Human Resource Consulting From The Business Viewpoint |
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Human Resource Update | June 2022 |
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In four days, we celebrate the founding of the United States – “My country ‘tis of thee, Sweet land of liberty”.
Our founding fathers faced insurmountable challenges and conquered them all. I wish all in HR and their associates a Happy Fourth and may you conquer your challenges through-out the rest of this year!
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Michael F. Yates
President
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If you find value in this newsletter please let us know. Feel free to call me with a comment and/or ask a question at any time (908-689-4200) or send me an email (myates@mfyco.com). We offer this timely information as another benefit of your relationship with our company. If you feel a friend or colleague would benefit from receiving our newsletter, please feel free to forward a copy.
You can view all of our newsletters by clicking the 'newsletter archives' link at our company website www.mfyco.com.
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NEW IRS PROPOSED REGULATION ADDRESSES
“ONE BAD APPLE” RULE FOR MULTIPLE EMPLOYER PLANS
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The US Government encourages private companies to establish plans that provide retirement income to their employees and owners. The benefits to society and the nation’s economy that result from these arrangements are indisputable and, to encourage their establishment, the nation’s tax laws provide favorable financial incentives for companies to set up these plans.
However, to benefit from these incentives, a company must comply with a vast array of laws and regulations that apply to the adoption and ongoing administration of these plans. The purpose of a majority of these rules is to ensure that the plans are designed and administered in a fair and non-discriminatory manner and do not unfairly discriminate in favor of the owners.
As a result, a company must incur significant and ongoing professional expense to maintain one of these plans. In addition, if mistakes are made in administration, a company may face high legal expenses to defend itself as well as possible fines from the government.
In response to these expense and potential liability hurdles, companies that are related by engaging in a common trade or activity have set up “multiple employer plans” (MEPs) that allow them to set up their retirement plans under a single document and administered by a single administrative entity. This type of arrangement thus lowers the expense and liability exposure for the participating employers.
These plans do have undeniable appeal. However, their growth has been relatively modest, mainly due to the limited number of situations in which the “related employer” type groups exist. In recognition of this, the IRS proposed extending the concept to allow unrelated companies to join together to form “pooled employer plans” (PEPs). These pooled arrangements would be set up similar to a MEP, using a single plan and professional administrator such as an investment firm or third party administrator. Unlike a MEP however, a PEP plan would be limited to defined contribution type plans, such as profit sharing or 401(k).
The above development was included in the SECURE Act legislation of 2019, and addressed both MEP’s and PEP’s. Because of the broader coverage of unrelated employers in a PEP, the law included language that would penalize the entire plan if a single participating employer violated any of the rules that affect the plan’s favorable tax status. This was nicknamed the “one bad apple” rule or officially the “unified plan rule.”
The SECURE Act was generally well received. However, the “one bad apple” approach was considered a major impediment to wide acceptance. The IRS first addressed the issue in a proposed regulation in 2019, which was subsequently withdrawn in response to negative comments.
The IRS is now back with a much more friendly set of proposed rules to handle participating employer failures, applicable to PEP’s and most MEP’s. The new rules consist of required language that must be included in each document. The new language must:
- Describe the required notices that must be sent to a failing participating employer.
- Contain a listing of the deadlines for sending these notices.
- Describe the actions that the plan administrator will take if the failures are not properly addressed.
- Include a statement that if the employer fails to act by the final deadline, its covered employees will be 100% vested in their benefits.
So essentially, the new proposal calls for a series of notices to the offending employer, describing the failures, and the corrective actions that must be adopted. If the employer does not correct the failures, the administrator can stop accepting that employer’s new contributions and the employer then has the option to spin off its portion of the plan. If, however, the employer does not correct and also does not do a spinoff, the covered employees can stay in the plan with fully vested benefits. Alternatively, the employees can do their own individual spinoffs to other plans or IRA’s.
This new proposal is much more geared to preserving all employees’ retirement security, including the ones from the offending employers, instead of the punitive “punish the whole plan” previous approach. However, it could also add a new layer of complexity for the plan administrator who may have to keep track of the employee accounts of non-compliant, non-responsive employers indefinitely.
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Postage Stamp Rate Increase |
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Effective July 10, 2022, U.S. Postal Service postage rates will increase. The price of a first-class mail forever stamp will increase by two cents from 58 cents to 60 cents. The single-piece letter additional ounce price will increase to 24 cents, the metered mail one-ounce price increases to 57 cents and the price of a postcard stamp will increase to 44 cents. A one-ounce letter mailed to other countries will increase to $1.40. Other services including certified mail, post office box rental fees, money order fees and the cost to purchase insurance when mailing an item will all also increase. |
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Standard Mileage Rate Increase |
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Effective July 1, 2022, The Internal Revenue Service announced earlier this month an increase in the optional standard mileage rate for the final six months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.
