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Year-End Reporting of Company-Paid Health Insurance—and an S-Corp Reminder

By | Benefits & Insurance, Payroll, Record-keeping | No Comments

As the year draws to a close, company personnel charged with record-keeping should collect their corporate health insurance information in preparation for W-2 and other tax form reporting. (MarathonHR clients should send this information to us as soon as possible.)

For S-Corporations (S-Corps), this information should be segregated by payments made to employees, and their spouses and dependents (which are not wages and are therefore not subject to withholding), and payments made on behalf of officers, owners or employees who own more than two percent of the company’s stock. For these individuals, the amount paid on their behalf must be reflected on their W-2s.

Shareholders cannot take their income as distributions to avoid this outcome. In fact, the courts have consistently held that S-Corp officers/shareholders who provide more than minor services to their corporation and receive, or are entitled to receive, compensation are subject to federal employment taxes and must receive a W-2.

If a shareholder performs no or minor services, or the S-Corp’s net income is so low that the shareholder receives very little income, they may take it as a distribution—but they still must report income for any insurance premiums that were paid on their behalf. The way to do that, in this scenario (and the way that LLC’s handle insurance payments made on behalf of partners), is to report it on the K-1 (Form 1065) as guaranteed payments to be included in gross income.

Employer Planning Strategies for the 2018 Healthcare Laws

By | Affordable Care Act, Benefits & Insurance, Employee Retention | No Comments

With the ACA very much alive as we head towards the start of 2018, many employers may be adjusting their health insurance strategies. Applicable large employers—those with 50 or more FTEs—full time equivalent employees; a blended combination of full-time (30 hours per week) and part-time personnel—must provide “affordable” health insurance or face stiff penalties that are increasing again in 2018.

For employers of fewer than 50 FTEs—small and midsized businesses (SMBs)—the mandate does not apply. However, other factors, such as the value workers place upon having company-provided health benefits, may incent the business owner to offer insurance, anyway. Here, we’ll discuss some of the factors in making this determination.

For Applicable Large Employers (ALEs)

  • Although the health insurance mandates for companies may still be eliminated by Congress in the future, action appears to be off the table, at least for the foreseeable future.
  • Companies that do not make accurate calculations and accidentally misreport may end up paying penalties unexpectedly.
  • In 2018, large employers that fail to offer minimum essential coverage (MEC) to 95 percent of their full-time employees and dependents under 26 must a penalty of $2,260 per FTE, excluding the first 30 employees.
  • For any full-time employee who receives a premium tax credit because the employer offered coverage that was unaffordable or did not provide minimum value, employers will pay $3,480, per employee that received the tax credit, in 2018.
  • The two penalties are not cumulative, and the penalty is capped at the amount the firm pays (or would have paid) for breaking the “95 percent” rule.
  • As reported in this SHRM article, some employers are choosing to pay the penalty rather than offer insurance. We urge employers to weigh all the factors before taking that path. In the next section, we review the major considerations.

For SMB Employers

  • Health insurance has consistently remained one of the most coveted benefits stated by employees, with 60% giving it “heavy consideration” when evaluating a job offer or deciding to stay with an employer, and another 22% giving it “some consideration” in their decisions.*
  • It costs SMBs much to provide a dollar of benefits than a dollar of compensation. Between worker’s compensation, taxes and other costs borne by both the employer and the company, a dollar of compensation is often worth less than 60 cents.
  • If an employer provides insurance, the amount the employee pays for their contribution comes out of pre-tax dollars. When personnel purchase their own insurance, they pay with after-tax dollars.
  • Based on current law, the individual penalty for not having health insurance will continue in 2018, as it is adjusted for inflation and is capped at the national average price of a bronze plan sold through the health insurance marketplace. This penalty will increase burdens for workers that do not purchase insurance on their own and do not receive it through their employer.
  • Companies that do not want to pay for or manage group health insurance, but still wish to offer a benefit, can create a “healthcare reimbursement plan,” whereby they give employees an annual contribution towards insurance and out-of-pocket costs capped at an amount the employer specifies. These costs are fully deductible by the employer.

*Harvard Business Review survey

Dealing with a Drug-Addicted Employee: Dismissal or Treatment?

