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SHRM Compensation & Benefits Newswire

By Stephen Miller, CEBS  7/28/2014


Compensation & Benefits Newswire

News To Use

For the latest SHRM-produced news and features, visit SHRM Online's
Benefits Page
and Compensation Page.

Also visit our Health Care Reform Resource Page, the Retirement Plans Resource Page, the

Wellness Resource Page and the Workplace Flexibility Resource Page.

For links/summaries to some of the best external compensation /benefits stories on the web, see below.​


Rankings Reveal Most Generous 401(k)s

A ranking of 401(k) plans at the 250 biggest companies in the U.S. found that ConocoPhillips, Philip Morris International and Abbott Laboratories were among those that provide the most lucrative retirement benefits, reports Bloomberg News, which compiled the rankings.

ConocoPhillips topped the Bloomberg News rankings of the largest public companies’ 401(k) plans, largely due to a matching formula that contributes 9 percent of annual salaries for employees who save as little as 1 percent of their pay. It was among about 90 companies that gave additional retirement funds to employees, regardless of whether or how much the workers themselves contributed. Philip Morris International, runner-up in the rankings, paid not only a 5 percent match but also an extra 15 percent of employees’ compensation.

  • At Abbott Laboratories, also in the top 10, employees who save just 2 percent of their annual salaries get a 5 percent match from the company. “We want to give incentives to young employees without a lot of discretionary income,” said Stephen Fussell, executive vice president of HR at the pharmaceutical company. “We don’t think you need to work at 10 companies over your career to keep advancing and growing.”



Split Subsidy Decisions No Excuse to Delay Preparation for ACA

“Large employers should continue to prepare for the Jan. 1, 2015 effective date for the employer penalties,” advises an alert from law firm Ice Miller Strategies LLC:

Employers who wish to avoid ACA employer penalties should continue to develop systems for tracking hours to determine the full-time employees to whom health coverage should be offered. They should continue to review their plan design to ensure that it meets the ACA's minimum value standards and they should review their health insurance premium structures to determine whether the employees' share of the premium is “affordable” under ACA standards.

  • Finally, employers with calendar year plans who wish to avoid penalties should make an offer of affordable, minimum value health coverage to full-time employees and their dependent children by Jan. 1, 2015.

(To learn more, see the SHRM Online article “Rulings on Subsidies Bring More ACA Confusion.”)



Most Employers Don’t Measure Cost of Worker Absences

The majority of employers don’t measure the impact of absence on their bottom line, despite the fact that it costs about 8 percent of payroll on average, according to an Aon Hewitt survey, reports Business Insurance.

  • Only 22 percent of employers will coordinate health and absence management with workers compensation in 2014, but more than half are considering doing so in three to five years, according a recent survey.



Why More Companies Want Pensions Off Their Books

More companies are moving their pension obligations off their books and into annuities run by insurance companies, reports the Washington Post.

Companies in recent years have poured billions into their pension funds to keep pace with accounting rules. Now that the stock market is up and interest rates are expected to increase, buying annuities to get rid of pension obligations is becoming less expensive—and interest in de-risking is rising.

  • A recent survey of 182 companies by Prudential found that 53 percent of them have either transferred defined benefit pension liabilities to a third-party insurer or “are likely to” in the next two years.

(To learn more, see the SHRM Online article "Pension Plan 'De-Risking' Strategies on the Rise.")



Reminder: Health Plans Must Pay PCORI Fees by July 31

Under the Affordable Care Act (ACA), self-insured health plans and insurance issuers must pay a fee each year for seven years to fund the Patient-Centered Outcomes Research Institute (PCORI). The fee is based on the number of individuals covered under the plan, and it is due by July 31 each year, reminds an alert from PricewaterhouseCoopers.

This is the second year for which PCORI fees have been collected. The fee is paid by filing IRS Form 720 (attached Form 720 and Form 720 Instructions).  Calendar year plans, as well as plans with plan years ending in October or November, were required to file for the first time in July of last year and to pay a fee of $1 per covered individual. Those plans will make their second PCORI fee payment this year, at the $2 per person rate that applies for the second year's filing.

  • Plans with plan years ending in January through September will file for the first time this year, and owe $1 per person.



Pay Raises for Recent College Grads Far Below Average

Salaries for recent college graduates have risen at less than half the pace for all U.S. workers since the recession, an analysis by the Federal Reserve Bank of San Francisco found, reports the Los Angeles Times. The study reveals that median earnings for recent college graduates rose only 6 percent between 2006 and 2013, compared with 15 percent for the workforce at large.

  • In the two most popular categories for recent graduates — professional occupations and management, business and finance—median earnings grew just 2.6 percent since 2007. A similar trend applied across nearly all occupations.



Employee Tax Refunds for Same-Sex Spousal Health Coverage

In June, the IRS published a letter outlining the steps taxpayers should take in order to obtain a refund for taxes paid on the value of employer-sponsored health coverage provided to an employee’s same-sex spouse, reports Proskauer’s ERISA Practice Center Blog.

The IRS instructed a taxpayer to contact her employer and request a corrected Form W-2, which she could then use to complete her tax return. If the employer does not issue a corrected Form W-2, the taxpayer should file her tax return using the original Form W-2 and file a Form 4852 (Substitute for Form W-2 or Form 1099-R) reporting the correct amount of her taxable wages (subtracting the value of excludable spousal health coverage).

  • Advises Proskauer, “Employers are not obligated to automatically furnish corrected Forms W-2 to employees who had imputed income in years pre-Windsor for the value of employer-sponsored health coverage provided to same-same spouses. However, it serves as a good reminder that employers should be prepared to respond to such requests as employees continue to seek refunds.”



Videos Can Promote Benefits Engagement

Interactive “video postcards” sent internally by employers to inform participants of benefit changes results in higher response levels than print mailings, reports

A video communications campaign generated an average 79 percent employee engagement rate (the percentage of employees who opened and watched the video postcard content). How long people spent engaging with the content was also surprisingly high—the average time was just over 3.5 minutes per viewing session.

  • Delivery is through the employer's e-mail system and responses can be integrated for campaign tracking to provide data about employee engagement and response.



Reference-Based Pricing for Health Services Explored

As insurers and large employers grapple with how to reign in health care costs, a growing number are turning to reference pricing, a benefit design in which an insurer defines the maximum amount that it will cover for a particular health care service, reports Health Care Financing & Organization, an initiative of the Robert Wood Johnson Foundation.

The Obama administration recently indicated that the use of reference pricing by large group and self-funded group plans does not violate the Affordable Care Act’s cap on patients’ annual out-of-pocket costs. Some experts say this guidance is likely to encourage additional employers to adopt reference pricing strategies.

  • Early evidence suggests that reference pricing may be a promising cost-control strategy when applied to frequently performed, non-emergency tests and procedures where the prices charged vary widely across providers but the quality of results remains largely similar. But some are concerned about the impact on consumers who unknowingly choose high-cost providers and incur thousands of dollars in medical bills as a result.



Employers Dropping Long-Term Disability Insurance

Employers are dropping their standard disability insurance plans in favor of employee-paid, voluntary plans. The result is a higher percentage of employees opting not to participate in the optional plans, leaving more workers vulnerable to financial ruin if they suffer long-term illnesses or injuries, reports the Portland Press Herald.

Insurers said employers’ uncertainty about the future costs of employees’ health benefits under the Affordable Care Act is likely to push even more companies to discontinue standard disability coverage for all employees.

  • The industry has responded to the drop-off in business by setting up private exchanges for employers to purchase either employer- or employee-paid group plans.

(To learn more, see the SHRM Online article "Disability Payments Up, But Fewer Workers Covered.")


San Francisco Law to Restrict Stand-Alone HRAs

A new San Francisco law will eliminate the appeal for employers in that city to use stand-alone health reimbursement arrangements (HRAs), one of the ways employers have used to satisfy the city's health care spending law, reports Business Insurance.

Under the city's 2006 health coverage law, employers with 100 or more employees are required to spend $2.44 per hour per covered employee on health care this year, while employers with between 20 and 99 employees must spend $1.63 per hour. The law allows employers to contribute to stand-alone HRAs that reimburse employees for health care-related expenses.

  • Under a newly passed city measure, HRA contributions can no longer be counted to satisfy San Francisco's spending law unless the contributions are irrevocable and cannot be recovered by the employer if unspent, lesseing the appeal of stand-alone HRAs for employers.



When One Pay Raise a Year Isn’t Enough

“As companies try to retain top employees and hit growth targets, some are ditching the annual salary review and doling out raises and bonuses several times a year,” reports the Wall Street Journal.

Executives say it doesn't cost that much to speed up the raise cycle—many companies simply break annual raise amounts into smaller bites—and the frequent pay raises keep workers motivated and less likely to jump to competitors since the next payoff is just around the corner.

  • But the practice isn't widespread: 5 percent of 1,147 companies increase salaries more than once a year, according to a 2013 survey by consulting firm Aon Hewitt. And some pay experts say the practice can be risky, since workers who respond well at first could grow unhappy if the rewards slow down.



A Wellness Program Compliance Checklist

Law firm Nixon Peabody explains that “While the plan design of a wellness program is generally simple, employer wellness programs are subject to myriad federal laws, and, in some cases, state laws as well, which can make compliance rather difficult. To add to the confusion, the laws that apply to an employer wellness program vary depending on whether or not the wellness program is a group health plan.”

  • A positive note: “Although the myriad laws impacting wellness programs may seem overwhelming, it is quite possible to design a compliant and cost-effective wellness program that has the potential for significant benefits to the employee and the employer.”



Lower Job Churn Depresses Wage Growth

Young workers always have earned less than those with more experience, but the gap has widened. In 2004, the median wage for workers 25-34 years old was 5 percent lower than the overall median wage. Today, it is 8 percent lower, reports the Wall Street Journal.

While the nation's jobless rate dropped to 6.1 percent in June, the lowest in nearly six years, the improvement masks the fact that many workers who held jobs throughout the downturn and recovery struggled to advance.

  • Their plight is best captured by the collapse in the monthly hiring rate, from 5.5 million in 2006 to as low as 3.6 million in 2009, according to the Labor Department. It was 4.7 million in May, the latest figure available.

(For more on this topic, see the SHRM Online article “Base Salary Rise of 3% Forecast for 2015.”)



Few Small Businesses Using SHOP Exchanges

There is apparently no way to know how many small business owners and employees have signed up for health care coverage through the Affordable Care Act law’s new Small Business Health Options Program (SHOP) exchanges, reports the Washington Post. By all indications, though, it’s not very many.

Health and Human Services (HHS) officials allowed states not to implement this first year a key cost-cutting feature that would have allowed business owners to give their employees a choice of multiple plans through the SHOP. Without that option, experts say small business owners are less likely to consider the small-business exchanges.

  • With HHS last month approving 18 states’ requests to delay that feature for yet another year, it for yet another year, it appears less likely that those small-business enrollment numbers will turn around in 2015.



Factors Shaping Upcoming Overtime Regs

The Department of Labor (DOL) expects to have proposed rules on the “white collar” overtime exemption by November of this year. Tammy D. McCutchen, a former administrator of the DOL’s Wage and Hour Division, said she expects the DOL to move faster than usual with this rule change. In her estimation, the final rules are likely to be published by September 2015 – and likely to go into effect by January 1, 2016, reports CFO Daily News. Currently, the DOL is looking at:

Raising the minimum salary level – after adjusting for inflation – to 1975’s level. That would bump the minimum salary level all the way up to $50,000 per year and force many firms to change the status of many employees they had previously classified as exempt.

Adopting the California salary level. This method relies on auto-corrections for inflation. Based on today’s standards, that level would be $570 per week.

Increasing the availability of overtime pay by amending the current duties test. The DOL is likely to narrow the duties test and to specifically spell out more jobs which are definitely overtime exempt.

Revising the “concurrent duties” regs under the executive exemption test. The DOL is seriously considering adopting California’s duties test, which requires an exempt manager to spend more than 50 percent of his or her time supervising employees.



How One Employer Tackled Pay Equity

Should female secretaries be paid at the same rate as male landscapers? That was one of the questions facing McGill University in Montreal as it launched a sweeping program to ensure gender pay equity among its 12,000 full-time employees, reports the Wall Street Journal.

As many U.S. companies gird for a new federal requirement to report pay data by gender, McGill's gender-equity program could be a model.

  • In February, McGill sent out checks covering back pay and raises for 2,100 current and former employees deemed to have been underpaid. For some workers with long tenures, that meant sizable sums—as much as C$80,000 in some cases.



Trade Group Creates Its Own Health Exchange

Industree, a hospitality trade group, launched a health care exchange aimed at making it easy for large restaurants and bars to comply with the Affordable Care Act, reports Associations Now.

Workers at participating restaurants will be able to choose from a variety of plans, with costs ranging from $61 to $92 per month for a basic plan to $175 to $425 per month for plans from larger insurers, such as Aetna.

  • “Every single option has been designed, negotiated, and built specifically for the demographics of the restaurant industry,” the group’s founder and CEO, Alisia Kleinmann, told The Washington Post.



Try Convincing an Employer to Pay for an Online Degree

Starbucks made headlines recently by creating a tuition reimbursement program for employers who pursue online degrees, but not all employers share the company's enthusiasm for online learning, reports U.S. News & World Report.

Employees should research their preferred online program and be able to convince their employer of its merits, making sure the employer knows that the institution is regionally accredited.

Online degrees can sometimes be better bargains than their on-campus counterparts, Lance says, and employees should also mention any relative cost savings to their manager.

(To learn more about the Starbucks program, see the SHRM Online article “Starbucks Helps Employees Earn Online Degrees.”)



IRS Releases Final Rule on ACA Small-Business Tax Credit

The Internal Revenue Service released final regulations on the tax credit available under the Affordable Care Act to small employers that offer health insurance coverage to their employees, reports Bloomberg BNA. The final rule was published in the June 30 Federal Register. The IRS also posted a new set of Q&As

  • The final rule extends the tax credit to employers with no more than 25 full-time equivalent employees (FTEs) whose annual average wages are a maximum of $50,000, adjusted for inflation after 2013, the IRS said.



Cost-Effective Obesity Strategies

There are several strategies for dealing with the expected cost increase associated with obesity’s designation by the American Medical Association as a disease, according to Segal Consulting’s Public Sector Letter.

These approaches include:

Institute “step-therapy” that might start with nutrition and exercise counseling.

