Tag Archives: group benefits

New Benefits Target Employee Debt
1st August 2017 by Site Admin in General

Today, most new full-time hires expect a company to offer certain standard benefits – health, dental, vision, and life insurance, paid vacation and sick days, and a 401(k) or pension. Some companies go beyond this and provide other benefits such as profit sharing, parking reimbursement, mobile phone reimbursement, wellness programs, and even on-site daycare. So what does the future hold for employees when it comes to their expectations of a traditional benefits package?

In an article titled, “Student Loan Repayment Programs Are ‘The Next 401(k)’” on the website Employee Benefit News, it claims that the next big thing in employee benefits is student loan repayment. In fact, they view this as not just a fad, but something that will stick given the high cost of tuition and its appeal to everyone in the workforce. Yes, you read that last part correctly. You may think that tuition reimbursement would only be an attractive benefit to those who are just entering the workforce, but people older than 39 currently have 35% of all student debt. Plus, graduate programs may be covered and so might be loans taken by parents to help pay for their kid’s education.

As of 2015, based on data from the Society for Human Resource Management, only about 3% of employers currently offer the benefit, but that’s expected to increase sharply. According to the article, the reason is that tuition reimbursement is a concept you don’t have to “sell” to decision makers like you would a complicated health plan. They already know today’s graduates are struggling to repay their student debt.

A side advantage of adding tuition reimbursement to a company’s benefits package is that, by removing the stress of repaying a student loan, employees will be more apt to contribute to their 401(k) or other corporate retirement plan. As companies look for ways to differentiate themselves when recruiting new employees, this benefit appears to have significant traction.

©Copyright 2017 by Geoff Mukhtar at United Benefit Advisors. Reproduction permitted with attribution to the author.

Employer Considerations When Offering Health Coverage Under the SCA or DBA
3rd November 2016 by Site Admin in News, Healthcare Reform, General

Employers that are subject to the McNamara-O’Hara Service Contract Act (SCA), Davis-Bacon Act (DBA), and Davis-Bacon Related Acts (Related Acts), and who are considered an applicable large employer (ALE) under the Patient Protection and Affordable Care Act (ACA) must ensure that they meet the requirements of all three acts, despite the fact that the interplay between them can be confusing and misunderstood. The Department of Labor has provided guidance for these employers based on two U.S. Department of Labor (DOL) documents: its December 28, 2015, Notice 2015-87 (DOL Notice) and its March 30, 2016, All Agency Memorandum Number 220 (DOL Memo).

The DOL Notice and DOL Memo give guidance on the interaction between the SCA’s and DBA’s fringe benefit requirements and the ACA’s employer shared responsibility provisions.

What are the SCA’s general wage and fringe benefit requirements?

The SCA generally requires that workers employed on federal service contracts greater than $2,500 be paid prevailing wages and fringe benefits. For some SCA contracts, the required wages and fringe benefits are provided in the predecessor contract’s collective bargaining agreement. However, for most SCA contracts, the DOL Wage and Hour Division (WHD) makes area-wide wage determinations regarding wages and fringe benefits based on Bureau of Labor Statistics Employment Cost Index data.

The SCA monetary wage must be paid in cash and cannot be satisfied by fringe benefits. The required SCA health and welfare amount is currently $4.27 per hour; this amount can be paid in benefits, cash equivalent of benefits, or both. Health coverage is one type of fringe benefit that may be provided to satisfy SCA requirements.

What are the DBA’s general wage and fringe benefit requirements?

The DBA generally requires that workers employed on federal construction contacts greater than $2,000 be paid prevailing wages. Under laws known as the Davis-Bacon Related Acts, the DBA’s requirements also apply to construction projects that are assisted by federal agencies through grants, loans, loan guarantees, insurance, and other methods.

The DBA and the Davis-Bacon Related Acts (collectively, DBRAs) require that covered workers receive a prevailing wage which is both a basic hourly rate of pay and any fringe benefits found to be prevailing.

The WHD makes DBRA wage determinations, including fringe benefit determinations, based on locally prevailing wages. Under the DBRAs, a covered employer can satisfy its basic hourly rate obligation by paying fringe benefits. Health coverage is one type of fringe benefit that may be provided to satisfy DBRA requirements.

What are the employer shared responsibility provisions?

Under the ACA, the employer shared responsibility provisions require an employer with an average of at least 50 full-time employees (including full-time equivalent employees) during the previous year (an applicable large employer or ALE) to:

  • offer its full-time employees and their dependents health coverage that is affordable and provides minimum value; or
  • pay the Internal Revenue Service (IRS) if the employer does not offer this coverage and at least one full-time employee receives the premium tax credit for purchasing health insurance through the Exchange.

