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Key Elements of a Good Health Benefit Plan for Small Companies

Posted on January 31st, 2020

The cost of providing health insurance for employees and their families is expected to be five percent higher this year than in 2019.

The National Business Group on Health estimates that the average cost of coverage for an employee and their family will be $15,375. This is obviously bad news for small employers, even though they are not required by the federal employer mandate to offer coverage if they have 50 or fewer full-time equivalent employees. However, many small employers feel that offering health benefits is necessary as a way to attract and retain valuable employees.

Another advantage of offering group health insurance is that it’s usually less expensive to spend money on employees’ coverage than using the same money to provide higher wages. Payroll and income taxes are not assessed on employers or employees on funds used to purchase health insurance. Generally, taxes also are not assessed on the portion of premiums that employees pay.

Most employers assume that traditional group health insurance is their only option, and many employees like traditional health insurance because they’re familiar with how it works. Employers purchase coverage through an insurance broker and pay a fixed premium to the insurance provider. Employees who are participating in the plan usually pay a portion of the premium and are responsible for the copays and deductibles.

The downside to traditional insurance is that group health insurance premiums have increased significantly in recent years. The least expensive policies usually have higher deductibles, which can be difficult for employees to pay.

In this environment, many small employers are looking beyond traditional coverage for affordable options, which include:

QSEHRAs

A Qualified Small Employer Health Care Reimbursement Arrangement (QSEHRA) allows companies with fewer than 50 full-time equivalent employees to contribute tax-deductible funds to a health reimbursement account (HRA). Employees purchase the health care they need, like individual insurance policies, prescriptions, medical services and dental services and then are reimbursed. Expenses that are reimbursed through a QSEHRA are free of payroll taxes for businesses and their employees, including social security, Medicare and unemployment tax.

A small business that qualifies and chooses to offer a QSEHRA cannot offer a group health plan to its employees. Also, it can limit the benefit to only full-time employees.

ICHRAs

New and effective Jan. 1, 2020, is a plan called Individual Coverage Health Reimbursement Arrangement (ICHRA). Similar to a QSEHRAs, an ICHRA is a company-funded, tax-free health benefit that allows businesses to reimburse their employees for personal health care expenses. The difference is that this arrangement is available to businesses of any size. With no annual allowance caps, businesses may offer different amounts of tax-free money based on different classes of employees: full-time, part-time or seasonal.

Self-funded Health Insurance

Self-funding is when a company pays for employees’ out-of-pocket health care claims as they arise instead of paying fixed premiums to an insurance provider. The Self-Insurance Educational Foundation says cost savings in non-claims expenses alone can range from 10 to 25 percent. You will probably also want to contract with a third-party administrator (TPA) to handle claims management. 

Previously, self-funding only was an option for large businesses that could afford potentially high claims. To reduce the possibility of high claims depleting a claims fund or risking unknown monthly costs, many companies opt to do level funding by pairing the fund with a stop-loss policy limiting the potential financial burden. Self-funding, or level funding allows employers to keep unused money from their fund.

Taxable stipends

Another option for employers is to give employees an informal wage increase (taxable stipend) to purchase health care services. The downside is that the funds are taxable for both the employees and the business and employees might not use the funds for health care premiums.

Association Health Plans

Some states allow companies to band together to purchase health insurance at lower prices than purchased separately. However, the rules for Association Health Plans (AHPs) are up in the air. A federal judge ruled in March 2019 that several key aspects of the Trump Administration’s 2018 rules relating to AHPs are unlawful. The Trump Administration could appeal that ruling, but the judge also granted the option to revise the new rules. Some observers are concerned that increased access to AHPs could destabilize the ACA-compliant individual and small group markets

Please contact us if you have any questions at info@aleragroup.com.

Basic Steps to Avoid Discrimination in the Workplace

Posted on January 27th, 2020

Workplace discrimination takes many forms, but sound policies and procedures can reduce the occurrences.

The U.S. Equal Employment Opportunity Commission (EEOC) reported that in 2018 it resolved 90,558 charges of workplace discrimination and collected $505 million for victims. Retaliation was the most frequently filed charge, followed by sex, disability and race.

What does this mean for employers? According to CERS (Cutting Edge Recruitment Solutions), the average out-of-court discrimination settlement for an employer is about $40,000 and the majority of cases are ruled in the plaintiff’s favor. Ten percent of wrongful termination and discrimination cases result in $1 million settlements.