Require prior authorization for covering obesity treatments.

Choose narrow networks or Centers of Excellence for bariatric surgery.

Introduce reference-based pricing that sets maximum payment on reimbursable amounts.



Presumption of Prudence Voided for Employer Stock

In Fifth Third Bancorp v. Dudenhoeffer, decided June 25, the Supreme Court unanimously rejected a presumption of prudence for employer stock held in ERISA individual account individual account plans.  As a result, law firm Kilpatrick Townsend & Stockton LLP advises the following steps:

Plan and trust documents should be updated; summary plan descriptions, investment policies and charters for investment fiduciaries should also be reviewed.

Apply an equally robust fiduciary process to employer stock as applies to other investments.

Addressing participant investment concentration in employer stock.

(To learn more, see the SHRM Online article Retirement Plans that Hold Employer
Stock: What Now?



Targeting Overweight Workers Can Backfire

Employers say obesity is a top health concern for their workers. But health is a sensitive and personal issue. Some employees say these wellness initiatives can go too far, reports

Obesity can lead to medical complications like diabetes and heart disease, and can increase absenteeism and the risk of injury on the job. Helping overweight employees nudge the scale in the other direction might be good for their health and for the company's bottom line. But firms have to walk a fine line in what they say to workers.

  • It's difficult to address obesity because wellness programs must be voluntary. Employers can offer incentives, but they can't directly talk to an employee about a weight problem. Preserving medical privacy is also a concern.



ACA Compliance Becomes Big Expense

Private businesses without large in-house legal departments are spending thousands of dollars hiring consultants to walk them through the ins and outs of complying with the new rules under the Affordable Care Act, reports USA Today.

Starting in 2015, businesses with 100 or more employees will need to document that they are providing health benefits that meet the ACA's coverage criteria to at least 70 percent of their full-time workers. The number rises to 95 percent by 2016. Firms that fail to meet the targets face penalties that start at $2,000 per employee. Businesses with 50 to 99 full-time employees will need to start insuring workers by 2016.

The ACA’s definition of full-time employee is 30 hours a week or more versus the historic 40 hour week recognized by other federal and state laws. The law also requires employers to collect signed waivers from employees who opt not to sign on to a company insurance plan.

  • The paperwork substantiating the number of full-time and part-time workers in itself is challenging, requiring most businesses to invest in ways to document that they are complying with the new rules.

(To learn more, visit SHRM Online's Health Care Reform Resource Page.)



Contraceptive Mandate Curtailed

The Supreme Court ruled that closely held for-profit companies may refuse to offer insurance coverage of specific birth control methods if they conflict with the owner’s religious beliefs, reports the Washington Post. The ruling pertains to the contraceptive mandate under the Affordable Care Act.

  • The ruling is limited to closely held companies whose owners hold sincere religious beliefs, such as the companies that brought the challenges: Hobby Lobby, an arts and crafts chain that says it is run on Biblical principles, and Conestoga Wood Specialties, a Pennsylvania cabinet-making company owned by a Mennonite family.

(To learn more, see the SHRM Online article "Contraception Ruling’s Impact Seen as Limited.")



IRS Ruling Gives Approval to Adjustable Pension Plans

The IRS approved the Newspaper Guild of New York and New York Times Co.'s  application to begin an adjustable pension plan (APP) that will allow the newspaper company to keep a defined benefit plan structure, reports Pensions & Investments.

The new plan structure, which shares the investment risk between employees and employers while providing more retirement income security than a typical defined contribution plan, required approval from the IRS.

  • The new defined benefit plan at the Times covers about 1,100 workers and guarantees a monthly payment for life for its employees.

(To learn more, see the SHRM Online article "IRS Ruling Favors Adjustable Pension Plans.")



CMS Guidance on Transitional Reinsurance Fee
Payment Process

The Centers for Medicare and Medicaid Services (CMS) disclosed the mechanics of collecting and remitting the Affordable Care Act’s transitional reinsurance fee, which will be imposed on insurers and self-insured health plans later this year, reports Lockton.

The tax is generally $63 per covered life ($5.25 per month), payable by insurers and by employers on behalf of self-funded major medical plans. A third-party administrator (TPA) may, but is not required to, pay the fee on behalf of the self-insured plans it administers.

  • An on-line process will be available at to offer a “one-stop” resource for registration, submission of headcount and payment to CMS. Either the self-insured plan sponsor or the plan’s TPA can complete the reinsurance contribution process, including payment, on behalf of the self-funded plan.



Final Regs on ACA and Orientation Periods Released

Federal regulatory agencies in charge of health care reform released final regulations clarifying the relationship between a group health plan’s eligibility criteria and the Affordable Care Act’s (ACA) 90-day limit on waiting periods, reports Proskauer Rose LLP.

  • The final rule (published in the June 25 Federal Register) address an employer’s ability to require new employees to satisfy a “reasonable and bona fide employment-based orientation period” before starting a group health plan’s waiting period.

(For background on this issue, see the SHRM Online article “Final Rule Limits Health Care Enrollment Wait to 90 Days.”)



Which Workplace Benefits Are In, or Out?

Employers are increasingly spending money to try to keep workers healthy, even if it comes at the cost of other benefits, reports the Washington Post, in its analysis of SHRM’s 2014 Employee Benefits trends report.

The report finds that employers are redirecting more of their spending toward wellness expenses such as health coaches, smoking cessation programs, and insurance premium discounts for employees willing to submit to health-risk assessments.

  • Investments are decreasing elsewhere, however, with companies removing benefits that are under-used or that don't apply to large swaths of employees.

(To learn more, see the SHRM Online article “Employers Adjust Benefits, Emphasizing Health Care”)



Federal Workers’ Right to Request Flextime Expanded

Federal employees now have the right to request a more flexible work schedule and managers must "carefully" consider those requests, President Obama told agency heads in a June 23 memo on expanding workplace flexibility in the federal government, reports

“The employee is encouraged to have a conversation with the employer about their flexibility needs,” Mike Aitken, SHRM’s vice president of government affairs, said. And the fact that the President is calling on agencies to expand flexible options "sets the tone from the top,” he added.

  • Aitken also pointed to the importance of expanding access to flexible work arrangements as a potential remedy for employee morale that's been eroded by tight budgets and constraints on federal pay.



HHS Webinar on Transition Reinsurance Program Fees

The Department of Health and Human Services (HHS) is offering a webinar regarding the Affordable Care Act’s transitional reinsurance program, with a particular focus on reinsurance contribution policy and operations.

The webinar, “The Transitional Reinsurance Program: An Overview of Policy and Operations for Reinsurance Contributions” will be held on June 20, 2014 and June 25, 2014 from 2:00 pm – 3:00pm EST. It will provide an overview of the transitional reinsurance program with a focus on reinsurance contributions, including general information regarding who is involved in submitting reinsurance contributions, how reinsurance contribution amounts are calculated, and the reinsurance contribution submission process. Registration is available through this portal.

  • HHS also published a new FAQ on May 22 regarding the reinsurance contribution submission process.



Emergence of Single-Carrier Model Expected in Private Exchanges

Private health insurance exchanges increasingly will feature single-carrier rather than multicarrier networks as well as more expansive product lines, according to survey findings reported by HIX.

“What we hear from health insurers is that they are interested in a single-carrier approach because it enables them to build direct and ongoing relationships with consumers while giving them control over product selection and presentation,” explained Array Health CEO Jonathan Rickert, whose firm conducted the survey.

  • While the findings suggest most private [exchanges] may be wed to one carrier rather than play the field, greater choice is seen in terms of the product suite. For example, 80 percent of health insurer respondents believe most of the exchanges will offer core medical, dental and vision plans alongside ancillary products by 2015,” HIX reported.

(To learn more about about this topic, see the SHRM Online article "On Private Exchanges, Choice Drives Satisfaction.")



PCORI Fee Due by July 31

The IRS has released the 2014 Form 720 that plan sponsors of self-insured group health plans will use to report and pay the Patient Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31 of this year, reminds an alert from Buck Consultants.

The Affordable Care Act imposes a fee on health insurers and plan sponsors of self-insured group health plans to help fund the Patient Centered Outcomes Research Institute.

  • Plan sponsors must pay the PCORI fee by July 31. All plan sponsors of self-insured group health plans will pay the fee in 2014, but the amount of the fee varies depending on the plan year.



Starbucks to Subsidize Online Degrees

The coffee chain plans to launch a new program on Monday that will pay for its employees to attend online college classes at Arizona State University, reports the New York Times (and also the Wall Street Journal, firewalled).

The program is open to any of the company’s 135,000 United States employees, provided they work at least 20 hours a week and have the grades and test scores to gain admission to Arizona State.

  • “Starbucks is going where no other major corporation has gone,” said Jamie P. Merisotis, head of the Lumina Foundation. “For many of these Starbucks employees, an online university education is the only reasonable way they’re going to get a bachelor’s degree.”

(For more on this topic, see the SHRM Online article “Starbucks Subsidizes Online Degree Tuition” and the HR Magazine article “Rejuvenate Tuition Reimbursement Programs.”)


Private Health Care Exchanges Enroll More Than Predicted

​Employers are moving more quickly than forecasted to offer health insurance to their workers through private exchanges, reports the New York Times.

Three million people signed up for workplace health coverage for this year through private exchanges, according to data from Accenture, roughly three times the number of people the firm had estimated would enroll for coverage through the private exchanges. The growth was driven largely by smaller and midsize companies — those with no more than 1,000 employees.

  • Accenture estimates that total enrollment in private exchanges by active employees will reach about 40 million by 2018, surpassing the number of people enrolling through state and federally funded exchanges.

(To learn more about this topic, see the SHRM Online article "On Private Health Exchanges, Choice Drives Satsifaction.")



It’s OK to Discuss Salary Early in Hiring Process

Contrary to conventional wisdom, employers are open to discussing salary early in the hiring process, according to a survey by staffing firm Robert Half, reports Canadian HR Reporter. Thirty-eight percent of senior managers in Canada said it's OK to ask about compensation and benefits in the first job interview, while 25 percent suggested waiting for the second interview.

But only one in 10 respondents said they decided against hiring someone because she brought up pay and benefits prematurely.

  • "It's important the candidate and potential new boss are within the same range of expectations before getting too far along in the hiring process," said Greg Scileppi, president of Robert Half, international staffing operations.




Employer Plans Adopting Reference-Based Pricing

While employee cost shifting remains the most prevalent strategy for U.S. employers to reduce health care costs, there is growing interest in adopting new tactics, reports

A new Aon Hewitt survey finds 68 percent of employers plan to adopt reference-based pricing—where employers set a pricing cap on benefits for certain medical services for which wide cost variation exists with no discernible differentiation in quality. Just 10 percent of employers have adopted reference-based pricing as a tactic today.

  • An analysis of health claims data by the Employee Benefit Research Institute found that adopting reference-based pricing for all workers with employment-based health benefits, for the six health care services EBRI analyzed, would have reduced the employers' overall spending on health benefits by 1.6 percent.

(Related SHRM Online article: "In-Network Costs Vary Widely for Common Procedures.")



SHOP Limited to One Plan in Many States

The piece of the Affordable Care Act meant to help small businesses provide better health insurance options for their workers—the Small Business Health Options Program (SHOP)—failed to launch through the federally facilitated ACA marketplace this year, and the Obama administration has now given the go ahead for 18 states to put part of it on hold once again, reports Politico.

Also, the Centers for Medicare and Medicaid Services released the list of federal exchange states where employee choice will not be available for the SHOP exchange for 2015. 

The delay leaves the exchange for small employers hobbled in large parts of the country until at least 2016 and creates another element of the law that’s inconsistent from state to state.

  • The choice feature was already delayed this year for most of the 32 states that relied on the federal exchange for small businesses, although 17 states and the District of Columbia are operating their own SHOPs, many of which do offer the choice option and online enrollment.



Employers Fail to Address Financial Stress

Most employers don’t offer a loan program to help employees deal with emergency situations, even though financial stress affects their employees’ ability to work, reports ThinkAdvisor magazine.

Over 45 percent of employees could not get access to $2,000 given a 30-day period to meet a financial challenge.

  • “I think that speaks volumes to why for those that have retirement accounts, why these 401(k) loans and what have you are being impacted at such a heavier rate to borrow against their financial futures,” said David Kilby, president of FinFit, a provider of financial wellness solutions.

(For more on this topic, see the SHRM Online article “SHRM Study Highlights Employees’ Financial Challenges.”)



Got Paternity Leave? Men Value It, but Are Conflicted by It

“Researchers say Americans’ conflicted views over paternity leave are a potent symbol of how tough it is to figure out what it means to be a good man, and a good dad, these days,” reports

  • A recent survey found that 68 percent of dads who took paternity leave took two weeks or less, and most dads surveyed thought that amount of time was appropriate.



Wellness Programs, Smoking Cessation and e-Cigarettes

The Affordable Care Act changed the maximum reward that can be provided under a “health-contingent” wellness program from 20 percent to 30 percent, and in the case of smoking cessation programs, the maximum reward is increased to 50 percent. But nowhere do final regulations issued last year address whether an individual who uses e-cigarettes is a “smoker” for purposes of qualifying, or not qualifying, for a wellness program reward, according to a blog post by law firm Mintz Levin.

A related question is whether a wellness program can offer e-cigarettes as an alternative standard, i.e., one that if satisfied would qualify an individual as a non-smoker.

  • An employer that wanted to treat the use of e-cigarettes as smoking in order to deny access to a wellness reward could confront arguments that e-cigarettes are part of a smoking cessation program. However, “The larger question, which may take some time to settle, is whether e-cigarettes advance or retard the cause of wellness,” according to the posting.



Narrow Networks Are Disliked but Reduce Costs

They annoy patients. They scare docs. But narrow networks might be a good thing,” according to a commentary in the Standard Examiner.

With narrow networks, insurers use quality and cost metrics to limit the number of health care providers participating in a given plan. Patients and providers have raised concerns that by limiting plan participants, narrow networks are creating unexpected access challenges. But narrow networks are credited with tamping down health insurance costs.

  • “If you don’t like narrow networks,” accordng to David Blumenthal of the Commonwealth Fund, “you’re saying ... that you don’t like competitive solutions -- at least under current market conditions -- to our health system’s problems.”



More Jobs but No Cheer on Pay Gains

“A big pool of unemployed people means that you're unlikely to get a big raise any time soon, and that means that you're also unlikely to go on a spending spree,” reports USA Today. “Consumer spending drives the bulk of the U.S. economy. And you can't have an inflationary wage-price spiral without higher wages.”

