Why Voluntary Benefits Are No Longer Voluntary for Employers

Are You Missing an Opportunity?

By Karen English, CPCU, ARM and Lai-Sahn Hackett, CPDM

 

Introduction to Voluntary Benefits

Gone are the days of “voluntary” being frowned upon in the workplace.  We are past the stage of employer unease with the concept and the resulting worry about “selling” to employees.  Instead, voluntary benefits have become a welcome addition – some would even say critical – yielding increasingly competitive employee benefits packages that couldn’t be offered without them.

we are at a point where employers welcome voluntary benefits, yielding increasingly competitive employee benefits packages that couldn’t have been reached without them.Voluntary Benefits Dental Insurance

Voluntary benefits are insurance products or services made available by employers, but paid for by employees.   They are typically offered at lower rates than employees can find on their own, and provide a degree of choice beyond an employer’s core benefit offering.  There are a number of insurance carriers that underwrite them with products ranging from traditional life, disability, dental and vision to emerging concepts such as critical illness, identity theft protection and student loan repayment.

Employers like voluntary benefits because they make their packages stronger and tailored to the wants and needs of their specific workforce. Employees like them because they are easily accessible, pre-vetted, discounted and more diverse than traditional benefits. Carriers, brokers and consultants like them because they are a needed extension of employer core offerings.

Employer Need

Voluntary Employee BenefitsIn today’s competitive environment, employers are striving to maintain relevant benefit offerings despite increasing costs and the continuing uncertainty of healthcare reform.  The constant need to attract and retain talent and increase productivity is even further challenged by evolving workforce demographics and degree of consumerism being applied to every interaction. Further, a recent survey found that sixty percent of employees are likely to take a job with lower pay but better benefits, emphasizing the importance of a robust benefits program made possible, in part, through voluntary products1.

However, it should not be looked at with a one-size-fits-all approach. Employers can no longer look across their employee populations and make a short list of benefits that will fulfill their collective needs.  With millennials now equaling the baby boomers in number, and generation X’ers on their way to surpassing both, employers need to think about not only age and gender, but also personas within these segments, such as what is warranted by income and lifestyle2.

Market Response

In recognition of these needs, insurance carriers have expanded their capabilities beyond what are typically core employer-paid benefits to what are often referred to as supplemental employee-paid benefits that can either be stand-alone or structured as buy-ups to core plans.  This expansion has opened up possibilities for employers, as they are no longer subject to a subset of specialty carriers and brokers with limited and often self-serving products. They instead can turn to over twenty3 of the most recognized life and health carriers to fulfill the widespread needs of their employees.Voluntary Benefits Trends

These carriers are partnering with employers, brokers and consultants to design voluntary programs that will resonate with employee populations.  Whether it is employee health, wealth, security and/or personal needs that an employer is looking to address, the products that can respond are broad, appealing and growing.  Considering the category of health, for example – accident, critical illness, dental and hospital indemnity are among the most common voluntary benefits offered4.  Within the category of wealth – optional disability, financial counseling and student loan repayment are highly popular. With respect to security, identity theft protection is projected to be the fastest growing voluntary benefit and within the personal sphere, pet insurance is following suit5.

How to Get Started

If you are grappling with how to find that happy medium for your workforce, taking the following steps will give you a start.

1. First and foremost, assess what your employees are interested in. At this point of conducting employee surveys and/or focus groups, you aren’t making any promises, just trying to listen and understand which voluntary products would be more valued than others.Voluntary Benefits Prices

2. Armed with this information, consider what your population can afford. You may find, for example, that six voluntary products are of most interest to your workforce. This doesn’t mean that employees can afford to buy all six.  In fact, we find that no matter how many are offered, employees purchase no more than three voluntary products at any given time6.

3. From here, think about resources to enroll and administer voluntary benefits. You may already have a technology platform you will want to leverage, or existing relationships with a set of carriers and enrollment firms that can help streamline the process.

