IRS Warning: HSAs, Health FSAs and HRAs Cannot Pay for Personal Health and Wellness Expenses

Employee Communications, IRS

IRS Warning: HSAs, Health FSAs and HRAs Cannot Pay for Personal Health and Wellness Expenses

The IRS recently issued a bulletin to remind taxpayers that tax-advantaged medical savings accounts, such as health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs), cannot pay for personal expenses for general health and wellness. Similarly, health savings accounts (HSAs) cannot be used to pay for these personal expenses on a tax-free basis.

The IRS provided this reminder as a warning to taxpayers to beware of companies’ misrepresentation of when personal health expenses can be reimbursed by health FSAs, HRAs and HSAs.

Qualified Medical Expenses

Health FSAs, HRAs and HSAs can be used to pay out-of-pocket costs for qualified medical expenses that are not covered by a health plan. Qualified medical expenses must be incurred primarily to alleviate or prevent a physical or mental defect or illness. These expenses include payments for medical services rendered by physicians, surgeons, dentists and other practitioners. They include the costs of equipment, supplies and diagnostic devices needed for these purposes. They also include the costs of medicines and drugs prescribed by a physician. However, expenses that are merely beneficial to general health are not qualified medical expenses.

Nutrition, Wellness and General Health Expenses

The IRS maintains a set of FAQs addressing when costs related to nutrition, wellness and general health are qualified medical expenses. These FAQs clarify that these costs are qualified medical expenses only in narrow circumstances. For example:

The cost of nutritional counseling or a weight-loss program is a qualified medical expense only if it treats a specific disease diagnosed by a physician (such as obesity or diabetes).
The cost of nutritional supplements is a qualified medical expense only if the supplements are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician.

…

By Jessica Rogers|March 10th, 2024|Employee Communications, IRS|Comments Off

Fair Employment – Equal Pay Laws For New Jersey

Broad Reach Benefits, Disability, Employee Benefits, Employee Communications, Human Resources, Legislation, U.S. Department of Labor

Fair Employment – Equal Pay Laws For New Jersey

The federal Equal Pay Act (EPA) requires that men and women receive equal pay for equal work in the same establishment. In addition to the federal EPA, many states, including New Jersey, have enacted their own equal pay laws prohibiting wage discrimination based on gender and other characteristics.

This Employment Law Summary provides an overview of New Jersey’s Diane B. Allen Equal Pay Act (NJEPA), which prohibits certain pay differentials between men and women, and the Law Against Discrimination (LAD), which was amended by the NJEPA to expand protections against unequal pay based on various protected traits.

COVERED EMPLOYERS

The NJEPA applies to virtually all employers in the state, other than nonprofit hospital associations or corporations, and generally protects all employees, both male and female. However, it does not protect volunteers providing service for a nonprofit organization, farm workers, or domestic servants in a private home or hotel.

The LAD is a broader anti-discrimination law that prohibits a variety of entities, including all employers with one or more employees in the state (other than employers of domestic servants), from discriminating in compensation or against employees or job applicants based on any of several characteristics.

PROHIBITED PAY PRACTICES

The NJEPA prohibits employers from discriminating in any way in the rate or method of payment of wages to any employee based on sex. In addition, the LAD prohibits employers from discriminating against employees or applicants in compensation or the terms, conditions or privileges of employment based on any of the following, which are known as protected traits:

Race (including “traits historically associated with race,” such as hair texture, hair type and protective hairstyles);
Color;
Age (18+);
Sex (including pregnancy or breastfeeding);
Affectional or sexual orientation;
Gender identity or expression;
Creed/religion;
Marital status;

…

By Jessica Rogers|March 3rd, 2024|Broad Reach Benefits, Disability, Employee Benefits, Employee Communications, Human Resources, Legislation, U.S. Department of Labor|Comments Off

7 Key Employee Benefits Trends in 2024

Employee Benefits, Employee Communications

7 Key Employee Benefits Trends in 2024

Attracting and retaining employees has challenged employers since the onset of the COVID-19 pandemic. In 2024, the labor market is expected to cool slightly; however, competition for talent will remain. As such, employers must remain agile and adapt to developing labor and market trends that will shape the market in 2024. In particular, current labor challenges are forcing employers to find ways to balance rising health care costs and inflation while providing employees with benefits they value and need. Understanding this year’s key employee benefits trends can help employers attract and retain talented individuals in an evolving labor market.

This article discusses seven key employee benefits trends in 2024.

