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The Recruiting & Retention Perfect Storm, Part 1

Posted on June 30, 2021 by Trinity HR

This is a series that continues Trinity’s May 17th article related to the labor market. In this 1st part of this series of articles, I’m focusing on turnover & its cost to employees.

The Bureau of Labor Statistics reports that there are now over 9 million jobs unfilled in the U.S.—up from 8.2 million’s prior report. This represents the highest number since the BLS started its reporting in 2000. Without talking about the reasons for so many vacant jobs (which I will do at a later point), the demand for workers far exceeds their supply.

  • This has multiple implications, which I will also talk about in a subsequent article in this multi-part series.

Based on the last “normal” year (that being 2019), Mercer reported a U.S. average turnover rate to be 22%, with 15% of that being voluntary, 6% being involuntary & 1% being retirements.

  • Suffice for now for me to say that as a result of the current supply & demand imbalance:
    • With the economy rebounding, employees have choices & are taking advantage of those choices—after being afraid to leave for the last eighteen months.
      • A Robert Half survey reports that 38% of workers say they have felt stuck in their careers since the pandemic began.
      • According to several surveys, it appears employees are ready to leave their current jobs behind in 2021, right along with the pandemic restrictions we’ve all had to live with for so long. The numbers range from 26% to 40%
    • We can expect to see more voluntary turnover.
    • Employees are in control of the employee – employer relationship.
      • Employers need to not accept this reality & listen to employee preferences & expectations, but also need to take action.
      • If not, they will almost certainly be dealing with an insufficient supply of the talent they need.
      • They’ll also incur significant expenses in order to replace exiting employees.

The Society for Human Resources Management (SHRM) estimates organizations can pay six to nine months of a worker’s salary to replace them.

  • Replacement costs include recruiting and training.

Let’s look at those estimates in terms of dollar costs associated with

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Job Level Annual Pay # of Months of Pay Estimated Cost to Employer
Low $   40,000 3 $10,000
Middle $   70,000 6 $35,000
Management $100,000 9 $90,000

We all know that meeting or exceeding the expectations of our customers/clients is a much better outcome that having to secure new ones. The same thing is true with respect to our employees.

FOR MORE INFORMATION ON HOW TRINITY’S TEAM OF CONSULTANTS CAN HELP YOU WITH RECRUITING, RETENTION OR PEOPLE-RELATED MATTERS:

Author: Salvatore LoDico, Trinity CEO (aka “The HR Godfather”)

YOU HAVE HR CHALLENGES…TRINITY HAS SOLUTIONS!

Posted in Talent Acquisition, Executive Search, Employment & Employee Retention

THE LABOR SHORTAGE: REASONS & TRINITY SUGGESTIONS TO MEET THIS CHALLENGE

Posted on May 17, 2021 by Trinity HR

We are in an extremely challenging time in terms of the labor market. The economic recovery has many employers hiring, but they cannot find nearly enough qualified applicants.

  • The Job Openings and Labor Turnover Report by the U.S. Bureau of Labor Statistics (BLS) of May 11th shows almost 8,200,000 (yes, 8.2 million!) job openings.
  • That’s the highest number of job openings in the history of the Bureau’s Report.
  • The table below shows the parts of the labor market that have been hit the hardest:
INDUSTRY # OF UNFILLED JOBS
Trade, Transportation and Utilities 1.5 M
Education and Health 1.4 M
Professional and Business Services 1.4 M
Leisure and Hospitality 1.2 M
Manufacturing 0.7 M

Source: Statista

CONTRIBUTING FACTORS

Here are some of the factors causing this shortage:

