Your Employee Matters

An extensive survey of more than 4,000 low-wage workers in Los Angeles, Chicago, and New York City by the National Employment Law Project (NELP) reached these conclusions:

• More than one in four workers surveyed (26%) were paid less than minimum wage.
• Among these workers, 16% were underpaid by more than one dollar per hour.
• More than three in four (76%) workers who worked overtime were not paid for their time. The average worker had put in 11 hours that were either underpaid or not paid at all.
• Women and foreign-born workers were victimized more than anyone else.
• The average wage theft was 15% of earnings.

Additional violation categories included:

• Off-the-clock
• Meal breaks
• Pay stubs
• Illegal deductions
• Tips
• Illegal employer retaliation
• Workers Compensation violations

It is hard to balance this economic suffering with the fact some executives are making tens of millions of dollars during a failing economy. You don’t have to be of any political persuasion to realize that something’s out of whack. Not only do these employers deprive good people of a fair day’s pay, they’re also at war with companies who strive to grow their business the right way; perhaps even going above the call and actually empowering their workers rather than oppressing them. If we can fight overseas to assure basic human rights, we should be able to do the same here.

Section 125 Cafeteria Plans refer to an employee benefit that allows you to pay certain expenses with pre-tax dollars. With this benefit, you maximize your income and reduce your tax burden.

What are Section 125 Cafeteria Plans?

These employee benefit plans get their names from Section 125 of the IRS Code. With Section 125 Plans, you deposit pre-tax dollars into a special account and use those funds to pay qualified expenses. The funds in these plans are exempt from federal, state, Social Security, Medicare, FICA and FUTA taxes.

You could save up to 50 cents for every dollar you contribute to a Section 125 Plan account. It’s a beneficial way to reduce your taxable income and increase the disposable income in your paycheck every week.

You may choose from several types of Section 125 Cafeteria Plans, including Premium Only Plans and Flexible Spending Accounts.

• Premium Only Plan (POP) – Your employer deducts your health insurance premiums before deducting taxes from your paycheck.
• Flexible Spending Account (FSA) – You choose an amount of money you’ll contribute to your FSA and then use the funds to pay eligible expenses.

According to the IRS, employers must offer Section 125 plans to all eligible employees. They cannot discriminate based on protected statuses or your job description, pay rate or seniority.

What Expenses do Section 125 Cafeteria Plans Cover?

Depending on your specific Section 125 Cafeteria Plan, you may use it to pay expenses related to:

• Adoption expenses
• Dependent care
• Group term life insurance premiums
• Health savings account premiums
• Medical treatment
• Supplemental insurance such as accident, cancer, dental or vision insurance
• Transportation expenses

How to Enroll in Section 125 Cafeteria Plans

Talk to your Human Resources department for details on enrollment in Section 125 Plans. Many employers hold an open enrollment for benefits during December, but your company’s enrollment date may vary.

How to Take Distributions From Section 125 Cafeteria Plans

Submit requests for reimbursement to your HR department. Usually, you don’t have to wait until the end of the year to withdraw funds for medical expenses from your Section 125 Cafeteria Plan. As soon as you have a qualified expense, you can take money from your account. This uniform coverage rule does not apply to a dependent care FSA.

Remember that you will lose any funds you don’t withdraw since they do not carry over to the next year. Track your contributions on your pay stub or ask your HR manager.

Section 125 Cafeteria Plans help you save for qualified expenses and give you extra cash in your paycheck. They also help you budget for medical and dependent care expenses, so consider opening an account this year.

Several recent events prove that the U.S. Department of Labor (DOL) is set to deliver on its previous promises that it will go to great lengths to help workers, at the expense of employers.

As we’ve informed you in previous newsletters, the DOL has received significant funding for investigating employers who misclassify workers as independent contractors or as exempt from the overtime provisions of the Fair Labor Standards Act. A DOL news release issued April 22, 2010, indicated that the DOL has requested $12 million for this initiative in 2011 alone, and that the department is working closely on these initiatives with the Vice President’s Middle Class Task Force. In the news release, Secretary of Labor Hilda Solis vowed to “help middle-class families remain in the middle class.”