1. Managing Health Care Costs

High inflation, provider shortages, an increase in serious chronic conditions and deferred care due to the pandemic continue to drive health care costs. According to several industry surveys and reports, employers anticipate health care costs to grow between 6% and 8.5% in 2024, the largest increase in more than a decade. This year, employers may struggle to mitigate skyrocketing health care costs while keeping benefits affordable for employees. Thus, many employers will plan and implement multiple cost-saving strategies in 2024 to mitigate rising health care costs, such as:

Modifying health plan designs
Incorporating health care analytics
Using artificial intelligence to streamline administrative workflows, help employees make informed benefits decisions and decrease costs
Implementing pharmacy management strategies
Maintaining full coverage of recommended prevention and screening services
Tailoring benefits to meet employees’ specific needs
Expanding voluntary benefits offerings
Improving employee health care literacy
Investing in more virtual health opportunities
Incentivizing employees to seek cost-effective care options
Revisiting cost-sharing arrangements

2. Increasing Personalization and Flexibility

The modern workforce is comprised of four or five generations of workers from various …

By Jessica Rogers|January 9th, 2024|Employee Benefits, Employee Communications|Comments Off

Small Employers Focus on Retention, While Large Employers Hire Slower

Employee Communications, Human Resources

Small Employers Focus on Retention, While Large Employers Hire Slower

Recent findings from payroll provider ADP showed that small businesses hired more than large employees during the fall of 2023. According to ADP, employers with fewer than 50 employees added 95,000 employees, while employers with 500 or more employees cut 83,000 jobs in September 2023. The divergent trends suggest that small businesses still need employees to produce and grow, while large employers can afford to reduce their workforce to mitigate inflation’s impact on their businesses.

For job seekers, this means that although job opportunities are available, they may not come with the most competitive wages or benefits. In fact, ADP found that only 18% of small businesses plan to change wages in the next three months, compared to 50% of midsized businesses and 58% of large businesses. Therefore, small businesses may need to consider other tactics to attract and retain workers.

With many midsized and large businesses planning on improving compensation to better retain workers, small businesses will need to make tough decisions about how to increase compensation or face the prospect of losing workers to competitors who are offering more. For small businesses unable to raise employee compensation as high as they would like, voluntary benefits can offer more perks to employees without raising health care costs. Voluntary benefits supplement traditional benefits (e.g., health insurance) and are usually employee-paid.

While many organizations have embraced offering voluntary benefits as an integral part of their benefits strategy, more small businesses will either embrace

these benefits or expand their offerings in 2024. According to ADP, 24% of small businesses plan on expanding employee benefits in the next three to six months. Voluntary benefits are extremely popular with employees and allow employers to tailor their benefits to employee demands and needs. Bolstering …

By Jessica Rogers|December 28th, 2023|Employee Communications, Human Resources|Comments Off

IRS Announces 2024 Retirement Plan Limits

Broad Reach Benefits, Employee Benefits, Employee Benefits Adviser, Employee Communications, Human Resources, IRS, Legislation, Retired, Voluntary Benefits

IRS Announces 2024 Retirement Plan Limits

The Internal Revenue Service (IRS) has released Notice 2023-75, containing cost-of-living adjustments for 2024 that affect the amounts employees can contribute to 401(k) plans and individual retirement accounts (IRAs).

2024 Increases

The employee contribution limit for 401(k) plans in 2024 has increased to 23,000, up from $22,500 for 2023. Other key limit increases include the following:

The employee contribution limit for IRAs is increased to $7,000, up from $6,500.

The IRA catch‑up contribution limit for individuals aged 50 and over remains unchanged at $1,000 for 2024 (despite this limit now including an annual cost‑of‑living adjustment because of legislation enacted at the end of 2022, referred to as “SECURE 2.0”).

The employee contribution limit for SIMPLE IRAs and SIMPLE 401(k) plans is increased to $16,000, up from $15,500.

The limits used to define a “highly compensated employee” and a “key employee” are increased to $155,000 (up from $150,000) and $220,000 (up from $215,000), respectively.

The annual limit for defined contribution plans (for example, 401(k) plans, profit-sharing plans and money purchase plans) is increased to $69,000, up from $66,000.

The annual compensation limit (applicable to many retirement plans) is increased to $345,000, up from $330,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $7,500. Therefore, participants in these plans who are 50 and older can contribute up to $30,500, starting in 2024.

The income ranges for determining eligibility to make deductible contributions to traditional IRAs, contribute to Roth IRAs and claim the Saver’s Credit (also known as the Retirement Savings Contributions Credit) also increased for 2024.