By | Benefits & Insurance, Drugs in the Workplace, Policies and Procedures, Risk Management & Safety | No Comments

With drug addiction rates continuing to rise—especially for prescription drugs—employers are increasingly dealing with substance-abusing employees. Statistics* indicate approximately 70 percent of drug abusers are employed—some 10 million people. Traditionally, many companies have dismissed personnel who exhibited signs of substance abuse, especially if it happened on the job. Now, the problem has become so rampant—even among trusted personnel at the highest level—that many employers are asking themselves, “Should I dismiss people with substance abuse problems, or try to work with them to resolve them?”

Articles about working with addicted personnel abound, so we won’t discuss that issue. (One good resource is posted here). Rather, our focus is on weighing the value of disciplinary action. In our view, this decision comes down to five key questions:

  1. Is the employee enthusiastic about seeking treatment? Beating addiction is tough, and employees who are seriously committed to ending the problem are far more likely to succeed. Even if an addiction was inadvertent, an employee who refuses to acknowledge the problem or embrace recovery presents an unreasonable risk.
  2. Was the addiction to a legal drug? If someone has accidentally become addicted to prescription drugs, such as painkillers, but is otherwise a valued employee, it can make sense to work with them while they seek treatment. If they engaged in illegal behavior, especially at or before work, employers have the legal right to terminate them—and may be risking both their personnel and their company if they do not.
  3. Was the addiction an outgrowth of a detrimental event, such as the death of a loved one or a workplace injury? In the event of a traumatic or debilitating life event, some employers offer more leniency, assuming the employee is viable in other ways.
  4. Does the worker have an excellent job record, overall? Some of the most passionate, driven workers become addicted to drugs (or alcohol). If they are an overall positive to the firm and meet other criteria, they may be a candidate for rehabilitation.
  5. Is the individual a “high value” employee? While we don’t advocate automatically giving anyone “a pass” based on a job title, skill level or other attribute, some personnel are particularly valuable to a firm. Examples include those who with extensive, specialized training and those that have an exceptional level of knowledge and competence due to their tenure on the job. Provided these employees want to become healthy, it may be more cost effective to keep them. The reverse of this argument is that substance abusers working in positions of trust may represent too great of a liability to let them stay.

* The National Council on Alcoholism and Drug Dependence

Top 10 OSHA Violations for 2017—Is Your Firm Safe from Them?

By | Employment Law, OSHA Regulations, Policies and Procedures, Risk Management & Safety, Uncategorized, Workplace Injuries | No Comments

At the National Safety Council’s September, 2017 Congress and Expo in Indianapolis, the Occupational Safety and Health Administration (OSHA) announced the top 10 cited violations for 2017.  As you might expect, the number one violation—fall protection—reflects the top cause of workplace injuries—falls. The next three—hazard protection, scaffolding protection and respiratory protection—also related to likely causes of workplace injuries. This list is a reminder to employers that workplace safety is a top priority, and that safety begins with properly documented policies and procedures. To review helpful compliance tips, read on.

Up-to-Date Paperwork Saves Lives: Operating and safety policies and procedures should be reviewed yearly and updated as necessary. In addition, safety rules, as well as required worksite information such as warnings about environmental hazards and potentially dangerous materials, should be posted conspicuously and checked for updates regularly. If your work requires written hazard or protection programs, document those and keep them updated, too.

A Trained Worker Is a Safe Worker: Companies should ensure all workers are properly trained for hazards they encounter, from chemicals and machinery to wet or slippery surfaces. Safety managers should keep a training manual that confirms training took place and audit it periodically to ensure everyone is properly trained for their current duties.

Don’t Forget Accessories: Organizations that run equipment requiring safety guards, or whose with activities necessitating protective gear and other safety accessories, should ensure workers have access to them and are using them properly.

Communicate Safety: Hold regular safety meetings and document what was discussed. Pick different topics to focus on, and rotate them so that all issues are covered over a period of time.

Be an Investigator: Review the OSHA 300 logs you create for workplace injuries and encourage personnel to report “near misses,” (without penalizing them for reporting them). Investigate the causes for both and take corrective action to mitigate the odds of the problem recurring.

Workplace injuries cost U.S. employers a staggering $1 billion each week. (To read our article on the cost and causes of injuries, click here). Taking the time to practice and document safe behaviors literally saves companies—and lives.

