HRFocus HR CORNER HUMAN CAPITAL PRACTICE VS. EXEMPT STATUS ANSWERED TABLE OF CONTENTS. August 2012 Issue 62.

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1 HR CORNER HUMAN CAPITAL PRACTICE HRFocus August 2012 Issue 62 EMPLOYER Q&As ON NONEXEMPT VS. EXEMPT STATUS ANSWERED In a recent BLR webinar, Allen M. Kato outlined the importance of proper classification of nonexempt vs. exempt employees. He explained why employers should conduct payroll audits to ensure that employees are properly classified, and he also talked about the most common exemptions. After the webinar, Kato lent his expertise to answer questions from the participants. Here s a recap of the question and answer session. Q: When using the executive exemption classification, what should you do about an executive staff position that does not have direct reports, such as general counsel? A: The main thing to look at here is that a position may qualify under more than one exemption. The position in question in this example "even if it doesn t fit within the executive exemption because there s no direct reports will none-the-less come within the professional [exemption] because that person is a licensed professional." Kato explained. Even if we weren t discussing general counsel let s say it s a higher staff position it may come within the administrative exemption: someone working on issues directly related to management policies or general business operations. Q: What do you suggest an employer should do if put in a position where an employee claims you have improperly classified a position as exempt? A: When this scenario happens, you want to conduct an immediate audit of the position or positions in question. At the end of the audit process, if you conclude that the position is properly classified as exempt, then the legal counsel will likely go back to the complainant and explain the conclusion and the reasons behind it. Conversely, if the audit team concludes that the position was improperly classified as exempt, then you have to address the situation. You must determine the best solution in the given context. Always engage legal counsel in this scenario. In conclusion, if you want to be sure that all of your employees accurately classified as nonexempt vs. exempt, you should conduct a top-to-bottom review of your pay practices, with help from an experienced employment law attorney. Don t risk non-compliance. TABLE OF CONTENTS HR CORNER EMPLOYER Q&As ON NONEXEMPT VS. EXEMPT STATUS ANSWERED 1 LEGAL & COMPLIANCE COVERAGE EXAMPLE CALCULATOR AVAILABLE 2 HEALTH CARE REFORM COMPLIANCE TIMELINE 3 HHS POSTS HIPAA PRIVACY AND SECURITY AUDIT PROTOCOL 3 IS DROPPING COVERAGE AT OPEN ENROLLMENT A COBRA QUALIFYING EVENT? 4 DOL RELEASES FMLA EMPLOYEE GUIDE 4 MEASURING THE SUCCESS OF YOUR WELLNESS PROGRAM 5 WEBCASTS 8 CONTACTS 9

2 Conduct an internal payroll self-audit that evaluates your current policies and practices, and discover mistakes before enforcement officials or employee attorneys do it for you. Allen Kato is an attorney in the Employment Practices Group of Fenwick & West LLP in San Francisco. His practice concentrates exclusively on representing management in equal employment opportunity, wage and hour, wrongful termination, privacy, unfair competition, and trade secret matters, and litigating individual and class action lawsuits before courts and agencies. This article is provided by BLR. LEGAL & COMPLIANCE COVERAGE EXAMPLE CALCULATOR AVAILABLE A calculator that group health plans and health insurers can use to complete the coverage examples for the summary of benefits and coverage (SBC) required under the Patient Protection and Affordable Care Act (PPACA) is available. Use of the calculator will be considered a safe harbor for plans and insurers for the first year of applicability. The SBC must contain coverage examples that illustrate benefits provided under the plan for pregnancy, serious and chronic medical conditions and for other common benefit scenarios and related cost-sharing based on recognized clinical practice guidelines (the agencies are taking a phased approach to implementing the coverage examples and reserve the right to require up to six examples in the future, but in the first year only two coverage examples, a normal childbirth and diabetes management, are required). The calculator, along with instructions and the algorithm used to create the calculator, can be found at BACKGROUND The agencies charged with implementing the health care reform law (Departments of Labor, Health and Human Services and Treasury) previously indicated they were developing a calculator that group health plans and insurers could use as a safe harbor for the first year of applicability to complete the coverage examples (plans and insurers will be required to provide comprehensive coverage examples, based on information specific to each benefit package option, no later than January 1, 2014). The calculator will allow plans and insurers to input a discrete number of elements about the benefit package. The output will be a coverage example that can be added to the SBC. The agencies first discussed the calculator in these FAQs that address the implementation of the SBC requirements. The SBC is intended to help individuals better understand their health coverage. Information about the SBC requirements can be found in the Willis Human Capital Practice Alert, March 2012, Summary of Benefits and Coverage: Final Regulations Released. 2

