HR corner

Paid family leave train: Next stop, New York — final destination, all states? .....................1

Health outcomes

Wellness culture barriers ..............................3

Legal and compliance

HHS announces 2017 federal poverty guidelines ...........................................................4

Since you asked

COBRA and second qualifying events — when does the clock start? ..........................6

Key contacts......................................................7

HR FocusMay 2017

HR cornerPaid family leave train: Next stop, New York — final destination, all states? By: Daniel Margolis, MBA, GPHR, PHR, SHRM-CP Senior HR Consultant, HR Partner

On January 1, 2018, New York will join California, New Jersey and Rhode Island as the fourth state to provide paid family leave. This benefit will be incorporated under the state’s statutory disability policy. Momentum is building throughout the country, and this may soon be law for all U.S. citizens.

BackgroundThis benefit follows a growing trend of providing guaranteed wage replacement for employees to have time to bond with a new child, provide care for a close relative or relieve family pressures related to military service. Although the Family and Medical Leave Act enacted in 1993 has provided job security for up to 12 weeks for leave, it has always been unpaid. To date, all states are funding paid family leave through payroll taxes with the exception of San Francisco. The San Francisco Paid Parental Leave Ordinance requires employers to provide supplemental compensation to employees who are receiving California leave benefits.

We noted in an HR Focus article last year, that companies providing paid family leave are part of a growing cultural shift.

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New York paid family leave overviewAny part- or full-time employee working in New York for 26 weeks and at least 175 days is eligible for paid family leave outside of their paid-time-off allowance. Employees may choose to use sick and/or vacation time to supplement their leave income. Leave may be used for:

�� The birth or adoption of a child

�� Caring for a close relative with a serious health condition

�� Active duty deployment

Paid family leave will gradually increase over the next four years as follows:

YearWeeks

available

Max % of employee

salary

Cap % of state average weekly wage

1/1/2018 8 50% 50%

1/1/2019 10 55% 55%

1/1/2020 10 60% 60%

1/1/2021 12 67% 67%

Employees will be able to take the maximum benefit in any 52-week period as of the first day the employee takes the paid family leave. This leave will be incorporated under the state’s statutory disability policy and will be funded by payroll deductions. As of today, workers compensation regulations state that “An employer is permitted, but not required, to collect the weekly employee contribution on July 1, 2017, for paid family leave coverage beginning on January 1, 2018.”

ConclusionEven if you don’t have employees in one of four states that provide paid family leave, the federal government may make this a requirement in the future. In his first address to Congress, President Trump stated he is committed to “help ensure new parents have paid family leave.” During the campaign, he proposed six weeks. This means that New York’s benefits would be more generous.

Furthermore, New York will provide more guidance prior to July 1, 2017. The workers compensation board will issue clearer regulations as well. If you need assistance, contact your payroll provider to ensure you are prepared for these changes, and work with your legal counsel if you need to amend your policies to comply with the law.

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According to the Willis Towers Watson 2016 Best Practices in Health Care Employer Survey, 62% of employers consider health and well-being a core part of their employee value proposition. You might assume then, that all of these employers have a culture of wellness that is supportive and reflective of their wellness programs. However, only 34% of employers audit their work environment and health and well-being programs to align with company culture.* Barriers to wellness can occur when employers fail to understand how the workplace culture can impact wellness program outcomes. Here are a few of the most common obstacles and tactics for addressing them.

Poor cafeteria options undercut wellnessA workplace cafeteria can enhance your wellness initiatives in two ways: by supporting healthier eating and by boosting productivity. (Imagine the time and money employees might save if they didn’t leave the building for lunch every day.) Then, there’s the matter of the menu. Is there a disconnect between what’s offered and your weight management or nutrition education programs? Whether the cafeteria is internally managed or contracted out, getting your meal planners engaged in your program is a must. This includes:

�� Discussing options to move toward healthier choices for your employees.

�� Determining if there is a way to display nutritional information on daily menu items.

�� Asking the chef for ideas to “make over” some of the best-selling items in the cafeteria.

�� Asking if the chef would be interested in offering a healthy cooking demo or taste-testing options.

