Healthcare Reform Updates: November 2014 November 7, 2014 Health & Welfare Benefits October 28, 2014 (Toolkit) IRS Issues Indexed Values for 2015 Arthur J. Gallagher & Co <more> New Change in Status Events – to Add or Not to Add Arthur J. Gallagher & Co <more> The Pulse of Preventative Care Benefits Pro <more> Deadline For Appeals in SPD Was Incorporated into Plan’s Written Instrument” Spencer’s Benefits. <more> October 24, 2014 Technical Bulletin: HPID Enforcement Delay November 3, 2014 Recorded Webinars: 2014 Year-end Review & Reminders November 6, 2014 Sections 6055 and 60056 Reporting October 28, 2014 Preparation for 2015 and 2016 under PPACA October 21, 2014 Healthcare Reform Chief HR Officers Give Negative Reviews to ACA’s Impact On Health Care Spencer’s Benefits <more> Human Resources View EEOC Adopts Controversial Positions in Recently Issued Enforcement Guidance on Pregnancy and Related Issues Employee Benefit Plan Review. <more> Majority of 2014 College Grads are in Jobs that Don’t Require College Degree, Survey Shows CCH, Incorporated <more> Labor and Employment Law Update December 4, 2014 CareerBuilder Releases This Year’s Most Unbelievable Reasons for Calling in Sick CCH, Incorporated <more> ADDITIONAL RESOURCES Retirement Healthcare Reform Update Archive 5 Deadlines Plan Sponsors Better Check Benefits Pro <more> Recorded Webinar Archive IRS: Deferred Annuities in 401(k)s are Fine, Really Benefits Pro <more> Directions Newsletter Archive State Law Review Technical Bulletin Archive Developments in Same-sex Marriage in 16 States Arthur J. Gallagher & Co. <more> GBS Healthcare Reform Resources Website What’s New in State Laws CCH, Incorporated <more> Coming Soon! Recorded Webinar: PAG E 1 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 Health & Welfare Benefits IRS Issues Indexed Dollar Values for 2015 Arthur J. Gallagher & Co. The IRS recently issued several 2015 cost-of-living adjustments for employee benefit plans. Many of the dollar limits that apply to benefit plans are changed for 2015 because the increase in the cost-sharing index met the threshold needed to trigger an adjustment. Other values remain unchanged for 2015. The charts below shows selected 2014 and 2015 values. Health & Welfare Plan Values Healthcare Flexible Spending Accounts 2014 2015 $2,500 $2,550 Transportation Assistance • Parking $250 $250 • Transit $130 $130 Maximum Wages for Calculation of Small Employer Health Insurance Tax Credit $25,400 $25,800 Adoption Assistance $13,190 $13,400 Long Term Care Insurance Premiums • Age 40 or less $370 $380 • Ages 41–50 $700 $710 • Ages 51 – 60 $1,400 $1,430 • Ages 61– 70 $3,720 $3,800 • Ages 71 and older $4,660 $4,750 $320 $330 Long Term Care Insurance Daily Benefit Limit At the same time, the Department of Health and Human Services (“HHS”) announced that the taxable wage base for Social Security taxes (OASDI) will increase to $118,500 in 2015 (the 2014 value was $117,000). Click here for a copy of HHS’ news release. The 2015 dollar values for Medicare (Parts A, B and D) and health savings accounts were released earlier this year. Click here for a copy of the October issue of our publication Directions which contains the article “CMS Releases Medicare Premium and Cost Sharing PAG E 2 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 Amounts for 2015”. The June 2014 issue of Directions contains an article – “IRS Releases 2015 HSA Dollar Values” – click here for a copy. Retirement Plan Values 2014 2015 Annual Compensation $260,000 $265,000 Elective Deferrals $17,500 $18,000 Catch-up Contributions $5,500 $6,000 Defined Contribution Limits $52,000 $53,000 Defined Benefit Limits $210,000 $210,000 Highly Compensated Employee (“HCE”) $115,000 $120,000 Key Employee $170,000 $170,000 IRS Publication IR-2014-99 released on October 23 also includes indexed values for IRAs along with indexed adjusted gross income phase out values, new values for ESOPs and indexed values for SEP and SIMPLE plans. Click here for a copy of the IRS publication. Two of these values, HCE and Key Employee thresholds, affect cafeteria plans. The Key Employee definition also affects Group Term Life Insurance subject to Internal Revenue Code Section 79. The income threshold for HCEs, which will be $120,000 in 2015, is one of the factors used to determine who is a HCE for the nondiscrimination rules that apply to cafeteria plans. The dollar amount of compensation is one of the factors used to determine who is a Key Employee for the purpose of Internal Revenue Code Section 79. New Change in Status Events – to Add or Not to Add Arthur J. Gallagher & Co. The IRS recently issued guidance permitting three new change in status events that may be used by a cafeteria plan. Employers may, but are not required to, include these events as status changes that will permit an employee to drop medical coverage under the employer’s plan and obtain coverage under a Qualified Health Plan (“QHP”) purchased in a Marketplace or enroll in another plan that provides minimum essential coverage. The three new status change events are: • Reduction in hours below 30 (without a change in eligibility) • Marketplace open enrollment (Nov. 15, 2014 – Feb. 15, 2015) • Marketplace special enrollments These new change in status events are not available for healthcare FSAs or other HIPAAexcepted benefits, such as separate dental and vision plans. But although employers may add these events, should an employer add all three events, two events, one event, or none of them? PAG E 3 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 In all three situations, regulations require the employee dropping coverage under the employer’s plan to enroll in a Marketplace QHP or another plan that provides minimum essential coverage within a specified time frame. The time-frame for Marketplace QHP enrollment in the event of a reduction in hours below 30 is no later than the first day of the second month following the month that coverage under the employer’s health plan ends. For the two Marketplace enrollment events, the employee is expected to obtain Marketplace coverage that is effective no later than the day immediately following the last day of coverage under the employer’s plan. Employers may rely on an employee’s reasonable representation that he has or intends to enroll in another plan; employers are not required to obtain proof of the employee’s enrollment in another plan. Selecting Status Change Rules for a Cafeteria Plan Some events such as HIPAA special enrollment and divorce are in virtually every cafeteria plan. And with good reason. When a HIPAA special enrollment right is available, the plan must permit the employee to enroll in health coverage, so it makes sense to permit the employee to make a corresponding change in his salary reduction election. In the event of a divorce, once the divorce decree becomes final, the ex-spouse is no longer eligible under the underlying benefit plan. The ex-spouse may continue under COBRA (if the plan is subject to COBRA), but the premiums must be paid on an after-tax basis. Other permitted changes have been adopted by some, but not all, employers. One example is a significant change in cost or coverage under another employer’s plan – usually it is the spouse’s plan. Employers may permit employees to make changes under these circumstances. But employers that permit a new election based on a “significant” cost or coverage change may want to include a definition of “significant” in their written plan provisions and communications. Unless the plan contains a definition of “significant,” an employer may find mid-year that Human Resource’s definition of “significant” and a particular employee’s definition of “significant” are worlds apart. There is one general rule that is important for all fully insured plans. Health insurance contracts often permit an employee to drop coverage at any time as long as the change is prospective. They may be less flexible when it comes to enrolling in coverage. Some health insurance contracts limit mid-year enrollments to newly eligible employees, HIPAA special enrollments, reinstatement at the end of an FMLA leave, and compliance with a Qualified Medical Child Support Order. Stop loss carriers may also have limitations in their contracts. Adopting the New Events (or not) Which brings us to the question we started with – should an employer include one or more of these events in its cafeteria plan? In addition, if one or more of these events is to be included, should any restrictions to any of these events be applied? For some employers, the answers to these questions may be “yes” and “yes,” but for others the answer may be a simple “no” to all. Let’s take a quick look at some things to think about for each event. Reduction in Hours Below 30 This rule may be of particular interest to employers that have decided to use the look-back method for counting hours for the ESR requirement and eligibility for variable hour employees – especially those that use a 12-month look-back period. An employer with a calendar year plan and a 12-month look-back period may have an employee who is in a stability period and hence considered full-time for all of calendar year 2016. In March 2016, there is a change in circumstances, and the employee’s average hours drop from 30 to 20 per week and are expected PAG E 4 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 to remain at the lower level. With a reduction in hours the employee also has a reduction in income and may find it difficult to afford the contribution required under the employer’s plan. If the employer used the look-back method to define eligibility for its variable hour employees, then Employee A does not lose eligibility for coverage during the 2016 calendar year stability period. Employee A would be eligible even if he dropped down to 1 hour per week; he only loses eligibility if he terminates employment. In addition to a reduction in income which may make the employer’s plan less attractive for the employee, an employee whose hours and income drop dramatically may be able to purchase a Marketplace QHP and qualify for a premium tax credit. However, an individual who is enrolled in an employer-sponsored health plan that provides minimum essential coverage is not eligible for a premium tax credit even if the employer’s coverage is unaffordable or does not provide minimum value. Unless Employee A’s employer adds reduction below 30 hours as a status change that would permit him to drop coverage, Employee A would not be able to qualify for a premium tax credit. This may be the type of scenario that prompted the IRS to issue guidance adding reduction in hours below 30 without loss of eligibility to the list of permitted status change events. If the employer’s plan is minimum essential coverage, but doesn’t provide minimum value or is not affordable, there is a possibility that Employee A’s dropping coverage could result in an Employer Shared Responsibility (“ESR”) penalty for at least part of the year. An employee who is enrolled in minimum essential coverage is not eligible for a premium tax credit and would not trigger an ESR penalty. For example, the lowest cost self-only option under the employer’s plan is $150 per month. If the employee’s Form W-2 compensation is $24,000 and the employer uses the Form W-2 safe harbor, the $150 x 12 = $1,800 required contribution would be affordable at 7.5% of her Form W-2 wages be affordable. However, if her hours (and compensation) are reduced so that her Form W-2 wages for the year are only $12,000, the $1,800 required contribution would be 15%, which is not affordable. Furthermore, even if the employee is permitted to drop coverage due to a reduction in hours, technically, that employee is still a fulltime employee for purposes of the Employer Shared Responsibility Mandate for the remainder of the applicable stability period. Thus, it would appear that the employee could trigger a penalty for the employer – unless the employee fits into a special exception for employees who had been continuously offered coverage since at least the first day of the fourth month after the date of hire. However, a variable hour employee for whom eligibility is based upon a measurement period will not likely fall within this special exception. In addition, employers that want to add a reduction in hours without loss of eligibility as a permitted status change may want to think about exactly how the provision should be written and what employee communications may be needed. First, does the employer want to permit a change for any reduction in average hours below 30? Or should a more restrictive standard such as a reduction below 25 hours per week be used? If the employer does not specify, then a reduction from 30 hours to 29 would enable an employee to drop coverage mid-year. The regulations only say that the employee “was reasonably expected to average at least 30 hours of service per week and there is a change in that employee’s status so that the employee will reasonably be expected to average less than 30 hours of service