HR Focus. HR Corner. Proposed EEO-1 Amendment to Include Pay Data Have you Heard? March 2016

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1 HR Focus March 2016 HR Corner Proposed EEO-1 Amendment to Include Pay Data Have you Heard? By: Marina A. Galatro, PHR-CA, SHRM-CP Sr. HR Consultant, HR Partner On January 29, 2016, the Equal Employment Opportunity Commission (EEOC) announced its intent to amend the current, demographic-related Employer Information Report (EEO-1) data collection requirements to include pay information for large employers. The agency plans to require companies, including federal contractors, with 100 or more employees to include pay data as part of their EEO-1 form submissions and issue enforcement guidance on unlawful retaliation. The EEOC and the Office of Federal Contract Compliance Programs (OFCCP) would jointly have access to the pay data for enforcement purposes. The action is among those President Obama highlighted during a White House speech to mark the anniversary of the first piece of legislation he signed into law the Lilly Ledbetter Fair Pay Act. According to a White House fact sheet: HR Corner Proposed EEO-1 Amendment to Include Pay Date Have You Heard? 1 Health Outcomes Second-Opinion Services to Improve Patient Safety and Health Care Quality 3 Legal and Compliance CHIP Model Notice Revised 4 PPACA Information Reporting Reminder: Employee Statements Due March 31 4 HHS Announces 2016 Federal Poverty Guidelines 5 Webcasts 8 Key Contacts 9 The President is highlighting several additional actions that his Administration is taking to further advance equal pay for all workers and to further empower working families. Continued on page 2

2 HR Corner continued from page 1 The White House explains that the EEOC s proposal would cover more than 63 million employees and will help focus public enforcement of our equal pay laws and provide better insight into discriminatory pay practices across industries and occupations. While the Obama Administration s January 29 statement announcing the proposal focused mainly on the gender pay gap as the basis for the new requirements, the proposed changes will mandate submission of pay data broken down by race/ethnicity, in addition to gender. What are the proposed amendments? Currently, the EEO-1 data provides the federal government with workforce profiles from employers by race, ethnicity, sex and job category. This proposal would add collective data on pay ranges and hours worked to the information collected, beginning with the September 2017 report. Employers would identify the number of employees to be reported in each pay band (pay bands proposed by the EEOC) based on the W-2 wages paid to employees for a 12-month period looking back from a pay period picked by the employer between July 1 and September 30 of the reporting year. The new EEO-1 report would also require submission of data on total hours worked during the same period. Further information on the proposed changes (Notice) is available on the Federal Register website. With respect to how the EEOC intends to use this wage information, the Notice on the Federal Register website explains: In the course of developing this EEO-1 proposal, the EEOC and OFCCP together consulted with the Department of Justice, focusing on how EEO-1 pay data would be used to assess complaints of discrimination, focus investigations, and identify employers with existing pay disparities that might warrant further examination. The EEOC and OFCCP plan to develop statistical tools that would be available to staff on their computers, to utilize the EEO-1 pay data for these purposes. They also anticipate developing software tools and guidance for stakeholders to support analysis of aggregated EEO-1 data. Finally, the EEOC and OFCCP anticipate that the process of reporting pay data may encourage employers to self-monitor and comply voluntarily if they uncover pay inequities. What can you do? The proposed rule was published February 1. The EEOC is soliciting public comments on proposed policy changes that could have a significant impact on employers, such as how employers can report hours worked for salaried employees and the estimated hours it would take for them to comply with this new reporting requirement. Comments on this proposed rule are due on or about April 1, The agency also intends to hold a public hearing on this matter at a time and date to be determined. In addition to submitting your comments, now would be a good time to look at your current pay practices to ensure they are line with the Equal Pay Act and applicable state laws regarding gender pay discrimination as mentioned in February s HR Focus. 2 willistowerswatson.com