  • 1)  Receipt of Covid-19 stimulus checks
    • This is obviously true for workers at the lower pay rates for which the stimulus checks equated in some instances to multiple months of their take home paycheck.
  • 2)  The financial decision by some that they are better off receiving state unemployment compensation benefits plus the federal unemployment benefits supplement of $300 per week (which some states have already begun to put an end to)
    • The sharp rise in gas prices has exacerbated this—as has now (and hopefully only temporary) gas shortage in many states
  • 3)  Individuals concern about the safety of returning to work despite the:
    • The large number of working age adults who have been vaccinated
    • Safety measures employers have in place
    • CDC’s recent announcement about the safety of the resumption of normal activities
  • 4)  Issues with child care—even though we are seeing the return of in school attendance in place of virtual school
    • The past and current societal reality is that this issue impacts females (especially single moms) to a much greater degree than it does males.
  • 5)  As technology has made and continues to make remarkable advances, it changes the skills needed to perform many of today’s jobs.
    • This results in a mismatch between employers’ needs and applicants’ qualifications.
    • Almost all projections indicate that this gap will continue to widen markedly unless and until there are significant collaboration efforts between employers, schools (both colleges and technical schools) and government agencies.

Although it’s not possible to assign a weight to these and other contributing factors with a high degree of accuracy, individually and collectively they have a negative impact on organizations acquiring the talent they need now and for some unknown future time period.

TRINITY’S THOUGHTS

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Below are some potential actions for you to evaluate in order to achieve greater success in meeting your staffing needs:

  • 1)  Re-assessing your recruiting process and what potential labor pools are being ignored
    • A Trinity client is discovering that many retirees are willing and able to work.
    • Another company is tapping into those who are re-entering the work force after military service.
  • 2)  Hiring search consultants for certain professional and management positions
    • Do not confuse search consultants with staffing agencies
      • The expertise of search consultants are as different from staffing agencies as a major league baseball player’s skill is from that of a high school player’s skill.
  • 3)  Re-evaluating your use (or non-use) of current employees as “recruiters”
    • This is often an undervalued source of new employees.
      • Trinity has created innovative “employee recruiter” programs.
  • 4)  Expanding the use of part-time and contingency jobs
  • 5)  Further re-evaluating which jobs can be performed from home
    • Including taking into account the amount of space owned/leased as less employees become on site ones
  • 6)  Creating or greater relying on internships and internal training opportunities
    • The latter includes the “old school” model of hiring trainees who receive on the job training to gain the necessary knowledge and skills.
  • 7)  Increasing pay rates
    • Behemoths such as Amazon and Walmart have already done so, but so have “mom and pop” businesses, as well as employers in between
  • 8)  Providing “hiring” bonuses
    • Keep in mind: a) The amount can vary based on the degree of difficulty to hire and b) Bonuses should not be paid until after a certain length of employment
  • 9)  Offering 100% company-paid healthcare benefits
    • This is after decades of employers having moving to a cost-sharing approach to healthcare benefits.
      • If you are considering this, keep in mind the implications for your existing employees.
  • 10)  Initiating or expanding child care assistance
    • Since some jobs cannot be performed remotely, response 3) falls short of a total solution
    • This may (but does not necessarily) mean creating on-site child care services through a third party or even making an employer contribution toward the cost of child care.
    • It may include actions such as: a) Identifying area providers and negotiating employee discounts and b) Having a Dependent Care Assistance Program under IRS regulations

FOR MORE INFORMATION ON HOW TRINITY’S TEAM OF CONSULTANTS CAN HELP YOU WITH YOUR TALENT ACQUISITION OR OTHER PEOPLE-RELATED MATTERS:

YOU HAVE HR CHALLENGES…TRINITY HAS SOLUTIONS!

Posted in Talent Acquisition, Executive Search, Employment & Employee Retention

BENEFIT PLAN NOTICES…NO GOOD DEED GOES UNPUNISHED, Part 3

Posted on April 26, 2021 by Trinity HR

Sadly, one of your employees has decided to move on for a new opportunity.  Now that they have left, you have no further responsibilities for benefit plan notices, right?  Nope, there are still several required notices for which you are responsible.

