Government Shutdown and Its Impact on Employee Benefits

As the federal government partial shutdown continues, employers who rely on government contracts or have business models that depend on a fully operational government are now forced to make difficult decisions regarding their workforce. Some employers are contemplating reductions in force, layoffs, or furloughs to weather the financial ramifications of the
shutdown. This leads to questions about employee benefits, and how benefits should be handled during these leaves of
trump maternity leaveabsence.

Employers contemplating a reduction in force, layoff, unpaid leaves of absence, or furloughs, should review the following:

  1. Review their employee handbook and plan document for eligibility provisions. How plan eligibility is determined will be critical in determining how benefits are or are not continued.
  2. Review their carrier contracts, including stop-loss or reinsurance provisions regarding eligibility.
  3. If they are an applicable large employer, review their obligations under the employer mandate
    play or pay provisions.
  4. Communicate process for benefit premium payments, if applicable.
  5. Provide COBRA notices appropriately, when necessary.

Eligibility Policies

Employers are obligated to follow the provisions put forth in their plan documents, and mirrored in their employee handbooks, for benefit eligibility. Employers whose handbooks do not contemplate layoffs, furloughs, or reductions in force, or who have conflicting language between documents, should consult with their legal counsel.

Carrier Contracts

Employers should work closely with their carriers, including stop loss and reinsurance carriers, to ensure that both parties agree about who is and who isn’t eligible for benefits. Conflicts between parties will require legal counsel.

Applicable Large Employers (ALE)

To comply with the ACA, applicable large employers must offer their full-time employees health coverage or pay one of two employer-shared responsibility/play or pay penalties. An applicable large employer has 50 or more full-time or full-time equivalent employees in the prior calendar year. Full-time employees are employees who are credited with 30 hours of service a week or more. A full-time equivalent employee is calculated by combining the number of hours of service of all non-full-time employees for the month (not including more than 120 hours of service per employee) and dividing the total by 120.

Under the ACA, any hour for which an employee is paid or entitled to payment must be counted as an hour of service. This includes:

  • An hour worked
  • Holiday
  • Incapacity (including disability)
  • Military duty
  • Vacation
  • Sick time
  • Layoff
  • Paid leave

This means that employees of applicable large employers will continue to accrue hours of service during a leave of absence due to the layoff provision if they are paid. If the employer is an ALE, and the employee is still considered full-time (e.g., due to being in a stability period), the employer will continue to be obligated to offer the full-time employees affordable, minimum value health coverage. Failure to do so would risk triggering ACA penalties (i.e., the “affordability” penalty, as the COBRA coverage offered due to the reduction in hours is likely to be “unaffordable”).

Employers are provided with two methods to determine an employee’s full-time status: the monthly method, and the measurement
and lookback method.

  • Under the monthly method, the employer looks at each employee’s actual hours of service each calendar month (an hour worked or an hour of paid time for vacation, holiday, sick time, incapacity including disability, layoff, jury duty, military duty, or other paid leave) each calendar month. An employee is full-time for the month if he or she works 130 hours, no matter how long or short the month is.
    • Under the look-back method, the employer looks at the number of hours the employee averaged during a look-back period called a “measurement period.” Once the employer determines whether the employee worked full-time during the measurement period, that determination generally will apply throughout the immediately following stability period regardless of the number of hours the employee actually works during the stability period (unless the employee’s employment ends).

Layoffs

If the employee is laid off during a stability period (not terminated) and is considered full-time, affordable coverage must be offered during the layoff to avoid exposure to potential penalties. Once the layoff is over, if the employee returns to work within 13 weeks (26 weeks for educational institutions), coverage must be reinstated by the first day of the month
following his return to work.

The time on layoff will not count as hours of service for purposes of the measurement period if the leave is unpaid. If coverage is terminated and the layoff exceeds 13 weeks, the employee can be treated as a new employee, with a new waiting period or initial measurement period, when he returns (of course, the plan may be designed to reinstate all returning employees immediately upon return). Generally, if the employee had coverage during the layoff (e.g., through COBRA or another extension of coverage), coverage will be reinstated upon return. There will be no hours of service to measure during unpaid leave (except for unpaid jury duty, FMLA or USERRA leave).

Unpaid Leave

If the employee is on an unpaid leave of absence (except FMLA) and in a stability period as full-time, the employee must be offered affordable coverage through the stability period to avoid potential penalties. When the employee’s hours are calculated during the measurement period, the leave of absence (except FMLA) will count as zero hours of service. Employers that are ALEs should seek experienced legal counsel to ensure that their plan documents reflect their practices during any furlough, layoff, reduction in force, or leave of absence to mitigate risk under the ACA.

Payment of Premiums

Employers who continue offering benefits during a furlough, layoff, or reduction in force will need to establish a process for premium payment.