Employee Benefits Communications4. Lastly and most importantly, contemplate not only how you will communicate their availability, but ultimately why employees should consider them. Employee education is critical to the reception of voluntary benefits, and the value proposition or “need” has to be clear for a benefit to even be considered7. This need should ideally be developed and communicated prior to the enrollment period, not during enrollment when the employee has likely already made up their mind and is not as open to processing new information.

Conclusion

In closing, the world of voluntary benefits looks very different than it did even five years ago. This shift is a result of a variety of factors including the rising costs of healthcare, changing workforce demographics, the increasing customizability of services in general, and the growing challenges presented by recruitment and retention. We are at a moment in time where stakeholders – employers, employees, carriers, brokers/consultants and more – are aligned and where there are great options for all parties.  The opportunities are endless and can be considered as a short-term strategy for now, with a longer-term view established based on the initial roll-out results.

 

Sources:

2016 Aflac WorkForces Report, op.cit
Pew Research Center, Millennials Overtake Baby Boomers as America’s Largest Generation, April 25, 2016
3 Spring Consulting Group and Gen Re Voluntary Pulse Market Update, 2016
4 Spring Consulting Group and GenRe Voluntary Market Pulse, 2016
5 Willis Towers Watson Voluntary Benefits Survey, 2016
6 Spring Consulting Group and GenRe Voluntary Employee Pulse, 2015
7 Spring Consulting Group and GenRe Voluntary Employee Pulse, 2016

 

Deconstructing ACA “Repeal and Replace”

The efforts to “repeal and replace” the Affordable Care Act (ACA) have occupied a good deal of recent media attention. This should not come as a surprise, since the ACA’s repeal was one of the centerpieces of Mr. Trump’s campaign, and it has also been a staple of Republican campaigns and legislation for the past eight years. The U.S. House of Representatives has voted to repeal or cripple the ACA on 60 separate occasions during that time. (For an excellent summary of these efforts, please see the November 2016 paper, prepare by Stephen Redhead, Health Policy Specialist, and Janet Kinzer, Senior Research Librarian, Congressional Research Service, entitled Legislative Actions to Repeal, Defund, or Delay the Affordable Care Act.)

aca repeal and replace

Image credit: Phil Roeder via flickr

While the mantra “repeal and replace” has become ubiquitous with reference to the ACA, for important political, budgetary and procedural reasons, these are really two different concepts, with radically different consequences. “Repeal” has a very different political calculus than “repeal and replace.”

What an ACA Repeal Really Means:

Despite their campaign promises, Republican lawmakers lack sufficient votes to repeal the ACA outright. This would require 60 votes in the Senate; Republicans have 52. So they must instead rely on a special budget strategy—referred to as “reconciliation”—that permits them to repeal those provisions of the ACA that directly impact federal spending. Created by the Congressional Budget Act of 1974, reconciliation allows for expedited consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills aren’t subject to filibuster. Because any controversial bills in the Senate tend to attract a filibuster, the Senate Parliamentarian reviews the bill and decides whether it qualifies for reconciliation. Under the so-called Byrd rule, reconciliation bills can only make legislative changes that affect the federal budget. A previous ACA repeal bill was approved for budget reconciliation, which passed by the Senate in December of 2015. The bill was vetoed by President Obama, however.

The ACA is a massive law with 10 titles and hundreds of provisions. Of these, it is the insurance reforms, the individual and employer mandates, and the exchanges/marketplaces that are the most well-known. But the ACA also includes Medicare reforms, workforce provisions, FDA approval of biosimilars, and the many other provisions.

