HR CORNER HUMAN CAPITAL PRACTICE HRFocus November 2015 www.willis.com EMERGENCY: HOW PREPARED IS YOUR BUSINESS? DO YOUR EMPLOYEES FEEL SAFE? Marina A. Galatro, PHR-CA, SHRM-CP Leann Hoene, SPHR-CA, SHRM-SCP Sr. HR Consultants, HR Partner Willis Human Capital Practice How often do individuals think about security on the job? According to a recent press release from CareerBuilder a majority of workers (94%) feel their office is a secure place to work. However, nearly a quarter of workers (23%) say they would not know what to do to protect themselves if an emergency in their office posed a physical threat. What if many physical threats could be mitigated or avoided if only the victims were given preventative training to identify the signs of danger or if they had known what to do when faced with immediate physical threat? There are some great resources to help employer and employees with emergency preparedness. In case you missed it, September 30 was National PrepareAthon Day. Even if you missed America s PrepareAthon, it is not too late to invest in a preparedness program for your business and your employees. Environmental Health and Safety Today conducted a study with managers in multiple industries and found that those who put the greatest focus on safety had the greatest success with their other business objectives. According to www.ready.gov, following are some of the reasons to start planning a program: Up to 40% of businesses affected by a natural or humancaused disaster never reopen. (Source: Insurance Information Institute) Customers expect delivery of products or services on time. If there is a significant delay, customers may go to a competitor. Larger businesses are asking their suppliers about preparedness. They want to be sure their supply chain is not interrupted. Failure to implement a preparedness program risks losing business to competitors who can demonstrate they have a plan. Insurance is only a partial solution. It does not cover all losses and it will not replace customers. HR CORNER Emergency: How Prepared is Your Business? Do Your Employees Feel Safe?... 1 HEALTH OUTCOMES 2015 State of Affairs: Employer Wellness Programs...3 LEGAL AND COMPLIANCE Employer-Provided Identity Protection Services for Data Breach Victims Not Taxable...4 Time Again To Impute Income on Group Term Life Insurance...5 SINCE YOU ASKED Medicare Entitlement and COBRA...7 WEBCASTS... 8 CONTACTS...9 Continued on page 2
HR Corner continued from page 1 How much should be invested in a preparedness program depends upon many factors. Regulations establish minimum requirements and beyond these minimums each business needs to determine how much risk it can tolerate. Federal, state and local laws and regulations define minimum requirements for emergency management and business continuity. Requirements may apply to industries that are part of our nation s critical infrastructure. These industries range from financial services to energy. Regulations may require emergency planning, business continuity plans, information technology disaster recovery plans, cyber/information security, physical and operational security and other issues. Other industries must comply with regulations because of their use of hazardous chemicals or their hazardous operations. Facilities that manufacture, treat, store or dispose of highly hazardous chemicals must comply with environmental regulations. Chemical facilities that pose a pollution threat to water resources also must comply with environmental regulations. Cover the federal, state and local requirements and then think about what else would benefit your employees the most to ensure they have the necessary knowledge to respond in the event of a disaster or a threat in the workplace. Some companies are taking it a step further and training their employees on personal safety as well. Business Continuity and Information Technology Recognizing the need to protect the confidentiality of electronic information and to ensure the stability of our financial system, the financial services and health care industries should carefully research regulations pertaining to business continuity and information technology disaster recovery planning. Businesses that store customer contact and financial information such as credit card data may have to comply with information security regulations. 8 Tips to Make Your Emergency Action Plan Accessible and Effective (Source: BLR) 1. Have each department review all pertinent parts of the plan to ensure accuracy and workability. Often, if one person is charged with writing the plan, he or she will write something that looks good on paper but may not work well when the time comes. 2. Do not store your action plan in electronic form only; make sure hard copies are readily available to key employees. 3. List the location of important utility shutoffs and include digital photos so they can be located quickly and easily. 4. List any equipment or machinery that must be shut down in an emergency and the names of those responsible for doing so. 5. Conduct periodic drills to gauge whether employees know what to do in an emergency. 6. Be sure to include provisions in your plan for visitors at your facility. 