3 HEALTH CARE REFORM COMPLIANCE TIMELINE Willis National Legal & Research Group has updated its compliance timeline for employer-sponsored health plans. The timeline (as you might expect) provides a chronological listing of health care reform compliance obligations for employers that sponsor health plans for their employees. For each item, the timeline provides one or more links to other Willis publications with additional details. HHS POSTS HIPAA PRIVACY AND SECURITY AUDIT PROTOCOL Under the Health Information Technology for Economic Clinical Health (HITECH) Act, the U.S. Department of Health and Human Services (HHS) is required to conduct periodic audits to ensure that covered entities and business associates are complying with the Health Insurance Portability and Accountability Act s (HIPAA) privacy and security rules, as well as all breach notification standards. HHS Office of Civil Rights (OCR) recently completed an initial audit of 20 covered entities. An additional 95 audits are to be completed by December 31, The OCR HIPAA audit program analyzes processes, controls, and policies of selected covered entities pursuant to the HITECH Act audit mandate. OCR has created, and recently made available, a comprehensive audit protocol used to conduct the required audits. The audit protocol contains the requirements to be assessed during the remaining audits and the procedures that will be used in conducting the assessment. The audit protocol can be accessed here. The audit protocol is organized around modules, representing separate elements of privacy, security and breach notification. The audit protocol covers privacy rule requirements for: Notice of privacy practices for PHI Rights to request privacy protection for PHI Access of individuals to PHI Administrative requirements Uses and disclosures of PHI Amendment of PHI Accounting of disclosures The protocol also covers security rule requirements for administrative, physical and technical safeguards and requirements for the breach notification rule. Employers may find the audit protocol helpful in completing a self-assessment of their compliance efforts with HIPAA s privacy, security and breach notification rules. Employers can use the audit protocol to help identify what documentation the OCR could request during an audit. 3