Discouraged workers—those who have given up looking for jobs—remained at 3.4 million, a rate the Federal Reserve views as too high to threaten inflation or push wages higher.



The 95% Coverage Rule under ACA: Know the Details

For employers subject to the Affordable Care Act’s shared-responsibility mandate (50 or more full-time employees or equivalents), not properly applying the 95 percent rule could subject them to penalties, notes an alert from Moulder Law. As always with the ACA, the details can get complicated.

An employer will be treated as offering qualifying coverage to all of its full-time employees (and their dependents) for a calendar month, if the employer offers coverage to all but 5 percent (or, if greater, five full-time employees) of its full-time employees. A full-time employee is an employee who accumulates 30 or more hours of service per week in a calendar month. Full-time employees receiving Medicare, Medicaid, or insurance from a spouse’s or parent’s employer are included when calculating the 95 percent rule.

  • The next step is to determine if any of the full-time employees fall into a non-assessment period. There are six different ways an employee can be considered an employee in a non-assessment period. These employees are not included when calculating the 95 percent rule.



DOL Sets November to Propose Changes in Overtime Rules

The Department of Labor (DOL) set a target date of November 2014 to propose new rules that would govern who is entitled to overtime pay, according to an alert from Buck Consultants.

It is widely anticipated that the DOL will tighten eligibility for the white-collar exemptions—and extend overtime pay to a sizeable number of currently exempt workers—by raising the minimum salary threshold of $455 per week and changing the current job duties tests. However, it is unclear what the new threshold or qualifying duties might be.

  • Given the steps the DOL will need to complete before any changes to the current overtime rules become final, it is unlikely that new rules would be finalized before spring 2015.



College Allowed to Cap Medical Leave at 6 Months, Court Rules

Employers can't reasonably be expected to grant more than six months of leave in order to accommodate sick or disabled employees, the U.S. Court of Appeals for the Tenth Circuit ruled, reports Bloomber BNA.

An "employee who isn't capable of working for so long isn't an employee capable of performing a job's essential functions," Judge Neil Gorsuch wrote.

  • The ruling pertains to the federal Rehabilitation Act, which prohibits recipients of federal funding from discriminating on the basis of disability, but also has implications for the Americans with Disability Act (ADA). It applied to a case in which a university faculty member requested to extend her leave beyond six months while undergoing cancer treatment.



Small Businesses May Have to Wait to Offer Employees ‘SHOP’ Plan Choices

For small businesses that want to offer employees health insurance coverage on the new Small Business Health Options, or SHOP, exchanges created by the Affordable Care Act, challenges remain, reports the New York Times

Insurers are skeptical that the federal SHOP exchanges, already running a year late, will be up to the technological challenge of facilitating choice. This includes collecting a single payment from the employer, calculating how much of that payment goes to each insurer, and then distributing it accordingly.

  • In Colorado, which is running its own SHOP exchange that offers three varieties of employee choice, only a very small number of businesses have chosen to enroll — about 256 businesses out of about 20,000 small groups in the state.



Pre-Existing Condition Bans for Health Insurance Linger

"Welcome to Cigna," said the letter, dated May 16, on behalf of a new employer. The letter also said the insurer was placing the employee on a one-year waiting period for any pre-existing conditions, reports

HIPPA says that if you've had continuous coverage, meaning coverage without a break of more than 63 days, your new insurer may not impose a pre-existing condition waiting period. Plus, for group plans, the Affordable Care Act prohibits all pre-existing condition exclusions for new plan years beginning on or after Jan. 1, 2014.

  • By the end of 2014, the requirement to eliminate pre-existing condition exclusions will have become effective for all group.



Employers Missing Opportunity with ACA Wellness Incentives

Employers continue to embrace wellness programs, and employees keep saying they appreciate them and will use them. A new study suggests, though, that many employers that could be realizing even more value from their wellness plans are not, reports

A new Virgin Pulse survey  found that when employers were asked whether they were going to beef up their incentives as permitted under the Affordable Care Act, more than four in 10 said they had no plans to.

  • About half of employers who offer wellness plans don’t track productivity results or test to see if employee engagement has increased as a result of wellness program participation, the survey revealed.



​Surge Expected in Costly Specialty Drugs

Even spending on prescription drugs has continued to slow over the past several years, an exception has been spending on new innovative specialty drugs to treat multiple sclerosis, rheumatoid arthritis, leukemia, osteoporosis and other conditions, reports the Fiscal Times.

“It’s not only unaffordable for the individual, but the system can’t absorb that much,” John Rother, chief executive of the National Coalition on Health Care, told the paper. Rother and his group of business leaders, health care providers and some drug manufacturers launched a campaign last week to highlight the mounting cost of specialty drugs.

  • Rother has urged pharmaceutical officials to find ways to reduce the cost of breakthrough therapies while continuing to cover companies’ research costs and compensate them for innovations that can save lives and reduce medical complications.



DOL Delays Fiduciary Redefinition Proposal Again

The Department of Labor (DOL) announced it would re-introduce in January 2015 a proposed rule to make retirement plan advisors subject to the fiduciary standard, reports

The DOL first proposed the rule in October 2010, but decided in 2011 to re-propose the rule, in part due to criticisms the proposal was too broad and may disrupt established business practices of financial institutions interacting with employee benefit plans.

  • Also in January 2015, the DOL expects to issue notices of proposed rulemaking about the safe harbor for the selection of annuity providers for individual account plans, as well as including lifetime income estimates on participants’ defined contribution account statements.



Workers Rely on Employers Regarding How Much to Save

Most financial planners advise setting aside 10 to 15 percent of pay for retirement. A worker who believes their employer has set the right savings default rate for them, and then does nothing more, will be sorely disappointed. Unfortunately, such workers are legion, reports

  • Many retirement experts recommend auto enrollment with a 6 percent employee deferral rate, and raising the deferral one percentage point each year until it reaches 10 percent of income. They further recommend that companies sweep all existing employees into the automatic plan—not just new hires. “They could opt out, but most wouldn’t. That’s inertia working for them, not against them,” according to the report.



Helping Employees Cope with Cost Shifting

High-deductible health insurance plans are a fact of life, but cost shifting doesn’t have to hurt morale or loyalty among workers, reports

  • Arming employees with all the information about the plan, ensuring they know which doctors are in network and out of network, and all the benefits associated with the plan (including preventive care), can go a long way in keeping out of pocket costs down.

  • Some employers who contribute to health savings accounts (HSAs) can increase their contribution to offset any bad feelings from offering a high deductible plan.

  • Brokers work with employers to create a health plan that limits the cost sharing for hospitalization, surgeries and outpatient procedures; a medical bridge policy can be taken out to insure employees from high deductibles associated with those expensive but less frequent medical needs. (But be aware of that HSAs may not be allowed if employees are offered supplemental health insurance that pays expenses under the deductible.)

(To learn more, see the SHRM Online article "Health Cost-Shifting Puts Burden on the Unprepared.")



Don't Ignore the Cultural Perks Millennials Crave on the Job

More than any other generation, Gen Y is made up of job hoppers. offers four company-culture perks and attributes "to help an organization recruit and retain great millennial talent before the competition lures them away":

  • Encourage entrepreneurial passion and creativity. Take a page from Google’s book and invest in a program like 20 percent time, whereby Googlers can dedicate 20 percent of their time to dreaming up new projects and finding creative solutions to problems.
  • Offer technological innovation. Millennials tend to love tech and smart companies will use this to reach out to them. Once millennials are hired, internal social-media apps, real-time tracking and mobile technology can help these employees stay organized and allow them to work on the go.
  • Grant flexible-time options. A two-year study by PwC determined that if milllennials were able to introduce more flexibility into their current posts, 64 percent would favor sometimes working from home and 66 percent would appreciate an adjustment in their hours.
  • Promote giving back. The Creative Jobs Report found 35 percent of millennials surveyed found it important to have a job with a positive social impact, compared with just 19 percent of employed Americans overall. Millennials will be more likely to stick around if they feel a company's culture is socially responsible and contributing to the community.



Study Reveals Health Costs Shifting to Employees

More employees are facing higher insurance premiums and co-payments, and many don't have the money to cover unexpected medical expenses, reports USA Today, citing the annual Aflac WorkForces Report.

In 2013, 19 percent of companies implemented a major medical plan with a high deductible (more than $1,000) and health savings accounts as an alternative to a traditional medical plan, the study finds.

  • Employees are worried about covering their medical costs: 49 percent have less than $1,000 to pay for unexpected out-of-pocket  medical expenses, and 53 percent would borrow from their 401(k)s or credit cards to cover unexpected medical costs.

(For a report on another recent cost-shifting study, see the SHRM Online article “Health Plan Cost-Shifting Trends Highlighted.”)



New Costs from Health Law Snarl Union Contract Talks

Disputes between unions and employers over paying for new costs associated with the Affordable Care Act are roiling labor talks nationwide, reports the Wall Street Journal.

Unions and employers are tussling over who will pick up the tab for new mandates, such as coverage for dependent children to age 26, as well as future costs, such as a tax on premium health plans starting in 2018.

  • Among the earliest supporters of the health-care law, unions have unsuccessfully tried to win concessions from the Obama administration on some issues now involved in the labor talks.



Agency Scraps Employee Ratings to Avoid Discrimination

The federal Consumer Financial Protection Bureau (CFPB) released an internal report that showed "statistically significant disparities" in employee evaluations based on race, age, location, tenure, and other factors. As a result, the CFPB said it was scrapping its current system and would pay most agency employees as if they received the highest rating available at the time of their evaluation. Ultimately, the remediation to its staff is expected to cost the government between $5 million to $5.5 million, according to the agency, reports American Banker.

  • The CFPB said it would remediate payment to any CFPB employee—except senior leadership—who received a 3 or 4 summary performance rating in fiscal years 2012 or 2013. Such staffers will be paid as if they received a 5 at the time of their evaluation, including merit and lump sum payments.

(For a different view on ratings systems, see the SHRM Online article "Improve Performance Evaluations Using Calibration.")


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IRS Bars Employers from Paying Pre-Tax Subsidies for Health Exchange Coverage

“Many employers had thought they could shift health costs to the government by sending their employees to a public health insurance exchange with a tax-free contribution of cash to help pay premiums, but the Obama administration has squelched the idea in a new ruling. Such arrangements do not satisfy the health care law, the administration said, and employers may be subject to a tax penalty of $100 a day — or $36,500 a year — for each employee who goes into the individual marketplace,” reports the New York Times

  • Christopher E. Condeluci, a former tax and benefits counsel to the Senate Finance Committee, said the ruling was significant because it made clear that “an employee cannot use tax-free contributions from an employer to purchase an insurance policy sold in the individual health insurance market, inside or outside an exchange.”

(To learn more, see the SHRM Online article “IRS Prohibits Payment Plans for Premiums.”)



Regs Allow Disability Regs Allow Disability Regs Allow Disability Insurance Premiums
to Be Paid from Retirement Plan Accounts

On May 9, the Treasury Department and the IRS released final regulations regarding amounts used by a qualified plan to pay for accident or health insurance premiums. The final regulations allow employers to adopt insured "plan contribution replacement" benefit programs for disabled employees, according to an analysis by law firm Holland and Knight.

  • Employers will be able to offer employees disability insurance to continue retirement plan savings during an extended disability.


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Free’ Preventative Care Can Still Cost Consumers

“The Affordable Care Act requires insurers to pay the full cost of services like cholesterol checks, women’s birth control, immunizations, colonoscopy screenings and a host of other items. … But does a free colonoscopy cover just the screening or the immediate removal of polyps, too? Does the smoking-cessation benefit include counseling, medication or both? And exactly when does a routine checkup become an ailment-specific appointment and leave patients on the financial hook?” asks Politco.

An increasing number of workplace plans carry substantial deductibles that consumers must meet before the insurer begins covering any bills. That raises the stakes on what applies as a preventive service with no out-of-pocket cost vs. a treatment for which the patient may end up paying full freight, the article notes.

  • “There are a number of preventive services where the insurers are not quite sure what they’re supposed to cover,” said Tim Jost, a law professor at Washington and Lee University and an expert on the Affordable Care Act.


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District Court Rejects Challenge to Self-Insured ERISA Health Plan's
Denial of Coverage for Same-Sex Spouses

A federal district court in the Southern District of New York found that a self-insured health plan that specifically excludes same sex couples does not run afoul of ERISA, reports Proskauer’s ERISA Practice Center Blog.

The case involved an employee of St. Joseph’s Medical Center in New York, who married a person of the same sex in 2011. Later that year, the employee sought to add her spouse as a dependent under St. Joseph’s self-insured health plan. The court rejected plaintiffs’ argument that the Supreme Court’s Windsor decision changed the legal landscape concerning the requirement to provide benefits to same sex spouse.

  • Praskauer attorneys commented that this decision and others “will pave the way for future courts to provide clarity on this issue for self-insured health plans. New federal anti-discrimination legislation may also have an impact on this issue. Employers and other sponsors of self-insured health plans will want to keep their eyes on developments in this area.”


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Good News About Elder Care Benefits at Work

More employers are offering several forms of elder care supports than in the past, but smaller employers lag behind their larger counterparts, according to an article in Forbes, citing research by SHRM and the Families & Work Institute.

Far more employers now offer Dependent Care Assistance Plans for elder care (the ability to set aside money from each paycheck before taxes to pay for elder care expenses) than in 2008. Currently, 41 percent do; in 2008, 23 percent did.

  • Large employers with 1,000 or more employees were more likely to offer Dependent Care Assistance Plans (53 percent do) than smaller ones (38 percent do).


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COBRA & ACA: When Two 60-Day Election Periods Are Not Equal

For former employees contemplating electing COBRA continuation coverage or medical coverage from the Affordable Care Act’s (ACA) insurance Marketplace, there are two distinct 60-day periods during which they may elect health insurance coverage, but these periods are not equal or equivalent. “Employers may want to consider how the impact of these two different 60-day periods may impact their plans in setting parameters for the vendors assisting them with COBRA notices and in planning separation packages,” according to an alert by law firm Winstead PC.

“Employers may want to review their COBRA notice procedures to maximize the period their former employees have to compare the terms and conditions and prices of COBRA coverage with the coverage available on [the ACA’s] Marketplace so that employees have time to review all of the information and make an informed decision,” the firm advises.