per week after the change.” Second, what types of status “events” will the plan include and will there be a minimum time period during which the reduced level of hours is expected (not guaranteed) to continue? Will the plan permit a change in the event of a reduction in hours regardless of the reason, or will only certain types of events with a reduction in hours be included? An employer could not, for example, permit an employee whose hours drop from 40 to 30 to drop coverage to enroll in a PAG E 5 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 QHP because the IRS rule requires a drop from an average of 30 hours or more to less than 30 hours per week. And what if the reduction in hours does not occur when the change in the employee’s status does? For example, if an employer decides that a change in location accompanied by a change in hours will qualify, and Employee A changes from Location #1 to Location #2 on March 1, but his hours are not reduced until May 1, will he be permitted to drop coverage in May or June? Unless specifics are determined and communicated to employees ahead of time, an employer may find it difficult to say “no” at a later date. The analysis is similar to defining “significant” for a change in cost or coverage. In any event, employers would not be permitted to expand upon the IRS’s rule. Further, the new IRS rules only permit an employee to drop coverage under the employer’s plan. The rules for re-entering the employer’s plan at a later time in the cafeteria plan year have not changed. For example, if Employee A experiences a drop in hours from an average of 30 hours per week to 20 hours per week in March 2016, then unexpectedly experiences an increase to 35 hours per week in June 2016 and loses eligibility for a premium tax credit, he cannot reinter the employer’s plan under prior rules. Specifically, the change in status rules would not permit him to re-enter his employer’s cafeteria plan in June 2016 because his eligibility under his employer’s plan has not changed. He might be able to re-enter the plan by paying contributions on an aftertax basis, but only if the insurance carrier’s contract permits re-entry under that circumstance. Employers that want to add this status change as an event to their cafeteria plans will want to make sure that they communicate both rules to the employee – the rules for dropping coverage mid-year and the rules for re-entering. And if re-entry on an after-tax basis outside the cafeteria plan will be permitted, the employer will want to coordinate with its insurance carrier. Although this rule is probably of most interest to employers using a twelve-month look-back measurement method for eligibility for variable hour employees, employers using the monthly measurement method may also use the rule. Some employers using the monthly measurement method might want consider permitting an employee who works 30 or more hours per week to drop coverage if the employee’s average hours decrease below 30 and are expected to remain at the lower level. (However, most employers will not wish to tie coverage eligibility to the monthly measurement method because fluctuations in scheduling could cause individuals to gain and lose eligibility multiple times during a plan year.) Of course, if the eligibility for coverage is 30 or more hours per week, the additional status change is unnecessary since the loss of eligibility is already a status change. But if the employer has a more generous eligibility provision such as 20 hours per week, an employee dropping from 30 to 25 hours would not use eligibility. This employer may want to adopt this rule and is less likely to be faced with a penalty under the Employer Shared Responsibility requirement because even if this employee receives a premium tax credit he may not be a full-time employee. (In contrast, a variable hour employee in a stability period would still be treated as “full-time” during a stability period for potential penalties regardless of the number of hours worked.) The issues about what provision the employer decides to use, coordination with insurance contracts, and communications to employees would be similar for employers using the monthly measurement period to those using the look-back method for eligibility. Marketplace Open Enrollment This rule may be of particular interest to employers with non-calendar year plans. Because Marketplace open enrollment focuses on the calendar year, an employee with non-calendar year PAG E 6 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 coverage may be unable to change to Marketplace coverage without either a gap in coverage or duplicate coverage. For example, if Employee B is enrolled in her employer’s cafeteria plan which has a July 1 through June 30 plan year, then the open enrollment for her employer’s plan will be different than the open enrollment from the Marketplace. Assume that as the result of a substantial increase in premium rates, the employee’s required contribution increases from $100 per month to $130 per month beginning on July 1, 2016. The employee, who is young, has found a bronze level QHP with an $80 per month premium. Since she is healthy, she would like to purchase the bronze level QHP even though the $80 premium must be paid on an after-tax basis. Unfortunately, unless her employer-sponsored coverage permits her to drop coverage in connection with enrollment during a Marketplace open enrollment, she cannot purchase a Marketplace QHP for July 1, 2016 when her employer’s plan’s contribution increases to $130 per month. She would only be able to purchase a QHP during the Marketplace’s open enrollment (for a January 1 effective date). In order to purchase that bronze level QHP, she must either go without coverage for 6 months (from July 1, 2016 – December 31, 2016 under her employer’s plan) or enroll in her employer’s plan and have duplicate coverage from January 1, 2017 – June 30, 2017 because she would not be able to drop her employer’s coverage until July 1, 2017. Permitting the employee to drop coverage during the Marketplace’s open enrollment period would solve this problem. However, if the employer’s plan is minimum essential coverage, but either does not provide minimum value or is not affordable, this employee may also qualify for a premium tax credit, which could trigger an ESR penalty. In addition, there may be some potential for adverse selection if the employees who drop coverage under this rule are disproportionally young and healthy. Note that both are these potential negatives may be largely a timing issue since the same result would occur if the employee drops at the employer’s annual open enrollment. Similar to permitting a change for other events such as a reduction in hours below 30, an employer that has decided to adopt Marketplace enrollments as a permitted change in status may want to consider if it wants to use a more restrictive provision. An employer might want to limit the timeframe for election changes to something less than the full Marketplace open enrollment period, which for 2015 will be from November 15, 2014 to February 15, 2015. For example, an employer might want to only accept changes within a shorter timeframe such as November 15 to December 14 for a January 1 effective date. Further, a change in the cost of a Marketplace QHP on January 1, 2017 will not be a change in status that would permit the employee to re-enter the employer’s plan at that time. So if Employee B drops out of her employer’s plan on January 1, 2016 to purchase an $80 per month bronze level plan, if the cost for that QHP increases to $150 on January 1, 2017, she will not be able to re-enroll in her employer’s plan at that time. Since Marketplace coverage is paid for on an after-tax basis (individual coverage is not a qualified benefit that can be offered in a cafeteria plan), Employee B can drop her Marketplace coverage at any time. However, even though Marketplace coverage is not subject to cafeteria plan change in election rules, it is subject to Marketplace enrollment rules. As a result, if Employee B cancels her Marketplace insurance policy, she would be able to re-enroll in a Marketplace QHP only during a Marketplace open or special enrollment period. Further, although the increase in premium from $80 to $150 is likely to be considered significant, IRS cafeteria plan regulations restrict the change in cost or coverage rules to a change in other coverage that is employment-based. She must wait until her employer’s next open enrollment period or until she experiences another change in status that would permit enrollment. Similar to the re-entry for Employee A who had an increase in hours; PAG E 7 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 it may be possible for Employee B to re-enroll in her employer’s plan on January 1, 2016 on an after-tax basis. It would be prudent to make sure that the insurance carrier’s contract permits this change. The employer will want to communicate to employees both the timeframe for dropping coverage and the re-entry rules that will apply. In addition, as with “significant” cost or coverage changes under another employer’s plan, an employer must determine what rules will to use for reentering the plan on an after-tax basis. An employer may want to agree that a premium increase from $80 to $150 is a sufficient reason to enroll on an after-tax basis, but what if the increase is smaller? If the change is not permitted on an after-tax basis, the employee must wait until the beginning of her employer’s plan year to drop her QHP coverage and enroll in her employer’s plan – a decision that she may not appreciate since it means she must pay the higher QHP premium for six months. Marketplace Special Enrollment The last of the new status change events allows an employee to drop coverage under an employer’s plan to enroll in a QHP in a Marketplace when the employee qualifies for a Marketplace special enrollment. Although the Marketplace special enrollment events are similar to those under HIPAA, they are not identical. In addition to HIPAA special enrollments which include marriage, birth, adoption, placement for adoption, loss of other health coverage, gaining eligibility for premium assistance under Medicaid (or SCHIP) and losing Medicaid (or SCHIP) eligibility, Marketplaces must provide a special enrollment right based on the following: • Gaining status as a citizen, national, or lawfully present individual; • Becoming newly eligible or ineligible for cost-sharing reduction or advance payments of the premium tax credit; • Gaining access to new QHPs as a result of a permanent change in legal residence; and • Demonstrating that the individual meets other exceptional circumstances as provided by the Marketplace. There are several other events such as enrolling or failing to enroll because of an error by a Marketplace and demonstrating to the Marketplace that the QHP in which the individual is enrolled substantially violated a material provision of its contract, but those are less likely to have an effect on employees. Similar to the other two events, employers considering adding a Marketplace special enrollment as a permitted change in status will want to consider if they will include all of the Marketplace special enrollments, or only some of them. Marketplace special enrollments extend for 60 days, so timing may be less of an issue, but an employer may want to use 30 or 31 days to match the time frame for HIPAA special enrollments (except for Medicaid and SCHIP special enrollments, which are 60 days), or the employer may need to use the shorter timeframe if a health insurance carrier’s contract uses a shorter period. As with the other changes, there may be a potential for an Employer Shared Responsibility penalty if the employer is using the Form W-2 safe harbor, and the employer will want to clearly communicate the rules before the employee drops coverage. PAG E 8 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 Next Steps When considering changes in election rules, there are several questions that should o be addressed: • How could this change affect the design and/or cost of the plan? • Which events should be included? • What, if any, additional restrictions should be applied? • What, when, and how should the change be communicated to employees? • Will any insurance contracts need to be amended, and will the carrier agree to do so? Many employers with calendar year plans have already determined and communicated their enrollment rules for the 2015 plan year, but may want to consider adding one or more of these events for their 2016 plan years. Employers with non-calendar cafeteria plan years whose open enrollment is in the future may have more time and want to consider which, if any, of these changes they want to adopt for their next cafeteria plan year. The Pulse of Preventative Care Benefits Pro When Benjamin Franklin first declared, “An ounce of prevention is worth a pound of cure,” it was within the context of fighting house fires. But the adage has been applied to everything from cleaning