Archive for December, 2015

ACA Auto-enroll Requirement Repealed


The Affordable Care Act requirement that large employers automatically enroll in a group health plan any employees that don’t respond when asked to choose a plan, has been repealed

The change came after the employer community had lobbied to have the provision repealed because of the lack of clarity in the law, particularly about how much discretion employers would have in choosing a plan for those workers.

Originally the ACA amended the Fair Labor Standards Act by adding a new section requiring employers with more than 200 full-time employees to automatically enroll new full-time employees in the employer’s health benefits plans and continue enrollment of current employees.

The enforcement of this section was pending regulations by the Department of Labor (DOL).

But, in November 2015, President Obama signed the Bipartisan Budget Act of 2015, which in small part repealed the auto-enrollment requirement.

The repeal does not bar employers from auto-enrollment. They may choose to voluntarily continue with automatic enrollment options, such as default or negative elections, but there is no obligation to do so.

Employers may still decide to use “default” or “negative” elections for enrolling employees into health plan coverage or certain other benefits. Under a default or negative enrollment arrangement, an otherwise eligible employee will be deemed to have elected a certain type and level of coverage, unless they timely return a written waiver of that coverage.

The Internal Revenue Service issued regulations in 2007 approving this approach. In fact, this same approach can also be used with health savings account contributions made under a cafeteria plan.

Under Section 125 of the Revenue Code, employers that implement default or negative elections must provide notice to employees about the coverage and cost, and provide the opportunity to opt out of the arrangement.

In many cases, negative or default elections will involve payroll deductions made without an affirmative election by employees to pay for the premiums with their wages.

Some state wage-withholding laws, however, have an express requirement that there be an affirmative election by the employee before any deductions may be made. But, the DOL has taken the position that in this context such wage-withholding laws are preempted by ERISA.

That said, if you do want to still use auto-enroll, you should tread carefully as the result could create a dispute with one of your staff. Fallout could include a run-in with the state labor commissioner, or in the worst-case scenario the threat of a lawsuit.

Before you go ahead with auto-enroll, please consult us or your legal counsel.





‘Cadillac Tax’ Delay Gives Employers Relief

cadillac tax dollar

Employers and their staff will get some relief for another few years from the impending “Cadillac” health insurance tax after Congress approved a delay as part of the budget deal it approved.

President Obama has said he will not veto the new budget, which means that the excise tax will not take effect until 2020, instead of 2018. While some analysts predict that the delay is a precursor to an outright repeal of the tax, benefits experts say it is unlikely to dampen ongoing efforts by employers to rein in their health insurance costs.

Under the Affordable Care Act, the Cadillac tax will be applied at a rate of 40% on any premium in excess of certain thresholds, currently set at $10,200 for an individual policy and $27,500 for family policies. Those thresholds will change annually based on the rate of inflation.

Under the law, health insurers are required to pay the tax, but they are expected to pass on the tax to group health plans, which will result in both employers and employees paying it in the end.

Employer groups lauded the delay. The Washington-based American Benefits Council, which counts mostly large employers as its members, said it considers the delay a “down payment on a full repeal.”

Other employer groups said they would use the extra time to further explore ways to keep their policies under the Cadillac threshold.

The tax is designed to dissuade the use of more expensive and generous plans, which many health care pundits blame for over-utilization of health services. The tax is also expected to help pay for subsidizing health insurance costs for low-income individuals purchasing plans through public exchanges.

Despite the delay, employers are likely continue to seek out ways to reduce their overall health insurance spend, which continues to increase every year, albeit at lower rates than we saw in the decade prior to the ACA.

Group health plan costs rose 3.8% in 2015 from the year prior to an average $11,635 per employee, according to Mercer Benefits.


Cadillac tax is serious business

According to an August 2015 survey by the National Business Group on Health, 72% of employers expected at least one of their benefit plans to hit the excise tax in 2020 if they didn’t control costs.

According to the bipartisan nonprofit Committee for a Responsible Federal Budget, delaying the Cadillac tax until 2020 would cost the government $16 billion. Repealing it would cost $91.1 billion over the next 10 years, the committee said recently.