Complying with Payroll Recordkeeping Requirements

By | Best Practices, Payroll, Policies and Procedures, Recordkeeping | No Comments

In the past, we have written about a variety of requirements and forms, from OSHA form to payroll and other accounting documentation. Today, we’ll cover some general guidance related to payroll recordkeeping. This task isn’t easy—although the requirements of the Fair Labor Standards Act (FLSA) are straightforward, other state and federal laws can be complicated and confusing. Additionally, most of them change from time to time.

As with so many workplace laws, one principle overrides all other considerations. To err on the side of caution, always follow the most “employee-friendly” laws and requirements. Other points to consider are:

  1. Complying with the FLSA is essential. Employers must record and maintain detailed information so they can demonstrate compliance, if necessary, with the FLSA provisions regarding minimum wage, overtime, equal pay and child labor. Records should comply with the DOL’s Fact Sheet #21 which lists the information that employers must maintain. (Requirements for tipped employees are more extensive. They are not covered by this fact sheet.) Should the U.S. Department of Labor request information, the firm must be able to provide it within 72 hours of the request.
  2. Multistate or national employers cannot make assumptions. Payroll recordkeeping laws vary from state to state, and even city to city, and company locations, rather than headquarters sites, dictate what laws must be followed. Employers with dispersed locations should work with a professional payroll expert or labor lawyer to determine what they need to store and where, and for how long.
  3. State laws are often more stringent than federal laws. For example, although the Department of Labor does not require organizations to provide pay stubs, 26 states require them to be provided in printed or electronic form. (Georgia is not one of them.) Some states also require employee records to be kept in an “unalterable form,” such as with written in ink on paper.
  4. Records management is the key: Whether the company manages its records in house or outsources them as part of the payroll function, having a structured records management plan is the best way to ensure payroll recordkeeping is done properly. If handled in house, such a program should dictate, not only when and by whom records are updated—and how and where they are stored, but also who has access to the records and what measures will be taken to ensure confidentiality.

In an increasingly complicated and dangerous world for business owners, all forms of recordkeeping—and especially those with sensitive information, like payroll records—must be handled conscientiously and with care. To do otherwise can literally put the company’s future at risk.

Big Jump Predicted for Group Health Plans in 2018

By | Affordable Care Act, Benefits & Insurance, Employment News | No Comments

Group health plan costs will nearly double the increase businesses experienced in 2017, according to surveys conducted by varied business advocacy groups. Plan costs are expected to rise 4.3 percent, even after plan changes and other measures to reduce costs. Without changes, the rise would be closer to 6 percent.

That figure is far below the rises business owners experienced around the turn of the millennium, when they rose as much as 14 percent in one year, but they will still have an impact. The increase will likely be felt across the board, and small and midsized business owners (SMBs), many of which already feel priced out of the market, will feel the pinch even more. On the upside, with the ACA repeal not going through (and with little chance it will, at this point), SMBs of 25 employees or fewer will still be eligible for a tax credit to offset insurance costs.

To address the increase, many large employers predict they will enact cost control strategies, such as how health care is delivered and paid for, per an annual survey by the National Business Group on Health. These adjustments will be in addition to pursuing traditional cost-control methods, such as cost sharing and plan design changes. As a result, many companies may offer their personnel a broader range of health care services, including telemedicine (remote doctor consultations via Internet, for example,) and onsite health centers during open enrollment.

Small Businesses Take a Hit, but Options Remain

As with a lot of big business cost-cutting initiatives, many SMBs will have a harder time adjusting for the increase. They often lack the resources and/or time to pursue many of the more original cost-saving measures for counteracting premium increases, unless they work collectively with other businesses locally or through small business associations or outsourced benefits firms.

Telehealth, which has been or will be adopted by 96 percent of large employers, is one creative option that is easily accessible to SMBs. It reduces costs and complexity not only for inquiries and preventive care but also for diagnoses of common medical problems, post-treatment check-ins, chronic care follow up, and authorization for prescription refills.

Plan Creativity Helps, Too

Employers are also getting inventive with coverage in their efforts to control both their costs (70 percent of total) and their employees (30 percent), per the Large Employers’ 2018 Health Care Strategy and Plan Design Survey. For 2018, per the survey, 90 percent of large employers will offer at least one Consumer Directed Health Plan (CDHP). 40 percent say it will be their only plan option. The most common CDHP approach is a high-deductible health plan (HDHP) paired with a Health Savings Account.