4 IS DROPPING COVERAGE AT OPEN ENROLLMENT A COBRA QUALIFYING EVENT? The National Legal & Research Group (NLRG) is frequently asked whether COBRA coverage must be offered to spouses and dependents that employees drop from the group health plan at open enrollment. In most cases, the answer is no. This is because simply dropping a spouse or dependent from the group health plan at open enrollment is not a COBRA qualifying event. WHAT IS A COBRA QUALIFYING EVENT? The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires a plan to offer continuation coverage to qualified beneficiaries (people who are covered under a group health plan as the covered employee, the spouse of the covered employee, or the dependent child of the covered employee on the day before a qualifying event) only if coverage is lost as a result of certain listed triggering events, including: Termination of the covered employee s employment or a reduction of hours Divorce (or legal separation) from the covered employee Death of the covered employee A dependent child s ceasing to be a dependent under the plan A triggering event that results in a loss of coverage is called a COBRA qualifying event. Many times, an employee will drop a spouse or dependent from coverage for reasons entirely unrelated to the listed COBRA triggering events; for example, because these individuals have enrolled in a plan sponsored by the spouse s employer or because the family cannot afford the employee s share of premiums for family coverage. These losses of coverage are not COBRA qualifying events, so they do not give rise to an obligation to provide a COBRA election notice. But plan administrators must exercise caution because sometimes dependents or spouses are dropped from coverage as a result of one of the COBRA triggering events. For example, dependents may be dropped from coverage because they have ceased to be dependents under the terms of the plan. Similarly, spouses or dependents may be dropped from coverage because of a divorce or legal separation (if legal separation will cause a loss of coverage under the terms of the plan). A child s ceasing to be a dependent and a divorce (or legal separation) are both COBRA triggering events so these losses of coverage may be COBRA qualifying events that give rise to an obligation to offer COBRA coverage. DOL RELEASES FMLA EMPLOYEE GUIDE The Department of Labor s Wage and Hour Division (WHD) recently rolled out a new employee guide to the Family and Medical Leave Act (FMLA). The new guide, entitled "Need Time? The Employee's Guide to the Family and Medical Leave Act," includes easy-to-follow and informative charts that map out the FMLA leave process and a summary of how coverage and eligibility are determined. The Employee Guide was rolled out during a June 27, 2012 webinar hosted by the WHD. The archived webinar can be accessed here. While the intended audience of the FMLA guide is employees, employers may appreciate its easy-to-read format and find it useful when discussing the FMLA with employees. The guide answers questions employees frequently have about FMLA and addresses who can take FMLA leave and what protections the FMLA provides. 4

5 But plan administrators must exercise caution because sometimes dependents or spouses are dropped from coverage as a result of one of the COBRA triggering events. For example, dependents may be dropped from coverage because they have ceased to be dependents under the terms of the plan. Similarly, spouses or dependents may be dropped from coverage because of a divorce or legal separation (if legal separation will cause a loss of coverage under the terms of the plan). A child s ceasing to be a dependent and a divorce (or legal separation) are both COBRA triggering events so these losses of coverage may be COBRA qualifying events that give rise to an obligation to offer COBRA coverage. Someone who is dropped in anticipation of a COBRA qualifying event may also have COBRA rights. The COBRA rules specifically provide that a reduction or elimination of coverage in anticipation of a qualifying event is disregarded in determining whether a specified event results in a loss of coverage. For example, when an employee voluntarily drops a spouse s coverage at an annual enrollment period, that spouse is not a qualified beneficiary. If, however, the employee and spouse later divorce, under the in anticipation rule, COBRA must be offered to the ex-spouse if the covered employee dropped the spouse from coverage in anticipation of the divorce. When this rule applies, the divorce is treated as the qualifying event, and COBRA coverage runs from the date of the divorce. (Coverage is not reinstated for any period before the divorce, however.) WHAT SHOULD PLAN ADMINISTRATORS DO IN THESE SITUATIONS? A plan is generally not required to provide a COBRA election notice unless the plan administrator is notified of a divorce (or legal separation) or a child s ceasing to be a dependent within 60 days after the event occurs (provided that information regarding the 60-day notice requirement is communicated through the plan s summary plan description (SPD) and COBRA initial notice). Nevertheless, if a plan has independent information available to it indicating that a qualifying event (such as a divorce) has occurred, the plan administrator may wish to act on that information and provide a COBRA election notice immediately, even without any notice from the qualified beneficiary. First, sending the election notice will start the 60-day COBRA election period for the spouse or dependents running at the earliest possible time. Second, it is possible that a court would hold a plan administrator responsible for providing COBRA election notices to qualified beneficiaries when the plan administrator knew or should have known that a qualifying event occurred, even if the required notice was not provided to the plan administrator within 60 days. To address these and other potential issues that may arise when a spouse or dependent is dropped from coverage at open enrollment, a letter that explains to spouses and dependents that the employee voluntarily dropped them from coverage could be included with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) certificate of creditable coverage (a sample letter is available on Willis Essentials). Dependents and spouses who are dropped from coverage must be provided with a HIPAA certificate of creditable coverage (the certificate must generally be provided any time employer-sponsored coverage is lost). Providing this notice will alert the spouse and/or dependent that they no longer have coverage and may trigger a response if they were unaware of the termination. MEASURING THE SUCCESS OF YOUR WELLNESS PROGRAM A wellness program is a good thing. Finding out how well it s working that s a very good thing. But don't worry; it s never too late to include regular program evaluation to determine if your efforts are paying off. The same goals and objectives that inspired your wellness program at the outset will provide the direction you need in determining 5