7. Since emergencies don t always happen on Tuesdays at 10 a.m., when writing your plan, be sure to take into account variations in emergency procedures for differences in shifts or days of the week. 8. List locations of special equipment (for example, special protective suits to be used in the event of a chemical release) and emergency supplies (food, water, etc.) in the event employees are stranded at your site. Additional Resources: http://www.ready.gov/ https://www.osha.gov/sltc/etools/evacuation/ http://emergency.cdc.gov/preparedness/index.asp There are many standards and practices for emergency management and business continuity. These standards and practices provide guidance on the subjects of fire brigades, rescue, hazardous materials response, pre-incident planning and security services in fire loss prevention. If you need help getting a business or organization prepared, please see the Business Continuity Planning Suite developed by DHS National Protection and Programs Directorate and FEMA. 2
HEALTH OUTCOMES 2015 STATE OF AFFAIRS: EMPLOYER WELLNESS PROGRAMS Willis Survey Reveals Growth and Strength in Workplace Wellness Ronald S. Leopold, MD, MBA, MPH Wellness programs appear to be more entrenched in employer strategies. The 2015 Willis Health and Productivity Survey Report collected responses from more than 700 employers across the U.S. to find out how broad and how deep they were going with their wellness programs. The results: employee wellness programs have become a part of doing business. Some findings to support this include: The vast majority (72%) of employers have a wellness program in place, with an additional 11% saying that they have plans to put a program in place. Most organizations with wellness programs (58.5%) have had their program in place for three or more years. 43% of organizations with wellness programs view their program as Comprehensive or Intermediate in terms of program maturity. This year s survey focused on many of the fundamentals of wellness programs. The Wellness Council of America (WELCOA) identifies seven benchmarks of a successful wellness program. 1. Capturing CEO support 2. Creating a cohesive wellness team 3. Collecting data to drive health efforts 4. Carefully crafting an operating plan 5. Choosing appropriate interventions 6. Creating a supportive environment 7. Carefully evaluating outcomes 82% said that senior management was committed to a comprehensive wellness program. 59% said that senior management had effectively communicated the importance of good health to employees. 66% said that senior management allocated the necessary resources for their wellness program. 45% said that they have a dedicated wellness committee in place with an additional 17% planning to establish one in the next year. The survey tracked many of the key tactics of employerbased wellness programs, including senior management buy-in, efficacy of communications, utilization of biometric screening and health risk assessments, use and activity of wellness committees and what metrics are being employed to track success. 60% of employers offer biometric screening for their employees, with an additional 11% of employers planning to in the near future. 57% of employers offer health risk assessments for their employees, with an additional 9% of employers planning to in the near future. 69% offered a 24-hour Nurse or Clinician Line. Willis conducted its ninth annual Health and Productivity Survey from May through June 2015. The survey asked employer organizations about health management and wellness program design, challenges, priorities, incentives, medical costs, and health and program evaluation. The survey was delivered to employer-based respondents electronically. All U.S.-based organizations were eligible to participate, regardless of employee size. Participating organizations ranged from fewer than 100 to more than 10,000 employees. Survey respondents included organizations from various industries and geographic regions, which provided a comprehensive sample of responses. 3
LEGAL AND COMPLIANCE EMPLOYER-PROVIDED IDENTITY PROTECTION SERVICES FOR DATA BREACH VICTIMS NOT TAXABLE In Notice 2015-22, the Internal Revenue Service (IRS) announced that it will not require the value of identity protection services to be treated as taxable income when provided to individuals whose personal information may have been compromised by a data breach. BACKGROUND It is not uncommon for organizations, including employers, to provide credit reporting and monitoring services, identity theft insurance policies, identity restoration services, or other similar services to the customers, employees or other individuals whose personal information may have been compromised as a result of the data breach. These identity protection services are intended to prevent and mitigate losses due to identity theft resulting from the data breach. Existing IRS guidance does not address the questions that have been raised concerning the taxability of identity protection services provided at no cost to customers, employees or other individuals whose personal information may have been compromised in a data breach. DISCUSSION According to the announcement, the IRS will not require that an individual whose personal information may have been compromised in a data breach include in gross income