  • For example, if instead the employer/plan administrator issues the notice within 30-days of the termination of employment and loss of coverage, then the former employee would have 30 days in which to consider the values of COBRA as opposed to Marketplace coverage and elect between the choices.

(To learn more, see the SHRM Online article “Updated COBRA Notices and Proposed Guidance Issued.”)


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Employer Health Costs to Rise Nearly 9% This Year, Survey Finds

Employer health care costs are expected to rise nearly 9 percent in 2014, a slight improvement over recent years, reports the Los Angeles Times, citing a Buck Consultants survey.

Despite the slowdown, the rise in health premiums continues to outpace inflation and wage growth.

  • "Even though the decline is good news, most [health] plan sponsors still find 8% to 9% cost increases unsustainable," said Harvey Sobel, a principal at Buck Consultants, a benefits consulting firm that surveyed 126 insurers and health plan administrators nationwide.

(To learn more about these findings, see the SHRM Online article "Slower Increases in Health Benefit Costs for 2014.")





New ‘Pay or Play’ Tools Help Businesses Evaluate Next Steps

A new collection of tools from health insurer Unum can help navigate through crucial decision regarding health care reform. They include:

  • Pay or play interactive tool: Employers can enter their employee information to find out whether they may be subject to the employer mandate—and what penalties they may face.
  • Pay or play decision tree: Employers can follow the arrows on this graphic to see the elements that make up the pay or play decision.
  • Employer responsibility timeline: This web-friendly roadmap walks employers through their health care reform decisions from now through 2018.

(For more tools and calculators, visit SHRM’s Health Care Reform Resources Page.)



Insurers to Unveil More Health Care Price Information

The goal of providing employees with competitive pricing information for available health care services may improve in 2015 via a collaborative effort of health insurance giants Humana, Aetna and United Health, and possibly other insurers, reports Forbes.

Through a nonprofit organization, the Health Care Cost Institute, the insurance companies will develop and provide consumers “free access to an online tool that will offer consumers the most comprehensive information about the price and quality of health care services.” Additional health plans could soon join Aetna, Humana and UnitedHealth in the effort.


  • The health insurers, who will continue to provide their own information via their own web sites, will provide information to the Institute as a supplement to what the companies provide. The Institute will maintain and manage access to the information in a secure portal.



San Francisco Bay Area Employers Required to Provide Commuter Benefits

Employers with 50 or more full-time employees in the San Francisco Bay area must offer commuter benefits to their employees by Sept. 30, 2014, reports Buck Consultants.

Employees who work an average of 20 hours per week (excluding seasonal and temporary employees) must be offered one of four commuter benefit options:

  • Pre-tax benefit. Allow employees to pay for their transit or vanpool expenses with pre-tax dollars, as permitted by federal law (for 2014, $130/month).
  • Employer-provided subsidy. Offer a transit or vanpool subsidy to reduce, or cover, employees’ monthly transit or vanpool costs (up to a maximum of $75/month).
  • Employer-provided transit. Provide a low-cost or free shuttle, vanpool, or bus service operated by or for the employer.
  • Alternative commuter benefit. Propose and seek approval of an alternative method (e.g., carpooling, bicycling, walking, compressed work week) that would be as effective as the other options in reducing single-occupant vehicle trips (and/or vehicle emissions).

Although employers must offer this benefit, the ordinance does not require employees to make use of the benefit.



IRS Provides Penalty Relief for Some Late Filers of Form 5500

The IRS has issued guidance providing relief from certain penalties for the late filing of a Form 5500 return, reports Practical Law/Thomson Reuters.

Specifically, Notice 2014-35 provides relief from late filing penalties for plans subject to Title I of ERISA that file a late Form 5500 series return, while Revenue Procedure 2014-32 establishes a one-year pilot program providing relief from late filing penalties for plans not subject to the reporting requirements of Title I.

  • Retirement plans that are subject toRetirement plans that are subject toRetirement plans that are subject to Title I of ERISA for the plan year in which the filing is delinquent are not eligible for penalty relief under Revenue Procedure 2014-32. They can seek relief for delinquent Form 5500 filing under Notice 2014-35




More Insured, but the Choices Are Narrowing

Insurers are promoting smaller health care provider networks for employers as a way to reduce overall health care costs, reports the New York Times.

“The larger the network is, the higher the cost,” said Larry Boress, chief executive of the Midwest Business Group on Health. Employers remain concerned about the quality of the networks, and many are doing an analysis to see how disruptive changing the network would be for their workers. Nonetheless, the bottom line is that more employers are considering smaller networks.

  • Some companies are experimenting with different tiers of networks, charging workers more if they go to the broadest network, said Joseph Kra, a Mercer consultant



Economists See Wages Climbing in 2014

After stagnating for years, wage gains will accelerate in 2014, a wide majority of leading economists predict in USA Today’s survey. Forty economists, surveyed May 2-6, also say economic and job growth will ratchet higher the rest of this year despite an economy that stalled in the first quarter.

Average wages have risen about 2 percent a year since the recovery began in mid-2009, and have been virtually flat after adjusting for inflation. But the jobless rate has been falling rapidly, to 6.3 percent from 8.1 percent in August 2012.

  • Economists say that as unemployment approaches 6 percent by year's end, a more limited supply of available workers will force employers to step up pay hikes.



IBM Ends Severance-Related Disclosures

“For at least a decade, International Business Machines Corp. gave fired employees information detailing a severance package that asked them to waive age-discrimination claims and also included a page listing the job titles and ages of workers being let go. This disclosure [is] required by U.S. federal law for workers over 40 if a company wants the person to agree not to file such a lawsuit. Now IBM is...avoiding the disclosure requirement by offering workers the option of bringing claims in arbitration,” reports Bloomberg News.

  • “Although employees are now able to accept a severance agreement and maintain their ability to bring an age-discrimination claim in arbitration, the strategy could make it harder and riskier for dismissed older employees to decide whether it’s worth taking on the cost of a legal battle, lawyers and labor law experts say,” Bloomberg reports.



Supreme Court to Rule on Retiree Health Obligations
under Union Agreements

The U.S. Supreme Court agreed to decide the question of what language is necessary in a collective bargaining agreement in order to require an employer to continue retiree medical benefits beyond the agreement’s expiration, reports Bloomberg News.

The Supreme Court granted review of the 6th circuit's decision in Tackett v. M&G Polymers USA. The lawsuit stemmed from M&G's announcement in December 2006 that it would begin requiring its retirees to contribute to the cost of their health benefits.

  • The case asks the high court to consider what has become known as the “Yard-Man inference,” a judicial presumption that union retiree benefits are intended to be vested in the absence of specific plan or bargaining agreement language to the contrary (United Auto Workers v. Yard-Man Inc., 6th Circuit, 1983). While Yard-Man has been applied in the retiree-friendly 6th Circuit, other circuits have required stronger plan language to support a finding of vested retiree health benefits.



Employers Eye Moving Sickest Workers to Insurance Exchanges

Can corporations shift workers with high medical costs from the company health plan into online insurance exchanges created by the Affordable Care Act? Some employers are considering it, reports Kaiser Health News.

It's unclear how many companies, if any, have moved sicker workers to exchange coverage, which became available only in January. But an employer that provides ACA-compliant health coverage to its employees might still be able to buy a targeted employee with high medical expenses a "platinum" plan in the ACA’s exchange/Marketplace. The plan “could cost $6,000 or more a year for an individual, but that's still far less than the $300,000 a year that, say, a hemophilia patient might cost the company,” according to the article.

  • Such practices could raise concerns about discrimination, and could also cause resentment among employees who didn't get a similar deal, benefit experts said.



Make Better Use of 401(k) Statements

In a blog post, Putnam Investments recommends beefing up 401(k) statements with the following “actionable information” to raise participation.

  • Many savers are leaving money on the table by not taking full advantage of their employer’s matching contribution. Segment and target these individuals, and demonstrate how maximizing the match can lead to greater savings at retirement age.

  • Savers over the age of 50 are eligible for catch-up contributions to their plan. Monitor participants’ birthdays and provide the necessary information to help them take advantage of this feature.

  • Give savers a before-and-after snapshot of their paycheck as they raise their deferral rates. Help them visualize the tax advantages of increasing their contribution.

Higher participation and savings rates are connected with employees assigning more value to their benefits, while an increase in the size of plan assets can lead to lower per capita recordkeeping fees.



Proposed Guidance on ACA and COBRA Notices

On May 2, the Department of Labor's Employee Benefits Services Administration (EBSA) issued a notice of proposed rulemaking regarding revisions to COBRA continuation notices that employers must provide to employees. EBSA also released a model general notice form and a model electronic notice form for providing COBRA notices, and a series of frequently asked questions (FAQs) addressing the relationship between COBRA and the Affordable Care Act (ACA).

Timonthy Jost, a professor at the Washington and Lee University School of Law, writes on the Health Affairs Blog:

The proposed rule would…provide model notices through guidance to make it easier to update the model notices. On May 2, the DOL published such model general and election notices on the EBSA website. The election model notice specifically states that COBRA coverage does not limit eligibility for marketplace coverage, which may be more affordable. Group health plans are not required to use the model notices, which must in any event be modified if the plan is not a single employer plan, but plans that do use the model notice are presumed to meet COBRA notice requirements.



Wage Pressure Begins to Build

U.S. Labor Department figures on Friday showed private-sector nonfarm hourly wages grew just 1.9 percent in April from a year earlier—and economists aren't finding much evidence of a strong uptick in wages five years after the recession ended.

Still, executives at more than two dozen large companies—including manufacturers as well as financial and services companies—reported rising wages in significant portions of their businesses, much of it in the U.S., reports the Wall Street Journal.

  • Some companies said the impact of wage increases was damped by productivity gains and cost-cutting efforts.



Are 401(k) Fees Too High? High Court May Rule

If the Supreme Court takes on a new case involving high 401(k) fees, it would be the first time it has considered a the topic. A ruling against California-based utility Edison International could force plan sponsors to take greater fiduciary responsibility for their plans, reports Reuters.

While several 401(k) fee cases are winding through the appellate courts, these class actions often end with large settlements that profit the attorneys who specialize in pursuing them.

  • One prominent litigator already has many trophies on his wall: settlements with Bechtel, Caterpillar, Cigna, General Dynamics, International Paper and Kraft Foods. The core allegations in those cases involved imprudent investment options, excessive fees and misleading information about fees.



Envisioning the End of Employer-Provided Health Plans

"The days of Americans getting health insurance through their employers may be numbered — and the change could be just as profound as the shift of employers forcing employees to manage their own retirement savings," reports the New York Times.

By 2020, about 90 percent of American workers who now receive health insurance through their employers will be shifted to government exchanges created by the Affordable Care Act, according to a projection by S&P Capital IQ, a research firm serving the financial industry.

  • "Companies’ experience with substituting 401(k)s for pensions may have taught them that employees had little choice in the transition, and just accepted it," the article states.



U.S. Employment Costs Rise Slightly

U.S. employers' costs for pay and benefits rose slightly in the first quarter, a sign of persistently weak inflation across the economy, reports the Wall Street Journal.

The employment-cost index, a broad measure of pay and benefits, rose a seasonally adjusted 0.3 percent from January through March, the Labor Department said Wednesday. That was slower than the 0.5 percent gain in the fourth quarter of 2013.

Wages and salaries, which make up about 70 percent of compensation costs, rose 0.3 percent in the first quarter. Benefits were up 0.4 percent. Total labor costs were up 1.8 percent in the first quarter from a year earlier.

In 2013, wages rose 1.6 percent for the year, while benefit costs climbed 2.1 percent.

  • Federal Reserve Chairwoman Janet Yellen has described recent wage gains for U.S. workers as "very low by historical standards," calling them evidence of "considerable slack" in the labor market, despite a falling unemployment rate that stood at 6.7 percent in March.



Five Surprising Work/Life Trends 

New findings by The Family & Work Institute and SHRM highlight five somewhat unexpected workplace flex trends: 

  • The FMLA leveled the playing field—12 weeks has become the norm for leaves; at the same time, longer leaves are less available.    

  • Businesses have become much more responsive in helping employees provide for their parents' elder-care needs.

  • Smaller employers are big leaders in providing flexibility.

  • Telecommuting is on the rise, but conversely, employers have reduced the options that involve employees spending significant time away from full-time work, include job-sharing and sabbaticals.

  • Employee retention needs are driving flex programs. 



Medicare Part D Amounts Will Increase in 2015

For 2015, retiree health plan sponsors that are eligible for the federal Retiree Drug Subsidy (RDS) will receive 28 percent of Part D prescription drug expenses between $320 and $6,660, reports Sibson Consulting, citing an April 7 announcement by the Centers for Medicare and Medicaid Services.

Plan sponsors should note the new benefit amounts for planning purposes for 2015 — both with respect to expected RDS income and to the design of any Medicare Part D prescription drug plan that is offered to retirees.

  • Prior to making benefits designs for 2015 final, plan sponsors may wish to analyze the benefits of contracting with a Medicare prescription drug plan as opposed to retaining the RDS.

(For a related SHRM Online story, see "For 2015, Higher Limits for HSA Contributions and Deductibles.")



Proposed Enrollment Process for Federal SHOP Coverage in 2015

The administration has clarified its proposed procedures for small group market employers seeking to purchase 2015 plan year health coverage for their workers through a federally facilitated Small Business Health Options Program (SHOP) exchange, Timothy Jost reports on the Health Affairs Blog.

Among the procedural steps outlined by the Centers for Medicare and Medicaid Services (CMS): 

  • The employer decides whether to offer employee choice, and at which single level (bronze, silver, gold, or platinum), and determines the level of employer contribution for medical, dental, and dependent coverage.
  • The employer offers coverage to employees and others eligible for coverage (such as business owner and spouse) and specifies the deadline to enroll.
  • The SHOP exchange notifies persons offered coverage of their eligibility (and offers an appeal to those determined ineligible).
  • Employees select a plan or waive coverage.
  • If an employer voluntarily terminates, a notice must be sent to all employees. Employees may also voluntarily terminate coverage. Notice must then be sent to the employer. Insurers may terminate coverage if an enrollee ceases to be eligible or coverage is rescinded because of fraud or misrepresentation.



    Talking Up Paternity Leave

    In an interview with the Chicago Tribune, the editorial director of Working Mother magazine, Jennifer Owens, offered perspective on paternity leave.