6 what data and metrics to collect in order to measure the success of your program and discover areas needing improvement. Program evaluation can be basic (e.g., tracking attendance at sponsored events and surveying employees regarding their engagement levels and interest), more advanced (comparing aggregate Health Risk Assessment [HRA] and biometric screening data to assess the highest risk areas) or at the highest level (assessing the program s overall impact on health costs by comparing claim costs year over year). Regardless of the method you choose, stay consistent and track your progress regularly. You can always add more evaluation methods as needed, but it is important to establish a few core measures early. Carefully selected metrics will serve as the foundation to monitor your program progress and measure and report program successes and impact. WHEN TO EVALUATE YOUR PROGRAM ONGOING EVALUATION: For participation, attendance tracking and satisfaction surveys BI-ANNUAL EVALUATION: To review modified medical claims, company health and productivity audits and pharmacy claims (reviewing these items biannually will provide for the most comprehensive data analysis) ANNUAL EVALUATION: For wellness interest surveys, personal health assessments or HRAs and for biometric screening results or other personal health screenings REASONS TO EVALUATE YOUR WELLNESS PROGRAM If you want to continue or enhance your wellness program, you would do well to understand what is and is not working. Evaluation provides measurable data regarding the program s progress and can help build a stronger case for additional funding and expansion efforts. A few key reasons to evaluate your program are: To gather feedback on your initiatives to improve programing efforts in the future. To calculate change. Program evaluation will enable you to measure employee attitudes/perceptions of wellness from the initial phases through the program s progression. Another way to use data is for comparison of your organization s aggregate biometric screening results to gauge how the wellness program has transformed your workforce. To secure funding for the future of your program. Measuring your program will allow you to prove that the program is worth funding based on cost savings or employee value. To compare the success of different intervention methods. When evaluating your wellness program, measure these results against 6

7 LOW COST & EASY METHODS FOR MEASURING PROGRAM SUCCESS Determine your baseline for key metrics. Look at the sample reports that will be available from your wellness program vendor(s). Select key metrics to track over time. Set specific, measurable, realistic goals to track over time. Obtain program registration sheets to see who is attending wellness events and to gauge how popular events are with your employees. Conduct participation surveys during and after wellness program efforts. Administer self-reported behavior change surveys. Conduct a program satisfaction survey. Report on program success annually to key internal teams and stakeholders. Make strategic planning and vision a priority with annual meetings dedicated to data review and goal setting for the future. other health and wellness related initiatives within your organization to determine where the most value is found. Focus future efforts on the intervention methods that work best and eliminate or phase out the methods that are not working as well for your population. BEST PRACTICES FOR COMMUNICATING YOUR RESULTS Just as important as program evaluation is the communication of your results. We recommend that you present findings annually (at minimum) to key stakeholders and senior management. Depending on your organization s size, culture and common practices, you may want to consider providing them with quarterly or twice-yearly program updates. Other tools and cost calculators available from national wellness resources, public health interest groups and health associations can help you paint a more vivid picture of your wellness program s success or areas where improvement is needed. Some organizations use external resources and calculators to determine return on investment and forecast estimates based on industry or national statistics in comparison with their own data. When reviewing these calculators, select the one that provides realistic information based on your organization s size, risks and other important factors. A combination of cost calculators, program evaluations and other analyses can provide a detailed and actionable results-based report that further justifies the continuation of your wellness program. Determining your program evaluation methods early on and consistently measuring data against your program s goals and objectives is a key to ensuring the success of your program. As with any program, your organization may need to make adjustments based on evaluations that do not indicate the level of success you hoped for. Please contact your local Willis representative if you have questions or would like to inquire about measuring the success of your worksite wellness program. 7