Not all discrimination, though, deals with sex, disability or race. Another form of discrimination is when employers fail to offer benefits equally to all employees. For instance, granting special accommodations to one employee and not another — such as granting extra time off — can lead to inconsistencies, which can lead to lawsuits. Make sure you apply policies equally when dealing with promotions, vacation, pay, assignments, awards, discipline and termination.

Here are some guidelines for staying compliant with the law and making your company a more respectful workplace:

Based on Salaries

•    Respect non-exempt status: You must pay your employees overtime if they work more than 40 hours per week. However, there is an exemption, and this is where it gets tricky. You do not have to pay exempt employees, and they do not qualify for minimum wage because they are paid for work performed, not for the hours they work. There are strict guidelines as to who qualifies for status as an exempt employee, outlined by the federal government’s Fair Labor Standards Act and some state regulations. For an employee to be considered exempt, they must use their independent judgment in performing their duties at least 50 percent of the time and must earn more than $455 per week. An example of an exempt employee would be an executive who supervises at least two employees and makes decisions to hire or fire employees. 

•    Base pay on job requirements: Salaries should be based on what the market demands, not on what a new employee made in a previous job or how long you’ve known that employee. If two employees are doing the same job, their salaries should be similar, although they do not have to be exact. Performance can be a factor. 

•    Don’t deduct from exempt employees’ paychecks: You don’t pay exempt employees for overtime. But you also can’t dock their pay if they leave work early. Plus, if you dock your exempt employees’ checks for missing partial days, you’ve automatically made them non-exempt and you may owe them overtime.

•    Pay non-exempt employees for all of the time worked: It is illegal for you to make an employee work off the clock. It also is illegal for an employee to work off the clock when you tell them not to. If they do, you must pay them for the time they worked before you can fire them.

Based on Hiring and Firing Practices

•    Follow discrimination law: You must hire people based on their qualifications. You cannot discriminate on the basis of race, gender, age, national origin, disability, religion, sexual orientation or pregnancy. Some states and localities have additional laws regarding discrimination. However, it is legal to discriminate based on weight, unless the weight is considered a disability.

•    Document everything: Don’t fire any employee for poor performance or other issues unless you have documented the circumstances at least twice. Also, don’t be in a hurry to terminate an employee. In addition to being well documented, the decision to terminate someone’s employment should at least be reviewed by more than one manager and involve someone with Human Resources training. Also, consider offering severance which can reduce the chance of a lawsuit.

Based on Employee Actions

•    Make it Easy to Report Complaints:  Provide more than one option for employees to complain about discrimination so that they can bring legitimate issues to management’s attention. This also ensures that a supervisor cannot hide issues from Human Resources and upper management. The sooner you learn about a problem, and investigate, the sooner you can fix it. 

•    Train Your Managers: Your managers need to be aware of potential discrimination issues in the workplace and how to handle complaints. If not handled properly, they can become lawsuits. Also, ensure that you have specialists knowledgeable in the Family and Medical Leave Act (FMLA) and the Americans With Disabilities Act (ADA) rules and regulations.

•    Have a good handbook: Include up-to-date policies on issues including at-will employment; equal employment and harassment issues; work hours; leave and accommodation under the FMLA and the ADA; workplace violence; trade secrets and confidentiality of company information; and work rules and the consequences for violating them. Employees should acknowledge that they received and read the handbook.

Please contact us at info@aleragroup.com if you need more information. 

Alera Group Acquires Muench Financial, Inc.

Posted on January 23rd, 2020

Alera Group, a national employee benefits, property and casualty, retirement services and wealth management firm, today announced that it has acquired Muench Financial, Inc., effective December 31, 2019.

Muench Financial, located in Seattle, Washington, works with small and medium-sized businesses throughout the Northwest. The firm works with clients in a variety of capacities, with service offerings including evaluating retirement plan features, plan participant education, monitoring and evaluating plan investments, and implementing effective retirement programs.

“Jon Muench and his team bring an exciting new element to Alera Group’s wealth management practice,” said Alan Levitz, CEO of Alera Group. “We are proud to have them as part of Alera Group working with Jeff Albers, Director of Retirement Plan and Wealth Management. Their expertise will help us continue to provide clients in the Northwest with industry-leading solutions.”

“We are excited to join Alera Group, and we look forward to continued growth with the power of national resources behind us,” said Jon Muench, President of Muench Financial. “Our goal, as always, is to serve our clients with excellence, and as an Alera Group company, we will be even better equipped to do that.”   