Some groups have partnered with local farmers markets or community-supported agriculture (CSA) groups to bring more fresh or organic vegetables, fruits and even meats to their cafeterias. Others have even created community gardens of their own in which employees share the work and the produce.

Wellness culture barriers By: Brittany Clarke, MS, MCHES Health Outcomes Practice Coordinator and Resource Assistant

Health outcomes

Busyness takes precedenceImagine a manufacturing company with a 24/7 line. Partial operating mode is not an option for this crew. If you’re relying on “lunch and learns” to provide wellness education, these employees are legitimately too busy to attend. You’ve got to reach them when and where they are receptive. Create video shorts to show during scheduled breaks, or post videos on your wellness platform so employees can catch them anywhere, anytime. Have supervisors share health and safety messaging at the start of every shift. Remember to select the right program for your business environment.

Some organizations use busyness as their excuse to forego implementing any type of program. Whether employees are focused on billable hours and meeting sales quotas, or work on a manufacturing plant floor or construction site, some type of intervention can be offered. Almost every smart phone has an activity tracking device built in, and many free apps are available for download. Consider implementing wellness challenges that incorporate activity tracking.

Managers not on boardA manager who is not on board with the company’s wellness initiative or who is generally not supportive can also be a culture crusher. Unless you are willing to groom your top talent into wellness advocates, your initiatives will likely fail. Be candid as you evaluate your promotional practices and the impact their leadership can have. Although some wellness initiatives can serve as great team-building activities, they will likely not make much difference if employees feel that their manager does not value wellness participation.

It’s important for employers to consider their workplace culture as they plan their wellness initiatives. Be honest about what can and cannot be changed given the current environment. Don’t let a supposed roadblock stand in the way of engaging your workforce. Find a creative way to work around it — your employees will appreciate your efforts and productivity should skyrocket!

*2016 Willis Towers Watson Best Practices in Health Care Employer Survey

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HHS announces 2017 federal poverty guidelines

Legal and compliance

On January 31, 2017, the Department of Health and Human Services (HHS) announced the federal poverty guidelines in effect for 2017. Those guidelines, also referred to as federal poverty levels or lines (FPLs), are published by HHS in January of each year and are used by a number of federal agencies to help determine eligibility for numerous federal assistance programs. HHS applies the FPLs in connection with an extensive number of federal health care assistance programs, including Medicare, Medicaid and the Children’s Health Insurance Program, as well as the Affordable Care Act (ACA).

There are three sets of FPLs (see 2017 HHS Poverty Guidelines Regulations) which vary depending on the number of persons in a family or household, and in which part of the U.S. they are being applied:

�� The contiguous U.S. (48 states including the District of Columbia)

�� Alaska

�� Hawaii

For purposes of administering the ACA, the following are the chief uses of FPLs:

�� To determine eligibility for a premium tax credit or cost-sharing reduction subsidy

�� To calculate the FPL affordability safe harbor under the employer mandate provisions of the ACA

FPL guidelines and ACA premium tax credits and cost-sharing reduction subsidiesTaxpayers with a household income between 100% to 400% of the annual FPL compensation amount and who are not offered affordable minimum value coverage by an employer, may be eligible for a premium tax credit that reduces the individual’s monthly premium for health coverage purchased on an exchange. In addition, such taxpayers may be eligible for cost- sharing reduction subsidies that help with out-of-pocket costs (like deductibles and copays) in connection with silver plans that are purchased on an exchange.

The amount of the taxpayer’s premium tax credit or subsidy depends on how much of a percentage the taxpayer’s annual household income is of the FPL compensation amount and the number of persons in the taxpayer’s household — the larger the percentage of the FPL compensation amount, the lower the taxpayer’s tax credit or subsidy, and the more persons in the taxpayer’s household, the higher the tax credit or subsidy. Eligibility and the amount of the premium tax credit or subsidy is determined by the marketplace exchanges.

FPL affordability safe harbor backgroundIf an employer has 50 or more full-time employees and full-time employee equivalents (i.e., is an applicable large employer or ALE), the ACA employer shared responsibility (i.e., pay-or-play) provisions require that the employer offer minimum essential health coverage to at least 95% of its full-time employees and their eligible dependents in order to avoid the Internal Revenue Code (IRC) Section 4980H(a) “sledgehammer penalty” of $188.33 (for 2017) per month per full-time employee (after subtracting the first 30 full-time employees) in the event one of the employer’s full-time employees purchases coverage on a marketplace exchange and qualifies for the premium tax credit.