There was another caveat in the budget bill. It requires the U.S. comptroller general and the National Association of Insurance Commissioners to conduct a study of whether the ACA uses “suitable” benchmarks to determine if the tax should be adjusted to reflect age and gender factors in setting the thresholds for levy.


What you can do

According to the International Foundation of Employee Benefit Plans’ “2015 Employer-Sponsored Health Care: ACA’s Impact Survey,” 34% of employers had started taking action to avoid triggering the 2018 Cadillac tax.
Actions include moving to a consumer-directed health plan (53%), reducing benefits (37%) and adopting wellness and preventive initiatives (28%).

You should run a financial projection to determine if your organization is expected to be affected by the Cadillac tax. If you expect to be impacted, talk to us about cost mitigation strategies and keep an eye out for upcoming proposed regulations.

As long as the tax hasn’t been repealed, the smart money is to stay on top of it.

Workers’ Comp Medical Costs Fall in Wake of Reforms

workers comp construction

The workers’ comp reforms in 2013 have generated surprising cost savings in treating injured workers in California, with overall medical costs per claim falling 8% over a three-year period.

That’s in contrast to the years of inflation before the reforms, when the average medical costs per claim were increasing by an average of 6.5% a year. The new study by the Workers’ Compensation Insurance Rating Bureau of California dissected claims costs between July 2012 and June 2015, finding the medical cost savings were greater than originally anticipated.

SB 863 increased benefits effective January 1, 2013 and January 1, 2014 and provided for a number of structural changes to the California workers’ compensation benefit delivery system.

In total, based on the most current information available, the WCIRB estimates the impact of SB 863 is an annual net savings of $770 million, or 4.1%, of total system costs.

The new study, released in early December, looked at the effects of the legislation on the medical costs associated with treating injured workers. The Rating Bureau had anticipated that reforms would cut medical costs, but it underestimated the effects.

These cumulative savings were primarily driven by changes to the physician fee schedule and pharmacy services, which collectively represent around 61% of all medical service payments. The use of medical services also dropped, due to a more stringent regimen of independent medical review (IMR) of claims.

Additional savings were generated by outpatient facilities and medical equipment providers, which when combined, represent roughly 16% of all medical service payments.

Medical-legal and inpatient hospital services, when taken together, represent approximately 23% of all payments and were the only services to register increases in costs per claim over the three-year period.


Other findings of the study include:

  • Payments per claim via the physician fee schedule (46% of all medical costs) decreased by 9% over the three-year study period. This decline was due in part to the introduction a new and more accurate fee schedule that is widely used in many states. That fee schedule took effect on Jan. 1, 2014.
  • Costs per claim for pharmaceuticals (which account for 15% of all medical costs) declined by 22% during the study period. But the legislation did not address drug costs, and the decline was largely the result of a drop in medical service usage – or utilization – due to the increased use of IMR.
    This reduction in utilization had a particular effect on the prescriptions of highly addictive drugs called opiates, such as OxyContin, the outlays for which fell 48% during the study period.
  • Inpatient hospital costs (12% of all medical costs) increased by 14% on a cost-per-claim basis over the study period. The costs declined in the first half of 2013 likely due to the elimination of payments for duplicate surgical hardware enacted by SB 863.
  • Costs per claim for outpatient facilities (7% of all medical costs) dropped 7% during the study period. Since the majority of these payments are to ambulatory surgical centers (ASCs), the primary driver of the savings was the reduction in reimbursements to ASCs enacted by SB 863.
    That said, outpatient facility cost payments started inching higher in 2015 due to upward adjustments in the Medicare ASC fee schedule as well as changes in the types of outpatient services these facilities provide.
  • Costs under another fee schedule for a variety of services like durable medical equipment, prosthetics and orthotics, fell 12% over the study period. The reforms had nothing to do with this, but rather, the costs were affected by changes to Medicare fee schedules.


Despite these results, the Rating Bureau noted that the trend may be reversing. It said payments per claim for all medical services increased 4% in the first half of 2015 from the same period the year prior.