Repeal – The Reconciliation Process

Of all of the ACA’s many provisions, the following items are those that can be addressed by reconciliation in a stand-alone “repeal” measure (i.e., that can pass be a simple majority in the Senate):

  • Individual mandate penalty reduced to zero
  • Employer mandate reduced to zero
  • 40% excise tax on so-called Cadillac plans repealed (currently delayed until 2020). The excise tax may be replaced with a cap on the amount excluded from the employee’s income for employer-sponsored health plan coverage.
  • Increase the dollar limit on flexible health spending account contributions for Section 125 cafeteria plans (currently set at $2,600 for 2017)
  • Federal government subsidies for individuals to purchase exchange coverage reduced to zero (likely to be phased in over time)
  • Federal government “risk stabilization” payments to insurance companies reduced to zero (likely to be phased in over time)
  • Federal government payments to states adopting the optional Medicaid expansion reduced to zero, with Medicaid payments as block grants

A complete list of ACA provisions that are subject to repeal under the reconciliation process can be found in Table 3 of the Congressional Research Service paper cited above.

Replace – Requires 60 Votes

In contrast, the following items may not be repealed using reconciliation. This means that 60 votes will be required in the Senate to proceed:

  • Coverage mandates for insured and employer self-insured group health plans:
    • Coverage of adult children to age 26
    • Prohibitions on imposing:
      • Preexisting condition coverage exclusions
      • Waiting periods exceeding 90 days
      • Annual and lifetime dollar limits on essential health benefits
      • Reporting requirements (e.g., Summary of Benefits and Coverage)
      • Other ACA insurance mandates (the full list is set out below)
    • Additional ACA Requirements for Non-Grandfathered Plans:
      • Coverage of preventive services without cost-sharing (the regulatory interpretation of “preventive services” as including contraceptive coverage is likely to be changed eventually by new regulations under a Trump Administration)
      • Limits on employee cost-sharing
      • Independent external review of denied claims for plans not already subject to IRO under state insurance laws
    • Insurance Market Reforms
      • Small employer insurance plans required to offer coverage of all ten essential health benefits
    • The requirement to report the cost of employer-sponsored health plan coverage on Form W-2 cannot be repealed via budget reconciliation

Any attempt to repeal these provisions through normal legislative channels would be subject to a filibuster. Consequently, these provisions would remain in effect even if the ACA revenue provisions were repealed under a reconciliation measure. (A complete listing of the insurance market reforms is provided in the accompanying tables.)

Ignore – No Change

There is alternative to the handling of the ACA insurance market reforms, which are enforced through an excise tax penalty imposed on the employer. The Penalty is $100 per affected individual, per day, and it applies to any employer (regardless of the size of its workforce) that offers a group health plan that fails to comply with the ACA’s market reform requirements. Congress could reduce the excise taxes to zero. Or the the Trump Administration might adopt a non-enforcement policy regarding some certain market reform violations, but still enforce other popular market reforms (e.g., coverage of adult children up to age 26).

The “state of play”

There are currently at least five separate “repeal and replace” proposals. There are no stand-alone “repeal” proposals. Among other things, there is widespread concern that the repealing the ACA without providing a replacement would destabilize the insurance markets, and even lead to the collapse of the non-group market. The reasons for this collapse are explained in compelling fashion in a study by the Urban Institute, which claims that repeal of the ACA without replacement would devastate the non-group market “causing 7.3 million . . . people to become uninsured” as a result of three factors:

  • Eliminating premium tax credits and cost-sharing assistance would make coverage unaffordable for many of the people currently enrolled, causing them to drop coverage. Those with the fewest health problems would drop their coverage fastest
  • Eliminating the individual mandate penalty would reduce the incentive to enroll for healthy people who can afford coverage
  • Insurers would remain subject to the requirement to sell coverage that meets adequacy standards to all would-be purchasers, and they would remain subject to the prohibition against charging higher premiums or offering reduced benefits to those with health care needs

While we find the Urban Institute’s analysis compelling, Congressional Republicans are almost certainly aware of this risk, and they may be prepared to appropriate funds necessary to stabilize the insurance markets pending passage of comprehensive ACA replacement legislation.

