Archive for category: Benefits & Compensation

(By Diane Cross, Compliance Analyst at HORAN. Reposted from HORAN’s Health Benefits Compliance Blog).

Question:

Are you in compliance with ERISA’s rules regarding Summary Plan Descriptions?

Answer:

The Employee Retirement Income Security Act (ERISA) sets minimum standards for employee benefit plans, providing several rules for private-sector employer sponsored group health plans (governmental and church plans are exempt from ERISA). Among ERISA’s many rules is the requirement to provide each participant with a Summary Plan Description (SPD). We often discover that many employers mistakenly believe they are compliant with this requirement when they are not, as discussed further below. The good news is, there are tools available to help achieve compliance.

The SPD is a document that communicates plan rights and obligations in a way that is easily understood, explaining the plan’s benefits, claim review procedures, and the participant’s ERISA rights. And, it must be distributed to participants at certain times. A common misunderstanding for employers is that the plan’s certificate of insurance/benefit booklet provided by an insurance carrier or third-party administrator (TPA) meets ERISA’s SPD requirement. Most often, this is not the case. The group health plan sponsor will need to provide additional information that may not be contained within the booklet created by the insurer to meet this requirement. For example, ERISA requires SPDs to include certain types of information such as plan number and plan year, employer’s tax ID number, name and address for the plan administrator, and plan contribution structure – which is typically not included in the certificate of insurance provided by a carrier.

To meet the SPD requirement, an employer can use a wrap document (SPD wrap) that includes the ERISA-required information that the certificate or booklet prepared by the insurer or TPA may not include. This document is called a wrap document because it essentially “wraps around” the insurance certificate or benefit booklet to fill in the missing ERISA-required provisions. In this scenario, the wrap SPD and the insurance certificate/booklet, together, make up the plan’s SPD.

When must an SPD be provided to a plan participant?
Participants must receive an SPD:

•Within 120 days of the plan becoming subject to ERISA;
•Within 90 days of enrollment for new participants;
•Every 5 years if material modifications are made during that period; or
•Every 10 years if no amendments occur.

Are all group health plans required to provide participants with an SPD?
All group health plans subject to ERISA must provide participants with an SPD, regardless of size. Both insured and self-funded group health plans must comply with the federal laws governing SPDs. While ERISA contains an exception for group health plans with less than 100 plan participants, that exception only applies to reporting requirements (e.g., 5500 filings).

Employers subject to ERISA should revisit their plan documentation to make sure they are compliant with ERISA’s SPD requirement, as not having an SPD can be costly for employers. For example, if an employer fails to provide an SPD within 30 days of a participant’s request, fines of $110 per day can accrue.  Without an SPD, it is difficult for an employer to respond to such request.  For more information on the SPD requirement, its required content, or how to utilize an SPD wrap document – contact your HORAN representative.

Thank you to HORAN for providing the content for our Question of the Week. HORAN serves as a trusted advisor on employee benefits, wealth management and life and disability insurance. To learn more about HORAN, please contact HORAN for additional information.

It’s never ending. Just when you thought you had a handle on recent regulatory changes something new crops up. There isn’t enough time in the day to keep on top of everything! That’s where Strategic HR can help. We stay on top of the changes so you don’t have to. Ask us for assistance with any of your benefits, compensation or other regulatory needs. Please visit our Benefits & Compensation page for more information on any of these services.

HR Question:

An employee on FMLA protected leave of absence has stopped paying for their health insurance premiums. Is it safe to terminate their health coverage given the employee’s failure to pay premiums?

HR Answer:

If the employee is on FMLA protected leave, absent any written policy that provides a longer grace period, the regulations require an employee receive a 30-day grace period to pay for benefit premiums before health coverage can be terminated. In addition, employers are required to provide the employee a written notice at least 15 days prior to the end of the grace period informing the employee that benefits will be terminated if payment isn’t received. It’s recommended that the written notice be sent via certified mail and in an electronic format (if the employee has communicated via email in the past). Over Communication to understand the ramifications of the employee’s failure to pay premiums is beneficial.

Failure to pay when not on FMLA leave

If the employee is not on FMLA-protected leave – the existing policy, practice, or precedent for how similar situations have been handled (non-FMLA related leaves) should dictate how to proceed as practices should be consistent. For ease of administration, it may be beneficial to handle the non-payment of benefit premiums for non-FMLA protected leaves in the same fashion – even if doing so is more than is legally required.  

For someone who is not yet on a formal leave of absence but may be out due to medical reasons, a formal memo should be sent to the employee. The memo should outline the employee’s requirement to notify the employer of the reason behind their absence, documentation to support the need for a medical leave (if applicable), and what accommodations (if any) may be needed. The memo should also outline the employee’s responsibilities for payment of health insurance premiums. Once again, prior to terminating health insurance, the memo should be provided to the employee, a minimum of 15 days prior to terminating health coverage.