REQUIREMENTS & RECOMMENDATIONS

  • COBRA Election Notice –This is sent to all medical, dental, vision care plan, Health Care FSA, and/or HRA, participants – employees, spouses, and children.  Timing depends on whether there is a separate plan administrator.   Note: this applies to losses of coverage while employed as well.
  • Notice of Unavailability of COBRA – If for any reason the qualified beneficiary is not eligible for COBRA this notice must be sent within 14 days of being notified of the event. For example, if a former employee notifies you that their divorce is final, then you must send the Notice of Unavailability to the spouse.
  • Notice of Early Termination of COBRA – Sent as soon as practicable following the determination that coverage will termination early. Typically, this would be sent for such events as failure to pay premiums, coverage under another plan or coverage under Medicare.
  • Life insurance conversion/portability notice – if you offer group life insurance and/or Accidental Death & Dismemberment insurance, covered employees, spouse and children must be offered the opportunity to convert or port to employee-owned coverage within 30 days of the date of termination.

Oddly, there is no requirement for employers/administrators to send monthly invoices to COBRA beneficiaries.  However, it is a good idea to send them as it helps prevent a lot of drama in the event the beneficiary is terminated for failure to pay.

Although the person is no longer employed, you may also need to send the certain documents while they are covered under COBRA.  These include: SAR, SMM, Summary of Material Reduction in Covered Benefits or Services, SBC, SBC Notice of Modification, and possibly an SPD, depending on timing and circumstances.

Compliance is hard and willful failure to comply with reporting and disclosure requirements can result in financial penalties.   For example, willful failure to provide a:

  • CHIPRA notice can result in up to a $119/day penalty for each violation.

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  • COBRA notices can result in penalties from both DOL and IRS of up to $110/day and $100/day respectively (capped at $200 if multiple qualified beneficiaries).
  • SBC can result in a penalty of $1,176/day.
  • Forms 1094 and 1095 can result in a $270 penalty per statement/return.

These are not insignificant penalties and compliance issues can put you on the DOL or IRS radar.

Trinity HR Consulting can help you with a compliance review to help ensure that you are meeting your obligations for these as well as other reporting and disclosure requirements. As well, if you need assistance with developing any of these notices, communicating with employees or carriers about the notices, or developing checklists, Trinity HR Consulting can help.  

Author: Kathleen Sholinsky, Senior Consultant

You have HR challenges…Trinity has solutions!

Posted in Benefits Management, HR Legal & Compliance

BENEFIT PLAN NOTICES…NO GOOD DEED GOES UNPUNISHED, Part 2

Posted on April 19, 2021 by Trinity HR

Your employee has been onboarded, you provided all of the disclosures for health and welfare plans as required, and now you can sit back and contemplate a job well done. Don’t contemplate too long because your disclosure tasks have just begun. Throughout the year, there are additional disclosure notices required. This article outlines those that must automatically be sent.

REQUIREMENTS & RECOMMENDATIONS

  • Summary Plan Description (SPD) –You must distribute every 5 years to existing participants if made change or every 10 years if they have not. Assuming that you have made changes, the five-year distribution is a good opportunity to remind employees of the major provisions and Updates.  Remember, the SPD that you distribute must reflect the provisions in effect not more that 120 days prior to the date you distributed.
  • Summary of Material Modification (SMM) – Must be distributed within 210 days after the end of the plan year in which you adopted a change. It is far better to announce changes and update your SPD well before this point.
  • Summary of Material Reduction in Covered Service or Benefits – if you make material reductions in health plan benefits or services, you must distribute this within 60 days of the date of the change. Ideally, this should be distributed with your annual enrollment materials or, if you are making a mid-year change, in advance of the effective date of the change.
  • Summary Annual Report (SAR) – Summary of your Form 5500 or 5500-SF. Must be distributed to participants within nine months after the end of the Plan Year or two months after the due date for filing your 5500 if you have an approved extension.  Strongly recommend that you send clarifying information along with the SAR explaining what it is.
  • Employer CHIPRA Notice – informs employees of premium assistance available in their state. This must be distributed annually, preferably during annual enrollment.
  • Women’s Health & Cancer Rights Act (WHCRA) Notice – describes benefits for post-mastectomy services. This must be distributed annually, preferably during annual enrollment.
  • Summary of Benefits Coverage (SBC) & Uniform Glossary – your insurer or plan administrator will provide this to the plan, and you must distribute with enrollment materials. It must also be provided to special enrollees within 90 days of enrollment
  • SBC Notice of Modification – if you make a material modification that would affect the SBC. This must be provided 60 days in advance of the change.
  • Notice Regarding Designation of Primary Care Provider – if the plan requires a participant to select a PCP, this must be provided, generally with the SPD or other descriptive materials.
  • Notice of Benefit Determination or EOB – your carrier or claims administrator will provide these to claimants. However, it is the Plan’s responsibility to ensure that your carrier or claims administrator is including all required language.
  • Wellness Program Disclosure – if you offer a Wellness program that includes rewards, this notice outlines the availability of alternate standards. Must be distributed with all plan material.