3 Health Outcomes Second-Opinion Services to Improve Patient Safety and Health Care Quality Imagine you have just been diagnosed with a serious condition, or maybe your doctor has just informed you that surgery is your only option. Would you seek a second opinion? Would you know where to turn to receive one? Research indicates that the incidence of misdiagnoses, (i.e., diagnoses delayed, missed or inaccurate) occurs between 10% and 20% of the time, 1 and regional variation in treatments for similar conditions are still prevalent in today s health care environment, resulting in costly and potentially harmful care. 2 Second-opinion services are offered by an increasing number of private corporations and medical centers. Employers can contract with these organizations and offer the benefit of an independent second opinion to their covered plan members and immediate family. These services can: Researchers are beginning to evaluate second opinions to determine their impact. When cases are reviewed, changes in diagnosis were found nearly 15% of the time, and changes in treatments were recommended over 37% of the time. 3 Patients lose precious time if they are not treating the correct condition, and employers may be paying for inappropriate and costly treatments that are not in their members best interests. As employers examine their health plans and look for benefits that can enhance consumerism and improve quality of care, about 60% of organizations are offering or considering offering decision support or second-opinion services. 4 There are no criteria for what conditions should receive a second opinion; however, a member may get the most benefit from this service if they have a rare or life threatening condition, unclear diagnosis, or if the treatment plan involves surgery or other risky interventions with multiple options. Employers should remember that they play an important role in reducing clinical errors and improving patient outcomes. Designing benefit plans that encourage second-opinion services will encourage provider collaboration, improve patient outcomes and reduce overall expenditures. Collect and review the patient s medical record Offer an expert medical opinion on the diagnosis and appropriate treatment required without needing to see the patient Share the expert review with the patient s treating physician in an effort to improve collaboration among health care providers, the quality of care and patient safety 1 The Journal of the American Medical Association: Bringing Diagnosis Into the Quality and Safety Equations 2 Variation in the Care of Surgical Conditions: A Dartmouth Atlas of Health Care Series 3 The American Journal of Medicine: Evaluation of Outcomes From a National Patient-initiated Second-opinion Program 4 National Business Group on Health, Large Employers 2016 Health Plan Design Survey; August HR Focus 2016

4 Legal and Compliance CHIP Model Notice Revised The Department of Labor s (DOL) Employee Benefit Security Administration (EBSA) has released an updated Children s Health Insurance Program (CHIP) model notice. The revised notice can be found at chipmodelnotice.doc. A printable version is also available at Employers who already fulfilled the CHIP notice requirement prior to the release of the new notice are not affected by the revised notice (redistribution of the notice is not required). However, employers who have not yet complied with the notice s annual distribution requirement will want to be sure they use the most recent notice. Background An employer is required under the Children s Health Insurance Program Reauthorization Act (CHIPRA) to provide a CHIP notice if it maintains an insured or selfinsured group health plan under which it offers benefits in a state that provides a premium assistance subsidy under Medicaid or CHIP. An employer must provide the CHIP notice to employees who reside in these states, regardless of the employer s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer or any other service provider affiliated with the employer or the plan) and regardless of an employee s enrollment status in the employer s group health plan. Employers were required to provide an initial CHIP notice by the later of either (1) the first day of the first plan year after February 4, 2010 or (2) May 1, After distributing the initial CHIP notice, employers must provide the notice annually. PPACA Information Reporting Reminder: Employee Statements Due March 31 On December 28, 2015, the Treasury Department and Internal Revenue Service (IRS) announced an extension of the due dates for mandatory reporting under the Patient Protection and Affordable Care Act (PPACA). Failure to file a timely, correct or complete information return with the IRS or to send a timely, correct or complete statement to an employee (or other individual, as applicable) can result in substantial penalties. As discussed in more detail below, employee statements for 2015 are due March 31, 2016 for both electronic and paper delivery. Background Under the PPACA employer mandate, applicable large employers (ALEs) must offer minimum essential coverage (MEC) to their full-time employees (average 30 hours or more per week), and the coverage must be affordable and provide minimum value, or pay a corresponding penalty tax. In order for the federal government to monitor ALE compliance, the law requires that ALEs meet certain reporting obligations to the IRS and to employees. Under Internal Revenue Code (IRC) Section 6056 regulations, ALEs are directed to use Form 1094-C (transmittal form that also summarizes employer shared responsibility compliance) and Form 1095 C (addressing each employee s coverage) (collectively, the C Forms ) to report how they are meeting their shared responsibility (i.e., employer pay or play) obligations. PPACA also requires individuals to secure minimum essential coverage or pay a corresponding penalty under the individual mandate. Under IRC Section 6055 regulations, employers, insurance companies and other entities that provide health coverage to individuals are required to meet certain reporting obligations to the IRS and to covered individuals that support that individual mandate requirement, by using the C Forms if the reporting entity is an ALE sponsor of a self-insured plan or Form 1094-B (transmittal form) and Form 1095-B (listing the covered individuals) (collectively, the B Forms ) if the reporting entity is an insurance company or a non-ale that is the source of health coverage for the individual. Continued on page 5 4 willistowerswatson.com

