HR corner CEO pay disclosure: preparing for compliance or hoping for a delay? .............1

Health outcomes Incorporating well-being into your health management strategy ...................................3

Legal and compliance HHS announces annual adjustment of civil monetary penalties for HIPAA violations ............................................................4

Communications Want a more successful benefit enrollment? Five common communication errors to avoid ..................................................5

Since you asked ...............................................6

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

HR FocusJune 2017

HR cornerCEO pay disclosure: preparing for compliance or hoping for a delay? By: Pamela Murray Senior HR Consultant, HR Partner, Atlantic Region

With some of the executive orders being proposed by the Trump administration, one might be tempted to think that the executive compensation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act will meet a swift demise and that companies can stop worrying about their CEO pay ratio calculations.

While it’s certainly possible that the Securities and Exchange Commission (SEC) could delay the compliance deadline of the Pay Ratio Disclosure Rule or that Congress could repeal Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, those actions could take time and the latter may not pass the Senate.

The final Pay Ratio Disclosure rule requires public companies in the U.S. to disclose the ratio of CEO pay to median employee pay with their 2018 proxy statements, with reporting based on fiscal year 2017 pay. As such, many companies are moving forward with their compliance efforts — working through these calculations — but are also considering the impact this new-found knowledge will present to shareholders and customers as well as to employees, who will be concerned about where they fall in relation to the median pay.

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Getting the message out Fostering a culture of transparency and trust can be accomplished via Total Rewards statements, manager pay communication effectiveness training, pay administration guides, online learning for pay administration and determination, and a host of other communications aimed at educating and informing both employees and managers.

Moving forward or lying lowEven though the SEC is reviewing comments on how organizations are coping with unexpected compliance challenges, it is important for public entities to prepare for this regulation now, as it is no small undertaking and one with significant implications.

Many organizations are already engaging experts to ensure they are prepared for any compliance changes, understanding they may not be best suited to address this new rule and that sitting on the sidelines is a risky business decision.

Step 1 — Choose a strategy and calculation approachAs companies consider their approach to pay ratio calculations, it’s time to think through an overall strategy. To identify the median employee, the final rule allows companies to select a methodology based on their own facts and circumstances. A company could use its total employee population, a statistical sampling of that population or other reasonable methods.

Here are some of the key challenges to ensuring compliance:

�� It requires hard, careful work. Some companies don’t have the bandwidth, and doing this last-minute will create a hardship for executive compensation staff who have many other tasks (it will also increase the risk of not being compliant). Calculations can be generated based on employee totals as early as October 1, and companies should be in a position to know their calculation method far before that date.

�� Finding the data and determining the median. Companies without complete data will be challenged and would be wise to consider statistical sampling to help estimate pay levels where data are hard to get.

�� Using a more inclusive definition means less flexibility. The more basic compensation definitions will result in the company ending up with several “medianable” employees from which to choose the appropriate median employee.

Step 2 — Preparing managers and employeesEmployees generally question their pay appropriateness, so it’s important for you to be prepared if they react strongly to the pay ratio and the median employee pay figure used to calculate it.

Source: 2016 Willis Towers Watson Global Workforce Study

Rather than fearing pay ratio disclosure, consider this an opportunity to discuss how compensation is determined for the workforce and how it aligns with the company’s values, brand, culture and future growth plans.

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Does your wellness program include step challenges or calorie counters? If so, you aren’t alone. Traditional worksite health management programs have focused primarily on physical activity and nutrition education aimed at an employer’s entire population. This has also included health assessments, biometric screenings and wellness coaching.

In recent years, however, more employers have begun broadening their health management strategies and retooling their programs to focus on their employee’s total well-being, with the goal of improving emotional and financial health. The Willis Towers Watson 2016 Best Practices in Health Care Employer Survey1 found that 75% of employers will increasingly focus on strategies to build the health and well-being of the workplace and culture to encourage healthy behaviors.