house to health care for decades. “As we all know, the United States health care system is by far the most expensive in the world,” notes Matt Jacobson, the chief executive officer and founder of SignatureMD. “The reason our expenses are so high is because we only allocate 30 percent of our health care dollars to prevention, yet more than 70 percent of the diseases that plague this country are preventable. We have a system that’s based on paying for procedure and not for prevention. If we were to allocate 25 percent more of our dollars to prevention, we would be able to eliminate many of these chronic diseases – diabetes, heart disease, hypertension and even certain forms of cancer – via diet, smoking cessation and exercise. It would eliminate more than 25 percent of health care expenditures.” However, now that the Patient Protection and Affordable Care Act has mandated that insurance companies cover preventive care procedures, some health care experts wonder whether an ounce of prevention really is worth a pound of cure in today’s economy. As is par for the course in health care, much of the debate centers on how to define prevention – and how to delineate prevention from treatment, which isn’t always easy. “There are three types of prevention that have been discussed for 250 to 300 years: primary, secondary and tertiary preventions,” explains Dr. David Nace, vice president of clinical development and medical director at McKesson. “Primary prevention means avoiding an occurrence in a person or a population. For example, eating well helps prevent all the complications that come from not eating well – that concept of wellness falls into this category of avoiding occurrence and primary prevention. PAG E 9 | © 2014 G ALLAGHER BENEF IT SERVICES, I NC. NOVEMBER | 2014 “Secondary prevention is identifying people who have a disease but don’t show symptoms yet,” he continues. “One great example of this that’s common in the United States is cardiovascular disease; you can detect that before a patient ever shows symptoms by measuring blood pressure. Secondary prevention is early diagnosis and treatment to prevent progress of symptoms or ameliorate the course of disease. “Tertiary prevention is preventing the progression of the disease. For example, if a patient with congestive heart failure has already had a heart attack, then you have to treat not only the immediate episode but also consider what you can do to prevent another one. “Each of these categories has inherent cost issues,” Nace notes, “because offering a preventive care program for everybody is different than offering it for a targeted group. And prevention and treatment overlap. If you’re doing secondary prevention, measuring blood pressure in a patient who has cardiovascular disease and you don’t know it – are you treating the disease, or are you preventing it?” Although carriers are on the hook for covering preventive care in any plans they offer the public, it’s clear there might be some disagreement about what constitutes prevention and what constitutes treatment. Furthermore, many experts note that preventive care is only successful when a patient is invested in his or her health – and that’s not necessarily a given. “A lot of payers and providers assume that when somebody’s unhealthy, they want to get better,” says Paul Schrimpf, an associate partner at Prophet. “Oddly enough, that’s not always the case. Some people are less healthy than others: They smoke, they drink, they don’t exercise, they figure everybody’s going to die someday and they just don’t care. People who are unhealthy and want to get better – those are the people who will be impacted by preventive care programs. It’s not going to be healthy people who stay healthy or unhealthy people who don’t care.” And sometimes, prevention simply doesn’t work as hoped. “We have a myth in the United States, and the myth is that illness is optional and that everything can be prevented,” says Alan Spiro, MD, chief medical officer and chief health assistant at Accolade. “People get sick; it’s part of the human condition. There are things you can do to stay healthier, and that fits into prevention. But there’s a distinction between activities you can do on your own to decrease your risk of illness – diet, exercise, those types of wellness activities – and visiting a doctor for a routine screening.” “Not all preventive care is created equal,” Schrimpf says. There are, however, some measures that experts generally agree are beneficial for your health – and that can help save money for carriers in the long run. “I think it’s a very good idea from a preventive point of view to have a primary care physician and to see that doctor in some kind of regular way, making sure that there’s some continuity and the doctor has a chance to get to know you,” Spiro notes. “Many of the activities that are really effective in terms of wellness don’t have anything to do with medical costs,” Nace says. “And many of these prevention activities are timespan-related in terms of cost-effectiveness for the health plan.” In other words, health plans will reap the most benefit from many prevention activities over an extended period of time – and there’s no guarantee that the insured will stay enrolled with the health plan that generated the prevention program. PAG E 10 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 “When it comes to preventive care and treatment options, what I think is a better question than ‘is it cost-effective?’ is, ‘Is it of good value?’” Nace continues. “Are you getting a significant benefit for the money that you’re spending? The treatment in question might be more expensive than what’s already available, but the greater benefit that it offers is worth that extra money. This new medicine for hepatitis: It obviously is much more expensive than anything else out there today, but it cures hepatitis. And nothing else has ever cured hepatitis, only managed it. So the question really becomes: Is the benefit you’re gaining from a new drug that now can do more to treat your condition worth that extra money?” Although preventive care and wellness might be the big buzzwords in the industry, experts also caution against jumping on-board with a program that doesn’t address specifics. “Beware of buzzwords, and especially buzzwords that have price-tags attached to them,” says Spiro. “When someone says ‘wellness’ or ‘prevention’ to you and says they can help you with that for only so many dollars per employee per month, then immediately, your next questions have to be, ‘Exactly what do you do, and how many of my employees will take part in and benefit from that – and how will they benefit?’ There have to be more questions.” And ultimately, whether preventive care is successful also will depend on patient investment. Jacobson’s SignatureMD concierge model is one example. “The reason why concierge and other personalized care models work is because the patient is making a monetary investment in his or her health,” he explains. “When the patient is allocating $1,800 a year toward a preventive health program, they’re making a commitment with their wallet saying that they’ll visit the doctor regularly, solicit a treatment plan and adhere to it.” “The best thing an employer can do is to say, ‘What can I do to engage the workforce?’” Nace says. “Now that we’ve moved toward value-based reimbursement where we’re holding physicians and organizations responsible for how well they’re treating chronic illness, the doctor pushback is that they can’t influence what patients do. So the next step is to develop ways to incent patients to get skin in the game.” © 2014 BenefitsPro. A Summit Professional Networks publication Deadline For Appeals In SPD Was Incorporated Into Plan’s “Written Instrument” Spencer's Benefits An appeals deadline set forth in a long-term disability plan’s summary plan description (SPD) barred a participant’s overdue claim because the SPD was incorporated into the plan’s other written documentation, according to the First Circuit U.S. Court of Appeals in Tetreault v. Reliance Standard Life Insurance Company (No. 13-2353). The long-term disability (LTD) plan participant had filed an internal appeal of a claim denial more than a year after the plan’s 180day deadline. Background. Starting in 2004, Michele Tetreault received LTD benefits for a back injury she sustained while working for The Limited. She was informed in 2008 that she was no longer eligible for LTD benefits, however, and that she had 180 days to appeal the plan administrator’s decision. In January 2009, her attorney requested documents from the plan, including the SPD and Tetreault’s file. The insurance company administering the plan, Reliance Standard Life PAG E 11 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Insurance Company, sent Tetreault’s file to the attorney, along with an old version of the plan documents that made no reference to an appeals deadline. Even though it had more updated documents in its possession that set forth the plan’s 180-day internal appeals deadline, Reliance failed to send them. Four days before the appeals deadline, Tetreault’s counsel sent Reliance a letter stating that she would be appealing its decision, and Reliance responded that, if Tetreault did not file an internal appeal before the deadline, she would be barred from challenging the denial of her LTD benefits. Nonetheless, Tetreault did not file her appeal until May 2010, almost one year after the deadline. Tetreault filed suit in district court, and the court dismissed her claims. Tetreault then filed an appeal, and the appellate court upheld the lower court’s decision. Written instrument can incorporate SPD. Tetreault had argued that ERISA mandates that only a plan’s written instrument can set forth claims procedures that must be exhausted before a claimant can pursue a remedy in court. The court noted that ERISA Sec. 503 requires a plan to provide claims procedures, and that ERISA Sec. 402 specifies that a plan’s written instrument must contain certain provisions. The court pointed out, however, that nowhere is it clear that ERISA requires that the plan’s claims procedures are part of the those provisions that must be contained in the written instrument. The court then applied Ohio trust law, (which was identified in the plan documents as the relevant state law to be used in construing plan terms), in holding that the SPD’s appeals deadline could be incorporated into the plan’s primary documentation, or “written instrument.” The court explained that the written instrument, by its terms, had expressly incorporated the SPD, and that ERISA permits more than one document to make up a plan’s written instrument. Tetreault had claimed that the LTD plan should be estopped from enforcing the appeals deadline and that she should not have had to follow the terms of the newer documentation, because the old version, which was what Reliance sent to her attorney, did not contain a deadline for appeals. The court responded, however, that Tetreault had not reasonably relied on any misrepresentation that may have occurred when she received the old documents, especially since Reliance had twice warned her attorney that her appeal had a 180-day deadline. Tetreault also had argued for statutory penalties against Reliance as the plan administrator. ERISA 502(c)(1)(B) provides for penalties of up to $110 per day where a benefit plan administrator fails to produce certain documents within 30 days of a beneficiary’s written request. The court found, however, that, even though Reliance was the claims administrator, it was not the expressly designated plan administrator. Therefore, Reliance was not subject to ERISA 502(c)(1)(B)’s statutory penalties. Disabilitynews Courtnews PAG E 12 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Healthcare Reform Chief HR Officers Give Negative Reviews To ACA’s Impact On Employee Health Care Spencer's Benefits The Patient Protection and Affordable Care Act (ACA) has increased health care costs, which are being largely borne by individuals with existing employer-provided health insurance, according to a survey conducted by the University of South Carolina’s Darla Moore School of Business. Fifty-two percent of the Chief Human Resource Officers (CHROs) responding to the survey reported that, as a direct result of the ACA, they have raised employee contributions toward health insurance. Eleven percent have cut back coverage eligibility, but few have moved employees to either private exchanges (1 percent) or public exchanges (.5 percent). Even more CHROs have moved employees to consumer directed health plans (CDHPs), whereby employees receive set amounts of money for regular health care. Although the trend toward offering CDHPs was growing prior to the implementation of the ACA, with 10 percent of firms previously surveyed offering them in 2007, for example, and 13 percent offering them in 2008, it appears that the ACA has accelerated that trend. Seventy-three percent of respondents now indicate that their companies either are offering