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Posted on September 14, 2010August 9, 2018

Age Affects Roth 401(k) Contributions, Hewitt Survey Finds

Only a small percentage of employees contribute to Roth 401(k) plans, with participation related directly to their age, according to an analysis.


In an examination of 20 Roth 401(k) plans with just over 500,000 eligible participants, Hewitt Associates Inc. found that 16.6 percent of employees age 20 through 29 made contributions, as did 9.4 percent of employees age 30 through 39.


By contrast, 6 percent of employees age 40 through 49 made contributions as did 4.2 percent of those age 50 through 59, and 2.6 percent of employees age 60 and older.


That finding, Lincolnshire, Illinois-based Hewitt Associates noted, “is consistent with the premise that younger workers will benefit more from Roth contributions.”


Unlike traditional 401(k) contributions, which are made with pretax dollars and then taxed when withdrawn, Roth 401(k) contributions are made with after-tax dollars and investment earnings can be withdrawn tax-free. Investment earnings, though, cannot be withdrawn tax-free until five years after an employee made the first contribution and after he or she reaches age 59½.


For young employees, the tax advantages of Roth 401(k) contributions may be far greater than pretax contributions to standard 401(k) plans. Young employees could accumulate decades of investment gains on their Roth contributions and never be taxed on those gains.


The analysis also found that participation increases steadily in the years after adoption of a Roth 401(k) plan. For example, an average of 7 percent of employees made contributions one year after the plan was adopted, while 15 percent of employees made contributions three years after the feature was added, according to the analysis.


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Posted on September 9, 2010August 9, 2018

Reform Rule on Covering Adult Children Looms

One of the first big pieces of health care reform legislation kicks in this month, when adult children up to age 26 must be covered by employed parents’ health insurance, regardless of student status. Previously, only dependents in college typically remained on their parents’ insurance plans after age 18, unless state law mandated coverage for older children who were not in school.


“This change is effective for plan years or plans that start on or after September 23, but many new plan years won’t start until January 1,” said Sarah Bassler Millar, a partner in the employee benefits and executive compensation practice group at Philadelphia-based law firm Drinker Biddle.


Some adult children already are being covered. In April, 66 health insurers agreed to a Department of Health and Human Services request to begin early enrollment of adult dependents who would have aged out of their existing coverage between April and either September 23 or a later starting date for a parent’s employer’s 2011 plan year. The agency wanted to prevent the cost and inconvenience of dropping adult children, providing interim COBRA coverage and then re-enrolling them.


“Some insurers gave employers a choice, while others just did it,” said Tracy Watts, a principal in the health and benefits practice at Mercer, a New York-based HR consulting firm. But many “self-insured employers said no. They said they didn’t have the budget for it.”


To comply with the eligibility expansion, employers must provide written notice of a 30-day open enrollment period for employees’ adult children. This “may take employers by surprise since typical open enrollment is two weeks,” Watts said. “So they should start a little earlier.”


Although eligibility expansion seems straightforward, the definition of a child raises questions. Many firms had extended dependent status to grandchildren, nieces and nephews based on residency with an employee. “The new law doesn’t allow that,” Millar said. “Advocacy groups are asking for clarification. It’s not clear that we’ll get clarity by January 1.” 


Filed by Workforce Management contributor Bridget Mintz Testa. To comment, e-mail editors@workforce.com.

Posted on September 8, 2010August 9, 2018

IRS Says Flexible Spending Accounts Cant Reimburse OTC Drugs Without Prescription

Employees who want to pay for over-the-counter medications using their health care flexible spending account will need a prescription to do so effective January 1, 2011, according to new Internal Revenue Service rules.


The rules issued September 3 involve a section of the health care reform law that sharply restricts FSA reimbursements for over-the-counter medications such as nonprescription pain relievers, cold medicines, antacids and allergy medications.


What was not clear, though, was whether a doctor’s note was enough or whether a prescription was required for an FSA to reimburse over-the-counter purchases, said Sharon Cohen, an attorney with Towers Watson & Co. in Arlington, Virginia.

