Between the pandemic, hurricanes, and wildfires, 2020 is a year we won’t soon forget. Many employers had to deal with supply chain interruptions, painful layoffs and unexpected compliance costs. One area that was certainly affected, and will continue to be in the future, is employee benefit plans. A lack of revenue made making annual 401(k) contributions more difficult. The pandemic potentially increased health spending in your group health plan. As you get ready for 2021, here are a few of the trends and new programs put in place to continue to provide your employees with the benefits they need while allowing you to keep costs under control as you navigate an uncertain future.
Individual Coverage Health Reimbursement Arrangements
An ICHRA lets you provide HRA funds to your employees so they can purchase health insurance outside of the traditional group plan arrangement, including through the ACA’s public exchange marketplace. Any employer can offer an ICHRA to its employees. However, you cannot offer employees in the same class a choice between an ICHRA or participating in a traditional health insurance plan. This prohibition ensures that companies cannot discriminate against older workers or workers in poor health.
You can offer an ICHRA if:
- Participants and dependents are enrolled in either Medicare or individual health insurance that covers more than excepted benefits
- Employees of the same class are offered the same level of HRA benefits with the same terms and conditions
- Employees of the same class are not given the choice of enrolling in either an ICHRA or a traditional group health plan
- Employees who select ICHRA coverage have the opportunity to opt out at least once a year
- You implement reasonable procedures to substantiate that ICHRA participants are or will soon be covered by individual health insurance or Medicare
Participants will be required to provide proof of enrollment in either qualified individual health insurance or Medicare in order to keep their ICHRA.
Excepted Benefit HRAs
An excepted benefit HRA lets you provide up to $1,800 a year to help employees pay for supplemental coverage or cover out-of-pocket health care costs. If you offer an excepted benefit HRA, you must also give your employees the opportunity to enroll in traditional group health coverage. However, they do not actually have to enroll in the group health plan in order to benefit from the excepted benefit HRA.
Employees can use the funds for any reimbursable health care expense defined in Code Section 213(d), including copays, deductibles and prescription drugs. Like the ICHRA, the excepted benefit HRA must be offered to all employees of the same class who are also eligible for coverage under your group health plan. Therefore, you cannot offer both an ICHRA and an excepted benefit HRA to the same employee.
The benefits consulting firm Mercer found that 32% all employers are adding or expanding the telehealth option for their group insurance plans. Demand for telehealth services has grown 64.3% so far in 2020, according to CivicScience. Telehealth typically allows your employees to find an appointment with an in-network doctor faster than if they tried to get into the doctor’s office.
Discretionary 401(k) matching
A discretionary 401(k) match can provide an escape hatch during a difficult financial year. Depending on the type of 401(k) plan you offer, you may be able to change your employer matching contribution from required to discretionary. This means you can decide on the amount of match you wish to provide each year, as opposed to formally writing down the match in your plan document.
If needed, you may also wish to alter your plan’s vesting schedule. Altering the vesting schedule may allow you to use the forfeited match of short-term employees in order to fund future contributions to your long-term vested employees.
Flexible scheduling and paid leave
Telecommuting, remote work arrangements and alternative scheduling have become standard operating mode during the pandemic.
Even as worksites slowly begin to re-open or return to pre-COVID capacity, many companies are discovering that employees want to keep working from home at least some of the time once the pandemic is under control.
With flexible scheduling typically comes a discussion about paid time off (PTO). Most employers already offer PTO. By combining sick, vacation and personal days, you give employees the freedom to decide how to use their time.
A growing number of employers now offer unlimited paid time off for any reason. While it remains a relatively new concept, it shows you appreciate the need for time away from work to address family concerns. From a financial perspective, it may also help you (depending on state law) avoid large accrued vacation payouts when employees leave your company.
Large employers like IBM and Walmart have begun expanding PTO benefits with increases in paid parental leave, including time off for adoption, surrogacy and placement of foster children. At the same time, eight states have adopted paid family and medical leave policies that go beyond the national FMLA requirements.
With many parents working from home and some school districts keeping classes remote, expanding childcare benefits and allowing flexible scheduling will also take front stage for the rest of 2020, going into 2021.
Technology for better benefit decision-making
The customization and digitization of benefits remains a hot trend in 2020. As HR departments and benefit administrators settle into long-term remote operations, they continue to look for automation of day-to-day tasks. Two of the most popular include:
- Workforce management tools: These applications are designed to work with your HRIS to improve and enhance the employee lifecycle. They can automate tasks beginning with your first contact with a potential employee, to onboarding, to termination and everything in between. There are programs to manage payroll, benefits, time and attendance, and employee performance. Some programs will even help minimize your compliance risk.
- Employee benefit decision support tools: Recommendation engines walk employees through a series of questions to help them understand their benefit needs and potential risks. They can also identify an employee’s financial ability to withstand a catastrophic illness or injury. These tools work quickly and easily, which allows employees to learn more about benefits that meet their specific needs.
In a COVID-19 world, the stakes of choosing the wrong health care coverage are much higher, which means the responsibility of explaining what the plan will cover, how cost-sharing works and how employees can budget for unexpected expenses is greater than ever before. Technology merely supports and enables you to raise the bar when it comes to individual involvement with your employees; it does not replace it.
If you have questions about how you can improve your employee benefits plan to compete in 2021, talk to your broker or benefits adviser. They can help you identify areas for development and upgrade your offerings to meet the needs of employees for the coming years.
This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem.