As we all get cozy for some end-of-year cheer, here are some benefits updates and reminders to ring in the new year.

HSA telehealth relief to be extended

In what will come as welcome news to many employers, the Further Continuing Appropriations and Disaster Relief Supplemental Appropriations Act, 2025 is set to extend telehealth relief through plan years beginning before Jan. 1, 2027. Though at the time of writing this bill has not yet passed, it is expected to pass before Christmas.

Without this relief, employers with high-deductible health plans (HDHPs) would have been required to impose plan deductibles for any non-preventative services offered via telehealth beginning on Jan. 1, 2025. In recent years, many employers have rolled out low-cost telehealth options. These options have been popular with employees but have created a looming headache for those with coverage through HDHP plans, because without specific relief, many of these programs provide services that will need to be subject to deductible minimums for employees to maintain HSA eligibility.

This extension temporarily solves this issue, which will come as a relief to many. We hope to see a more permanent solution in the future.

ACA reporting obligations reduced

For those employers covered by the Affordable Care Act (ACA), reporting forms create a multipronged headache. However, one prong of that burden has been lifted by the Paperwork Burden Reduction Act (PBRA).

Under the PBRA, which will apply to the 2024 Form 1095-C, employers will no longer be required to distribute the form to employees so long as they provide employees with a notice of availability and give employees a copy of the form upon request.

DOL updates cybersecurity guidance

As anyone running a business is aware, cybersecurity is one of those topics that ramps up in importance every year. In recognition of this reality, the Department of Labor has released updates to its 2021 cybersecurity guidance. Of note, this updated guidance applies to both health and welfare and retirement plans.

Employers of all sizes are directed to ask their plan service providers about their security standards, practices, policies, and audit results. They are then asked to consider industry standards for comparable services to determine if their service providers offer sufficient protections. Service providers with recognized standards and annual audits of their practices are preferred.

The guidance also includes best practices, which are worth review by anyone sponsoring an employee benefits plan.

New HIPAA privacy protections on the horizon

On Dec. 23, 2024, new reproductive health care privacy protections take effect. While the rules have been subject to substantial and ongoing attack, their effective date remains in place, calling for action by those holding protected health information as a covered entity or business associate:

• Uses and disclosure are subject to the new protections effective Dec. 23, 2024. If you receive a request for such information, we suggest contacting counsel.
• HIPAA policies and procedures must be updated to comply with the new protections.
• Notices of privacy practices must be updated by Feb. 16, 2026.

More information about the protections covered by these new rules can be found at www.hhs.gov/hipaa/for-professionals/special-topics/reproductive-health/index.html.

Gag clause attestations still loom large

Plan providers and employers are to file gag clause attestations no later than Dec. 31, 2024, attesting to the fact that their contracts contain no prohibited terms. This is the second year this requirement has been in effect and has thankfully not proven as complex as some of the recent filing requirements imposed on plans.

For employers with insured health plans, this requirement falls to the insurer and does not pose a concern but those with self-insured health plans will want to speak to plan vendors to ensure they have clarity as to who will make the filing.

Consider testing cafeteria plan contributions early

Every year several clients reach out in December with concerns about their cafeteria plan nondiscrimination tests. These tests, which look at whether the plan favors highly compensated and key employees, either in design or operation, sneak up on employers and come to their attention during their fall open enrollment cycles. However, this timing is not ideal.

Whereas we are used to correcting retirement plan issues in the tax year that follows a retirement plan year, cafeteria plan testing issues can only be cleanly resolved during the tax year in which the error occurs. It’s best to know about any testing problems by midyear. Finding out about issues early allows plan sponsors to reduce contributions for highly paid employees or otherwise make adjustments to address any concerns. Consider checking this compliance topic off your list in the summer of 2025.

Iris Tilley is a Barran Liebman LLP partner. She advises employers on a range of benefit and employment law matters. Contact her at 503-276-2155 or itilley@barran.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91ĘÓƵ guarantees the accuracy or completeness of any information published herein.

The post Employee benefits updates and reminders for a cheerful year to come | Opinion appeared first on Daily Journal of Commerce.

By Iris K. Tilley & Gabrielle A. Hansen

There is no denying that time has moved particularly fast over the past year and a half. In the world of employee benefits, the law has changed, adapted and updated in a multitude of ways to move with the needs of plan participants and sponsors. Below we discuss some of these changes so that employers can prepare for the changes ahead.

Health Plans

COBRA

The specific measures affecting COBRA include extension of COBRA deadlines until 60 days after the end of COVID-19 National Emergency (the Outbreak Period) and a 100 percent COBRA Subsidy in the American Rescue Plan Act (ARPA).

The COBRA deadline extensions tolled major COBRA deadlines, including the election of COBRA. After their implementation in 2020, these extensions were extended again in February. This February extension revised the application of the previously extended deadlines to extend them for the lesser of one year from the original deadline or the end of the Outbreak Period. The Outbreak Period is still ongoing as of July 15, 2021, but each individual COBRA beneficiary is limited to one year of Outbreak Period relief.

