Creating a Strong Safety Program for Your Fleet Drivers

While most operations with an automotive or trucking fleet focus on safety, few businesses are actually monitoring their drivers to make sure they are adhering to the company’s rules, a new study has found.

Many companies only pull reports on their drivers’ records on an annual basis, which means they miss important developments like a DUI or a few moving violations that will increase the cost of insuring them.

In fact, 70% of companies with fleets do not even monitor their drivers and 60% don’t have a safety program in place, according to the study by SambaSafety, a firm that provides background screening and driver safety records for companies.

The key to having a successful driver safety program in place requires management buy-in and a company-wide culture focused on safety that encompasses not only a company’s fleet drivers, but also anybody in the operation that may drive their personal vehicles on occasional company business.

SambaSafety recommends:

Motivating staff to be safer – The company advises against just issuing warnings like “slow down” and “put away the phone,” and instead focusing on what’s at stake if they don’t. Instead of numbers and checklists, make a presentation that lets them think in terms of their well-being, or even loss of life, for the best response.

Providing strong safety leadership – Creating a safety culture requires leadership to model the behaviors that all employees should adopt.

Not just focusing on fleet drivers – Any employees that use their vehicles for work must also be part of the training and they should know that you expect the same safe behavior of anybody you employ that drives.

Drive home the point that an employer can be responsible for anything that happens when employees are conducting company business, even if they are running to the office supply store for you.

Being consistent – Just because you have a safety policy, it may not be enough to get you off the hook if one of your drivers causes an accident. Companies can be held responsible if they do not have proactive intervention policies and detailed documentation.

Using data to your advantage — Collecting data on your employees’ driving habits can greatly improve your ability to make sure you have a safe fleet of drivers. And the best way to do that is through continuous driver monitoring.

“The right data can help employers accurately reward those who are doing well, too, and securely keep up with disciplinary actions toward those who are missing the mark,” SambaSafety says in its report.
Do you have a strong safety policy for your drivers? The company recommends that you ask the following of your safety program:

  • Was the policy established with input from key stakeholders?
  • Has it been clearly communicated to all employees?
  • Does it tie in to company goals and mission?
  • Do employees receive regular reminders and updates about safety policies?
  • Is it aspirational and values-based rather than simply disciplinary?
  • Is there complete buy-in from top management?
  • Is the policy uniformly enforced?
  • Is there a fair, diverse, professional board for incident review?
  • Is data properly used to increase compliance?
  • Is it time for an update?

Drug Use Skyrockets among American Workers

Drug use is rapidly increasing among American workers, as more states liberalize marijuana laws, cocaine makes a resurgence and more people abuse amphetamines and heroin. A new study by Quest Diagnostics Inc., a workplace drug-testing lab, found that the number of workers testing positive for illicit drugs is higher than at any time in the last 12 years.

That puts employers in a tricky predicament, particularly if employees are using at work, which could reduce productivity and also make them more susceptible to workplace injuries since they may not be as focused as they should be on their work. In 2016, 4.2% of the 8.9 million urine drug tests that Quest conducted for employers turned up positive, compared to 4% in 2015 and 3.5% in 2011. The rate was the highest since 2004, when 4.5% of tests showed evidence of potentially illicit drug use.

While there were marked increases in positive tests for most illicit drugs, the surprising excption was prescription opioids like hydrocodone and oxycodone, thanks to stricter enforcement in many jurisdictions around the country. Marijuana is the most commonly used drug among U.S. workers and was identified in 2.5% of all urine tests for the general workforce in 2016, up from 2.4% a year earlier. In oral fluid testing, which detects recent drug use, marijuana positivity increased nearly 75%, from 5.1% in 2013 to 8.9% in 2016. The highest increases for marijuana usage among workers seemed to be in states that have recently legalized the recreational use of marijuana. The number of workers testing positive in Colorado rose 11%, while in Washington there was a 9% increase. The rates of increase were more than double the increase nationwide in 2016.