the value of the identity protection services provided by the organization that experienced the data breach. Additionally, employers providing identity protection services to employees whose personal information may have been compromised in a data breach of the employer s (or employer s agent or service provider s) recordkeeping system will not be required to include the value of the identity protection services in the employees gross income and wages. The IRS also will not require these amounts to be reported on an information return (such as Form W-2 or Form 1099-MISC) filed with respect to such individuals. Note, however, that this announcement does not apply to cash received in lieu of identity protection services, or to identity protection services received for reasons other than as a result of a data breach, such as identity protection services received in connection with an employee s compensation benefit package. It also does not apply to proceeds received under an identity theft insurance policy since these payments are covered by existing law governing insurance recoveries. CONCLUSION Under the Internal Revenue Code, all compensation or benefits provided to an employee by an employer is taxable as income unless an exclusion applies. Given the increasing frequency of data breaches and the fact that identity protection services are commonly offered as a method of mitigating the risk of identity theft, the IRS guidance is welcome news to employers and other organizations offering such services. Continued on page 5 4
Legal and Compliance continued from page 4 TIME AGAIN TO IMPUTE INCOME ON GROUP TERM LIFE INSURANCE If an employee has more than $50,000 in group term life insurance coverage through his or her employer, the excess coverage may be taxable under federal law. If it is, federal law also requires the employer to impute income to the employee. Some employers satisfy the requirement by imputing income on life insurance coverage as it is provided during the year. Others wait until the end of the year. While it is generally recommended that employers track the value through the year, both methods are permitted as long as imputing is completed by the end of the year. BACKGROUND The federal tax code excludes the cost of the first $50,000 in group term life insurance coverage that an employer provides to an employee. Because there is no tax code exclusion for additional employer-provided coverage, the cost of excess coverage is subject to federal income and FICA (Social Security and Medicare) taxes. The employer providing the excess coverage must report the cost of it on the employee s W-2 and must withhold the employee s portion of FICA taxes and pay the employer s portion. NOTE: The imputing requirement may be avoided in some cases if the premium rates under the group term life insurance policy(ies) meet certain requirements. This design strategy is discussed in the Group Term Life Benefits Employer Guide that is available on Willis Essentials, but is beyond the scope of this article. (Editor s Note: Please contact your Willis adviser should you need to obtain access to materials described within this article.) EMPLOYEE PAYS, BUT EMPLOYER PROVIDES If an employee pays the entire premium for life insurance, one might assume that the coverage is not employer-provided. For group term life insurance, however, that is not always the case. First, if the employee pays for coverage using pre-tax dollars, the coverage is treated, for tax purposes, as if the employer paid those premiums. Second, even if the employee pays the entire premium on an after-tax basis, the coverage may be considered partly employer-provided. That can happen when the cost of coverage for tax purposes is higher than the premium that an insurer charges. IRS DETERMINES THE COST OF GROUP TERM LIFE INSURANCE IRS regulations include a table of rates (reproduced below) for calculating the cost of excess group term life insurance for tax purposes. The Table I rates are not indexed for inflation, so they do not change each year the rates are the same for 2014 as they were for 2013 and will not change until the regulations are revised. Table I Rates for Group Term Life Insurance: Age Bracket * Monthly Cost/$1,000 of Coverage Rates Under 25 $0.05 25 29 $0.06 30 34 $0.08 35 39 $0.09 40 44 $0.10 45 49 $0.15 50 54 $0.23 55 59 $0.43 60 64 $0.66 65 69 $1.27 70 and over $2.06 * When imputing income for 2014, use the employee s age on December 31, 2014. Of course, the IRS-determined rates may be higher or lower than the premiums actually paid for group term life insurance coverage. If the IRS rates are higher, an employee who paid 100% of the premiums for excess coverage with after-tax pay may nonetheless have additional taxable income due to the excess coverage as deemed by the IRS measurement of value. DETERMINING THE AMOUNT OF INCOME TO IMPUTE If an employer pays the premiums for all of an employee s group term life insurance coverage, determining the amount to impute is easy: subtract $50,000 from the total group term life insurance coverage in effect for the employee during the year and multiply the remaining coverage amount by the applicable Table I rate. If the employer does not pay all of the premiums, but the employee s contributions are made on a pre-tax basis, this same calculation applies. Continued on page 6 5