or are planning to offer CDHPs. CHROs responding to the survey stated that a 7.73 percent increase in health care costs was directly attributable to the ACA. A substantial number of CHROs also reported that the ACA had created increases in labor costs (37 percent), as well as decreases in their employees’ quality of health care (33.8 percent), in transparency of health delivery (20 percent), in the quality of health delivery (31.6 percent), in the efficiency of health care (37 percent), and in innovation for both health care and health systems (32 percent and 30 percent, respectively). It was not clear from the published survey results exactly what these decreases entailed. Part-time employees. Employers also are apparently taking a more rigorous stance with regard to how many hours a part-time employee can work, in anticipation of upcoming employer mandate penalties. The ACA describes employees working at least 30 hours per week as full time, and many employers are concerned that enough part-time workers would end up working more than that. One employer was quoted as saying of his part-time workers who were limited to the ACA’s definition of part-time hours, “we frequently had people that worked 32-34 hours, and if enough of them did so, it would put us a risk for fines. Therefore we now limit workers to 7 hours to ensure that we minimize the number that might exceed 30 hours.” Many employers (29.7 percent) also have taken or plan to take some action to encourage parttime employment or limit the use of full-time employees. In support of this number, the article references the June 2014 jobs report, which showed an increase in part-time employment of 840,000. For more information, visit http://www.moore.sc.edu/UserFiles/moore/Documents/News/CHRO%20ACA%20Report.pdf. Healthinsurancenews Healthreformnews Surveynews PAG E 13 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Human Resources View EEOC Adopts Controversial Positions in Recently Issued Enforcement Guidance on Pregnancy and Related Issues Employee Benefit Plan Review Peter J. Ennis The US Equal Employment Opportunity Commission (EEOC), over the dissent of two of its five members, recently issued an Enforcement Guidance (Guidance) on pregnancy and related issues. Although the Guidance does not have the same legal effect as EEOC regulations, it is important for employers because it indicates the positions EEOC will take when investigating discrimination charges and litigating claims. In many respects, the Guidance sets forth well-established principles. In other respects, the Guidance adopts a broad view of the Pregnancy Discrimination Act (PDA), including a position that employers must make accommodations for pregnant employees that they would not make for similarly situated male or female employees. This position is directly contrary to a decision issued last year by a federal court of appeals in Young v. United Parcel Service, Inc., which the US Supreme Court agreed to review two weeks before the EEOC issued the Guidance. This article briefly reviews the PDA and the Guidance, highlights some of the more controversial portions of the Guidance, and sets forth what employers should do to comply with the Guidance.1 HISTORY AND OVERVIEW OF THE PDA The PDA was enacted in 1978 to overrule the US Supreme Court’s decision in General Electric Corp. v. Gilbert, which held that a disability plan that covered nonoccupational illnesses and injuries, but not pregnancy, did not violate Title VII. The law amended Title VII by defining discrimination because of sex as including “pregnancy, childbirth, or related medical conditions.” The law also provided that “women affected by pregnancy … shall be treated the same for all employment related purposes … as other persons not so affected by similar in their ability or inability to work … .” In 1983, the US Supreme Court held that the PDA “makes clear that it is discrimination to treat pregnancy-related conditions less favorably than other medical conditions.”2 Based on this history, the standard advice given to employers has been to treat pregnancy, childbirth, and related conditions the same as any other illness or medical condition. SUMMARY OF THE NEW GUIDANCE Intentional Discrimination The Guidance reiterates the basic legal principle that it is unlawful for employers to knowingly discriminate against women who are pregnant, have been pregnant, or want to become pregnant or based on conditions related to pregnancy. As part of this analysis it gives examples of how employees can prove that their employer knowingly discriminated against them. For example, if an employer terminates an employee shortly after an employee announces she is pregnant, that timing can be used as evidence of unlawful intent. Similarly, if an employee is terminated after telling her supervisor that she is trying to become pregnant, in response to which the supervisor PAG E 14 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 tells the employee that he does not know how he can replace her, that can be used as evidence of unlawful intent. Finally, terminating an employee because of lactation, breastfeeding, or medical conditions that relate to pregnancy would be unlawful. The Guidance also reiterates that harassing an employee based on pregnancy or a related condition would be unlawful. Stereotypes and Assumptions The Guidance provides that making decisions based on assumptions or stereotypes of what pregnant women can or should do is unlawful, even if the employer’s intent is to protect the employee. This has been the law since at least the Supreme Court’s 1991 decision in UAW v. Johnson Controls, in which the Court held that the employer’s policy of not allowing pregnant employees to work in a particular area of the plant because of potential risk to the fetus was unlawful. Similarly, employer-imposed weight restrictions on pregnant employees would be unlawful. Light Duty, Leaves of Absence, and Accommodations The Guidance points out that if an employer had a certain amount of light-duty positions, which were all filled, it would not violate the PDA to refuse to create a new light-duty position for a pregnant employee. On the other hand, if there is evidence that the employer had exceeded the standard number of light-duty positions in the past, it would violate the PDA to refuse the same type of benefit for a pregnant employee. The Guidance goes further, however, and says that if light duty was reserved for work-related injuries suffered by both men and women, it would violate the PDA not to grant the same benefit to a pregnant employee. This is one example in the Guidance that conflicts with the Young v. UPS case, which the Supreme Court has agreed to hear. Similarly, the Guidance says that even when an employer has a uniformly imposed policy requiring an employee to be employed for a certain time period to be eligible for a leave of absence, that policy could not be enforced against pregnant employees because it would have an adverse impact on pregnant women. Health Insurance The Guidance provides that insurance policies must treat pregnancy and related conditions the same as any other condition, although an insurance plan does not have to cover abortions except in certain limited exceptions. The Guidance goes further, however, in saying that the insurance plan must cover contraceptives on the same basis as any other medical cost designed to prevent the occurrence of other medical conditions. In the Q & A issued along with the Guidance, the EEOC notes the Supreme Court’s recent decision in the Hobby Lobby case, holding that closely held corporations could object to paying for such coverage on religious grounds, but that the Guidance did not take a position on that case. Parental Leave Some employers provide their employees with paid or unpaid leaves of absence beyond the time period when the female employee is unable to work due to her pregnancy or child birth in order to spend time with their new child. This is often referred to as “parental” or “parenting” leave. PAG E 15 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 The Guidance reiterates the well-established principle that if an employer provides “parenting leave” as opposed to medical-related leave to employees, it must provide the same benefit to both its male and female employees. Interplay with the ADAAA The Guidance points out that even though pregnancy itself is not a disability, under the amendments to the Americans With Disabilities Act (ADA), it is now much easier to establish a disability (e.g., the ADA regulations now provide that conditions can last less than six months and still constitute a disability), and there are many pregnancy-related medical conditions that could qualify as a disability (e.g., anemia, pregnancy-related sciatica, gestational diabetes, or swelling due to limited circulation, and depression). Therefore, if an employee qualifies under the ADA either because her pregnancy-related condition constitutes a disability, the employee has a history of such a condition, or the employee is regarded as having such a condition, the employee could be protected under both the ADA and the PDA. CONTROVERSIAL PORTIONS OF THE GUIDANCE Pregnancy Is Treated More Favorably Than Other Conditions The Guidance describes two circumstances in which pregnant employees are treated more favorably than other employees, regardless of whether they are male or female. The first is when the employer has a policy limiting eligibility for a leave of absence or other benefits to employees who have been employed for a certain period of time. For example, assume an employer has a policy not granting sick leave or a personal leave of absence until an employee has been employed six or 12 months. This would affect men and women equally. However, the Guidance says that such a policy would have a disparate impact on the pregnant women, and therefore, it violates the PDA. The Guidance also provides that reserving light-duty jobs for employees with work-related injuries violates the PDA because pregnant employees could have the same limitations on their ability to work as those with a work-related injury, but would not be eligible for light duty. The problem with the EEOC’s analysis is that men and women are treated exactly the same under the policy. If a woman is injured at work, she is eligible for light duty. Conversely, if a man suffers a non–work-related injury, he is not eligible for light duty. As the US Court of Appeals for the Fourth Circuit pointed out in Young v. UPS, the position advocated in the Guidance results in pregnant employees being treated more favorably than other male and female employees. Contraception Coverage Given that the Guidance was issued so soon after the Supreme Court’s decision in Hobby Lobby, and it took no position on the holding in that case, it appears that EEOC is going to be looking at ways to limit the scope of that decision, without saying so officially. Recommendations for Employers • • At a minimum, make sure that employees who are pregnant and are not experiencing any complications or problems with their pregnancy are treated like any other employee with a medical condition. If an employee has a pregnancy-related physical or mental impairment that limits her in some way, determine whether the employee is entitled to an accommodation under the ADAAA or comparable state law. PAG E 16 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 • • • • Comply with requirements, if any, under the Family and Medical Leave Act and comparable state or local laws (e.g., laws requiring employers to provide paid or unpaid leave to pregnant employees). Review adverse employment decisions affecting pregnant employees (and formerly pregnant employees) before they are finalized to ensure that those employees are not being treated less favorably than other employees. Do not assume what a pregnant employee can or cannot do. Let the employee come to you when she feels the need for some accommodation. At least until Young v. UPS is decided, consider making exceptions to policies that limit benefits to pregnant employees (e.g., reserving light duty for work-related conditions and prohibiting short-term employees from taking leaves of absence or sick leave). Notes 1. Copies of the Guidance and questions and answers the EEOC posited regarding the Guidance can be obtained at: http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm, last accessed Oct. 2, 2014, and http://www.eeoc.gov/laws/guidance/pregnancy_qa.cfm, last accessed Oct. 2, 2014. 