For a calendar month, a full-time employee is defined as a person employed on average at least 30 hours of service per week or 130 hours of service per month. An ALE is not required to offer health coverage to part-time employees to avoid an employer responsibility payment.

An employer may be subject to one of two types of payments, but not both types of payments.

  1. An ALE is subject to an annual payment of $2,000 (adjusted for inflation to $2,160 for 2016) for each full-time employee (after excluding the first 30 full-time employees from the calculation) if the ALE does not offer minimum essential coverage to at least 95 percent of its full-time employees and their dependents and at least one full-time employee receives the premium tax credit for purchasing health insurance through the Exchange.
  2. An ALE is subject to an annual payment of $3,000 (adjusted for inflation to $3,240 for 2016) for each full-time employee who receives the premium tax credit for purchasing coverage through the Exchange. The amount of this payment can never exceed the potential amount of the employer shared responsibility payment described in item 1 above.

How does an employer meet the ACA and either the SCA or DBRAs requirements?

An employer subject to the ACA and either the SCA or DBRAs must comply with each law. The ACA does not alter or supersede the SCA or DBRAs. Each of the laws is separate and independent.

As a practical matter, an employer subject to each of these laws must satisfy all the requirements of each applicable law. For instance, an employer who is in compliance with the ACA’s employer shared responsibility provisions may not necessarily be in compliance with the SCA’s or DBRA’s provisions, and vice versa.

 To help employers meet their responsibilities under the ACA, SCA, and DBRAs, request UBA’s ACA Advisor, “Employer Considerations When Offering Health Coverage under the SCA or DBA” for a detailed review of the DOL’s guidance on how to comply with all the provisions.

©Copyright 2016 by Danielle Capilla and United Benefit Advisors. Reproduction permitted with attribution to the author.

Controlled Groups and Affiliated Service Groups: How They Apply to the ACA
25th October 2016 by Site Admin in News, Healthcare Reform, General

The Patient Protection and Affordable Care Act (ACA) imposes a penalty on “large” employers that either do not offer “minimum essential” (basic medical) coverage, or who offer coverage that is not affordable (the employee’s cost for single coverage is greater than 9.5 percent of income) or it does not provide minimum value (the plan is not designed to pay at least 60 percent of claims costs). A large employer is one that employed at least 50 full-time or full-time equivalent employees during the prior calendar year. To discourage employers from breaking into small entities to avoid the penalty, the ACA provides that, for purposes of the employee threshold, the controlled group and affiliated service group aggregation rules will apply to health plans. Essentially, this means that the employees of a business with common owners or that perform services for each other may need to be combined when determining if the employer is “large.”more

The aggregation rules are very complicated and may require a large amount of information to do an accurate analysis. This article does not address all of the possible considerations or all of the intricacies of the rules, and assumes that the regulations that apply to retirement plans will also apply to health plans. We strongly encourage employers with complex arrangements to consult with their attorney or accountant.

Controlled Group

When one business owns a significant part of another business, there may be a “controlled group.” There are four types of controlled groups – parent-subsidiary, brother-sister, combined, and life insurance.

Ownership includes:

  • Stock ownership in a corporation
  • Capital interest or profits in a partnership
  • Membership interest in an LLC
  • A sole proprietorship
  • Actuarial interest in a trust or estate
  • A controlling interest in a tax-exempt organization (80 percent of the trustees or directors are also trustees, directors, agents or employees of the other organization or the other organization has the power to remove a trustee or director)
  • A government entity, including a school, if there is common management or supervision or one entity sets the budget or provides 80 percent of the funding for the other.

Affiliated Service Groups

If the company regularly performs certain types of personal services or management functions with or for related entities, it may be part of an “affiliated service group” even if there is not common ownership.

An affiliated service group is basically a group of businesses working together to provide services to each other or jointly to customers, and can be one of three types:

  • A-Organization (A-Org), which consists of a First Service Organization (FSO) and at least one A-Org
  • B-Organization (B-Org) which consists of an FSO and at least one B-Org
  • Management groups

Only entities that provide personal services are subject to the affiliated service group rules. Attribution rules similar to those that apply to controlled groups apply to affiliated service groups.

For detailed information on the four types of controlled groups, three types of affiliated service groups and other related aggregation rules, request UBA’s ACA Advisor, “Controlled Groups and Affiliated Service Groups: How They Apply to the ACA”

©Copyright 2016 by Danielle Capilla  and United Benefit Advisors. Reproduction permitted with attribution to the author.

