by admin | Apr 6, 2018 | Benefit Management, Employee Benefits, ERISA
The Department of Labor’s new claim rules for disability benefits took effect April 2, 2018. The changes were announced over a year ago, but the effective date was delayed to give insurers, employers, and plan administrators adequate time for implementation. Although we’ve reported on the key issues in this blog previously, now seems like a good time for a refresher on how the new rules affect employer plans.
Affected Plans
The new claim rules apply to disability benefits provided under plans covered by the Employee Retirement Income Security Act (ERISA); that is, plans sponsored by private-sector employers. Then the new rules apply if the ERISA plan must make a determination of disability in order for the claimant to obtain the benefit. Group short- and long-term disability plans are the most common examples, but pension, 401(k), and deferred compensation plans also may be affected.
Many plans do not make their own determination of disability, but instead condition the plan’s benefit on another party’s determination. For instance, employer plans that base the benefit on a disability determination made by the Social Security Administration (SSA) are not affected by the new rules.
New Rules
For ERISA plans affected by the new rules, the following additional requirements apply to disability claims filed on or after April 2, 2018:
- Disclosure Requirements: Benefit denial notices must explain why the plan denied a claim and the standards used in making the decision. For example, the notices must explain the basis for disagreeing with a disability determination made by the SSA if presented by the claimant in support of his or her claim.
- Claim Files and Internal Protocols: Benefit denial notices must include a statement that the claimant is entitled to request and receive the entire claim file and other relevant documents. (Previously this statement was required only in notices denying benefits on appeal, not on initial claim denials.) The notice also must include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used. (Previously it was optional to include a statement that such rules and protocols were used in denying the claim and that the claimant could request a copy.)
- Right to Review and Respond to New Information Before Final Decision: Plans are prohibited from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
- Conflicts of Interest: Claims and appeals must be adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
- Deemed Exhaustion of Claims and Appeal Processes: If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan (unless exceptions for minor errors or other conditions apply). In that case, the claimant may immediately pursue his or her claim in court. Plans also must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
- Coverage Rescissions: Rescissions of coverage, including retroactive terminations due to alleged misrepresentations or errors in applying for coverage, must be treated as adverse benefit determinations that trigger the plan’s appeals procedures.
- Notices Written in a Culturally and Linguistically Appropriate Manner: Benefit denial notices must be provided in a culturally and linguistically appropriate manner in certain situations. Specifically, if the claimant’s address is in a county where 10 percent or more of the population is literate only in the same non-English language, the notices must include a prominent statement in the relevant non-English language about the availability of language services. The plan would also be required to provide a verbal customer assistance process in the non-English language and provide written notices in the non-English language upon request.
Action Steps for Employers
Employers are reminded to work with their carriers, third-party administrators, and advisors to make sure their plans comply with the new requirements. Consider these steps:
- Identify all plans that are subject to ERISA. (Plans sponsored by governmental employers, such as cities and public school districts, and certain church plans, are exempt from ERISA.)
- Does the ERISA plan provide any benefit based on disability? If so, is the benefit conditioned on a determination of disability made by the plan or by another party, such as Social Security?
- For insured plans, such as group STD and LTD insurance plans, the carrier generally is responsible for compliance with ERISA’s claim rules. The employer, however, does have a duty to make reasonable efforts to ensure the carrier is complying.
- For self-funded plans, the employer is responsible for compliance. Although the employer may engage the services of a third-party claims administrator, the employer remains responsible for the plan’s compliance with all rules.
Originally Published By ThinkHR.com
by admin | Apr 3, 2018 | Hot Topics, Human Resources, IRS, Workplace
Managing pay can be tricky. Handled incorrectly, pay can create problems for an employer — everything from the inability to attract the right candidates and losing great employees to the competition to presenteeism (employees who are physically in the workplace but not engaged in their work), employee relations issues, compliance audits, and lawsuits. These outcomes impact productivity. They infect the company culture. And they tarnish the employer brand.
In your role as a trusted advisor to clients who may be struggling with their total compensation programs, you need to be ready to help them determine how to make the right decisions. This requires you to be aware of new trends while also helping clients manage risk by complying with wage and hour rules.
Pay Versus Employee Motivation and Retention
Many employee engagement reports note that pay doesn’t impact motivation as much as other work factors, such as:
- The quality of the company and its management.
- Belief in the organization’s products.
- Alignment with the company’s mission, values, and goals.
- Ability to make a meaningful contribution.
- Ability to develop new professional skills.