2. Newport News Shipbuilding & Dry Dock v. EEOC. Peter J. Ennis is a shareholder at Buchanan Ingersoll & Rooney PC, focusing his practice on labor and employment law. He may be contacted at peter.ennis@bipc.com. Majority of 2014 College Grads are in Jobs that Don’t Require College Degree, Survey Shows CCH, Incorporated Several months removed from spring graduation, the majority of Class of 2014 college graduates are currently working; however, about half (51 percent) of that group are in jobs that don’t require a degree, according to a new CareerBuilder survey. This includes 45 percent of 4-year degree graduates and 57 percent of associate degree graduates. Sixty-five percent of recent college grads are employed, 4 percent are in internships, and 31 percent are not working at all, although many in the latter group simply haven’t started their job search or are already back in school to pursue a higher degree. The national survey was conducted online within the U.S. by Harris Poll on behalf of CareerBuilder from August 11 to September 5, 2014, and included a representative sample of 305 college graduates completing either an associate or 4-year degree in 2014. Employment status of 2014 college graduates • In full-time, permanent positions: 36 percent (49 percent, 4-year; 25 percent, associate) • In part-time, permanent positions: 17 percent (15 percent, 4-year; 18 percent, associate) • In temporary or contract positions: 12 percent (10 percent, 4-year; 15 percent, associate) • In an internship: 4 percent (5 percent, 4-year; 3 percent associate) • Not working: 31 percent (22 percent, 4-year; 39 percent associate) Among graduates currently working, 51 percent said their job is related to their college major. Of PAG E 17 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 those who are not working, only 43 percent indicate they are currently looking for a job. Salary expectations are modest for most; only 44 percent expect to make more than $30,000 their first year out of college. Most recent grads pursuing a higher degree. Continuing education is a factor for many graduates regardless of their current employment status; two-thirds (61 percent) are already pursuing an advanced degree or plan to do so in the next year – 66 percent of associate degree earners and 56 percent of 4-year degree completers. • Of those not currently working, 47 percent say they are pursuing an advanced degree, and 19 percent say they plan to in the next year. • Of those currently working, 43 percent say they are pursuing an advanced degree, and 17 percent say they plan to in the next year. • Of those graduates who say their current job doesn’t require a college degree, 36 percent say they are currently pursuing an advanced degree, and 22 percent say they plan to in the next year. The recent grads most likely to be employed full-time. For many recent graduates, however, landing a good job remains the top priority. The following is a profile of graduates in full-time, permanent positions broken down by a variety of demographic and behavioral factors: • Gender: Women are slightly more likely than men to be in a full-time position (38 percent vs. 34 percent); however, they are also more likely to not be working (34 percent vs. 26 percent). • College major: Health care and STEM (science, technology, engineering, and math) graduates are slightly more likely to be employed full-time than non-STEM graduates (40 percent vs. 34 percent). • Student loan debt: Graduates with outstanding student loan debt are slightly more likely to be employed full-time than graduates with no debt (39 percent vs. 33 percent). • Internships: Graduates who previously held internships are more likely to have a fulltime position than those who have not (32 vs. 21 percent), and are significantly less likely to not be working at all (21 percent vs. 38 percent). • Applied for jobs early: Forty-one percent of graduates who started their job search before their spring semester of their senior year are currently employed full-time, compared to 34 percent who started during the spring or later. • Want to make a difference vs. want to make money: 51 percent of grads who say “making a lot of money” is more important in their job than “making a difference” are in a full-time positions, compared to 28 percent of those who think the reverse. College is worth it, all things considered. Eighty-seven percent of all recent college graduates say they do not regret their college major and 89 percent think going college is worth the investment in the long-run. However, fewer graduates (57 percent) think college adequately prepared them for work in the real world. Outstanding loans. Thirty-two percent of graduates said the time it would take to pay off their student loans was among their biggest fears after graduation. Eighteen percent of recent grads PAG E 18 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 have student loan debt of at least $50,000, while 40 percent have loans totaling less than $50,000. Forty-two percent say they’ve acquired zero student loan debt. Most grads are not back in the nest. The class of 2014 isn’t fitting the “generation who never leaves home” stereotype so far. Seventy-one percent are not currently living with their parents. Among those who are, 63 percent hope to be there for only a year; 37 percent expect to live with their parents for two years or longer. A third (34 percent) of these graduates are charged for rent or other household expenses. What do grads want in a new job? Work-life balance trumps all other factors that would make graduates more likely to pursue employment with a particular company. The company: • “Provides a good work-life balance”: 65 percent • “Is well established and growing”: 53 percent • “Provides good learning opportunities”: 51 percent • “Is geographically desirable”: 45 percent • “Gives back to the community”: 38 percent • “Provides nice perks (catered lunch, concierge services, etc.)”: 32 percent • “Is a leader in technology”: 24 percent • “Is global”: 19 percent • “Has a lot of young people working there”: 19 percent • “Fun social media presence”: 15 percent • “Is a startup”: 15 percent • “Has a cool website”: 8 percent Source: CareerBuilder. CareerBuilder Releases This Year’s Most Unbelievable Reasons for Calling in Sick CCH, Incorporated From claiming they need the day to fix some botched plastic surgery to saying they accidentally got on a plane, America’s workers have either had some sitcom-worthy misadventures this year, or they’ve simply gotten more creative with their sick day excuses. A new CareerBuilder survey looks at how many workers have faked being sick this year, as well as some of the strangest excuses they’ve used while doing so. The national survey was commissioned by CareerBuilder and conducted online by Harris Poll from August 11 to September 5, 2014 and included a representative sample of 3,103 workers and 2,203 hiring managers and human resource professionals across industries and company sizes. Over the past year, 28 percent of employees have called in to work sick when they were feeling PAG E 19 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 well, down from 32 percent last year. When asked for a reason, 30 percent said they just didn’t feel like going in to work and 29 percent said they wanted the day to relax. Another 21 percent took the day off to attend a doctor’s appointment and 19 percent wanted to catch up on sleep. Meanwhile, bad weather was enough for 11 percent of employees to take the day off. While half (49 percent) of employees say they have a Paid Time Off program that allows them to use their time off however they choose, 23 percent of those workers say they still feel obligated to make up an excuse for taking a day off. The most unbelievable excuses for calling in sick. When asked to share the most dubious excuses employees have given for calling in sick, employers reported hearing the following reallife examples: • Employee just put a casserole in the oven. • Employee’s plastic surgery for enhancement purposes needed some "tweaking" to get it just right. • Employee was sitting in the bathroom and her feet and legs fell asleep. When she stood, up she fell and broke her ankle. • Employee had been at the casino all weekend and still had money left to play with on Monday morning. • Employee woke up in a good mood and didn't want to ruin it. • Employee had a “lucky night” and didn’t know where he was. • Employee got stuck in the blood pressure machine at the grocery store and couldn't get out. • Employee had a gall stone they wanted to heal holistically. • Employee caught their uniform on fire by putting it in the microwave to dry. • Employee accidentally got on a plane. Playing hooky or playing with fire? Though the majority of employers give their employees the benefit of the doubt, 31 percent say they have checked to see if an employee was telling the truth in one way or another. Among employers who have checked up on an employee who called in sick, asking to see a doctor’s note was the most popular way to find out if the absence was legit (66 percent), followed by calling the employee (49 percent). As many as 15 percent of employers went the extra mile (quite literally) and drove past the employee’s house. Nearly 1 in 5 employers (18 percent) say they have fired an employee for calling in sick with a fake excuse. Additional findings. Additional survey findings include: • One in four employers (24 percent) have caught an employee lying about being sick by checking social media. Of those, 22 percent have actually fired the employee, but 54 percent were more forgiving, only reprimanding the employee for the lie. • More than half of employees (53 percent) say they have gone into work when sick because they felt the work won’t get done otherwise, and 2 in 5 workers (38 percent) PAG E 20 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 did the same because they can’t afford to miss a day of pay. • December is the most popular time of year for employees to call in sick, according to 21 percent of employers, followed by January (17 percent) and February (14 percent). Despite higher absentee rates during the holiday season, only 8 percent of employees say they have ever faked being sick during this time. Of those who have, most did it to spend time with family and friends (69 percent), while others wanted to holiday shop or decorate for the season. • Employees in Professional and Business Services called in sick most often (35 percent) in the past year, followed by closely by Sales employees (34 percent). On the flip side, employees in the IT, Retail and Leisure and Hospitality industries were least likely to call in sick this past year (22 percent, 21 percent and 20 percent, respectively). Source: CareerBuilder. Retirement 5 Deadlines Plan Sponsors Better Check Benefits Pro While Santa Claus may get away with waiting until December to make his list and check it twice, plan sponsors usually need a bit more lead time to make sure they’ve complied with all the deadlines for qualified plans. To that end, here’s a checklist of items, thanks to the lawyers at Bryan Cave, that need attention well before you start decking the halls and planning that New Year’s Eve party. 1. Determination letters. Sponsors of individually designed plans, which are on a five-year cycle, may be required to renew their determination letters with the IRS. Employers with employer identification numbers ending in 4 or 9 are assigned to Cycle D, which ends on Jan. 31, 2015. Multiemployer plans are usually assigned to Cycle D. 2. Recognition of same-sex marriages. Qualified retirement plans must recognize the decision in United States v. Windsor effective June 26, 2013. Any plans that refer to the Defense of Marriage Act in defining marital relationships or fails in any other way to comply with the Windsor judgment must be amended to reflect that judgment. While plans that define marital relationships exclusively in general terms, such as “spouse,” and do not distinguish between same-sex and opposite-sex spouses, usually don’t require such an amendment, such clarification can still be beneficial. Although there are exceptions under certain criteria, plan sponsors in general have only until Dec. 31 to adopt such an amendment. 3. Change in PBGC premium due date. Both flat-rate and variable-rate premiums for small defined benefit plans, according to a change in rule from the Pension Benefit Guaranty Corporation, are now due 9½ months after the beginning of the plan year for which they are payable. That means that small plans now find their premiums due 6½ months earlier than under the old rule. PAG E 21 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 The final rule is applicable for 2014 and subsequent years, although there is a transition rule for small plans that allows a four-month delay of the new due date for the first plan year beginning after 2013. The transition rule is intended to ease potential cash-flow problems. 4. New final regulations for cash-balance and hybrid plans. New final regulations governing vesting and interest credits for cash-balance and hybrid plans were issued by the IRS in September after a long wait. While compliance with these new regulations is not required until 2016, plan sponsors should familiarize themselves with their requirements. 