So what, exactly, is well-being? While there is no single universally accepted definition, the Centers for Disease Control and Prevention (CDC) notes that there is at a minimum an agreement that well-being includes the presence of positive emotions, the absence of negative emotions, satisfaction with life, fulfilment and positive functioning.2

Well-being impacts on the bottom lineStudies show that employees with high well-being are healthier and more productive. The opposite is also true: Employees in poor health report more absences and are less engaged than those who view their health status as good. According to U.S. data in the 2015/2016 Willis Towers Watson Global Benefits Attitudes Survey, 46% of employees who reported very good health also reported being highly engaged. Just 27% of employees who reported poor health also reported being highly engaged. That same survey showed that employees in poor health are more likely to be stressed and financially struggling. Sixty-five percent of employees with poor health also had high stress, and 18% with poor health were struggling financially. It’s clear that better well-being contributes to a better bottom line.

Elements of well-being programsModern well-being programs incorporate emotional health, financial wellness and the environment into the traditional wellness strategy for a more holistic view on health.

Emotional health relates to mental health concerns such as stress, depression, anxiety and resilience. According to the National Alliance on Mental Illness, one in five U.S. adults will experience a

Incorporating well-being into your health management strategy By: Brittany Clarke, MS, MCHES, Health Outcomes Practice Coordinator/Resource Assistant

Health outcomes

mental health condition in their lifetime,3 and the CDC estimates that depression costs employers $17 billion to $44 billion each year from lost workdays.4 There are well-being strategies employers can implement to mitigate these issues. Available programs include those aimed at directly assisting employees with stress reduction through a choice of channels (onsite, telephonic, online, phone apps) as well as cognitive behavioral therapy, meditation and next-generation employee assistance programs.

Financial wellness is the feeling of having control over daily or monthly finances, being on track to meet goals and the ability to absorb financial shock. Financial stress is associated with diminished happiness, decreased productivity, increased medical ailments and deferred retirement. Financial well-being programs can include personal or digital financial advice, student loan refinancing and repayment options, mortgage assistance, estate planning and voluntary benefits, all of which can be seen as a valuable employee perks. To be successful, financial well-being programs should be communicated effectively, measure engagement and speak to the generational profile of your workforce.

A healthy worksite environment is also an essential component of a well-being program. A health management strategy may have the best intentions of motivating employees toward healthy behaviors, but if smoking is allowed on the property and pizza is served at every working lunch, those intentions will be sabotaged. Efforts to make the worksite more supportive of healthy behaviors show genuine concern for employees and can substantially improve health and productivity, often for a very small investment. Employers should consider environmental changes such as tobacco-free campus policies, exercise-friendly workplaces (including walking paths and open stairways), nutritious foods at meetings and in vending machines, and ergonomic programs.

When employers consider implementing broad well-being programs, they want to improve physical, emotional and financial health and employee productivity. These programs require executive sponsorship and excellent communication, and must be consistent with strategy and culture. A comprehensive employee value proposition would be incomplete without wellness programs.

Sources 1 2016 Willis Towers Watson Best Practices in Health Care Employer Survey2 CDC Well-Being Concepts3 National Alliance on Mental Illness4 CDC Workplace Health Promotion Workplace Strategies: Depression

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HHS announces annual adjustment of civil monetary penalties for HIPAA violations

Legal and compliance

The U.S. Department of Health and Human Services (HHS) Office for Civil Rights has been having a very busy year. Since January, it has announced the imposition of civil monetary penalties against several covered entities for violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacy and security requirements, including:

�� A $475,000 settlement for failing to report a breach of unsecured protected health information in a timely manner

�� A $2.2 million settlement for the impermissible disclosure of unsecured electronic protected health information (ePHI)

�� A $3.2 million civil monetary penalty for the impermissible disclosure of unsecured ePHI

�� A $5.5 million settlement for failing to have access controls in place and not regularly reviewing audit logs

�� A $400,000 settlement for failing to conduct a risk analysis and implement a risk management plan to safeguard ePHI

�� A $31,000 settlement for failing to obtain a signed business associate agreement

�� A $2.5 million settlement for the impermissible disclosure of unsecured ePHI

Given the significant audit activity involving the HIPAA privacy and security rules, employers should be aware that the HHS recently released inflation-related increases to the civil monetary penalties that a covered entity or business associate of a covered entity may be subject to for failing to comply. The adjusted civil penalty amounts apply to civil penalties assessed on or after February 3, 2017, when the violation occurred after November 2, 2015. If the violation occurred prior to November 2, 2015, or a penalty was assessed prior to September 6, 2016, the pre-adjustment civil penalty amounts in effect prior to September 6, 2016, will apply.