The employer mandate further requires that an ALE offer coverage that is affordable and provides minimum value (i.e., pays at least 60% of the cost) to all full-time employees in order to avoid the IRC Section 4980H(b) “tack hammer penalty” of $282.50 (for 2017) per month per full-time employee who goes on an exchange and qualifies for a premium tax credit.

In order to meet the affordability requirement, the employee contribution for the lowest-cost health benefit option offered by the employer must be no greater than 9.69% of the full-time employee’s household income in 2017. In lieu of requiring employers to calculate each full-time employee’s household income for the year, the IRS issued regulations authorizing use of three safe harbors that address alternatives to employee household income for purposes of determining affordability. These include the W-2 safe harbor (based on an employee’s W-2, box 1 compensation reported for the year), the rate-of-pay safe harbor (based on an employee’s hourly or monthly rate of pay, as applicable) and the FPL safe harbor.

Application of the FPL guidelines to the FPL affordability safe harborIn applying the new guidelines to the FPL affordability safe harbor that is determined based on the employee only (i.e., the “one person family/household” income level), effective January 31, 2017, the FPL annual compensation amounts for the three regions used to calculate the employee lowest-cost contribution affordability safe harbor are as follows:

�� Continental U.S. — $12,060 (as compared with $11,880 in 2016)

�� Alaska — $15,060 (as compared with $14,840 in 2016)

�� Hawaii — $13,860 (as compared with $13,670 in 2016)

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The FPL safe harbor is determined by multiplying the applicable percentage (9.69% in 2017) and dividing that product by 12. The result is the monthly limit on the employee-only contribution for the ALE’s lowest-cost option that the employer can require the employee to pay and still qualify for the FPL affordability safe harbor. Aside from the simplicity in calculating the affordability standard in this way, the FPL safe harbor also allows the employer to avoid having to report the lowest-cost employee-only contribution on the employee’s Form 1095-C in connection with ACA reporting.

Because ALEs need to know well in advance of open enrollment what their employee contributions are and whether the lowest-cost employee-only contribution meets the affordability standard, the employer shared responsibility regulations, published every January, allow employers to select the applicable FPL compensation amount by looking back six months prior to the start of their plan year (may use any of the poverty guidelines in effect within six months before the first day of the plan year). If that look-back period reaches into a prior calendar year and two different FPL compensation amounts (and corresponding FPL affordability safe harbor contribution amounts) are available (one from the prior year and the other from the current year), the employer can choose between the two calculations in applying the FPL affordability safe harbor.

Applying this approach to 2017:�� If the employer’s plan year started January through July 2017,

looking back six months would bring up two possible FPL affordability safe harbor employee contribution amounts that the employer can choose from:

�� January 2016 safe harbor amount — 9.69% x $11,880 (the FPL compensation amount HHS posted in January 2016) and then divided by 12 = $95.93 per month

�� January 2017 safe harbor amount — 9.69% x $12,060 (the FPL compensation amount HHS posted in January 2017) and then divided by 12 = $97.38 per month

�� If the employer’s plan year started August through December 2017, looking back six months would bring up only one possible FPL affordability safe harbor employee contribution amount that the employer can use:

�y January 2017 safe harbor amount — 9.69% x $12,060 (the FPL compensation amount HHS posted in January 2017) and then divided by 12 = $97.38 per month

Note that in applying the look-back approach, the employer always uses the affordability percentage that applies in the year for which the calculation is being made — a 2017 FPL safe harbor affordability calculation would apply the 9.69% affordability percentage that applies in 2017 even when looking back and using the FPL compensation amount from January 2016. Also keep in mind that the above calculations are using the FPL annual compensation amounts for the contiguous U.S., and different FPL compensation amounts apply for employers with employees in Alaska and Hawaii.