Just before this, in March 2010, the DOL announced its intent to stop a longstanding practice of issuing fact-specific opinion letters to employers. For nearly a decade, employers with questions regarding federal wage and hour laws could seek the department’s opinion on whether they were in compliance, which could serve as evidence of an employer’s good faith efforts if they were sued. Now, however, the DOL will only issue opinions that “set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision at issue.

The DOL contends that this will be a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations, where a slight difference in the facts could change the outcome.” This position is set forth on the DOL Web site at www.dol.gov/whd/opinion/opinion.htm. Of course, the net effect of this shift away from fact-specific opinion letters is even less guidance for employers than before.

The department made this announcement about the same time that it issued an opinion letter finding mortgage loan officers non-exempt (despite employers’ arguments that they were white-collar administrative employees in accordance with a prior DOL opinion letter issued during the Bush administration, which found such employees exempt).

Also, in May 2010, Secretary Solis signed a Workers Rights Joint Declaration along with Ambassador Sarukhan of Mexico, committing to “inform Mexican workers in the United States about their labor rights through information sharing, outreach, education, training, and exchange of best practices.” This declaration will clearly lead to more complaints, investigations, penalties, and the use of employer resources.

Lesson: Collectively, these actions amply demonstrate that the current DOL is preparing (if it has not already begun) to get tough on employers. Consequently, you should redouble your efforts to classify workers properly and make sure that your pay practices comply fully with the law. Article courtesy of Work law® Network firm Pilchak Cohen & Tice (www.mi-worklaw.com).

Health Savings Accounts (HSAs) allow you to pay for qualified medical expenses that aren’t covered by your high-deductible health insurance policy. It can be a wise investment, so learn more about how health savings accounts work and why you should have one.

How to Qualify for an HSA

If you have a high-deductible health insurance policy, you qualify for an HSA. Your eligibility is re-evaluated annually.

How is an HSA Funded?

After you enroll in an HSA, you’ll fund your account with post-tax dollars. The money you contribute but don’t use is rolled over to the next year. You may take your HSA funds with you if you switch jobs, and you can even invest your HSA money in mutual funds, stocks or bonds when the total reaches a certain amount.

What Does an HSA Cover?

An HSA will cover a variety of medical expenses as long as they are not reimbursed by other means such as a long-term care policy, and you can use your HSA funds for your own medical expenses or those accumulated by your dependents. Qualifying medical expenses include:

• Acupuncture
• Addiction treatment
• Artificial limbs or prosthetics
• Chiropractors
• Dental services and dentures
• Emergency care
• Fertility enhancements
• First aid supplies
• Health insurance premiums from COBRA coverage or if you’re receiving unemployment compensation
• Laser eye surgery
• Long-term care insurance premiums
• Medical equipment
• Medicare Part A or B premiums
• Mental health treatment
• Nursing services
• Prescribed smoking cessation tools or weight loss medicine
• Prescription medications
• Surgery
• Vision care and aids

Remember that HSA will typically not cover several expenses such as:

• Babysitting or household help
• Cosmetic surgery that is unrelated to a medical condition
• Diaper service
• Electrolysis for hair removal
• Funeral expenses
• Hair transplants
• Health club dues
• Maternity clothing
• Medications that are not prescribed
• Over-the-counter diet drinks or vitamins
• Swim lessons
• Teeth whitening
• Weight-loss programs that are not prescribed by a doctor

If you use your HSA to pay for a non-qualifying expense, you must pay income tax on the funds you withdraw plus a tax penalty.

How do you Use Your HSA Funds?

Use the debit card or checks associated with your HSA account to pay for qualifying medical expenses.   You will pay no taxes on your HSA distributions.

How do you Enroll in an HSA?

Talk to your employer, insurance agent or bank about starting an HSA. As soon as the account is funded, you may begin withdrawing from it.

