HHS Announces New Health Plan Out of Pocket Limits for 2017

On March 1, 2016, the Department of Health and Human Services (HHS) announced the finalized 2017 health plan out-of-pocket (OOP) maximums.   Applicable to non-grandfathered health plans, the OOP limits for plan years beginning on or after January 1, 2017 are $7,150 for single coverage and $14,300  for family coverage, up from $6,850 single/$13,700 family in 2016. The OOP maximum includes the annual deductible and any in-network cost-sharing  obligations members have after the deductible is met.  Premiums,  pre-authorization penalties, and OOP expenses associated with out-of-network benefits are not required to be included in the OOP maximums.

In addition to the new OOP maximum limits, employers offering high deductible health plans need to be particularly mindful of the embedded OOP maximum requirement. Beginning in 2016, all  non-grandfathered health plans, whether self-funded or fully insured, must apply  an embedded OOP maximum to each individual enrolled in family coverage if the plan’s family OOP maximum exceeds the ACA’s OOP limit for self-only coverage  ($7,150 for 2017).  The ACA-required embedded OOP maximum is a new and  often confusing concept for employers offering a high deductible health plan  (HDHP). Prior to ACA, HDHPs commonly imposed one overall family OOP limit  on family coverage (called an aggregate OOP) without an underlying individual  OOP maximum for each covered family member.  Now, HDHPs must comply with  the IRS deductible and OOP parameters for self-only and family coverage in  addition to ACA’s OOP embedded single limit requirement.     

The IRS is expected to announce the 2017 HDHP  deductible and OOP limits in May 2016.

Limiting Employee Hours To Avoid ACA Could Violate ERISA

In a first-of-its-kind decision, a federal court recently upheld the right of employees to sue their employer for allegedly cutting employee hours to less than 30 hours per week to avoid offering health insurance under the Affordable Care Act (ACA). Specifically, the District Court for the Southern District of New York denied a defense Motion to Dismiss in a case where a group of workers allege that Dave & Buster’s (a national restaurant and entertainment chain) “right-sized” its workforce for the purpose of avoiding healthcare costs.

Although this case is in the very early stages of litigation and is far from being decided, you should monitor this for developments to determine whether you need to take action to deter potential copycat lawsuits. 

Reducing Workforce Hours In Response To ACA

The ACA requires employers who employ 50 or more “full-time equivalents” to offer affordable minimum-value coverage to full-time employees and their dependents or pay a penalty if any of their full-time employees receive federal premium assistance to purchase individual coverage in the Health Insurance Marketplace. This requirement is also known as the “Employer Mandate”.  

One of the initial concerns by ACA critics is that many employers would respond to the Employer Mandate by reducing full-time employee hours to avoid the coverage obligation and associated penalties, increasing the number of part-time workers in the national economy. This is because the ACA does not require an employer to offer affordable, minimum-value coverage to employees generally working less than 30 hours per week.  

Although the initial economic data analyzing the national workforce suggests that the predictions of wide-scale reduction in employee hours have not materialized, some employers have increased their reliance on part-time employees as an ACA strategy to manage the costs of the Employer Mandate.

Could That Reduction Violate ERISA?

Although an employer who reduces employee hours would not violate any specific provision of the ACA, there is an open question as to whether such an action would violate another federal law. As alleged by employees of Dave & Buster’s, such a reduction creates a cause of action under the Employee Retirement Income Security Act of 1974 (ERISA). A group of employees filed a class action lawsuit against the restaurant chain last year making such an argument.

Section 510 of ERISA prohibits discrimination and retaliation against plan participants and beneficiaries with respect to their rights to benefits. More specifically, ERISA Section 510 prohibits employers from interfering “with the attainment of any right to which such participant may become entitled under the plan.” Because many employment decisions affect the right to present or future benefits, courts generally require that plaintiffs show specific employer intent to interfere with benefits if they want to successfully assert a cause of action under ERISA Section 510.  

Round One Goes To Employees

Dave & Buster’s moved to dismiss the class action lawsuit, arguing that the complaint failed to demonstrate that it reduced work hours with the specific intent to deny employees the right to group health insurance. However, the district court disagreed and recently denied the employer’s motion, clearing the case for further litigation.

The court found that the class of plaintiffs showed sufficient evidence in support of their claim that their participation in the health insurance plan was discontinued because the employer acted with “unlawful purpose” in realigning its workforce to avoid ACA-related costs. In this regard, the employees claimed that the company held meetings during which managers explained that the ACA would cost millions of dollars, and that employee hours were being reduced to avoid that cost.