The ARPA introduced the other major change related to COBRA in the past year: subsidized COBRA coverage. The subsidy took effect on April 1 and will last until Sept. 30. It is available to anyone, including dependents, who lost employer-provided group health coverage because they experienced a reduction in hours or an involuntary termination.

The subsidy has altered the way employers administer COBRA in several ways. First, under ARPA rules, employers were required to provide notices to those individuals who experienced a qualifying event prior to the start of the subsidy, but who could enroll in subsidized coverage starting April 1. Second, it includes a second notice requirement regarding the end of subsidized coverage. Finally, and most relevant to employers’ day-to-day operations, it calls for changes to the COBRA forms that employers use when an individual experiences a loss of coverage.

Optional Provisions for Section 125 Plans and Dependent Care Plans

Among the notable optional changes, for plan years ending in 2020 or 2021, employers may lengthen the grace period or increase the carryover limit to allow employees to utilize otherwise unused 125 Plan funds. And for plan years beginning after December 31, 2020, and before January 1, 2022, employers may amend their 125 Plan to increase the limit of the amount that an employee can exclude from their income for dependent care assistance from $5,000 to $10,500 and from $2,500 to $5,250 for taxpayers who are married filing separately.

Self-Insured Health Plan Mandates

While sponsors of self-insured health plans have often been able to stay out of the regulatory fray, recent federal legislation has put the compliance spotlight on these plans. In particular, new mental health parity testing requirements rolled out this spring, and transparency and “no surprises” mandates will take effect in 2022.

Payroll Considerations

Both Washington and Oregon introduced new payroll considerations for employer withholding in the last year.

WA Cares

In Washington, the WA Cares long-term care benefit requires employers to start withholding the mandatory employee-side payroll tax January 1, 2022.

WA Cares is a long-term care benefit designed to provide payment for benefits necessary for daily living. The program is funded by an employee-side only payroll tax. Benefits are scheduled to be available starting in 2025 for employees who have met the contribution requirements and who are otherwise eligible.

There is a one-time opt-out available to individuals who do not wish to participate in the program. Individuals wishing to opt out must obtain alternative long-term care insurance and opt out between Oct. 1, 2021 and Dec. 31, 2022.

Preschool For All

In Oregon, the Multnomah County Preschool for All Tax took effect on Jan. 1, 2021. This tax is a personal income tax measure that affects individuals earning over $125,000 individually or $200,000 jointly who work or live in Multnomah County.

Employer withholding is required starting Jan. 1, 2022. This tax may come as a surprise to the employees to whom it applies, so employers should be prepared to explain the withholding.

Conclusion

As the Biden administration continues, it is apparent that we will continue to see developments regarding employer sponsored health and welfare plans. Further, although deadlines for plan sponsor action related to some of the changes that have already occurred may have recently seemed far off, they are now approaching.

To learn more about the topics discussed herein and more, register for Barran Liebman’s upcoming webinar presented by Iris Tilley: “Preparing for 2022: Your Benefits & Compensation Planning Guide,” by emailing jpeterson@barran.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91ĘÓƵ guarantees the accuracy or completeness of any information published herein.

The post OP-ED: Are your employee benefits ready for 2022? appeared first on Daily Journal of Commerce.

This column is being written on Jan. 20 – Inauguration Day – and it is going to discuss the Accordable Care Act (ACA). That’s a recipe for immediate obsolescence, right? Perhaps, but the more likely outcome is that we will see the ACA rules on the books for a few months while possibilities for repeal and replacement are considered, and a full repeal is tabled while a replacement plan is finalized. Accordingly, I am rolling the dice and providing ACA guidance on the eve of what may ultimately be the end to the federal statute – at least as we know it. With that in mind, I have assembled the top 5 benefits questions that have come my way in the past 30 days.

1. Do I really have to file and distribute my ACA reporting forms?

Yes. Despite the ongoing dialogue about plans to repeal and replace the ACA, reporting remains on the books. Covered employers accordingly must provide Forms 1095-C to their employees on or before March 2, 2017 (this is an extended deadline). The forms are due to the IRS by Feb. 28, 2017 for paper forms and March 31, 2017 for electronic filings. Filers may obtain an automatic 30-day extension to the filing deadline by filing Form 8809 on or before the regular due date, but filing Form 8809 does not extend the March 2, 2017 deadline for getting forms in the hands of employees.

The good faith penalty relief that applied to filings for the 2015 tax year continues to apply to the filings for 2016 that employers are preparing now.

As a reminder, the ACA reporting requirements apply only to those employers with 50 or more full-time equivalent employees in the tax year that preceded the reporting year (2015 for the reports employers are filing now).

2. What happens if I don’t file and distribute my ACA reporting forms?

An employer large enough to fall under the reporting rules that doesn’t file may be penalized. The stated penalty is $250 for each return for which the failure occurs, with a maximum penalty of $3 million.

3. What do I do if I get a notice from a health care exchange telling me that an employee got subsidized coverage?

If an exchange notice is issued, the first question is whether the employee listed in the exchange notice was eligible for health coverage. If the employee was not eligible for coverage under the employer’s health plan, nothing needs to be done. However, if the employee was eligible for health coverage, and it’s affordable and otherwise meets the ACA minimums, let the exchange know. The process varies a bit from state to state, but the letter from the exchange will detail appeal rights. Raise an appeal if an employee listed on an exchange notice was eligible for the employer’s coverage because failing to do so could put the company at risk for a penalty for failing to provide coverage.

