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Healthcare Reform Updates:

October 8, 2015

September 22, 2015

Technical Bulletins: Life After Browning-Ferris: What Employers Need to Know Under the New Joint Employer Regime

September 3, 2015

A Deeper Dive into the DOL’s Proposed Overtime Rule Changes

July 10, 2015

Recorded Webinars: Internal Claims and External Appeals under PPACA

September 21, 2015

Annual Enrollment in the Era of Healthcare Reform

August 20, 2015

Coming Soon!

Recorded Webinar:

Transitional Reinsurance Fee – Oct. 15

ADDITIONAL RESOURCES

Healthcare Reform Update Archive

Recorded Webinar Archive

Directions Newsletter Archive

Technical Bulletin Archive

GBS Healthcare Reform Resources Website

October 2015 Healthcare Reform CMS Publishes Limited Relief for Health Insurance Issuers Having Problems Posting Policies CCH, Incorporated

Opt-out Bonuses under PPACA Arthur J. Gallagher & Co

Health & Welfare Benefits Moderate Health Care Growth Continues, but Average Family Premium Surpasses $17,000 Spencer’s Benefits

Just Over Half of Employers Implemented FSA Rollover Rule Spencer’s Benefits

Health FSAs during FMLA Arthur J. Gallagher & Co.

Watch Those Actively-at-Work Provisions Arthur J. Gallagher & Co.

Human Resources View Role of HR Becoming More Strategic, New Report Shows Society for Human Resource Management (SHRM)

SHRM Slams DOL’s Proposed Overtime Rule Benefits Pro

Employer Branding Versus Employee Rights: Knowing Where to Draw the Line CCH, Incorporated

Retirement PBGC Final Regs Exempt Most Plans and Sponsors from Many Reportable Events Rules Spencer’s Benefits State Law Review

What’s New in State Laws CCH, Incorporated

Important Reminder! Upcoming Deadlines Arthur J. Gallagher & Co.

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Healthcare Reform CMS Publishes Limited Relief for Health Insurance Issuers Having Problems Posting Policies CCH, Incorporated For issuers encountering difficulties posting individual coverage policies and group certificates of coverage to websites, as is generally required for this fall, the Centers for Medicare & Medicaid Services (CMS) has stated that it will not take enforcement action as long as the necessary documents are posted by November 1, 2015. The CMS cautions, however, that the relief is only for the requirement to post the individual coverage policy or group certificate of coverage, so a summary of benefits and coverage (SBC) must still be provided in accordance with the timeframes set forth in final rules published on June 16, 2015 (see 80 FR 34292).

Also, by November 1, 2015 issuers must provide on the SBC the web address where the documents will be available, and they must include language on the web page indicating the documents will be accessible on November 1, 2015.

Under Patient Protection and Affordable Care Act (ACA) ((P.L. 111-148) Sec. 1001(5) and PHS Act section 2715(b)(3)(i), health insurance issuers must include an Internet web address where an actual individual coverage policy or group certificate of coverage can be reviewed and obtained on the SBC.

In accordance with the newly-issued relief, if a group health insurance issuer is required, in accordance with June 12, 2015 SBC final rules (see 80 FR 34298), to provide an internet web address on the SBC before October 31, 2015, HHS will not take enforcement action against that issuer if it provides an internet web address for group certificate of coverage documents no later than November 1, 2015.

Some issuers are overwhelmed by posting requirements. The HHS realizes that, since this is the first year this process has been necessary, some issuers have had trouble making the necessary documents accessible online by the due dates, especially since some issuers have several hundred documents that must be posted in compliance with this requirement for both individual coverage and group coverage.

The original due dates are as follows:

(1) For disclosures with respect to participants and beneficiaries who enroll or re-enroll in a group health plan through an open enrollment period (including reenrollees and late enrollees), beginning on the first day of the first open enrollment period that begins on or after September 1, 2015;

(2) For disclosures with respect to participants and beneficiaries who enroll in group health plan coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), beginning on the first day of the first plan year that begins on or after September 1, 2015;

(3) For disclosures with respect to plans, beginning September 1, 2015; and

(4) For disclosures with respect individuals and covered dependents in the individual market, beginning with respect to SBCs issued for coverage that begins on or after January 1, 2016.

The CMS adds that the newly-published relief is only applicable with respect to the requirement to make

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individual coverage policy and group certificate of coverage documents accessible online, and does not apply to any other requirements of the June 16, 2015 final rules.

The CMS also states that, for coverage that is no longer being offered for purchase (closed blocks of business), it will not take enforcement action against an issuer of a closed block of business that does not satisfy the safe harbor criteria that limits access to the individual coverage policy or group certificate of coverage documents to plan sponsors that have already purchased and individuals who are currently enrolled in the coverage. This is based on its recognition of concerns that consumers shopping for coverage might access the individual coverage policy or group certificate of coverage documents for a closed block of business in which they are not eligible to enroll, leading to confusion and delay.

SOURCE: CMS Q&A on SBC Online Posting of Policy and Certificate of Coverage Documents, September 8, 2015.

HealthInsuranceNews HHSNews

Medical Opt-out Bonuses under PPACA Arthur J. Gallagher & Co. Some employers may include an opt-out bonus in their cafeteria plans. An opt-out bonus gives the employee a choice between coverage under the plan or a taxable cash payment. Historically, opt-out bonuses were offered to employees who waived all coverage under the medical plan. In addition, some employers would only pay the bonus to employees who had coverage from another source, such as through the employer medical plan of a spouse.

Background

Opt-out provisions were originally developed to discourage double coverage that could occur when both spouses worked and had access to their respective employer’s medical plans. If both working spouses enrolled in family coverage under their employer’s plans, the result would often be little or no cost sharing since the two plans combined would often pay 100% of eligible expenses. Employers and insurers were concerned that 100% coverage could encourage increased utilization which could lead to higher costs. An opt-out bonus was intended to discourage double coverage and was more prevalent when some employers provided coverage on a non-contributory basis (i.e., employee does not pay any premium for coverage). As medical costs increased, fewer employers provided non-contributory coverage and monthly required contributions from employees would occasionally reduce the potential for double coverage. As a result, fewer employers have continued to offer opt-out bonuses.

Prior to 2014, individuals with health conditions might have found it difficult or impossible to purchase individual health coverage. The availability of Qualified Health Plans (“QHPs”) in Marketplaces created by the Patient Protection and Affordable Care Act (“PPACA”) now makes it possible for employees (and family members) to purchase individual medical insurance regardless of health status. As a result, young healthy employees who do not have access to coverage, such as under a spouse’s employer’s plan, might still be able to purchase inexpensive coverage in a Marketplace.

If an employer provides an opt-out bonus of $200 per month, a healthy 20-something employee might be able to purchase a QHP for $100 per month and have $100 extra cash. Even though the $200 per month is taxable, an employee in a lower tax bracket might have a lower cost by purchasing QHP coverage. However, if the plan is

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self-insured and the employee is healthy and would have incurred $0 in claims under the plan, then the employer’s cost would be higher since the actual claims cost to the employer would have been less than $200 per month opt-out bonus. In addition, under certain circumstances the employer that pays the opt-out bonus might still be faced with a $3,000 (as indexed) penalty under PPACA’s Employer Shared Responsibility (“ESR”) Mandate. (Our September 2014 Directions article discusses these issues in more detail, click here to access.)

PPACA’s FAQ XXII

In November 2014, the Departments of Labor, Health and Human Services, and the Treasury (“Departments”) issued FAQ XXII (click here to access) which substantially affects not only the desirability, but may affect the feasibility of offering a medical opt-out bonus. FAQ XXII (Q2) addresses a situation involving a hypothetical employer offering a large cash payment to an individual with a high claims risk in order to encourage the individual to enroll in a QHP through the Marketplace rather than the employer’s plan. The hypothetical employer offers the high-claims-risk employee a $10,000 cash payment (taxable) if the employee waives coverage under the employer’s medical plan. The hypothetical employer’s intent in this example is to reduce the employer’s cost by shifting the employee’s potentially large claims to the Marketplace. The FAQ begins by addressing the question of whether or not this offer constitutes permitted “benign” discrimination. The Departments stated that while providing coverage to individuals with health conditions on a more favorable basis such as reduced contributions may be permissible as “benign” discrimination, the offer of a cash-or-coverage arrangement only to employees with a high claims risk is not permissible benign discrimination.

