by Johnson and Dugan | Aug 6, 2021 | Benefit Plan Tips, Tricks and Traps, Employee Benefits, Hot Topics, Human Resources, IRS
Many employees have the option to choose between their employer’s plan and another program where they meet the eligibility requirements (i.e., spouse’s, domestic partner’s, or parent’s plan). A Cash in Lieu of Benefits program, or cash-out option, offers an incentive for those employees to waive the employer coverage and instead enroll in the other plan. The incentive is in the form of a cash payment added to their paycheck. Properly implementing a Cash in Lieu of Benefits program is crucial, as unexpected tax consequences could occur otherwise.
Overview
The Internal Revenue Service (IRS) requires a Section 125 plan be in place to be a qualified cash-out option. If the plan is not set up under an IRC Section 125 plan, the plan will be disqualified and employees who elect coverage under the health plan will be taxed on an amount equal to the amount of cash they could have received for waiving coverage.
The IRS has ruled that when an option is available to either elect the health plan, or to receive a cash-out incentive, then the premium payment to the insurance company becomes wages. The reasoning is that when an employer makes payments to the insurance company where the employee has the option of receiving those amounts as wages, the employee is merely assigning future income (cash compensation) for consideration (health insurance coverage). Therefore, the payment is treated as a substitute for the health insurance coverage. By setting up an IRC Section 125 plan, the employer is offering a choice between cash and certain excludable employer-provided benefits, without adverse tax implications.
Plan Set-up
There must be a Plan Document in place and nondiscrimination requirements must be followed, including annual nondiscrimination testing, in order to be a qualified Section 125 plan. To meet nondiscrimination rules, Cash in Lieu of Benefits must be offered to all employees equitably. To be sure an employer is not over incentivizing employees to drop the plan, which could impact the nondiscrimination participation requirements, the monthly cash benefit should not exceed $200-$300.
When a Section 125 plan already exists (Premium Payment Plan, Health Care Spending Account, Dependent Care Spending Account), the plan can be amended to add the cash out feature. Where no Section 125 plan is in place, it is standard to have an attorney provide this service. It is important to note that, although the Section 125 plan protects the employees electing coverage from taxation, the cash-out incentive is an after-tax benefit.
As always with any IRS-qualified plan, proper documentation is essential. An employee should only be allowed to waive coverage when there is another plan available, and proof of enrollment is provided. If there is a subsequent loss of that coverage, HIPAA Special Enrollment Rights will allow entry onto the plan, and the cash-out incentive will cease.
Considerations
Cash in Lieu of Benefits funds cannot be used to purchase individual health coverage. For companies over 20 lives and Medicare is secondary coverage, the plan should not be structured to incentivize employees over 65 to opt out of the employer plan to enroll in Medicare.
Another factor to consider is the impact to employers considered Applicable Large Employers (ALE) and subject to the affordability determination and reporting under the Affordable Care Act (ACA). An ALE is an employer averaging 50 or more full-time plus full-time equivalent employees for the preceding 12 months. If a cash out option is offered without an IRS qualified Cash in Lieu of Benefits plan, the payment must be included in the affordability calculation.
There are also Fair Labor Standards Act (FLSA) implications. Any opt-out payments made by an employer to an employee must be included in an employee’s regular rate of pay and therefore is used in calculating overtime compensation for non-exempt employees.
These considerations should be reviewed with a tax expert and/or ERISA attorney to determine if a Cash in Lieu of Benefits program is the right option for your organization. These professionals, along with a Section 125 Plan Administrator, can provide the necessary guidance to ensure the program will satisfy compliance requirements. For further information on this topic, please contact your Johnson & Dugan team.
By Jody Lee, Johnson & Dugan
by admin | Jun 24, 2021 | Human Resources
There are certain issues that have taken center stage in the collective conscious when talking about the workplace, the future of work and how the current workforce is faring under the current conditions. Naturally, as those things enter the collective conscious, researchers find themselves asking what exactly holds true and what can we learn from it?