4. I keep hearing about wellness programs. Did something change?

The Equal Employment Opportunity Commission published final wellness program regulations in fall 2016. A notice requirement under these regulations took effect as of an employer’s first plan year beginning on or after Jan. 1, 2017. The notice is required in instances when an employer offers a wellness program that requires a medical exam (think biometric screening) or asks health-related questions that could disclose a disability (think health risk assessment). A model notice is available at: www.eeoc.gov/laws/regulations/ada-wellness-notice.cfm.

5. Can I just give my employees money to buy coverage on the health care exchanges?

Generally, IRS guidance prohibits an employer from purchasing coverage on the individual market (including exchange coverage) for an employee. However, in December 2016, President Obama signed into law legislation that changes this for small employers. A small employer here is an employer that is too small to fall under the ACA reporting and shared responsibility rules. (This means that the employer had fewer than 50 full-time equivalent employees in the preceding tax year. For 2017, the relevant employee count is this January-December of 2016.)

The new legislation allows these small employers to sidestep the general prohibitions on the purchase of individual health coverage for an employee through a health reimbursement account (HRA). The HRA must be implemented with 90 days’ notice to employees, so it came too late in the game for many small employers to consider it for 2017, but it could offer a viable alternative for small employers still looking at coverage options for this year.

Iris Tilley is a partner at Barran Liebman LLP. She advises employers about all aspects of employee benefits, including ACA compliance. Contact her at 503-276-2155 or itilley@barran.com.

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On Sept. 17, about two months after most employers would have liked to have seen final guidance, the Internal Revenue Service released final Affordable Care Act reporting forms and instructions for 2015. Applicable large employers and insurers will use these forms and instructions to complete mandatory reporting in early 2016 for offers of coverage and coverage in the 2015 calendar year. As a reminder, these forms will be used to enforce the individual mandate and employer penalties as well as crack down on individuals who may have received subsidies for which they were not eligible.

While many of the reporting details are better left to a personal conversation, here is a summary of key details that employers will find most relevant.

Who distributes and files what?

As background, employers with an average of 50 or more full-time equivalent employees in 2014 will distribute Forms 1095-C to all employees who worked on a full-time basis for at least one month in 2015. (Employees were not eligible for coverage due to a waiting period or measurement period fall under a special rule.) These forms are due to employees on or before Feb. 1, 2016. Insurers and small employers with self-insured health plans distribute Forms 1095-B to covered individuals on the same schedule. Employers file both Forms 1095-C and a transmittal form, Form 1094-C, with the IRS. Insurers and smaller employers with self-insured plans do the same with Forms 1094-B and 1095-B.

I was prepared for reporting; now what?

Employers who were prepared are in large part still prepared. The final forms are substantively identical to the draft forms, and the instructions are in large part unchanged.

What do the final instructions do with HRA reporting?

Prior to the final instructions, the IRS’ guidance indicated that employers offering health reimbursement arrangements (HRAs) that are integrated into a medical plan would be required to file two sets of forms – one for the main medical plan and one for the HRA. These employers can breathe a collective sigh of relief because the final forms correct this ambiguity in employers’ favors.

The final instructions provide that employers offering more than one type of minimum essential coverage (MEC) to a particular employee are only required to report one type of coverage.  That is, employers with both a major medical plan and an HRA are only required to report one of the two coverage types.

Do the instructions do anything to clarify simplified reporting?

As anyone who has spent time sorting through the reporting requirements is aware, the instructions provide for several types of “simplified reporting.” However, this reporting is governed by so many rules and nuances that it often seems as if qualifying for the simplified reporting is more complicated than just reporting without any so-called simplification. The final instructions attempt to get at this complexity by providing some clarifications to the qualifying offer method of simplified reporting.

Through an example, the instructions explain that an employer can use the qualifying offer method of reporting (with the corresponding reporting code of 1A) if an employee and the employee’s dependents received an offer of affordable coverage for all months of the calendar year in which the employee was a full-time employee of the employer.

The example illustrates that an ALE member can use the qualifying offer code (1A) on Form 1095-C so long as the employee received a qualifying offer for all months in which the employee was full-time (and not in a limited non-assessment period), but the ALE member cannot furnish the alternative statement unless the employee received a qualifying offer for all 12 months in the calendar year. Months in which an employee was excluded from coverage for a permissible reason, like a waiting period that does not exceed the ACA maximums, will not preclude an employer from using the qualifying offer reporting method. However, the instructions make clear that this method is not available for self-insured employers if the employee actually enrolled in the employer’s self-insured coverage.

Do I really need to report COBRA offers of coverage?

No, COBRA offers of coverage are no longer reported as an offer of coverage if an employee terminated employment. However, in instances where an employee loses coverage due to a reduction in hours but remains an employee, an offer of COBRA coverage would be reported.

Am I really going to need to report in 2016?