What Should Employers Do Now?

The lawsuit against Dave & Buster’s is the first case to address whether a transition to a substantially part-time workforce in response to the Employer Mandate constitutes a violation of ERISA Section 510. The case is far from over and we do not know when it will be resolved. 

However, if you are considering reducing your employee hours, you should carefully consider how such reductions are communicated to your workforce. Employers often have varied reasons for reducing employee hours, and many of those reasons have legitimate business purposes. It is vital that any communications made to your employees about such reductions describe the underlying rationale with clarity. 

Be Prepared To Respond To Employer Notices Of ACA-Subsidized Employees

Beginning in Spring 2016, the Affordable Care Act (ACA) Exchanges/Marketplaces will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the “Employer Notice Program” to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance via an Exchange.

What are the Potential Penalties?

The notices will identify any employees who received an advance premium tax credit (APTC). If a full-time employee of an applicable large employer (ALE) receives a premium tax credit for coverage through the Exchanges in 2016, the ALE will be liable for the employer shared responsibility payment. The penalty if an employer doesn’t offer full-time equivalent employees (FTEs) affordable minimum value essential coverage is $2,160 per FTE (minus the first 30) in 2016. If an employer offers coverage, but it is not considered affordable, the penalty is the lesser of $3,240 per subsidized FTE in 2016 or the above penalty. Penalties for future years will be indexed for inflation and posted on the IRS website. The Employer Notice Program does provide an opportunity for an ALE to file an appeal if employees claimed subsidies they were not entitled to.

Who Will Receive Notices?

The first batch of notices will be sent in Spring 2016 and additional notices will be sent throughout the year.  For 2016, the notices are expected to be sent to employers if the employee received an APTC for at least one month in 2016 and the employee provided the Exchange with the complete employer address.

Last September, the Centers for Medicare and Medicaid Services (CMS) issued FAQs regarding the Employer Notice Program. The FAQs respond to several questions regarding how employers should respond if they receive a notice that an employee received premium tax credits and cost sharing reductions through the ACA’s Exchanges.

Appeal Process

Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable minimum value employer-sponsored coverage, therefore making the employee ineligible for APTC. An employer has 90 days from the date of the notice to appeal.  If the employer’s appeal is successful, the Exchange will send a notice to the employee suggesting the employee update their Exchange application to reflect that he or she has access or is enrolled in other coverage.  The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.

An employer appeal request form is available on the Healthcare.gov website. For more details about the Employer Notice Program or the employer appeal request form visit www.healthcare.gov.

Advice

Although CMS has provided these guidelines to apply only to the Federal Exchange, it is likely that the state-based Exchanges will have similar notification programs.

Employers should prepare in advance by developing a process for handling the Exchange notices, including appealing any incorrect information that an employee may have provided to the Exchange.  Advance preparation will enable you to respond to the notice promptly and help to avoid potential employer penalties.

Employers May Soon Be Forced To Reveal Pay Information By Gender

Businesses With 100 Or More Workers Would Be Subject To Proposed New Law Aimed At Combating Gender Discrimination

The federal government announced at the end of January 2016 its intent to gather additional pay information from larger employers, forcing all businesses with over 100 workers to provide detailed information about their pay practices in an effort to address gender discrimination. If the President’s plan moves forward as expected, employers will be subject to a heightened pay transparency standard by the end of this calendar year.

What Has Been Proposed?

The Obama Administration has proposed executive action through the Equal Employment Opportunity Commission (EEOC) to require certain businesses to provide detailed information about how much each of their employees is earning. Affected employers must break down pay information by gender, as well as race and ethnicity, after the law goes into effect in order to make it very easy to identify pay gaps.

Who Will Be Impacted?

This executive action will apply to all businesses that employ 100 or more workers. According to the White House, the proposal would cover more than 63 million Americans.

How Will Employers Report The Information?

Currently all employers with 100 or more workers already complete the EEO-1 form on an annual basis, providing demographic information to the government about race, gender, and ethnicity. Once the new revisions take effect, the EEO-1 form will also require that salary and pay information be included.

Why Has The Government Proposed This Change?

The federal government has specifically stated that the goal of this additional data-gathering is to identify businesses that might have pay gaps, and then target those employers who are discriminating on account of gender. It is no coincidence that this plan was announced on the seventh anniversary of the Lily Ledbetter Fair Pay Act, a federal law that overturned a Supreme Court decision and made it easier for employees to bring equal pay claims.

In other words, once this new law takes hold, the EEOC will have greater ease in identifying disparities and areas of potential pay discrimination to determine where it will take enforcement action.