IBM’s Smarter Workforce Institute’s 2017 study looked at employees’ decisions to leave their jobs and found that the three generations comprising most of today’s workforce would be open to considering new job opportunities for better compensation and benefits: Millennials at 77 percent, Generation X at 78 percent, and Baby Boomers at 70 percent. Those are big numbers, and they shouldn’t be ignored when designing pay plans.
Further, while pay may not be a motivator, it can be a powerful dissatisfier when employees believe that they aren’t being paid correctly for the value they are bringing to the organization, or at the market value of their jobs. Worse yet is the perceived — or real — belief that their pay is lower than what their co-workers are earning. In some markets, this problem is genuine, as companies in hot labor markets struggle with paying new people more than current employees, causing pay compression. Employees do talk and pay information is readily available.
Considering every variable that goes into compensation planning can be complicated. Your clients can start by: setting a compensation strategy to fit their company’s needs and budget; developing compensation programs to fit that strategy, the talent marketplace, and employee demographics; and then administering the compensation program fairly and in compliance with federal, state, and local laws.
Equal Pay Mandates
The Equal Employment Opportunity Commission’s (EEOC) Strategic Enforcement Plan prioritizes enforcing the Equal Pay Act (EPA) to close the pay gap between men and women, and the Trump administration has been silent about changing this direction. This topic is trending, as legislators in more than 40 jurisdictions introduced bills related to equal pay in 2017. California, New York, Massachusetts, and Maryland are setting the pace with laws addressing this issue. These states have set rules that more broadly define the equal pay standard requiring different factors, such as skill, effort, working conditions, and responsibility, in justifying gender pay disparities. These states are also broadening the geographic restrictions for employee pay differentials.
We expect that more states will enact equal pay rules in 2018. Companies should review gender pay differences in their workforce, document the bona fide business reasons for the differences, and correct wage disparities as needed. Permitted differences could include seniority, documented merit performance differences, pay based on quantity or quality of production or sales quotas, or geographic differentials.
Salary History Ban
The issue of pay has traditionally been an inevitable topic of discussion in any job interview. However, in a growing number of places throughout the country, an employer can no longer ask an applicant about his or her salary history. At least 21 states and Washington, D.C., along with several municipalities, have proposed legislation that would prohibit salary history questions. California (effective January 2018), Delaware (effective December 2017), Massachusetts (effective July 2018), and Oregon (effective January 2019) have enacted laws impacting private employers. More bans are expected at both the state and local level.
While the provisions of each law vary, they make it illegal for employers to ask applicants about their current compensation or how they were paid at past jobs. The rationale for these laws stems from the equal pay issue and the premise that pay for the job should be based on the value of the job to the organization, not the pay an applicant might be willing to accept. These laws are designed to reverse the pattern of wage inequality that resulted from past gender bias or discrimination.
For employers, this means:
- Establishing compensation ranges for open positions and asking applicants if the salary range for the position would meet their compensation expectations.
- Updating employment applications to remove the salary history information.
- Training hiring managers and interviewers to avoid asking questions about salary history.
Pay Transparency
Outside of certain industries, the public sector, and unionized environments where pay grades and step increases are common knowledge, historically many employers have had a practice of discouraging employees from openly discussing their compensation. That practice is fast becoming history, due to another notable trend in state legislatures: enacting laws that allow employees to discuss their wages and other forms of compensation with others. Although the provisions of the laws vary, California, Colorado, Connecticut, Delaware, Washington, D.C., Illinois, Louisiana, Maine, Maryland, Michigan, Minnesota, New Hampshire, New Jersey, New York, Oregon, and Vermont now have laws in place allowing pay transparency.
In addition to these state laws, Section 7 of the National Labor Relations Act (NLRA) allows employees to engage in pay discussions as “concerted and protected activities for the purpose of collective bargaining or other mutual aid or protection.” During the Obama administration, the National Labor Relations Board (NLRB) broadly interpreted the NLRA’s Section 7 to side with employees’ rights to discuss wages and other terms and conditions of employment. Unless the Trump administration’s NLRB changes direction on this issue, which is not expected, the clear message for employers is to remove any prohibitions of employees discussing pay or working conditions with others.
Be Vigilant
Employee compensation has always been a hot topic, and this year the temperature will continue to rise. Keep abreast of legislative and regulatory changes that impact pay practices to help your clients stay in compliance with the pay laws that are spreading throughout the country.
Now is a good time to suggest that your clients consider conducting pay audits, updating compensation plans, making compensation adjustments where needed, training managers regarding pay strategy and practice, and communicating the company’s compensation strategy and incentive plans to employees.
By Laura Kerekes, SPHR, SHRM-SCP
Originally posted on thinkHR.com