Changes in test-positives by drug:

  • Amphetamine: Up 8%
  • Marijuana: Up 4.2%
  • Heroin: Zero (after 146% increase in four years prior)
  • Oxycodone: Down 4%
  • Cocaine: Up 12%

Implications for businesses

About 12% of workers who die on the job test positive for drugs or alcohol in their system at the time of the incident. And incidentally, one OSHA study found that the most dangerous occupations, like construction and mining, also have the highest drug use rates among workers.

Employers suffer from hiring substance abusers in many ways. Not only do they run the risk of having deadly or dangerous accidents occur, but substance abusers also cost employers money in other ways, including poor productivity and decision-making.

Substance abusers may:

  • Have poor work performance.
  • Frequently call in sick or arrive late.
  • Frequently change workplaces.
  • Struggle with productivity.
  • Injure themselves or others at work.

 

The takeaway

If you’re concerned, you can initiate an effective workplace drug program that includes drug testing before hiring and during employment – and the consequences for violating the rules. You should have in place rules for working while under the influence and the ramifications for doing so.

You may also want to consider an employee assistance program for employees who feel they may have a problem, as well as for those who feel they’re developing a problem. A quality assistance program will offer services such as counseling to deal with substance abuse problems. You can also want to consider holding meetings about health and safety and drug use. Provide education about what addiction looks like and why people begin to abuse drugs/alcohol. Education can help employees understand how to support those that are struggling, as well as remove negative stereotypes often associated with addiction. Provide health benefits that offer a more “comprehensive coverage” for addiction. This includes addiction assessment (screening), treatment, aftercare and counseling.

 

Employee Texting Blows Holes in Your Company Communications Policy

If you are not aware, your employees are most likely communicating with each other and clients using texting or instant messaging.

While the immediacy of texting and instant messaging is great for business as it allows faster communications, better collaboration and more responsiveness, the downside is that your organization likely can’t track and retrieve those communications.

It becomes even harder if the communications are via instant messaging apps like Whatsapp! and Facebook’s Messenger.

As an employer, it’s important that you understand the issue and that you have clear rules for communications among employees in order to protect your company’s interests.

You’ll need a policy in place when something goes wrong and you need to track the thread of communications to see what was said or promised by whom, and when. These details can be crucial to resolving problems with clients, or if you are ever sued and your communications are subpoenaed for discovery.

Plaintiff-side lawyers in employment cases are already started demanding the production of text messages and e-mails during discovery. And if litigation ensues on an issue, you may have a duty to preserve text messages.

 

Roadblocks

There are a few issues that you need to consider, especially in light of the fact that many companies are allowing staff to use their own devices for company communications, including giving them access to the business’s e-mail system on their phone.

If your employees are exchanging texts and instant messages on company phones, the history of communications would be preserved and you would be able to access the content by asking for the phone.

But, if your employees are sending and receiving work texts and instant messages on their personal devices, the issue gets murkier, particularly if you don’t have a bring-your-own-device (BYOD) policy. Accessing messages about company business on an employee’s smartphone may raise privacy issues.

The problem especially arises in the case of wrongdoing by an employee. If they are using their phones for communications that could provide insight into their behavior, they can erase those messages before you ask to see them.

In other words, you cannot rifle through their phone without first obtaining it, meaning you can’t look at it without them knowing as you could if you looked at their e-mail on your company server.

There are also privacy issues that arise if you are trying to access an employee’s personal phone to view texts and messages.

The big issue is: how do you capture those communications? After all, it will not be done over your network, unlike your company’s e-mail system that preserves all communications which are available to you. The messages reside on the phone instead.

 

What you should do

Obviously texting and instant messaging are a potential minefield for employers who want to be able to access all company communications among employees and between your staff and clients, vendors or partner organizations.

To ensure you have a handle on it, you should set rules outlining what method of communication employees may use for business purposes.