5. Annual notice requirements. Plan sponsors need to be sure that all required annual notices are sent to participants and beneficiaries in a timely manner. Required notices include the Section 401(k) Safe Harbor Notice, which describes the safe harbor contribution and certain other plan features and is due by Dec. 1 for calendar-year plans. For non-calendar year plans, the notice is due not fewer than 30, and not more than 90, days before the first day of the plan year. Another required notice is the Section 401(k) Automatic Enrollment Notice that informs employees how they are automatically enrolled and how automatic contributions work. This is due by Dec. 1 for calendar-year plans, and for non-calendar year plans not fewer than 30 days before the first day of the plan year. Then there’s the Qualified Default Investment Notice, which is required by Dec. 1 for calendaryear plans, and for non-calendar year plans at least 30 days prior to the beginning of the plan year. It notifies participants who have the option of directing investment of their account balances how their balances will be invested if participants do not give an affirmative investment direction. Last but not least is the Defined Benefit Plan Funding Notice, which describes the plan’s funded status for the past two years, provides a statement of its assets and liabilities and includes other information about its funded status. This notice must be provided to participants within 120 days after the end of the plan year. Calendar-year plans have an April 30 deadline; small plans covering fewer than 100 participants have the same due date as for their Forms 5500. A safe harbor 401(k) plan can include two or all three of the Section 401(k) Safe Harbor, Section 401(k) Automatic Enrollment and Qualified Default Investment notices, if applicable, in the same notice. © 2014 BenefitsPro. A Summit Professional Networks publication IRS: Deferred Annuities in 401(k)s are Fine, Really Benefits Pro Plan sponsors can offer target-date funds that include deferred-income annuities to older, higherincome earners without breaching ERISA’s non-discrimination requirements, the IRS said Friday in a special ruling. The ruling is expected to boost the popularity of lifetime-income options, helping employees hedge against the potential of running out of money in retirement. In issuing its special ruling, the IRS said, “a TDF that holds deferred annuities should not be expected to permit participants whose ages fall outside the designated age-band for the TDF to hold an interest in that TDF.” PAG E 22 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 “Today’s guidance provides plan sponsors an additional option to make it easier for employees to consider using lifetime income,” the Treasury Department said in a statement. “Instead of having to devote all of their account balance to annuities, employees use a portion of their savings to purchase guaranteed income for life while retaining other savings in other investments.” Plan sponsors and advisors had sought the clarification from the IRS. “This guidance demonstrates the Treasury Department’s commitment to, and ongoing support for, making lifetime income more accessible in workplace retirement plans,” Insured Retirement Institute President and CEO Cathy Weatherford said. She said the ruling could “help ensure that American workers and their families can attain guaranteed retirement income that cannot be outlived.” Along those lines, the IRS in July issued final rules allowing defined contribution participants to invest a maximum of $125,000 in qualifying longevity annuity contracts that guarantee income later in retirement. Assets in those longevity annuities are not subject to the annual distribution requirements of 401(k) assets that begin at age 70 ½, according to the IRS At the request of the IRS, the Department of Labor reviewed the special ruling. Phyllis Borzi, assistant Secretary of Labor, wrote that the use of deferred annuity contracts as fixed-income instruments in certain TDFs “would not cause the funds to fail to meet the requirements” of ERISA, as long as investment managers “satisfy each of the conditions of the annuity selection safe harbor” when choosing annuities. Under the annuity selection safe harbor, fiduciaries must engage in a “thorough and analytical search” in selecting annuity providers, fully consider the provider’s ability to make future payments, and take the costs and fees of annuities in consideration when selecting them, according to the DOL. © 2014 BenefitsPro. A Summit Professional Networks publication State Law Review Developments in Same-sex Marriage in 16 States Arthur J. Gallagher & Co. The developments surrounding same-sex marriage have been fast-paced since the U.S. Supreme Court denied the requests to review the constitutionality of several states’ same-sex marriage bans on October 6. As a result, there have been same-sex marriage updates in numerous states since the release of the October issue of our Directions newsletter (available here). Below you will find a brief summary on the developments in each of these states. Alaska: On October 12, a federal judge ruled that Alaska’s constitutional ban on same-sex marriage was unconstitutional. As part of that ruling, the judge also required Alaska to recognize same-sex marriages that were lawfully entered into in other states. As a result, Alaska began issuing valid same-sex marriage licenses on October 13. PAG E 23 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Arizona: Following the Ninth Circuit Court of Appeals’ ruling that state same-sex marriage bans are unconstitutional (October 7), a federal judge struck down Arizona’s same-sex marriage ban on October 17. The judge denied the state’s request to stay the ruling and ordered the state to “permanently cease” enforcement of the ban. On October 17th, Arizona’s Attorney General announced he will not appeal the judge's ruling and issued a letter instructing county clerks to immediately begin issuing marriage licenses to same-sex couples. Colorado: By denying to hear any appeal of any state ban on same-sex marriage, the U.S. Supreme Court made effective the Tenth Circuit Court of Appeals’ ruling that same-sex marriage bans are unconstitutional. Colorado falls under the jurisdiction of the Tenth Circuit. On October 7, the Attorney General of Colorado ordered all 64 counties in the state to begin issuing samesex marriage licenses. Idaho: On October 7, the Ninth Circuit Court of Appeals struck down Idaho’s same-sex marriage ban. Idaho requested a stay to delay the immediate enforcement of the decision, which was initially granted by the U.S. Supreme Court. However, that stay was later removed by the U.S. Supreme Court effective October 15, and Idaho began issuing same-sex marriage licenses. Kansas: Same-sex marriage is subject to a state constitutional ban, but the status of same-sex marriage in Kansas remains in flux due to court actions. Following the U.S. Supreme Court’s decision that denied review of the Tenth Circuit Court of Appeals’ ruling, a Johnson County judge ordered its court clerk to issue licenses to allow same-sex marriage. One same-sex marriage license was issued based on this order. However, on October 10, the Kansas Supreme Court placed the order on hold, and set oral arguments for November 6. In addition, the ACLU filed a federal lawsuit and the federal district court issued a preliminary injunction on November 4 barring Kansas officials from enforcing the state’s same-sex marriage ban. Nevertheless, that order was simultaneously stayed (i.e., put on hold) by the court until November 11, to allow time for the state to appeal the order. Mississippi: Same-sex marriage is still subject to a state constitutional ban. On October 20, two same-sex couples in Mississippi filed the first federal challenge to the state's constitutional ban on same-sex marriage, which also bans the recognition of same-sex unions performed out-ofstate. The Mississippi Supreme Court has another case pending which was brought by a samesex couple, married in California, and are seeking to have their marriage recognized for purposes of a divorce proceeding. Missouri: On November 5th, St. Louis Circuit Judge Rex Burlison overturned Missouri's constitutional ban on gay marriage. In his ruling, Judge Burlison held that Missouri's measure recognizing marriage only between a man and woman violates the due process and equal protection rights of the U.S. Constitution. Missouri’s Attorney General, Chris Koster, appealed the ruling to the state Supreme Court, but said that his office would not seek a stay of the Judge Burlison’s order. North Carolina: On October 10, a federal judge ruled that North Carolina’s same-sex marriage ban was unconstitutional; the ruling was effective immediately. Same-sex marriage licenses were issued in North Carolina beginning October 10. Despite the ruling, there has been some debate over whether North Carolina magistrates can cite religious objections in declining to issue marriage licenses. On October 14, a North Carolina state court issued a memo directing magistrates to perform same-sex marriages or face disciplinary action. At least six magistrates have chosen to resign than marry same-sex couples. A state senator is planning to file a bill to allow state officials to refuse to marry same-sex couples due to religious objections. PAG E 24 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Texas and Louisiana: Same-sex marriage is currently not recognized due to state constitutional bans. In Texas, a federal judge found the state ban on same-sex marriage unconstitutional, but stayed (put on hold) his decision pending appeal. Meanwhile, in Louisiana, a federal judge upheld that state’s ban on same-sex marriage. Both the Texas and Louisiana cases have been appealed to the U.S. Court of Appeals for the Fifth Circuit. A decision is expected following oral argument for both cases, which will be held in early January 2015. Interested parties across the country anxiously await the Fifth Circuit’s decisions in the Texas and Louisiana cases. If the historically conservative court upholds either state’s ban on same-sex marriage, it will create the “circuit split” that is likely to push the U.S. Supreme Court to take up the issue. West Virginia: On October 9, the West Virginia Attorney General announced that the state will no longer defend its same-sex marriage ban in light of the U.S. Supreme Court’s decision not to review other federal appellate court rulings. West Virginia began issuing same-sex marriage licenses on October 9. Wyoming: A federal court found Wyoming’s same-sex marriage ban to be unconstitutional on October 17. However, the judge stayed the decision until October 23 to permit the state time for an appeal. The state subsequently stated that it would not appeal the decision. Thereafter, Wyoming began issuing same-sex marriage licenses on October 23. Kentucky, Michigan, Ohio and Tennessee: On November 6th, the U.S. Court of Appeals for the Sixth Circuit upheld the right of states to ban same-sex marriage, overturning lower court decisions in Kentucky, Michigan, Ohio and Tennessee that found such restrictions to be unconstitutional. Importantly, this decision gives Supreme Court justices an appellate ruling that runs counter to rulings issued by four other circuits (the 4th, 7th, 9th and 10th). This “split in the circuits” makes it more likely that the U.S. Supreme Court will consider this issue in the future. While the speed of future developments on the issue of same-sex marriage may slow, we do expect that there will be additional developments. To help our clients with general information on recognition of same-sex marriage within their organization’s employee benefit program, AJG has put together a “Same-Sex Marriage Guide.” The Guide also provides an up to date summary of each state’s position with respect to this issue. The Guide is available here. What’s New in State Laws CCH, Incorporated For busy Human Resources professionals who want ready access to what is new and what has recently changed in State laws, here is a brief update. California Background Checks California Governor Edmund G. Brown, Jr. signed the Fair Chance Employment Act into law on September 30, 2014. The new law, which will take effect January 1, 2015, will require that any person submitting a bid to the state on a contract involving onsite construction-related services shall certify that the person will not ask an applicant for onsite construction-related employment to disclose orally or in writing information concerning the conviction history of the applicant on or at the time of an initial employment application. PAG E 25 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 The law shall not apply to a position for which the person or the state is otherwise required by state or federal law to conduct a conviction history background check, or to any contract position with a criminal justice agency. Exception is also made for a person to the extent that he or she obtains workers from a hiring hall pursuant to a bona fide collective bargaining agreement (Ch. 880 (A. 1650), L. 2013, enacted September 30, 2014). In other legislation, the state has amended its Health and Safety Code with respect to criminal records checks of applicants