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Welcome to the Benefits, Inc. Newsletter!
 
Our newsletter this month is full of important information on topics we may not think about on a regular basis. We are often questioned by those companies with cafeteria plans if non-discrimination testing really is necessary. Taylor Luther has a great article about this topic. In addition, there is an article on WRAP documents. Taylor Luther and Kyle Sanders, our compliance consultants, have been working diligently with our representatives to draft WRAP documents for our clients. If you have questions concerning why this document is needed and how we can help please speak with your representative or call Taylor or Kyle direct. Finally, keep in mind that all groups must issue the "Part D Notification of Creditable Coverage" to all employees and dependents that are Medicare eligible and enrolled on your group plan. This notification must be distributed by October 15, 2015. This notification is an annual requirement for employers. Thank you for allowing Benefits, Inc. to work with you and your employees. Sincerely,
Kevin Smith and Tim White
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Nondiscrimination Rules for Cafeteria  Plans
Cafeteria plans cannot discriminate in favor of highly compensated or key employees. Nondiscrimination rules exist because cafeteria plans, medical plans (including health FSAs), DCAPs, and other benefit programs enjoy favorable tax treatment. The main reason for conferring those tax benefits was to encourage employers to provide benefits to their rank-and-file employees. Although Congress did not object to letting an employer's executives get some tax benefits as a byproduct, it wanted to make sure that providing benefits to these individuals was not the primary focus of the program. As a result, the nondiscrimination rules are generally designed to prevent plans from discriminating in favor of individuals who are either highly compensated or otherwise key to the business. In other words, Congress wrote the rules so that the rank-and-file employees would get their fair share of the tax benefits.
Who are the highly compensated and key employees that Congress watches so closely ("the prohibited group")? The Code defines the members of the prohibited group differently for each benefit plan, so the exact answer depends on the type of plan at issue.
To make sure that cafeteria plans and their component plans do not discriminate in favor of highly compensated employees and key employees, Congress came up with specific nondiscrimination tests. These tests are complicated but can be boiled down to three basic themes, all of which involve protecting employees who are not highly compensated or key to the business:
- Eligibility. The first theme is that if enough non-highly compensated employees cannot get into a plan, then it will be discriminatory. One way to visualize this "eligibility test" is to think of the plan as a party where the guests get to save on taxes and ask yourself, "Have enough non-highly compensated employees been invited to the party?"
- Benefits. The second theme is that a plan will not pass the nondiscrimination tests if the highly compensated employees or key employees are able to get more benefits than the non-highly compensated employees. Think of the different benefits as being appetizers and ask, "Who's being offered appetizers at the party?" This is sometimes called a "contributions and benefits test."
- Utilization. The third theme is that a plan will not pass the nondiscrimination tests if the highly compensated employees or key employees actually take more benefits under the plan. In other words, ask yourself, "Who's actually taking the appetizers?" This is sometimes called a "utilization test" or "concentration test". It is often the most difficult to pass, especially for small employers.
Benefits that fail the nondiscrimination test may be included in gross income, when they would have been nontaxable if the cafeteria plan benefits had passed the nondiscrimination tests. This can create some unpleasant surprises for prohibited group members, especially if the discrimination problem is not discovered before the end of the plan year, because corrections cannot be made to reduce the adverse impact once the plan year has ended.
A discriminatory plan will not lose its tax-advantages for all employees. Employees who are not in the prohibited group can still exclude the benefits from income.
For further information about discrimination testing, please feel free to contact our office.
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Access to Health Care Remains High on List of Employer-Provided Benefits
Employer-provided medical care was available to 86% of full-time employees in the private sector, according to data from March 2015 reported by the U.S. Bureau of Labor Statistics in July. Twenty-one percent of part-time workers in the private sector had access to employer-provided health care benefits.
Access to paid leave continues to top the list of employer-provided benefits for full-time employees working in private industry:
- Paid vacation was available to 91% of full-time workers and 34% of part-time workers.
- 90% of full-time workers and 37% of part-time workers received paid holidays.
- Paid sick leave was offered to 74% of full-time workers and 24% of part-time workers.
More details and survey results are available in the report, 'Employee Benefits in the United States,' which is based on data from the National Compensation Survey. To learn more about employer-provided benefits, visit our section on Employee Benefits.
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Wrap SPDs: Satisfying Disclosure Requirements for Group Health Plans
To ensure that employees participating in a group health plan are provided with the most important facts about their benefits, rights, and obligations under the plan, the federal Employee Retirement Income Security Act (ERISA) requires the plan administrator--typically the employer sponsoring the plan--to furnish a Summary Plan Description (SPD). The SPD contains important disclosures and other information about the plan in understandable terms.
Comply with SPD and Plan Document Requirements
Because the benefit summaries, certificates of coverage, and other documents that are typically provided by insurance carriers to plan participants do not contain all of the information required by ERISA, many employers choose to use a Wrap SPD to make sure the plan is ERISA-compliant. The Wrap SPD includes required ERISA provisions and recommended information to "wrap" around the benefit summaries and other materials for each fully insured or self-funded plan option. To be compliant with ERISA's reporting and disclosure requirements, the Wrap SPD and accompanying benefit plan component documents must be distributed to plan participants.