Sprinkler Damage from a Quake Can Prove a Costly Business: Protect Your Assets


While you might expect cracks to the foundation of your business building during an earthquake, that is not the most common damage resulting from temblors in California.

More typically, businesses may suffer property damage after a quake shakes a building enough to activate or damage indoor sprinklers, which in turn spray water, wreaking havoc on office fixtures, machinery and inventory. The resulting damage from water sprinkler damage can often far exceed the damage to the structure itself.


Napa quake case study

After the Napa earthquake in 2014, the Federal Emergency Management Agency studied 32 buildings with fire sprinkler systems and found five that had sustained sprinkler system damage during the quake. The damaged systems had sprinkler breakage resulting in water damage, short hanger failures, and impact with adjacent components.

Interaction between sprinkler systems and something else was the main cause of damage.

The five systems that were damaged resulted in significant water damage because the quake happened early in the morning in a business district, meaning no employees were on site to shut off water valves.

“Pressurized piping system failures, especially fire sprinkler systems, caused significant damage even though the actual number of piping failures was comparatively small,” according to the FEMA report.

When an earthquake occurs, the majority of sprinkler system damage is from the building shaking and swaying. This movement can cause a sprinkler system that has not been properly braced to come into contact with other building systems or structural members that can damage the sprinklers and fittings. This damage can lead to leaking throughout the piping network, and can impair the system.

If you have a sprinkler system in place, it should comply with the National Fire Protection Association Standard, Section 9.3 of which is designed to limit the impact of this differential movement so that the sprinkler system can function as intended after, and potentially during, the seismic event.

To help maintain the alignment of system components and prevent the development of damage-inducing momentum, the standard requires sway bracing and restraint for system piping.

It is critical to have fire protection systems in place after an earthquake, because it is not uncommon to see a higher volume of fires due to ignition sources that become exposed during the seismic activity.

These ignition sources include electrical hazards such as disconnected or exposed wires and panels, along with fuel sources that may have spilled due to ruptured tanks or broken piping connections. Leaks involving natural gas and propane are also a source of fire once the gas is ignited.


Have the right insurance

If you own a commercial building or are a tenant in a commercial building that is equipped with a sprinkler system for fire suppression, you may not have coverage if there is damage done to your building or the contents inside the building for water damage caused by either a leak in the system or damage to a sprinkler pipe.

Standard commercial property insurance will not cover this type of damage, leaving many affected businesses out of luck should they suffer sprinkler damage after an earthquake.

Coverage for this type of loss can be added to your policy. Earthquake sprinkler leakage (EQSL) or sprinkler leakage coverage can be added to your existing policy by endorsement, usually for an additional premium depending on the insurance company.

An EQSL or sprinkler leakage endorsement would provide coverage for the building and/or contents inside the building should the sprinkler system leak due to an earthquake or accident. It would also provide coverage should the sprinklers become damaged.






Run FMLA Concurrently with Workers’ Comp for Long-term Absences


Employers that run federal Family and Medical Leave Act benefits at the same time as workers’ comp benefits give themselves more leeway when employees are off work for workplace injuries for an extended period of time, a state supreme court has ruled.

In the case of Kings Aire Inc. vs. Jorge Melendez, the Texas Supreme Court ruled that an employer who laid an employee off who had been out on workers’ comp concurrently with FMLA, but had exceeded the 12 weeks away that is allowed by the law, was entitled to do so.

But regardless of the outcome of this case, employers need to be careful about terminating any workers that are out on workers’ comp.


The case

Here are the facts of the case:

Jorge Melendez filed a workers’ comp claim after he injured his wrist in July 2009, cutting two tendons and the median nerve.

His employer informed him that while he was out on workers’ comp, it would concurrently place him on FMLA leave, which allows eligible employees who cannot perform their jobs due to a serious health condition, to take up to 12 weeks of job-protected leave per year.

After 12 weeks, Melendez was unable to return to work and his employer sent him a termination letter. He later sued, accusing the heating and air company of retaliating against him for filing the workers’ comp claim.