In the notice, the IRS says a prescription is required for over-the-counter reimbursements. It defines a prescription as a “written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which a medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.”


The IRS also resolved uncertainty involving the new over-the-counter restriction on what are known as “grace period” FSAs. Under rules the IRS issued in 2005, unused contributions made to FSAs in the current year can be rolled over to pay for expenses incurred during the first 2½ months in the following year. The new IRS rules say over-the-counter reimbursements are banned for grace-period FSAs and FSAs without grace periods effective January 1, 2011, said Mark Berggren, benefits outsourcing counsel with Hewitt Associates Inc. in Lincolnshire, Illinois.


It isn’t known what percentage of expenses reimbursed through FSAs involve over-the-counter medications.


In 2010, an average of 20 percent of eligible employees made FSA contributions, according to Hewitt Associates, while contributions averaged $1,535 per employee among employers with at least 500 workers in 2009, according to Mercer in New York.


The health care reform law’s restrictions on reimbursing over-the-counter expenses from FSAs is the first of two major provisions affecting FSAs to take effect. The other provision will cap pretax contributions to FSAs at $2,500 effective January 1, 2013.


Under prior law, there was no annual limit on FSA contributions, though employers typically imposed annual limits ranging from $4,000 to $5,000.


Congress imposed the new limits to raise revenue to help pay for other provisions in the reform law that will expand coverage, such as new federal insurance premium subsidies for the lower-income uninsured, beginning in 2014.  


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Posted on September 8, 2010August 9, 2018

Survey Employees Pay Larger Share of Health Care Costs

Average annual premiums for employer-sponsored health insurance grew just 3 percent this year for family coverage, but employees’ share of those costs surged 14 percent, according to a survey released Thursday, September 2.


The 12th annual Kaiser Family Foundation/Health Research & Educational Trust “Employer Health Benefits” survey found that employee contributions for single coverage grew 15 percent, compared with the 5 percent increase in annual employer premiums.


As a result, employees paid an average of $3,997 toward the $13,770 cost of family coverage and $899 toward the $5,059 cost of single coverage this year. By comparison, employees last year paid an average $3,515 toward the $13,275 cost of family coverage and $779 toward the $4,824 cost of single coverage.


Since 1999, the share of health care premiums paid by employees has increased 159 percent, while the cost of employer-sponsored health care benefits has grown 138 percent, according to the study.


Drew Altman, president and CEO of the Washington-based Henry J. Kaiser Family Foundation, attributed the recent surge in employee health care coverage contributions largely to the recession, saying that many employers—Kaiser included—are asking employees to take on a greater share of the health care cost burden so their firms can continue to afford to offer the coverage and perhaps avoid layoffs.


“I think it is a recession survival tactic,” he said during a Thursday news conference in Washington.


“The continued economic downturn is leading to more burden for employees in terms of what they have to pay for their health insurance,” Gary Claxton, vice president and director of the Health Care Marketplace Project at KFF, said during the news conference.


Because significant cost-sharing still is permitted under the Patient Protection and Affordable Care Act, Claxton said he expects the trend of greater health benefit cost-sharing with employees will continue in the next few years.


The survey, however, was unable to gauge the effects of PPACA on employer-sponsored health benefit costs because much of it was conducted before the reform measure became law earlier this year, he said.


While employee contributions to the cost of coverage grew significantly, the scope of that coverage eroded somewhat, Altman noted.


In particular, the percentage of employees enrolled in plans with deductibles of $1,000 or more grew to 27 percent this year from 22 percent last year, while the percentage with deductibles of $2,000 or more for single coverage grew to 10 percent this year from 7 percent last year.


“Insurance in this country is gradually changing, becoming less comprehensive, so that what workers get today is less comprehensive than what their parents got,” Altman said.


In a first during the 2010 survey, respondents were asked whether they review performance indicators on health plans’ clinical and service quality. While 34 percent of employers with 200 or more employees said they reviewed such performance indicators, only 5 percent of small employers did so.


