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The Department of Labor (DOL) recently released its 2020 inflation-adjusted civil monetary penalties that may be assessed on employers for violations of a wide range of federal laws, including:
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The U.S. Department of Labor (DOL), announced a new final rule that clarifies how to calculate an employee’s regular wage rate under the Fair Labor Standards Act (FLSA). The final rule became effective on Jan. 15, 2020.
Calculating the regular rate is an essential first step when determining an employee’s overtime compensation. Under the FLSA, an employee’s regular rate includes all forms of compensation paid to that employee in a workweek. The final rule clarifies what qualifies as compensation. The DOL’s stated objective with this rule is to provide more certainty for employers that offer additional perks to their employees, but aren’t sure of whether these benefits should be counted as income under the FLSA. New Rule at a Glance
Employers should become familiar with this final rule and adjust their payroll practices to account for this new guidance on what should be considered compensation. Employers must comply with numerous reporting and disclosure requirements throughout the year in connection with their group health plans.
Listed below are upcoming important compliance deadlines for employer-sponsored group health plans, organized chronologically. For these requirements, the information provided herein shows the deadlines that apply to calendar year plans. For non-calendar year plans, these deadlines will need to be adjusted to reflect each plan’s specific plan year. January 2020 Employers that filed 250 or more IRS Forms W-2 for the prior calendar year must file Forms W-2 with the Social Security Administration and furnish Forms W-2 to employees by Jan. 31 of each year, unless an extension applies. February 2020 ALEs that sponsor fully or self-insured health plans are required to report information about the coverage to the IRS each year, using IRS Forms 1094-C and 1095-C. Employers that are not ALEs use IRS Forms 1094-B and 1095-B to meet these reporting obligations. The deadline for filing paper versions of the forms is Feb. 28, 2020. The deadline for electronic filing is March 31, 2020. March 2020 Group health plan sponsors that provide prescription drug coverage to Medicare Part D-eligible individuals must disclose to the Centers for Medicare & Medicaid Services (CMS) whether prescription drug coverage is creditable or non-creditable within 60 days after the beginning of the plan year. For calendar year plans, the deadline is March 1, 2020. ALEs that sponsor fully or self-insured health plans to report information about the coverage to covered employees each year, using IRS Form 1095-C. Employers that are not ALEs use IRS Form 1095-B to provide this information. The IRS recently extended the deadline for furnishing 2019 employee statements, from Jan. 31, 2020, to March 2, 2020. The electronic filing deadline for Code Sections 6055 and 6056 reporting is March 31, 2020. ALEs that sponsor fully or self-insured health plans are required to report information about the coverage to the IRS each year, using IRS Forms 1094-C and 1095-C. Employers that are not ALEs use IRS Forms 1094-B and 1095-B to meet these reporting obligations. The IRS announced an increase to flexible spending account (FSA) contribution limits for the 2020 plan year. Individuals can contribute $2,750 in 2020, up $50 from the previous year.
Since this announcement came so late in the year, some employers may not use the updated figures in their benefits limits—as doing so would require an addendum. In fact, some employers have been known to use limits from the previous year because they cannot wait until this far into the enrollment season to release benefits materials. With that in mind, it wouldn’t be surprising if employers use the 2019 limits for their FSA plans in 2020. In addition to the FSA contribution limits, the IRS announced increases for transportation benefits and adoption services. Qualified transportation benefit limits (for parking or transit passes) increased to $270 for 2020. Maximum employer subsidies for qualified adoption expenses rose to $14,300, up $220. Other adoption-related limits increased as well. On Sept. 24, 2019, the U.S. Department of Labor (DOL) announced a new final rule that updates the salary thresholds that some individuals must meet in order to qualify for a minimum wage and overtime exemption under the federal Fair Labor Standards Act (FLSA). The final rule becomes effective on Jan. 1, 2020.
2019 Overtime Final Rule The final rule affects the exemptions for executive, administrative and professional (EAP) employees, highly compensated employees (HCEs), employees in the motion picture industry and individuals who work in various U.S. territories. The final rule’s salary levels differ from both the 2016 and 2019 proposed levels. For 2020, the final rule EAP and HCE salary exemptions are as follows:
Employer Action Steps To prepare for the final rule’s Jan. 1, 2020 effective date, employers should:
Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2019.
What is this notice? This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and do not enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees. What do employers need to do? Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices before Oct. 15, 2019. To make the process easier, employers often include Medicare Part D notices in open enrollment packets. Resources CMS has provided model disclosure notices for employers to use. Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important. To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2020. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2020 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM). Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable—for example, the summary of benefits and coverage (SBC). There are also some participant notices that must be provided annually or upon initial enrollment. Important Notices
Health officials issued a final rule that expands the usability of health reimbursement arrangements (HRAs).