The impact of repeal and replace on Government programs (Medicare and Medicaid)

Medicare

The ACA made some valuable, and correspondingly costly, changes to Medicare. Among other things, it expanded Medicare coverage to include certain preventive services, like mammograms or colonoscopies, without charging Part B coinsurance or deductible. In addition, the ACA phased out the prescription drug “donut hole.” Finally, the law took steps to ensure the Medicare program’s long-term solvency. All of this would be rolled back in the case of a full-blown ACA repeal. But at least one of the major replacement plans proposes to leave the ACA changes to Medicare intact. Presumably, this is a nod to popularity of the phase-out of the prescription drug donut hole.

One replacement plan (proposed by Rep. Paul Ryan) does not stop here. It instead proposes “transforming the [Medicare] benefit into a fully competitive market-based model using premium support.” Under the Ryan plan, beginning in 2024, Medicare beneficiaries would be given a choice of private plans competing alongside the traditional fee-for-service Medicare program on a newly created Medicare Exchange.

Medicaid

Medicaid is another matter entirely. The ACA vastly expanded the reach of the Medicaid program. The matter of Medicaid’s regulation post-ACA was further complicated by the Supreme Court’s ruling in 2012 that states were free to reject the ACA Medicaid expansion.

Before the ACA, Medicaid provided health care for children, pregnant mothers, the elderly, the blind, and the disabled.” The ACA expanded Medicaid’s reach to all low- income individuals. The Republican members of Congress roundly criticized this expansion, noting that the program’s expansion under the ACA accounts for more than 15 percent of all health care spending in the United States. This, they claim, is unsustainable.

The “Ryan” Plan’s approach to Medicaid is representative of the various “replace” proposals. Like the other plans, it makes radical changed to Medicaid that go well beyond mere repeal. This and the other plans offer two alternative approaches that states can elect: per capita allotment and block grants.

Per capita allotment

Under the per capita allotment approach a total federal Medicaid allotment would be available for each state to draw down on. The amount of the federal allotment would be the product of the state’s per capita allotment for the four major beneficiary categories—aged, blind and disabled, children, and adults—and the number of enrollees in each of those four categories. The per capita allotment for each category would be determined by each state’s average medical assistance and non-benefit expenditures per full-year-equivalent enrollee during the base year (2016), adjusted for inflation. The per capita allotment would be designed to grow at a rate slower than under current law.

Block Grants

Under the block grant option, a state that opts out of the per capita allotment could automatically receive a block grant of federal funds to finance their Medicaid program. States would then be free to manage eligibility and benefits generally as they see fit without the need to apply to the Department of Health and Human Services for waivers.