The FAQ goes on to state that the offer of a large cash payment effectively increases the contribution the employer’s plan requires the employee to pay for coverage because “…unlike other similarly situated individuals, the high-claims-risk employee must accept the cost of forgoing the cash in order to elect plan coverage.” The FAQ includes the following example: (1) the employer’s group health plan requires all eligible employees to contribute $2,500 toward the cost of coverage, and (2) the employer offers $10,000 in additional cash compensation only to high-claim-risk employees who waive coverage under the employer’s medical plan. In the Departments’ view, the high-claim-risk employee’s required contribution for coverage is $12,500 – the $2,500 required contribution plus the $10,000 the employee must give up in order to enroll in coverage – not the $2,500 other employees must contribute. As a result, the high-risk-claims employee’s $12,500 required contribution violates PPACA’s prohibition against discriminating on the basis of a health condition.1

Cafeteria Plan Opt-out Provisions

The FAQ does not refer to cafeteria plan opt-out bonuses which are offered to all eligible employees – not just high-claim-risk employees – and are virtually always far less than the $10,000 amount used in the example in the FAQ. Since a cafeteria plan opt-out bonus is offered to all eligible employees, the issue of impermissible discrimination based on a health condition does not arise.

However, the underlying rationale for determining an employee’s required contribution for coverage appears to be the same and could result in a medical plan not satisfying PPACA’s affordability requirement. A medical plan that is not affordable could trigger PPACA’s $3,000 (as indexed) penalty under the ESR Mandate. For example: An employer offers a PPO medical plan that provides minimum value and charges $50 per month for self-only coverage. The employer also offers an opt-out bonus of $200 per month to any employee who waives coverage. Using the approach in the FAQ, the employee contribution for self-only coverage is deemed to be $250 per month rather than $50 per month. At $50 per month, the coverage would be affordable to all eligible 1 The Health Insurance Portability and Accountability Act (“HIPAA”) which predates PPACA by 14 years already prohibits discriminating against individuals with health

conditions.

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employees since the contribution is less than 9.5% of the Federal Poverty Level (“FPL”) for a single person (9.5% of the 2015 FPL for one person of $11,770 would be $93.17). At $250 per month, the coverage would be affordable for the purpose of the ESR Mandate only for employees with incomes from the employer that are greater than $31,579 (9.5% of $31,579 = $250 per month). Using a more modest opt-out bonus amount such as $100 per month might reduce (but would not eliminate) the potential for an employer’s plan to fail to be affordable. A $100 per month opt-out bonus combined with a $50 per month required contribution would make the employer’s plan unaffordability for employees with incomes below $18,947 (9.5% of $18,947 ÷ 12 = $150 per month). More modest opt-out amounts might reduce the potential for unaffordable coverage and an ESR Mandate penalty, but may also be too low to encourage employees to waive coverage.

In addition to considering potential plan cost issues, employers that have or are thinking about offering an opt-out bonus under a cafeteria plan will want to review the Departments’ FAQ XXII guidance to determine if an opt-out bonus is desirable. For many employers, the impact on affordability and the potential for an ESR Mandate penalty will outweigh the potential benefits of an opt-out provision. For others, it may still be desirable even after considering plan cost and affordability issues. Those employers who determine that an opt-out bonus may still be desirable will want to determine how much to offer and under what conditions (e.g., will other coverage be required).

Health & Welfare Benefits Moderate Health Care Growth Continues, but Average Family Premium Surpasses $17,000 Spencer’s Benefits Premiums for single and family coverage rose an average of 4 percent in 2015, continuing the decade-long trend of moderate growth, according to the Kaiser Family Foundation and the Health Research & Educational Trust (HRET). The 2015 Employer Health Benefits Survey found that since 2005, premiums have grown an average of 5 percent each year. The average annual premium for single coverage is $6,251, of which workers pay $1,071. The average family premium is $17,545, with workers contributing $4,955.

In 2015, 57 percent of employers offer health benefits to at least some of their workers, statistically unchanged from 55 percent last year, the survey found. Offer rates vary by firm size, with 98 percent of large firms (200 or more workers) offering coverage, compared to 47 percent of the smallest firms (three to nine workers).

Deductibles on the rise. Since 2010, both the share of workers with deductibles and the size of those deductibles have increased sharply, Kaiser/HRET found. These two trends together result in a 67 percent increase in deductibles since 2010, much faster than the rise in single premiums (24 percent) and about seven times the rise in workers’ wages (10 percent) and general inflation (9 percent).

According to the survey, 81 percent of covered workers are in plans with a general annual deductible, which average $1,318 for single coverage in 2015. Covered workers in smaller firms (three to 199 workers) face an average deductible of $1,836 this year, while those in large firms (200 or more workers) face an average deductible of $1,105.

“With deductibles rising so much faster than premiums and wages, it’s no surprise that consumers have not felt the slowdown in health spending,” Foundation President and CEO Drew Altman said.

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Cadillac tax. A majority (53 percent) of large employers offering health benefits said that they conducted an analysis to determine if any of their plans would exceed the Patient Protection and Affordable Care Act’s Cadillac tax thresholds, and 19 percent of this group said their plan with the largest enrollment will exceed the threshold amount. In addition, 13 percent of large firms offering health benefits said they have made changes to their plans to avoid reaching the excise tax thresholds, and 8 percent say they switched to a lower-cost health plan.

“Our survey finds most large employers are already planning for the Cadillac tax, with some already taking steps to minimize its impact in 2018,” said study lead author Gary Claxton, a Foundation vice president and director of the Health Care Marketplace Project. “Those changes likely will shift costs to workers, but exactly how and how much will vary for individual workers.”

Financial incentives. Many large employers offering health benefits offer health screening programs including health risk assessments (50 percent), which are questionnaires asking employees about lifestyle, stress or physical health; and biometric screenings (50 percent), which are in-person health examinations conducted by a medical professional.

Kaiser/HRET found that 31 percent of large employers offering health benefits have a financial incentive for employees to complete health-risk assessments, and 28 percent have an incentive for employees to complete biometric screening.

The majority of large employers continue to offer wellness programs, such as smoking cessation, weight loss or other lifestyle coaching. Thirty-eight percent of those offering one of these wellness programs provide a financial incentive for employees to participate or complete the program. Among these firms, 15 percent offer a maximum incentive greater than $1,000 for all of a firm’s health and wellness programs, including any incentives for health screening.

SOURCE: http://kff.org/health-costs/report/2015-employer-health-benefits-survey/

Healthinsurancenews Healthreformnews Wellnessnews Surveynews

Just Over Half of Employers Implemented FSA Rollover Rule Spencer’s Benefits When flexible spending account (FSA) plan changes became effective for plan year 2014, just over half of employers (51 percent) adopted the rollover option, versus 49 percent that elected to offer a 2 1/2-month grace period for using FSA funds, according to the 2014 Flexible Spending Account Trends Study from the Healthcare Trends Institute.

In 2013, the IRS gave employers the option to amend their cafeteria plans to provide for the carryover of up to $500 in unused health FSA contributions to the immediately following, and, if the employer wishes, entire, plan year. The funds remaining unused, for the purpose of the IRS guidance, is the amount left after medical expenses have been reimbursed at the end of the plan’s run-out period. Employees may still elect up to the maximum allowed salary reduction ($2,550 in 2015) for that immediately following year. Previous to the 2013 guidance, employers were only allowed to offer a grace period, which gave employees an additional two-and-a-half months to incur new expenses using prior year FSA funds. Plans can offer either a carryover amount or a grace period, but not both.

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According to the survey, 68 percent of employers that implemented the FSA rollover rule said they did so to encourage participation by those employees that were reluctant due to the fear of losing money they put into the account. More than one-quarter of employers (27.6 percent) indicated they adopted the rollover rule because employees’ year-end balances tend to be lower than $500, so it made sense to give them the ability to roll over into next year. Slightly more than 4 percent of employers said employees requested the rollover option.

Among those employers that did not implement the FSA rollover rule, 37 percent did not want to change their system or processes to manage the change, and 20.4 percent did not want to increase employee communication efforts to explain the new benefit and are happy with the grace period option. However, of those that did not offer the rollover option in 2014, 40.5 percent stated they will consider the option in the future.

While most companies (66 percent) reported they did not experience any challenges as a result of adopting the rollover option, nearly 20 percent reported administrative roadblocks, followed by 17 percent that had system compatibility issues. Others grappled with employee education and communication concerns.