Megan McHugh, director of research at HRET, described the numbers as “troubling.”
“Employers are not holding health plans accountable for the quality of care” their employees are receiving, McHugh said. “Firms might simply be choosing health plans based on price.”


Among other significant survey findings:
• The percentage of firms offering health care coverage grew to 69 percent in 2010 from 60 percent in 2009. The increase was the greatest among firms with three to nine workers, growing to 59 percent from 46 percent last year. While on the surface this appears to be good news, researchers said the increase was an aberration that could be attributed to the fact that only firms still in business were interviewed, and that most of those that went out of business during the recession did not offer health care coverage.


• Although preferred provider organization plans still dominate the market with 58 percent of employees enrolled in them, the percentage of employees enrolled in high-deductible health plans has grown to 13 percent in 2010 from 8 percent in 2009. Meanwhile, enrollment in health maintenance organizations shrunk slightly to 19 percent from 20 percent in 2009, while point-of-service plan enrollment fell to 8 percent from 10 percent in 2009, and traditional indemnity plan enrollment held steady at 1 percent.


• Large employers were more likely to offer high-deductible health plans, with 34 percent of firms with 1,000 or more workers offering them, compared with 21 percent of those with 200 to 999 workers and 15 percent of those with three to 199 workers. HDHPs include health plans with a deductible of at least $1,000 for single coverage and $2,000 for family coverage offered with a health reimbursement arrangement, as well as HDHPs that meet federal requirements to permit an enrollee to establish and contribute to a health savings account.


• The percentage of firms with 200 or more active workers offering retiree health benefits dropped to 28 percent in 2010 from 30 percent in 2009.


• Thirty-one percent of employers with 50 or more workers made changes to their mental health benefits in response to the Mental Health Parity and Addiction Equity Act. Of those, 66 percent eliminated limits on coverage, 16 percent increased utilization management of mental health benefits and 5 percent dropped mental health coverage entirely. Twenty-three percent of those employers made other changes that were not specified in the survey.


The survey was conducted between January and May and included responses from 3,143 randomly selected nonfederal public and private employers with three or more workers.  


Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Posted on September 3, 2010June 29, 2023

Tapping Family Leave—Occasionally

By 2005, officials at Nokia Siemens Networks recognized that they were having difficulty coordinating various absence-related requests, including short-term disability and Family and Medical Leave Act claims.


So they decided to create an ombudsman-style position, an individual who could help employees coordinate the related paperwork—FMLA and short-term disability typically run concurrently—to document their leave and avert any payment difficulties.


Soon that position developed into a broader role, says Charlotte Gambrell, who manages and directs North American benefits for Nokia Siemens Networks. The telecommunications company, which employs about 2,200 North American employees, separated from Nokia in 2007.


These days, the ombudsman might intervene when a snag develops related to an FMLA claim, such as when paperwork is required from a physician, Gambrell says. “What the role of this person is, is to eliminate any sense of worry for our employees, especially when they have difficult times. We realize that at those times it’s very overwhelming for them.”


Sharyn Tejani, a senior policy counsel with the National Partnership for Women & Families, cites the ombudsman concept at Nokia Siemens as a great strategy to streamline any logistics associated with FMLA use, particularly if the leave involved is intermittent.


Rather than taking off a block of time under FMLA, such as for maternity leave, some employees may take more sporadic absences, such as when a migraine flares or when they need medical treatment. But there is some concern over the degree to which the federal law’s protections may be abused, so an employee’s sporadic use of FLMA must be monitored closely.


Providing FMLA job protection in such situations is one of the best attributes of the 1993 law, says Tejani, whose group advocated for the law’s passage. After all, chemotherapy might require only several hours away from work each week, and a mother cannot predict when her child will suffer an asthma attack. “For certain conditions, there really is no other way of doing this,” Tejani says. “It’s really the type of leave that will save your job.”


Gail Scott, a partner at MorningStar Health, which specializes in health and productivity management, including FMLA, cautions that employers need to stand guard against malingering employees, who can create a ripple effect across an organization.