5 Legal and Compliance continued from page 4 Deadlines The required IRS information returns and employee statements for 2015 are due as follows (note that these dates are the extended 2015 deadlines that the Treasury Department and IRS announced in Notice ): Employee statements Due March 31, 2016 for both electronic and paper delivery (the due date was originally January 31) IRS information returns: Mail filing (permitted if fewer than 250 Forms 1095-B or 1095-C) Due May 31, 2016 (the due date was originally February 28) Electronic filing (required if 250 or more Forms 1095-B or 1095-C) Due June 30, 2016 (the due date was originally March 31) Due to the IRS s extension of the otherwise applicable deadlines, no additional extensions will be available. On December 28, 2015, the Treasury Department and Internal Revenue Service (IRS) announced an extension of the due dates for mandatory reporting under the Patient Protection and Affordable Care Act (PPACA). HHS Announces 2016 Federal Poverty Guidelines On January 25, 2016, the Department of Health and Human Services (HHS) announced the Federal Poverty Guidelines in effect for Those guidelines (also referred to as Federal Poverty Levels or Lines [FPLs]) are published by HHS every January 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 Patient Protection and Affordable Care Act (PPACA). There are three sets of FPLs, which vary depending on the number of persons in a family or household and to which part of the U.S. they are being applied: Continental U.S. (48 contiguous states and the District of Columbia) Alaska Hawaii The following is a link to the three sets of FPLs: 2016 HHS Poverty Guidelines Regulations. For purposes of administering the PPACA, the following are the chief uses of the 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 PPACA FPL guidelines and PPACA premium tax credits and cost sharing reduction subsidies Taxpayers with household incomes between 100% and 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. Such taxpayers may also 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. Continued on page 6 5 HR Focus 2016

6 Legal and Compliance continued from page 5 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 background In 2015, if an employer had 50 or more full-time employees and full-time employee equivalents (i.e., an applicable large employer or ALE), the PPACA pay or play employer mandate provisions required that the employer offer minimum essential health coverage to at least 70% of its full-time employees and their eligible dependents in order to avoid the IRC Section 4980H(a) sledgehammer penalty of $ per month per full-time employee (after subtracting the first 80 full-time employees) in the event one of the employer s full-time employees purchased coverage on a marketplace exchange and qualified for the premium tax credit. For 2016 that requirement has increased to 95% and the penalty increased to $180 per month per full-time employee (after subtracting the first 30 full-time employees). Note that final regulations issued in February 2014 delayed IRC Section 4980H penalties until 2016 for ALEs with fewer than 100 full-time employees (including full-time equivalent employees) during 2014 if they satisfied certain conditions. The 2014 employer mandate further required that an ALE offer coverage that was affordable and provided 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 $260 per month per full-time employee who went to an exchange and qualified for a premium tax credit. For 2016 that penalty has increased to $270 per month per full-time employee. 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 9.56% of the full-time employee s household income in 2015 (9.66% in 2016). 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 harbor In applying the new guidelines to the FPL affordability safe harbor that is determined based on the employee only (i.e., the 1 person family/household income level), effective January 25, 2016, the FPL annual compensation amounts for the three regions used to calculate the employee lowest cost contribution affordability safe harbor are: Continental U.S. $11,880 (as compared with $11,670 in 2014 and $11,770 in 2015) Alaska $14,840 (as compared with $14,580 in 2014 and $14,720 in 2015) Hawaii $13,670 (as compared with $13,420 in 2014 and $13,550 in 2015) The FPL safe harbor is determined by multiplying the applicable percentage (9.56% in 2015 or 9.66% in 2016) 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 employee-only lowest cost contribution meets the affordability standard, the Pay or Play regulations allow employers to select the applicable FPL compensation amount published every January by looking back six months prior to the start of their plan years (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 Continued on page 7 6 willistowerswatson.com