8 WEBCASTS SOCIAL MEDIA: HOW EMPLOYERS NEED TO RESPOND TO SOCIAL NETWORKING POLICIES TUESDAY, AUGUST 21, :00 PM EASTERN TIME PRESENTED BY: FRANCES K. HORN NATIONAL LEGAL & RESEARCH GROUP WILLIS HUMAN CAPITAL PRACTICE The use of social media websites continues to increase. A recent survey shows that 85 million people currently use LinkedIn, 175 million use Twitter and 500 million use Facebook. Many employers promote the use of social media as it can assist with branding, sales and some even claim employee productivity. However, as the use of these websites for personal reasons overlap with company time, employers wonder what policies should be instituted in their workplaces. This webinar on social networking will address rules for policymaking as they pertain to employer and employee rights, especially as to how the National Labor Relations Board (NLRB) has addressed these rights. PARTICIPANT ACCESS Advance reservations are required to participate. Click here to RSVP for this call. VARIABLE PAY PLANS A MANAGEMENT TOOL TO DRIVE BUSINESS RESULTS TUESDAY, SEPTEMBER 18, :00 PM EASTERN TIME PRESENTED BY: DEBBI DAVIDSON SENIOR HUMAN RESOURCES CONSULTANT WILLIS HUMAN CAPITAL PRACTICE An effective variable pay plan ensures that employees focus their efforts on those areas critical to business success and assists in promoting a pay for performance culture. This seminar will provide participants with the skills and information needed to develop such a plan. Learning objectives in this session include: Understanding why variable pay is on the rise Reviewing the types of variable pay programs and examples of each Identifying seven decisions that must be made when designing incentive plans How to calculate an incentive plan payout award Typical incentive plan design mistakes PARTICIPANT ACCESS Advance reservations are required to participate. Click here to RSVP for this call. 8

9 KEY CONTACTS U.S. HUMAN CAPITAL PRACTICE OFFICE LOCATIONS NEW ENGLAND Auburn, ME Bangor, ME Boston, MA Burlington, VT Hartford, CT Manchester, NH Portland, ME Shelton, CT NORTHEAST Buffalo, NY Morristown, NJ Mt. Laurel, NJ New York, NY Norwalk, CT Radnor, PA Wilmington, DE ATLANTIC Baltimore, MD Knoxville, TN Memphis, TN Metro DC Nashville, TN Norfolk, VA Reston, VA Richmond, VA Rockville, MD SOUTHEAST Atlanta, GA Birmingham, AL Charlotte, NC Gainesville, FL Greenville, SC Jacksonville, FL Marietta, GA Miami, FL Mobile, AL Orlando, FL Raleigh, NC Savannah, GA Tallahassee, FL Tampa, FL Vero Beach, FL MIDWEST Appleton, WI Chicago, IL Cleveland, OH Columbus, OH Detroit, MI Grand Rapids, MI

10 Milwaukee, WI Minneapolis, MN Moline, IL Pittsburgh, PA Schaumburg, IL SOUTH CENTRAL Amarillo, TX Austin, TX Dallas, TX Denver, CO Houston, TX McAllen, TX Mills, WY New Orleans, LA Oklahoma City, OK Overland Park, KS Wichita, KS WESTERN Fresno, CA Irvine, CA Las Vegas, NV Los Angeles, CA Novato, CA Phoenix, AZ Portland, OR Rancho/Irvine, CA San Diego, CA San Francisco, CA San Jose, CA Seattle, WA The information contained in this publication is not intended to represent legal or tax advice and has been prepared solely for educational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication. San Antonio, TX