SOURCE: http://www.evolution1.com/flexible-spending-account-trends-survey-report-2014.html

FSAnews Surveynews

Health FSAs during FMLA Arthur J. Gallagher & Co. The Family Medical and Leave Act (“FMLA”) rules impact all employer-provided health plans – including health Flexible Spending Accounts (“FSAs”) sponsored by employers with 50 or more employees.2 In general, FMLA requires employers to continue health coverage for employees during an FMLA leave. Employers must continue to offer the same health coverage that the employee had at the start of the leave at the same active employee contribution rate (i.e., on the same terms and conditions as active employees not on FMLA leave). Any changes in the health plan during the leave – such as a change in benefits at the beginning of a new plan year – will apply to employees on FMLA just as it applies to employees not on FMLA leave. Employees must be permitted to terminate coverage at the beginning of an FMLA leave, and those who terminate coverage at the beginning of the leave must be permitted to reinstate the same coverage at the end of the leave. This article will focus on the treatment of health FSAs during FMLA leaves.

Although the Department of Labor (“DOL”) writes most of the rules that govern FMLA, the Internal Revenue Service (“IRS”) writes the rules that apply to an employer’s cafeteria plan and thus to health benefits provided through a cafeteria plan. Since the overwhelming majority of health FSAs involve employee salary reduction elections, both the DOL rules and IRS rules apply. The DOL’s FMLA regulations are intended to be a basic level of protection. Employers must follow the FMLA rules at a minimum, but are free to be more generous. However, if the employer uses a more generous set of rules for another type of leave – such as a personal leave – then the employer must use the more generous rules for FMLA leaves as well. In contrast, the IRS rules such as the election change rules are often a maximum.

There are three key areas where both the DOL and IRS rules apply: (1) contribution payment options, (2) the uniform coverage rule, and (3) election change rules.

2 Many states have similar laws; this article covers only the federal requirements. Employers should discuss any applicable state laws with their legal advisors.

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Contribution Payment Options

Permissible payment options for employee health FSA contributions during FMLA leave are the same as for other types of health coverage: pay-as-you-go, pre-payment, and/or catch-up. An employer must allow employees to use the pay-as-you-go option and may offer either (or both) of the other two options. When the employer offers both the pre-payment and catch-up options, the employee has the ability to make any contributions to continue coverage during the FMLA leave either before the leave begins (pre-pay) or after the employee returns from leave (catch-up). In both cases, the employee is able to make the contributions on a pre-tax basis via salary reduction. The same is not true of the pay-as-you-go option unless the employee is receiving compensation from the employer such as pay for vacation days or sick days; otherwise, the employee must pay contributions with after-tax dollars.

When an FMLA leave straddles two plan years – for example an employee enrolled in a calendar year plan is on FMLA leave in December and January – the pay-as-you-go and catch-up options are not affected. However, pre-payment would only be available for the month of December. The plan must then use either pay-as-you-go or catch-up for January.

Uniform Coverage Rule

When an employee enrolls in a health FSA, the employee elects a dollar amount such as $1,200 for the period of coverage. Benefits are payable based on the date a service is provided, but are also subject to a maximum dollar reimbursement which must be available at all times during the period of coverage. For example, if the employee elects $1,200 for the plan year, the entire $1,200 must be available starting on the first day of the plan year. But what happens if the employee chooses to terminate health FSA coverage at the beginning of an FMLA leave? If an employee who elected $1,200 terminates participation when the leave begins and does not reinstate coverage upon return from leave, then the plan will reimburse expenses incurred prior to the date the employee terminated participation up to the $1,200 maximum. The salary reduction amount will be equal to the amount that has been paid before the leave began.

The situation becomes more complicated if the employee terminates participation at the beginning of an FMLA leave and chooses to reinstate coverage upon return from FMLA later in the plan year. The plan will pay expenses while the employee was participating, but will not pay expenses incurred during the leave when the employee was not participating. So how does the plan administer the uniform coverage rule? What is the maximum dollar amount available? Under IRS rules, the employee must be given a choice of the full election amount or a pro-rated amount based on the period of participation.

For example, let’s assume that an employee made a $1,200 election under a calendar year health FSA plan, has a two-month FMLA leave during September and October, the employee does not continue participation during the leave, and the employee reinstates participation when he/she returns from leave. This employee must be given choices to:

• Reduce the election amount on a pro-rata basis. Since the employee participates for 10 months (January through August and November through December), the reduced election amount would be $1,000 (($1,200 ÷ 12) x 10). Because of the uniform coverage rule, the entire $1,200 must be available to the employee for the first eight months (i.e., January through August). However, once the employee returns from FMLA leave, the total amount available would be $1,000 minus any amounts paid for the first eight months of the year. If the FSA is funded via salary reduction, the employee’s contribution on a monthly basis would be $1,000 for the year ($100 for each of the 10 months the employee participated). Under this option, the employee would contribute the same each month – both before and after FMLA leave – but the total amount contributed would be reduced. OR

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• Retain the original election amount and increase contributions accordingly. The entire $1,200 must be available during the 10 months the employee is participating. For example, if the employee terminates health FSA participation when the leave begins (at the beginning of September in this example) and reinstates coverage after the FMLA leave ends (at the beginning of November in this example), to determine the adjusted amount of contributions, the total contributions for the first eight months is determined ($100 x 8 = $800). Then, that amount is subtracted from the original election amount ($1,200 - $800 = $400). That result is divided by the months remaining in the year to establish a new monthly contribution for the remaining months ($400/2 = $200). The employee’s contributions would be $800 for January through August ($100/month x 8 months), $0 for September and October, and $400 for November and December ($200/month x 2 months) so that the total salary reduction amount would be $1,200.

Regardless of which option the employee selects, expenses incurred during the leave would not be reimbursable.

Election Changes

The, IRS rules permit termination and reinstatement of health coverage including health FSA coverage for FMLA leaves. IRS rules for other election changes are more complicated. And unlike the DOL rules for FMLA leaves, the IRS election change rules represent a maximum rather than a minimum– an employer may not use a more liberal set of rules. An employer may do less –i.e., the employer may permit fewer election changes than the IRS rules allow (as long as the employer complies with other applicable laws).

The IRS list of change in status events that may permit a new cafeteria plan election include commencement and termination of an unpaid leave (FMLA or other type of leave) as a change in status that may permit a new election. IRS rules also permit a new election during any period of FMLA leave – paid or unpaid – but only if there is another event that permits a change under IRS rules. For example, if an employee gets married or divorced during an FMLA leave, the rules for changes in the event of marriage or divorce would also apply during an FMLA leave.

In all cases, the consistency rule applies, and the cafeteria plan must also permit the change.

Action Steps

Employers should be careful to review all applicable rules for handling FSA contributions before, during, and after an FMLA leave. Options for paying for coverage during leave must be provided in writing when FMLA leave commences. Employers should also carefully communicate the impact of discontinuing FSA contributions during FMLA leave to avoid employee confusion over permissible reimbursements if an employee choses to discontinue FSA benefits during FMLA leave.

Watch Those Actively-at-Work Provisions Arthur J. Gallagher & Co. Before the Health Insurance Portability and Accountability Act (“HIPAA”) was passed in 1996, the overwhelming majority of insurance contracts and benefits plans included an “actively-at-work” provision. A typical eligibility provision would require an employee to be a member of a specific employment class such as a full-time employee, complete a service requirement or waiting period such as 1 month, and be actively-at-work on the effective date for coverage to begin. An actively-at-work provision might state that that the employee must be actively-at-work on a full-time basis at his/her regular place of employment in order for coverage (or

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change in coverage) to become effective. Some provisions looked to the last regularly scheduled workday if the effective date fell on a weekend or holiday such as New Year’s Day. If the employee was not actively-at-work on a full-time basis at his/her regular place of employment on that date, coverage would be delayed until the employee satisfied that condition. Health plans generally also included a not confined/hospitalized or not disabled provision for dependent coverage. Similar to the actively-at-work provision, coverage for a dependent that was confined or disabled would be delayed.

HIPAA Portability Rules

The portability provisions of HIPAA generally prohibit the use of actively-at-work (and dependent not confined/disabled) provisions for all health coverage subject to HIPAA’s portability requirements if the employee is absent from work because of a health condition on the day coverage was scheduled to begin. Plans are permitted to use an actively-at-work provision, but only if individuals with health conditions are deemed to be actively-at-work. (Since the original underwriting purpose of provisions such as actively-at-work was to delay coverage for individuals with health conditions, which is precisely what PPACA prohibits, most plans have eliminated this provision.) HIPAA portability rules apply to all types of employers and employer-provided health plans3 regardless of the funding method – insured or self-insured. The rules do not, however, apply to health plans that qualify as “excepted benefits.” Because HIPAA prohibits the use of an actively-at-work (and dependent not confined/disabled) provision, only group health plans that are HIPAA excepted may include these provisions. Some common HIPAA excepted benefits are:

• Separate dental and or vision plans – either a separate insurance contract or not an integral part of the medical plan (i.e., employees have the right to decline dental and/or vision coverage or the claims for the dental and/or vision benefits are administered under a contract separate from claims administration for other benefits.)