The IRS’ affirmative step in releasing final forms and instructions signals that employers will not see an additional delay in reporting requirements. The IRS has stated that it will not impose penalties where an employer makes a good faith effort to comply, but penalties are likely where an employer simply ignores the reporting rules.

For employers that have been ignoring the rules in hopes that they would disappear, this new guidance signals the perfect moment to get things in order.

Iris Tilley is a partner at Barran Liebman LLP. She advises employers about all aspects of employee benefits, including ACA compliance. Contact her at 503-276-2155 or itilley@barran.com.

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On April 20, the Equal Employment Opportunity Commission issued a notice of proposed rulemaking addressing how the Americans with Disabilities Act applies to employer wellness programs that are part of a group health plan. Wellness programs, which are otherwise regulated under employee benefits laws including HIPAA, the ACA, GINA and (sometimes) ERISA have long remained an open question under the ADA. The EEOC’s proposed regulations, together with the FAQs from other agencies, would provide some welcome clarity, but open questions continue to require employers to tread a careful line.

What is a wellness program?

A wellness program can be a slew of different things – from an informal poster encouraging employees to take walks during lunch to a complex scheme involving computerized health risk assessments (possibly including disability-related inquiries) and medical exams with individualized follow-up where the assessments reveal a potential health risk.

Employers have long been drawn to wellness programs because they have been linked to decreased health costs as well as associated costs, like absenteeism and presenteeism. Typically, employees are granted a discount on their health insurance premiums or given another type of financial reward for participating in the employer’s wellness program.

On its face, the ADA permits wellness programs to include disability-related inquiries or medical examinations only if participation in the program is voluntary, the confidentiality of information is maintained, and the information is not used to discriminate against an employee. However, the question of whether and when a program is in fact voluntary under the ADA has long been a point of confusion.

Recent EEOC challenges

The EEOC’s recent proposed regulations come on the tail of three separate EEOC lawsuits based on alleged wellness program violations and may have been the result of congressional pressure to provide some clarity to employers. In two of the three pending lawsuits, the EEOC alleged that an employer violated the ADA through improper design of a wellness program. In each of these suits, the EEOC appeared to be taking the position that wellness programs with disability-related inquiries would violate the ADA’s voluntariness requirement if they included any incentive for participation. However, the EEOC’s proposed regulations take a softer view of the issue.

Proposed regulations and FAQs

The EEOC’s proposed regulations address the voluntariness component of wellness programs head on by laying out specific rules for when and how an employer can offer a program that includes disability-related inquiries or medical exams. In relevant part, the proposed regulations provide the following:

• Wellness programs do not fall under the bona-fide benefit plan safe harbor within the ADA, so employers are at risk of violating the ADA if they improperly design their wellness programs.

• Where a wellness program includes a disability-related inquiry or medical examination, the benefit under the program cannot exceed 30 percent of the cost of employee-only coverage. This is in contrast to HIPAA and the ACA, which allow programs that benefit dependents of an employee to offer rewards up to 30 percent of the cost of family coverage.

• The proposed ADA regulations do not allow for higher tobacco-related incentives unless the program does not include a disability-related inquiry or medical examination (like a test for nicotine).

• Employers would be prohibited from requiring participation in a wellness program, denying or limiting coverage where an employee refuses to participate in a wellness program, or taking adverse action against an employee who either does not participate in a wellness program or fails to achieve a health outcome.

• The proposed regulations also would require employers to provide a notice to employees explaining details about most wellness programs.

The EEOC would impose confidentiality requirements that limit the data that may be communicated to an employer, where the employer does not administer the health plan internally.

• Finally, the proposed regulations include the requirement that the wellness program be reasonably designed to promote health or prevent disease. This requirement has been liberally construed with regard to the HIPAA regulations.

In conjunction with the timing of the EEOC’s release of the proposed regulations, several administrative agencies published FAQs addressing limited aspects of wellness program design and administration. In particular, the FAQs addressed reasonable requirements in wellness programs,  reinforced the fact that compliance with one set of regulations governing wellness programs is not determinative of compliance with other wellness program regulations, and addressed how HIPAA’s breach notification rules apply to wellness programs.

What now?

The comment period on the EEOC’s proposed regulations ends on June 19, 2015, and we expect to see extensive comments from employers and human resources groups regarding the existing conflicts between the EEOC’s proposed regulations and other law governing wellness programs, but we do not yet know the effective date of the final regulations.

For now, employers should take this time to review their existing wellness programs and determine whether any existing programs contain disability-related inquiries or medical examinations. Where they do, employers should work with their attorney to determine whether the programs are compliant with the proposed regulations, and where they are not compliant, conduct a cost-benefit analysis to determine whether to adjust existing programs now or wait for the final regulations. The safest approach at this point is to design new wellness programs to comply with the proposed regulations, but some employers may prefer to hold off on new wellness program design until final regulations are released because doing so will avoid the risk of an immediate redesign.

Iris Tilley is a partner at Barran Liebman LLP. She advises employers about all aspects of employee benefits, including health care. Contact her at 503-276-2155.