For additional information, the U.S. Department of Labor provides this guidance.  

Strategic HR is ready to assist you with any of your challenging situations around Benefits and Compensation. We offer support ranging from salary and benefits competitive analysis, ACA assessment and reporting, and compensation structure design to payroll/benefits administration, including FMLA. Please visit our Benefits & Compensation page for more information on how we can assist you.

Question:

My husband just received a “Notice of Creditable Coverage” at home from his employer.  As a Human Resources professional, I’m not sure what this is and I am wondering if I am supposed to be distributing something to my employees?

Answer:

Yes!  The Medicare Modernization Act requires entities, employers with prescription drug coverage, to notify Medicare eligible policyholders annually as to whether their prescription drug coverage is creditable coverage.  Basically, we must tell those covered if the company plan is “as good as” the standard Medicare prescription drug coverage. There are two disclosure requirements:

1. The first disclosure requirement is to provide a written disclosure notice to all Medicare eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year.  There are other times when notification is necessary (such as upon joining the plan) but the 10/15 deadline is important because open enrollment begins for Medicare eligible individuals.
2. The second disclosure requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. The Disclosure should be completed annually no later than 60 days from the beginning of a plan year.

For sample, creditable coverage notices and model language, refer to the Centers for Medicare & Medicaid Services.

Providing adequate employee Benefits and Compensation are key to recruitment and retention of employees and having the right polices can make or break a company. Strategic HR understands this critical need and can help you with any of your tough benefit and compensation questions. Please visit our Benefits & Compensation page for more information on how we can assist you with creating a strong Benefits or Compensation package.

Question:

If I have an employer that has a premium only (pre-tax / IRS Section 125a premium deduction plan) – do I have to allow employees the opportunity to “opt out” of the pre-tax deduction?  In other words, they want the premium to come out post-tax….do I have to allow that?

Answer:

Yes, employees must be given the option to participate in the pre-tax deduction and may elect to opt-out of this annually.  Depending on who you have your plan with, many offer an election form that should be completed annually opting “in” or “out” of the program.  If not, be sure employees put the request in writing so it cannot be questioned later.

Strategic HR is ready to assist you with any of your challenging situations around Benefits and Compensation. We offer assistance with everything from job descriptions to policy development to help address your difficult issues that impact employee compensation or benefits. Please visit our Benefits and Compensation for more information on how we can assist you.

Question:

I have an employee telling me that I should be paying them for the time it takes them to go to their locker and get ready for work.  Is that true?

Answer:

Paying employees for the time they work seems pretty straight forward, however, the activities that they perform before or after their shift to ‘get ready for work’ can create a lot of question as to whether or not the time spent must be paid time by the employer.  The Fair Labor Standards Act (FLSA) provides guidance but the topic is still very murky and in some instances require a consult with your attorney to make sure you get it right.

The ‘go-to’ document to provide you guidance is the Portal to Portal Act and verbiage around compensation for all time spent within a continuous workday.  The topic that becomes most questionable is what activities are deemed “integral and indispensable” for the job and it is verbiage that many times is interpreted by the court and is specific to the industry and even sometimes the job.  Those activities that are deemed integral and indispensable are those that must be paid time for the employee.  As an example, if the employee is REQUIRED to wear certain clothes or certain equipment, the time spent in putting those items on must be paid time.  If it is something they prefer to wear, it is not necessarily work time or time that is paid.

As an employer, you need to look carefully at what employees do before or after they clock in or clock out for the day.  If they cannot perform their jobs without wearing certain items or equipment, it should be paid.  Dive in deeper to determine what it is that they are doing and then make a determination on whether or not it should be paid or not.  And as always…keep in mind that outside of the legal requirements, payment for such activities may just be “the right thing to do” in your workplace.

Are you hesitant when it comes to navigating FLSA and other federally mandated rules and regulations? Strategic HR understands your uncertainty. Ask us for assistance for any of your benefits and compensation needs including evaluating the exemption status of your jobs relative to the proposed changes. Please visit our Benefits & Compensation page for more information on any of these services.

Question:

Many of our employees have smartphones. Do we have to pay them for every time they use it outside of regular working hours?  I tell them not to respond until work hours but many of them still respond to emails and texts outside of work hours.  What do I do?

Answer:

This issue has exploded as of late!  Most employers and employees use smartphones, an ideal tool to improve efficiency, productivity, and accessibility for their employees.  It does, however, become an issue, because non-exempt employees must be paid for all hours worked…this includes hours responding to emails, phone calls, and texts outside of “regular” work hours.  This is probably one of the most common violations that Wage and Hour auditors are finding.