Individual and Group Market Reforms*

Provision Effective Date Section Title/Heading
(1) PPACA §1201§10103(e); PHSA §2704 Plan years beginning on or after September 23, 2010 Prohibition on preexisting condition exclusions for enrollees who are under 19 years of age.
(2) PPACA §1001§10101(a)HCERA §2301(a); PHSA §2711 Plan years beginning on or after September 23, 2010 Ban on annual and lifetime dollar limits on essential health benefits. Applies to group and individual insurance markets, and group health plans, including grandfathered group and individual plans. Annual or lifetime limits are permitted for items and services that are not part of the essential health benefits.
(3) PPACA §1001HCERA §2301(a); PHSA §2712 Plan years beginning on or after September 23, 2010 Rescissions permitted only for fraud or intentional misrepresentation of material fact and with prior notice to the enrollee. Applies to group and individual insurance markets, and group health plans, including grandfathered group and individual plans.
(4) PPACA §1001; PHSA §2713 Plan years beginning on or after September 23, 2010 Group and individual insurance contracts and group health plans (other than grandfathered plans) must cover the following preventive health services with no cost-sharing:
• Evidence-based items/services with a rating of “A” or “B” in the current recommendations of the U.S. Preventive Services Task Force (USPSTF).
• Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC).
• Evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA) for infants, children and adolescents.
• With respect to women, additional preventive care and screenings provided for in guidelines supported by HRSA.
(5) PPACA §1001HCERA §2301(a)§2301(b); PHSA §2714 Plan years beginning on or after September 23, 2010 Group health plans that provide dependent coverage must make coverage available to age 26. Grandfathered group health plans may delay to plan years commencing on and after January 1, 2014, for adult children eligible to enroll in an employer-sponsored plan.
(6) PPACA §1001§10101; PHSA §2715 Plan years beginning on or after September 23, 2010 Group health plans must provide summaries of benefits and coverage (SBC) explanation that meets standards developed by HHS.
(7) PPACA §1001§10101(d); PHSA §2716 Plan years beginning on or after September 23, 2010, but enforcement suspended (Notice 2011-1, 2011-2 I.R.B. 259) Insured group health plans (other than grandfathered plans) must satisfy benefits-related non-discrimination rules under §105(h)(2) prohibiting discrimination in favor of highly compensated individuals in terms of eligibility and benefits.
(8) PPACA §1001; PHSA §2717 Plan years beginning on or after September 23, 2010 Group and individual market policies and group health plan (other than grandfathered plans) must establish quality programs and report quality data to HHS and to enrollees during each open enrollment period. Required elements of a quality program include:
• Improve health outcomes through activities such as quality reporting, effective case management, care coordination, case management and medication and care compliance initiatives, including through the use of the medical home model.
• Implement activities to prevent hospital readmissions through a hospital discharge program that includes patient-centered education and counseling, comprehensive discharge planning and post-discharge reinforcement by an appropriate individual.
(9) PPACA §1001; PHSA §2718 Plan years beginning on or after September 23, 2010 Bringing down the cost of health care coverage: Health insurance issuers provide an annual accounting for coverage offered (including grandfathered health plans) and rebates to enrollees if medical loss ratios are not met.
(10) PPACA §1001§10101(g); PHSA §2719 Plan years beginning on or after September 23, 2010 Internal appeals/external review:
• Issuers in the group market and group health plans must have an internal claims and appeals process based on existing DOL claims and appeals procedures, updated by standards established by HHS.
• Non-group plans must have an internal claims and appeals process based on existing law, updated by standards established by HHS.External Review: Issuers in the group market and group health plans must comply with applicable state or federal external review requirements.
(11) PPACA §10101(h); PHSA §2719A Plan years beginning on or after September 23, 2010 Group health plans must provide patient protections, including more choice of health care professionals, coverage of emergency services, and access to pediatric care and obstetrical or gynecological care.

 

Health Insurance Market Reforms*

Provision Effective Date Section Title/Heading
(1) PPACA §1201; PHSA §2704 Plan years beginning on or after January 1, 2014 Prohibition on preexisting condition exclusions or other discrimination based on health status.
(2) PPACA §1201; PHSA §2701 Plan years beginning on or after January 1, 2014 Fair health insurance premiums.
(3) PPACA §1201; PHSA §2702 Plan years beginning on or after January 1, 2014 Guaranteed availability of coverage.
(4) PPACA §1201; PHSA §2703 Plan years beginning on or after January 1, 2014 Guaranteed renewability of coverage.
(5) PPACA §1201; PHSA §2705 Plan years beginning on or after January 1, 2014 Prohibiting discrimination against individual participants and beneficiaries based on health status.
(6) PPACA §1201; PHSA §2706 Plan years beginning on or after January 1, 2014 Nondiscrimination in health care.
(7) PPACA §1201; PHSA §2707 Plan years beginning on or after January 1, 2014 Comprehensive health insurance coverage.
(8) PPACA §1201HCERA §2301(a); PHSA §2708 Plan years beginning on or after January 1, 2014 Prohibition on excessive waiting periods.
(9) PPACA §10103(c); PHSA §2709 Plan years beginning on or after January 1, 2014 Prohibition on denial of participation in approved clinical trials.