Employers that already have an established process for premium payment during unpaid FMLA leave or during a pay shortage (for example, for tipped employees) should utilize those policies. The IRS has not provided guidance or regulation for handling pay shortages without a loss of benefit eligibility. Employers often refer to the rules provided for handling employee contributions during an employee’s unpaid Family Medical Leave Act (FMLA) leave. There are three options that employers have during unpaid FMLA leave:

  • Pre-payment
  • Pay-as-you-go on an after-tax basis
  • Catch-up salary reduction upon return from leave

During the government shutdown, it is likely that only the second two options would be feasible. The premium payment policy should be uniformly enforced for all employees. Employers may set a time limit for the employee to catch up on contributions before terminating coverage, as well as a maximum period of time over which employees may spread payments. Employees should be allowed uniform periods of time to pay back missed contributions; for instance, management should not be given three months to pay back missed contributions when other employees are only given one month.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows qualified beneficiaries who lose health benefits due to a qualifying event to continue group health benefits.COBRA

COBRA qualifying events include what is called a “reduction in hours.” A reduction of hours commonly occurs when an employee goes from full-time to part-time, when an employee is temporarily laid off or furloughed, or when an employee goes on a leave of absence. The IRS COBRA regulations provide that a reduction of hours in a covered employee’s employment “occurs whenever there is a decrease in the hours that a covered employee is required to work or actually works, but only if the decrease is not accompanied by an immediate termination of employment.”

In this event, employers who are subject to COBRA should timely provide affected employees with their COBRA election notice if their reduction in hours results in a loss of coverage under the plan.

COBRA Strategy for ACA Compliance or Culture Concerns

In the event that a plan document, employee handbook, or carrier policy determines a furloughed or laid off employee is no longer a benefits eligible full-time employee, employers who are subject to COBRA could offer impacted employees COBRA coverage and assist the employee with premium payment.

Under the ACA play or pay provisions, an offer of COBRA coverage is considered an “offer of coverage” and if an employer assists in premium payments, COBRA coverage could potentially be made affordable to ensure the employer was not triggering ACA penalties for failing to offer affordable, minimum value coverage.

Spring to Speak at World Captive Forum 2019

We’ll be packing our bags for sunny Florida soon enough! Spring’s Managing Partner, Karin Landry, will be speaking on three different panels at this year’s World Captive Forum.

The three-day event will run from January 30th to February 1st in Turnberry Isles, Florida and we expect a great turnout of employers, regulators and service providers alike, all there to share their experiences and perspectives.World Captive Forum 2019

Karin will lead the following sessions:

  • State Regulation Again! Time for a Fresh Look! from 10:45-11:45 AM on January 31st. She will be speaking alongside Joseph Holahan, Attorney at Morris, Manning & Martin, LLP about the varied regulatory issues facing the captive industry today. They’ll be looking at Washington state and others who have passed recent tax regulations related to captives, and fleshing out how captive professionals can move forward.
  • US Benefits – It’s a Better Year from 1PM to 2PM on January 31st. Karin and David Slenn, Partner at Shumaker Loop & Kendrick LLP, will discuss benefits captives – where they stand today and where they’re headed. They will specifically address updates from the Department of Labor (DOL) and share a case study to bring the topic to light.
  • Stop-Loss in Captives from 2:15-3:15PM on January 31st. In this session, Karin will be joined by Steve Kroll of International Capital Investment Company and Tom DeNoma of Nationwide to discuss the growing trend of stop-loss captives and best practices in doing so. They will represent the employer, insurer and consultant viewpoints.

Spring has been to the World Captive Forum several times and always finds it to be a strong indicator of industry hot topics. Karin is excited to learn and share her knowledge. Not to mention she’ll get to escape from the Boston cold! If you’ll be in Florida too, don’t forget to catch a session (or two or three) or Karin’s and say hello.

Spring to Exhibit at Yankee Dental Congress 2019

Our team is excited to head to the Yankee Dental Congress in Boston’s Seaport from January 30th to February 2nd. As a long-time broker and partner for hundreds of Massachusetts Dental Society (MDS) members, this event has always been a rewarding way to meet with small business owners and vendors in the dental arena. In fact, this will be Spring’s 10th year in a row being involved with the Yankee Dental conference, and we are thrilled!

Captive Insurance

The four-day event is sure to bring the best and brightest in the field, drawing a crowd of almost 20,000. We look forward, as always, to this networking and learning opportunity. If you will be at the conference – which takes place at the Boston Convention and Exhibition Center – please stop by booth 2234 and say hello! We will have plenty of fun giveaways, as well as information about the services we offer to so many of the area’s dentists (among others).

Spring Spotlight: Grace Giannattasio

We know you’ve been missing these, so we’re back and we’re giving you the deets on Grace.