Health Savings Accounts supplement your health insurance policy. They can be a wise investment you should consider.

The administrative exemption creates one of the most difficult distinctions in the wage and hour area. Whether somebody works in an “administrative capacity” has a lot to do with whether they work “in the business” or “on the business.” A telling case was recently decided in the Northern District of West Virginia, Desmond v. PNGI Charles Town Gaming (08-1216).

In this case, racing officials at the Charles Town Gaming racetrack were treated as exempt employees. After extensive analysis, the appellate court overturned the previous court, ruling that the employees were not exempt and overtime was owed.

Remember, an employer bears the burden of proving, by clear and convincing evidence, that an employee’s job falls within the administrative exemption.

These exemptions are “narrowly construed against the employee seeking to assert them.” In viewing the dichotomy, the court made these points to keep in mind:

The indispensability of an employee’s position within the business cannot be the determining factor of whether the position is directly related to the employer’s general business operations.

Regulations generally exclude “run of the mill” jobs with administrative classification. So although secretaries and clerks might be “indispensable,” they are not exempt under the FLSA. In the same way, just because an employee is required under state law (i.e., posting a flagman around highway work), it does not mean that they are indispensable for purposes of exemption analysis.

The employee must perform work directly related to assisting with the running or servicing of the business, as distinguished, for example, from being a secretary, working on a manufacturing production line, or selling a product in a retail or service establishment.

According to the DOL, administrative exempt work includes — but is not limited to — functional areas such as

• Tax
• Finance
• Accounting
• Budgeting
• Auditing
• Insurance
• Quality Control
• Purchasing
• Procuring
• Advertising
• Marketing
• Research
• Safety and Health
• personnel management
• Human Resources
• Employee Benefits
• Labor Relations
• Public Relations
• Government Relations
• Computer Network
• Internet and Database Administration
• Legal and Regulatory Compliance
• Other Similar Activities

Not included would be work consisting of tasks similar to those performed on a manufacturing production line or selling of a product in a retail or service establishment. (See 29 C.F.R. § 541.241) To learn more, please click here.

Under the Affordable Care Act, almost all Americans must buy health insurance, and many choose to participate in employer-sponsored coverage. Self-insured group health insurance is one option some companies choose.

What is Self-Insured Group Health Insurance?

With self-insured group health insurance, a company takes on the financial responsibility and risk of providing its employees with health insurance benefits. The company collects premiums from employees and their dependents. The company then pays medical claims directly instead of paying an insurance carrier.

The company may contract with a third party administrator (TPA) to perform certain insurance services such as setting up the plan, reviewing services and arranging network contracts.

Self-insured group health insurance is more common in larger companies than in smaller companies because of the financial risk. However, companies with as few as 25 people do choose this type of health insurance.

Which Laws Apply to Self-Insured Group Health Plans?

Self-insured group health plans must comply with a variety of federal laws. They include:

• Age Discrimination in Employment Act
• Americans with Disabilities Act (ADA)
• Civil Rights Act
• Consolidated Omnibus Budget Reconciliation Act (COBRA)
• Employee Retirement Income Security Act (ERISA)
• Health Insurance Portability and Accountability Act (HIPAA)
• Pregnancy Discrimination Act
• Various budget reconciliation acts

What are the Advantages of Self-Insured Group Health Insurance?

Companies choose self-insured options for several reasons, including these.

1. 1. Easy to customize.Rather than purchase a pre-packaged insurance plan, a company may customize its plan based on the needs of covered employees.

1. 1. Choose providers.Because a company decides to be self-insured, it may also choose its providers and provider network that suits its employees’ needs.

1. 1. Maintain financial control of plan reserves.A typical self-insured group health insurance plan requires a company to earmark premiums for future claims. The employer may invest those premiums to maximize the interest earned.

1. 1. Improve cash flow.With a self-insured group health insurance plan, the company is relieved from pre-paying for coverage. This perk improves cash flow instead of tying up funds.
   2. Reduce conflict and confusion caused by state health regulations.Federal laws regulate self-insured group health insurance plans. That means the company is free from conflicting and confusing state regulations and benefit mandates.