Muench Financial, Inc., joins Alera Group through Wilson Albers. The Muench Financial team will operate out of Alera Group’s Seattle office. Terms of the transaction were not disclosed.

Alera Group was formed in early 2017 and is one of the nation’s foremost independent insurance agencies. For more information on partnering with Alera Group, visit Partner With Us at www.aleragroup.com.

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About Alera Group
Based in Deerfield, IL, Alera Group’s over 1,800 employees serve thousands of clients nationally in employee benefits, property and casualty, retirement services and wealth management. Alera Group is the 15th largest privately held firm in the country. For more information, visit www.aleragroup.com or follow Alera Group on Twitter: @AleraGroupUS.

M&A Contact
Rob Lieblein, Chief Development Officer
Email: rob.lieblein@aleragroup.com
Phone: 717-329-2451

Media Contact
Jessica Tiller, Weiss PR
Email: jtiller@weisspr.com
Phone: 443-621-7690

Congress Repeals Unrelated Business Income Tax for Tax-Exempt Entities Offering Qualified Transportation Fringe Benefits

Posted on January 15th, 2020

As part of the Further Consolidated Appropriations Act, 2020 (the “Act”), Congress repealed Section 512(a)(7) of the Internal Revenue Code of 1986 (the “Code”). This Code section was added as part of the Tax Cuts and Jobs Act of 2017 (the “TCJA”) and resulted in an unrelated business income tax (UBIT) liability when a tax-exempt entity provides qualified transportation benefits to employees.  The repeal is effective retroactively to December 22, 2017, the date the TCJA was enacted. Tax-exempt entities who paid an UBIT on transportation benefits in the last two years should be able to obtain a refund.

About UBIT and Qualified Transportation Fringe Benefits

The UBIT on qualified transportation fringe benefits only affected tax-exempt entities. UBIT generally applies to income that is not related to an entity’s exempt purpose, so it was unclear why Congress targeted expenses related to providing parking or transportation for employees.  Under the TCJA, tax-exempt entities offering qualified transportation fringe benefits to their employees were exposed to a 21% UBIT tax.  The tax applied regardless of whether the employer was providing the benefits or whether employees were paying pre-tax.

Qualified transportation benefits include transit passes, parking, and commuter highway vehicle rides. Notably, the amount of the UBIT was based on the qualified transportation benefit expenditures instead of the entity’s income. As a result, tax-exempt entities were experiencing larger UBIT bills, even though employees may have been paying for the benefits themselves via salary reduction.

What the Repeal Does

Under the Act, the UBIT for tax-exempt entities who offered qualified transportation fringe benefits is retroactively repealed. This means that tax-exempt entities are no longer subject to UBIT on qualified transportation benefits and should also be able seek a refund of taxes paid.  The IRS may issue further guidance or establish a separate process for refunds.

With this repeal, tax-exempt entities can continue to provide employees with qualified transportation benefits without incurring a 21% tax. This should be a relief to affected employers, who can continue to offer these transit benefits without exposure to an UBIT. 

 

About the Authors.  This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Stacy Barrow or Alyssa Oligmueller at sbarrow@marbarlaw.com or aoligmueller@marbarlaw.com.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2020 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.

Rules and Exceptions When Providing Benefits to Same Sex Couples

Posted on January 13th, 2020

Employers who offer benefits to spouses must also offer them to same-sex couples though there are exceptions.

The U.S. Supreme Court ruled in 2015 that the rights of same-sex couples are protected under the due process and equal protection clauses of the Fourteenth Amendment to the U.S. Constitution. Therefore, employers who offer benefits to employees’ spouses also must extend those benefits to those with same-sex spouses.

However, there are some exceptions as to when you must offer benefits to spouses and that’s where it can get tricky.

In addition, some employers offer domestic partner benefits to same-sex couples. Many employers are discontinuing domestic partner benefits because they are harder to administer and they have negative tax implications.

Here are some popular benefits and who is eligible for each:

Health Insurance

The Affordable Care Act (ACA) requires all employers with 50 or more full-time equivalent employees to offer health insurance. However, the law does not require employers — large or small — to offer these benefits to employees’ spouses. But if employers do, and the insured employee is forced to leave their job, the employee and a covered spouse can continue health coverage through COBRA, regardless of sexual orientation.

The exception to the law is employers who self-fund their health benefits. Self-funded coverage is not technically considered health insurance. It’s an employee benefit and is covered under ERISA (Employee Retirement Income Security Act) laws and regulations. Therefore employers are not required by ACA law to provide coverage for same-sex spouses.