Title: Consulting AnalystSpring Consulting

Joined Spring in: July of 2017, although she’s sometimes still referred to as the “new girl” for some unbeknownst reason.

Professional interests/skills: Grace is an integral part of the Integrated Disability Management (IDM) team. As such she works on leave and absence management projects of varying kinds, like those related to the FMLA or ADA.

Outside-of-work: Grace is always making us jealous of her awesome tan, so it’s no surprise that she spends a lot of time outside (when Boston weather allows – a very small window!). She also enjoys reading and going to the beach (reading at the beach is a favorite activity).

Favorite season: Summer because, obviously. This is the only time she can work on said tan and beach reading.

Favorite flower: Grace went with lavender because it smells nice and is also known for helping you relax and sleep well.

Favorite part about working at Spring: “My favorite part about working at Spring is definitely the team I work with. Everyone is collaborative and supportive and the whole group works really well together.”

If your house was burning down, what non-living thing would you save? Grace would, rightly so, save her great-grandmother’s jewelry. Proud.

 

Spring to Sponsor RIMS 2018 Annual Conference

RIMS 2018

Spring team at RIMS 2017

It’s been a busy conference season for us here at Spring, and it’s not over yet! We are excited to be sponsoring and exhibiting at this year’s RIMS (The Risk Management Society) annual conference in San Antonio, Texas from April 15th – 18th. Spring has been actively involved with the RIMS organization for over a decade and we are pleased to continue this partnership. Further, after having just endured three Nor’Easters in a two-week span, we are ready to pack our bags for warmer weather!

The event boasts an incredible turnout each year, and we’re sure this year will be no exception with an expected audience size of almost 3,000. This ties in well with the 2018 theme, “Go Big.” RIMS is one of the best events for risk managers to network, learn and share ideas. The four-day conference combines a good mix of work and play and brings an impressive list of talent when it comes to speakers and content. We’re particularly excited to see Jay Leno!

If you’re reading this, there’s a decent chance you will be at RIMS too, so please don’t forget to come say hi to us at booth #753. We’ll have giveaways, raffle prizes and more, and we’d love to chat with you!

Spring to Speak About Absence Management at the IBI Annual Forum

This is a busy time of year for the Spring team when it comes to conferences, and we’re excited to announce that one of our Partners, Karen English, will be speaking on a panel at this year’s Integrated Benefits Institute (IBI) Annual Forum. We have sponsored and been involved with the organization for many years now, and we look forward to continued participation as we join other benefits professionals for another thought-provoking summit. This year’s conference will be held from March 12th-14th in San Francisco and boasts about 25 different educational sessions, along with networking opportunities like a dinner cruise.Employee Benefits Conference

As a speaker, Karen will be in good company, with other IBI Forum sessions being led by representatives from companies including Delta Airlines, Prudential Financial, Walmart, Goodyear Tire & Rubber Company, Walgreens and many others. On Wednesday, March 14th  from 8-9 AM, Karen will join Gene Lanzoni of The Guardian Life Insurance Company, Claudia Ruggiero of Chevron and Kerry Daley of Robert Half International.

The presentation, entitled “Evolving Your Absence Management Strategy: Let’s Talk Best Practices” will provide an overview of the different companys’ absence management programs, best practices and how it all works for that company based on things like corporate culture. The need to constantly adapt and modify your program will be stressed, a concept that will be demonstrated with specific examples.

Attendees of this session can expect to come away with strategies for identifying trends in your absence management program, tips for how to take action and implement changes, an understanding of key metrics to consider and more. If you’re wondering how to keep your absence management program updated and running with optimal efficiency, don’t miss out on this presentation!

With a Nor’Easter coming our way, we’re especially excited to head out to California, and we’re never disappointed by the quality of content or turnout at the IBI Annual Forum. Hope to see you there!

Spring to Lead Two Sessions at This Year’s CICA Conference

The Captive Insurance Companies Association (CICA) Annual Conference is just about around the corner, and Spring is excited to be participating in two of the conference’s many valuable sessions this year.

The conference, penned with the theme, “The Challenge of Change” this year, is set for March 11th-13th at the Westin Kierland Resort & Spa in Scottsdale, Arizona. We expect about 400 of the industry’s best and brightest to attend, and hot topics are sure to include regulatory issues, preparing for the future of captives and global and emerging captive markets, among others.CICA Annual Conference

The Arizona sun and warmth, as well as the opportunity to meet and network with so many esteemed colleagues, isn’t all the Spring team has to look forward to this year. This will be our 10th straight year of involvement in the CICA annual conference, so we are excited to be speaking in two sessions: “Captives 201: Is It Time for a Captive Refresh?” and “The Risk Business of Cyber: From Traditional to Terrorism”.