“If FMLA is not being administered well by a company, it can become epidemic,” Scott says. If “a significant percent of the population has an approved claim for intermittent use for a chronic condition, they can come and go as they please and are not subject to the company’s attendance policy for a total of 12 weeks a year.”


Use vs. abuse
This year Scott spoke on a FMLA panel at the 2010 Health and Productivity Forum in San Antonio and talked about some steps a PepsiCo facility took to get a better handle on high FMLA use at one of its facilities.


At the facility, 2.1 percent of total employee work hours, or roughly 17,000 annually, were classified as time off under FMLA, according to data presented. The facility’s rate was more than three times the national average of 0.6 percent in 2007. “It’s kind of a staggering number when you first look at it,” said Javier Feliciano, a PepsiCo senior manager of human resources, who also spoke at the San Antonio FMLA panel


Feliciano, who has since left the company, said that some managers were approving requests without asking questions or providing a sufficient review. The estimated cost of lost productivity per year: $577,000.


Intermittent FMLA use can be particularly disruptive in some production-related work environments, says Carl Bosland, a Denver attorney who has written several books related to the federal law. For example, if an employee announces that he or she needs to leave immediately, he says that “it can become very difficult to make sure you have the bodies you need to literally keep the line moving.”


But Tejani maintains that concerns about abuse or disruption are overblown. After all, employers manage to handle other situations in which workers suddenly call in sick for non-FMLA reasons.


 Clarifying FMLA requests
Indeed, there are procedures to prevent abuse. By working carefully through the forms provided by the Department of Labor and adhering to the related deadlines, employers can clarify exactly what medical information they will need, says Charlie Plumb, chair of the labor and employment practice group for McAfee & Taft. The new medical certification form, issued in the wake of the 2009 regulatory changes, is quite helpful, he says. “It’s much more robust and beefed up and it requires a lot more detailed information before you can approve intermittent leave.”


For example, if an employee suffers from migraines, the physician will be asked to predict how often the migraines will occur and how long the employee will need to be off from work each time, Plumb says. If the pattern begins to differ substantially, the employer can circle back to the physician for further clarification.


The 2009 regulations also allow employers—as long as they are not a direct supervisor—to contact the doctor’s office directly if they harbor suspicions about the medical certification’s authenticity, Plumb says. For example, an employer might be suspicious if the handwriting looks like the employee’s or if a word such as bronchitis is misspelled.


Employers also should pay close attention to patterns of absences, particularly if they tend to fall on Mondays and Fridays, Scott says. After all, she quipped at the San Antonio meeting, how does an illness know what day of the week it is?


At the PepsiCo facility, additional training and standardization of procedures made a significant difference, according to the data presented. The initial goal had been to reduce FMLA work hours from 2.1 percent of the total work hours to 1.6 percent in the first year. But in the end, the percentage of FMLA hours declined to 0.8 percent of the total, resulting in a labor cost savings of nearly $257,000.


Workforce Management Online, September 2010 — Register Now!

Posted on September 1, 2010August 9, 2018

Striking Coca-Cola Workers Benefits to Be Restored

Approximately 500 striking Coca-Cola Enterprises Inc. workers in Washington state will have their health benefits restored when they return to work Wednesday, September 1, and contract talks resume, a company spokesman said.


However, the Atlanta-based soft drink company maintains it was within its legal rights to suspend the workers’ health benefits during the work stoppage, which began August 24. The company spokesman also said Monday, August 30, that when health benefits are restored, workers’ contributions will be prorated to reflect the temporary lapse in coverage.


Meanwhile, lawyers for the striking workers filed a motion for a temporary restraining order in U.S. District Court for the Western District of Washington in Seattle seeking to force Coca-Cola to restore health benefits retroactively.


Attorneys from the law offices of Schwerin Campbell Barnard Iglitzin & Lavitt also filed a lawsuit against Coca-Cola on Friday, asserting that the company violated the Employee Retirement Income Security Act when it terminated health benefits for the 500 striking workers.