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Employers may also want to include additional communications explaining what all of these notices are and that the employer is mandated to provide them.  You also must keep records showing when and how the notices were distributed.

If you need assistance with developing any of these notices, communicating with employees or carriers about the notices, or developing checklists, Trinity HR Consulting can help.

  • This includes conducting an audit of your benefit plans to identify issues & provide specific corrective actions to avoid the consequences of violations.

Author: Kathleen Sholinsky, Senior Consultant

You have HR challenges…Trinity has solutions!

Posted in Benefits Management, HR Legal & Compliance

EXPANSION OF CALIFORNIA FAMILY RIGHTS LAWS

Posted on April 7, 2021 by Trinity HR

BACKDROP

Small employers typically do not have the same level of in-house HR Management expertise as do their large corporate counterparts. Also, they do not usually have the financial resources to engage law firms specializing in employment law.

  • As a result, many small employers in California may not be aware that they need to comply with California Senate Bill 1383 (SB 1383), which became effective January 1st, 2021.

This “compliance blind spot” occurs because these small employers were not previously required to provide either:

  • 1)  Family care and medical leave under the California Family Rights Act (“CFRA”)
  • nor
  • 2)  “Baby bonding” leave under the State’s New Parent Leave Act (NPLA)

LOWERING THE NUMBER OF EMPLOYEES FOR AN EMPLOYER TO BE OBLIGATED TO COMPLY

SB 1383 repealed CFRA and NPLA and expanded the obligation to provide leave to small employers not covered before. The law requires employers with at least five employees to:

  • 1)  Provide up to 12 workweeks of unpaid job-protected leave during any 12-month period
  • 2)  Maintain and pay for the employee’s coverage under a group health plan for the duration of the leave at the level and under the conditions coverage would have been provided if the employee had continued in employment continuously for the duration of the leave.

ADDITIONAL COVERED FAMILY MEMBERS AND EXPANDED REASONS FOR LEAVE

SB 1383 also expands the covered family members and potential reasons for which an eligible employee may take leave. Under it, eligible employees may take leave to:

  • 1)  Bond with a new child of the employee
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    • It requires an employer that employs both parents of a child to grant up to 12 weeks of leave to each employee. Under pre-existing law, the employer only had to grant both employees a combined total of 12 weeks of leave.
  • OR
  • 2)  Care for themselves or a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner.
    • Under the prior CFRA statute, leave for purposes of caring for a family member was available only if the family member was the employee’s child, a parent, spouse, or domestic partner.

COVERAGE DUE TO EMPLOYEE EXIGENCY

  • 1)  The law also requires employers to provide up to 12 weeks of unpaid job-protected leave during any 12-month period due to a qualifying exigency related to the covered active duty or call to covered active duty of an employee’s spouse, domestic partner, child, or parent in the Armed Forces of the United States.
  • 2)  It does not permit an employer to refuse reinstatement of “key employees” as was previously allowed by the CFRA under qualifying circumstances.

Under SB 1383, employees will still need to meet eligibility requirements, including 12 months of service and 1,250 hours worked for the employer in the previous 12-month period, to qualify for family and medical leave.

FOR MORE INFORMATION ON HOW TRINITY’S TEAM OF CONSULTANTS CAN HELP YOU WITH PEOPLE-RELATED MATTERS:

You have HR questions…Trinity has answers!