As usual, my inbox is full of the latest studies and surveys being conducted by HR vendors, researchers and employers of all sizes. In today’s data drop, we’re going to take a closer look at how employees view diversity and inclusion efforts, what challenges they’re facing when it comes to mental health and the impact the gig economy is having.
The D&I Appetite
At this point, there should be little doubt around the importance of D&I or DEI in your organization. It’s been well established the impact it has on the bottom line and employer brands, but if you needed more reassurance, the latest study from Boston Consulting Group should hammer it home.
The study asked questions of more than 200,000 employees across 190 countries and the results shouldn’t come as a surprise to anyone who’s been following sentiments around DEI over the last year. Results included the following:
- More than half (51%) of U.S. respondents said they would exclude a company from their job search if its values and stance on diversity and inclusion (D&I) didn’t match their own beliefs. This number was even higher among respondents 30 years and younger (56%).
- D&I became more important over the last year across all age groups globally. In the U.S., respondents 30 years and younger (72%) were most likely to agree with this statement compared to all U.S. respondents (63%) and all respondents globally (69%).
It’s a notable sentiment following the release of research by diversity platform Headstart as part of its “Discrimination in American Hiring” report. The findings show that 54% of those seeking a new job in the last two years felt they were frequently discriminated against. That number rose to 66% for Black Americans and 83% for those who identify as gender-diverse. Interestingly, however, 30% of respondents who faced recruitment discrimination would consider reapplying for the same company.
Mental Health Struggles
In June of last year, the Centers for Disease Control and Prevention (CDC) released data which showed that 40% of Americans were struggling with mental health. That number hasn’t decreased as the pandemic has continued and the months that followed included a hectic election and numerous other crises.
A more recent report from The Standard, an Oregon based insurance company, showed that 55% of workers surveyed said that a mental health issue had affected them more since the pandemic began. MetLife’s annual Employee Benefits Trends Study backs this up, with 54% saying mental health has been their biggest concern during the pandemic.
This won’t come as a surprise to HR teams that have been working toward developing mental health support tools for their workforces, but it should also be extended to talent teams as they consider their hiring processes.
Among the unemployed, one in five are or have been treated for depression in the last year. Many suffer from sleep loss and high levels of stress that can impact their ability to search and interview for a new job. Long term unemployment can lead to serious health issues such as obesity and other conditions related to stress and inactive lifestyle.
Expanding Gig Economy
Globally the gig economy has seen a boom as layoffs and needs for flexible scheduling have seen more people around the world adopt gig work than ever before. In the U.S., around 40% of Americans are currently working in gig or contract roles.
Job boards are now seeing a stark rise in contract job postings, with Resume-Library noting a 58% increase in the demand for handyman roles month over month. While many think of rideshare drivers and freelancer graphic artists when they think of gig work, the top five gig postings on the site now include the following:
- Handyman +58.3%
- Market Researcher +50%
- Packer +20.3%
- Social Media +4.5%
- Photographer +4.3%
The U.S. is currently the fastest growing freelance market in the world, experiencing a 78% growth in gig positions over the last year, with the UK following behind at 59% and Brazil at 48%.
By David Rice
Originally posted on ThinkHR
by admin | May 25, 2021 | Human Resources
The right performance management process for your organization depends in large part on what you want to accomplish with it and what you’re willing to invest in it. Here are some principles to keep in mind when deciding on your policy and performing assessments:
- Performance reviews are often stressful and difficult because the employees don’t know how they’ll be evaluated and they’re worried they’ll be surprised with a bad review. But reviews, however often they’re done, shouldn’t be a surprise. If you give employees regular feedback on their performance and address poor performance when it happens, then the review becomes more of a reminder and summary of what employees are doing well and where they have opportunities to improve.
- Setting clear performance expectations and holding employees accountable to them improves efficiency and productivity. It also improves morale. Conversations with an underperforming employee may be challenging, but allowing poor performance to continue unabated can cause widespread frustration and resentment from coworkers whose work is affected by it. Ignoring poor performance only compounds the problem.