Tables used with permission. © 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com2017.

How Business Might Change Under Trump: Maternity Leave

trump maternity leave

Image credit: Diego Cambiaso via flickr

Note: There are many unknowns for employers as Donald Trump takes office in two months. While many policy specifics are not crystal clear, we do know that a Trump presidency will be significantly different than our last eight years under President Obama. This is the first in a series of posts we will be writing that are aimed at letting you know what this regime change might mean to you as an employer.

One of the most developed policy announcement of the Trump presidential campaign came midway through the summer and was presented by his daughter Ivanka. Within Trump’s childcare reform plan was a program for ensuring paid maternity leave for all mothers in the United States. Here is how it would work conceptually:

The proposed Trump maternity leave plan would offer mothers six weeks of partial pay while they are out on leave. This maternity pay applies to women that work at companies that don’t already pay for maternity leaves and would be handled through unemployment insurance, which according to Trump represents 1.4 million women annually.

It should be noted that Trump’s maternity leave proposal, as we understand it, does not include any additional leave benefits for men or parents that adopt and there are conflicting views on whether it covers unwed mothers.

It is also worth noting that some have called the funding source of this initiative into question. Trump’s program calls for paying this new entitlement, which he estimates at $2.5 billion annually, through savings the Federal Government will realize by cleaning up unemployment fraud. Trump pegs “improper payments” of unemployment insurance at $5.6 billion, which covers the maternity leave program and then some, if his estimate is accurate.

It is unclear if this plan will garner enough support from Congress to be enacted, and frankly, it is unclear if Trump would send it to Congress as proposed. We will be monitoring this as the transition proceeds and will provide updates here if anything materializes.

You can read the entire Trump Childcare Reform position paper here.

New Limitations on Short-Term Healthcare Policies: What You Need to Know

Short-Term Healthcare

Image credit: Michael Havens via flickr

On October 31st, the US Departments of Labor, Health and Human Services and Treasury (the Departments) issued a Final Rule pertaining to short-term healthcare policies. Here are the details:

Short-term health policies are exactly as they sound: healthcare policies, limited in duration, that are meant to function to fill a gap in coverage some individuals may face during their lives if they transition between jobs or group health plans. They are currently limited to twelve months of coverage.

What the Departments have found is there is a growing practice of individuals purchasing short-term policies (which are generally cheaper than exchange policies) and then paying the IRS penalty (short-term policies are not considered Minimum Essential Coverage), which has become a cheaper option. In some cases, individuals are even allowed to renew their short-term policy past the twelve month period, further solidifying the policy as their primary coverage.

It is speculated those opting to go this route are healthier individuals that just want to ensure they have some coverage. These healthier individuals are exactly what the Affordable Care Act needs in the exchange risk pool to balance things out. This is why there was such a concerted effort to close the door on this practice and push these individuals to the exchanges.

To combat this practice and further diversify the exchange risk pool, the Departments have issues a Final Rule, which changes the twelve month maximum for short-term policy coverage to three months. This will be effective for any policies with policy years beginning January 1, 2017. It should be noted that the limit will not be enforced on any 2017 policies, sold before April 1, 2017, in states with existing approved 12 month limits providing the policy expires in the 2017 calendar year.

The full ruling can be found here.

This change won’t cause a seismic shift in the exchange risk pool, but with some of the projected rate increases being reported for 2017 and beyond, even small steps certainly help in chipping away.

Of course, in light of last night’s election results, much of the Affordable Care Act will be under a cloud of uncertainty for the foreseeable future, so stay tuned…

Let’s Combat Rising Health Insurance Costs!

The big news in the world of politics last week was the reported increases employers are facing due, in part, due to insurer costs related to the Affordable Care Act. Media accounts have health insurance exchange open enrollment renewals pegged at an average increase of 28% with some having to pay double their current rates

We will leave it to the politicians to duke it out over the specific causes of the increase and who is to blame. As employee benefit advisors, we prefer to focus on how we can help employers get out from under these significant cost hikes, while still providing your employees with robust, cost-effective benefit packages. One solution that is generating positive results and cost savings for businesses is self-funding their health insurance.