Posted in HR Legal & Compliance

THE PRO ACT—BAD NEWS FOR EMPLOYERS

Posted on March 16, 2021 by Trinity HR

On March 9th, the U.S. House of Representatives passed H.R. 842, the Protecting the Right to Organize (referred to as “PRO”) Act.  The PRO Act is by far the most pro-labor union legislation in many decades.

It reflects the pledge made by then candidate Joe Biden to be “the strongest labor president you have ever had”.

  • This Act is viewed as a huge reward to labor unions across the country for their financial and voter support for Biden’s election.
  • Unionization in the private sector has declined steadily and substantially over the past 50 years.
  • Today, only 6.3% of private sector employees are unionized, whereas in 1971 the percentage was 28.2%.
  • This legislation is intended to reverse this trend by making it significantly easier for unions to organize your employees.

If passed by the Senate, this sweeping legislation would make major anti-employer changes to the National Labor Relations Act (NLRA) that extend well beyond union organization. IT WOULD ADVERSELY AFFECT ALL PRIVATE EMPLOYERS, REGARDLESS OF THEIR WORK PLACE BE UNIONIZED AND NON-UNIONIZED.

  • That’s because employees in both unionized & non-unionized work places are covered by the NLRA.

The PRO Act encompasses more than 50 significant changes to current law and seeks to overhaul the NLRA for the first time in more than 70 years. Below are some of the most noteworthy aspects of the PRO Act:

  • Redefines the definition of “supervisor” to include more frontline leaders & thus their not being able to be considered to be part of management
  • Expands the definition of “employee” to all but eliminate the concept on an independent contractor by deeming them as employees covered by the NLRA
  • Greatly weakens “right to work” laws in the 27 states that have such laws
  • Restricts the ability of employers to obtain labor relations advice & to counteract unionization
  • For example, holding mandatory employee meetings to dissuade employees from unionizing would not be permitted.
  • Limits the ability of employers to contest union election petitions and allow unions to engage in coercive tactics long held to be unlawful
  • Denies employers having a voice on such important issues as who should be eligible to vote, what unit is appropriate for bargaining, where and how the ballots will be counted, and many other issues
  • Gives employees the right to utilize employer electronic systems (use an employer’s email and other technology) to organize unions or engage in other protected concerted activity
  • Expands penalties and other remedies on employers for unfair labor practices

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In order for the PRO Act to become the law of the land, it requires passage by the U.S. Senate. In 2020, a version of this Act was voted down in the Republican controlled Senate.

  • However, in 2021, the Senate is split 50-50, with Democratic VP Harris being the tie breaker.

RECOMMENDATIONS TO EMPLOYERS TO CONSIDER

  1. If you belong to an organization (examples: the Chamber of Commerce, the National Association of Manufacturers or the Society for Human Resources Management), find out what they are doing & encourage them to speak out against passage.
  2. Contact the 2 U.S. Senators in any state where you have employees & let them know you oppose this Act.
  3. Be proactive
    • CONDUCT AN OBJECTIVE, comprehensive assessment of your organization’s UNIONIZATION vulnerability

FOR MORE INFORMATION ON HOW THE TRINITY TEAM CAN HELP YOU WITH THIS OR SOME OTHER PEOPLE-RELATED MATTER:

You have HR challenges…Trinity has solutions!

Posted in Employee & Labor Relations, HR Legal & Compliance

BENEFIT PLAN NOTICES…NO GOOD DEED GOES UNPUNISHED

Posted on February 5, 2021 by Trinity HR

This is never truer than for employers that offer health and welfare and/or retirement benefits to employees.  Your reward for spending a lot of money, aside from providing employees with valued benefits, is an endless series of regulations and requirements.

  • Among the more onerous and under-appreciated requirements are reporting and disclosure to employees – SPDs, SARs, SMMs, CHRIPA, COBRA, Plan Documents, and so forth.
  • For health and welfare plans alone, there are about 30 different required notices and disclosures.

As a practical matter, many employees ignore the notices.  Nevertheless, employers and plan sponsors must follow the reporting and disclosure rules. And, there are consequences for failure to comply – in some cases cash penalties.

