Fiduciary Responsibility Weighed in 401(k):
Money Market vs. Stable Value Funds
While most Fortune 500 401(k) plans use stable value over money market funds for their cash-equivalent option, 10 percent or so use money market funds. This has turned up in recent litigation, such as the Southern California Edison case, in which participants charged the plan improperly offered a lower-return money market fund instead of a stable value fund paying a higher return, reports MarketWatch.com.
• Many 401(k) providers don't offer stable value to plans under a certain size since it is in collective trust form, which is more expensive for them to administer than mutual funds.
What Does an 'Equivalent Position' under FMLA Mean?
Under the Family and Medical Leave Act (FMLA), a worker returning from FMLA leave must be offered a position "virtually identical" to the former position, and it must maintain the same privileges, perks and status. The Sixth Circuit refused to dismiss an employee's claim, finding that the new position: 1) did not offer the same career advancement; 2) did not require a similar level of education and training; 3) increased her clerical duties; and 4) did not allow her to utilize her legal skills, reports FMLA Insights.
• As a result, in August the Sixth Circuit ruled in Crawford v. JPMorgan Chase and Company that a jury could decide that the new position was not equivalent under the FMLA.