• Specified illness insurance such as cancer policies. • Fixed indemnity insurance policies that reimburse on a per diem (or other time period) basis –under a

separate insurance policy that is not coordinated with the employer’s medical plan. • Individual fixed indemnity individual insurance policies that reimburse on a per diem (or other time

period) and/or a per service basis under a separate insurance contract that is not coordinated with the employer’s medical plan. Individuals who purchase these policies must attest that they have other coverage that qualifies as minimum essential coverage under PPACA.

• On-site clinics. • Long-term care insurance. • Beginning in 2016 - limited wraparound coverage under a pilot program. The general purpose is to

permit employers to provide additional coverage to certain employees such as part-time employees who are enrolled in some type of individual market coverage with overall coverage that is generally comparable to the coverage provided to full time employees. Our March 2015 Healthcare Reform Update newsletter describes these plans in more detail. Click here for a copy.)

Although supplemental benefits such as Medicare Supplement insurance policies (often called Medigap) are also excepted benefits, these plans will be limited to retiree only groups because of the Medicare Secondary Payer law rules and PPACA’s prohibition against annual or lifetime dollar limits on essential health benefits (and required coverage of specified preventive care services with no cost sharing for non-grandfathered plans). Retiree only plans are not subject to HIPAA’s portability requirements or PPACA’s prohibition against dollar

3 Originally, self-insured nonfederal governmental plans were permitted to opt-out of this requirement, but the Patient Protection and Affordable Care Act (“PPACA”)

eliminated the ability of those plans to opt-out.

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limits (or requirement for non-grandfathered health plans to cover specified preventive procedures with no cost sharing.)

There is one other type of plan that is are permitted to use an actively-at-work provision, but virtually never does – a health FSA that qualifies as an excepted benefit. (Note: Health FSAs that are not HIPAA-excepted will not be able to satisfy PPACA’s prohibition against annual or lifetime dollar maximums on essential health benefits or provide coverage of specified preventive services with no cost sharing and may be subject to PPACA’s $100 per affected person per day penalty.)

Non-health Plans

Life insurance contracts almost always include some type of actively-at-work provision for employee coverage. Typically, the provision will apply when the employee first enrolls for coverage and will also apply later to any increases in coverage. Some insurance contracts may also apply an actively-at-work provision to decreases in coverage (so that a reduction does not occur if the employee is not at work.) In the case of a coverage improvement, the requirement would apply just to the increase in coverage. For example, if the employee has supplemental life insurance of 1 x earnings and elects 3 x earnings at open enrollment, the actively-at-work requirement would only apply to the additional 2 x earnings. In lieu of an actively-at-work provision life insurance contracts that cover dependents typically use a “dependent not confined” or “dependent not disabled” provision. Of course, additional requirements such as evidence of good health might also apply.

Similarly, disability insurance contracts virtually always contain an actively-at-work provision for both initial enrollment and any later coverage improvements.

Action Steps

Some action steps that employers may want to take:

• For group health plans, verify that the actively-at-work provision has been eliminated, or that the actively-at-work provision is administered according to the requirements described above.

• Review current insurance contracts and plan documents to confirm that actively-at-work (and dependent not confined/disabled) provisions are included only where permissible.

• For plans that have a permissible actively-at-work (or dependent not confined/disabled provision), make sure to communicate with employees to prevent misunderstandings at a later date. Each year at annual enrollment many employees sign up for coverage for the upcoming plan year. Employees may enroll in November for coverage that will not begin until January 1. It is important that employees understand that the requirement will apply and that it will apply on the January 1 effective date, not the date the employee enrolled.

• Review current administrative practices to make sure that permissible actively-at-work provisions are being administered as specified in the applicable insurance contracts and plan documents.

• Review current payroll practices to determine if any changes should be made. Some employers begin taking deductions on the effective date and will retroactively reimburse contributions if coverage is delayed. This is easier to administer and may be the only way the employer can administer dependent coverage where the employer is less likely to know a dependent’s health status. The key disadvantage of this approach is that it could lead to a misunderstanding about coverage. Other employers will delay payroll deductions until the employee has satisfied the actively-at-work requirement. This can avoid potential misunderstandings about the coverage that is in effect, but may be more difficult to administer. and may not be feasible for dependent coverage because the employer may not have information about whether or not a dependent is confined or disabled. Regardless of which approach the employer uses, it should be communicated to employees to reduce the potential for misunderstanding.

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Human Resources View Role of HR Becoming More Strategic, New Report Shows Society for Human Resource Management (SHRM) Human resources is increasing its strategic role in business with HR leaders more often part of an organization’s board or executive team, a new report found.

The report, Human Resource Management Policies and Practices in the United States, was released by the Cranfield Network on International Human Resource Management (CRANET) in collaboration with the Society for Human Resource Management (SHRM) and the Center for International HR Studies in the School of Labor Employment Relations at The Pennsylvania State University (CIHRS).

The CRANET/ SHRM/CIHRS 2014/15 report outlines the results of a survey of almost 700 senior-level HR practitioners, both SHRM and non-SHRM members, in organizations with 200 or more employees.

The results detail key practices in HR management and the role of the HR department, including:

Leadership

• 70 percent of responding organizations said HR has a place on the board of directors. That compares to 63 percent in 2009 and 41 percent in 2004.

• Two-thirds of responding organizations (66 percent) reported having a written HR management strategy.

• Responses indicated that HR appears to be moving away from working jointly with line management and taking sole responsibility for major policy decisions such as setting pay and benefits.

Talent Management

• The vast majority of organizations reported having a formal performance review system (96 percent for management, 95 percent for professional staff, and 93 percent for clerical/manual staff).

• Performance appraisals are predominantly used for pay/salary decisions (76 percent). But, because performance reviews frequently require the input of employees themselves, they are equally likely to be used for decision-making on career moves (75 percent) and identifying opportunities for training and development (74 percent).

Technology

• 83 percent of organizations use HR information systems or electronic HR management systems, with 67 percent using an employee self-service option.

• Outsourcing is most frequently used for pensions and benefits, the accounting aspects of HR management. Twenty-six percent of respondents said their organizations completely outsourced pensions, and 14 percent said benefits administration was completely outsourced.

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The survey also showed:

• A trend toward less frequent use of part-time working arrangements and more frequent use of teleworking.

• Annual staff turnover rose from 12 percent in 2009 to 19 percent in 2014/15.

• 60 percent of responding organizations spent less than 5 percent of annual payroll costs on training. Yet the mean number of training days increased since 2004, which might be explained by a greater investment in e-learning.

About the Society for Human Resource Management

Founded in 1948, the Society for Human Resource Management (SHRM) is the world’s largest HR membership organization devoted to human resource management. Representing more than 275,000 members in over 160 countries, the Society is the leading provider of resources to serve the needs of HR professionals and advance the professional practice of human resource management. SHRM has more than 575 affiliated chapters within the United States and subsidiary offices in China, India and United Arab Emirates. Visit SHRM Online at shrm.org and follow us on Twitter @SHRMPress.

- See more at:

http://shrm.org/about/pressroom/pressreleases/pages/hr_policies_and_practices_survey.aspx#sthash.p8anDin7.dpuf

SHRM Slams DOL's Proposed Overtime Rule Benefits Pro The Society for Human Resource Management, a vigorous opponent of changes to overtime regulations proposed by the Obama administration, told the Department of Labor in comments last week that the changes will not only burden management but be a detriment to the workers they intend to help.

The change floated by the DOL would raise the threshold for exempting employees from overtime pay from $23,660 to $50,440.

SHRM contends that many workers who currently earn below the proposed threshold would not all of a sudden begin making more money if the changes are implemented. Instead, the HR organization predicts that employers will impose stricter work hours in order to limit overtime. The result, argues SHRM, would be "reduced workplace flexibility and access to opportunities to gain experience" as well as a "loss of professional status."

The organization is basing its assertions on a survey of member employers, 70 percent of whom said that a change in overtime classifications would mean that their employees would have fewer opportunities to work overtime.