To best understand what you are required to do, the information is broken down by new hire, ongoing employment and end of employment.  For this article, we will concentrate on H&W notices for new hires.

REQUIREMENTS & RECOMMENDATIONS

When an employee is onboarded or attends new hire orientation, certain benefit plan documents and notices should be provided.  Legally, you do not have to distribute all of them at hire.  However, it may be less complicated to distribute the documents/notices or a link to your online system, at that point and to take the opportunity to explain what the employee is receiving.  This will also enable you to more easily maintain records of what has been distributed, when, and have the employee acknowledge receipt.

  • Summary Plan Description (SPD) – must be distributed within 90 days of the employee’s becoming covered. However, why wait?  Handing it to the employee or giving them the link is a good opportunity to talk about your plans and where to find information.
    • Summary of Material Modification (SMM) – only required if you haven’t updated your SPD.
  • COBRA General Notice – strongly urge you provide this to your new employees during onboarding. That way you won’t have employees calling you later to ask why you cut off their health insurance coverage because they see COBRA and assume the worse.
  • Notice of Special Enrollment Rights – this needs to be distributed before the employee is offered the opportunity to enroll and describes when they may enroll other that during Annual Enrollment.
  • Women’s Health & Cancer Rights Act (WHCRA) Notice – describes benefits for post-mastectomy services. This must be provided no later than the time of enrollment.
  • Summary of Benefits Coverage (SBC) & Uniform Glossary – your group insurer will provide this to the plan and you must distribute with enrollment materials.
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    • Summary of Benefits and Coverage Notice of Modification – only if your SBC is not up to date.
  • Notice Regarding Designation of Primary Care Provider – if the plan requires a participant to select a PCP, this must be provided. Generally, provided with the SPD or other descriptive materials.
  • Employer Notice to Employees of Coverage Options – discloses the existence of the Marketplace and possible financial aid. Must be provided to all new employees.
  • CHIPRA – informs employees of premium assistance available in their state. This must be distributed annually; however, it is advisable to distribute to new hires as well.

Employers may also want to include additional communications explaining what all of these notices are and that the employer is mandated to provide them.

If you need assistance with developing any of these notices, communicating with employees about the notices, or developing checklists, Trinity HR Consulting can help.

  • This includes conducting an audit of your benefit plans to identify issues & provide specific corrective actions to avoid the consequences of violations.

Author: Kathleen Sholinsky, Senior Consultant

You have HR challenges…Trinity has solutions!

Posted in Benefits Management, HR Legal & Compliance

FINALLY SOME CLARIFICATION…INDEPENDENT CONTRACTOR OR EMPLOYEE?, PART 1

Posted on January 18, 2021 by Trinity HR

This question of an individual is an independent contractor or an employee has never really had a clear answer. As the nature of our economy and how work is performed has evolved (and will continue to do so), the answer has taken on multiple shades of gray.

  • The consequences of misclassification are more far reaching and have much greater impact than many employers realize.
  • Also, the likelihood of the U.S. Department of Labor (DOL) looking into your company’s classifications has never been higher—they have hired a substantial number of auditors for that specific role.

The DOL has announced a final rule clarifying the standard for employee versus independent contractor under the Fair Labor Standards Act (FLSA).

  • The effective date of the final rule is March 8, 2021.
  • The U.S. Department of Labor today announced a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (FLSA).

In making the announcement, DOL officials said the following:

  • “This rule brings long-needed clarity for American workers and employers. “Sharpening the test to determine who is an independent contractor under the Fair Labor Standards Act makes it easier to identify employees covered by the Act, while recognizing and respecting the entrepreneurial spirit of workers who choose to pursue the freedom associated with being an independent contractor.”
  • “Streamlining and clarifying the test to identify independent contractors will reduce worker misclassification, reduce litigation, increase efficiency, and increase job satisfaction and flexibility. The rule we announced today continues our work to simplify the compliance landscape for businesses and to improve conditions for workers. The real-life examples included in the rule provide even greater clarity for the workforce.”

