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  • October 2022

Blogs October 2022

  1. Annual Employee Benefit Plan Limits

    System Administrator – Thu, 20 Oct 2022 15:00:00 GMT – 0

    The last of the 2023 employee benefits annual limits and numbers have now been finalized by the IRS. Here is a recap of all the finalized 2023 numbers:

    HDHP and HSA Limits

    2023

    2022

    HDHP Minimum Deductible – Self Only

    $1,500

    $1,400

    HDHP Minimum Deductible – Family

    $3,000

    $2,800

    HDHP OOP Limit – Self Only

    $7,500

    $7,050

    HDHP OOP Limit – Family

    $15,000

    $14,100

    HSA Contribution Limit – Self Only

    $3,850

    $3,650

    HSA Contribution Limit – Family

    $7,750

    $7,300

    HSA Contribution Limit – Catchup (55+)

    $1,000

    $1,000

    ACA Limits

    2023

    2022

    Health Plan OOP Limit - Self Only

    $9,100

    $8,700

    Health Plan OOP Limit - Family

    $18,200

    $17,400

    ACA Affordability Threshold

    9.12%

    9.61%

    Flexible Spending Accounts (FSA)

    2023

    2022

    Health FSA Election Maximum

    $3,050

    $2,850

    Health FSA Rollover Maximum

    $610

    $570

    Dependent Care Election Maximum (not indexed)

    $5,000

    $5,000

    HRA Limits

    2023

    2022

    QSEHRA - Self Only

    $5,850

    $5,450

    QSEHRA - Family

    $11,800

    $11,050

    EBHRA

    $1,950

    $1,800

    Commute

    2023

    2022

    Transit Pass Maximum (Monthly)

    $300

    $280

    Parking (Monthly)

    $300

    $280

    Bicycle (Monthly)

    $20

    $20

    Retirement Plans

    2023

    2022

    Elective Deferral Maximum

    $22,500

    $20,500

    Catch-up Maximum (50+)

    $7,500

    $6,500

    Total Contribution Limit (<50)

    $66,000

    $61,000

    Total Contribution Limit (50+)

    $73,500

    $67,500

    401(a) Compensation Limit

    $330,000

    $305,000

    Compensation Thresholds

    2023

    2022

    Highly Compensated Employee (HCE)

    $150,000

    $135,000

    Key Employee Officer Comp

    $215,000

    $200,000

    Key Employee 1% Owner Comp

    $150,000

    $150,000

    Other Limits

    2023

    2022

    Educational Assistance (not indexed)

    $5,250

    $5,250

    Adoption Assistance

    $15,950

    $14,890

    Social Security Wage Base

    $155,000

    $147,000

    Terms


    HSA

    The HSA is an individual Health Savings Account that is owned by the employee and may be used for the payment of medical expenses that are not covered by a qualified High Deductible Health Plan (HDHP), including expenses that go toward satisfying the deductible. This maximum is inclusive of employer and employee contributions.

    FSA

    A Health or Dependent Care Flexible Spending Account (FSA) allows participating employees to reduce their earnings on a pre-tax basis to pay for certain qualified expenses. Salary reductions provide significant tax savings to both the employee and the employer.

    FSA Rollover (Carryover)

    Employers may offer employees the option of rolling over a portion of their remaining Health FSA balance each year, to be used in the same type of plan during the following plan year. The final balance that is available for rollover will be determined after the current plan year’s claim submission deadline.

    Transit

    The Transit Plan allows employees to set money aside on a pre-tax basis for mass transit expenses. Employees get to use tax-free money for their commuting expenses when traveling to and from work.

    Parking 

    The Parking Plan allows employees to set money aside on a pre-tax basis for work-related parking expenses. Employees get to use tax-free money for parking at or near an office location or mass transit hub.

    Educational Assistance

    With a Tuition Reimbursement Plan, the IRS allows employees to generally exclude from income amounts received from an employer-sponsored tuition assistance or educational assistance program (EAP) used to fund employee education-related expenses, subject to the maximum limit.