ConclusionThe FPL affordability safe harbor provides ALEs with a simpler method for determining whether their lowest-cost employee-only contribution meets employer mandate affordability requirements and for preparing their ACA reporting forms. Moreover, IRS regulations provide employers with some flexibility in applying that standard, depending on the employer’s plan year. There is some cost associated with that simplicity and flexibility; however, among the three affordability safe harbors, the FPL safe harbor requires the lowest employee-only contribution. In addition, employers who apply the FPL affordability safe harbor will need to be watchful for the new FPL compensation amount that HHS publishes every January in order to verify that they are continuing to meet the requirements for use of this affordability safe harbor.

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A client recently asked about second qualifying events under the Consolidated Omnibus Reconciliation Act of 1985 (COBRA). The client had an employee who terminated from employment on February 1, 2016, and elected COBRA for himself and his spouse. The employee and spouse later divorced, on March 1, 2017. The client questioned whether the extended COBRA coverage, to which the spouse would now be entitled due to the divorce, would run from the date of the divorce or the employee’s termination date.

BackgroundUnder COBRA, an individual who might otherwise lose coverage under a group health plan due to the occurrence of certain events can pay to continue that coverage for a limited period of time. COBRA specifies several types of events that may be “qualifying events” that trigger COBRA rights. Events that can be qualifying events are:

�� A covered employee’s death

�� A covered employee’s voluntary or involuntary termination, other than for gross misconduct or reduction in a covered employee’s hours of employment (for example, full time to part time)

�� A covered employee’s divorce or legal separation (actual entry by the court of a divorce decree or legal separation order)

�� A covered employee becomes entitled to (covered under) Medicare

�� A dependent child ceases to be eligible for dependent coverage under the applicable plan provisions

�� Filing of a Chapter 11 bankruptcy petition by the employer (only applicable to retired employees and their dependents covered under a retiree medical program)

If, under the terms of the plan, a specified event will cause a loss of coverage during the continuation period that usually applies following that event, then a qualifying event generally occurs as of the date of the event. This is true even if coverage does not end immediately, as long as the plan provides that coverage will end due to the event. An employer may use the date that an individual actually loses coverage as the qualifying event date for purposes of administering COBRA if the plan document states that the plan uses that date.

DiscussionCOBRA sets minimum requirements for the period during which a group health plan must allow a qualified beneficiary — an employee, an employee’s spouse or an employee’s dependent child who was covered under the group health plan on the day before a qualifying

COBRA and second qualifying events — when does the clock start?

Since you asked

event — to pay for and retain COBRA coverage (the maximum COBRA coverage period).

The maximum period of COBRA coverage following a qualifying event of a covered employee’s termination of employment or reduction in hours is generally 18 months. However, when certain events constitute qualifying events that trigger COBRA rights, the maximum COBRA coverage period is 36 months. Qualifying events for which the maximum COBRA coverage period is 36 months are:

�� Death of a covered employee

�� Divorce or legal separation of a covered employee from a spouse

�� A covered employee becomes entitled to (covered under) Medicare

�� A dependent child ceases to be a dependent child of a covered employee under the generally applicable requirements of the plan

The maximum COBRA continuation period when these qualifying events trigger COBRA rights is always 36 months and is not subject to extension. If the initial qualifying event that triggers an individual’s COBRA rights is terminating employment or reducing hours of employment, subsequent qualifying events may result in an extension of the maximum COBRA coverage period for certain qualified beneficiaries.

If a second qualifying event occurs while COBRA coverage is in effect and within the 18 months after a termination-of-employment or reduction-in-hours qualifying event, the maximum COBRA coverage period is extended to 36 months from the original termination-of-employment or reduction-in-hours qualifying event. Note that a covered employee is not a qualified beneficiary with respect to any 36-month qualifying event. Therefore, the expanded period that applies in connection with a second qualifying event will not apply to a covered employee but only to the spouse or a dependent child of a covered employee.

In the client’s situation mentioned above, for example, when the employee terminated employment on February 1, 2016, he and his covered spouse were offered 18-months of COBRA coverage, starting as of the date of the qualifying event. Upon the couple’s divorce on March 1, 2017, the spouse’s entitlement to COBRA was extended from 18 months to 36 months. The 36 months will run from the date of the spouse’s initial COBRA qualifying event that occurred on February 1, 2016.

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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

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

For more information, contact your local Willis Towers Watson office.

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About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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