for employment in community care facilities, foster family homes or certified family homes, residential care facilities, and child day care facilities (Ch. 824 (A. 2632), L. 2013, enacted September 29, 2014). Additionally, the state Penal Code has been amended with respect to state summary criminal history information (Ch. 472 (A. 2404), L. 2013, enacted September 19, 2014; and Ch. 708 (A. 1585), L. 2013, enacted September 28, 2014). California Civil Rights The Unruh Civil Rights Act has been amended to expand the relief authorized to be sought by an individual in a civil action to include appropriate equitable and declaratory relief to eliminate a pattern or practice of interference, or attempts to interfere. Additionally, the law has been amended to prohibit waivers of the protections afforded by the law as a condition of entering into a contract for the provision of goods and services. These amendments will take effect January 1, 2015 (Ch. 296 (A. 2634), L. 2013, enacted August 25, 2014; and Ch. 910 (A. 2617), L. 2013, enacted September 30, 2014). California Fair Employment Practices Driver’s licenses. The state has enacted a law to prohibit employment discrimination against an individual who obtains a driver’s license under special provisions that allow for licensure despite an individual’s inability to submit satisfactory proof that his or her presence in the United States is authorized under federal law. Specifically, the California Fair Employment and Housing Act is amended to provide that national origin discrimination includes, but is not limited to, discrimination on the basis of possessing a driver’s license granted under the conditions described just above. The state’s Vehicle Code is also amended to provide that an employer may not require a person to present a driver’s license unless possessing such a license is required by law or is required by the employer, and the employer’s requirement is otherwise permitted by law. Additionally, driver’s license information obtained by an employer shall be treated as private and confidential, is exempt from disclosure under the California Public Records Act, and shall not be disclosed to any unauthorized person or used for any purpose other than to establish identity and authorization to drive (Ch. 452 (A. 1660), L. 2013, enacted September 19, 2014, and effective January 1, 2015). Emergency personnel. Current California law prohibits an employer from discriminating against an employee for taking time off to perform emergency duty as a volunteer firefighter, reserve peace officer, or emergency rescue personnel. PAG E 26 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Effective January 1, 2015, under a law signed by Governor Edmund G. Brown, Jr. on September 15, that law will expand the definition of emergency rescue personnel to include an officer, employee, or member of a disaster medical response entity sponsored or requested by the state. An employee who is a health care provider will be required to notify his or her employer at the time the employee becomes designated as emergency rescue personnel and also when he or she will be deployed as a result of that designation (Ch. 343 (A. 2536), L. 2013, enacted September 15, 2014). Public assistance recipients. California Governor Edmund G. Brown, Jr. has signed a law prohibiting an employer from discharging or in any manner discriminating or retaliating against an employee who enrolls in a public assistance program. Additionally, an employer shall not refuse to hire a beneficiary for reason of being enrolled in a public assistance program. The law, which will take effect January 1, 2015, and remain in effect only until January 1, 2020, also prohibits an employer from disclosing to any person or entity, unless otherwise permitted by state or federal law, that an employee receives or is applying for public benefits. For purposes of these provisions, “public assistance program” means the Medi-Cal program. Under this program, which is administered by the State Department of Health Care Services, qualified low-income persons receive health care benefits (Ch. 889 (A. 1792), L. 2013, enacted September 30, 2014). California Security Breach Notification Current California law requires a person or business conducting business in the state that owns or licenses computerized data that includes personal information to disclose a breach of the security of the system or data following discovery or notification of the breach to any California resident whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. Likewise, a person or business that maintains computerized data that includes personal information that the person or business does not own must also notify the owner or licensee of the information of any breach immediately following discovery. Effective January 1, 2015, the state will require with respect to the information to be included in a notification of a security breach described just above, that if the person or business was the source of the breach, appropriate identify theft prevention and mitigation services be provided for a specified time at no cost to the affected person (A. 1710, L. 2013, enacted September 30, 2014). California Social Security Number Privacy The state’s law prohibiting a person or entity, with specified exceptions, from publicly posting, displaying or otherwise compromising the security of an individual’s social security number has been amended to prohibit the sale of, advertisement for sale of, or offer to sell an individual’s social security number (A. 1710, L. 2013, enacted September 30, 2014). California Veterans’ Preference The state has enacted a law to include the veterans’ preference system among employment selection devices of the State Department of Human Resources (Ch. 645 (A. 1397), L. 2013, enacted September 27, 2014). PAG E 27 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Colorado Minimum Wage The Colorado Department of Labor and Employment, Labor Standards, has scheduled a hearing on proposed Colorado Minimum Wage Order Number 31 (7 CCR 1103-1). If adopted, the Order would increase the state minimum wage from $8.00 to $8.23 per hour on January 1, 2015. The state minimum wage for tipped employees would also increase from $4.98 to $5.21 per hour effective January 1, 2015. The new Order, which would replace current Minimum Wage Order No. 30, would also revise recordkeeping requirements and complaint procedures. The hearings will be held on November 4, 2014, at 2:00 p.m., at the Colorado Division of Labor, 633 17th Street, Second Floor, Suite 200, Denver, Colorado, 80202. Comments on the proposed rulemaking must be submitted to the Division by the close of business on November 6, 2014 (State of Colorado Department of Regulatory Agencies (DORA), Notice of Proposed Rulemaking, September 30, 2014; Colorado Department of Labor and Employment, Proposed Rules, https://www.colorado.gov/pacific/cdle/proposed-rules). Connecticut Credit Checks The state has enacted a law amending the definition of “financial institution” for the purposes of employer inquiries about employee or prospective employee credit ratings. The following have been added as financial institutions: mortgage brokers, mortgage correspondent lenders, mortgage lenders licensed pursuant to existing law, and mortgage servicing companies (P.A. 14109 (S. 221), L. 2014, effective October 1, 2014). Delaware Pregnancy Discrimination As previously reported, on September 9, 2014, Delaware Governor Jack Markell signed legislation (S. 212) to address pregnancy accommodations in the workplace and to clarify that current prohibitions against sex discrimination in employment include pregnancy. Senate Bill 212 amends state law to make it an unlawful employment practice for an employer with four or more employees to fail to hire or to discharge an individual or to otherwise discriminate against that person with respect to compensation, terms, conditions or privileges of employment because of pregnancy. Employers are also prohibited from limiting, segregating or classifying employees in any way so as to deprive them of employment opportunities or otherwise adversely affecting an individual’s status as an employee because of pregnancy. The new law requires employers to provide notice of the right to be free from discrimination in relation to pregnancy, childbirth and related conditions, including the right to reasonable accommodation to known limitations related to pregnancy, childbirth and other related conditions. This notice must also be conspicuously posted at the employer’s place of business in an area accessible to employees (Ch. 429 (S. 212), L. 2013, enacted and effective September 9, 2014, http://www.legis.delaware.gov/LIS/lis147.nsf/EngrossmentsforLookup/SB+212/$file/Engross.ht ml?open). Delaware Whistleblower Protection Employees who report or are about to report to a public body or to their employer or the employer’s supervisor any noncompliance or infractions involving campaign contributions and expenditures that the employee believes has occurred or is about to occur are protected under the Delaware Whistleblowers’ Protection Act. PAG E 28 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Employees are also protected from retaliation when participating in an investigation, hearing, trial or inquiry involving a person or entity other than the employee, or for refusing to participate or assist in such noncompliance or infraction involving campaign contributions and expenditures (Ch. 344 (H. 300), L. 2014). District of Columbia Minimum Wage The Minimum Wage Revision Act has been amended to include contractors and subcontractors as covered “employers,” and to hold both as jointly liable for violations under the Act. In addition, the law has also been amended to require that employers provide itemized wage statements and written notice at time of hire covering certain wage and hour information, such as wage rates and payday. Temporary staffing agencies will also be required to provide notice to employees, at the initial interview or hire, and later updated with more detailed information when a specific assignment is given. The law has also been amended to enhance remedies, fines and administrative penalties for violations (Act 20-426 (B20-671), L. 2014, the “Wage Theft Prevention Amendment Act of 2014,” approved and signed by the Mayor on September 19, 2014). District of Columbia Paid Sick Leave The Accrued Sick and Safe Leave Act of 2008 has been amended with respect to enforcement (Act 426 (B. 671), L. 2013, enacted September 19, 2014). District of Columbia Wage Payment The District’s wage payment and collection law has been amended by the “Wage Theft Prevention Amendment Act of 2014” to include general contractors and subcontractors as covered “employers” under the law and to remove an exemption from “employee” any person employed in a “bona fide executive, administrative or professional capacity,” as defined by District of Columbia regulations. Under the Act, general contractors and subcontractors will be jointly and severally liable to employees for wage payment violations and for violations of the Living Wage Act and Sick and Safe Leave Act, unless the violations were due to the general contractor’s lack of prompt payment in accordance with the terms of the contract between the contractor and the subcontractor. In addition, temporary staffing firms will be jointly and severally liable with employers for wage payment violations and for violations of the Living Wage Act and the Sick and Safe Leave Act to the employee and the District. The law has also been amended to enhance remedies, fines and administrative penalties for violations, including suspension of business licenses of employers that are delinquent in paying wage judgments or agreements. Administrative procedures have also been clarified (Act 20-426 (B20-671), L. 2014, approved and signed by the governor on September 19, 2014). PAG E 29 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Illinois Minimum Wage Fiscal Year 2014 living wage rates for Cook County are $11.47 per hour with health benefits, or $14.33 per hour otherwise. Kentucky Unemployment Insurance The taxable wage base for Kentucky in 2015 will be $9,900, up $300 from the 2014 taxable wage base amount of $9,600. Maryland Minimum Wage The living wage rate for Montgomery County is $14.15 per hour, effective through June 30, 2015. Also, Baltimore’s current hourly living wage rate of $11.29 will remain in effect through June 30, 2015. Massachusetts Military Leave Military leave and reemployment rights provisions have been amended to defer to federal protections. Members of the armed forces of the Commonwealth ordered to active duty will be entitled to all rights, protections, privileges and immunities afforded under the federal Uniformed Services Employment and Reemployment Rights Act and the federal Servicemembers Civil Relief Act (50 U.S.C. App. Section 501, et seq., except for Sections 536 and 541 to 549, inclusive, pertaining to life insurance). For public employees, employees