A local court and appeals court sided with Melendez, but the Texas Supreme Court reversed those decisions, saying that the evidence did not support the allegation that he had been fired for the workers’ comp claim. Instead, the employer had rightfully signed him up for FMLA leave and he was fired under the company’s policy, which the employer had enforced equally in four other circumstances before Melendez’s termination.


The lesson

If you foresee an employee missing a long period from work, it is not a bad idea for you to also put them out on FMLA leave to protect your interests, employment law attorneys say. And regardless, employers that fail to provide FMLA protections risk running afoul of the law.

If you do not offer FMLA leave while they are out on workers’ comp, your employee will still have those 12 weeks to use for other potential FMLA-approved leaves.

The two laws have some intersections, as well. For example, where provisions of both laws are running concurrently, an employee may turn down light duty under workers’ compensation.

If that happens, the employee may lose benefits under workers’ compensation, but would retain FMLA rights to a continuation of job-protected leave.

If an employee returns to work in a light-duty capacity under workers’ compensation, employers typically may pay a lower wage than that of the worker’s normal position.

Under the FMLA, if an employee is transferred to an alternate position which better accommodates recurring periods of leave than does their regular position, such a position must have equivalent pay and benefits. However, light duty is generally not an alternative position.


Note of caution

But be aware of the following issues. According to the Department of Labor:

  • If an employee is collecting workers’ compensation in relation to something which is also a serious health condition under the FMLA, the employer cannot require the employee to substitute any paid vacation, personal, or medical or sick leave, for any part of the absence that is covered by the payments under workers’ comp.
  • Similarly, an employee is precluded from relying upon FMLA’s substitution provision to insist upon receiving workers’ compensation and accrued paid leave benefits during such an absence. However, the employer and employee may be able to agree to paid leave to supplement the workers’ compensation replacement income.


Preventing Warehouse and Factory Fires


One of the biggest risks to warehouses and production facilities is fires, which can spread rapidly in these environments.

Facilities that are most at risk are those that have high ceilings, large footprints and hold large quantities of inventory that is stored close together. Once a fire starts in that kind of setting, it’s difficult to suppress, putting your entire inventory at risk, as well as machinery and the building itself.

If you operate such a facility, you need to make sure that you reduce the risk of fires, and that you keep your inventory clear of any potential ignition sources.

To start, you need to understand what kind of ignition sources you have in your facility and how to identify hazards.


Ignition sources to watch for include:

  • Paint
  • Oil and chemicals
  • Wiring
  • Heat sources, like lighting and portable heaters
  • Dust


The next step is to put together a fire protection plan.

Your plan will depend on the materials and inventory that you are storing and using.

For example, materials in corrugated cartons are much less combustible than plastic packaging. And inventory such as paint, oil and sawdust is extremely flammable.

One of the first orders of business is to evaluate your current shelving design.

One factor is the height of your storage. The higher you stack your inventory, the greater the fire suppression challenge becomes. That’s because the sprinkler system which will run along your ceiling has to reach not only the top layers of your inventory, but also the bottom layers – and in some cases that could be 30 to 40 feet to the floor.

One way to alleviate this risk is to install in-rack sprinklers, which can reach down to the bottom levels as well.

Another issue to consider is solid versus open shelving. Solid shelving increases the fire risk because it creates an enclosed area where the fire can burn more easily. Fires to products on open shelving are easier to douse.

One of the keys to preventing fires is clearly defined and adequate storage.


Failing to arrange such storage can increase your fire risk for several reasons:

  • Crowded aisles may block fire exits and make it harder for people to escape,
  • Fires spread more easily in cramped warehouses, and
  • Storing hazardous materials such as flammable liquids with other warehouse stock greatly boosts the chances of a fire.


Storage tips

  • Keep electrical switchgear and heating equipment clear of storage.
  • Never let goods sit within 18 inches of lighting.
  • Allow enough clearance between sprinkler heads and stored goods to make sure your sprinkler system can effectively douse the area.
  • Segregate hazardous and non-hazardous materials.


Dust danger

One of the biggest risks is dust igniting. When accumulated dust particles are suspended in the air and contained in a confined space, all it takes is one small ignition source – like static electricity or metal-on-metal friction – to set off a chain reaction of explosions.