When Will Employers Be Subject To The New Law?

If the proposal proceeds as scheduled, the draft revisions would be available for inspection and public comment between February 1, 2016 and April 1, 2016. The EEOC Chair has stated that she anticipates the rulemaking process to be completed by September 2016, when the new rules would officially go into effect. If this holds true, employers will have to submit their pay data for the first time in September 2017.

What Should Employers Do Now?

In light of these developments, affected companies should make it a priority to review current pay systems and identify and address any areas of pay disparity. It is critical to take steps now to minimize increased scrutiny once the data begins to be reported next year.

By conducting your own gender-specific audit of pay practices, you will be able to determine whether any pay gaps exist that might catch the eye of the federal government when you turn over this information next year. You will have time to determine whether any disparities that may exist can be justified by legitimate and non-discriminatory explanations, or whether you will need to take corrective action to address troublesome pay gaps.

Seven Questions Employees Will Ask About the ACA 1095s

You did it! Your 1095 forms are ready and going out to employees. Now what?

You guessed it: Employee confusion. You’re going to get some questions. If you’re the one in charge of providing the answers, remember a great offense is the best defense. You’ll want to answer the most common questions before they’re even asked.

We’ve put together a list of some basic things employees will want to know, along with sample answers. Tailor these Q&As as needed for your organization. and then send them out to employees using every channel you can (mail, e-mail, employee meetings, company website, social media, posters). Tell employees how to get more detailed information if they need it.

Employee questions about the 1095s:

1.    What is this form I’m receiving?
A 1095 form is a little bit like a W-2 form. Your employer (and/or insurer) sends one copy to the Internal Revenue Service (IRS) and one copy to you. A W-2 form reports your annual earnings. A 1095 form reports your health care coverage throughout the year.

2.    Who is sending it to me, when, and how?
Your employer and/or health insurance company should send one to you either by mail or in person. They may send the form to you electronically if you gave them permission to do so. You should receive it by March 31, 2016. (Starting in 2017, you should receive it each year by January 31, just like your W-2.)

3.    Why are you sending it to me?
The 1095 forms will show that you and your family members either did or did not have health coverage with our organization during each month of the past year. Because of the Affordable Care Act, every person must obtain health insurance or pay a penalty to the IRS.

4.    What am I supposed to do with this form?
Keep it for your tax records. You don’t actually need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not you had health insurance for each month of 2015. The Form 1095-B or 1095-C shows if you had health insurance through your employer. Since you don’t actually need this form to file your taxes, you don’t have to wait to receive it if you already know what months you did or didn’t have health insurance in 2015. When you do get the form, keep it with your other 2015 tax information in case you should need it in the future to help prove you had health insurance.

5.    What if I get more than one 1095 form?
Someone who had health insurance through more than one employer during the year may receive a 1095-B or 1095-C from each employer. Some employees may receive a Form 1095-A and/or 1095-B reporting specific health coverage details. Just keep these—you do not need to send them in with your 2015 taxes.

6.    What if I did not get a Form 1095-B or a 1095-C?
If you believe you should have received one but did not, contact the Benefits Department by phone or e-mail at this number or address.

7.    I have more questions—who do I contact?
Please contact _____ at ____. You can also go to our (company) website and find more detailed questions and answers. An IRS website called Questions and Answers about Health Care Information Forms for Individuals (Forms 1095-A, 1095-B, and 1095-C) covers most of what you need to know.

PTO Use May Be Required During Inclement Weather

It doesn’t usually sit well with employees, but they can be required to use their accrued paid time off (PTO) during inclement weather events, wage and hour attorneys say.

“Unless there is a state law restriction or a written policy to the contrary, employers may require employees to use their PTO to cover absences,” said Paul DeCamp, an attorney with Jackson Lewis in Reston, Va., and a former administrator of the Department of Labor’s Wage and Hour Division.

Relevant Policies

It’s important for an employer to have an inclement weather policy spelling out the rules that apply to exempt and nonexempt employees when the employer is open during inclement weather vs. when it is closed.

The rules for nonexempt employees are straightforward—they are paid only for the time worked. If the employer closes for some of a workweek due to inclement weather, it must pay an exempt worker their usual salary if the employee performs any work during the workweek, even if remotely.

A PTO policy might specifically reference the employer’s ability to require the use of PTO by employees to cover weather-related absences. If an employer closes the office and requires the use of PTO to cover the day, the impact on morale is likely to be negative—more so than if the office is open but the employer allows employees who can’t make it in to use a PTO day.  If the employer decides in advance to shut down and it turns out that the expected inclement weather does not materialize, employees who are forced to use PTO on a day they could have made it in will almost certainly react negatively.