SMBs will continue to have access to the ACA’s Small Business Health Options Program (SHOP). SHOP provides SMBs with year-round access to health plans, and it allows employers to offer multiple plans as well as decide how much of the premiums they wish to pay. For more about SHOP, click here.)

“Employers are recognizing that traditional cost control techniques alone aren’t able to reduce costs to the point where they are no longer a drain on the bottom line,” said Brian Marcotte, president and CEO of the National Business Group on Health, in a prepared statement. ” We expect them to increasingly focus on value purchasing opportunities within the delivery system and improving the experience for health care consumers. Finding solutions to the growing challenge of skyrocketing specialty pharmacy costs will also remain a top priority.”

*The Large Employers’ 2018 Health Care Strategy and Plan Design Survey was conducted between May and June 2017. A total of 148 large employers participated in the survey. Collectively, respondents represent a wide range of industry sectors and offer coverage to more than 15 million employees and their dependents. Two-thirds of respondents belong to the Fortune 500 and/or the Global Fortune 500, and 42 belong to the Fortune 100.

Employee Benefits—Managing Them for Everyone

By | Benefits & Insurance, Best Practices, Employee Retention, Hiring, Sick Leave | No Comments

Employee benefits have become increasingly complicated for business owners as they struggle to address them for very different generations of workers. Baby boomers may want time off for elder care, while millennials may want extra paid vacation or flex time.

Compounding the issue, workers have become increasingly willing to turn down a job offer—or even leave one company for another—to acquire the benefits package they desire. Organizations can address these concerns without negatively affecting the firm. All it takes is a little ingenuity and flexibility.

The recent 2017 Society for Human Resource Management study on Employee Job Satisfaction and Engagement offers insight into this situation. We’ve hit some of the high points, below, but you can read the entire report, here. The survey found:

  • The most valued components of a benefits program address employee quality of life: health care, leave and flexibility. Not only were these benefits important; they also displayed the greatest gap between importance and level of satisfaction with current corporate policies and attitudes.
  • Financial advice benefits are on the rise, going from 28 percent in 2014 to 49 percent in 2017.
  • Over the past four years, spousal and domestic partner benefits have increased:
    • 95 percent provide health care coverage for opposite-sex spouses.
    • 85 percent provide coverage for same-sex spouses.
    • Just over one-half provide coverage for domestic partners, regardless of whether they are the same or opposite sex.
  • Nearly one-third of organizations increased their overall benefits offerings in the past 12 months, with health (22 percent) and wellness (24 percent) benefits topping the list.

Benefits Don’t Have to Break the Bank

Owners of small and midsized businesses reading this survey may wonder how they can compete for top talent with large corporations and their fancy benefits packages. With a little imagination, smaller firms can thrive in their hiring and retention efforts, compared to larger competition. Here’s how:

  • Foster a caring, “family” environment, with frequent employee gatherings, recognition of personal needs and other approaches that are difficult for larger companies to manage.
  • Be flexible—if a worker wants four weeks of vacation, for example, let him or her have it, but reduce compensation accordingly.
  • Offer perks that build employee loyalty but don’t break the bank. Flexible work hours, part-time telecommuting and casual dress codes, where appropriate, don’t cost the firm a penny yet deliver substantial value in terms of employee appreciation.

Reasonable Accommodation—Maintain A Paper Trail, and Don’t Assume Anything

By | Best Practices, Risk Management & Safety, Workplace Injuries | No Comments

One of the most complex issues for employers is the definition of reasonable accommodation. Per the U.S. Office of Personnel Management, reasonable accommodation is “any change to a job, the work environment, or the way things are usually done that allows an individual with a disability to apply for a job, perform job functions, or enjoy equal access to benefits available to other individuals in the workplace.”

Evaluating disabled job candidates equitably is difficult enough, but the process can be especially hazardous when a previously healthy worker is injured and, upon return to work, can no longer perform all their prior job functions.

Per federal law, company leaders must make a reasonable effort to accommodate those limitations, and the process must be both thorough and well documented. Only after they have determined that there is no job modification that the worker can perform with his or her limitations can they terminate the worker’s employment. To avoid a negative decision that is potentially actionable, decision makers must follow specific guidelines, and consider input from a variety of sources, before making that determination.