If you don’t want texting or instant messaging of any kind for company business, that needs to be spelled out – including ramifications for breaking the rule.

If you decide to allow texting and instant messaging, your policy should be clear on what kind of communications are okay.

You will need to amend your policy related to employee communications and record retention to make sure texts and instant messages are included.

If you have a BYOD policy, at a minimum it should include allowing you to take custody of the employee’s phone for legitimate purposes like a dispute with a client, or discovery for litigation.

As you can see, it’s important that you initiate a policy on employee communications that takes into account texting and messaging.

If you haven’t done so, you should do it now as this faster method of communication is becoming the new normal, particular as Generation Y continues filtering into the workforce.

 

April Is Distracted Driving Awareness Month: Educate Your Staff

As accidents skyrocket in part due to people using their smartphones while behind the wheel, April has been designated Distracted Driving Awareness Month – a great time for you as an employer to further promote safe driving among your staff.

Hammering home the importance of safe driving can keep your employees from causing serious damage or worse to a third party, and also help keep your insurance costs in check.

That’s especially important now as commercial auto insurance rates are rising due to a combination of factors, including:

  • More traffic – The number of total miles driven has increased 50% faster in California than in the rest of the country since the start of 2015, and more vehicles and mileage equals a higher frequency of accidents.
  • Distracted drivers – 25% of accidents now involve at least one driver talking on a phone, texting or using some smartphone feature.
  • Escalating medical costs – Medical care costs are increasing at a significantly higher rate than other costs, like repairs.
  • More fatalities and other severe accidents – Accident rates per person and per mile of driving are rising.
  • Inexperienced or poor commercial drivers – There is a general shortage of skilled commercial drivers with good driving records.
  • Rising auto repair costs – Record U.S. auto sales mean garages are often servicing newer cars, many of which are equipped with more expensive parts.

 

While you are likely to see an increase in your insurance rates even if you’ve had no accidents, you’ll want to make sure that you continue focusing on safety to reduce the chances of future accidents.

 

Liberty Mutual Insurance Company recommends that employers who have driving employees:

Implement a fleet safety program

This should include:

  • A questionnaire to weed out employees and job applicants with poor driving records,
  • Requiring road tests for new driving employees,
  • Training them in post-crash procedures and reporting,
  • Carrying out continuing driver training and education,
  • A policy on mobile devices by drivers,
  • Having a list of sample safe-driving performance expectations, and
  • Conducting regular vehicle maintenance and inspections.

 

Enforce company policy for use of vehicles

Use standard operating procedures like limiting personal use of company vehicles and monitoring who can use them.

 

Hire qualified drivers

Create a form for each applicant to document their driving history, employer references, medical certificates, and more.

 

Use a company fleet

There are extra risks involved when drivers use personal vehicles on the job.

 

Train your drivers

Some topics you can cover in your safety training include breakdowns, distracted driving, driving under the influence (DUI), the importance of resting when tired, negotiating heavy traffic conditions, and the dangers of speeding.

 

Regularly check driving records

Set a schedule for checking an employee’s driving records to ferret out any deterioration in their experience, particularly if they’ve been cited for a DUI.

 

Review every accident

Your insurer will often be able to supply you with a vehicle accident form for your employees to fill out and follow in case of an accident, including witness names, circumstances, and the other driver’s information, including insurance.

 

You should have contact information for the person in your office that they should contact in case of an accident.

 

Also, urge your drivers to take photos of the accident scene.

Bill Would Make Collecting Health Information for Wellness Plans Easier

Legislation has surfaced in Congress that would allow employers to collect biometric and genetic information from employees and their family members as a precondition for participation in a company wellness program.

The bill would essentially repeal a portion of the Genetic Information Non-discrimination Act (GINA), which in part bars employers from collecting genetic information on employees or members of their family for certain wellness programs.

The GINA bars health insurers and employers from discriminating against people based on information that their genes carry – say, a family history of heart disease or stroke.