Effective in 2020, the final rule establishes two new types of HRAs: Individual Coverage HRA: Allows employers to offer an HRA to be used to reimburse the cost of individual market premiums on a tax-preferred basis, subject to certain conditions, as an alternative to traditional group health plan coverage. Excepted Benefits HRA: Allows employers that offer traditional group coverage to provide an HRA of up to $1,800 per year (as adjusted) to reimburse certain qualified medical expenses. President Donald Trump recently signed an executive order aimed at improving price and quality transparency in health care. The order is intended to increase availability of health care price and quality information and protect patients from surprise medical bills.
What’s in the Order? Specifically, the order is aimed at:
Within 120 days, the order directs the Treasury to issue guidance to expand access to high deductible health plans. Additionally, the order directs the Treasury to propose regulations within 180 days to:
On May 28, 2019, the IRS releasedRevenue Procedure 2019-25 to announce the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health plans (HDHPs) for 2020. These limits include:
HSA Contribution Limits for 2020 The IRS limits for HSA contributions increase for 2020. Eligible individuals with self-only HDHP coverage will be able to contribute up to $3,550 for 2020, while eligible individuals with family HDHP coverage will be able to contribute up to $7,100 for 2020. The $1,000 catch-up contribution limit that applies to HSA-eligible individuals who are age 55 or older will remain unchanged. HDHP Cost-sharing Limits for 2020 For self-only coverage in 2020, the HDHP minimum deductible will increase to $1,400 and the out-of-pocket maximum will increase to $6,900. For family coverage, these limits will increase to $2,800 and $13,800, respectively. Action Steps Because these limits change for 2020, employers that sponsor these plans may need to make plan design changes for plan years beginning in 2020. Making Emotional Intelligence Work for YouEmotional intelligence (EQ) is the ability to understand and manage your emotions, as well as others’. It’s similar to empathy, but the ability to manage the emotions effectively is key. Many businesses are flocking to high-EQ individuals for their attractive leadership style. Leaders with high EQ are able to communicate their feelings effectively, look at a situation from all perspectives and maintain a positive outlook regardless of the situation. Do We Need EQ Here? Effective managers tend to have higher EQ than others, so you may already have leaders like them on board. They have good people skills, can self-regulate and lead by example. Managers who operate by more authoritarian practices get a much different view of their workplaces than high-EQ leaders. Authoritarian managers are identified by their lack of self-awareness, making them hard to confide in. You want employees to feel comfortable talking to their managers. If your managers have high EQ, they will likely have a better rapport with employees and be able to manage their needs more effectively. Most importantly, fostering high EQ invites more democratic corporate management, which is critical for effectively managing differences in opinion. You don’t have a shouting match when your leaders are able to have a mature discourse. Don’t Forget About PCORI Fees The Affordable Care Act (ACA) imposes a fee on health insurance issuers and self-insured plan sponsors in order to fund comparative effectiveness research. These fees are widely known as Patient-Centered Outcomes Research Institute (PCORI) fees. The PCORI fees were created to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. Fees paid by health insurance issuers and sponsors of self-insured health plans fund the institute’s research, in part. The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years. Therefore, the 2018 plan year is the last plan year that these fees will be effective, for calendar year plans. Issuers and plan sponsors must pay PCORI fees annually on IRS Form 720 by July 31 of each year. The fee will generally cover plan years that end during the preceding calendar year. For the 2018 plan year, PCORI fees are due by July 31, 2019. How Much Are the PCORI Fees? On Nov. 5, 2018, the IRS published Notice 2018-85, which increased the PCORI fee amount for plan years ending on or after Oct. 1, 2018, and before Oct. 1, 2019 (that is, 2018 for calendar year plans), to $2.45 multiplied by the average number of lives covered under the plan. Who Must Pay the PCORI Fees? The entity responsible for paying the PCORI fees depends on whether the plan is insured or self-insured.
The Department of Labor (DOL) has advised that, because the PCORI fees are imposed on the plan sponsor under the ACA, it is not permissible to pay the fees from plan assets under ERISA, although special circumstances may exist in limited situations. On Jan. 24, 2013, the DOL issued a set of frequently asked questions regarding ACA implementation that include a limited exception allowing multiemployer plans to use plan assets to pay PCORI fees (unless the plan document specifies another source of payment for the fees). What’s Next? PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). These fees are due each year by July 31 of the year following the last day of the plan year. This means that, for plan years ending in 2018, the PCORI fees are due by July 31, 2019. Covered employers should have reported and paid PCORI fees for 2017 by July 31, 2018. |
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