Legal and Compliance continued from page 5 If the employee pays all or part of the premium for any group term life insurance coverage (including the first $50,000) on an after-tax basis, an additional calculation is needed. After finding the Table I cost of all coverage above $50,000, as described above, deduct from that amount all of the employee s after-tax contributions toward the coverage (including contributions for coverage under $50,000). If the result is a positive number, that is the amount to impute. NOTE: If an employee is covered by more than one group term life plan, the IRS requires aggregation of all coverage so that the employee may not exclude the cost of more than $50,000 in coverage for the year. A NOTE ABOUT DEPENDENT LIFE INSURANCE Employer-provided dependent life insurance is taxable unless the amount of the insurance is less than $2,000. If the coverage exceeds $2,000 then the full amount of the dependent life insurance is taxable, including the first $2,000. 6
SINCE YOU ASKED MEDICARE ENTITLEMENT AND COBRA The National Legal & Research Group (NLRG) was recently asked whether an employer has any COBRA obligations to covered employees/former employees who are eligible or entitled to Medicare and, if so, how long must the COBRA coverage period last. The response to this question is: yes, an employer still has an obligation to offer COBRA to covered employees/ former employees who are eligible or entitled to Medicare. However, Medicare entitlement can affect an individual s COBRA rights in that the maximum COBRA coverage period is dependent on whether and when the employee/former employee becomes entitled to Medicare. Note that entitlement means that a Medicare-eligible individual has actually enrolled in Medicare. BACKGROUND Generally, employers with 20 or more employees that offer a group health plan are subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA). Under COBRA, employers are required to offer continuation coverage to covered employees, former employees, spouses, former spouses and dependent children when group health coverage would be lost due to COBRA qualifying events. The coverage continuation requirement applies to all group health plans maintained by an employer, including, but not limited to, medical, dental and vision plans. DISCUSSION Employers have a COBRA obligation to covered employees/former employees who have experienced COBRA qualifying events, regardless of whether an employee/former employee is eligible for or entitled to Medicare. Although neither eligibility nor entitlement to Medicare affects an employee/former employee s right to elect COBRA coverage, the period in which an employee/ former employee becomes entitled to Medicare may affect the length of the COBRA coverage period for the employee/former employee and his or her spouse and dependents. If an employee/former employee is enrolled in Medicare before electing COBRA, he or she must be offered COBRA and has the right to continue COBRA coverage for an 18-month maximum coverage period (the maximum continuation of coverage period for a loss of coverage due to the employee s reduction in hours or termination of employment). Further, if an employee/former employee has a qualifying event which is a termination of employment or reduction in hours, within 18 months after becoming entitled to Medicare, a special rule applies to the covered spouse and dependents of the employee/former employee. Under this special rule, the 18-month maximum COBRA coverage period that normally would apply is extended for the covered spouse and dependents (the rule does not apply to the covered employee). Specifically, the maximum coverage period is the longer of either 18 months from the employee s/former employee s reduction in hours/termination of employment or 36 months from the date of the employee s/former employee s Medicare entitlement. On the other hand, if an employee/former employee becomes entitled to Medicare after electing COBRA, effective on the date of Medicare entitlement, the employer has the right to terminate COBRA coverage for the employee/former employee before the maximum COBRA period is exhausted. Note, however, the employer may not terminate the COBRA coverage for the spouse or dependents of the employee/ former employee. For a detailed discussion of COBRA qualifying events, the plans subject to COBRA, and COBRA notice requirement, please see the Willis COBRA Administration Employer Guide. AN EMPLOYER STILL HAS AN OBLIGATION TO OFFER COBRA TO COVERED EMPLOYEES/ FORMER EMPLOYEES WHO ARE ELIGIBLE OR ENTITLED TO MEDICARE Continued on page 8 7