    Asked about the best practices in terms of paternity leave, Owens said, "Just making it available to men is one. But in the best companies, there’s a lot of communication to let men know that not only is paternity leave available and accepted, but that they are encouraged to take it, with a top executive stepping up and saying ‘I took it’ and talking about its value in his life."

    • On Working Women's annual 100 Best Companies list, 83 percent offer paid paternity leave of, on average, three weeks. These companies included Johnson & Johnson, IBM, S.C. Johnson, Ernst & Young and Marriott.



    The ACA and COBRA at Odds

    Laid off workers who opt for temporary coverage under COBRA while they evaluate options under the Affordable Care Act can’t switch to an exchange-based ACA plan until the next open enrollment period in November, reports Forbes. If workers choose COBRA coverage, even for a month, they are trapped within its much more expensive coverage until the next open enrollment period.

    In a limited number of situations involving a qualifying life event, such as loss of a job, workers can sign up for an exchange-based plan outside one of the enrollment periods. But most people wait a month or more to get the COBRA notice and then make the decision. COBRA covers medical expenses incurred during the gap retroactively, while exchanged-based ACA plans do not.

    • Often severance agreements provide that the company will pay a month or two of its share of the health insurance premiums and apply them to the COBRA payment for which the employee would otherwise be responsible. In the past this would be considered a favorable term. “But now if you accept that payment, you elect COBRA,” said employment attorney Donna M. Ballman.



    U.S. Trails on Bereavement Leave

    The United States continues to lag behind other developed countries in one key area: mandatory bereavement leave for employees, reports

    The U.S. Department of Labor states that the Fair Labor Standards Act "does not require payment for time not worked, including attending a funeral. This type of benefit is generally a matter of agreement between an employer and an employee (or the employee's representative)."

    • Even though U.S. federal law does not require it, 87 percent of (surveyed) companies still offer paid bereavement leave to employees, according to a 2013 study of employee benefits published by SHRM. Employers generally limit paid bereavement leave, however, to an "immediate family member."



    SEC Readies to Require More Disclosures
    on Target-Date Funds

    The Security and Exchange Commission (SEC) is preparing to require further participant disclosures regarding the design of target-date funds (TDFs) in  401(k) or similar plans, reports MarketWatch.

    The SEC earlier this month reopened the public comment period for its TDF regulations, which were first proposed in 2010 but haven’t yet been completed. That proposed rule would generally require TDFs to more prominently disclose the fund’s asset allocation at the target date, and require fund materials to include a table, chart, or graph depicting the fund’s asset allocation over time (the "glide path.")

    • A group of regulators, consumer advocates, academics and others earlier this month recommended a number of changes to the proposed TDF regulations, requiring additional, detailed information be provided for plan participants, in the belief that further disclosure materials are actually read.



    5 Red Flags for 401(k) Plans

    Most of the nation's more than 600,000 401(k) plans are fine. That doesn't mean employees should let their guard down when they get statements for their employer-sponsored retirement plan, advises USA Today.

    Employees are warned about frequent service provider turnover, along with either frequent changes or no changes to the plan's investment options, which would be equally worrisome.

    • If their plan isn't providing much in the way of investment education — such as, meetings and online or printed material — employees should consider that a red flag.



    Give Employees a Stipend to Buy Health Insurance?

    Robb Mandelbaum's New York Times' "You're the Boss" column looks at whether giving employees a flat stipend to purchase health insurance would violate age discrimination law (since premiums are higher for older individuals).

    The answer: it depends on how the benefit is designed and communicated.

    • Moreover, Bruce Elliott, SHRM's compensation and benefits manager, tell the columnist that whether a lump sum payment is distributed equally or as an equivalent share of the premium expense, the employer "is bound to alienate some segment of his work force."



    Why More Companies Should Pay Employees to Quit

    Following up on the recent announcement that Amazon will pay employees up to $5,000 to quit (unrelated to any reduction in force layoff or negotiated severance), Washington Post workplace columnist Jena McGregor contends more companies should do the same. She writes:

    "Five thousand dollars here and there, after all, isn't that much when compared with what disengaged people can cost a company's bottom line. Gallup has shown that companies that have 9.3 "engaged" employees (those who are emotionally connected with their jobs and willing to go above and beyond) for every one "disengaged" employee saw 147 percent higher earnings per share on average in 2011-2012 when compared with their competitors. Meanwhile, employers with just 2.6 happy workers for every unhappy one saw earnings per share that was 2 percent lower than their competitors. Gallup estimates that "active disengagement" costs the United States $450 billion to $550 billion each year."

    (To learn more, see the SHRM Online article "Amazon Offers 'Pay to Quit' Bonuses to Disgruntled Workers.")



    CEO Pay Study Looks at Largest U.S. Companies

    Although compensation awarded to CEOs at the largest U.S. corporations is increasing, the link between pay and performance continues to be strengthened by shareholder "say on pay" voting, according to pay consultancy Equilar's latest CEO Pay Study.

    The study examines CEO pay at the 100 largest U.S. public companies, based on proxy filings from thousands of U.S. firms. Findings from this year’s study include:

    • The median pay for the 100 CEOs on the list was $13.9 million, an increase of 9 percent over the previous year.

    • The cash component of CEO pay increased 10.8 percent while the equity component rose 7.1 percent.

    • Oracle’s Larry Ellison remains at the top of the list with $78.4 million, marking the seventh consecutive year he has been in the top three in this study. Bob Iger of Disney and Rupert Murdoch of Twenty-First Century Fox round out the top three.



    In Wellness Programs, 'Wearables' Step Forward

    Wearable technology is seen as one way for companies to ensure that employees are keeping active and sleeping well, reports Fortune.

    More than 13 million wearable fitness tracking devices are expected to be incorporated into employee wellness programs within the next five years, according to estimates from ABI Research. In firms where the tech is used, the benefits have included clearer goals, proactive approaches to health, and employees who are thinking about improving their lifestyle on a regular basis.

    • The gas and oil giant BP offers employees the use of a Fitbit tracker, which measures the number of steps taken every day, among other things. Employees are encouraged to improve their health and earn "wellness points" along the way.



    Patients Often Win If They Appeal a Denied Health Claim

    To help make sure a patient's claims aren't improperly denied, the Affordable Care Act creates national standards allowing appeals to the insurer and, if necessary, to a third-party reviewer, reports Kaiser Health News. Previously, the rules regarding such appeals varied by state and employer.

    Capital Public Radio in Sacramento analyzed multiyear data from California and found that about half the time a patient appeals a denied health claim to the state's regulators, the patient wins. A 2011 GAO report sampling data from a handful of states before the health law took effect found that patients were successful 39 to 59 percent of the time when they appealed directly to the insurer.

    • When appealing to a third party (such as the state insurance commissioner), patients also were often successful in getting the service in question – winning as many as 54 percent of such decisions in Maryland, for example.



    Discord Over What's 'Preventive' Care During Physicals

    Access to preventive care at no charge to the patient is a key tenet of the Affordable Care Act. But questions about what qualifies as "preventive" are causing discord between doctors and patients, particularly when it comes to the traditional annual checkup, reports the Wall Street Journal (subscription required).

    A long list of services do qualify as preventive care under the Affordable Care Act, including vaccinations and screenings for diabetes, depression, high blood pressure, high cholesterol and several cancers. Most nongrandfathered plans cover one such preventive visit per year with no charge to the patient. But care related to existing health problems, or new issues, is considered "evaluation and monitoring," not preventive.

    • Some doctor offices now ask patients to schedule separate annual visits—one for preventive care (with no out-of-pocket cost) and one to discuss problems (with the usual deductible and co-pay). Some insurers let doctors bill for preventive and nonpreventive services in the same visit using a special code ("modifier 25"). But that does trigger patient co-pays—and sometimes patient ire.



    Amazon Offers 'Pay to Quit' Bonuses
    to Disgruntled Employees

    Amazon has a deal: The company will pay unhappy employees a bonus—up to $5,000—to leave, reports USA Today.

    In a program that Amazon calls "Pay to Quit," those who aren't committed to their jobs are urged to leave on their own and can get $2,000 in severance pay in the first year of employment with the bonus topping out at $5,000 in the fourth year. "The goal is to encourage folks to take a moment and think about what they really want," Amazon CEO Jeff Bezos said in an April 10 letter to shareholders. "In the long run, an employee staying somewhere they don't want to be isn't healthy for the employee or the company."



    Large Employers' Health Premium Trends

    The newly released 2014 ADP Annual Health Benefits Report highlights significant trends in employer-provided health benefits between 2010 and 2014 among U.S. companies with 1,000 or more employees. Among the findings:

    • Premium increases leveling. In 2014, the average monthly health plan premium was $870 (including employer and employee contributions), an increase of 15 percent since 2010. However, after a spike of 6.9 percent between 2010 and 2011, the rate of increase moderated, and premiums rose 1.7 percent between 2013 and 2014. The cause of moderating premium costs may have been due, in part, to an increasing number of employers using high-deductible health plans with higher co-pays, or implementing spending accounts and consumer-directed health plans.

    • Premium per covered life fairly constant. Employees with higher incomes tended to incur higher premiums, but they also covered more dependents. When premiums were adjusted for total covered lives—considering each insured person, rather than each employee—premium costs were fairly constant among income levels, averaging $411 per month in 2014.

    • Dependents on parent’s plan until age 26. Several trends identified may be linked to the ability of dependents up to age 26 to stay on a parent’s health policy, if the plan offers dependent coverage. Higher premium costs in older age groups may have been linked to the growing likelihood that a covered employee could have covered dependents who may be up to age 26. Among those 30 and under, the take rate declined -7.6 percent between 2010 and 2014.

    • Employers contributing slightly less. In 2014, employers contributed 74 percent of the premium cost for those with dependents, whereas those with no dependents experienced a 77 percent employer contribution share. Employer contributions to health premiums declined slightly for all groups from 2010 to 2014, within a tight range of -1.0 percent with no dependents to -1.5 percent with dependents.



    White House Advisor Reaffirms Prediction
    Employers Will Drop Health Coverage

    Dr. Ezekiel Emanual, who advises the White House on health care reform, provoked controversy when he recently predicted most employers will abandon health coverage by 2025. In a follow-up Q&A with the New York Times, Emanual contends employers will raise wages to make up for ending health benefits.

    • Says Emanual: "After the [initial] interview appeared a colleague of mine wrote me and said, ‘You know, my sister would love to be able to go into the exchange, because she can get a better deal for herself, but her employer’s not going that direction, at least not now.’ ”



    Obama Readies Executive Actions on Equal Pay for Women

    President Obama on Tuesday will sign an executive order to prevent federal contractors from "retaliating" against workers who discuss their compensation, reports Reuters (via

    The president also will direct the U.S. secretary of labor to create regulations that require federal contractors to submit to the government summary data on employee compensation including details on sex and race.

    • The move comes ahead of consideration in the U.S. Senate for the Paycheck Fairness Act, which would update equal pay laws by barring all employers—not just federal contractor—from punishing workers who share information about their pay.



    Justices Hear Arguments in 'Stock Drop' Case

    The issue of inside information dominated the back-and-forth between U.S. Supreme Court justices and attorneys debating the pro-fiduciary presumption of prudence during oral argument April 2 in the first Employee Retirement Income Security Act stock-drop case to reach the high court, reports Bloomberg BNA.

    While the case involves an employee stock ownership plan (ESOP), the ruling could affect fiduciary responsibility with respect to employer stock offered in 401(k) and other defined contribution plans.

    • The justices' questions to counsel suggest that they see the central issue as how a prudent fiduciary of an employer stock plan should respond to inside information affecting the value of the stock price.



    Study Estimates ACA Costs for Large Employers

    The Washington Post reports on a new study by the American Health Policy Institute, The Cost of the ACA to Large Employers, that looks at direct costs to companies from the Affordable Care Act's requirements, over and above projected employer health care cost trends without the ACA.

    The study found that:

    • The cost of the ACA to large U.S. employers (10,000 or more employees) is estimated to be between$4,800 to $5,900 per employee.

    • These large employers will see overall ACA-related cost hikes of 4.3 percent in 2016 and 8.4 percent in 2023 over and above what they would otherwise be spending.

    • The total cost of the ACA to all large U.S. employers over the next ten years is estimated to be from $151 billion to $186 billion.




    Health Care Spending Growth Hits 10-Year High

    Health care spending rose at the fastest pace in 10 years last quarter, a development that could foreshadow higher costs for consumers this year, reports USA Today. Expenses for health care rose at a 5.6 percent annual rate in the fourth quarter, the Bureau of Economic Analysis said last week.

    Driving the increase was an $8 billion rise in hospital revenue — more than the previous four quarters combined. The increase is a marked change from slow-growing rates of health care prices and spending in recent years.

    • The Centers for Medicare & Medicaid Services expect health spending to rise 6.1 percent this year, up from about 4 percent in 2013, as an estimated 11 million Americans gain health insurance.



    Group of Democratic Senators Seeks ACA Changes

    Six Senate Democrats up for re-election this year have proposed legislation aimed at changing parts of the Affordable Care Act, reports The Hill. Sen. Mary Landrieu (D-La.), is leading the effort, joined by Sens. Mark Warner (D-Va.), Mark Begich (D-Alaska), Sens. Heidi Heitkamp (D-N.D.), Joe Manchin (D-W.Va.) and Angus King (I-Maine).

    The first bill from the group would add a new, cheaper option, a copper plan, to ObamaCare’s existing menu of platinum, gold, silver and bronze plans. The second bill would expand tax credits to small businesses and would also expand the option for voluntary health care coverage from employers with 50 or fewer workers to employers with 100 or fewer. The third bill would allow consumers to enroll directly through insurers and other web-based entities besides

    • While the chances of passing any major changes to the Affordable Care Act are viewed as slim to none, the proposals might receive a better reception after the midterm elections.



    Employee Gripes: Higher Health Care Costs, Lower Raises

    Cost-cutting by big companies in response to the changing business landscape has their employees worried about money. Three out of four employees of big corporations say some of their companies' recent decisions, such as increasing health care premiums and giving smaller raises, are hurting employees' finances, reports USA Today, citing a new survey by Towers Watson.

    • "The last two years have been a period of rapid change among large employers," Towers Watson Senior Consultant Shane Bartling told the paper. The survey showed that 47 percent of employees are worried about their current finances; 58 percent are worried about their future finances. "Clearly the level of worry is correlated to employers' actions," Bartling said.