Despite the resumption of contract talks, the workers plan to pursue their litigation, said Dmitri Iglitzin, a partner in the Seattle-based firm.


Although the Coca-Cola spokesman said the company had not yet been served with the suit or the motion for a temporary restraining order, the company believes the litigation has no merit, he said.  


Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Posted on September 1, 2010August 9, 2018

Survey U.K. Firms May Cut Benefits Under New Pension Law

More than one-third of large U.K. employers say they are likely to reduce pension benefits when rules requiring them to automatically enroll employees go into effect in October 2012, according to a survey released Tuesday, August 31.


The survey by the London-based Association of Consulting Actuaries found that 41 percent of employers said they are “likely” or “highly likely” to reduce future pension benefits due to the automatic enrollment law.


The association surveyed 210 large employers—companies with more than 1,000 employees—during July and August.


According to the study, 16 percent of employers said they would be “highly likely” and 25 percent said they would be “likely” to review existing pension benefits to mitigate the increased cost of higher plan membership caused by automatic enrollment.


The U.K. government rules requiring that all employees automatically be enrolled in workplace pensions are expected to increase membership of employer-sponsored pensions by 35 to 40 percent, according to survey respondents.


Under the rules that go into effect in October 2012 for larger employers, employees would automatically be enrolled but also could opt out of their employer’s pension plan.


By 2017, automatic enrollment will apply to companies of all sizes. The rules were first announced in 2006.


While 75 percent of employers surveyed said they supported the principle, 70 percent also said the automatic enrollment regulations “appeared complex.”


In June, the recently elected U.K. coalition government said it was conducting a review to determine how best to support the implementation of automatic enrollment into company pension plans. Interested parties have until September 30 to offer feedback to the U.K. Department for Work and Pensions.


More than half of the respondents to the ACA survey said they believe the government should delay implementation of rules.  


Filed by Sarah Veysey of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Posted on September 1, 2010June 29, 2023

Caregivers Incur Higher Health Costs for Selves

It’s no surprise that employees who care for older relatives may cost employers more in terms of reduced productivity and higher absenteeism. But a recent study by the MetLife Mature Market Institute now finds that family caregivers tend to have higher health care costs as well.


“We’re trying to make a case to have employers think about their caregivers and what they can do to support them,” says Sandra Timmerman, director of the institute. “We looked at hidden costs that caregivers incur to call attention to the issue.”


The study estimates that U.S. employers pay 8 percent more per year in health care costs for employees who care for elders than for employees without those responsibilities. This could potentially cost U.S. employers $13.4 billion per year, according to the report. The good news, Timmerman stresses, is there are “low-cost or no-cost” solutions to the problem. In particular, the study urges employers to better integrate caregivers into wellness programs.


To conduct the study, MetLife partnered with the University of Pittsburgh Institute on Aging and the National Alliance for Caregiving. The researchers analyzed data in a single company’s health risk appraisal questionnaire, completed by 17,000 employees. Twelve percent said they were responsible for care of an elderly friend or relative. Of these employees, almost half were 50 or older and more than half were blue collar.


Among the chronic conditions more prevalent in caregivers than noncaregivers: depression, costing the company an estimated $6,380 in increased medical expenses; hypertension combined with coronary artery disease, costing $30,073; and diabetes, costing $14,979.


Younger female caregivers, 18 to 39 years old, reported especially high levels of stress—22 percent felt stress at home “almost always,” compared with 12 percent of their non-caregiving counterparts.


“We found that work can become a respite from caregiving,” Timmerman says. “It is a way that people can step back. They want to do a good job because they find work to be a break from their caregiving responsibilities.”


Annette Byrd, global lead for flexibility and performance at GlaxoSmithKline in Research Triangle Park, North Carolina, says the study confirms her observations. “I see people who have had a long-term caregiving responsibility,” she says. “I see them get sick because they’ve burned the candle at both ends and not gotten their own mammograms and not eaten right.”