More Information

The IRS’s news release contains more details on the cost-of-living adjustments for …

By Jessica Rogers|November 1st, 2023|Broad Reach Benefits, Employee Benefits, Employee Benefits Adviser, Employee Communications, Human Resources, IRS, Legislation, Retired, Voluntary Benefits|Comments Off

Overview of the NLRB’s 2023 Joint-employer Standard

Compliance, Employee Communications, Human Resources, Legislation, U.S. Department of Labor

Overview of the NLRB’s 2023 Joint-employer Standard

On Oct. 27, 2023, the National Labor Relations Board (NLRB) published a final rule that establishes new criteria to determine joint-employer status. Joint employment situations can happen when two or more employers share personnel hiring, supervision and management practices. When a joint employment status exists, joint employers are equally responsible for compliance with applicable laws and regulations.

The final rule becomes effective 60 days after publication, on Dec. 26, 2023. This final rule applies to labor issues related to the National Labor Relations Act (NLRA) and focuses on the amount of control an employer exerts over the employment relationship.

Whether joint employment is by design or unintentional, joint employers are equally:

Liable for unfair labor practices committed by other joint employers;
Required to bargain with the union that represents jointly employed workers; and
Subject to union picketing or other economic pressure if there is a labor dispute.

Action Items

Employers, particularly contractors and subcontractors, should become familiar with the new rule and determine whether a more inclusive joint-employer standard would reclassify them as joint employers in their operations by the rule’s effective date. Employers affected by the new standard should also take precautionary steps to ensure other joint employers comply with regulations regarding labor and employment laws for joint employees.

The 2020 Joint-employer Standard

The NLRB adopted the current joint-employer standard on April 27, 2020. This standard will expire once the 2023 final rule becomes effective. The NLRB will review cases filed before Dec. 26, 2023, under the 2020 joint-employer standard.

The 2020 standard considers the “substantial direct and immediate control” employers have over essential terms and conditions of employment for individuals who are employed by another organization. Specifically, the 2020 joint-employer standard indicates that a business is a joint …

By Jessica Rogers|October 30th, 2023|Compliance, Employee Communications, Human Resources, Legislation, U.S. Department of Labor|Comments Off

Federal Agencies May Expand Health Coverage for OTC Preventive Products

Broad Reach Benefits, Compliance, Employee Communications, Legislation

Federal Agencies May Expand Health Coverage for OTC Preventive Products

On Oct. 4, 2023, the Departments of Health and Human Services, Labor and the Treasury (Departments) issued a request for information (RFI) on the scope of the Affordable Care Act’s (ACA) preventive care coverage requirements for over-the-counter (OTC) products. Specifically, the Departments are gathering input from the public on requiring group health plans and health insurance issuers to cover OTC preventive products without cost sharing even when they are not prescribed by a health care provider.

The RFI signals that the Departments are considering eliminating the prescription requirement for first-dollar coverage of OTC preventive products. The Departments note that eliminating the prescription requirement is an important option to consider for expanding access to contraceptive care, as the first OTC daily oral contraceptive is expected to become available soon.

Preventive Care Coverage Requirements

The ACA requires non-grandfathered health plans and issuers to cover certain recommended preventive health services without imposing cost-sharing requirements when the services are provided by in-network providers. Most recommended preventive services require a health care provider to either provide a prescription for the item or service or directly furnish the service. However, there are several OTC preventive products available to consumers without a prescription. Examples of these include:

Certain types of tobacco cessation pharmacotherapy;
Folic acid supplements;
Breastfeeding supplies (e.g., breast pumps and breast milk storage supplies); and
Certain contraceptives, including the OTC daily oral contraceptive that was approved by the Food and Drug Administration in July 2023 and is expected to become available soon.

Current agency guidance requires health plans and issuers to cover OTC preventive products without cost sharing only when they are prescribed for an individual by their health care provider. The RFI seeks public input regarding the potential benefits and costs …

By Jessica Rogers|October 16th, 2023|Broad Reach Benefits, Compliance, Employee Communications, Legislation|Comments Off

Legal Update-Upcoming EEO-1 Reporting Deadlines

Compliance, Employee Communications, Human Resources, Legislation, U.S. Department of Labor

Legal Update-Upcoming EEO-1 Reporting Deadlines

Under Title VII of the Civil Rights Act (Title VII), employers with 100 or more employees and certain federal contractors must submit a report about their workforces to the Equal Employment Opportunity Commission (EEOC) by March 31 every year. This report, known as the EEO-1 report, is a federally mandated survey that collects workforce data categorized by race, ethnicity, sex and job category.

However, the collection of this data from 2022 was delayed, and the portal for submitting EEO-1 reports was not even opened before the usual deadline in 2023. Instead, the EEOC announced that it would open the portal for submissions of 2022 EEO-1 information on Oct. 31, 2023.

The EEOC also set the deadline for employers to complete their 2022 EEO-1 Reports. These submissions must be completed by Dec. 5, 2023.