Representing Spring and speaking to the importance of keeping your captive fresh and optimized will be Karin Landry, Managing Partner. She will be joining Brian Johnson of Risk International Consulting and Steve McElhiney, President of Tall Pines Insurance Company in discussing this critical issue. The session is scheduled for Monday, March 12th from 1:30-2:30 PM. 

In-house cyber expert and Senior Consultant at Spring, Prabal Lakhanpal, will be sharing his knowledge of cyber risk and its prevention and mitigation at this year’s conference, along with Stephen Vina from Marsh & McLennan who will be focusing on the relationship between cyber and terrorism. This session will take place on Monday, March 12th from 4:15-5:15 PM. 

If you’ll be attending the CICA conference this year, be sure to tune into the above presentations – you won’t be disappointed!

World Captive Forum Recap: 5 Hot Topics

The World Captive Forum, sponsored by Business Insurance, held its 27th annual conference earlier this month in Fort Lauderdale, Florida. From captive owners, reinsurers, brokers, regulators and more, the event brought together about 300 of industry thought leaders, and we were happy to have taken part (and not just because we got to temporarily escape winter in Boston).

It’s been a few weeks now and we’ve had time to reflect on the topics and issues that really stuck with us after leaving the conference. As always, we wanted to share our vieGlobal Captive Marketwpoint. So if your schedule didn’t allow you to attend the World Captive Forum, or you’re just a little fuzzy on the details several weeks later, we’ve got you covered! Stay in the loop with our event highlights below.

1. International Regulations & Markets

Being the World Captive Forum, it makes sense that there was a significant focus on captive happenings outside of the US. A panel including employees of Willis Towers Watson and the State of Delaware commented on Brexit,, BEPS, IAIS, US tax reform and other issues related to international regulations that are important for the captive market. Later, we heard an update on the Latin American captive market from regional thought leaders. Among other lessons, we learned that Mexico and Colombia have the leading captive markets, while Peru, Argentina and Brazil have various obstacles hindering their captive development and growth.

2. Captives & Benefits

Captives can be a powerful, advantageous funding mechanism for an organization’s employee benefits. But as the world of benefits continues to change and evolve, so too has that structure. Bill Fitzpatrick and Mark Cook provided updates on global (there’s that word again) employee benefits and captives best practices. They outlined some of the different considerations for benefits and captives in different countries. Marsh then led a session on using voluntary benefits to grow your captive. They highlighted the advantages (or benefits, you could say) of voluntary benefits, different products available, factors involving ERISA and other pertinent issues.

3. Medical Stop-Loss

Mark Weinstein of Independent Colleges and Universities Benefits Association (ICUBA) led a discussion around the adding of medical risk to a captive, and all that entails. His panel explored different medical risk structures as well as the significance of risk diversification. In a separate roundtable, representatives from companies like Coca-Cola and Kirkway International covered medical stop-loss captives – their advantages and factors to consider.medical stop-loss

4. Microcaptives & Cells

In light of last year’s Avrahami vs. Commissioner court case ruling, it’s no surprise that microcaptives have been grabbing more of the industry’s attention. Specifically, one panel including Jeremy Huish and Mary Ann McMahon focused on pooling in microcaptives: how it works, best practices, IRS considerations, a look at how pooling relates to Avrahmi and more. The presentation included a case study highlighting The Spinx Company. Later, David Provost of the Vermont Department of Insurance presented with colleagues on the innovative ways to utilize a cell company. The session highlighted benefits like stop-loss protection , outlined the various possible structures and demonstrated it all through a look at an actual client’s experience. Further, a roundtable discussion delved further into the topic of microcaptives and cells.

5. Captive Optimization

A captive is a worthwhile endeavor, but it is a large one. As such, it’s important to make sure you’re getting the most out of it and continually checking for new opportunities that may have arisen due to market or regulatory changes. This theme appeared in a few different sessions at World Captive Forum. In one, “Spicing Up Your Captive”, introduced pensions, cyber, intellectual property, climate risks, reputation and others as food for thought when it comes to new captive strategies.

In another session, our very own Karin Landry, along with Michael Lubben of Henry Crown and Company/CCI, highlighted the importance of undergoing captive refeasibility studies on a regular basis, to ensure there are no missed opportunities and that your captive is keeping up with the changing needs of your organization. The presentation also included a case study. The topic got even more stage time when it was discussed in a roundtable – “Doing More With Your Captive.”

Captive Optimization

 

We hope this recap helped you glean all of the most prevalent and highly discussed issues of the 2018 World Captive Forum, whether you were able to attend or not. As you can see, we weren’t just in it for the weather! We enjoy having the opportunity to look back at each event we go to and sharing our takeaways with like-minded professionals. Keep an eye out for a similar synopsis after the CICA Annual Conference next month!