1. 1. Relieve tax burden.Some states charge a tax on health insurance premiums. A self-insured company does not pay these taxes.

A self-insured group health insurance plan may be a smart decision for a company. Understand its risks and benefits as you ensure you comply with the Affordable Care Act and obtain valuable health insurance.

I remember a Southwest executive telling me once that if we take care of our people they will take care of our customers and that will take care of our profits. Since their inception this has held to be true. The Success article was an interview with the CEO of the $1.8 billion company, Andrew Cherng. Here are some pointers that he made to help nurture your workforce:

“The environment here is about personal growth, personal well-being. When you are healthy mentally, physically, emotionally, spiritually—when you’re doing well, you’re likely to do good things in your life and that’s what we advocate.”

Tell me you wouldn’t want to work for a boss like this!

“The environment is a way you see the future. One person at a time.”

Cherng realizes your environment and culture is a choice. As he stated, you can only build a culture through individuals; one person at a time.

“People who are successful tend to take care of those little things very well. And then they accumulate credit, resources, and do whatever it is that you need in life—that’s the preparation for success.”

Do you take care of the little things very well? Have you accumulated credit, resources, and do whatever it takes to prepare for success? As the saying goes, when you take care of the little things the big things tend to take care of themselves.

“We can all do a better job. And when we do we all get rewarded. The reward may come in just being happy or in other people being happy. When you do your job well, your customer feels that and your business blossoms”

How motivated are you and your fellow employees to not do just an average job or a comfortable one but an extraordinary, awesome one? Are they doing tasks in a way that make them feel happy?

Cherng suggests that management should ask employees:

“Are you being mindful? Are you putting your heart into the work? Are you passionate about your work? Are you loving your environment? Our job is to raise everyone’s levels of understanding and caring. When you raise the level of caring, you see a good result.”

While we think of ourselves as good people and have good intentions we often times don’t manifest that. An excellent book was written about it “Leadership and Self Deception.” The essential theme being that we deceive ourselves; that we in fact manifest caring. What have you done lately to show employees that you care?

We live in an experience economy and the whole purpose of any business is to increase human well-being. What a wonderful opportunity for every one of us!

Attracting top leadership talent for your company is essential since good leaders grow businesses, increase productivity and motivate employees. However, many companies cannot afford to offer competitive benefits plans to the leaders who can guide their organization to success. Executive benefits plans provide a solution. If your company needs strong leadership, consider offering an executive benefits plan.

What is an Executive Benefits Plan

Attract, reward and retain leaders and key employees in your business with an executive benefits plan. It’s a contractual agreement between the employer and key employees. It offers retirement benefits that supplement your company’s existing benefits package.

The plan gives your company flexibility when offering compensation to executives and key employees, and it can:

• Replace income at retirement
• Replace benefits lost because of IRS limits on qualified plans
• Defer compensation
• Enhance benefits during an acquisition or other change of control
• Add additional benefits to qualified employee benefit plans

There are no coverage, eligibility or participation requirements for an executive benefits plan, making it ideal for companies of all sizes.

Executive Benefits Plan Eligibility

Almost any employee is eligible for qualified employee benefits packages. Only select employees are eligible for executive benefits plans, however. According to the Department of Labor, these plans may only cover select management personnel with specific job titles.

• President
• Chief executive officer
• Chief financial officer
• Senior or executive vice president
• General counsel
• Treasurer

Additionally, highly compensated employees or those with key responsibilities may be eligible for executive benefits plans.

Products Available in an Executive Benefits Plan

Consider all the available products when you assemble an executive benefits plan. In general, you may choose from several product options, including:  

• Executive Health Plans
• Elective Deferred Compensation Plan (EDC)
• Benefit Equalization Plans (BEPS)
• Supplemental Executive Retirement Plan (SERP)
• Medical Reimbursement Plans
• Section 162 Bonus Plans
• Split-Dollar Plans
• 457(b) Plans
• 457(f) Plans
• Key Person Disability Coverage
• Key Person Life Insurance

Funding Considerations

When funding an executive benefits plan, you can choose between two options.