The law contains an exception for employers that collect information from employees for a voluntary wellness program, the kind with no carrots or sticks for participation.

It is aimed at wellness programs that offer employees discounts on their health insurance in exchange for participation. Wellness plans may require participation in a health risk assessment or that the employee meet certain fitness or health goals.

Under the Affordable Care Act, employers can offer discounts of up to 30% on health insurance to employees that participate in wellness plans. In some cases, the employer can offer up to a 50% discount if the employees meet certain health targets.

HR 1313 would allow employers to collect biometric information from employees and their family members as a prerequisite for participation in wellness programs that provide discounts or other financial incentives.

Employer groups have decried the GINA’s strict rules, which they say inhibit their ability to help employees improve health metrics like high blood pressure and obesity, among others.

 

Bill’s key language

HR 1313’s key language states that:

The collection of information about the manifested disease or disorder of a family member shall not be considered an unlawful acquisition of genetic information with respect to another family member as part of a workplace wellness program.”

The bill passed along party lines in the House Education and the Workforce Committee, (22 Republicans for and 17 Democrats against). It still has other committees to clear before the full House votes on the legislation and sends it to the Senate.

Proponents of the bill, like the American Benefits Council, say that it would preserve wellness plans, which they say have suffered under the GINA.

Appeal Promptly if You Get Notice of Staff Receiving Exchange Subsidies

More employers have been receiving notices from their state health insurance exchange, informing them that one of their employees has received subsidies to purchase insurance on the exchange and that the employer may be subject to a penalty for not offering employees a health plan that complies with the law.

The notices are not calls to pay a fine – only the IRS can do that – but employers need to respond with documentation to show that they did in fact offer affordable coverage that meets the minimum value requirements of the Affordable Care Act.

If you receive a notice, you will need to file an appeal promptly. If you don’t, or if your appeal is eventually rejected, you could receive a demand for payment from the IRS.

You can appeal the finding if you believe the employee was ineligible for the premium subsidy.

Individuals whose employers offered them affordable coverage that meets the minimum value requirements are not eligible for premium subsidies under the ACA.

If they do receive a subsidy and you did offer them compliant coverage, there will be a conflict on your form 1095-C that you have to file with the IRS. That could prompt the IRS to either go after you for a penalty, or go after the employee, from whom it would demand repayment of the subsidy.

 

Penalties and the law

First off, there could be some innocuous reason for receiving the notice, such as one of your part-time employees who was not offered coverage may have been eligible for a subsidy on the exchange.

There should only be two reasons that an employee for a large employer that is subject to the employer mandate receives a subsidy on an exchange:

  • The plan does not provide minimum value (defined as covering 60% of all health costs).
  • The plan is not affordable (less than 9.66% of the employee’s income in 2016, and 9.69% in 2017).

 

The applicable fine would be $3,240 per full-time employee receiving a subsidy or $2,160 per full-time employee (minus the first 30).

 

Appeal problems

Some employers who have gone through the appeals process report problems. According to the National Association of Health Underwriters’ (NAHU) Compliance Cornered blog:

  • One employer submitted proof that it had offered coverage to the employee that met minimum value and was affordable. But the hearing officers countered, requesting proof of this offer in the form of the employee’s response to the offer.
  • An NAHU review of several decision letters found that decisions often cite “insufficient information” as the basis for the decision to reject the appeal.
  • Still other employers have received a letter while an appeal is under review that asks for more information to support the appeal.

 

What you can do

The NAHU recommends that employers develop a checklist of materials that they will provide to ensure that appeals are not lost for want of more information.

The following documents could be pertinent:

Proof that employee was offered coverage:

Form or letter confirming the employee’s election of benefits.

Employer-sponsored coverage declaration form or notice.

Employee’s benefits summary chart.

Letter from health insurer stating that the employee is enrolled in employer-sponsored coverage.

 

Proof of income and payments:

Copies of employee pay stubs.

Payroll ledger or worksheet.