When that happens it’s actually a series of small explosions of dust particles that go off at the same time to create a large explosion.

That creates a rise in temperature and a rise in pressure. That pressure will push outwards and if your building is not designed to contain that explosion and vent it safely, the result can be widespread damage.

On top of that, the initial explosion may dislodge additional dust on horizontal surfaces, which will add to the fire.


Dust fire prevention

Fires can be prevented via proper housekeeping and regular maintenance and upkeep of equipment, and the installation of vacuum-powered dust collectors on the outside of the warehouse.


Example of dust fire

On January 29, 2003, a powerful explosion and fire ripped through a rubber-products manufacturing plant at West Pharmaceutical Services in Kinston, NC, taking the lives of six employees, and injuring 38 others, including two firefighters who responded to the accident.

The fuel for the explosion was a fine plastic powder, which had accumulated above a suspended ceiling over a manufacturing area at the plant and ignited.

The blast occurred without warning during a routine workday and could be heard 25 miles from the plant.

Start Educating Your Workers on Affordable Care Act Tax Forms


While we’ve told you about the various forms you may be required to submit as part of your responsibilities under the Affordable Care Act, your employees may not be aware of what’s coming.

Chances are, they’ll likely be confused by the new form 1095-C, which all applicable large employers must provide to them along with their W-2 by the end of January 2016 – and about what they are supposed to do with it.

The problem with this form is that it only states what the employee was offered, and not the health insurance that they chose. That information will be included on another form, 1095-B, which the health insurer will send them.

The ACA’s reporting requirements apply to employers with 50 or more full-time or equivalent employees for calendar year 2015. There is no extra year of relief from reporting for mid-size employers, as there is under the employer shared responsibility provisions.

Form 1095-C provides information for employees to use when completing their income tax returns, showing that they or their family members had qualifying health coverage (also known as minimum essential coverage) for all of the year, or partially depending on when they started working for you.

Here is what you need to know about the forms:


  1. You must provide these forms to all of your staff who were full-time employees (FTEs) for one or more months of the calendar year, including former employees and COBRA participants, regardless of whether the employee participated in your employer-sponsored group health plan. The form provides information for all 12 months of the calendar year.
  2. You must provide these forms to any part-time employees who were enrolled, as well.
  3. You are not required to provide the form to part-time employees who are not enrolled in your health plan.


Small employers

Some small employers may also have to provide their staff with these forms. Those with fewer than 50 FTEs also will be required to file Forms 1095-C and 1094-C if they are members of a controlled or affiliated service group that collectively has at least 50 FTEs.

For fully insured plans, insurance companies will provide the 1095-Bs.


Form 1095-C basics

The form identifies:

  • The employee and the employer
  • Which months during the year the employee was eligible for coverage
  • The cost of the cheapest monthly premium the employee could have paid under the plan


Actual coverage in Form 1095-B

Form 1095-C merely describes what coverage was made available to an employee. A separate form, the 1095-B, provides details about an employee’s actual insurance coverage, including who in the worker’s family was covered. This form is sent out by the insurance provider rather than the employer.

Here’s what you can tell your employees about the forms:

  • You will use your Form 1095-C to complete your tax return. However, the IRS has not yet defined exactly what information from the 1095-C you will need to complete your taxes. If you were not eligible for receive a 1095-C, then you will not need one to complete your tax return.
  • If you worked at more than one company, you may receive a Form 1095-C from each company. For example, if you changed jobs in 2015 and were enrolled in coverage with both employers, you should receive a 1095-C from each employer. Or, if you work for an employer with different franchises or companies, you may receive a 1095-C from each company.
  • Form 1095-B provides information needed to report on your income tax return that you, your spouse (if you file a joint return) and individuals you claim as dependents had qualifying health coverage (also known as minimum essential coverage) for some or all months during the year.
    Individuals who don’t have minimum essential coverage and don’t qualify for an exemption from this requirement may be liable for the individual shared responsibility payment.


Start communicating now

The sooner you start educating your staff, the less confusion and fewer questions they will have.