- Employees are more likely to take ownership over their performance goals if they have a role in defining those goals.
- Connecting performance measures to company objectives and values can increase employees’ sense of purpose and engagement by drawing a direct correlation between their individual work and performance and your collective success as a company.
- It’s helpful to structure performance evaluation meetings and conversations around the specific expectations set in the job description to ensure that the discussion is directly applicable to that employee’s particular job duties.
- Documenting performance evaluations can help you justify pay increases, decreases, or other employment decisions like termination that could be challenged as discriminatory. It’s safest to terminate an employee when you have documentation that justifies the legitimate business reasons for the termination.
by admin | May 4, 2021 | Benefit Management, Human Resources
The overall well-being of an employee has never been more of a priority for employers as it is right now. From health care to vision care to mental health care, the entirety of the employee’s health is important to the health of the organization.
Importance of Mental Health Benefits
Mental health and the cost of not treating its issues has far-reaching effects from the individual to the global world.
- If left untreated, an employee’s poor mental health could lead to work related accidents, absenteeism, poor workplace productivity, and even workplace violence.
- Mental health costs make up about 8% of the US’s total healthcare spending.
- The National Institute on Mental Health estimates that major mental illness costs the US at least $193 billion per year in lost earnings.
- Globally, depression and anxiety issues cost about $1 trillion a year.
Types of Mental Health Benefits
Mental health benefits can look different for each organization. Universally, businesses offer some sort of Employee Assistance Program (EAP) to its members. EAPs include services that are typically delivered online or by telephone. Services may include alcohol and substance abuse counseling, legal aid, and health and wellness counseling. These services are offered to the employee free of charge and are done anonymously.
As an extension of basic health care benefits, mental health benefits can also include one-on-one counseling with a licensed counselor for a certain number of sessions. Mental health benefits may also incorporate wellness programs like relaxation and meditation classes, sleep techniques, and stress management lessons. Check your health insurance benefits package details as you may find mental health insurance coverage included under the behavioral health section.
During open enrollment, when employers present the employees with the upcoming year’s health insurance plans, the employee should also ask about mental healthcare options. Just as you assess the different healthcare plans and what fits best for you and your family, you can also assess the costs and coverage of mental health plans. Also, find out if your company offers a Flexible Spending Account as you can use that pre-tax money to pay for out-of-pocket mental health service costs.
Now, more than ever, people are more aware of the benefits to good mental health and how it affects their overall health and work performance. Utilize the company sponsored EAP offerings and investigate the details of your health insurance plan to find out what mental health services are covered. Your overall health and well-being are important and so are you!
by admin | Apr 27, 2021 | Human Resources
Remote Onboarding Success Plan
Remote workplaces have become very commonplace in our world today. In fact, a PwC survey of 669 CEOs, 78% agree that remote work is here for the long-term. As a result, remote onboarding has become part of the normal Human Resources operation in companies. Let’s dive into what remote onboarding looks like and some benefits and challenges of this new way of welcoming employees to the team.
What is onboarding?
Onboarding is the process of welcoming new employees to the company and introducing them to the company culture of their new employer. Onboarding is different from training in that training focuses on the policies and procedures of the job while onboarding is more focused on integrating the new hire to the team and helping them develop relationships within the workplace. Remote onboarding has the same focus but everything is done online through Zoom or other virtual meeting platforms. Onboarding is also not a one-time event. It’s a process that takes multiple days and an ongoing commitment to truly acclimate the new employee to the department.
Challenges of remote onboarding
Connecting virtually with others can have its challenges. Coordinating the entire team’s schedule to welcome new hires as they arrive on the team can be hard. This same challenge happens as the team attempts to continue to build camaraderie with some in-person team members and other remote team members. As many of us have come to understand, working remotely can be very isolating. Throw in joining a new team, and your new hire can feel extremely unengaged. Another challenge is technology set up in a remote environment. When onboarding in person, the IT department can physically be there to issue company technology. Remote onboarding relies on the new employee setting up their own technology or walking through set-up with an IT representative online.