Previous year’s W-2 form.

 

Proof of affordability:

Rate sheet of employer-sponsored coverage.

Summary of Benefits and Coverage sheet.

Pay stubs showing premium deductions.

 

Proof of minimum value:

Summary of Benefits and Coverage sheet.

Report of Minimum Value Certification from an actuary.

 

Remember: Appeal decisions don’t automatically trigger IRS penalties, but a successful appeal would be helpful for you if the IRS tries to penalize you.

 

How Three Companies Reduced Their Workers’ Comp Costs

We’ve told you often in these pages about various workplace safety and claims management techniques, but sometimes it’s good to learn from the first-hand experiences of other employers.

The National Underwriter insurance trade publication recently profiled three companies that had reduced their workers’ comp costs using a combination of claims management and safety initiatives.

You can use their experience to apply similar programs at your company.

 

SMS Holdings’ experience

This housekeeping and maintenance service provider did not roll out a one-size-fits-all approach to safety at is multiple locations in 46 states.

The company instead took a silo approach to improving safety by having its front line staff and their supervisors come up with programs to enhance safety at each work site.

It created safety committees at each of its locations that hold pre-shift safety huddles. Site managers also host weekly safety talks with employees that address hazards that are unique to the location, near misses or more general safety rules.

The company also started a safety-tracking program that provides a forum for managers to exchange ideas on how injuries could have been prevented.

SMS Holdings revised its injury reporting system, standardized claims instructions and forms and provided a claims checklist for its managers. Also, the company provides injured workers with a packet that outlines the process for handling their workers’ comp claim and includes all the forms and contact information they need.

The company says its claims litigation rate fell to 11% of all claims in 2015, from 18% in 2014 since implementing the changes. The number of claims dropped more than 14%, and claims that required lost time from work plunged 52% – all while the payroll has increased by 14%.

 

Seaboard Foods LLC

After noting a strong uptick in claims, this self-insured pork producer started working more closely with its third-party administrator, which handles its workers’ comp claims, to mine the company’s injury claims for data.

Seaboard, a 5,000-employee company in a small Texas town with a local network of providers, doesn’t always include the required specialist.

The company now ensures that every injured worker receives the appropriate specialized medical care right at the time of injury, even if that means that the employee see a specialist in another town. They can drive themselves and get reimbursed for mileage, but if they can’t, then the company arranges transportation.

Seaboard also started looking for and contracting with new service providers – like physical therapy and pharmacy management firms – that could demonstrate through data how they are able to reduce costs.

Finally, the company started holding quarterly meetings with its senior leadership, workers’ comp team, third-party administrator and workers’ compensation attorney to review claims. They set goals and objectives for closing claims as early as possible and identifying particular claims that the company would try to close prior to the next quarter.

To address injuries sustained in the cutting and packing lines, the company started conducting job-demand analyses to identify how employees get hurt doing certain tasks, and then evaluating workers to make sure they are fit for the work they’ve been assigned.

Finally, it started a “work conditioning program” that helps workers get their bodies in shape to deal with the physical demands of repetitive motions they encounter in the workplace.

All of this has paid off, and between 2012 and 2015 reduced Seaboard’s annual claims numbers by 46%. In addition, claims costs dropped 69% in that period.

 

Stater Bros. Markets

This supermarket chain started a new program focused on education and injury prevention for all of its employees, be they cashiers at its 168 stores or workers at its 2-million acre warehouse and distribution center in San Bernardino, Calif.

Some changes were small, like requiring all employees who use knives to wear a chain-link metal mesh glove on the hand opposite the one wielding the knife. This reduced cutting injuries from an average of 200 a year to none.

The company reviewed all of the clinics its injured workers are sent to, identifying and selecting facilities based on level of customer service and cleanliness.

The company also started a training regimen that rotates from store to store to train staff and low-level managers on injury prevention, focusing mainly on avoiding sprains and strains – the most common injuries in its stores.