A self-funded health insurance plan is one in which an employer retains the financial risk of covering employees’ health care costs with the option to insure against the cost of catastrophic claims. Contracting with a third-party payer, administrative services organization, or an insurance company, an employer will pay a third party to administer the benefits, pay claims and perform certain limited fiduciary functions.

There are many benefits to self-funding including plan design choice, cost transparency and cost savings. Self-funded employers have much more flexibility in their plan design than insured employers, as they are not subject to state coverage mandates. They also have insight into the actual cost of care, administrative costs and any loaded fees or additional expenses to the plan. Other benefits of moving to self-insurance include eliminating a number of taxes, fees and administrative costs incurred with a fully funded plan.

Once an employer has made the conversion to self-funding, they can achieve savings of anywhere from 5% to 15% depending on their cost structure. Self-insurance remains a powerful weapon in the war on burgeoning benefit costs. Employers who make the change can reap immediate benefits and avoid, or at least slowdown, some of the significant and inevitable cost increases on the horizon.

If your company is in the process of renewing your health insurance for 2017, or if a renewal is on the horizon, we can help. You owe it to your business and employees to talk to us about self-funding. Speak to one of our team of brokers, consultants, underwriters and actuaries for self-funding advice and a free, no-obligation quote. In the end, you may chose to go a fully funded route, but you should know your options especially in light of the projected increases.

Contact us today using the form below to discuss self-funding health insurance further.

You might also be interested in our FREE white paper on self-funding. This helpful eguide was written by our funding experts and will give you more detail about how exactly self-insurance works.

What Employers Need to Know About the US Department of Labor’s New Overtime Pay Rules

new overtime pay rulesWith media coverage squarely focused on politics these days, significant regulatory changes that are about to be enacted and will impact countless American businesses, have completely flown under the radar. These changes center on determining who is eligible for overtime pay and they are definitely worth taking note. Here is what you need to know.

The overtime changes from the US Department of Labor (DOL), are being termed the “Final Rule” and what they essentially do is bring a modern interpretation to determining which white-collar salaried employees are exempt from the Fair Labor Standards Act’s overtime pay protection.

According to the Department of Labor, the percentage of full-time, salaried employees covered by overtime protection has dropped to just 7%, compared to 62% in 1975. These Final Rule changes about to be enacted will extend overtime pay eligibility to an estimated 4.2 million workers.

There are a few changes that will be ushered in with the implementation of the Final Rules, most notably is a significant rising of the salary threshold for overtime exemption.

Let’s step back for a moment and explain how a worker is exempt from overtime pay. In order to qualify for overtime exemption, a white-collar employee must meet all three of the following criteria:

  • The employee must be salaried, earning a fixed salary that is not impacted by the amount of hours they work. This is referred to as the “Salary Basis Test.”
  • The employee must earn more than $455 per week. This is referred to as the “Salary Level Test.”
  • The employee’s primary job must be to perform executive, administrative or professional duties. This is referred to as the “Duties Test.”

Any employee that does not qualify for the exemption by meeting each of the three standards is likely to be entitled to 1.5x their weekly pay divided by 40 for every hour they work over 40 each week.

So what has changed?

The DOL is raising the salary threshold in the Salary Basis Test significantly from $455 per week to $913 ($47,476 per year). They are also enacting a requirement that this threshold is to be automatically updated every three years, going forward, to meet each new standard salary level, which are equal to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census Range. The first automatic increase will be triggered on 1/1/2020.

That latter provision is important because, prior to these changes, the DOL had not updated their overtime regulations since 2004. This ensures the threshold stays current going forward.