BackgroundThe HHS can impose a civil monetary penalty upon a covered entity or business associate if it determines that the covered entity or business associate has failed to comply with the HIPAA privacy or security rules. The Health Information Technology for Economic and Clinical Health Act, effective February 18, 2009, set new minimum amounts for civil monetary penalties (for violations occurring on or after the effective date) based on the culpability, or “state of mind,” of the violator. The HHS is required to base the amount of the penalties on the nature and extent of the HIPAA violation, as well as the nature and extent of the harm resulting from that violation.

�� No knowledge. Where a covered entity does not know, and by exercising due diligence would not have known, that the covered entity violated HIPAA’s administrative simplification provisions, the penalty range is $100 to $50,000 for each violation of an identical requirement or prohibition within the same year. The penalty is capped at $1.5 million for violations of an identical requirement or prohibition within the same calendar year.

�� Reasonable cause. Where a violation is due to “reasonable cause” and not “willful neglect,” the penalty range is $1,000 to $50,000 per violation, with a cap of $1.5 million for violations of an identical requirement or prohibition within the same calendar year.

�� Willful neglect (corrected). Where a violation is due to “willful neglect” but was corrected, the penalty range is $10,000 to $50,000 per violation, with a cap of $1.5 million for violations of an identical requirement or prohibition within the same calendar year.

�� Willful neglect (not corrected). Where a violation is due to “willful neglect” but was not corrected, the minimum penalty is $50,000 per violation; there is no maximum per violation, and the total penalty is capped at $1.5 million for violations of an identical requirement or prohibition within the same calendar year.

Civil monetary penalty annual inflation adjustmentThe civil monetary penalties for HIPAA violations are subject to cost-of-living adjustments. The HHS recently issued the annual inflation-related increase to the penalties, effective February 3, 2017. Note that regardless of the violation category, the total penalty is capped at $1,677,299 for violations of an identical requirement or prohibition within the same calendar year.

�� No knowledge. The penalty range is $112 to $55,910 per violation.

�� Reasonable cause. The penalty range is $1,118 to $55,910 per violation .

�� Willful neglect (corrected). The penalty range is $11,182 to $55,910 per violation.

�� Willful neglect (not corrected). The minimum penalty is $55,910 per violation; there is no per-violation maximum.

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Communicating with your employees about their benefits is critical. For employees, informative and consistent benefit education helps them choose coverage that makes the most sense for their personal situation — and use those benefits wisely. For the HR department, a strong communication program can minimize the calls and issues that arise from a lack of understanding.

While employers do their best to create a strategic plan around benefit education, most HR professionals are not communication experts and struggle to fit this additional task into an already busy schedule.

Numerous resources (online education, industry seminars and workshops, and professional consultants, to name a few) can help employers develop an effective benefit communication program. In the meantime, here are five common errors to avoid:

�� Underestimating the value of a strong visual identity, including a benefit program name. A strong visual identity helps your employees relate your benefit program to your organization. This typically includes common colors, typefaces and images that are used for all of your communications. You might also use a corporate or benefit logo, and a tagline for instant recognition. Your identity could even include a style of writing (casual, fun, humorous) that you employ with all of your benefit communications.

�� Using long emails with multiple attachments to share benefit information. Your employees receive information from multiple sources every day. This includes personal email and text messages; solicitations, catalogs and flyers in their personal mail; social media; and if they work at a desk, corporate, IT and possibly spam emails. You need to break through all of this noise, and to do so, your messages must be visually appealing with crisp and informative writing. Expecting an employee to read through a long email, then to open and read one or more attachments, is unrealistic. Say what needs to be said using the fewest words possible, and if needed, provide a link to more information. Avoid repeating the same ideas in an email, especially if they are stated differently, as this can cause confusion. Consistency begets clarity. Use a compelling, newspaper-style headline as the email subject. You may even want to test your emails with some employees to get their feedback.