Plan administrators are also required to have a written Plan Document in place that governs how the plan operates, which must be kept on file should a participant or beneficiary request it. A Wrap Plan Document, together with the insurance contracts and other materials from the carrier, fills in the gaps left by the insurer-provided materials to ensure that the plan functions in accordance with federal law.
Other Benefits of Utilizing Wrap Documents
One of the primary reasons that many employers use Wrap Documents is the significant amount of time and expense involved with preparing plan documents from scratch. Few small- or even medium-sized employers possess the resources or expertise necessary to create and maintain ERISA-compliant plan documents in an ever-changing regulatory landscape. Moreover, hiring a team of ERISA attorneys to draft an SPD and Plan Document is cost-prohibitive for the majority of small companies.
Finally, many employers simply prefer the convenience that comes with maintaining all of their employee benefit plan information within a single location. Since all employee benefits--even those not subject to ERISA--can be included in the Wrap Documents, participating employees enjoy the ability to access key aspects of their benefit information in one place.
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3 Guidelines for Managing a Difficult Employee
Managing a difficult employee is one of the biggest challenges an employer can face. While you might be tempted to ignore the situation and hope it improves on its own, it's important to take action before the behavior affects overall workplace morale and productivity (or drives other valuable employees away). These three steps can help you get the situation under control:
- Be responsive to the issues and complaints of the offending employee's colleagues. Although a difficult employee may not be violating company policy, his or her demeanor, attitude, and behavior can be off-putting to others. Document any complaints in detail, and ask for specific examples of the behavior in question. Maintain confidentiality to the greatest extent possible, and discourage the office rumor mill, which can only worsen the situation.
- Address the employee in question. It is understandably uncomfortable to confront a difficult employee, but an in-person meeting is essential to conveying the seriousness of the situation and working with the employee to come to a resolution. Ideally, you will speak with the employee immediately following an incident, so that the event is fresh in his or her mind. Be specific about the behavior, and remember that you are not addressing the employee's underlying character.
- Follow an established protocol of steps based on progressive discipline. If the negative behavior persists following a conversation or counseling session with the employee, move to a verbal and then a written warning. At each step, ask the employee if he or she understands the effect of the behavior, and spell out the consequences. Document each of these conversations, and include your notes and copies of any written warnings in the employee's personnel file.
Absent special circumstances, termination should generally be a last resort, as even difficult employees may be very good at their jobs (and strong contributors to your company's bottom line). The goal of your efforts is not to dismiss the employee, but instead to foster an environment of consideration, politeness, and civility in the workplace. Remember that discipline should be applied consistently and fairly to avoid claims of discrimination.
Visit our section on Motivating Employees for more ideas on how to maintain a positive and productive workforce.
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Quick Facts About the Americans with Disabilities Act
The federal Americans with Disabilities Act (ADA) recently celebrated its 25th anniversary. Under the law, private employers with 15 or more employees may not discriminate against qualified individuals with disabilities in job application procedures, hiring, firing, advancement, compensation, job training, and other terms, conditions, and privileges of employment.
Did you know . . .
The ADA also covers medical examinations and inquiries.
- Employers may not ask job applicants about the existence, nature, or severity of a disability; however, applicants may be asked about their ability to perform specific job functions.
- A job offer may be conditioned on the results of a medical examination, but only if the examination is required for all entering employees in similar jobs.
- Medical examinations of employees must be job related and consistent with the employer's business needs.
Medical records are confidential.
- The basic rule is that with limited exceptions, employers must keep confidential any medical information they learn about an applicant or employee.
- Information can be confidential even if it contains no medical diagnosis or treatment course and even if it is not generated by a health care professional. For example, an employee's request for a reasonable accommodation would be considered medical information subject to the ADA's confidentiality requirements.
Employees and applicants currently engaging in the illegal use of drugs are not covered by the ADA when an employer acts on the basis of such use.
- Tests for illegal drugs are not subject to the ADA's restrictions on medical examinations.
- The law may protect qualified alcoholics and recovered drug addicts who are no longer engaging in the illegal use of drugs if they meet the definition of disability.
- Employers may hold illegal drug users and alcoholics to the same performance standards as other employees.
Our ADA-Disability section has more information regarding employer obligations under the Americans with Disabilities Act.
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Reminder: 2015 Annual Enrollment Counts for ACA Transitional Reinsurance Program Due November 16th
Contributing Entities
Health insurance issuers and certain self-insured group health plans offering "major medical coverage" that is part of a commercial book of business are contributing entities. A contributing entity must make reinsurance contributions on behalf of its enrollees in plans that provide "major medical coverage," unless one of the exceptions provided under the law applies to such coverage.
For 2015 and 2016, self-insured plans that do not use a third-party administrator to perform their claims processing, claims adjudication, and enrollment functions do not have to pay reinsurance contribution fees.
Upcoming Deadline for 2014 Contributions
As a reminder,the second contribution deadline for the 2014 benefit year (of $10.50 per covered life) is due no later than November 15, 2015, for contributing entities that opted not to pay the entire 2014 benefit year contribution in one payment.
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Benefits, Inc. is a full service employee benefits agency. However we also offer Business Insurance, Work Comp, and Risk Analysis. Contact us
today at 615-446-3303 for more information.
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