Also in the Final Rule, the DOL is setting the annual compensation level for highly compensated employees (HCEs) equal to the 90th percentile of earnings for full time salaried workers nationally, which is $134,000 (up from $100,000).

Finally, employers will be permitted to use nondiscretionary bonuses and monetary incentives to cover up to 10% of the employee’s salary level as long as they payments are made at least quarterly.

It should be noted that the Duties Test to determine if the employee is an executive, administrative or professional has not changed in the Final Rule.

These changes stem from a March 2014 Presidential Memorandum in which President Obama instructed the DOL to bring overtime regulations up to modern standards. The new rule becomes effective December 1st, 2016.

So, as an employer, what should you do to ensure you are in compliance without shelling out a bunch of overtime? Here are a few tips:

  • Identify which of your staff members are not exempt based on the criteria above and ensure you have complete control over their schedules;
  • Consider bumping salaried employees that are already close to $47,476 up to clear the threshold and save the overtime;
  • Re-evaluate your team structure and determine if it makes sense to add lower paid staff to support salaried workers under the threshold to lighten their workload;
  • Change salaried employees to hourly to gain greater control of overtime and potentially make up for the added cost of overtime by hourly employees working less than 40 hours occasionally if their work tends to ebb and flow;
  • Amend your budget to account for additional labor cost in new overtime if you think these other suggestions won’t work for your business.

These are just a few general ways in which an employer can counterbalance the new overtime pay rules. We hope you find this helpful and we highly recommend, if you have any questions about how these changes would impact you specifically, please contact our Employee Benefit Team Lead Teri Weber. Teri and her team of benefits and HR professionals are ready to help you stay compliant with the plethora of regulations facing your business.

Spring Consultants to Present Voluntary Benefits to Industry Organization

Karen English, Spring Consulting Group

Karen English, Spring Consulting Group

It was recently announced that Spring Partners and Consultants Karen English and Teri Weber, will be presenting Voluntary Benefits at an upcoming meeting of the New England Employee Benefits Council (NEEBC).

The presentation, titled “Voluntary Offerings:  From Auto to Zebra Coverage,” will kick off by summarizing the current landscape and providing some primary research about the pulse of the market which includes key trends, marketplace changes and benchmarks.

From there, experts will discuss the evaluation process including determining if your organization is well positioned for voluntary benefits, how to implement a best in class strategy including identifying partners, defining the employee experience and rolling out a successful program.

teri weber spring consulting group

Teri Weber, Spring Consulting Group

The session will wrap up with employer panelists providing unique and detailed insights from their experiences and addressing your questions.

English and Weber will be joined in the presentation by Joanne Abate, Assistant Vice President, Global Health and Insurance Programs at UNUM and Lydia Jilek, Senior Consultant, Voluntary Benefits at Willis Towers Watson.

The event will take place on Thursday, October 6th from 8:30am-12:00pm with Registration and Breakfast from 8:00am-8:30am at Waltham Woods Conference Center, 860 Winter Street, Waltham, MA.

More information on the event can be found here or by calling 781-684-8700.

Report: Cost of Long-Term Care Rises Significantly

long term careLong-term care may cost more than you think. A lot more.

A new report from Genworth Financial shows that private nursing home rooms now average $92,378 annually ($7,698 monthly). This is an increase of 1.2% from last year and close to 19% from 2011.

Semi-private nursing homes weren’t spared from cost increases either. Genworth pegged the average annual cost of a semi-private nursing home at $82,125 ($6,844 monthly), which is close to 17% more expensive than it was in 2011. Assisted living communities saw an increase of 0.8% from 2015 and now average $3,628 monthly.

So what does this all mean to you? Long-term care insurance is becoming a necessity for most Americans. It is becoming increasingly challenging for the average person to afford care as they grow older and the burden is often too much to handle for their children. There are a number of long-term care options available that will help insure you have the necessary funds available to you if you should require assistance in your golden years.

More information about Spring’s long-term care services can be found here.