It is important that employees understand the expectations about working away from work ahead of time, along with employees being required to accurately report all time worked. Employers should also have policies about how employees can challenge the accuracy of paychecks and the consequences for not making timely challenges.

Courts have held that employees who claim to have worked off-the-clock but who have not notified the employer about that worked time are not entitled to pay for that time.

If an employer stays open despite inclement weather and an exempt employee chooses not to work, that is a personal decision and the day may be docked without jeopardizing the exempt status.

Safety Considerations

A written policy is an opportunity for an employer to underscore the importance of employees’ safety when determining closures or whether employees should attempt to report to work in inclement conditions.

Employers sometimes ask whether they may discipline employees for choosing to stay home during inclement weather. The employer does not want to allow employees to hinder operations or to force a closure, but the last thing an employer wants to see is a situation where a supervisor orders an employee to come to work in a snowstorm and the employee gets into a car accident. Employers should think very carefully before disciplining in this situation and to err on the side of employee and public safety.

PTO Deficits

One of the most common questions employers have during inclement weather is if they can force employees with insufficient PTO balances to go into a negative balance situation, or, in other words, whether they can advance the employee extra PTO and then recoup that advance over time.

Generally, an employer can do that, assuming the practice complies with state law and the employer’s written policies.

Another frequent issue that arises is how to treat PTO deficits upon an employee’s separation from employment. State law will dictate whether and when employers may deduct the negative PTO balance from the final pay of nonexempt employees.

For salaried exempt employees, whether the employer can deduct that balance from final pay depends on whether the employer could have deducted it from the employee’s pay at the time of the absence—the missed time that gave rise to the PTO deficit.

Reminder: OSHA 300A Logs Must Be Posted by Feb 1st

All OSHA 300A logs must be posted by February 1st in a visible location for employees to read. The logs need to remain posted through April 30th.

Please note the 300 logs must be completed for your records only as well. Be sure to not post the 300 log as it contains employee details. The 300A log is a summary of all workplace injuries and does not contain employee specific details. The 300A log is the only log that should be posted for employee viewing.

Please contact our office if you need a copy of either the OSHA 300 or 300A logs.

What Employers Legally Can and Can’t Ask During a Job Interview and Salary Negotiation

“Where are you from?” It’s an easy conversation starter and suitable in most settings except a job interview.

 
So too, are other common social inquiries like, “Are you married,” “When did you graduate,” or “Have I seen you at my church?” Asking a candidate the questions may signal a red flag to the prospective employee as well as signal a lack of understanding of workplace anti-discrimination laws, or worse, no concept of workplace diversity.

  
The above examples can lead to information about a candidate’s national origin, marital status, sexual orientation, age, or religion. It is illegal to ask any questions that may illicit information about any status protected by federal, state, or local laws. The interviewer’s questions should stay focused on top-level priorities related to the job’s essential duties, such as the candidate’s work history as it pertains to the position, or availability for certain work shifts.

Other inappropriate interview questions include:

• Have you ever been arrested?
• Is English your native language?
• Are you a US citizen?
• Are you planning on having children?
• Have you ever been injured on the job?
• How many sick days did you take last year?
• Why were you discharged from the military?
• Do you like to drink socially?
• When is the last time you used illegal drugs? (But not: Do you currently use illegal drugs?)

Not always so easy

A trickier area is when candidates might need a religious or disability-related accommodation. An employer has to walk a fine line of not asking improper questions about these two protected categories, while not ignoring the obvious. The Supreme Court's 2015 decision in the Abercrombie & Fitch case, involving the interplay of its dress code policy and a job candidate who wore a hijab to an interview, shows how difficult this balancing act is. 
It’s up to the candidate to speak up and request a reasonable accommodation to assist in the interview and application process (though to be clear, accommodation requests related to the job itself belong in the stage between an offer being made and the start date).

Post-offer considerations

Receiving a job offer may lead to another phase—salary negotiation.  Here, an employer is less restricted than you may think. You can ask the candidate about their salary history and salary requirements (and confirm this information by asking for W2s, if you choose), although a candidate is not legally required to provide it.

As for benefits like paid time off, a candidate should not assume they are legally entitled to them. For example, no state has passed mandatory paid vacation, so that also remains a point of negotiation. However, several states and cities have passed paid sick leave laws, and some even now include pregnancy or childbirth-related disabilities within their coverage (watch for that to be specified and explained in jurisdictions like California, Connecticut, Oregon, or Seattle and San Francisco). Make sure to put any negotiations in writing before offering the position to the candidate to avoid any future miscommunication.