Covered Entities

The following entities are subject to EEO-1 reporting:

A private employer that has 100 or more employees (with limited exceptions for schools and other organizations);
A private employer with between 15 and 99 employees if it is part of a group of employers that legally constitutes a single enterprise that employs a total of 100 or more employees; and
A federal contractor with 50 or more employees, is either a prime contractor or first-tier subcontractor, and has a contract, subcontract or purchase order amounting to $50,000 or more.

Enforcement

Although the EEOC sends notification letters to employers it knows to be subject to the EEO-1 requirements, all employers are responsible for obtaining and submitting the necessary information prior to the appropriate deadline.

An employer that fails or refuses to file an EEO-1 report as required may be compelled to do so by a federal district court. Federal contractors also risk losing their government …

By Jessica Rogers|September 5th, 2023|Compliance, Employee Communications, Human Resources, Legislation, U.S. Department of Labor|Comments Off

Open Enrollment 2024 – Health Savings Accounts (HSAs)

Broad Reach Benefits, Employee Benefits, Employee Benefits Adviser, Employee Communications, Human Resources, Voluntary Benefits

Open Enrollment 2024 – Health Savings Accounts (HSAs)

Employers who sponsor high deductible health plans (HDHPs) that are compatible with health savings accounts (HSAs) should prepare for open enrollment by:

Ensuring that employees understand how HSAs work, including the benefits of opening an HSA; and
Updating their HDHP’s design and communicating any plan changes to employees.

There are many advantages to selecting an HDHP/HSA option at open enrollment time—for example, HSAs have three levels of tax savings and HDHPs typically have lower monthly premiums. However, many employees may not be aware of these advantages or understand how the HSA rules apply to them. Employers should help their employees understand key HSA features during the open enrollment process.

In addition, to be compatible with HSAs, HDHPs must comply with IRS limits regarding the plan’s annual deductible and out-of-pocket maximum. The IRS adjusts these limits for inflation each year. Employers should review their plan limits to make sure they comply with the limits for the plan year beginning on or after Jan. 1, 2024.

HDHP Plan Design

To prepare for open enrollment, employers with HDHPs should:

Review their plan’s minimum deductible and out-of-pocket maximum limits to ensure they comply with the IRS’ limits for 2024;
Review coverage options for telehealth and COVID-19 testing and treatment; and
Communicate any plan changes to employees.

Communicating HSA Rules to Employees

As part of the open enrollment process, employers that offer HSA-compatible HDHPs should help their employees understand the benefits of opening an HSA and making tax-free contributions. Employees may be confused about the rules surrounding HSAs and may not realize all the advantages associated with these accounts.

Alera Group can provide sample resources for communicating the HSA rules to employees.

HSA Advantages

Open enrollment is an ideal time for employers to highlight to eligible employees the advantages …

By Jessica Rogers|August 22nd, 2023|Broad Reach Benefits, Employee Benefits, Employee Benefits Adviser, Employee Communications, Human Resources, Voluntary Benefits|Comments Off

Deadline for Employers to Receive 2023 MLR Rebates Is Approaching

Broad Reach Benefits, Employee Benefits, Employee Communications, Human Resources

Deadline for Employers to Receive 2023 MLR Rebates Is Approaching

Employers with insured group health plans may soon receive a medical loss ratio (MLR) rebate from their health insurance issuers. Issuers who did not meet the applicable MLR percentage for 2022 must provide rebates to plan sponsors by Sept. 30, 2023. These rebates may be in the form of a premium credit or a lump sum payment.

MLR Rules

Employers with insured group health plans may soon receive a medical loss ratio (MLR) rebate from their health insurance issuers. Issuers who did not meet the applicable MLR percentage for 2022 must provide rebates to plan sponsors by Sept. 30, 2023. These rebates may be in the form of a premium credit or a lump sum payment.

Issuers who did not meet their MLR percentage for 2022 must provide rebates by Sept. 30, 2023. As a general rule, an employer who receives a rebate should use it within three months to avoid ERISA’s trust requirement. For rebates received on Sept. 30, 2023, this three-month deadline is Dec. 30, 2023. This deadline should be adjusted for rebates received before Sept. 30, 2023. Employers who receive MLR rebates should also be prepared to answer questions from employees about the rebate and how it is being allocated. The MLR rules require health insurance issuers to spend a minimum percentage of their premium dollars on medical care and health care quality improvement. This percentage is 85% for issuers in the large group market and 80% for issuers in the small and individual group markets. States may set higher MLR standards than the federal 80%/85% thresholds. Issuers must report to the federal government how they spent their premium dollars for each calendar year by July 31 …

By Jessica Rogers|August 7th, 2023|Broad Reach Benefits, Employee Benefits, Employee Communications, Human Resources|Comments Off