For the final six months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute. The IRS provided legal guidance on the new rates in Announcement 2022-13.
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Deadline For Transparency In Coverage Compliance Fast Approaching |
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The Transparency in Coverage Rule (the "Rule") requires group health plans to disclose two machine readable files ("MRFs") beginning July 1, 2022. The first MRF must disclose information on in-network pricing for certain items and services, and the second MRF must disclose out-of-network allowed amounts. Below provides additional guidance on disclosing the MRFs by the July 1 deadline.
Are self-insured group health plans subject to the Rule?
Yes, self-insured plans are subject to the Rule and must provide the MRFs.
Are fully insured plans subject to the Rule?
Yes, fully insured plans are subject to the Rule and must provide the MRFs.
Are grandfathered plans subject to the Rule?
No. The Rule applies to non-grandfathered plans, not grandfathered plans.
What information is included in the in-network MRF?
The in-network MRF must include rates for all covered items and services, except prescription drugs subject to a fee-for-service reimbursement arrangement. For each coverage option, this includes:
- The plan's name and 14-digit Health Insurance Oversight System (HIOS) identifier, the 5-digit HIOS identifier where the 14-digit identifier is not available, and if no HIOS identifier is available, the Employer Identification Number.
- A billing code.
- All applicable rates, which may include negotiated rates, underlying fee schedule rates, and derived amounts.
- Other information relating to the rates, reimbursement arrangement, and providers.
What information is included in the out-of-network MRF?
The out-of-network MRF must include for each coverage option:
- The plan's 14-digit HIOS Identifier, the 5-digit HIOS identifier where the 14-digit identifier is not available, and the Employer Identification Number where no HIOS identifier is available
- A billing code.
- Unique out-of-network allowed amounts and billed charges with respect to covered items or services for specified time periods.
Information relating to the allowed amount, including the amount of each item or service and provider information.
Do the MRFs have to be publicly available?
Yes. The MRFs must be publicly available, free of charge, and available without conditions. This means a plan cannot require individuals to create credentials, user accounts, or submit personally identifiable information before giving them access to the MRFs, and the MRFs cannot be password protected.
May the MRFs be provided in a proprietary file format?
No. The MRFs must be provided in a nonproprietary, open format. A portable document format (PDF) file, for example, would not meet this requirement due to its proprietary nature.
Does a plan need to contract with a third party to create and host the MRFs?
The Rule does not require a plan to contract with a third party to create and host the MRFs. Regulators anticipate that plans will contract with third parties to create, host, maintain, and update the MRFs. We encourage all plan sponsors to amend existing contracts with their insurers and TPAs to facilitate compliance with the Rule.
Do self-insured and fully-insured plans have to post a link to the MRFs on their public website?
The Rule is not completely clear on this issue, but the answer is likely yes. If a third party has posted the MRFs on its website, the plan should post a link to the MRFs on its public website. In addition to linking to the MRFs on the public website, links can be included on intranet websites, in SPDs, and open enrollment materials.
What is the deadline for making the files publicly available?
The effective deadline for making the files publicly available is July 1, 2022, as that is when the U.S. Department of Labor will begin enforcement.
What if a plan or employer does not have a public website?
The regulations are not clear on what happens in this circumstance. The regulations do not explicitly require an employer to create a website; they assume a website exists. The regulations require that a group health plan or health insurance issuer make the information available on a website. As such, an employer may want to consider creating a public microsite to link to the MRFs. We anticipate future guidance will address this frequently asked question.
Are the MRFs different than the notice regarding balance/surprise billing prohibitions?
Yes. The Consolidated Appropriations Act, 2021, added a new disclosure obligation relating to prohibitions on balance billing. Each group health plan and health insurance issuer offering group health insurance coverage must make publicly available, post on a public website of the plan or issuer, and include on certain explanations of benefits information regarding balance billing prohibitions. The U.S. Department of Labor issued a model notice that can be used for this purpose. This notice applies to plan or policy years beginning on or after January 1, 2022.
Next Steps
Employers should:
- Check with its plan administrator or insurer to confirm that the MRFs are available on their websites.
- Post links to the MRFs on their public websites.
- Amend their contract with the insurer, third-party administrator, or other third party to create, host, maintain, and update the MRFs in accordance with the Rule.