In the past, SHRM has highlighted the effect the rule change could have on non-profit organizations. Charitable groups, whose employees often make less than their counterparts in the business world, would be forced to lay off employees or to cut into their services if they are forced to pay more of their employees overtime.

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Furthermore, 67 percent said the rule change would result in less autonomy and flexibility for employees, leading some workers to view the change as a demotion.

And yet, SHRM insists it supports the idea of changing overtime rules to allow some higher-paid workers to qualify for overtime wages. But it says the new reclassification is too drastic a change.

“While DOL’s proposal acknowledges that the proposed rule may have some adverse effect on employees, the consequences of reclassification are not considered in any depth,” Mike Aitken, SHRM’s vice president of government affairs, wrote in comments to the DOL. “Of course, the department could mitigate the impact of these negative consequences by more appropriately setting the salary threshold so that it serves as a reasonable proxy for those employees unlikely to pass the duties test.” Copyright © 2015 BenefitsPro, A Summit Professional Networks Website

Employer Branding Versus Employee Rights: Knowing Where to Draw the Line CCH, Incorporated Today employees and the public are generally aware of product branding and a company’s need to protect its brand in the marketplace. But how far can an employer go in prohibiting employee activities that it regards as potentially damaging its brand in the public’s eye? That was the question addressed by the D.C. Circuit in Southern New England Telephone Co. v. NLRB. The appeals court ruled that although Section 7 of the NLRA protects the right of employees to wear union apparel at work, under the “special circumstances” exception to that rule, AT&T lawfully prohibited publicly visible employees from wearing “Inmate/Prisoner” shirts.

Understanding the AT&T case

As part of a public campaign to put pressure on AT&T during contentious contract negotiations, the union representing AT&T technicians distributed T-shirts to its members. The front of the shirt said “Inmate #” and had a black box beneath the lettering. The back of the shirt said “Prisoner of AT$T,” with several vertical stripes above and below the lettering. The shirt contained no reference to the union or to the ongoing labor dispute.

Under AT&T’s appearance standards, publicly visible employees are required to present a professional appearance at all times and to refrain from wearing clothing with “printing and logos that are unprofessional or will jeopardize” the “Company’s reputation.” Under this policy, AT&T banned employees who interact with customers or work in public from wearing the union T-shirts. It issued one-day suspensions to 183 employees who did not comply with the directive to remove the shirt.

In response, the union filed an unfair labor practice charge contending that AT&T infringed employees’ Sec. 7 rights by suspending the employees. Finding that “the totality of the circumstances would make it clear” that a technician wearing the shirt was an AT&T employee “and not a convict,” the NLRB majority found that the prohibition violated the NLRA.

“Special circumstances” doctrine. The Supreme Court has long recognized, since Republic Aviation Corp. v. NLRB, that under the “special circumstances” doctrine, a company may lawfully ban union messages on publicly visible apparel on the job when it reasonably believes the message may harm its relationship with its customers or its public image. The “special circumstances” exception is designed “to balance the potentially conflicting interests of an employee’s right to display union insignia and an employer’s right to limit or prohibit

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such display,” the D.C. Circuit observed. “Special circumstances” include “protecting the employer’s product” and “maintaining a certain employee image.”

Unreasonable application. In this case, the appeals court determined that the Board applied the “special circumstances” exception in an unreasonable way. The appropriate test for “special circumstances” is not whether AT&T’s customers would confuse the “Inmate/Prisoner” shirt with actual prison garb, but whether AT&T could reasonably believe that the message might harm its relationship with its customers or its public image. To resolve this case, it was enough to ask the question: “What would you think about a company that permitted its technicians to wear such shirts when making home service calls?” Consequently, in the Southern New England Telephone case, the appeals court ruled that the Board should have held that “special circumstances” applied.

The Look Policy. But just how far can an employer take its dress code in attempting to establish its brand? Retailer Abercrombie & Fitch required employees in its stores to comply with a “Look Policy” intended to promote the Abercrombie brand. Accordingly, employees were required to dress in clothing consistent with clothes that Abercrombie sold in its stores. While the policy prohibited employees from wearing black clothing and “caps,” it did not explain the meaning of the term “cap.”

Because Abercrombie claimed it did very little advertising through traditional media outlets, it contended that its Look Policy was critical to the health and vitality of its “preppy” and “casual” brand. It argued that a sales-floor employee who violated the Look Policy by wearing inconsistent clothing “inaccurately represents the brand, causes consumer confusion, fails to perform an essential function of the position, and ultimately damages the brand.”

However, in EEOC v. Abercrombie & Fitch Stores, Inc., the U.S. Supreme Court held that the retailer’s refusal to hire a Muslim applicant because her headscarf conflicted with the store’s “Look Policy” violated Title VII. In Abercrombie, a practicing Muslim woman applied for a sales position. Her interviewer was concerned whether her headscarf was a forbidden cap, which would conflict with the retailer’s Look Policy. Indeed, a district manager told the interviewer that the applicant’s headscarf would violate the Look Policy, as would all other headwear, religious or otherwise.

In addition to the headscarf, Abercrombie has used its “Look Policy” to justify not hiring individuals because of tattoos, body piercings, and weight. Abercrombie has previously been taken to task for marketing campaigns that perpetuate racial stereotypes by avoiding Asian and African-American models.

Takeaway for employers

Employers have a recognized interest in ensuring that employees who deal with customers promote a good public image. When a company issues dress and grooming policies, its strongest position is to communicate and justify dress and grooming requirements based upon objective job requirements. A strong connection between dress or grooming and job performance will place the company in the best position to defend the policy to employees and third parties.

So what factors should an employer consider in developing a dress code?

• Business justification–The key factor in determining whether a personal appearance and dress code is justified is the nature of the work performed by the individuals to whom the code is applied. For example, it is more reasonable for a department store to set certain appearance standards for its sales personnel than for a machine shop to establish appearance standards for its workers.

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• Privacy–Requiring a specific type of dress or personal appearance may be an intrusion into the personal lives of employees.

• Safety–Another factor that employers should consider when establishing dress codes is safety. For example, most employers require employees to wear hard hats when on a construction site because of the danger of heavy, falling objects.

• Morale–Beards and hair styles have been a problem for some employers in the past. Absent justification for the restrictions, no-beard and hairstyle policies can cause disruption and morale problems. They may even cause the good, creative, and independent employee to leave.

• Legal compliance–Dress and appearance policies and regulations bring on legal responsibilities. For example, an employer can’t use a dress policy to justify its refusal to accommodate the religious practices of job applicants or employees.

Source: Article written by Ronald Miller, J.D. and originally published in the August 5, 2015 edition of Employment Law Daily, a Wolters Kluwer Law & Business publication.

Retirement PBGC Final Regs Exempt Most Plans and Sponsors from Many Reportable Events Rules Spencer's Benefits The Pension Benefit Guaranty Corporation (PBGC) has issued final regulations that establish risk-based safe harbors that exempt most companies and plans from many of its reportable events requirements and target reporting toward the minority of plan sponsors and plans presenting the most substantial risk of involuntary or distress termination. The regulations make the requirements of the sponsor risk-based safe harbor more flexible, make the funding level for satisfying the well-funded plan safe harbor lower and tied to the variable-rate premium, and add public company waivers for five events. The PBGC anticipates the final rule will exempt about 94 percent of plans and sponsors from many reporting requirements and result in a net reduction in reporting to the PBGC.

The PBGC final regulations are effective October 13, 2015. The reportable events regulations apply to post-event reports for reportable events occurring on or after January 1, 2016, and to advance reports due on or after that date.

Waiver structure. The final rule provides a new reportable events waiver structure that is more closely focused on the risk of default than the old waiver structure. Some reporting requirements that poorly identify risky situations—like those based on a modest level of plan underfunding—have been eliminated. A new low-default-risk safe harbor based on company financial metrics is established that better measures risk to the pension insurance system, according to the PBGC.

The final regulations also provide a safe harbor for plans owing no variable-rate premium (VRP) (referred to as the well-funded plan safe harbor). The PBGC explains that this safe harbor is consistent with a Congressional determination of the level of underfunding that presents risk to the pension insurance system. Other waivers, such as public company, small plan, de minimis segment, and foreign entity waivers, have been retained in the final regulations, and in many cases expanded, to provide additional relief to plan sponsors where the risk of an

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event to plans and the pension insurance system is low.