So what to do?  As an employer, you need to have a policy in place requiring tracking of smartphone usage, even restricting use outside of regular business hours, and make sure to tie it into your overtime policy.   That being said, managers then cannot email employees during those off times, and expect an immediate response, or even a response first thing in the morning.  IF you find out employees are replying outside of regular work hours you need to (1) address the issue in terms of performance and (2) make sure you pay them!

For exempt employees, smartphone usage can be less of an issue, however, it can pose a problem.  If these employees are working any part of the workweek, they must be paid for the entire week.  Some companies make it a policy that employees must relinquish all smart devices (smartphones, laptops, tablets, etc.) when they are going to be off but honestly, this can be somewhat unreasonable if you need to touch base on a client issue or a “quick question”.

Consider these issues when you create policy and determine how you will handle such issues with  employees – whether exempt or non-exempt.  The Department of Labor website, www.dol.gov offers guidance for managing these types of concerns and making sure you are paying employees for actual hours worked.

Strategic HR has the answers to all of your tough Benefits and Compensation related questions. Whether you need an audit of your exemption statuses or a job analysis of your positions, Strategic HR can do the job. Please visit our Benefits & Compensation page for more information.

by Linda Gravett, Ph.D., SPHR, CEQC

A compensation philosophy relates to an organization’s commitment to how it values employees. A consistent and intentional pay philosophy gives both the organization and its employees a frame of reference when discussing salary in a negotiation. The goal of a compensation philosophy is to attract, retain and foster an environment that motivates employees. For organizations in the private sector, this typically requires a competitive pay philosophy. In the public and nonprofit sectors the focus is on benefits and the employees’ sense of value in the contributions their work provides to society.

Organizations attract, develop and retain quality employees through a total compensation approach. To accomplish this, astute compensation strategists use a mixture of the three main ingredients of a compensation system: base pay (salary); incentive pay such as cash or stocks; and benefits (rewards such as life and health insurance). A sound approach is a blend of all three.

An organization’s pay philosophy might be to offer salaries that are competitive in the industry, or it may decide to offer pay to attract junior level employees rather than senior level. In order to retain loyal and proficient seasoned workers, perhaps tailored benefits such as long-term disability will be offered. The challenge is to create a compensation system that includes all three components without exhausting the company’s resources.

Many organizations have a compensation philosophy that includes paying a competitive base salary that’s comparable to what employees could get somewhere else doing similar work. Additionally, if employees have equity in the company, that’s a powerful incentive to do well and encourage co-workers to excel. Another excellent incentive is the use of a signing bonus and later on, a retention bonus. The key, according to my research over the last 20 years, is to reward high-performers well to demonstrate their value in meeting strategic business imperatives.

Another consideration is whether your company wants to lead or lag the market with salaries and salary adjustments. Even though many companies review salaries only once a year, the marketplace is continuously moving. A company’s compensation, then, is likely to be at market value just once a year. As a consequence, companies must decide what time of year to offer raises and whether to lead the market at the beginning of the year and lag behind at the end of the year, or to lag behind at the beginning of the year and lead at the end.

Yet another consideration is whether to pay for employee proficiency or longevity, or a combination of both. The formula for employee proficiency involves calculating a comparatio — the employee’s salary compared to market. For example, if an employee earns 45,000 and the median in the marketplace for that job is $50,000, the employee has a comparatio of 90%. If this employee has worked at this comparatio for long, the company is at risk of losing him or her, especially if the employee is highly proficient.

The advantage of paying for proficiency is that the market value of jobs is tied to skills. Employers can assess how their employees stack up on any number of measures related to these skills. The Society for Human Resource Management (SHRM), at www.shrm.org, has numerous articles on developing a matrix of measures related to skills and compensation.

Under protective labor laws, a compensation program must be consistently carried out across all employees and cannot discriminate based on illegal factors such as race, gender, or disability. Companies have the absolute right, however, to differentiate based on factors such as level of position and skill sets required to perform a job.

I’ve found that organizations always benefit from being transparent about their compensation philosophy. A consistently followed, well-developed philosophy will make sense to employees and result in a sense of fairness. This approach can also be a strong recruiting tool, especially in today’s marketplace in which 20–somethings want to understand career growth opportunities before accepting a position. During a salary negotiation for a new employee, consider which would come across more positively: “My final offer is $65,000 and I can’t pay a dollar more”, or “My final offer is $65,000 which is at 100% of market.”

If your company hasn’t been intentional about a compensation philosophy in the past, I encourage you to think about it now. Underpaying or overpaying employees can cost the company in the long run, either in turnover or unnecessarily high salaries.

For more information on this topic, contact Dr. Linda Gravett at lsg@justthebasics.com orLinda@gravett.com.