In the final rule, the DOL:

  • Reaffirms an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee).
  • Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
    • The nature and degree of control over the work.
    • The worker’s opportunity for profit or loss based on initiative and/or investment.
  • Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are:
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    • The amount of skill required for the work.
    • The degree of permanence of the working relationship between the worker and the potential employer.
    • Whether the work is part of an integrated unit of production.
  • The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
  • Provides six fact-specific examples applying the factors.

In Part 2, we’ll talk about:

  1. 1)  The various negative consequences of misclassifications
  2. 2)  The six fact-specific examples applying the factors
  3. 3)  Steps you as an employer can take to avoid–or at least minimize, misclassifications, and the associated consequences

FOR MORE INFORMATION ON HOW TRINITY CAN HELP YOU WITH PROPER CLASSIFICATION OF INDIVIDUALS AS INDEPENDENT CONTRACTORS OR EMPLOYEES (AS WELL AS WITH OTHER PEOPLE-RELATED MATTERS):

YOU HAVE HR QUESTIONS…TRINITY HAS ANSWERS!

Posted in HR Legal & Compliance

A BENEFITS MANAGEMENT CHALLENGE: NON-DISCRIMINATION TESTING

Posted on January 8, 2021 by Trinity HR

There are various complex non-discrimination provisions that apply to self-funded health plans, cafeteria plans, HRAs, and health care and dependent care FSAs.  These include IRC Section 105(h), IRC Section 125, and ACA.  The purpose is to ensure that HCEs and Key Employees do not receive more favorable treatment or greater benefits than non-HCEs/Key Employees.  As well, the definition of Key Employee and HCE can vary somewhat among the different code sections.

Do you have a one or more of the plans listed above?  If yes, have you checked your email to see whether your TPA or broker/consultant sent you the results of the non-discrimination testing for your plans?  Or, as many of us have done, did you file it because it was the end of the year, things were busy and besides, you don’t have to submit it to the IRS or the Dept of Labor?

If the latter, you should open it now and make sure that your plans have passed the discrimination tests.  If not, then benefits that would otherwise have been non-taxable for your Highly Compensated and/or Key Employees may be taxable and reported on the employees’ W-2. (You should consult with your ERISA attorney and/or tax professional.)

Communications will need to be sent to the impacted individuals no doubt raising embarrassing questions as to why you didn’t tell the employees including your Corporate Officers sooner.

How do you avoid having to answer these embarrassing questions?  There are steps that you can take now:

SAMPLE TESTING

Have your TPA or consultant/broker run sample discrimination test(s) for the current year as soon as possible. Ideally, sample testing should be done after the close of the annual enrollment period so that the affected employee(s) can adjust their elections. However, if you run the tests early in the plan year, any issues that turn up in the preliminary test, can be corrected for the current year. This may, again, raise some questions, but best to make the corrections as early as possible.

PLAN DESIGN

Review your plan design. In order to avoid discrimination issues, you may want to consider offering the same plans and employee cost share across the entire organization. If you want to offer additional benefits to executives, then consider separate fully-insured plans or perquisites that are not associated with self-funded health plans, cafeteria plans, etc.

COMMUNICATIONS

HCEs and Key Employees should be aware that there are legal limitations on what can be provided on a pre-tax basis. Communicating this during the annual enrollment period will help alleviate some of the pain if, after sample discrimination testing, elections have to be changed. And, don’t assume that all your HCEs will be in management or above. Highly paid non-exempt employees can move into the HCE category. The definition of an HCE includes employees that were paid $130,000 or more in the prior year and an employee whose salary is in the top 20% (25%) under Section 105(h)) of all employees.

If you passed your discrimination testing, congratulations. What are your next steps? Pretty much the same as for those that do not pass.
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    1. 1)  Do the sample testing for the current plan year to make sure you continue to pass. The definitions of HCE and Key Employee change every year so passing last year does not guarantee passing this year. Further, new employees, salary changes, and promotions will impact this year’s testing.
    2. 2)  Review your plan design to be that you are taking advantage of all the Safe Harbors and that your plans are meeting your employees’ needs. Companies spend a significant amount of money on employee benefits and administration. Employee benefits not only need to be aligned with company goals, but to be a valued part of employee compensation.
    3. 3)  Finally, communications are just as important. Do your employees understand their benefits? You may provide excellent benefits, but if employees do not understand them, you are wasting money. And, while compliance is not going to be interesting to most employees, they do need to understand why you may need to revise some elections, as an example.