• Funded plans offer security since contributions are deposited into an independent trust which then pays the benefits.
• Unfunded plans are deducted from the company’s general assets.

Talk to your benefits plan administrator or insurance agent for more details on funded and unfunded plans. Then choose the type that meets your needs.

Leaders can make or break a business. Offer an executive benefits plan to develop a strong leadership team. When choosing an executive benefits plan, look for one that’s managed by a reputable company. It should be effective and cost-efficient too as you retain leaders who help your company prosper.

The National Insurance Crime Bureau (NICB) released its list of U.S. metropolitan areas plagued with the highest stolen-vehicle rates in 2015. California cities took eight of the top ten spots, with New Mexico and Colorado filling out the list.

What does this mean for you, the business owner?

It reinforces the threat of vehicle theft. If your company vehicle is stolen, it could take some time to replace that vehicle, which could impact your business. Although it seems that those in sunny California get the short end of the stick, the bottom line is that thieves wreak havoc on business parking lots and jobsites nationwide.

The NICB recommends three levels of security:

• Warning devices, such as alarms.
• Immobilizing devices, such as a smart key or kill switch.
• Tracking devices that help police locate the vehicle.

The NICB also advises owners and users of vehicles to exercise such common sense precautions such as not leaving the car unlocked.

Although NICB’s recommendations provide viable risk-management techniques, a commercial auto policy that includes theft coverage will also help.

If we haven’t discussed your coverage in a while, now’s the time. Please give us call us today

Some employers offer a dental plan as part of the employer benefits package. It can be a beneficial employment perk, so become familiar with the common types of dental benefits as you decide if your company’s plan meets your needs.

Fee-for-Service Dental Benefits

Under this type of plan, the dentist receives a set fee for services. There are five common types of fee-for-services dental benefits plans.

1. Direct Reimbursement

   This self-funded plan allows you to choose your dentist. Your insurance will directly reimburse the dentist or you pay out-of-pocket, submit a receipt to your insurance and receive a check.

1. Indemnity Plans

   Also called traditional insurance, indemnity plans allow you to choose your dentist and pay dentists based on the procedures they perform. The dentist determines the fee for each procedure, and your insurance covers a portion of each procedure up to a maximum allowance.

1. Preferred Provider Organization (PPO)

   Dentists in a PPO plan contract with an insurance company and deliver specific dental services for a set fee. You’ll save money by seeing a dentist in your PPO rather than an out-of-network provider.

1. Managed Care

   Dental providers may partner with members and provide managed dental care. This care includes dental procedures and financing.

1. Dental Health Maintenance Organization

   A dental health maintenance organization (DHMO) is also known as a capitation or pre-paid plan. Under a DHMO, your dentist receives a certain amount of money each month. The dentist must then provide services to you at no or a reduced cost. You must visit the covered dentist and will not receive any financial reimbursement for services you don’t use.

Other Types of Dental Plans

In addition to fee-for-service dental benefits, you may choose from several other types of dental plans.
Discount or Referral Dental Plans

1. The insurance company may contract with a network of dentists who agree to discount their services to members. You pay for treatment you need out-of-pocket according to the fee schedule.

1. Point of Service Options

   With your managed care dental plan, you may receive treatment from dentists who are not in your network of dental providers. Expect to pay significantly more to out-of-network providers than you would for services from an in-network dentist.

1. Table or Schedule of Allowances Plans

   A type of indemnity plan, a table or schedule of allowance dental plan assigns a dollar amount to each dental procedure. You must pay the difference between the allowance and the actual charge, and you may need to choose a PPO dentist to receive the maximum benefit amount.

Your employer may offer dental benefits as part of your employee benefits package. Understand which type of plan is offered as you decide if the coverage is right for you.