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If you run a staffing firm or utilize a staffing firm in your business, chances are good that compliance with the Affordable Care Act (ACA) is somewhere on your list of concerns. For people running staffing firms, questions of when to offer coverage and who to cover tend to dominate the discussion. Meanwhile, staffing firm clients struggle to confirm whether ACA penalties will be triggered by staffing-firm employees.

Penalties: the big picture

We will get to what we know about each of these issues, but first, a reminder: The period during which penalties may be assessed under the ACA will begin on Jan. 1, 2015. During this first year, penalties will be assessed only against employers with 100 or more full-time equivalent employees.

In 2016, this number will drop to 50 or more full-time equivalent employees. Penalties will be assessed in 2016 based on information reported in employer tax filings and records of those employees who received help paying for coverage on the insurance exchanges.

Employers are vulnerable to penalties if they either fail to make an offer of coverage to at least 70 percent (95 percent after 2014) of their employees working 30 or more hours per week, or if they make an offer of coverage but the offered coverage is either insufficient or unaffordable. Various forms of transitional relief reduce penalties in 2015 and give some employers a free pass for a few months, but this covers the basics at a big-picture level.

The staffing-firm challenge

At its most fundamental level, the challenge faced by staffing firms and their clients is a question of employment. Specifically, which entity employs a W-2 employee supplied by a staffing firm to a client, or “who’s the boss?” Identifying the W-2 employer matters because penalty exposure and reporting requirements under the ACA are driven by employee count, and a single staffing-firm employee could trigger thousands of dollars in penalties if his or her W-2 employer fails to comply with the ACA.

In addition, many staffing-firm placements are designed to be only temporary in nature or to work erratic hours, triggering further questions about whether and when they should actually receive an offer of health insurance coverage.

ACA compliance

While, like so many areas of the ACA, more guidance on this issue is needed, both staffing firms and the employers who rely on them can help protect themselves from penalty exposure (and in the case of staffing firms, client discontent) with a few steps:

1. Clarify W-2 relationships. Review staffing firm agreements, offer letters to employees and handbook language to ensure that it is clear that the staffing firm operates as a staffed-employee’s W-2 employer. Language directing the employee to contact the staffing firm’s human resources, and not the client company’s human resources is helpful, but both the staffing firm and client entities may want to consult with employment counsel regarding the latest joint-employer issues.

2. Review (and possibly revise) agreements. Final ACA regulations include a special safe harbor for staffing firms and their clients, which relieves clients from penalty exposure for staffed workers where: 1, the staffing firm makes an offer of health coverage to the worker, and 2, the fee paid by the client is higher than the fee the client would have paid to the staffing firm if the staffing firm did not make an offer of health coverage to the employee.

Some staffing-firm clients have asked firms they work with to sign addendums to existing agreements that explicitly provide for these terms. In some cases, this may mean that a staffing firm with fewer than 100 employees will discover that it is in the firm’s business interests to offer coverage to employees it places with larger employers to assuage those clients’ concerns about ACA penalties.

3. Become familiar with the rules and safe harbors. This guidance is really just for the staffing firms, but for those staffing firms that have not already done so, it is not too late to become familiar with when penalties will be imposed for a new hire and when measurement and stability periods may allow the firm to delay making an offer of coverage.

In particular, while the ACA does not include an exception for temporary employees, no penalty will actually be assessed against a new hire until the new hire’s fourth month of employment. This means that very short-term placements do not pose a penalty risk. However, staffing firms must be mindful that an employee who bounces from temporary position to temporary position with the same staffing firm can pose a penalty risk because the law will aggregate the employee’s service in the multiple temporary positions.

Similarly, when used properly, measurement and stability periods can offer some relief. An employee-benefits attorney is helpful in crafting these periods and ensuring that they are properly documented, because measurement and stability periods allow employers to delay making an offer of health coverage to those employees who are brought on for a seasonal or variable-hour position. (A variable-hour position is one for which the employer legitimately does not know if the employee will work sufficient hours to qualify for health insurance.)

Bringing it all together

In light of these complexities and the significant monetary impact that may result for both staffing firms and businesses that use staffing firms, careful consideration of the regulations and the particulars of an organization can save it thousands of dollars in penalties. Taking a proactive approach is likely to be well worth the investment.

Iris Tilley is a partner at Barran Liebman LLP. She advises employers about all aspects of employee benefits, including health care under the ACA. Contact her at 503-276-2155 or itilley@barran.com.

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As you toast the New Year, health care reform will probably be the last thing on your mind. But for many employers, the start of 2014 signals the start of new compliance obligations as well as the first real health care reform countdown – to 2015.

In 2015, the previously delayed employer mandate and reporting requirements take effect, triggering the possibility of penalties for some employers. Here is a look at the issues that employers should follow in this final calm before the storm.

Employee count

Employers have always had to watch their employee count, but it will take on new meaning in 2015. Large employers – those with 50 full-time equivalent employees or more – will be subject to reporting requirements. In addition, penalty payments may accrue if at least one employee of a large employer obtains coverage through the exchanges with coverage assistance because the employer either failed to offer coverage or offered coverage that was insufficient or unaffordable.