Compliance, benefits design, and communications are complex and time consuming.  Trinity HR Consulting can provide support in these areas, to help you meet the challenges, ensure compliance, and help employees understand the value of the benefits that you provide.

    Author: Kathleen Sholinsky, Senior Consultant

For more information, including how Trinity’s team of consultants may be able to help you with BENEFITS MANAGEMENT RELATED MATTERS, such as cost containment and employee education and communication:

You have HR challenges…Trinity has solutions!

Posted in Benefits Management, HR Legal & Compliance

A WAY YOUR HEALTHCARE COSTS RISE

Posted on December 18, 2020 by Trinity HR

An employee questioned why he had received a check for $37,000 from the medical insurer.  He did not understand why the insurance carrier was not, as he was used to happening, paying the bill.

The only recent medical services that he had was a trip to the Emergency Department for a severe hand laceration.  There was concern that the injury would require surgery and a hand surgeon was called in to assess the situation.  He determined that surgery was not needed and stitched the laceration in the ED.

When I called the insurer, I was told that the doctor was out-of-network, (a plastic surgeon, not a hand surgeon) so the payment was sent to the insured to then pay the provider.  With respect to the amount of the payment, had the surgeon been in-network, the reimbursement would have been between $1,800 and $2,000. Since he was out-of-network, and because the plan paid emergency charges at the billed rate, his $37,000 bill would be paid.

  • However, the employee still had an out-of-pocket maximum of $9,000 for which he would be personally responsible.
  • The employee was shocked and outraged. He quickly got past his outrage when the doctor told him that he would accept the $37,000 as payment in full and mailed the check to the doctor.

So, a happy ending, correct?

  • YES, FOR THE DOCTOR as he was paid, and YES FOR THE EMPLOYEE as he was not financially harmed.
  • NO, NOT FOR THE EMPLOYER!
    • The employer’s plan paid about $35,000 more than for an in-network provider.
    • In turn, this impacted claim costs and therefore the employer’s cost and the employees’ share of the cost for medical coverage.
    • MANY EMPLOYEES AND SOME EMPLOYERS DO NOT ASSOCIATE INCREASED CLAIM COSTS WITH INCREASED PREMIUMS.

What Can Employers Do?

  1. Continue communicating to employees that using network providers is important and not just because of cost.
    • Health plans screen providers for quality and safety performance and credentialing standards. They also set ongoing quality standards and periodically re-evaluate their providers. Most plans have robust networks of physicians, hospitals, and other services patients will need.
    • Not enough communication is done around the non-cost advantages of networks.
  2. Remind employees to check every time they are referred to a hospital, specialist, and laboratory to ensure that the provider is in-network.
    • They need to check even if the specialist is associated with a network practice or hospital. It is their responsibility to make sure of the provider’s network status and no provider should be insulted to be asked.

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  3. Make it easy for employees to find network providers.
    • Most insurers have online provider lists so send them the link frequently and encourage them to use it.
  4. Consider communicating with your employees about how costs are calculated and the relationship between high claims and high premiums.
    • As an employer you understand this relationship.
    • However, many employees think the claims costs are the insurers’ problem and do not realize the direct effect on the total cost of coverage, including the portion by them.
  5. Work with your carrier on the issue of paying non-network physician specialists.
    • It is difficult to find certain types of specialists in-network and employees should not be penalized.
    • Know what your carrier will do if they do not have a particular specialty in-network or do not have robust network.

Author: Kathleen Sholinsky, Senior Consultant

For more information, including how Trinity’s team of consultants may be able to help you with BENEFITS MANAGEMENT RELATED MATTERS, such as cost containment and employee education and communication:

You have HR challenges…Trinity has solutions!

Posted in Benefits Management