- Confirm the balance/surprise billing prohibition notice is publicly available, posted on their public website, and included with applicable explanations of benefits.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Wolters Kluwer, Vital Law News, Expert Guidance, 6/29/2022, Article by Employee Benefits Practice Group of Kutak Rock LLP
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What Would You Like To See In A Future Issue? |
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IRS Launches New 90-day Pre-Examination Compliance Pilot |
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The IRS Employee Plans function is piloting a pre-examination retirement plan compliance program beginning June 2022. This program will notify a plan sponsor by letter that their retirement plan was selected for an upcoming examination. The letter gives a plan sponsor a 90-day window to review their plan document and operations to determine if they meet current tax law requirements. If you do not respond within 90 days, they will contact you to schedule an exam.
If your review reveals mistakes in the plan’s documents or operations, you may be able to self-correct these mistakes using the correction principles in their voluntary compliance program (EPCRS), described in Revenue Procedure 2021-30. If you find mistakes during your review that are not eligible to be self-corrected, you can request a closing agreement. The IRS will use the Voluntary Correction Program fee structure to determine the sanction amount you pay under a closing agreement. The IRS will review your documentation and determine if they agree with your conclusions and that you appropriately self-corrected any mistakes. They will then issue a closing letter or conduct either a limited or full scope examination.
The goal of this program is to reduce taxpayer burden and reduce the amount of time spent on retirement plan examinations. At the end of this pilot, they will evaluate its effectiveness and determine if it should continue to be part of an overall compliance strategy.
Have you received this letter from the IRS? As always, please let us know if there is any way MFYCO can help.
IRS Employee Plans News - June 3
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Employer’s Guide to Workplace Protections for Abortion-Related Decisions |
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Employers likely have questions about abortion-related employment protections and healthcare benefits after SCOTUS’ controversial decision that overturned Roe v. Wade. Given the ruling, people in states with strict abortion limitations may end up traveling to other states to receive abortion-related care. Can employees take job-protected leave to obtain such services? What other rights might employees have under federal employment laws? Here are a few points you should keep in mind in light of the June 24 Dobbs v. Jackson Women’s Health Organization decision.
Anti-Discrimination Laws Protect Abortion-Related Decisions. Employers should understand the workplace protections employees have under existing federal anti-discrimination laws and how they apply to an employee’s decision whether to have an abortion.
The Interplay of Employment Discrimination Statutes. Title VII of the Civil Rights Act of 1964 bans employment discrimination based on color, national origin, race, religion, and sex. Additionally, in 1978, Congress enacted the Pregnancy Discrimination Act (PDA) to clarify that discrimination based on pregnancy, childbirth, and related medical conditions is considered unlawful sex discrimination under Title VII.
Under these laws, employers are prohibited from firing an employee for having or considering having an abortion, according to the Equal Employment Opportunity Commission (EEOC). Likewise, employees are protected from adverse employment actions based on their decision not to have an abortion. For example, the EEOC said, a manager can’t pressure an employee to have an abortion in order to keep a job, get promoted, or be assigned better projects.
Coverage under Health Insurance Plans. “However, Title VII makes clear that an employer that offers health insurance is not required to pay for coverage of abortion except where the life of the mother would be endangered if the fetus were carried to term or medical complications have arisen from an abortion,” the EEOC noted in enforcement guidelines that were issued in 2015.
Still, under federal law, employers may choose to provide health insurance coverage for abortion-related services. “If an employer decides to cover the costs of abortion, it must do so in the same manner and to the same degree as it covers other medical conditions,” the EEOC said. Additionally, an employer may provide abortion benefits directly or through a collective bargaining agreement.
Notably, states have their own rules on abortion coverage for private insurance plans, which vary significantly. For example, half the states limit or prohibit abortion coverage in healthcare plans that are offered through a state-regulated Affordable Care Act Marketplace. On the opposite end of the spectrum, several states – including California, Illinois, and New York – require state-regulated plans to cover abortions and related care.
The decision overturning Roe v. Wade did not make abortion illegal nationwide. Rather, it lifted the federal right to abortion access and gave states the ability to pass stricter abortion laws. For multi-state employers that are fully insured, monitoring of activity of state departments of insurance will also be important as states are free to regulate the insurance industry within their state, including insurance issued in another state that covers individuals within such state.
In addition, questions remain regarding the impact of state abortion restrictions and bans for employers with self-insured plans. While fully insured medical plans are subject to state insurance laws, employers with self-funded healthcare plans are governed by ERISA, which generally preempts state law. Litigation on the ERISA preemption and state regulation issues are surely going to follow – in particular for employers who adopt travel benefits for abortion access.