For its warehouse employees, Stater introduced a program called “Ice Pack” in which physical therapists are available onsite at its corporate campus to help employees with taping, wrapping and icing parts of the body to help them do their jobs more efficiently or recover after a shift.

Finally, to address rising prescription drug expenses, it conducted a claims review to identify problematic prescription patterns. It met with the health care providers its employees use and worked with pain-management doctors to find alternatives to prescribing so many drugs, which employees often are not taking.

Since it started this program, Stater has reduced its prescription drug costs by $1 million over two years.

 

 

Countdown to New Overtime Exemption Rules

If you have not yet done so, now is the time to start preparing all of your accounting and payroll systems for the onset of the Department of Labor’s new overtime exemption rules. The final regulation changes the salary level that must be met before an employee can be exempt from overtime if they satisfy the “duty requirement,” meaning they have to be engaged in certain “white collar” jobs, like management.

The White House estimates that some 4 million workers who are currently considered “exempt” from overtime pay of time and a half for working more than 40 hours in a week, will now earn that rate for extra time worked if their salaries remain below the new threshold.

But while the rules are generally straightforward, employers in California will have a different standard to meet in the years to come and compliance will become trickier. Under the DOL’s final rule, starting Dec. 1, employers will be required to pay overtime to full-time employees who earn less than $913 per week ($47,476 per year), regardless of their duties.

This new high threshold, more than double the current $455 per week ($23,660 annually), will be higher than in any states that have their own current thresholds. In such cases, the law that provides the most protection for workers takes precedence. Currently, the salary threshold for the overtime exemption for white collar workers in California is $41,600 a year, or $3,466.67 per month. But California’s overtime exemption level is based on twice the state minimum wage, which is set to substantially increase in the coming years, hitting $12 an hour in 2019 and $15 an hour by 2022. After that, it will continue to rise based on a statutory-required formula.

For example, beginning January 1, 2019, when California’s minimum wage hits $12 per hour, the overtime-exempt threshold for California employers will be $49,920. That’s $2,444 higher than the impending federal threshold.

Do the math for 2022, and the California threshold will hit $62,400.

The federal minimum salary threshold will also be automatically updated – every three years. The first update will be in 2020, and a White House projection has figured that the salary threshold will rise to $51,000 at that time.

Duties test

California also has a different duties test than that of the Fair Labor Standards Act (FLSA). The federal duties test for white collar exemptions requires exempt employees to be “primarily engaged” in certain duties, like managing people and making decisions independently. In California, an exempt employee must spend more than half of his or her time engaged in exempt work.

Get current now

With the new rule about to take effect, it is imperative that you get all of your systems and procedures in place before the change.

Here is a checklist of action items that you should address immediately:

  • Check whether your salaried employees satisfy the duties and salaries components of the FLSA White Collar Exemptions (or your state law).
  • Identify all of the positions that will require reclassification under the new rule and decide whether it is worth it to increase someone’s salary.
  • Analyze the financial impact of reclassifying employees as nonexempt.
  • Consider reassigning certain tasks to reduce the effects of the rule.
  • Make plans to conduct reviews regularly – like every three years for federal law compliance or more frequently in some states, like California ahead of minimum wage changes.

Pokémon Go and the Dangers to Your Business

The Pokémon Go craze has exposed people who play the game to new dangers that have previously not been associated with mobile phone apps. But while many of these perils are associated with individuals who actually play the game, companies also have a lot to lose because of the game. To play Pokémon Go, players follow their phone’s GPS, which leads them to various places in the real world where they encounter and capture in-game creatures called Pokémon. In their zeal to catch these virtual critters, players have been robbed at gunpoint after walking into alleyways, been shot at for trespassing on private property, been hit by cars after walking into traffic – and even fallen off cliffs. While these are all personal dangers, businesses also face risks, such as: • Workers’ compensation, if an employee plays the game while on the clock and gets hurt. • Data breaches, if employees who play the game on a company-issued mobile device download malware or are victims of phishing attempts. • Property liability, if players wander on to your business premises and are injured.