The relevant period for determining an employer’s employee count is total business days during the previous calendar year, so the number of employees an employer maintains in 2014 will affect its large employer status in 2015.

Employers that enter the year close to the 50-employee mark may wish to track employee count throughout the year in preparation for requirements taking effect in 2015.

Compliance

Plan years beginning on or after Jan. 1, 2014 are subject to a small host of new insurance requirements. For employers with insured plans, many of these changes will take place behind the scenes; however, there are two compliance updates that may require employer action or are likely to trigger employee questions.

The first of these requirements is waiting periods. They are limited to no more than 90 days as of an employer’s first plan year beginning after Jan. 1, 2014. The tricky part is that the regulations implementing this rule take a hard approach to counting days and mandate that employers make coverage available to employees on their 91st day of employment.

Some insurers allow for mid-month enrollment, and for these insurers, a 90-day waiting period remains feasible. However, most employers enroll employees on the first of the month following satisfaction of the waiting period. For these employers, the maximum waiting period is only 60 days because coverage does not become available until the first day of the next month following the 60th day of employment. Handbooks often reference a plan’s waiting period, so check internal policies to ensure they are consistent with the law.

A second issue garnering a fair amount of attention is out-of-pocket maximums (aka cost sharing). While new requirements take effect in 2014 that limit a plan’s total cost sharing – the amount individuals pay in deductibles, co-payments, co-insurance and similar charges – most employers have found that the cost sharing in their plans increased this year. These increases are primarily driven by the continually increasing regulatory requirements of health care reform, but each employer that made every attempt to continue its current plan in its existing form should be sure to communicate those efforts to employees so they do not come away from benefit meetings with the impression that coverage is being reduced purposefully.

New and final regulations

While the framework for health care reform has taken shape slowly over the past few years, we are still waiting for many final and proposed regulations. In particular, we do not yet have final regulations addressing the mechanism through which employers will comply with reporting requirements or calculate measurement and stability periods. At this point, consultants and attorneys are working from proposed regulations, but employers should remain aware that systems changes may be necessary when final regulations are released.

On a related issue, proposed regulations are still outstanding on automatic enrollment and nondiscrimination testing. Employers need not worry about compliance until regulations come out, but employers with 200 employees or more should watch for automatic enrollment regulations.

In addition, any employer with a non-grandfathered insured plan (most employers with a health plan today) may be affected by nondiscrimination regulations, which will require plan testing to determine if the plan discriminates in favor of employees compensated more highly.

Measurement and stability periods

For employers with 50 employees or more, questions about which employees qualify for coverage will become paramount in 2015. That is because employees who qualify for coverage, but do not receive an offer put the employer at risk for a penalty.

A full discussion of measurement and stability periods is beyond the scope of this column, but the key lesson for employers is that employers may measure hours worked by variable hour employees or seasonal employees on a monthly basis to determine eligibility. Or they may look at hours over a longer period of between three and 12 months.

For some employers, averaging an employee’s hours over a longer period of time will be advantageous because it will allow the employer to smooth out slower and busier periods. Measurement periods are followed by stability periods of between six and 12 months during which the employee maintains the eligibility status that he or she established during the measurement period.

Employers with variable hour or seasonal employees should speak with their benefits attorney or broker to get more information about measurement and stability periods.

Iris Tilley, a partner at Barran Liebman LLP, specializes in employee benefits. Contact her at 503-276-2115 or itilley@barran.com.

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As the key health care reform date of Jan. 1, 2014, looms ever nearer, employers may find themselves seeking more time to comply. But employers with eyes on the issues will find an easy year ahead. Following are the top eight health care reform issues for 2013.

W-2 reporting takes effect

With the exception of employers who filed fewer than 250 W-2 forms for 2011, employers are required to report the cost of employer-sponsored health insurance on the 2012 W-2 forms they will distribute in January 2013. While the IRS has exempted certain types of coverage from the reporting requirement, employers are required to report amounts paid by both the employer and the employee for major medical coverage (this includes dental and vision unless these coverages are part of a stand-alone plan).

Flexible spending account limits are capped at $2,500

As of Jan. 1, 2013, employees may defer only $2,500 to pay for medical expenses on a pre-tax basis. While many employers have capped flexible spending account deferrals for years, these caps were usually set at $5,000. Employers who have not yet amended their flexible spending account plans to reflect this new cap should do so before the start of 2013; they will need to correct any excessive deferral elections that employees may have made during recent open-enrollment periods.

Employers must plan for 2014

Beginning in 2014, three key changes will take effect:  (1) employers with 50 or more employees who do not offer health coverage, offer insufficient coverage, or offer unaffordable coverage may be subject to penalties under health care reform, (2) many individuals who do not maintain health coverage will be subject to a tax, and (3) the state-based health insurance exchanges will begin to operate.  This trifecta of changes raises unique planning issues for employers who may find that their best financial option is dropping health coverage or changing their health insurance model.

Employers must inform employees about health-insurance exchanges

Beginning on March 1, 2013, employers will have an obligation to give existing employees and new hires information about the health-insurance exchanges, which will begin paying claims as of Jan. 1, 2014. A sample notice is expected to be available prior to the compliance date, but the notice must inform employees about the exchanges and provide information about how employees can contact the exchanges for assistance; inform employees if their employer’s plan does not provide adequate coverage; and inform employees that they may lose the right to health benefits offered by their employer if they purchase insurance through the exchanges.