Employers Providing Travel Benefits. Many employers have already announced that they will provide travel benefits to employees and family members who live in states where abortion is outlawed or severely curtailed. Travel benefits for medical care are not uncommon in group health plans and can be provided tax-free up to certain limitations in the Internal Revenue Code.
Providing travel benefits outside of the group health plan to all employees raises additional tax, Affordable Care Act, and ERISA compliance issues. Therefore, you should discuss the consequences of such decisions with benefits counsel. Of course, the provision of any travel benefits should be monitored in light of the state laws that are being changed and updated across the country. You should consult with your employee benefits counsel to determine how to best comply with applicable federal and state laws for any decisions regarding abortion coverage and travel access.
Job-Protected Leave May Be Available. Although Title VII and the PDA protect workers from employment discrimination based on their decision to have (or not to have) an abortion, additional issues involving absenteeism may arise if an employee needs time off to travel to another state for abortion-related care.
Is such leave job-protected? It depends. Title VII does not require an employer to provide pregnancy-related leave if it doesn’t provide leave for other temporary illness or family obligations, according to the EEOC. However, employees can take job-protected leave as a reasonable accommodation under federal law in some circumstances, and state laws may provide additional protections. Here are some of the federal laws that may come into play:
Pregnancy Discrimination Act: In addition to protecting workers from pregnancy discrimination, the PDA covers reasonable accommodations for pregnant workers, but only if such accommodations are offered to other employees with similar limitations. “Under the PDA, an employer must allow women with physical limitations resulting from pregnancy to take leave on the same terms and conditions as others who are similar in their ability or inability to work,” according to the EEOC. A worker who is temporarily disabled due to pregnancy should be allowed to take unpaid leave “to the same extent that other employees who are similar in their ability or inability to work are allowed to do so.”
Americans with Disabilities Act (ADA): Notably, pregnancy alone is not considered a disability under the ADA. However, a pregnancy-related impairment may be covered by the ADA, in which case you should engage in an interactive dialogue with the employee to explore reasonable accommodations.
A pregnancy-related impairment is considered a disability if it substantially limits a major life activity (such as walking, standing, and lifting) or a major bodily function (such as the musculoskeletal, neurological, cardiovascular, circulatory, endocrine, and reproductive functions). Therefore, an employee who is seeking an abortion due to a disability may be entitled to take ADA-protected leave in addition to what you would normally provide under a sick leave policy, unless the leave accommodation would result in an undue hardship for the business.
Family and Medical Leave Act (FMLA): While Title VII, the PDA, and ADA apply to employers with at least 15 employees, pregnant workers at larger companies (with 50 or more employees) may be entitled to take time off under the FMLA.
An employee may be eligible to take FMLA leave for abortion-related care if their healthcare provider determines that they have a qualifying serious health condition. When administering such leave requests, you should follow FMLA guidelines for obtaining certification from the employee’s healthcare provider and maintaining confidentiality of the employee’s medical information.
Importantly, you should note that state laws may cover smaller businesses and provide employees with additional leave rights, as well as privacy, confidentiality, and anti-discrimination protections. Consult with local counsel to discuss the interplay between federal, state, and local employment laws.
Wolters Kluwer, Vital Law News, Expert Guidance, June 29, 2022
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2022 Retirement Plan Limits
All limits are based on the calendar year.
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If you have not received our business card with these numbers printed on it and would like one, please let us know! We would be happy to mail you one (or a few to share!) |
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Michael F. Yates & Company, Inc. can help you with a variety of services ranging from retirement plans to providing results-oriented survey instruments, training and development programs for your employees. Our products and services are intended to help you maximize the effectiveness of your Human Resources function.
- These products and services incorporate our years of experience so that you receive rapid results and exceptional value. From onsite consulting, to strategic business integration, to Web enablement, we understand how Human Resources can be applied to solve your problems and achieve your goals. As a result, we can help you get the most out of your investment and turn your most precious resource into a competitive advantage.
- We offer Consulting, Retirement Planning, Pension and 401(K) both qualified and non qualified Plans, Welfare Plans, Communications, Computer Systems, Executive Plans, Compensation, Mergers, Acquisitions, Divestitures and Other Services.
- We offer a true and honest, Client Partnership.
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Our staff and firm are proud members of the following professional organizations:
Society of Actuaries
American Society of Pension Professionals & Actuaries
Society for Human Resource Management
(Sussex-Warren NJ Chapter)
GAPS (Global Association Pension Services)
WorldatWork
American Management Association
National Federation of Independent Business
Better Business Bureau
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101 Belvidere Avenue
P.O. Box 7
Washington, NJ 07882-0007
908-689-4200
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