What caregiving employees most value, Byrd says, is flexibility in their schedule, a sympathetic boss and co-workers who will help them out on occasion—none of which costs money.


But even when companies do offer support to employees, they may find few takers. Byrd says that of 20,000 GlaxoSmithKline employees in the U.S., just 200 annually take advantage of the company’s elder care program, even though “we promote it like crazy.”


One reason, suggests Sherri Snelling, senior director of corporate social responsibility and strategic relationships for Evercare in Cypress, California, is that economic hard times make employees uneasy. In a 2009 study, Evercare, which is part of UnitedHealthcare, found that 50 percent of working caregivers reported feeling both more stress and less comfort asking managers for time off for caregiving duties since the recession began.


Workforce Management, July 2010, p. 8 — Subscribe Now!

Posted on August 26, 2010August 9, 2018

Survey Notes More Health Care Costs Will Shift to Employees

Nearly two-thirds of employers say they intend to make health care plan design changes to shift more costs to employees in 2011, according to a survey released Wednesday, August 27.


The Aon Consulting survey found that 65 percent of respondents plan to increase cost-sharing through actions such as boosting deductibles, co-payments, co-insurance or out-of-pocket limits.


In addition, 57 percent said they expect to boost health care plan premiums paid by employees.


Those changes come amid major increases in health care plan costs. Just over one-third of respondents said their group health care costs rose at least 5 percent but less than 10 percent this year, while 18 percent said costs climbed at least 10 percent but less than 15 percent. Twenty-four percent, though, said cost increases were less than 5 percent, while 5 percent said cost increases were at least 15 percent but less than 20 percent.

The survey also details how expensive COBRA health care continuation coverage has become. For example, this year the median monthly COBRA premium charged for single coverage in a preferred provider organization plan was $449, while the median monthly premium for family coverage was $1,310.


Through legislation passed in 2009 and later extended and expanded, the federal government pays 65 percent of the COBRA premium for employees who are involuntarily terminated. But that subsidy is available only to employees laid off through May 31.


A total of 1,079 individuals participated in the survey, including 44 percent at employers with 500 to 5,000 employees, 38 percent at employers with fewer than 500 employees and 18 percent at employers with more than 5,000 employees.


A summary of the “2010 Benefits Survey” and information on how to obtain the full survey is available at http://aon.mediaroom.com. 


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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Posted on August 19, 2010August 9, 2018

Analysis COBRA Premium Subsidy Doubled Enrollment

The percentage of laid-off employees that opted for COBRA coverage after the government offered a premium subsidy for the health care coverage was double the percentage that opted in during five months prior to the subsidy, according to a study.


Under the subsidy program, which was embedded in an economic stimulus measure Congress passed in February 2009 and later extended and expanded, the federal government pays 65 percent of the COBRA premium for up to 15 months for involuntarily terminated workers.


From March 1, 2009, when the subsidy first generally became available, through May 31, when the program ended for employees laid off after that date, monthly enrollment rates for laid-off employees averaged 38 percent, according to the Hewitt Associates Inc. analysis of COBRA enrollments among 200 large employers.


By contrast, from September 1, 2008, through February 2009, an average of 19 percent of involuntarily terminated employees enrolled in COBRA.


With the end of the subsidy, COBRA enrollment rates now are falling. “Enrollment rates will likely decline over time as workers can’t, or aren’t willing to, afford the high premiums associated with COBRA coverage,” Karen Frost, Hewitt’s health and welfare outsourcing leader in Lincolnshire, Illinois, said in statement.


In addition, employees who were laid off in June and enrolled in COBRA expecting that Congress would retroactively extend the subsidy—as it previously did—may drop the coverage as it has become clear that legislators will not extend the subsidy, Frost said.


Congressional support for extending the subsidy has dwindled amid concerns by Republican and some Democrats about the cost of the subsidy.


Congressional budget analysts estimated that the initial subsidy law, in which laid-off employees were entitled to the subsidy for nine months, would cost the government nearly $25 billion.  


Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


 


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