Additional Medicare tax takes effect

Beginning on Jan. 1, 2013, employers must withhold an extra 0.9 percent of Medicare tax on certain employee earnings. The tax applies to amounts earned over $250,000 for married couples filing jointly, amounts over $125,000 for married couples filing separately, and amounts over $200,000 for single individuals, certain individuals filing as head of household, and certain widow(er)s. Regardless of filing status, employers are directed to withhold the additional tax on amounts greater than $200,000 earned by an employee.

Employers must prepare for auto enrollment

Health care reform’s auto enrollment mandate will require employers with more than 200 full-time equivalent employees to automatically enroll new hires in employer-provided health coverage after those employees complete any required waiting periods (not exceeding 90 days). Auto enrollment will not take effect until regulations are issued, probably by Jan. 1, 2014.

Employers must prepare for nondiscrimination testing of insured plans

Nondiscrimination testing has long been required for self-insured plans, but health care reform includes a mandate extending similar testing to non-grandfathered insured plans – i.e., plans in which medical claims are paid by an insurance carrier. Regulations have not yet been issued covering this requirement, but they are expected in 2013 with an early 2014 effective date. The testing, which will target employers that provide better coverage to their highest-paid workers, comes with steep penalties of up to $100 per day a plan is noncompliant. Employers can expect a grace period to correct compliance issues after regulations are released.

Employers must prepare for new wellness program rules

New wellness program regulations take effect for plan years beginning on or after Jan. 1, 2014. While these new regulations leave the existing rules governing wellness programs largely intact, they do alter the wellness program landscape in several important respects. For example, they increase the maximum reward available through a wellness program from 20 percent to 30 percent (and 50 percent for smoking cessation and prevention programs). In addition, they alter the way in which reasonable alternatives for obtaining a reward must be communicated to participants, and require employers to pay for certain aspects of some reasonable alternatives. Employers offering wellness programs should have those programs examined in 2013 for compliance.

Iris Tilley is an attorney with Barran Liebman LLP. She specializes in employee benefits. Contact her at 503-276-2155 or itilley@barran.com.

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As many employers are aware, the Patient Protection and Affordable Care Act amends the Internal Revenue Code to require employers to report the aggregate cost of applicable employer-sponsored health coverage on employees’ W-2 forms.

While this requirement initially was scheduled to take effect in 2011, guidance from the Internal Revenue Service extended the compliance period, so employers’ 2012 W-2 forms (due by the end of January 2013) are the first ones that will need to comply with the reporting requirement.

In anticipation of the upcoming deadline, the IRS released additional guidance early this month to assist employers with compliance. Following are answers to questions frequently asked about this issue, along with the IRS’ latest guidance.

Do the reporting requirements mean that health care coverage is now taxable?

No, the reporting requirements do not change the taxability of health care coverage.

Which employers are required to report?

With a narrow exception for Indian tribal governments, all employers that filed 250 or more W-2 forms in the preceding calendar year are required to report. There is no exception for federal or state government employers, but limited government plans benefiting service members are excluded (as discussed below). Employers that filed fewer than 250 W-2 forms in the preceding calendar year are not required to report unless required by additional guidance.

Where is the information reported on the W-2 form?

The aggregate cost is reported in box 12, using code DD.

What information must employers report?

Employers are required to report the aggregate cost of all applicable employer-sponsored coverage provided to the employee. Applicable employer-sponsored coverage means coverage under any group health plan that is excludable from the employee’s gross income under section 106 of the Internal Revenue Code or would be excludable if it were employer-provided coverage (unless an exception applies).

What exceptions apply to the reporting requirement?

Employers need not report for any long-term care coverage; most excepted benefits under Internal Revenue Code section 9832(c)(1); dental and vision benefits excepted from the Health Insurance Portability and Accountability Act; and contributions to an Archer MSA, a Health Savings Account, or salary reduction contributions to a flexible spending arrangement. Any optional employer flex credits contributed to a flexible spending arrangement do need to be reported.

What does aggregate reportable cost mean?

The aggregate reportable cost includes both the portion of the premiums paid by the employer and the portion paid by the employee for the employee and any person covered by the plan because of his or her relationship with the employee, whether taxable or not. For example, coverage for a domestic partner would be included in the aggregate cost of coverage even though this coverage is taxable, and the amounts paid will also be reported as income on the employee’s W-2 form.

How is the reportable cost calculated?

The IRS has approved multiple approaches for determining the reportable cost of coverage. First, employers may calculate the reportable cost via the same method used to calculate the cost of coverage for COBRA purposes (COBRA premiums less the 2 percent charge). Second, employers may report the premium charged by the employer for coverage. Third, when an employer subsidizes the cost of COBRA coverage, it may use a good faith estimate of the applicable premium for the relevant period. Finally, employers charging employees a composite rate are subject to special calculation requirements explained further in the IRS’ most recent notice.

What is an employer’s obligation to report when a former employee requests his or her W-2 before the end of the year?