    Supreme Court Says FICA Tax Due On Severance Pay

    Overturning the Sixth Circuit, the Supreme Court declared today in U.S. v. Quality Stores that lump sum severance payments made to laid-off employees are taxable wages for FICA purposes, dashing the hopes of employers and former employees for FICA tax refunds of tens of millions of dollars, reports Forbes.

    What the Supreme Court decision means for employers is that what had long been the case—severance pay is subject to FICA tax—remains the case.

    • Employers can avoid paying FICA taxes on severance pay if it’s structured in a special way—employers fund a trust and employees get weekly payments tied to the receipt of state unemployment benefits. But employers don’t take advantage of the exception because it’s onerous, experts say.



    Coca-Cola's Stock Incentives Called Excessive

    According to a shareholder's analysis, Coca-Cola plans to award stock worth about $13 billion to its senior managers over the next four years, based on the company’s current stock price. The analysis estimates that between the proposed compensation plan and a previous plan, the company had allocated as much as $24 billion toward stock-based rewards for its senior people, reports the New York Times.

    “We can find no reasonable basis for gifting management 14.2 percent of the share capital of Coca-Cola, worth $24 billion at today’s share price. No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation,” wrote shareholder David Winters, a longtime money manager and founder of Wintergreen Advisers.

    • Coca-Cola said that the plan “is not limited to senior executives, but extends to a large group of employees and is important for incentive and retention. Approximately 6,400 were eligible in 2013. The amount of long-term equity compensation awards granted each year are within industry norms.”



    Insurers Offering Spousal Coverage Must Offer Coverage for Same-Sex Spouses

    On March 14, the Department of Health and Human Services announced that, beginning with the 2015 plan or policy year, health insurers offering nongrandfathered health coverage for opposite-sex spouses must also offer coverage for same-sex spouses, reports Thomson Reuter's EBIA Weekly.

    The announcement, in the form of a new FAQ, confirms that insurers must offer coverage to legally married same-sex spouses, if their marriage was validly entered into in a domestic or foreign jurisdiction that authorizes same-sex marriage, under the same terms and conditions that apply to opposite-sex spouses, regardless of the jurisdiction in which the policy is offered or operated, or where the policyholder resides—including in states that do not recognize same-sex marriages.

    • The FAQ does not require an insurer to provide coverage that is inconsistent with a group health plan’s eligibility requirements or interfere with a plan sponsor’s right to define “spouse” as it chooses for purposes of plan eligibility. But it does prohibit an issuer from declining to offer to a plan sponsor the option to cover same-sex spouses under the coverage, on the same terms as opposite sex spouses.



    Eighth Circuit Rules on Excessive 401(k) Fee Claims

    The Eighth Circuit Court of Appeals issued a highly anticipated decision in a 401(k) excessive fee class action case, reports law firm Goodwin Procter's ERISA Law Update.

    In Tussey v. ABB, the court affirmed the trial court’s holding that a plan sponsor is liable for recordkeeping fees that resulted from a deficient process. The court vacated and remanded that part of the decision that held the sponsor liable for mapping a balanced fund to a target-date fund, given that insufficient deference was afforded to the sponsor’s decision. It also reversed a holding that the plan’s provider can be liable for its treatment of float and float income, given that float is not a plan asset.

    • The Eighth Circuit panel agreed with the plan sponsor that the manner in which plan recordkeeping was paid, through revenue sharing and bundled service arrangements, was a “common and ‘acceptable’ investment industry practice…that frequently inure[s] to the benefit of ERISA plans.” Nonetheless, the court affirmed the judgment against the plan sponsor for excessive recordkeeping costs given the trial court’s finding of facts that, among other things, the sponsor made an insufficient investigation of those costs.



    Caregivers for Aging Parents Need Employers' Assistance

    As America ages and elder care needs increase, working Americans need more help from their employers, reports Healthline. Caregivers in the workplace need help navigating the available resources, for instance. Even looking for a care facility, if it comes to that, can be a grueling process.

    Catch-all employee assistance programs won't cut it for caregivers, says Jody Gastfriend, vice president of senior care services for, a senior-care benefits provider. “EAPs were a grab bag of all things related to employee wellness: substance abuse, mental health, child care, the elderly. They didn't have providers trained in senior care and nobody ended up using it,” she said. One valued benefit: backup services that help employees handle emergency situations.

    • Pharmaceutical giants Pfizer and Janssen have helped support a program developed in recent years called ReACT, or Respect A Caregiver's Time. ReACT provides training to front-line managers at companies nationwide on how to better understand the needs of a caregiving employee.



    Administration Tweaks Exchange-Based Plans

    The Obama administration issued new standards for health insurance sold through the Affordable Care Act's federally run marketplace/exchange, to address complaints from consumers who said that costs were too high and that the choice of doctors, hospitals and prescription drugs was too limited, reports the New York Times. The federal government sets standards for insurers in the federal exchange, which serves three dozen states with about two-thirds of the nation’s population. States running their own exchanges generally build on the federal standards.

    Many health plans held down premiums this year by limiting the networks of doctors and hospitals available in the exchanges, and consumers expressed concern about such narrow networks. The administration said it would examine health plans to make sure consumers have “reasonable access” to care in 2015.

    • Consumer advocates welcomed the standards and said they should have gone further. But insurers and employer groups complained of burdensome overregulation and said the White House should focus first on getting the online exchanges to work properly.



    Pension Rules Force Frozen Plans to Terminate

    If the IRS doesn't change some of the tax code's nondiscrimination rules regarding defined benefit pension plans, sponsors that have closed plans to new hires, or put them under a “soft freeze,” are likely to decide to cease benefit accruals for existing participants to avoid running afoul of rules that prohibit favoring higher earners, report Bloomberg BNA.

    With no new participants flowing into the plan, higher attrition rates for nonhighly compensated employees and pay increases that turn some of them into highly compensated employees mean that eventually, the plan might very well run afoul of the tax code's nondiscrimination rules.

    • IRS Notice 2014-5, issued in December, provided a temporary reprieve for closed plans from some nondiscrimination rules and offered suggestions for more permanent solutions. Comment letters from plan sponsors seek permanent rule changes to allow frozen plans to avoid closing down entirely.



    Multiple Employer Retirement Plans Grab Attention

    A concerted effort in Washington to get more employers to offer retirement plans has raised the profile of multiple employer plans, a largely untapped market for service providers, reports Pensions & Investments. Unlike the similarly named "multiemployer plans," which serve employers in a specific industry and are typically collectively bargained and managed, a "multiple employer plan," or MEP, is adopted by two or more unrelated employers that do not want the administrative burdens and fiduciary responsibilities of sponsoring a plan themselves.

    There has been a lack of guidance or sometimes conflicting guidance from the Internal Revenue Service, which has authority over the tax status of retirement plans, and the Department of Labor, which enforces the participant protections of the Employee Retirement Income Security Act. The Labor Department has reservations about open MEPs in particular.

    • Now, with four legislative proposals making the rounds on Capitol Hill to help clear up the confusion and make it easier to form multiple plans, “it's going to help conquer what I consider the last frontier,” said Edward Ferrigno, vice president for Washington affairs for the Plan Sponsor Council of America.

    (For background on this topic, see the SHRM Online article "Multiple Employer Plans: An Emerging Solution for Managing 401(k)s?")



    Businesses Chafe at Proposed Overtime Rules

    Business groups and corporate lawyers assailed a White House plan to expand overtime eligibility to millions more workers, saying the move could hurt job growth, worker productivity and the economy, reports USA Today. Department of Labor rules would set a minimum amount of executive work employees must perform in order to meet the classification, making millions of workers newly eligible for overtime.

    Richard Alfred, chairman of Seyfarth Shaw's national wage-and-hour practice, said most employers will respond to the new directive by limiting the hours of existing workers to avoid paying costly overtime. "This won't necessarily translate into more pay in the pockets of those workers," he noted. Instead, companies will hire more workers.

    • Some firms could take a different approach, reducing the basic wages of management workers to account for the new overtime expenses and leaving employees no better off, said Dan Yager, president and general counsel of the HR Policy Association.




    DOL to Expand Mandatory Overtime for Millions of Workers

    Department of Labor (DOL) is issuing proposed regulations to expand overtime pay requirements to millions of workers currently classified as "executive or professional" employees, reports

    The new regulations to the Fair Labor Standards Act will mandate that businesses provide overtime pay for those who work jobs as varied as fast-food restaurant managers, loan officers, and computer technicians. Currently, businesses are prohibited from denying overtime to a salaried worker making less than $455 per week. The rules that DOL will propose would increase that salary threshold.

    • Business groups warn that the planned change will lead employers to reduce staff or cut pay.



    Critics Versus Defenders of Target-Date Funds

    Critics have charged that plan sponsors often fail to properly vet the target date funds they offer through their 401(k) plans, lazily sticking with a few from the Big Three providers—Fidelity Investments, T. Rowe Price and Vanguard Group, which together held 73 percent of the target date fund market as of January, reports Institutional Investor. And they note that most target-date funds are actually "funds of funds," with the underlying funds limited to the fund provider's own proprietary offerings.

    There's a big gap between what the Department of Labor expects plan fiduciaries to do and what they're actually doing as regards conducting due diligence when selecting target date funds, says ERISA attorney C. Frederick Reish. "These kinds of gaps are red flags," he warns.

    • Others defend the Big Three's dominance. "Few companies can break through and build really good 401(k) platforms properly," says Todd Cipperman of Cipperman Compliance Services. "I can't say there's anything untoward that three companies own the market. A lot of companies got out."



    In 401(k) Plans, Match Formulas Make a Big Difference

    The design of 401(k) plans can vary significantly, and even small differences in an employer match formulas can add up to hundreds of thousands of dollars over the course of a career, reports Bloomberg Businessweek.

    Consider an employee with a starting salary of $31,000 at age 25, who is then granted annual pay increases of 3 percent, reaching a final salary of $101,123 at age 65: Assume she made the average contribution for her age and that the portfolio generated an annual return of 5 percent. Under those conditions, she would have $999,231 if she worked at DuPont, where the top corporate match is 6 percent and the company kicks in an additional 3 percent of pay (DuPont also counts bonus pay when calculating its match). The same person would end up with $504,684 if she worked at Wynn Resorts, where the maximum match is $500, according to the Employee Benefit Research Institute.

    • McDonald's match is surprisingly generous: 300 percent of the first 1 percent employees save in their 401(k) accounts. The company also matches 100 percent of the next 4 percent of pay an employee contributes, and in the past two years also has made a discretionary profit-sharing contribution of 2 percent.

    (To learn more about 401(k) matching formulas, see the SHRM Online article "401(k) Match: 'Thresholds' Drive Participation More than Rates.")



    Boeing to End Pensions for Non-Union Workers

    Boeing will end its pension plans for non-union employees by 2016 in an effort to curb the company's growing pension costs, reports The change in retirement plans will impact 68,000 workers including managers and executives.

    Beginning in January 2016, Boeing will contribute 9 percent of an employee's eligible income to their 401(k) account. That percentage will decrease by 1 percentage point for the following two years. Then, Boeing will contribute between 3-5 percent of a worker's income each pay period, depending on their age, as the company explained in a fact sheet. The company will also match employee contributions up to 6 percent of base pay.

    • The announcement means that a "vast majority" of Boeing employees will have now been moved to a 401(k) plan, said spokesman John Dern.



    Further Delays of SHOP Options
    for Small Businesses Likely

    The administration is raising the possibility that small-business workers in some states might not be given a choice of health plans under the Small Business Health Options Program (SHOP)—potentially undermining a significant aspect of the law that federal health officials already have delayed once, reports the Washington Post.

    Under the Affordable Care Act, states are required to offer a SHOP health care exchange where small businesses can enroll in and pay for insurance plans online. Companies in states that declined to build their own SHOP portals would be able to access a similar network run by the federal government. The administration has now again delayed the requirement that states using the federal exchange offer employees a choice of more than one plan option, pushing the deadline back another year to fall of 2015.

    (For background on this topic, see the SHRM Online article "‘SHOP’ Small Business Exchange Pared Back Further.")



    FAQs on Out-of-Pocket Maximums and
    Preventive Services Requirements

    Federal agencies recently published new frequently asked questions (FAQs) that address the Affordable Care Act's requirements for out-of-pocket maximums and preventive services, reports Sibson Consulting's Capital Checkup.

    The answers clarify, among other points, that for nongrandfathered plans:

    • Out-of-network expenses are not required to be counted toward the in-network out-of-pocket maximum.

    • Cost sharing includes deductibles, co-payments or similar charges. Cost sharing does not include premiums, balance billing amounts for non-network providers, or spending for non-covered items or services.

    • Plans must cover breast cancer risk-reducing medications, such as tamoxifen or raloxifene, for women without cost sharing subject to reasonable medical management.



    Obama's 2015 Budget Would Cap Retirement Savings Breaks
    for High Earners

    "President Barack Obama’s $3.901 trillion budget would raise taxes on the rich, expand tax credits for the poor and middle class — though as of now, it merely serves as a White House wish list," reports Politico. "Although very little of it is expected to become law — or even be seriously considered via legislation on Capitol Hill — the president’s budget still serves as a benchmark for congressional Democrats."

    Fully half of the budgets new $56 billion suite of programs would be funded by cutting tax breaks on retirement accounts for the wealthy. High earners would lose their tax break on annual income greater than $200,000.

    • “Tax-preferred savings accounts were intended to help middle class families save for retirement,” the budget reads. “However, under current rules, some wealthy individuals are able to accumulate millions of dollars in these accounts, substantially more than is needed to ensure a secure retirement.”



    Advisers Warn Against 401(k) Loans

    Investors are racking up billions of dollars in defaults on loans taken from their 401(k) plans, ignoring warnings from financial advisers they're incurring needless tax hits and endangering their retirement nest eggs, reports the Wall Street Journal.

    In U.S. 401(k)s and related accounts, one out of every four plan participants has borrowed against his or her principal, according to consultancy Aon Hewitt. Meanwhile, an estimated $6 billion a year in loans wind up in default, finds a new study published by the Wharton School of the University of Pennsylvania.


    • A 401(k) loan default usually occurs after the investor leaves his or her job and fails to repay the loan in full—normally within 30 to 90 days, according to advisers. Investors who default in most cases have to pay federal and state income taxes. Those under age 59-1/2 who default also are likely to be hit with a 10 percent early-withdrawal penalty.