Fully Insured, Self-Insured, Level-Funded: What Does It All Mean To The Small Employer?
21st October 2016 by Site Admin in Healthcare Reform, General

Small employers looking for ways to control their group health insurance costs are more closely examining what it means to be “fully insured.” These days, employers with as few as ten full-time employees are exploring other funding arrangements which can allow them more control—or at least more accountability—over their annual premium increases.

Fully Insured

“Fully insured” is what most people mean by “insurance.” The individual, or his employer, pays a premium to the insurance carrier; in return, the insurance carrier is responsible for paying future medical claims that are:

1) Covered in the insurance policy’s contract (thus usually excludes cosmetic or other elective procedures).

2) Beyond a certain annual “out-of-pocket maximum,” which is the total amount an individual or family will pay up front for medical services. For instance, an annual deductible amount, or the individual’s share of a coinsurance percentage such as 80/20.

The financial risk for future medical claims, then, is almost entirely the insurance carrier’s. Beyond that out-of-pocket maximum—for instance, $5,000—it doesn’t matter whether an individual incurs a $13,000 appendectomy or $300,000 respiratory failure, or a combination of medical procedures in a given year; the insurance carrier has contracted to pay all claims, and not charge any more for monthly premiums during the term of the contract (typically at least one year).

Now, because an insurance carrier must obey simple math in order to function, it needs to bring in at least as much premium as it costs to pay the incurred medical claims (and the employees of the insurance carrier often want to take home paychecks, too). If, therefore, the cost of providing medical services increases—or, by actuarial calculation, is likely to increase—insurance carriers offer individuals or employers increased premium rates at the beginning of their next contract year, and those individuals or employers are free to accept those new premium rates or to shop around with other insurance carriers. Regardless of whether the individuals or companies stay with the same insurance carrier, the medical claims already incurred are the insurance carrier’s responsibility to pay.

The idea of “pooling” has always been a part of fully insured coverage as well. In simple terms, if ten people are insured, the insurance carrier’s goal is to make sure that the premium collected from all ten covers the claims incurred by all ten, not necessarily that the premium collected from each individual covers that individual’s claims. Up until the enactment of the Affordable Care Act, insurance carriers could put a higher price tag on the insurance offered to individuals and small employers with higher risk (existing sicknesses or other conditions) to cover the higher expected claims; now, the ACA mandates that, for individuals and small employers (under 50 full-time employees), insurance carriers use “community rating,” which equalizes the premiums charged to all in a certain geographic area for a certain level of service. Insurance carriers can still charge more by age—small-group coverage for a 21-year-old is usually much cheaper than that for a 61-year-old—but a sick 61-year-old and a healthy 61-year-old would pay the same amount for coverage with the same deductibles and out-of-pocket maximums.

The benefit of community rating is that individuals and companies with a large number of health conditions can find insurance coverage which is not priced completely out of their range. However, small employers with few health risks are finding that not only have their premiums increased by amounts greater than their own use of the insurance benefits would justify, but there is no benefit to them in prudently trying to control costs (via wellness plans or other initiatives), as their own efforts to reduce claims would only be drops in the huge bucket from which renewal increases are calculated.

Self-Funding

Self-funded insurance is almost the complete opposite of full-insured coverage. A self-funded insurance plan is exactly what it says: A company provides all the funds to pay for expected claims (with an important caveat—see “Reinsurance/Stop-Loss”section). In essence, the employer has formed an “insurance pool” all of his own, with the participants in the pool consisting only of his employees.

Reinsurance/Stop-Loss

Because even larger groups can incur greater than expected claims, most self-funded insurance plans still have a form of insurance in place, alternately called “reinsurance” or “stop-loss insurance.” These employers will pay a premium for protection in case their actual claims exceed, for example, 125% of actuarially predicted expenses, or in case a single large claimant incurs claims large enough to skew the entire “pool.” Typically, even employers with several thousand employees will have stop-loss to hedge their bets against the unexpected—which is really what insurance is for.

Self-funding is generally NOT an option for small employers, due to the nature of statistics. If you have 500 employees, you can estimate with fair accuracy the general level of claims you can expect to be incurred, and the probability of any specific large claims (systemic cancer, serious accidents, etc.). As the number of employees goes up, the accuracy of such statistical estimates goes up. As the number of employees goes DOWN, not only does the predictability of any individual large claim go down, but the ability of the “pool” to compensate for any one large claim goes down. If you have five employees and are funding their healthcare expenses to expected levels, it only takes one stroke or one high-risk pregnancy to incur expenses far beyond what you had planned for.