Medical Evaluation Is Mandatory

When an employee is injured, on or off the job, the employer must require the individual to be examined by a physician to determine “fitness for duty” before allowing them to resume work. (Not doing this can cause additional problems. We’ll discuss this issue in a later article.) In some cases, the physician may determine that the worker can only resume work with limitations, such as avoiding certain activities.

A Documentation-Based Evaluation

One of the primary reference sources for reasonable accommodation should be the job description. All companies should include “essential functions” in their job descriptions—activities that workers must be able to perform in order to do their jobs. Without a list of essential functions, it can be nearly impossible for an employer to prove that inability for a worker to perform a certain activity makes them unfit for duty.

An Interactive Process

Additionally, organizations must interactively include the worker in the process of identifying a possible accommodation. As a recent court case proves, failure to do so can be very expensive. In Vetter v. Iowa, Iowa Ct. App., No. 16-0208, an Iowa appeals court awarded more than $900,000 to John Vetter, an employee with the Department of Natural Resources (DNR), after the DNR determined it could not accommodate Vetter’s medical limitations without  “undue hardship.” The primary rationale for the decision was that the DNR failed to give Vetter the chance to have input in the process.

The key takeaway for employers is that requirements such as medical examinations, lists of essential functions and interactive discussions with injured workers about their post-injury outcomes may seem burdensome, but the alternative is for employers to assume considerable, unnecessary risk.

Make Technology Work for You

By | Benefits & Insurance, Best Practices, Employee Engagement, Technology in the Workplace, Uncategorized | No Comments

In our last article, we offered strategies for managing personal technology use at work. Employee use (or abuse) of technology in the workplace, while detrimental, is not the only concern for business leaders. Firms must also help workers better manage their time using technology for valid business purposes, both inside and outside the office. Here’s a bit more practical advice.

Help Workers Help Themselves: Many office workers report that the volume of business email and other communication has become overwhelming—and deeply distracting. For employees whose jobs are not centered around email, encourage them to establish “quiet” times—periods when they don’t read or respond to email and can get other work done.

Most email programs allow the user to set up rules for message delivery—including desktop alerts that can penetrate the silence if a message is truly urgent. The Society for Human Resource Management recently published an article with more tips for preventing technology-related distractions. You can review it, here.

Address Technology Outside the Workplace: Increasingly, workers find themselves conducting business after hours using their cell phones or personal computers. Many report a preference for this practice. It lets them make productive use of “downtime” (e.g. riding to and from work on the bus or train) and resolve issues when they arise rather than having to deal with them the next day.

Business owners should recognize this extra effort by personnel and reward them with compensation or other perks. As the National Law Review reports, in many cases, companies do not have a choice about how they compensate personnel for these activities. However, even when rewards are not required, providing them shows workers that the company appreciates their extra effort. It also reinforces the concept that personal and business activities are separate and should be managed as such.

Stop Technology from Disrupting Your Workplace

By | Best Practices, Policies and Procedures, Technology in the Workplace | No Comments

For the past several decades, experts have talked about the “disruptive” nature of technology to change, for the better, the way companies run their operations. However, with the use of digital technologies becoming as common in offices as desktop computers, these disruptions aren’t always positive.

To prevent technology from becoming a detriment to the work environment, shrewd business leaders can enact policies and procedures to manage the flow of information through their company.

Personal Technology Use in the Workplace

From social media posting to streaming videos, personal technology use at work has become so problematic that it’s overloading the networks of some firms. Corporate bandwidth consumed for personal use isn’t available to run cloud applications, exchange files with clients or support other legitimate business tasks. Furthermore, when workers access corporate networks with potentially insecure devices, they increase the chances of a cybersecurity breach.

Marathon has previously offered advice about personal device usage policies (read that article, here), so we won’t revisit that discussion, now. Following are a few added tips:

  • Include in company policies a notation that unauthorized use of corporate technology, such as network connections, is equivalent to stealing and can result in termination.
  • Set up a separate, slower “guest” network in public areas (e.g. lobbies; break rooms) for both employees and visitors to use—and establish rules for when personnel can use that network.
  • If workers are allowed to use personal devices on corporate networks, deploy mobile device management (MDM) technologies to ensure the devices don’t pose a threat to company security.