Since we are coming up on the end of the year, it would be a good idea to write a memo to your staff and prepare a fact sheet that you may want to include as a note in their open enrollment materials.

E-mail communications, posters and other appropriate marketing channels should be used in December and January to get the word out. After the Form 1095-C is sent out, you may want to send them a follow-up e-mail saying it should have arrived.



Why Slips, Trips and Falls Are So Hard to Avoid

Slips, trips and falls constitute the majority of general industry accidents, cause 15% of all accidental deaths, and are second only to motor vehicles as a cause of fatalities.

With those stark realities, any employer that fails to guard against these preventable accidents is asking for an injury to occur. And despite all of American employers’ best efforts, slips trips and falls:

  • Result in more than 95 million lost work days per year (or about 65% of all work days lost).
  • Account for nearly 25% of all reported injury claims every year.
  • Accounted for a 17% increase in the number of deaths from such accidents in 2013, compared to the prior year.


Obviously, there is a disconnect between employer safety measures and the outcome.

A December 2014 survey of almost 1,300 safety professionals, carried out by Safety Daily Advisors, found the “big three” causes of slip, trip and fall incidents are:

  • Human factors – 54%
  • Wet or slippery surfaces – 25%
  • Poor housekeeping – 16%


While you can put in place stringent safety procedures, require fall-protection equipment and install non-skid surfaces, there is one thing that is hard to control: the human factor.

That’s why it’s important to instill in workers the importance of:

  • Immediately cleaning up spills,
  • Closing file drawers when done,
  • Picking up loose items from the floor,
  • Keeping aisles and walkways free from clutter, and
  • Keeping their personal workspace clean and orderly.


But it doesn’t pay to tell them once. Regular reminders can help instill safety mindedness like the above.

Slippery surfaces are one of the biggest challenges a business faces in protecting its employees – and customers, for that matter. It’s important, then, that you know in which types of area slippery surfaces are likely to occur. You should pay special attention to these high-risk areas:

  • Parking lots, especially in areas where water is pooling,
  • Sidewalks,
  • Food preparation areas, where grease and water can cause hazards, and
  • Non-carpeted entryways or lobbies.


Conduct walkway audits to identify safety issues, so that you can develop plans to eliminate them. The plans need to account for varying weather conditions.

Besides those physical aspects, also remind employees to wear proper shoes when it’s raining and not to rush when walking in those areas during rainy days.

The problem is that walking is something we do almost automatically and these days many people are distracted, reading and texting on their smart phones while walking, or maybe lost in thought about their weekend plans.

Distraction results in blindness to their surroundings. Moreover, their emotions, sense of urgency, fatigue or complacency can take over.

But training your employees to be more mindful in areas with slip, trip and fall hazards is not as simple as telling them to “pay attention” or “don’t get distracted.”

Changing behavior is not easy and it takes time and commitment, but the best solution is a behavior-based safety approach.

The first step you need to take is to help your employees become aware of unsafe habits and analyze their mistakes. These include:

  • Walking with caution and making wide turns at corners.
  • Test footing before committing weight.
  • Opening doors with caution.
  • Using railings on stairs.
  • Ensuring there are three points of contact on ladders and equipment.
  • Looking before moving.
  • Wearing appropriate footwear.
  • Being aware of weather forecasts.
  • Pushing (rather than pulling) carts to allow a better line of sight.
  • Keeping eyes and mind on task; no multitasking.
  • No texting or talking on phone while walking.
  • Being alert for trip hazards.
  • Recognizing dangers of walking on ice.
  • Taking designated walkways, rather than shortcuts.
  • Not wearing sunglasses in low-light areas.
  • Reporting all potential hazards.


It will take time and effort to change employees’ perception of risk and personal responsibility. But with a proactive approach that builds a culture and fosters an attitude and behavior that puts safety first, workplace injuries will be reduced.


On your end, you can:

  • Implement good housekeeping practices.
  • Provide proper lighting, traction aids and require safe footwear.
  • Keep walking surfaces clean and in good repair.
  • Install railings and guards.
  • Display warning signs in high-risk areas (‘slippery when wet’-type signs).