Leave Benefits

The Family and Medical Leave Act (FMLA) requires covered employers to provide eligible employees with unpaid, job-protected leave for up to 12 weeks for qualified medical and family reasons, including personal or family illness, family military leave, pregnancy, adoption, or foster care placement. As of 2015, the Department of Labor designates same-sex spouses as legal spouses. However, FMLA rules do not apply to small employers (those with fewer than 50 employees).

Health Savings Accounts

Employees who have a Health Savings Account, Health Reimbursement Account (combined with a high deductible plan) or Flexible Spending Account can set aside money on a pre-tax basis to pay for qualified medical expenses.

Employees who contribute to these types of savings accounts also can use the benefit to pay for their spouse’s medical expenses. Both opposite-sex and same-sex spouses can contribute up to the maximum family contribution.

Retirement Plans

Retirement plans, such as 401(k) plans, must provide survivor annuities when an employee is married or offer the participant’s account balance at death to a spouse.

The exception is government or church plans. Neither is required to provide a qualified joint and survivor or qualified pre-retirement survivor annuity, nor must spousal benefits be provided at death. These government and church plans also are not required to provide these benefits to same-sex spouses.

Workers’ Compensation

Workers’ compensation is accident insurance provided by employers, and most states require employers to carry or self-fund this coverage for their employees. Workers’ compensation pays benefits to a same or opposite sex spouse if the employee dies on the job. 

New Hardship Distribution Rules for Retirement Plans

Posted on January 8th, 2020

The Internal Revenue Service (IRS) has made it easier for employees to make withdrawals from their retirement plans during the time of hardship. The IRS also made it easier for employees to rebuild their accounts.

Some of these changes affecting 401(k) and 403(b) plans are mandatory, requiring employers to have made the changes by Jan. 1, 2020, while others are optional.

The final rule does the following:

•   No longer requires employees to wait six months after employment before making contributions to their employer-sponsored retirement plan.

•   Allows employees to withdraw earnings on 401(k) contributions, and on profit-sharing and stock-bonus contributions in time of hardship. Previously, employees could only withdraw contributions, not earnings. Earnings on 403(b) contributions would remain ineligible for hardship withdrawals.

•   Makes it easier for plan administrators to determine if a hardship withdrawal is necessary by only requiring that a distribution not exceed what an employee needs. Also, employees must certify that they lack enough cash to meet their financial needs.

Optional changes that only will be made if adopted by the employer:

•   No longer requires employees to take a plan loan before making a hardship withdrawal.

•   The list of allowed hardships for taking a hardship withdrawal now can include the following for a participant, their spouse or children or other dependents: medical, education and funeral expenses.

Plans allowing hardship distributions will need to be amended to reflect the new rules. Please contact us for more information.

Dental Insurance Promotes Overall Health

Posted on January 2nd, 2020

Providing employees the opportunity to purchase dental insurance is not enough. Employee education is an important element when you offer voluntary benefits.

A 2019 survey by the National Association of Dental Plans shows that approximately 47 percent of adults participate in employer-sponsored dental insurance plans but less than half of insured adults use their dental insurance and only 4.2 percent reach the annual maximum.

The American Dental Association reports that the primary reason people don’t go to the dentist is cost. That’s followed by fear of the dentist and the inability to find convenient locations or appointment times.

A dental exam can detect the signs of more than 120 diseases. For instance, dentists can detect signs of conditions such as diabetes or AIDS by the presence of mouth lesions or other oral problems. Periodontitis, which can lead to tooth loss, is often linked to health problems such as cardiovascular disease, stroke and bacterial pneumonia. Women who are pregnant and have periodontitis have increased risk of delivering pre-term and/or low-birth-weight infants.

The typical dental plans typically provide 100/80/50 coverage, because they cover:

•   100 percent of the cost for preventive care, such as exams, cleanings and X-rays received during an average dental checkup. Teeth should be cleaned at least twice a year.

•   Seventy to 80 percent of procedures like fillings, extractions and periodontal work.

•   50 percent or less of major procedures including crowns, root canals, dentures, bridges, or implants.

To ensure your employees get the most from their dental benefits, emphasize the importance of good oral health — not only during open enrollment — but throughout the year. Remind them they can typically visit the dentist and get a checkup for little to no out-of-pocket cost.

Also, if you have a PPO plan, encourage employees to visit dentists in their plan’s network as a way to lower costs.  If you have any questions, please contact us at info@aleragroup.com. 

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