Under the final regulations, all small plans (about two-thirds of all plans) will be waived from reporting Category 1 events (other than substantial owner distributions). Further, if a reportable event occurs, 82 percent of large plans (more than 100 participants) qualify for at least one waiver for these events. Category 1 events include extraordinary dividend or stock redemption, active participant reduction, change in contributing sponsor or controlled group, distributions to a substantial owner, and transfer of benefit liabilities events. Thus, if a reportable event occurs, the PBGC estimates that 94 percent of plans covered by the pension insurance system will qualify for at least one waiver of reporting for Category 1 events.

Low-default-risk safe harbor. Based on its experience, the PBGC has found that the default risk of a plan sponsor generally correlates with the risk of an underfunded termination of the sponsor’s pension plan. In the proposed regulations, the PBGC developed a waiver from reporting for the five Category 1 events if, as of the date an event occurred, each contributing sponsor met a financial soundness standard. Most commenters opposed the sponsor financial soundness safe harbor, with some of the commenters seeing the financial soundness test as a pronouncement by PBGC on the financial status of American businesses, which they believed to be inappropriate for a government agency. The PBGC responds that many federal agencies have rules that include standards for measuring aspects of financial health or ability to meet certain financial obligations for a wide variety of purposes. The PBGC explains that the safe harbor tests were never meant for that purpose. Rather, they were intended to measure the likelihood that a company would be able to continue to sponsor a plan and, thus, not present a risk to the pension insurance system. To clarify this point, the final regulations more precisely characterize this safe harbor as the company low-default-risk safe harbor rather than the sponsor financial soundness safe harbor, and refers to a safe harbor for plans (described below) as the well-funded plan safe harbor rather than the plan financial soundness safe harbor.

The PBGC states that its company low-default-risk safe harbor is entirely voluntary and relies mainly on private-sector financial metrics derived from a company’s own financial information. Use of the safe harbor is not conditioned on an evaluation by the PBGC of plan sponsor financial soundness. It does not involve sponsors reporting to the PBGC (or anyone else) any financial metrics, such as company financial information, credit scores or other evidence of creditworthiness. Since the PBGC is convinced that adding a company low-default-risk safe harbor to the reportable events regulations furthers the PBGC’s goals of tying reporting to risk and avoiding unnecessary reports, the final regulations retain the risk-based safe harbor with modifications to mitigate commenters’ concerns, particularly by providing more flexibility in applying the safe harbor and clarifying when and how the satisfaction of the low-default-risk standard is determined. Under the final regulations, an entity (a “company”) that is a contributing sponsor of a plan or the highest level U.S. parent of a contributing sponsor satisfies the low-default risk standard if the company has adequate capacity to meet its obligations in full and on time as evidenced by satisfying either (A) the first two, or (B) any four, of the following seven criteria:

(1) The probability that the company will default on its financial obligations is not more than 4 percent over the next five years or not more than 0.4 percent over the next year, in either case determined on the basis of widely available financial information on the company’s credit quality.

(2) The company’s secured debt (with some exceptions) does not exceed 10 percent of its total asset value.

(3) The company’s ratio of total-debt to-EBITDA (earnings before interest, taxes, depreciation, and amortization) is 3.0 or less.

(4) The company’s ratio of retained earnings-to-total-assets is 0.25 or more.

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(5) The company has positive net income for the two most recent completed fiscal years.

(6) The company has not experienced any loan default event in the past two years regardless of whether reporting was waived.

(7) The sponsor has not experienced a missed contribution event in the past two years unless reporting was waived.

For reporting to be waived for an event to which the safe harbor applies, both the contributing sponsor and the highest level U.S. parent of the contributing sponsor must satisfy the company low-default-risk safe harbor. To make the safe harbor user-friendly, the final regulations provide that a company determines whether it qualifies for the low-default-risk safe harbor once during an annual financial reporting cycle (on a “financial information date”). If it qualifies on that financial information date, its qualification remains in place throughout a “safe harbor period” that ends 13 months later or on the next financial information date (if earlier). If it does not qualify, its nonqualified status remains in place until the next financial information date. For a company that does not have annual financial statements, the financial information date is the date the company files its annual federal income tax return or IRS Form 990 with the IRS.

Well-funded plan safe harbor. In the proposed regulations, using plan funding as a basis for waivers of reporting, the PBGC provided that reporting would be waived if the plan was either fully funded on a termination basis or 120 percent funded on a premium basis (in both cases, using prior-year data). After considering critical comments, the PBGC, in the final regulations, eliminates the test for the well-funded plan safe harbor based on termination basis liability. The PBGC also decided that a well-funded plan safe harbor based on 120 percent funding on a premium basis is not helpful to most plans since plans are not likely to fund that high. The PBGC settled on 100 percent funding—meaning a plan would pay no VRP. Thus, the well-funded plan safe harbor in the final regulations applies if the plan owed no VRP for the plan year preceding the event year. Plans exempt from the VRP (e.g., certain new plans) will qualify for the safe harbor regardless of their funding percentage.

Public company waiver. The old regulations included a limited public company waiver for reporting controlled group change and liquidation events. However, the PBGC did not include such a waiver in the proposed regulations. One commenter urged the PBGC to add a public company waiver, arguing that public companies already have to report significant events on their Securities and Exchange Commission (SEC) filings and there should not be duplicative filings with the PBGC. Based on a review of SEC reporting requirements and reportable event notices, the PBGC waives reporting in the final regulations where any contributing sponsor of an affected plan is a public company and the contributing sponsor timely files a SEC Form 8-K disclosing the event, unless the disclosure concerns a Form 8-K item relating primarily to the results of operations or financial statements. This waiver applies to the same five events as the low-default-risk and well-funded plan safe harbors.

Other changes. In addition, the final regulations revise and simplify the descriptions of several reportable events, reflect changes made to the funding and premium rules by the Pension Protection Act of 2006 (PPA; P.L. 109-280), and make other technical changes.

The regulations simplify the descriptions of several reportable events and make some event descriptions (e.g., active participant reduction) narrower so that compliance is easier and less burdensome. One event is broadened in scope (loan defaults), and clarification of another event has a similar result (controlled group changes). These changes, like the waiver changes, are aimed at tying the reporting burden to risk. The PPA made changes to the plan funding rules in Title I of ERISA and the Code and amended the VRP rules to agree with the funding rule changes. These law changes affected the test for whether advance reporting of certain reportable events is required. The final regulations conform the advance reporting test to the new legal requirements. Also, the final

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regulations make electronic filing of reportable events notices mandatory. However, the PBGC may grant case-by-case waivers of the electronic filing requirement.

Plantermnews Otherdocnews

State Law Review What’s New in State Laws CCH, Incorporated For busy Human Resources professionals who want ready access to what is new and what has recently changed in State laws, here is a brief update.

Alabama Unemployment Insurance

Alabama’s Unemployment Compensation Law has been amended as follows:

Individuals rendering services to an educational institution, while in the employ of an employer that is primarily or exclusively engaged in the provision of its employees to perform work for educational institutions, are disqualified from receiving benefits for any week commencing during the period between two successive academic years or terms, or for any week which commences during an established and customary vacation period or holiday recess, if the individual performs services for the educational institution in the period immediately before the vacation period or holiday recess, and there is a reasonable assurance that such individual will perform the same or similar services for the educational institution in the period immediately following the vacation period or holiday recess.

Also, an individual's weekly benefit amount will be reduced by the amount of any governmental or other pension, retirement or retired pay, annuity or similar periodic payment that is based on previous work, that the individual has received or has been determined eligible to receive, and that may reasonably be attributed to the benefit week in question, where (1) such payment is made under a plan that is maintained or contributed to by a base period employer and 100% employer-financed and not contributed to by the worker; and (2) eligibility for or the amount of such payment (other than Social Security or railroad retirement payments) is affected by the services performed or the remuneration paid for such services. If an individual is awarded pension payments retroactively, covering the same period for which benefits were received, the retroactive payments will constitute cause for disqualification and any benefits paid during the period will be recovered only if the retroactive pension payments were made under a plan that is maintained (or contributed to) by a base period employer, 100% employer-financed, and not contributed to by the worker.

California Unemployment Insurance

Legislation has been enacted that requires California employers to file all income tax withholding returns and reports electronically and remit all payments of withheld income taxes to the Employment Development Department (EDD) by electronic funds transfer (EFT). The requirement will be phased in as follows: effective January 1, 2017, it applies to employers with 10 or more employees; and effective January 1, 2018, it applies to all employers. Waivers may be granted under specified conditions.