�� Communicating with employees only before, during and immediately after the open enrollment window. This is a common error that results from HR departments being so busy with other tasks that communications that are not considered critical often fall by the wayside. However, communicating with employees year-round helps maintain engagement with and awareness of your benefit program and any related goals. In

Want a more successful benefits enrollment? Five common communication errors to avoid By: Lisa Beyer, Senior Communications Consultant

Communications

addition, a predictable pattern of communication helps employees feel informed and included, reinforces your messages and helps increase comprehension. If your enrollment window is in the fall, you have at least eight months — when employees aren’t on a deadline to read their enrollment guide and enroll — to provide benefit education. If you’ve not developed an annual communication schedule, consider doing so to establish a regular pattern of communication.

�� Sending enrollment packets that include contract-like carrier materials and legal notices. Open enrollment can be a stressful time for the HR professional, but it’s even more stressful for employees. Keep in mind that your employees need the right amount of, but not too much, information to make informed benefit decisions. This is best accomplished in a high-level guide that outlines their benefit coverage options, but doesn’t get into the “weeds” with overwhelming detail. Most employees will not take the time to dig through carrier information to ferret out the details they need, nor should they have to. And when was the last time you read a plan’s legal notice? Keep benefit information short and action-oriented, using an eight-page guide as the main source of information, then offering resources for additional details. This will save you time and money. And your employees will thank you for it!

�� Relying on a single communication channel to convey benefit information. You probably have a preference for how you receive and engage with information. Some people like print materials, while others insist on getting their information online. Your employees are the same. Using all-print, or all-electronic communication almost guarantees that you won’t reach the majority of employees. You can easily use multiple communication platforms to share information. For example, a benefit guide can be mailed to the home and shared via email in a PDF or a flip-book link. You can use posters in common areas while mailing a postcard to the home for employees who work remotely. And to promote employee self-service, you can host all information on an intranet or enrollment site. Other delivery channels include videos, infographics, email blasts, decision-making enrollment sites, microsites and online wallet cards. Face-to-face meetings are a great idea if you have large groups of employees in common locations. Taking time to address these five common missteps can help you expand your communication program in a way that’s actually more focused toward the ultimate outcome: employees who understand their benefits, see their value more clearly, make better choices and are more satisfied with them (and their employer, too!).

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Under the Affordable Care Act’s (ACA’s) employer shared responsibility mandate (also known as the employer pay-or-play mandate), penalties are imposed on certain employers that fail to offer full-time employees health coverage that meets specific standards. A full-time employee is one who is employed on average at least 30 hours of service per week. The pay-or-play mandate was generally effective as of January 1, 2015, but employers with 50 to 99 full-time employees, including full-time equivalents, were granted a one-year delay (until 2016) to comply.

Applicable large employers, those that employ 50 or more full-time, including full-time-equivalent, employees, that fail to offer minimum essential health coverage to substantially all (generally defined as 95% for 2016 and later) of their full-time employees could face a penalty of $2,000 for each full-time employee, less 30 full-time employees, if any full-time employee purchases health insurance on the public exchange and is certified as eligible for financial assistance in the form of premium tax credits for such coverage. Employers that offer health coverage that either is not affordable or does not provide minimum value could pay $3,000 for each full-time employee buying public exchange coverage with premium tax credits. The penalties

are presented as annual amounts but are actually calculated on a monthly basis. Employers would be assessed one-twelfth of the above amounts for each month that they fail to offer coverage in accordance with applicable rules ($166.67 and $250 per month, respectively).

These dollar amounts are adjustable for inflation in years after 2014. In the case of any calendar year after 2014, the applicable per-employee dollar amounts of $2,000 and $3,000 are increased based on the premium adjustment percentage (as defined in section 1302(c)(4) of the ACA) for the year, rounded to the next lowest multiple of $10. In Notice 2015-87, issued December 16, 2015, the IRS announced the 2015 and 2016 penalty amounts. For 2015, the amounts were $2,080 ($173.33 per month) for failing to offer coverage, and $3,120 ($260 per month) for failing to offer affordable, minimum value coverage. For 2016, the penalties increased to $2,160 ($180 per month) and $3,240 ($270 per month), respectively.

The IRS recently updated its Q&As on the employer shared responsibility mandate. For calendar year 2017, the adjusted $2,000 penalty amount is $2,260 ($188.33 per month) and the adjusted $3,000 penalty amount is $3,390 ($282.50 per month).

What are the employer shared responsibility penalties for 2017?

Since you asked

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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 CentralAmarillo, 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 WatsonWillis 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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