Tips for remote onboarding success
Despite the challenges, remote onboarding can be a successful experience. Here are some tips to overcome some of these obstacles and make your new hire feel engaged and part of the team by the end of their remote onboarding process.
- Set up a kick-off video call with your entire team to welcome the new member. By having a video call, you make it easier for names and faces to connect. Video welcome calls also allow the new hire to see the enthusiasm in the faces of their new team and begin to build an emotional connection.
- Provide an organizational chart so that the remote employee understands the reporting lines in the company. Additionally, consider including pictures of those included on the chart so they can put faces to names. Another great way to go to the next level to connect with the new hire would be to pre-record quick welcome videos by the high-level execs and send them via email.
- Introduce the new employee to the company via email or social media. Do a simple “Getting to Know You” interview with them so you can share some interesting facts about this new team member.
- Regularly check-in via quick chat messages or video call with your remote new hire to find out if they have any questions or concerns in their first week(s). By having scheduled times where you connect with your new employee, they will have less of a chance to feel alone and will begin to learn your management style.
According to ServiceNow, “enthusiasm for a job peaks at the start of the job and wanes by 22% shortly thereafter.” Now is the time to capture your new hire’s enthusiasm and encourage its growth. While remote onboarding can be a challenge, it is possible to overcome the obstacles it presents with some careful planning and dedication to its success.
by admin | Apr 22, 2021 | Human Resources, Workplace
Think for a minute about all you have done today. Now, from that list of tasks, how many would you say you have done well? Again, from the list of tasks you feel you’ve done a good job on, how many were you praised for by your manager or even a co-worker? We all crave approval and praise from others in our life. The workplace is no exception. Praise motivates us to do well and to improve. Praise is necessary and praise is powerful. Follow these easy steps to build an effective habit of praise in your organization.
The WHY of Praise
Before we can get into the HOW of praise, let’s touch on the WHY. According to Gallup.com, “Recognition for good work releases dopamine in the brain, which creates feelings of pride and pleasure.” People want to feel like others see them and appreciate them. The praise-giver also receives benefits from this exchange. By giving praise, you get the same sense of satisfaction as you get when making a charitable gift or helping others. An environment of praise-giving is one where individuals work, not just to complete a task and be done, but they work to do a good job and to please their manager with hard work that is done well. Also, in terms of employee engagement, a manager who regularly praises their team, is one who is
The HOW of Praise
Giving praise is easy and, if you follow these simple tips, it is also an effective tool to motivate and encourage those in your workplace.
Make it QUICK
When you notice something that should be recognized with praise, do it immediately. The more time that passes between the event and the recognition, the less powerful the praise becomes. Make it a habit that when you see good work or good behavior, you stop what you are doing and give praise.
Make it SPECIFIC
Now that you have recognized the behavior or project that deserves praise, you’ll want to make the praise specific. Offering a vague compliment like, “You did good” doesn’t truly speak to the specific action that is praise-worthy. Instead, make your words of affirmation ones that point to a specific instance like, “The logo you created for the Milestone marketing project was clean and really inventive.”
Make it GENUINE
You may be tempted to adopt this new praise policy and start doling out compliments left and right like a praise shotgun, but, don’t. Disingenuous praise is almost as bad, if not worse, than no praise at all. You can tell if someone is making a forced comment or one that has no thought behind it. Instead, make sure the praise is given with a genuine heart and tone.
Create a CULTURE of praise
As you fine tune the act of giving praise in your workplace, your final task is to create a culture of praise-giving. When you build this culture, and everyone is actively involved in recognizing their peers, you will find the morale and engagement in your office is lifted higher. Increased morale and engagement also increase productivity, lowers absenteeism, and lowers turnover.
Praise is incredibly powerful. Praise has the power to motivate, encourage, and build. By following the simple tips outlined here, you can unleash the power of praise in your organization and in your life and reap the benefits to both the giver and receiver.