An employer that is required to file a quarterly return electronically and without good cause fails to do so will be subject to a penalty of $50, in addition to any other penalties that may apply. However, prior to January 1, 2019,

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any employer required to file a quarterly return electronically that files a timely return by means that are not electronic will not be subject to the penalty. An employer required to remit withheld income taxes by EFT may also request a waiver of that requirement. Prior to January 1, 2017, employers are required to remit withheld income taxes by EFT only if their cumulative average payment for deposit periods in the 12-month period ending June 30 of the prior year was $20,000 or more (Ch. 222 (A. 1245), L. 2015, effective January 1, 2016, and applicable as noted).

Colorado Unemployment Insurance

The taxable wage base in Colorado for 2016 will be $12,200, up $400 from the 2015 taxable wage base amount of $11,800.

Connecticut Smoking in the Workplace

The state has enacted a law regulating the use of electronic nicotine delivery systems and vapor products (e-cigarettes) in public places, effective October 1, 2015 (P.A. 15-206 (H. 6283), L. 2015).

Delaware Background Checks

The state has amended its background checks law with respect to child-serving entities (Ch. 154 (S. 144), L. 2015).

Florida Recordkeeping

The Computer Abuse and Data Recovery Act (CADRA) will take effect October 1, 2015. The law is intended to safeguard an owner, operator, or lessee of a protected computer used in the operation of a business from harm or loss caused by unauthorized access to such computer. The law is also intended to safeguard an owner of information stored in a protected computer used in the operation of a business from harm or loss caused by unauthorized access (Ch. 2015-14 (S. 222), L. 2015).

Idaho Unemployment Insurance

Idaho has amended its Employment Security Law to add a specific exemption regarding owner-operators in the trucking industry. Owner-operators are in the independent business of leasing trucks to a motor carrier and supplying drivers to operate the leased trucks. Recent court cases in Idaho have demonstrated the potential misapplication and/or misinterpretation of the general exemption under the Idaho Employment Security Law when applied to owner-operators. As a result of these recent court cases, many motor carriers have chosen not to engage owner-operators in Idaho. As amended, the legislation provides a clear and concise exemption that can be efficiently administered and enforced by the Department of Labor and reasonably relied on by the motor carriers.

Illinois Child Labor

The Child Labor Law has been amended to provide that money recovered in a civil penalty is to be paid into the Child Labor and Day and Temporary Labor Services Enforcement Fund, to be used, subject to appropriation, for exemplary programs, demonstration projects, and other activities related to enforcement of the Child Labor Law, the Day and Temporary Labor Services Act, or for activities or purposes related to the enforcement of the Private Employment Agency Act (P.A. 99-422 (S. 1859), L. 2015, effective January 1, 2016).

Illinois Equal Pay

Illinois Governor Bruce Rauner signed House Bill 3619 on August 20 to expand the Equal Pay Act of 2003 to

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apply to all employers as of January 1, 2016. Currently, the law applies to those with four or more employees.

In addition, the civil penalties for violation of the law or any related rule will increase (P.A. 99-418 (H. 3619), L. 2015).

Illinois Health Insurance Benefits Coverage

The state has amended its health insurance coverage law with respect to treatment for infertility (P.A. 99-421 (S. 1764), L. 2015, effective January 1, 2016).

Illinois Minimum Wage

The Private Employment Agency Act has been amended to provide that a private employment agency will be jointly liable with an employer for violation of the state Minimum Wage Law (P.A. 99-422 (S. 1859), L. 2015, effective January 1, 2016).

Illinois Wage Payment

The Private Employment Agency Act has been amended to provide that a private employment agency will be jointly liable with an employer for violation of the Illinois Wage Payment and Collection Law (P.A. 99-422 (S. 1859), L. 2015, effective January 1, 2016).

Indiana Drug Testing

Drug testing requirements under Indiana Code 4-13-18 applicable to employees of public works contractors also apply to employees of contractors on local government agency public works projects if (1) the estimated cost of the contract is at least $150,000 and (2) the contract is awarded after June 30, 2016 (P.L. 252 (H. 1019), L. 2015, and amended by P.L. 213 (H. 1001), L. 2015).

Indiana Employee Misclassification

A person who, with the intent to avoid the obligation of obtaining worker’s compensation coverage, falsely classifies an employee as (1) an independent contractor, (2) a sole proprietor, (3) an owner, (4) a partner, (5) an officer, (6) or a member in a limited liability company commits worker’s compensation fraud and is guilty of a Class A misdemeanor (P.L. 252 (H. 1019), L. 2015).

Indiana Prevailing Wages

The Indiana General Assembly has repealed the Indiana Common Construction Wage Act. Contractors working on Common Construction Wage projects awarded prior to July 1, 2015, must continue to comply with the Act as it existed prior to the repeal, and workers must continue to be paid at or above established wage and fringe benefit rates for the duration of the project.

Unless federal or state law provides otherwise, a public contract may not establish, mandate or require a wage scale or wage schedule for a public works contract awarded by a public agency after July 1, 2015. This change does not impact work on federally funded projects covered by Davis-Bacon and Related Acts.

Public contractors are now required to certify compliance with the federal Fair Labor Standards Act and the Indiana Minimum Wage Law. In addition, requirements for public works construction contractors include that: Tier 1 (general or prime) contractors must contribute at least 15% of the contract price in work, materials, services or any combination thereof; contractors cannot pay employees in cash; contractors must comply with E-Verify requirements for each employee on a project; contractors may be required to have a drug testing program

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in accordance with Indiana Code 4-13-18; and contractors must maintain required levels of general liability insurance (Indiana Department of Labor, Common Construction Wage information, http://www.in.gov/dol/2723.htm) (P.L. 252 (H. 1019), L. 2015, and P.L. 213 (H. 1001), L. 2015).

Kansas Health Insurance Benefits Coverage

The state has amended its health insurance coverage law with respect to autism spectrum disorder (H. 2352, L. 2015).

Kansas Military Leave

Military leave and reemployment protections have been amended to extend protections to any person employed in Kansas called to state active duty. A person called to state active duty by Kansas or any other state, who notifies the employer of such, upon release from such duty or recovery from disease or injury from such duty, under honorable conditions, is to be reinstated or restored to the position of employment held at the time the person was called to state active duty (H. 2154, L. 2015).

Louisiana Medical Marijuana

Louisiana has enacted a law, known as The Alison Neustrom Act, providing for the therapeutic use of marijuana under specified conditions. The law, which does not directly address any workplace implications regarding the use of medical marijuana, dictates the issuance of rules and regulations not later than 2016 (Act 261 (S. 143), L. 2015).

Maine Background Checks

The state has enacted a law to establish a secure internet-based background check center for providers of long-term care, child care and in-home and community-based services (Ch. 299 (S. 541), L. 2015).

New York Disability Law

The state has amended its Executive Law and its Civil Rights Law with respect to service animals. The amendments specifically address the training of such animals (Ch. 141 (S. 1314), L. 2015).

New York Minimum Wage

Acting State Labor Commissioner Mario J. Musolino on September 10, 2015, signed a wage order accepting the 2015 Fast Food Wage Board’s recommendations and designating increases in the minimum wage for workers in fast food establishments to reach $15 per hour by December 31, 2018, in New York City, and by December 31, 2021, for the rest of the state.

Under the fast food wage order, the minimum wage for fast food workers in New York City will increase to $10.50 on December 31, 2015, $12.00 on December 31, 2016, $13.50 on December 31, 2017, and $15.00 on December 31, 2018. For the rest of the State of New York, the minimum wage for fast food workers will increase to $9.75 on December 31, 2015, $10.75 on December 31, 2016, $11.75 on December 31, 2017, $12.75 on December 31, 2018, $13.75 on December 31, 2019, $14.50 on December 31, 2020, and $15.00 on July 1, 2021.

Fast food establishments in New York that are part of a chain with 30 or more locations nationally would be covered by the order, including franchises and integrated enterprises. The order is now subject to the regulatory

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process before it becomes final.

In conjunction with the signing of the wage order, also on September 10, New York Governor Andrew M. Cuomo proposed an all-industry minimum wage increase that would be phased in to mirror the fast food order, reaching $15.00 per hour by December 31, 2018, in New York City, and by July 1, 2021, for the rest of the state. The Governor hopes to garner enough support for a bill proposing the increase to be introduced in the next legislation session (New York State Office of the Governor, Press Release, September 10, 2015; Order of Acting Commissioner of Labor Mario J. Musolino on the Report and Recommendations of the 2015 Fast Food Wage Board, September 10, 2015).