It is very much in the interests of a self-funded insurance plan to minimize claims, as all costs come out of the company’s pockets—and conversely, all savings benefit the company’s bottom line. Thus, wellness programs, biometric screenings, in-house exercise programs, and smoking cessation incentives can often be found at these companies, supplied and encouraged by well-motivated management.

Self-funded insurance plans are set up with the assistance of professional actuaries who can help determine reasonable levels of funding from year to year, and third-party administrators (TPAs) who provide the mechanics of claims payment to providers, and often contract with an existing insurance carrier for the use of their network.

Level-Funding

Level-funding has recently attracted far more attention among larger small employers (those nearing 50 full-time employees) or smaller large employers. At its simplest, level-funding is simply self-funding done small, usually by an office or offshoot of a fully-funded insurance carrier. With some level-funding providers offering their services to companies down to 10 full-time employees, these plans obviously can’t operate under the kind of risk possible with a larger company; the stop-loss coverage comes into play at a much lower threshold, protecting the company from unforeseen huge claims. These plans are often thus referred to as “partially self-funded.”

Because self-funded and level-funded plans, even for small groups, don’t need to be community rated as fully insured plans do, a level-funded plan can cost less to provide health benefits to the employees, and save the company money… but only if the cost of its claims stays low so that the cost-per-employee doesn’t rise as high as, or higher than the community-rated premiums available to them. In other words, only a company of healthy individuals (who will need to attest to their health status by individual health questionnaires when applying) should consider level-funding.

What Does This Mean For YOUR Group Benefits?

As always, insurance is a balance between costs and risks. A fully insured plan removes most risk from the employer and employees, but the guaranteed cost of the plan is higher. A self-insured plan leaves most of the risk with the employer, but also has the greatest chance for savings. Level-funding attempts to combine the best of both worlds, but is really only viable for a narrow segment of employers. There is no one “right” answer to which funding arrangement is “best”—if there were, there would only be one way to fund an insurance plan, not three.

How many employees do you have? How healthy is your employee pool? How much variation in your premiums can you accommodate, year to year? How much input into benefit design do you want to have (or want to HAVE to have)? Together with our office, sit down and discuss these questions to find out which kind of insurance funding best meets your needs.

©Copyright 2016 by Nathan Shumate and Fringe Benefit Analysts, LLC. Reproduction permitted with attribution to the author.

ALE Employers Ask: Should Benefits Be Offered to Variable Hour Employees?
18th July 2016 by Site Admin in General

UBA’s compliance team leverages the collective expertise of its independent partner firms to advise 36,000 employers and their 5 million employees. Lately, a common question from employers is: How does an applicable large employer (ALE) determine whether or not a newly hired variable hour employee should be offered benefits?

The answer depends on how the ALE is measuring its regular or ongoing workforce. If the employer uses the monthly method to track its ongoing employees, it would offer a variable-hour employee benefits within 90 days and by the first of the fourth month after an employee averaged 30 hours a week or more, and for every month after that the employee was full time.

If the ALE uses the measurement and look-back method for its ongoing employees, it can use the special “initial measurement period” option for newly hired variable hour employees. To use the variable-hour look-back option:

  • An “initial measurement period” of three to 12 months must be chosen
  • The stability period must be the same length as the stability period for ongoing employees
    • For new employees determined to be full-time, it must:
      • be at least as long as the initial measurement period
      • be at least six months long
    • For new employees determined not to be full-time, it must not:
      • be more than one month longer than the initial measurement period
      • exceed the remainder of the standard measurement period, plus any associated administrative period, in which the initial measurement period ends

Example: Because XYZ Company uses a 12-month stability period for ongoing employees, it must use a 12-month stability period for new hires. XYZ chooses an initial measurement period of 12 months for new variable hours and seasonal employees. Sally is hired May 10, 2015. Sally works in the after-school program, so she will work a few hours a day during the school year and as many as 50 hours per week during school vacations. She is on-call if the school closes due to bad weather. XYZ tracks Sally’s hours from May 10, 2015, to May 9, 2016, and determines she averaged 32 hours per week during that time. Sally is offered coverage as of June 1, 2016. XYZ does not owe a penalty for Sally during the entire 12-month initial measurement period, even though it was more than the three-month period generally allowed and she actually averaged more than 30 hours per week because of this special option for variable employees.

Note: If an employer uses a three-month measurement period and needs to use a six-month stability period because the employee is full-time, the next measurement period (plus administrative period) must be adjacent to the end of the stability period to determine benefits.

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