    (To learn more, see the SHRM Online article "Explaining 401(k) Plan Loans’ Upsides and Downsides.")


    Health Law's Co-ops Have Mixed Record

    The co-ops, a late addition to the Affordable Care Act, are being heatedly debated in Washington, where congressional Republicans recently warned that many of the co-ops could fail, putting at risk the nearly $2 billion in government loans that helped create them, reports the New York Times.

    Established insurers privately question whether some co-ops that priced their plans too low could end up struggling if they end up with unexpectedly high medical costs.

    • As start-ups, the co-ops were among the hardest hit by the technical failures that marred the law’s rollout.



    Parsing the Affordable Care Act’s Labor Taxes
    and Work Disincentives

    The U.S. labor market will be receiving three blows from the new health care law: the implicit employment tax, the employer penalty and an implicit income tax, according to an analysis at the New York Times Economix Blog.

    The law acts as an implicit income tax on employment because most workers could not get federal government subsidies to pay their health care premiums during the months they were at work. The household that is employed more months of the year is likely to get less assistance (and maybe no assistance) under the law.

    • This new implicit employment tax will apply to tens of millions of workers who are offered health insurance on their job and to millions of non-employed persons who are considering a position that offers coverage. Relatedly, CNNMoney reports how the Affordable Care Act is giving workers more options to cut back their hours or quit their jobs to pursue other goals.



    New Rules Will Increase Small Business Health Costs

    Nearly two-thirds of U.S. small businesses that currently offer health insurance to their workers will pay more for coverage as a result of new rules in the health care law, as will millions of small-business employees and their family members, according to new estimates released by the Obama administration, reports the Washington Post.

    The Centers for Medicare and Medicaid Services said new rules requiring insurers to offer guaranteed coverage and renewal options to small employers will likely drive up the price of insurance for an estimated 65 percent of small firms, while the remaining 35 percent with exceptionally sick or at-risk workers are anticipated to have rate reductions.

    • Ninety-six percent of small businesses say their premiums have increased in the past five years, with the average monthly insurance cost soaring from $590 per employee in 2009 to $1,121 in 2014, according to poll released earlier this month by the National Small Business Administration.



    Health Care Law’s Small-Business Marketplace Not Attracting Many Small Businesses

    Small businesses in many states have been left with access to an online portal for coverage through the Affordable Care Act's Small Business Health Options Program (SHOP) that is only partially functional — if they have any access at all, reports the Washington Post.

    In Maryland, small-business enrollment has not started. Oregon has not yet launched an employer exchange, either, and Minnesota’s small-business site has reportedly been riddled with glitches. During the first few months in Kentucky, which has been lauded as a success in terms of overall enrollment, only 14 companies signed up on the small-business marketplace. And in California, officials earlier this month pulled down the state’s small-business exchange website, admitting that it “was not meeting the needs of agents or small employers and needed improvements.”

    • Online enrollment on the federal exchange—which is available in states where governors declined to set up their own exchanges—has been repeatedly delayed, too, most recently until November.

    (For background on this topic, see the SHRM Online article "'SHOP' Small Business Exchange Pared Back Further.")



    Assistance for Laid-Off Workers Gets Downsized

    As unemployment remains stubbornly high, one of the main tools companies use to help some laid-off workers—outplacement assistance for finding new jobs—is shrinking, reports the Wall Street Journal.

    Where companies once paid outside firms for months of face-to-face coaching, job leads, office space and workshops, laid-off workers today get less help. Outplacement firms say their revenues are being squeezed as contract values with employers fall and cover fewer services, and a host of online upstarts—which offer web-only career assistance for a fraction of the cost of traditional packages—force providers to compete at lower price points.

    • Interviews with about two dozen individuals who have recently gone through outplacement indicate that the services can be useful. And for employers, outplacement helps maintain goodwill and head off potential lawsuits from former employees.



    Most 401(k) Matches Not Changing

    Only eight out of every 100 large U.S. companies wait until the end of the year to make contributions, according to AON-Hewitt, and that level hasn’t changed in two years, reports the Associated Press. Most companies that use an annual, lump-sum match are banks, where the bulk of an employee’s salary often comes from a year-end bonus.

    “The reality is that the 401(k) is not being accessed for 20, 30, 40 years, so an annual match would smooth out over that course of time,” says Bruce Elliott, manager of compensation and benefits for SHRM. “It’s the employees leaving the organization that are taking a hit, and it especially hurts employees who are laid off.”

    • Because so many employers now use a 401(k), any cutback is going to face resistance, experts say.



    Misclassifying Workers Could Trigger ACA Penalties

    Small employers, those with 50 full-time employees or less, aren’t subject to the Affordable Care Act (ACA) employer mandate. The definition of "employee" doesn't include independent contractors, provided that your independent contractor classification holds up, reports Forbes.

    • The IRS Inspector General issued a report claiming that millions of workers are misclassified as independent contractors when they are really employees who should be subject to payroll tax withholding and who should be counted when determining with the ACA's employee threshold has been reached.



    Are More Companies Squeezing Their 401(k) Plans?

    Employers are squeezing their workers’ retirement savings, holding back on both the amount and the timing of 401(k) matching funds and dragging out vesting schedules. Taken together, these measures are making it more difficult to save for old age, reports Bloomberg, which says the most frugal have been scaling back company matches and setting lower limits for the maximum annual payment they’ll make to a 401(k) account.

    On the other hand, Pensions & Investments reports that more 401(k) plans are raising employees automatic default savings rates above the traditional 3-percent-of-salary figure.

    • Among its clients, Fidelity Investments, said the 3-percent-deferral group accounted for 58 percent of plans offering auto enrollment last year and the more-than-3-percent group represented 27 percent. By comparison, at the end of 2008, those figures were 62 percent and 21 percent, respectively.



    AOL's CEO's 'Distressed Babies' Comment Raises
    Health Privacy and Insurance Issues

    AOL Chief Executive Tim Armstrong created a firestorm when he singled out two employees and their "distressed babies" for driving up benefit costs for the company. How did the boss know about personal medical conditions of his employees and their families?, asks

    Employers, especially at large, self-insured companies, often know about high-cost medical treatments that their workers and dependents are undergoing, the article states. Benefits administrators will send employers reports about claims their workers incur, particularly outsized ones. But these should use aggregate data and not include any identifying information about the employee in order to avoid violating HIPAA provisions.

    • A separate report by Fortune (via notes that the problem with self-insurance, as the name implies, is that the company is on the hook for its employees' medical bills up to a cap, above which many self-insured companies purchase stop-loss insurance to cover. Armstrong's comments imply that AOL's stop-loss insurance was insufficient for a firm of its size, not kicking in until an individual incurred expenses over $1 million, a health care consultant contended.



    Large Employers Also Benefit from ACA Tweak

    Big retail stores, hotels, restaurants and other companies with lots of low-wage and part-time workers are among the main beneficiaries of the Obama administration's latest tweak to health care rules, reports the Associated Press (via the St. Louis Post-Dispatch).

    Companies with 100 or more full-time workers will be able to avoid the biggest of two potential employer penalties in the Affordable Care Act (ACA) by offering coverage to 70 percent of their full-timers.


    • Mark Holloway, a benefits expert with the Lockton consulting company, says that will help some companies avoid what he calls the law's "nuclear penalty," a $2,000-per-employee fine levied across a company's entire workforce, after adjustments.



    For Midsize Firms, Employer Mandate Delayed Until 2016

    The Obama administration is relaxing the employer mandate under the Affordable Care Act--in a big way for medium-sized businesses, and a smaller way for the largest employers, reports the Washington Post.

    According to the Treasury department's new final rule and related questions and answers on Employer Shared Responsibility Under the Affordable Care Act:

    • For employers with the equivalent of 50 to 99 full-time employees, the employer mandate does not take effect until 2016.

    • For employers with 100 or more full-time equivalent workers, offering coverage to 70 percent of their full-time employees will be counted as fulfilling the employer mandate in 2015. This is a transitional measure and, by 2016, large employers will need to hit the original, 95 percent target.

    Other, smaller tweaks in the new Treasury rule deal with how employers are to count how many hours employees work (for seasonal workers, for example, or teachers.)



    AOL Reverses Year-End 401(k) Match Policy

    After being lambasted by employees and the media, AOL Inc. Chief Executive Tim Armstrong said on Feb. 8, 2014, the company would rescind a controversial change to its 401(k) plan and apologized for remarks used to explain the initial policy shift, the Wall Street Journal reported.

    The company, following the lead of IBM and others, had recently announced it would give employees a lump-sum contribution to their 401(k) retirement accounts at year-end, rather than matching contributions each pay period. The year-end disbursement was available only to employees active on Dec. 31 and meant that those who left before then wouldn't get a matching contribution, the Journal reported.

    Armstrong caused an uproar among employees and social media by saying that care for two staffers' "distressed babies" in 2012 had cost the company about $1 million each, and that higher heatlh care costs required the company to cut benefits elsewhere.

    • On Feb. 9, the mother of one of the babies Armstrong referred to posted an article on the website Slate taking issue with "how (Armstrong) exposed the most searing experience of our lives...for no other purpose than an absurd justification for corporate cost-cutting."



    Laws on Paid Sick Leave Divide Businesses

    Many cities and states across the country have been adopting strict new mandates outlining paid sick days. In recent years, New York City, San Francisco, Jersey City, Portland, Ore. and Washington, D.C., have enacted measures, reports the Wall Street Journal.

    The laws generally require businesses with at least five employees to provide a number of paid sick days, based on the total hours worked, up to a specified maximum, typically five to seven days a year. Proponents of such laws say low-wage workers are the least able to afford an unpaid day off, and sick workers can infect others. Critics say the laws unnecessarily raise costs for small employers and blunt job growth.

    • Jersey City's law went into effect Jan. 24, requiring employers with 10 or more workers to provide up to five paid sick days a year. "The standard in the work environment for a part-time role is that you're paid only for the hours you work," says Karen Davis-Farage, president of Pole Position Raceway, whose hourly workers are mostly students. The cost of paying absent workers, plus their replacements, to greet customers and organize races could hurt the bottom line of her three-year-old Jersey City franchise company, she says, adding, "Now we're going to need to track information we didn't track before."



    Exchange-Traded Funds Can Drop 401(k) Costs

    By offering low-cost exchange-traded funds (ETFs) instead of actively managed mutual funds, some 401(k) plans could lower their expenses significantly, reports the Washington Post. ETFs are index-tracking funds with extremely low expense ratios that are cheaper than index-based mutual funds, and much cheaper than actively managed mutual funds.

    Demand is so strong for the lower costs of index funds that it’s pushing the industry to alter its offerings. The latest shift: 401(k) plans built entirely around ETFs, rather than traditional mutual funds.

    • Charles Schwab launched an all-ETF 401(k) offering and says it expects several employers to begin offering the program to their workers later this year.



    ACA May Prompt People to Work Less

    Many workers may opt to work less to retain their eligibility for Medicaid or federal subsidies under the Affordable Care Act (ACA), according to the nonpartisan Congressional Budget Office (CBO), reports

    The ACA could reduce the labor force by the equivalent of 2.5 million workers in 2024, according to the report.

    • The Obama administration pointed to the CBO finding that Americans' new ability to get health insurance not tied to their jobs will give them more freedom and flexibility, thanks to federal subsidies for those in lower income brackets.



    Coercive Wellness Programs Can Backfire

    Wellness programs "that coerce, intimidate, threaten, cajole, bribe, or otherwise undermine individual choices related to health improvement are viewed by workers as self-serving and not in the employees’ self-interest," writes Ron Z. Goetzel, director of the Emory University's Institute for Health and Productivity Studies and VP for Truven Health Analytics, on the Health Affairs Blog.

    • "Poorly designed programs do not work. In fact, they often backfire because employees become resentful of management’s underhanded methods of compelling individuals to do what they would not otherwise do on their own accord," Goetzel observes.



    Unions Upset Over Lack of Exemptions from ACA

    "Labor leaders who have spent months lobbying unsuccessfully for special protections under the Affordable Care Act warned this week that the White House’s continued refusal to help is dampening union support for Democratic candidates in this year’s midterm elections," reports the Washington Post. "Their complaints reflect a broad sense of disappointment among many labor leaders, who say the Affordable Care Act has subjected union health plans to new taxes and mandates."

    Suprisingly, this story does not report that union plans have been granted exemption from at least one major ACA expense, the transitional reinsurance fee, as SHRM Online reported.



    Older Workers May Still Need Life Insurance

    Older workers should re-evaluate whether they have enough life insurance while they are employed and plug any gaps in their risk-management plan, experts advise, reports USA Today.

    If seniors are planning to continue working because they need the income, and not just to stay active, then they should be protecting against the possible loss of that income during this time period.

    • Under the Age Discrimination in Employment Act of 1967 your employer-provided life insurance death benefit after reaching age 65 can be reduced and often is. Experts says that reduction must be based on the estimated increased cost to provide the coverage for older workers.



    Common Flaws in Corporate Wellness Programs

    Instead of supporting employees already undertaking their own self-improvement plans and encouraging others to start them, wellness has morphed in many directions that increasingly overlook or even conflict with that original goal. But human resources departments can reconfigure their offerings so they are embraced, not resented, according to an opinion piece posted on the Harvard Business Review Blog Network.

    Among common flaws, many programs have become an employee control tool heavy on financial forfeitures while light on and actual health improvement or cost containment. Meanwhile, the emphasis has moved away from science towards a "round-up-twice-the-usual-number-of-suspects" emphasis on participation.

    • Executives running or paying for these programs should ask, "Are you doing wellness to your employees or for your employees?"



    More ACA Regs Coming for Employer-Provided Health Plans

    Four years after the Affordable Care Act (ACA) was signed into law, large businesses haven’t seen final rules for the employer mandate and insurers are waiting for more details on the benefits they’ll have to offer in the future, reports Politico.

    • Final rules for the employer mandate, now scheduled to take effect in 2015, are being hammered out. Businesses with at least 50 full-time equivalent employees will face fines if they don’t offer health coverage meeting minimum standards to full-time workers and if employees then get subsidies on health insurance exchanges.
    • The administration is also now weighing whether and how to exempt some groups from the ACA's transitional reinsurance fee intended to support a $20 billion reinsurance program. The program is meant to provide financial protection to insurers if too many sick patients sign up for coverage right away.
    • HHS will soon reconsider rules on essential health benefits, which dictate what health plans in the small group and individual markets must cover. The rules originally gave states and insurers more leeway to design benefit packages in 2014 and 2015, but consumer advocates pushed for a more prescriptive approach.