WEBCASTS WELLNESS INCENTIVES 2.0 HOW TO CREATE THE RIGHT PROGRAM FOR YOUR POPULATION TUESDAY, NOVEMBER 17, 2015, 2 PM EASTERN Heidi Guetzkow Senior Consultant Health Outcomes Human Capital Practice The art of wellness incentives is becoming more of a science. Employer organizations are becoming more sophisticated in developing wellness incentives that work for their workforce. Best practices need to be tailored to the demographics of your population, your organization s culture and how your employee benefits program is configured and delivered. No two employer wellness incentive programs look the same. Understanding what behaviors an organization wants to change, and leveraging incentives in a way that resonates with a particular workforce, is critical to your organization s success in this area. This presentation will present a roadmap for developing a wellness incentive program, which components to consider, and the data you need to monitor and measure success. During this session, participants will learn: What behaviors your organization should consider incentives for Incentive considerations participation, engagement or outcomes-based? Workforce demographics how can they tell you what will work with your population? The role of personal technology for your program To RSVP, click here. NOTE: Advance RSVP is required to participate in this call. Registration ends 1 hour prior to the call start time. HOW TO PREPARE FOR 2016 HEALTH CARE REFORM CHALLENGES TUESDAY, DECEMBER 15, 2015, 2 PM EASTERN Jason Sheffield Managing Attorney National Legal & Research Group Human Capital Practice For employers, 2015 was a year of change and anticipation. What will happen in 2016? What should employers be doing this year? Looking back to the challenges of 2015 and evaluating the challenges to come, Willis invites you to join us for a year-end ACA update. In this program, we will recap the rollout of the employer mandate and then look to upcoming challenges for 2016 and beyond. While many employers still struggle with ACA basics like employee classification and testing rules for control group aggregation, the ACA s looming inaugural information reporting period promises to challenge even the most well prepared employers. These challenges are compounded by compliance with ACA fees, excise taxes, wellness program mandates, and recent cafeteria plan modification opportunities. In this program, we ll start with the basics, reviewing the employer mandate and then move on to more timely topics, including an information reporting update, Cadillac Tax updates, and public exchange developments. Join us for this informative how to session, as we take a look back at 2015 and prepare for 2016. During this session, participants will learn: Basics of implementation of the employer mandate Overviews of ACA taxes and fees Current status of the Cadillac Tax Wellness program updates Developments in public exchange policy and administration To RSVP, click here. NOTE: Advance RSVP is required to participate in this call. Registration ends 1 hour prior to the call start time. Each of the above programs has been approved for 1 recertification hour toward PHR, SPHR and GPHR recertification through the Human Resource Certification Institute (HRCI). For more information about certification or recertification, please visit the HRCI homepage at www.hrci.org. 8
KEY CONTACTS U.S. HUMAN CAPITAL PRACTICE OFFICE LOCATIONS NEW ENGLAND Auburn, ME 207 783 2211 Bangor, ME 207 942 4671 Boston, MA 617 437 6900 Burlington, VT 802 264 9536 Hartford, CT 860 756 7365 Manchester, NH 603 627 9583 Portland, ME 207 553 2131 Shelton, CT 203 924 2994 NORTHEAST Buffalo, NY 716 856 1100 Morristown, NJ 973 539 1923 Mt. Laurel, NJ 856 914 4600 New York, NY 212 915 8802 Stamford, CT 203 653 2430 Radnor, PA 610 254 7289 Wilmington, DE 302 397 0171 ATLANTIC Baltimore, MD 410 584 7528 Knoxville, TN 865 588 8101 Memphis, TN 901 248 3103 Metro, DC 301 581 4262 Nashville, TN 615 872 3716 Norfolk, VA 757 628 2303 Reston, VA 703 435 7078 Richmond, VA 804 527 2343 Rockville, MD 301 692 3025 SOUTHEAST Atlanta, GA 404 224 5000 Birmingham, AL 205 871 3300 Charlotte, NC 704 344 4856 Gainesville, FL 352 378 2511 Greenville, SC 864 232 9999 Jacksonville, FL 904 562 5552 Marietta, GA 770 425 6700 Miami, FL 305 421 6208 Mobile, AL 251 544 0212 Orlando, FL 407 562 2493 Raleigh, NC 704 344 4856 Savannah, GA 912 239 9047 Tallahassee, FL 850 385 3636 Tampa, FL 813 281 2095 Vero Beach, FL 772 469 2843 MIDWEST Appleton, WI 800 236 3311 Chicago, IL 312 288 7700 Cleveland, OH 216 861 9100 Columbus, OH 614 326 4722 Detroit, MI 248 539 6600 Grand Rapids, MI 616 957 2020 9
Milwaukee, WI 262 780 3476 Minneapolis, MN 763 302 7131 763 302 7209 Moline, IL 309 764 9666 Overland Park, KS 913 339 0800 Pittsburgh, PA 412 645 8506 Schaumburg, IL 847 517 3469 SOUTH CENTRAL Amarillo, TX 806 376 4761 Austin, TX 512 651 1660 Dallas, TX 972 715 2194 972 715 6272 Denver, CO 303 765 1564 303 773 1373 Houston, TX 713 625 1017 713 625 1082 McAllen, TX 956 682 9423 Mills, WY 307 266 6568 New Orleans, LA 504 581 6151 Oklahoma City, OK 405 232 0651 San Antonio, TX 210 979 7470 Wichita, KS 316 263 3211 WESTERN Fresno, CA 559 256 6212 Irvine, CA 949 885 1200 Las Vegas, NV 602 787 6235 602 787 6078 Los Angeles, CA 213 607 6300 Phoenix, AZ 602 787 6235 602 787 6078 Portland, OR 503 274 6224 Irvine, CA 949 885 1200 San Diego, CA 858 678 2000 858 678 2132 San Francisco, CA 415 291 1567 San Jose, CA 408 436 7000 Seattle, WA 800 456 1415 The information contained in this publication is not intended to represent legal or tax advice and has been prepared solely for educational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication. Willis North America Inc. Brookfield Place 200 Liberty Street, 7th Floor New York, New York 10281-1003 United States Tel: +1 212 915 8888 www.willis.com 14801/10/15