7 Legal and Compliance continued from page 6 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 2016: If the employer s plan year started January through July 2016, looking back six months would bring up two possible FPL affordability safe harbor employee contribution amounts that the employer can choose from: January 2015 safe harbor amount 9.66% X $11,770 (the FPL compensation amount HHS posted in January 2015) and then divided by 12 = $94.75 per month January 2016 safe harbor amount 9.66% X $11,880 (the FPL compensation amount HHS posted in January 2016) and then divided by 12 = $95.63 per month. If the employer s plan year started August through December 2016, looking back six months would bring up only one possible FPL affordability safe harbor employee contribution amount that the employer can use: January 2016 safe harbor amount 9.66% X $11,880 (the FPL compensation amount HHS posted in January 2016) and then divided by 12 = $95.63 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 2016 FPL safe harbor affordability calculation would apply the 9.66% affordability percentage that applies in 2016, even when looking back and using the FPL compensation amount from January Also keep in mind that the above calculations are using the FPL annual compensation amounts for the continental U.S., and different FPL compensation amounts apply for employers with employees in Alaska and Hawaii. Conclusion The 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. Some cost is associated with that simplicity and flexibility, however, since 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. 7 HR Focus 2016

8 Webcasts How to Do the Math on Medical and Rx Claims: Data-Driven Health Outcomes Strategies for Employers Tuesday, March 15, p.m. ET Ronald S. Leopold, MD, MBA, MPH Practice Leader, Health Outcomes Human Capital and Benefits During this session, participants will learn how to: Focus wellness programs on specific gaps in preventive care Provide access to the care utilization patterns identified in the member population Target individuals at risk for high costs with solutions for their clinical conditions Integrate new types of solutions partners, such as telemedicine, patient advocacy, specialty case management, expert second opinions and cost/quality transparency As employer plan sponsors are taking greater ownership of their medical cost exposure, the need to harness health care claim data has never been stronger. With a projected increase in medical and pharmacy cost trend in 2016, the looming Cadillac Tax in 2018, and a growing shift to selffunding, employers are asking for data-driven solutions to offset increases in coverage costs. New health care analytic tools are allowing employers to leverage their own medical claim data sets and benchmark cost trends, utilization patterns, burden of disease, risk stratification, gaps in medical care, and which specific conditions account for their highest medical costs. When smartly analyzed, data analytics can empower employers to identify strategies that work specifically for the members they cover. This is the new ROI. Are you doing the math? To RSVP, click here. NOTE: An advance RSVP is required to participate in this call. Registration ends one hour prior to the call start time. How to Navigate the Medical Leave of Absence Maze: Understanding Your FMLA and ADA Obligations Tuesday, April 19, p.m. ET Marina Galatro, PHR-CA, SHRM-CP Senior Human Resources Consultant HR Partner Human Capital and Benefits Dan Margolis, GPHR, PHR, SHRM-CP Senior Human Resources Consultant HR Partner Human Capital and Benefits During this session, participants will learn how to: Learn the similarities and differences of FMLA and ADA Understand the interplay between FMLA and ADA Receive guidance on which law should be followed when they contradict each other FMLA and ADA have similar legal requirements, yet they can contradict and confuse. Have you ever felt unsure about which law to comply with? From leave requests, medical certifications, notice requirements, light duty obligations and more, getting the Family and Medical Leave Act (FMLA) and the American Disabilities Act (ADA) right can be challenging. This session will discuss these complicated scenarios and highlight the similarities, differences and basic statutory obligations between the two laws as well as offer guidance on which law takes precedence, or trumps, the other when one contradicts the other. To RSVP, click here. NOTE: An advance RSVP is required to participate in this call. Registration ends one hour prior to the call start time. The programs listed above have been approved for 1 recertification credit through the HR Certification Institute. For more information about certification or recertification, please visit the HR Certification Institute homepage at The use of this seal is not an endorsement by HR Certification Institute of the quality of the program. It means that this program has met HR Certification Institute s criteria to be pre-approved for recertification credit. Willis is recognized by SHRM to offer Professional Development Credits (PDCs) for the SHRM-CPSM or SHRM-SCPSM. For more information about certification or recertification, please visit 8 willistowerswatson.com

9 Key Contacts 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 Stamford, 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 Milwaukee, WI Minneapolis, MN Moline, IL Overland Park, KS 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 San Antonio, TX Wichita, KS Western Fresno, CA Irvine, CA Las Vegas, NV Los Angeles, CA Phoenix, AZ Portland, OR Irvine, CA San Diego, CA San Francisco, CA San Jose, CA Seattle, WA HR Focus 2016

10 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 39,000 employees in more than 120 territories. 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. Copyright 2016 Willis Towers Watson. All rights reserved. WTW-NA willistowerswatson.com