Late Breaking Benefits News for 2016

Congress and the IRS were busy changing laws governing employee benefit plans and issuing new guidance under the ACA in late 2015. Some of the results of that year-end governmental activity include the following:

Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

The PATH Act, enacted by Congress and signed into law on December 18, 2015, made some the following changes to federal statutory laws governing employee benefit plans:

• The ACA’s 40% excise tax (aka “Cadillac Tax”) on excess benefits under applicable employer sponsored coverage — so called “Cadillac Plans,” due to the perceived richness of such coverage — is  delayed from 2018 to 2020.

• Formerly a nondeductible excise tax, any Cadillac Tax  paid by employers will now be deductible as a business expense.

• Beginning with plan years after November 2, 2015,  employers with 200+ employees will not be required to automatically enroll new or current     employees in group health plan coverage, as originally required under the ACA.

• After December 31, 2015, individual taxpayers who purchase private health insurance via the Healthcare Exchange will not be eligible to claim a Health Care Tax Credit on their tax returns.

IRS Notice 2015-87

On December 16, 2015, the IRS issued Notice 2015-87, providing guidance on employee accident and health plans and employer shared-responsibility obligations under the ACA. Guidance provided under Notice 2015-87 applies to plan years that begin after the Notice’s publication date (December 16^th), but employers may rely upon the guidance provided by the Notice for periods prior to that date.

Notice 2015-87 covers a wide-range of topics from employer reporting obligations under the ACA to the application of Health Savings Account rules to rules for identifying individuals who are eligible for benefits under plans administered by the Department of Veterans Affairs. Following are some of the highlights from Notice 2015-87, with a focus on provisions that are most likely to impact non-governmental employers.

• Under the ACA, an HRA may only reimburse medical expenses of those individuals (employee, spouse, and/or dependents) who are also covered by the employer’s group health plan providing minimum      essential coverage (“MEC”) that is integrated with the HRA.

• Employer opt-out payments (i.e., wages paid to an employee solely for waiving employer-provided coverage) may, in the view of Treasury and the IRS, effectively raise the contribution cost for employees who desire to participate in a MEC plan. Treasury and the IRS intend to issue      regulations on these arrangements and the impact of the opt-out payment on the employee’s cost of coverage. Employers are put on notice that if an opt-out payment plan is adopted after December 16, 2015, the amount of the offered opt-out payment will likely be included in the employee’s cost of coverage for purposes of determining ACA affordability.

• Treasury and the IRS will begin to adjust the affordability safe harbors to conform with the annual adjustments for inflation applicable to the “9.5% of household income” analysis under the ACA. For plan years beginning in 2015, employers may rely upon 9.56% for one or more of the affordability safe harbors identified in regulations under the ACA, and 9.66% for plan years beginning in 2016. For example, in a plan year beginning in 2016, an employer’s MEC plan will meet affordability standards if the employee’s contribution for lowest cost, self-only coverage does not exceed 9.66% of the employee’s W-2 wages (Box      1).
• To determine which employees are “full-time” under the ACA, “hours of service” are intended to include those hours an employee works and is entitled to be paid, and those hours for which the employee is entitled to be paid but has not worked, such as sick leave, paid vacation, or periods of legally protected leaves of absence, such as FMLA  or USERRA leave.

• The Treasury and IRS remind applicable large employers that they will provide relief from penalties for failing to properly complete and submit Forms 1094-C and 1095-C if the employers are able to show that they made good faith efforts to comply with their reporting obligations.

The IRS Gives A Holiday Gift to Applicable Large Employers – 2015 ACA Reporting is Delayed

In the recently released Notice 2016-4, the IRS has extended the due dates for certain 2015 Affordable Care Act information reporting requirements.

Specifically, the Notice extends:

• the due date for furnishing to individuals the 2015 Form 1095-B and Form 1095-C from February 1, 2016, to March 31, 2016, and

• the due date for filing with the IRS the 2015 Form 1094-B, Form 1094-C and Form 1095-C from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

In the Notice, the IRS also grants special relief to certain employees and related individuals who receive their Form 1095-C or Form 1095-B, as applicable, after they have filed their returns:

• For 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns will NOT be required to amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C.

• For 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns will NOT be required to amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections.

Thus, generally, employers should not be concerned that furnishing these Forms on a delayed basis in accordance with the Notice will force employees to file amended 2015 income tax returns.

Finally, the extensions do not require the submission of any request or other documentation to the IRS and have no effect on information reporting provisions for other years.