Workplace safety – The highly addictive game cuts across many demographics in terms of usage and is putting people in danger if they play it and are not paying attention. And since most people have jobs, the same people who play Pokémon Go are also employees, including yours. As mentioned, many people have been injured playing the game. Already you must know that your employees are spending time on their smart phones doing things that are not associated with their jobs. It doesn’t take much stretching of the imagination to understand that employees will play the game while on the clock. If they play while driving on the job, they can not only injure themselves, but also add further liability if they injure someone else or damage a third party’s property. You may also have your own damaged property as a result.

Cyber security – The game was created by a company called Niantic Labs, which is owned by Alphabet Inc., the parent company of Google. Problems at Niantic Labs have added to the security issues with Pokémon Go. Because of the company’s scalability problems, millions of users have had to download the app from third-party websites, where some of the software contains malware along with the game.

One version of the malware, called DroidJack, is able to gain access to anything on your Android phone, including all of your e-mail, contacts and text messages. In addition, this malware can access your keystrokes, on-board microphone and camera. Now, imagine that an employee has downloaded the game onto their company-issued phone and that phone has as a result become a conduit for criminals to access your network.

Other liability – Businesses also face potential liability, as Pokémon Go players wander premises where they can hurt themselves. Construction sites carry specific dangers to anyone not paying attention if they enter the property. These include open trenches, trip hazards and nails and other fasteners strewn on the ground. There was one report from Idaho of a Pokémon Go player wandering onto a farm and almost falling into a grain elevator. So, if you have another commercial facility and players wander in and fall and hurt themselves, you could be held liable. Even if you face a lawsuit and eventually win, it will still cost you mounds in defense costs.

The takeaway You should work with your company counsel to develop policies to address the phenomenon. These can include forbidding employees from playing the game on a company-owned device, while driving or during work hours. You will also have to ensure that your properties are secure, especially after hours, to thwart overzealous Pokémon Go players from stepping onto your facilities and injuring themselves. If you have security on your grounds, you should alert them to stop players from wandering into unauthorized areas

IRS Proposes New Rules Making Health Coverage Opt-out Arrangements More Difficult

The IRS has proposed new regulations that add another layer of complication to any employer that offers or is considering offering the option of cash in lieu of payment to employees that decline employer-sponsored health coverage.
Already, any employer offering to pay employees who decline coverage has to walk a fine line and clearly state that the cash in lieu of payment is not to be used to purchase coverage elsewhere.
As a result of these newly proposed rules, employers that are still offering cash in lieu of coverage may want to reconsider doing so because if they make a mistake they could be subject to the biggest fine available under the Affordable Care Act: $36,500 ($100 for each day) per employee.
Under the proposed rules, employers that offer an unconditional cash-in-lieu option would be required to add the payment to what the employee would have been required to pay for coverage (had they elected to take it) in order to calculate if the plan is affordable under the ACA.
For an employer’s health plan to pass the ACA’s “affordability test,” it must cost the employee no more than 9.5% of their W-2 salary.
You should note that the opt-out arrangement must be completely unconditional and should in no way be tied to requiring proof of alternative coverage, such as through an exchange or a spouse’s employer-sponsored health plan.
There is one caveat under the new rules, though: the employer would be exempt from adding the cash in lieu of payment to the employee’s expected contribution if the employee can show proof that they have secured insurance that covers the “minimum essential coverage” standard under the ACA.
The employee would have to show reasonable evidence that they are insured. Under the proposed rules, sufficient evidence would be an employee’s affidavit that they have coverage or soon will have it.
The evidence must be provided in a timely manner, like during open enrollment, and must be provided annually, under the proposed rules.
Employers that still want to offer cash to employees that reject employer-sponsored coverage should carefully study the regulations, so that they can structure the arrangement in a manner that reduces the risk of being assessed penalties.