New York Smoking in the Workplace

The state has amended its Public Health Law to prohibit smoking in or near after-school programs (Ch. 993 (S. 993), L. 2015).

North Carolina Access to Personnel Files

The state has amended its access to personnel files law with respect to sworn law enforcement officers. Effective October 1, 2015, even if considered part of an employee’s personnel file, the following information regarding any sworn law enforcement officer shall not be disclosed to an employee or any other person: information that might identify the residence of a sworn law enforcement officer; emergency contact information; or certain other identifying information (Session Law 2015-225 (S. 699), L. 2015).

North Carolina Child Labor

North Carolina’s child labor law restricts the employment of youth in establishments where the employer holds an ABC (alcoholic beverage control) permit for on-premises sale or consumption of alcoholic beverages. This law has been amended to provide that the employer shall not employ a person under the age of 18 years of age to prepare, serve, dispense or sell any alcoholic beverages, including mixed beverages, except for the sale of alcoholic beverages at the point-of-sale for only off-premises consumption.

The law restricting the employment of youth in employments where the employer holds an ABC permit has been amended to provide that no person who holds an ABC permit for the on-premises sale or consumption of alcoholic beverages, including mixed beverages, shall employ a youth: (1) under the age of 16 on the premises for any purpose, unless the youth is at least 14 years of age and (a) obtains the written consent of a parent or guardian of the youth and (b) the youth is employed to work on the outside grounds of the premises for a purpose that does not involve the preparation, serving, dispensing, or sale of alcoholic beverages; (2) under the age of 18 years of age to prepare, serve, dispense or sell any alcoholic beverages, including mixed beverages, except for the sale of alcoholic beverages at the point-of-sale for only off-premises consumption (Session Law 221 (S. 429), L. 2015).

North Dakota Child Labor

The state has amended its law relating to individuals under 21 years of age being allowed in alcoholic beverage establishments (S. 2333, L. 2015).

North Dakota Unemployment Insurance

The state has amended its unemployment insurance law to provide that benefits will not be denied to an individual who left his or her employment voluntarily if the reason for the separation was stalking, provided certain conditions are met.

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Oklahoma Unemployment Insurance

For 2016, the taxable wage base for Oklahoma will be $17,500, up $500 from the 2015 taxable wage base amount of $17,000.

South Carolina Military Leave

Reemployment rights and protections granted to members of the South Carolina National Guard and South Carolina State Guard also apply to a person who is employed in South Carolina but who is a member of another state's national guard or state guard (Act 16 (H. 3547), L. 2015).

Texas Breastfeeding Rights

A public employer may not suspend or terminate the employment of, or otherwise discriminate against, an employee because the employee has asserted the employee's rights under Government Code Title 6, Subtitle A, Ch. 619 (Right to Express Breast Milk in the Workplace) (H. 786, L. 2015, effective September 1, 2015).

Texas Rest Periods

Effective as of September 1, public employers must (1) provide a reasonable amount of break time for an employee to express breast milk each time the employee has a need and (2) provide a place, other than a multiple user bathroom, that is shielded from view and free from intrusion from other employees and the public where the employee can express breast milk.

The public employer must establish a written policy stating that the public employer shall (1) support the expression of breast milk and (2) make reasonable accommodation for the needs of employees who express breast milk. Employees are protected from suspension, termination or other forms of discrimination for exercising their rights under the law.

A covered “public employer” means (1) a county, municipality or other state political subdivision, including a school district, or (2) a board, commission, office, department, or another agency in the executive, judicial, or legislative branch of state government, including an institution of higher education (H. 786, L. 2015).

Utah Background Checks

The state has amended its law with respect to the Department of Human Services’ background check procedures (Ch. 255 (H. 145), L. 2015). The law relating to background checks for school employees has also been amended (H. 124, L. 2015).

Utah Breastfeeding Rights

The Utah Antidiscrimination Act has been amended to specify that “pregnancy, childbirth, or pregnancy-related conditions” includes breastfeeding or medical conditions related to breastfeeding (H. 105, L. 2015).

Vermont Employee Misclassification

Officials from the U.S. Department of Labor and the Vermont Department of Labor have signed a three-year Memorandum of Understanding intended to protect employees’ rights by preventing their misclassification as independent contractors or other non-employee statuses. Under the agreement, both agencies may share information and coordinate law enforcement.

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The MOU represents a new, combined federal and state effort to work together to protect the employees’ rights and level the playing field for responsible employers by reducing the practice of misclassification. Vermont is the latest state agency to join this effort with the U.S. Labor Department. Alabama, Alaska, California, Colorado, Connecticut, Florida, Hawaii, Illinois, Idaho, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, New Hampshire, New York, Rhode Island, Texas, Utah, Washington, Wisconsin and Wyoming agencies have signed similar agreements (United States Department of Labor, WHD News Brief, No. 14-1749-NAT, September 3, 2015, http://www.dol.gov/opa/media/press/whd/WHD20151749.htm).

Important Reminder! Upcoming Deadlines Arthur J. Gallagher & Co. Keeping track of all of the compliance requirements that face employers sponsoring health and welfare plans has always been a challenge. The additional requirements imposed on employers by the Patient Protection and Affordable Care Act (“PPACA”) has added significantly to the burden. Each month this article will provide information on deadlines that are coming up in the next three months for a calendar year plan. Key requirements for November and December 2015 and January 2016 are listed below.

Dates are based on the timing for a calendar year plan (except as noted); employers with non-calendar year plans will need to modify dates as appropriate.

Deadlines for November and December 2015 and January 2016

• November 16, 2015 (because November 15, 2015 is a Sunday) – due date for self-insured primary medical plans subject to the Transitional Reinsurance Fee to provide the total number of covered lives for the first nine months of 2015 on the Pay.gov website. The ACA Transitional Reinsurance Annual Enrollment Contributions Submission Form is expected to become available on October 1, 2015.

• December 15, 2015 – deadline for providing the Summary Annual Report (SAR) for calendar year plans that extended their Form 5500 filing for 2 ½ months.

• December 31, 2015 – deadline for annual notices including CHIPRA and the Women's Health and Cancer Right Act unless those notices were included as part of annual enrollment.

• December 31, 2015 – deadline for self-insured non-federal governmental plans to provide HIPAA opt out notice to employees.

• January 15, 2016 – first payment of Transitional Reinsurance Contributions due.

• February 1, 2016 (because January 31, 2016 is a Sunday) – due date to provide Form W-2 Wage and Tax Statement, Form 1095-B Health Coverage (by certain self-insured health plans), and Form 1095-C Employer-Provided Health Insurance Offer and Coverage (by applicable large employers) to employees. (Note: This deadline to provide Form 1095-B or 1095-C may be extended by a maximum of 30 days by sending a letter to the IRS.)

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Note: November 5, 2015 was originally the deadline for small health plans to obtain a Health Plan Identifier Number (“HPID”). Large health plans originally had a deadline of November 5, 2014. Guidance issued on October 31, 2014 delayed both of these deadlines until further notice.

2016 Medicare Values

Updated values for Medicare are generally released in early to mid-November each year. Updated values for Medicare Part D (drug coverage) are released in May.

Ongoing Activities (Selected)

Many compliance requirements apply every month. Some of the key ongoing requirements are:

• Marketplace notices - to all newly hired employees within 14 days of hire

• Provide the following materials when an employee becomes eligible for/enrolled in the health plan:

o Summary of Benefits and Coverage (“SBC”) – upon eligibility

o HIPAA Privacy Notice – upon enrollment

o COBRA General (Initial) Notice – to employee (& spouse if married) – upon enrollment

o HIPAA Special Enrollment Rights Notice – upon eligibility

o Medicare Part D certificate of creditable/noncreditable drug coverage – upon enrollment

In addition to federal requirements, some states have additional requirements such as reporting on the availability of dependent health coverage. Employers should check with their state(s) to determine what requirements and deadlines will apply.

Note: We include information about the above required communications indicating whether the requirement is triggered by the employee’s eligibility or enrollment in the plan. Exact timing varies by requirement.

The intent of this Newsletter is to provide general information on employee benefit issues. It should not be construed as legal advice and, as with any interpretation of law, plan sponsors should seek proper legal advice for application of these rules to their plans. © 2015 Arthur J. Gallagher & Co.

Our list focuses on major federal and, in some cases state, requirements that will impact a significant number of employers. It is not intended to be a comprehensive list.