    Wage Hike for Federal Contract Workers Limited

    President Obama's plan to raise the minimum wage for federally contracted workers is winning praise from unions and labor activists, but it could take a year or more before any hikes take place and the impact may not be as widespread as some advocates had hoped, reports the Associated Press.

    • The increase is only expected to cover about 10 percent of the 2.2 million federal contract workers overall, since most of those employees already make more than $10.10. It won't take effect until 2015 at the earliest and doesn't affect existing federal contracts, only new ones.



    President Proposes 'MyRAs' for Workers Lacking 401(k)

    The “MyRA” plans, similar to individual retirement accounts, will provide “a new way for working Americans to start their own retirement savings,” President Obama said during his State of the Union address, reports Bloomberg News.

    Under the proposal, workers could have part of their pay deducted for deposit into an account invested in U.S. government bonds that would be treated for tax purposes as a Roth individual retirement account. The accounts would be open to people with annual household income up to $191,000 whose employers choose to participate, according to a White House fact sheet.

    • Participation would be voluntary and principal contributions will be guaranteed under the plan. Initial investments could be as low as $25 and payroll contributions as low as $5. The plans would be set up through the Treasury Department.



    Supreme Court: “Changing Clothes” Not Compensable Under Plant Workers’ Union Contract

    On Jan. 27, in a very limited ruling, the U.S. Supreme Court held that an employer was not required to pay union employees for the time it takes them to put on and take off protective gear when their collective bargaining agreement did not provide for compensation for that time, according to a blog post by law firm Ogletree Deakins.

    For nonunion employers the ruling, Sandifer v. United States Steel Corp., does not change the donning and doffing rules under the Fair Labor Standards Act (FLSA).

    • According to Danuta B. Panich, a shareholder in the Indianapolis office of Ogletree Deakins, “Unfortunately, Sandifer offers little solace for nonunion employers and those unionized employers that have not negotiated an exclusion of washing and clothes-changing from compensable time. The Supreme Court assumed that putting on protective clothing required for the job is compensable time except when carved out by [FLSA] section 203(o). Moreover, the Supreme Court rejected the notion that any of the time spent on activities of this nature can be disregarded because it is ‘de minimis.’”



    Will 2014 Be the Year of the Raise?

    With the unemployment rate set to fall nearer to pre-recession levels by year's end, 2014 could be the Year of the Raise—at least for some people. For millions of workers, it’s about time: Real median family income has fallen 6.4 percent to $52,163 since peaking in 2007, reports USA Today.

    Surveys by compensation consultants Aon Hewitt and Buck Consultants say corporations plan to keep 2014 raises around 3 percent, not adjusted for inflation, similar to 2013.

    • "Most estimates of the unemployment rate below which real wage growth accelerates are around 5.5 percent," Moody's Analytics chief economist Mark Zandi said. "This suggests wage growth won't accelerate in earnest until 2016."

    (For more on this topic, see the SHRM Online article "2014 Salary-Increase Budgets Stable.")



    Monetary Incentives, Consistent Messages,
    Encourage Wellness Participation

    Johnson & Johnson pares $500 off the annual premium for employees who submit health information, which is then used to create an individual health risk profile and recommend activities for the employee, such as a diabetes management program. The company also wants to make sure employees act on their health information, so it offers an additional $100 to $250 for participation in a recommended activity, reports the U.S. Chamber of Commerce.

    • Mixed messages can have an impact on wellness program participation. For example, a company can spend a lot of time talking about healthy behavior, but the effect will be blunted if leadership shows no interest in the initiatives or if vending machines are still full of junk food.

    (To learn more, see the SHRM Online article "Why Employees Participate—or Don't—in Wellness Programs.")



    Overworked Knowledge Workers Need a Break

    One reason knowledge workers are expected to work longer hours is that work has gotten more specialized, so the penalty for handing off work to multiple people has risen, says columnist Megan McArdle at She writes:

    Every time I come back from vacation, I dive back into work with new ideas and a lot more energy, and I think, “Why don’t I do this more often?” And still, every year, I lose most of my vacation days. Maybe U.S. employers should [require] you to take all your vacation -- not “use it or lose it,” just “use it.” But you can see why they aren’t, when most of the economic and cultural pressures run the other way.



    DOL to Look at Brokerage Windows in 401(k) Plans

    The Department of Labor (DOL) is scheduled to release a request for comment in April on so-called brokerage windows in 401(k) plans. The mechanisms provide a way for workers to select investment vehicles that are not offered in the plan, reports Investment News, which said the focus on brokerage windows reflects the DOL's concern that plan participants are on their own if they opt to use the mechanism.

    In 2012, the DOL addressed concerns about brokerage windows in two Field Assistance Bulletins. But the answers to the frequently-asked-questions posed in the documents generated more questions in the financial industry.

    • “This is potentially the beginning of a regulatory effort on brokerage windows that could be very broad and significant,” Bradford Campbell, counsel at Drinker Biddle & Reath and a former DOL assistant secretary for the Employee Benefits Security Administration, told Investment News. “It is one of the surprises on the regulatory agenda. They're sticking their toe in the water.”

    (For background on this issue, see the SHRM Online article "401(k) Plan Brokerage Windows Get a Reprieve.")



    Target to Drop Health Insurance for Part-Time Workers

    Target Corp. said it will end health insurance for part-time employees, joining Trader Joe’s Co., Home Depot Inc. and other retailers that have scaled back benefits in response to changes from the Affordable Care Act, reports Bloomberg News.

    • About 10 percent of Target’s part-time employees, defined as those working fewer than 30 hours a week, use the company’s health plans now, according to an announcement posted on the Minneapolis-based company’s website. Target said it would pay $500 to part-timers losing coverage and a consulting firm will help workers sign up for new public-exchange plans.



    ACA Nondiscrimination Rules Remain Elusive

    The Obama administration is delaying enforcement of another provision of the new health care law, one that prohibits employers from providing better health benefits to top executives than to other employees. Tax officials said they would not enforce the provision this year because they had yet to issue regulations for employers to follow, reports

    A blog posted by Fox Rothchild LLP notes further:

    One of the key questions facing the IRS is how to apply the non-discrimination rules if an employer offers the same coverage to all employees but large numbers of low-paid workers turn down the offer and instead obtain coverage from other sources, like a health insurance exchange. In other words, the employer does not intend to discriminate, but ends up with only a few highly compensated employees electing the plan. Plus, there is a question about whether to revise the existing non-discrimination rules for self-funded plans that have been in effect for years. In short, the same questions that existed in 2010 when the Act was passed exist today, and until regulations are written, enforcement remains impossible.

    (For background on this issue, see the SHRM Online article "Nondiscrimination Rules for Health Plans Loom Ahead.")



    Bare-Bones Health Plans Survive Through Quirk in Law

    The health-care overhaul was supposed to eliminate insurance plans that offer skimpy coverage at cut rates. But a quirk in the law stands to help some companies keep them going for years to come, reports the Wall Street Journal.

    As long as companies offer at least one plan that complies with the law's requirements, they are free to keep offering ones that don't. However, employees who pick the cheaper plan could have to pay the individual penalty—though that could still cost them less than signing up for the more expensive plan.

    • Such plans, which might cost an employee just $80 a month in premiums, generally pay a set amount for specific medical services—$70 for a doctor's visit, for example, or $20 for a prescription—without regard to the underlying cost. They limit the amount of payments or care available in a year, and can exclude entire areas of coverage.



    Experts: Supreme Court Likely to Affirm
    Severance Pay Is Subject to FICA

    The U.S. Supreme Court heard oral argument was heard in United States v. Quality Stores, Inc. on whether so-called “supplemental unemployment benefits” (SUB payments) qualify as “wages” for purposes of the Federal Insurance Contributions Act (FICA), and the government appeared likely to prevail in reversing a Sixth Circuit decision, reports SCOUTSBlog.

    • At the end of the day, the justices seemed quite comfortable with the government’s reading of the FICA statute as applying to severance payments, finding that SUB payments like those made by Quality Stores are wages under FICA because they plainly constitute “remuneration for employment.”



    Target-Date Fund Fees Provoke Switching

    Lori Lucas, Callan’s defined contribution practice leader, told she was surprised by how much activity is happening in defined contribution plans around target-date funds (TDFs). More than one-third of respondents in Callan's 2014 Defined Conribution Trends Survey said they were planning to change target-date funds or managers.

    As PlanSponsor reported, Lucas noted that the survey found an increase in the use of indexed funds within TDFs, with actively managed funds making up less than 30 percent of TDFs used by plan sponsors now. Lucas said this was primarily driven by fees.

    • Callan's survey similarly found an increase in the use of indexed funds within plans’ core investment lineups. The percentage of plan sponsors that offer an active/passive mirror (i.e., where major asset classes are represented by both active and passive funds) jumped from 12 percent in 2012 to 21 percent in 2013. In 2014, 24 percent of plan sponsors aim to increase the proportion of passive funds in their defined contribution plan lineup, PlanSponsor reported.



    Minimum Wage Hike Could Mean a Raise for All

    When New Jersey increased its minimum wage this year, Dolores Riley gave raises to all 16 employees at her childcare center. But it wasn't because they were all making $7.25 an hour. In fact, only five staff members at Gramma’s School House were affected when New Jersey upped its minimum wage to $8.25, reports CNNMoney.

    Riley is not alone. When there's a minimum wage increase, some small business owners will raise the pay for most, if not all, hourly workers in order to preserve their wage structure and retain quality employees. That's what economists call a ripple effect, meaning an increase in the minimum wage spills over to higher wage brackets.

    • As the year began, 13 states raised their minimum wage (by varying degrees), and on July 1, California will increase its by $1 an hour. Congressional Democrats and President Obama are pushing to raise the federal minimum wage from $7.25 an hour to $10.10 by 2015.



    Second Wave of Health-Insurance Disruption
    Affects Small Businesses

    According to industry analysts, insurers and state regulators, millions of people who receive insurance through small employers could be affected when their employer plans receive cancellation notices in October 2014, reports the Washington Post.

    Some of the small-business cancellations are occurring because the policies don’t meet the law’s basic coverage requirements. But many are related only indirectly to the law; insurers are trying to move customers to new plans designed to offset the financial and administrative risks associated with the health-care overhaul. As part of that, they are consolidating their plan offerings to maximize profits and streamline how they manage them.

    • Now that insurers aren’t able to charge more to people with preexisting conditions, companies with sicker workers may see lower premiums, while those with a healthier workforce may see higher premiums. Many small businesses are also discovering that the new plans have more restrictions on access to specific doctors, hospitals and prescription drugs.



    Understanding New Rules That Widen Mental Health Coverage

    Final rules to fully carry the Mental Health Parity and Addiction Equity Act of 2008 were issued in November, after a long delay. While many plans are already complying with certain aspects of mental health parity, the final rules fill in gaps about how the law must be applied, reports the New York Times.

    The parity law says that when health insurance plans provide coverage for mental ailments, it must be comparable to coverage for physical ailments. For instance, plans cannot set higher deductibles or charge higher co-payments for mental health visits than for medical visits, and cannot set more restrictive limits on the number of visits allowed.

    • Plans also cannot limit mental health care to a specific geographic region, if they do not do so for physical illnesses. And the rules clarify that the law also applies to 'intermediate' treatment options for mental health and addiction disorders, like residential treatment or intensive outpatient therapy.

    (To learn more, see the SHRM Online article "Final Mental Health Parity Rules Issued.")



    Send Sick Workers to Exchanges?

    Can employers pay chronically ill workers to leave the company health plan and get insurance through a public exchange, while keeping healthier employees on their own plans? That’s a question some business owners are asking, now that no one can be turned away from individual health plans under Obamacare, reports Bloomberg Businessweek.

    While ERISA bars employers from discriminating in how they offer workers benefits, it doesn’t address a situation in which an employee and an employer come to an agreement that the worker voluntarily decline coverage in favor of a better deal on the exchanges, subsidized with a cash benefit from the employer.

    • However, such a practice may be illegal, and it might leave business owners open to employment discrimination claims, said John L. Barlament, an attorney at Quarles & Brady in Milwaukee. Nevertheless, he said he has had “multiple conversations” with business owners and insurance brokers interested in pursuing this option.



    EAPs Underused; Poor Communications Cited

    Employee assistance programs (EAPs) can effectively reduce the adverse effects of depression, workplace stress and other mental health issues, but a new study shows just 3 percent of employees use their employer's EAP, reports Business Insurance (registration required).

    A frequent barrier to broader use of EAP counseling services is employees' distrust or lack of awareness of privacy policies.

    • A sidebar advises employers to change the conversation around using EAPs in order to remove the stigma that might come with it. Advertising an EAP's less intrusive services—including financial planning and family-oriented concierge services—can draw employees into the program without fear of incurring negative attention from their co-workers or managers.



    Small Businesses Without Exchange Access
    Lose Tax Credits

    During the past three years, the Affordable Care Act's small business tax credits have been available to firms with no more than 25 workers that offered health care to their workers, and the subsidy was worth up to 35 percent of the cost of coverage. Starting in January 2014, it expands to cover as much as 50 percent, as long as it is applied to plans purchased on the new state-run marketplaces or the federal exchange, reports the Washington Post.

    In Maryland, small business owners are still waiting for health officials to open the state’s new employer exchange. Until then, Maryland employers are left with the same private insurance market they have been using for decades, and they cannot yet purchase plans that qualify for the credits.  It is the same story in Idaho, Oregon and Mississippi. None of those states have launched a functioning small business exchange, and because each is building its own site, it is unclear whether employers will be able to access the full federal tax credit next year.

    • Meanwhile, even in states where small-business plans are currently available through the new federal marketplace, some employers are not pleased they must switch to plans sold through the exchange in order to qualify for tax credits they have been using since 2010. 

    (To learn more, see the SHRM Online article "‘SHOP’ Small Business Exchange Pared Back Further.")



    Percentage of Revenue to Spend on Pay

    Businesses should plan to devote 15 to 30 percent of their gross revenue to payroll; according to consultants, businesses within this range tend to be the most successful. However, it is sometimes necessary to make adjustments, and businesses in the service industry may spend up to 50 percent of their revenue on payroll, reports the Bellevue Business Journal.

    • Once you have successfully indexed your payroll costs to your revenue, you need to make a plan for adjustments.



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