of the Commonwealth in the armed forces or a reserve component of the armed forces are entitled to paid leave benefits for not more than 34 days in any state fiscal year and not more than 17 days in any federal fiscal year during annual training, drills and parades. Employees of the Commonwealth in the service of the armed forces of the Commonwealth, under sections 38, 39 or 41 (state militia), are entitled to leave without loss of pay and benefits for the first 30 consecutive days for any mission, and after that such pay is to be reduced by any amount received as base pay for military service. Employees of the Commonwealth in the armed forces of the Commonwealth performing duty under Title 10 or 32 of the United States Code are to be paid the regular base salary as public employees for each period of military leave of absence, reduced by any amount received either from the United States or the Commonwealth as base pay for military service performed during the same pay period, without loss of benefits. Employees of a county, city or town, by vote of the county commissioner or city council or via town meeting that accepts this provision or similar provisions of law are entitled to these benefits and protections or the benefits of the accepted earlier law (Ch. 307 (H. 4109), L. 2014, enacted September 3, 2014, and effective December 2, 2014). Massachusetts Veterans’ Preference The state has enacted a law allowing private employers to give preference in promotion or hiring to veterans, spouses of disabled veterans, and surviving spouses of veterans (Ch. 62 (S. 2052), L. 2013, enacted April 3, 2014). Michigan Minimum Wage Living wage rates for Ann Arbor, Pittsfield Charter Township, and Southfield have been PAG E 30 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 adjusted. Minnesota Unemployment Insurance Minnesota's taxable wage base for 2015 will be $30,000. This is a $1,000 increase from the 2014 base amount of $29,000. Mississippi Family Leave Mississippi has enacted a law allowing state employees to use earned major medical leave for adoption or foster care placement (S. 2084, L. 2014). Montana Minimum Wage The minimum wage in Montana will increase from $7.90 per hour to $8.05 per hour on January 1, 2015. In the 2006 General Election, voters approved Initiative 151 to raise Montana's minimum wage and provide for future, automatic adjustments based on any inflation in the cost of living. Pursuant to Montana Code Annotated Section 39-3-409, the Montana Department of Labor and Industry is to adjust the state minimum wage, to be calculated no later than September 30 of each year, based upon any increase in the U.S. City Average Consumer Price Index for All Urban Consumers for All Items from August of the preceding year to August of the year in which the calculation is made. This amount is to be rounded to the nearest five cents. The new, adjusted minimum wage then becomes effective on January 1 of the following year. The 2015 rate reflects a 1.7 percent increase in the CPI-U from August 2013 to August 2014 (Montana Department of Labor and Industry, News Release, October 1, 2014, http://dli.mt.gov/news/21; Montana Department of Labor and Industry, http://www.mtwagehourbopa.com). See Section 39-3-409. Nevada Unemployment Insurance For 2015, the taxable wage base in Nevada will be $27,800, up $400 from the 2014 taxable wage base amount of $27,400. New Jersey Minimum Wage The state minimum wage will increase from $8.25 per hour to $8.38 per hour on January 1, 2015, according to the New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance. New Jersey voters approved Ballot Question Number 2 in the November 5, 2013, General Election, to amend the state constitution to raise the state minimum wage rate to $8.25 per hour on January 1, 2014, and to provide for future, annual increases based on any increases in the cost of living, effective January 1 of each year. The measure also provides that if the federal rate is ever raised above the state rate, the state rate would be raised to match the federal rate. The increase for 2015 is based on a 1.59 percent increase in the CPI-W, U.S. City Average, for the period August 2013 through August 2014. Using as a base for the calculation the current New Jersey minimum hourly wage of $8.25 per hour, a 1.59 percent increase, rounded to the nearest penny, is $0.13, yielding an adjusted state minimum hourly wage rate of $8.38, effective January 1, 2015. Administrative changes to New Jersey Administrative Code rule 12:56-3.1 are PAG E 31 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 adopted to reflect the increase (State of New Jersey Department of Labor and Workforce Development, Division of Wage and Hour Compliance, Notice of Administrative Change, N.J.A.C. 12:56-3.1, September 24, 2014, http://lwd.dol.state.nj.us/labor/forms_pdfs/lwdhome/MinWage2015.pdf). See also New Jersey State Constitution, Article I, Section 23. New Jersey Veterans’ Preference Effective September 10, 2014, preference in appointment to the State Police shall be provided to all qualified applicants who are veterans (Ch. 51 (A. 1510), L. 2014). New York Minimum Wage As of September 30, 2014, employees who work for commercial tenants at projects in New York City that receive more than $1 million in city subsidies must be paid a Living Wage of $13.13 per hour, without benefits. If the tenant provides employees with supplemental health benefits, the employer must pay employees a Living Wage of $11.50 per hour. The health benefits supplement rate is $1.63 per hour. The Living Wage for these workers previously stood at $11.90 without benefits, and $10.30 with benefits. The Living Wage increase was made through an Executive Order signed by Mayor Bill de Blasio on September 30, 2014. The Living Wage rate and health benefits supplement rate are adjusted annually, based upon increases, if any, in the cost of living (City of New York, Office of the Mayor, Executive Order, September 30, 2014, http://www1.nyc.gov/office-of-themayor/news/459-14/mayor-de-blasio-signs-executive-order-increase-living-wage-expand-itthousands-more#/0; Executive Order No. 7, http://www1.nyc.gov/assets/home/downloads/pdf/executive-orders/2014/eo_7.pdf). In other news, living wage rates for Rochester, Syracuse, and Nassau County have been adjusted. Ohio Minimum Wage The minimum wage in Ohio is scheduled to automatically increase to $8.10 per hour on January 1, 2015, for non-tipped employees and to $4.05 per hour for tipped employees. The increased minimum wage will apply to employees of businesses that have annual gross receipts of more than $297,000 per year. Currently, the state’s minimum wage is $7.95 per hour for non-tipped employees and $3.98 for tipped employees and applies to employees of businesses with annual gross receipts of more than $292,000 per year. Ohio voters passed a Constitutional Amendment in the November 2006 election that states Ohio’s minimum wage shall increase on January 1 of each year by the rate of inflation. Calculations are based on the Consumer Price Index (CPI) for urban wage earners and clerical workers for the 12-month period prior to September. The CPI index rose 1.6 percent over the 12month period from September 1, 2013, to August 31, 2014. The Amendment also states that the wage rate for non-tipped employees shall be rounded to the nearest five cents. For employees at smaller companies (with annual gross receipts of $292,000 or less per year in 2014 or $297,000 or less per year after January 1, 2015) and for 14- and 15-year-old workers, the state minimum wage is $7.25 per hour. For these employees, the state minimum wage is tied to the federal minimum wage. See also, Ohio Constitution, Article II, Sec. 34a (Ohio Department of PAG E 32 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 Commerce News Release, September 30, 2014). Ohio Recordkeeping/Posting Requirements Effective January 1, 2015, the Ohio minimum wage will increase to $8.10 per hour. Employers are required to post the minimum wage poster. Ohio 2015 Minimum Wage Poster, http://www.com.ohio.gov/documents/dico_2015MinimumWageposter.pdf). Oregon Minimum Wage Effective January 1, 2015, the minimum wage in Oregon will increase by 15 cents to $9.25 per hour, reflecting changes in the cost of living. Pursuant to Oregon Revised Statutes Section 653.025(2), the state minimum wage is to be adjusted no later than September 30 of each year based upon any increase in the U.S. City Average Consumer Price Index (“CPI”) for All Urban Consumers for All Items from August of the preceding year to August of the year when the calculation is made. The current minimum wage is $9.10 per hour. Based on an increase in the CPI of 1.70 percent from August 2013 to August 2014, the calculation used for determining the minimum wage rate for 2015 is as follows: $9.10 X .0170 = $.1547, rounded to $.15. Oregon employers are required to post minimum wage posters. Downloadable posters for 2015 reflecting the new minimum wage rate are available from the Bureau of Labor and Industries (BOLI) Internet website free of charge. See Sec. 653.025 (Oregon Bureau of Labor and Industries Press Release, September 17, 2014, http://www.oregon.gov/boli/WHD/docs/2015_minimumwage_press_release.pdf; Oregon Bureau of Labor and Industries, 2015 Minimum Wage Determination, September 17, 2014, http://www.oregon.gov/boli/WHD/docs/2015_minimumwage_determination.pdf). In other news, living wage rates for Ashland and Corvallis have been adjusted. Oregon Posters Effective January 1, 2015, the minimum wage in Oregon will increase to $9.25 per hour. Employers are required to post minimum wage posters. Oregon Minimum Wage Poster – English (2015), http://www.oregon.gov/boli/WHD/docs/oregonminimumwage_eng_2015.pdf; Oregon Minimum Wage Poster – Spanish (2015), http://www.oregon.gov/boli/WHD/docs/oregonminimumwage_span_2015.pdf Tennessee Unemployment Insurance Effective July 1, 2014, through December 31, 2014, Premium Rate Table 6 is in effect. Employer rates range from 0.01% to 2.3% for positive-balance employers, and from 5.0% to 10.0% for negative-balance employers. Vermont Plant Closings Effective January 1, 2015, Vermont employers with 50 or more employees will be required to give notice of a potential plant closing or mass layoff that will involve an employment loss or layoff of 50 or more employees over a 90-day period. Employers are required to notify the Secretary of Commerce and Community Development and the Commissioner of Labor 45 days prior to the effective date of the closing or layoffs, and must give 30 days’ notice to the local chief elected official or administrative officer of the municipality, affected employees, and to the PAG E 33 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014 bargaining agent, if any (Act 125 (H. 758), L. 2014). Vermont Smoking in the Workplace The state has enacted a law extending restrictions on smoking in workplaces and areas of public access to include smoking in lodging establishments, hospitals, and child care facilities, among other places. Also, with respect to child care facilities, tobacco substitutes are specifically banned while children are present and in care, and tobacco substitutes are defined to include e-cigarettes (Act 135 (H. 217), L. 2013, enacted May 22, 2014). Vermont Unemployment Insurance The taxable wage base in Vermont for 2015 will be $16,400, an increase of $400 over the 2014 wage base amount of $16,000. Vermont Whistleblower Protection A Public Records Act exemption protects the identity of whistleblowers who submit complaints about public agency or government contractor misconduct (Act 129 (H. 863), L. 2014). Washington Minimum Wage The minimum wage in Washington will increase by 15 cents to $9.47 per hour beginning January 1, 2015, according to the Washington Department of Labor and Industries. The Department calculates the state’s minimum wage each year at this time as required under Initiative 688, which Washington voters approved in 1998. The change reflects a 1.59 percent increase in the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) over the last 12 months ending August 31. The federal Bureau of Labor Statistics announced the change in the CPI earlier this month. The minimum wage applies to workers in all industries, including agriculture, although 14- and 15-year-olds can be paid 85 percent of the adult minimum wage, or $8.05 an hour. See Section 49.46.020 (Washington State Department of Labor and Industries, News Release, September 30, 2014, http://lni.wa.gov/News/2014/pr140930a.asp). Washington Unemployment Insurance For 2015, the taxable wage base in Washington will increase to $42,100, up $800 from the 2014 wage base amount of $41,300. The intent of this Newsletter is to provide general information on employee benefit issues. It should not be construed as legal advice and, as with any interpretation of law, plan sponsors should seek proper legal advice for application of these rules to their plans. © 2014 Arthur J. Gallagher & Co. PAG E 34 | © 2014 G ALLAGHER BENEFIT SERVI CES, INC. NOVEMBER | 2014