Employers are not required to report the employee’s aggregate cost of coverage when an employee requests a W-2 form early.

In cases where an employer provides coverage to retirees or other individuals with no W-2 compensation, is the employer required to report the aggregate cost of coverage?

No. Reporting is not required if the individual would not otherwise receive a W-2 form.

Do participants in a multiemployer plan need to report the aggregate cost?

No. Employers that contribute to multiemployer plans do not need to report that cost on W-2 forms.

Which government plans are excluded?

Generally, both federal and state governments must comply with the W-2 reporting requirements, but health plans maintained primarily for members of the military or for members of the military and their families do not need to be included in the aggregate reportable cost on an employee’s W-2 form.

While this is the IRS’ second substantive guidance document and third notice on this requirement, the guidance remains transitional, and these requirements and exceptions may change in the future. With that said, the IRS has provided assurances that any future guidance will take effect no earlier than Jan. 1 of the calendar year beginning at least six months after the date the guidance is issued.

Iris Tilley is an attorney with Barran Liebman LLP who specializes in employee benefits and employment litigation and advice. Contact her at 503-276-2155 or itilley@barran.com.

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Most Oregon employers are aware that nonexempt employees who work at least six hours are entitled to an unpaid meal period of at least 30 minutes. But some employers face issues related to the realities of day-to-day work. For instance, some employees choose not to take their entire break, and others can’t escape work during their breaks. Even the most careful employers can make meal-period mistakes.

In Oregon, an employer’s obligation to provide meal periods derives from Oregon law, but any obligation to pay employees for interrupted periods is governed by both Oregon law and the federal Fair Labor Standards Act.

In addition to the 30-minute meal period mentioned already, additional meal periods are required when employees work 14 hours or more. Employees must be relieved from all duties during meal periods, unless an exception permitted under the law applies. Also, an employee who is not so relieved must be paid for his or her time.

The legal exceptions are fairly narrow and include unforeseeable equipment failures, special industry practice (special rules apply to tipped food and beverage workers) or custom, and undue hardship.

“Undue hardship” is defined as significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer’s business. Hospitals, for example, are good candidates for the undue hardship exception because emergencies sometimes make it impossible for certain nonexempt employees, like nurses, to take a full meal period.

However, the undue hardship exception is subject to notice to employees and other requirements, so employers that believe they may qualify should consult with counsel or review the rules before making any conclusions.

Common errors and misconceptions

1. We don’t have to pay employees for interrupted meal periods if the interruption was very short.

Employees are entitled to an uninterrupted meal period. The Oregon law is written to exclude some de minimis interruptions (such as glancing at the screen of a cell phone), but generally, even a short interruption is enough to require payment.

If possible, it is better to direct employees to leave cell phones and pagers at their desks and leave their work areas for meal periods to avoid the temptation to engage in work even in small increments.

Employers with payroll programs that automatically deduct time for an employee’s meal period are at an added risk here because the program does not account for the realities of interruptions, and employers are responsible for ensuring that employees receive full meal periods.

2. Employees carrying a pager or cell phone must be compensated for all meal periods, whether they are interrupted or not.

Under current law, employees are not entitled to compensation just because they must carry a cell phone or pager while on a meal period. However, answering the phone, even if briefly, is generally enough to constitute an interruption that must be paid.

3. It’s OK to treat different employees differently as long as we are not doing it for an impermissible reason.

Over time, some employers discover that certain groups of employees have been receiving pay for meal periods while other, seemingly similar, groups have not. Little risk exists so long as a business justification exists for these differences, but employers with varying policies should be sure to document the reasons to protect themselves from a claim that they are being applied in a discriminatory fashion.

Risk

Current Oregon case law indicates that employees do not necessarily have a private right of action for missed meal periods. This means that employees may not be able to bring an action directly for missed meal periods.

However, this limitation does not preclude employees from bringing an action for unpaid wages. So while employees may not be able to sue their employers directly for a failure to provide meal periods, they are able to sue if they receive interrupted meal periods and were not compensated. The risk inherent in this type of lawsuit depends on the scope of the problem.

Employees can recover for long-standing problems back to the start of the requisite statute of limitations, which, under Oregon law, is six years for general wage claims and two years for overtime, and under federal law, is up to three years for any wage claim.

Back pay can add up quickly, so employers facing a potential issue should start by examining potential claims to see if counting the employee’s meal periods as work time would result in the employee being owed overtime pay. If it would, the employee has no choice but to seek overtime, which will lessen employer liability to a maximum of three years’ back pay.

Corrective action

Correcting meal period errors often requires an individualized solution with the employers’ workforce, risk and industry in mind. However, large-scale problems are sometimes best addressed by performing a meal-period audit designed to determine the scope of the problem and then holding individual meetings with employees to settle prospective claims. Employers that believe they may have a large-scale issue should consult with counsel.

In addition to employment counsel, both the and the have great information discussing applicable rules and frequently asked questions.

Iris Tilley is an attorney with Barran Liebman LLP who specializes in employee benefits, employment litigation and advice. Contact her at 503-276-2155 or itilley@barran.com.

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