  2. Fixing the “Family Glitch” in the ACA

    System Administrator – Wed, 19 Oct 2022 15:00:00 GMT – 0
    Under the ACA, people who do not have access to “affordable” health insurance through their employer may qualify for a premium tax credit to purchase coverage through the ACA’s health insurance marketplaces (CoveredCA in California). Current regulations define employer-based health insurance as “affordable” based solely on the lowest cost plan’s employee contribution, not on the full contribution to insure their family members. This has the consequence of deeming family members ineligible for premium tax credits, even though the cost of employer-sponsored coverage for family members could be well above the affordability threshold. This problem has been dubbed the “family glitch.”
     

    Final Regulations Released

    The Treasury Department and the IRS released proposed regulations in April to eliminate the family glitch. Those regulations have just been finalized. The new regulations allow family members of workers who are offered affordable self-only coverage, but unaffordable family coverage would no longer be disqualified from receiving premium tax credits to purchase ACA coverage.
     

    Are we surprised by this?

    No. This change is not a surprise. The regulations flow from an executive order on the ACA and Medicaid issued by President Biden in January 2021, which hinted at the possibility of fixing the family glitch. Critics have long argued that the family glitch interpretation is inconsistent with the text, structure, and goals of the ACA and unfairly penalizes family members of lower-income workers. In addition, it has long been the intention of the current administration to beef up the ACA where possible, with the goal of providing greater access to healthcare and to lower individuals’ costs were possible.
     

    Fixing the Family Glitch

    The proposed rule would reinterpret how affordability of employer health care coverage is determined for purposes of premium tax credits with respect to family members who are offered employer-sponsored coverage.

    The Old Way: Employer coverage is defined as unaffordable for a single employee if the employee contribution for self-only coverage is more than the affordability threshold (9.61% in 2022 of household income, 9.12% in 2023). An oddity emerges in that calculation with respect to family coverage because affordability for family members is also determined with respect to the contribution for self-only coverage (not the contribution for family coverage).

    The New Way: The affordability test for single employees will remain unchanged. Employees would still be barred from accessing marketplace subsidies if their employer offered affordable employee-only coverage. However, the calculation will change for employees with families. Under the new rules, affordability would be calculated separately for family coverage and would be deemed unaffordable for family members if the required family contribution is greater than the affordability threshold (9.61% of household income in 2022, 9.12% in 2023). When this affordability threshold is exceeded, family members would no longer be barred from accessing premium tax credits and thus could seek subsidized coverage through the Exchange.
     

    Key Employer Takeaways

    There is a lot in here . . . What do I really need to know as an employer? The good news is that there is little that is newly actionable for employers in these proposed regulations. It impacts access to premium tax credits for dependents who may have been previously disqualified. The following are the key takeaways for employers:

    No Impact to Employer Shared Responsibility Penalties: The proposed rule will not affect Shared Responsibility liability under the employer mandate. Why? The employer mandate requires certain ALEs to offer coverage to employees and dependents. However, penalties for violating the mandate are triggered only when an employee receives premium tax credits through the marketplace. Therefore, extending marketplace tax credits to family members of employees (who are not offered affordable employer-sponsored family coverage) would not impact the eligibility of employees and thus would not trigger a shared responsibility payment.

    No Impact to 1095 Reporting: These regulations have no impact on 1095 reporting. It is important to remember that affordability and minimum value for premium tax credit eligibility is different than for purposes of potential employer shared responsibility penalties. No doubt the new proposed rule will create some confusion given the similar terminology. However, the regulations do not change the affordability calculation or minimum value determination as it relates to annual ACA reporting or assessment of penalties.

    Conforming Cafeteria Plan Change: A change was also made to allow an employee to make a mid-year election change to their health insurance coverage (not FSA coverage) when a dependent becomes newly eligible for a premium subsidy under the Exchange.

    Marketplace Notice: Employers can expect the standard Marketplace Notice to be revised to reflect these changes and should plan on updating the version that is distributed to employees once a new version has been released.
     

    Two Nitty Gritty Clarifications

    The regulations also addressed two additional items as follows:
     
    1. Minimum Value Rule: The minimum value rule is extended to dependent coverage. This means that employers must provide an offer of minimum value coverage to dependent children as well as to employees (to avoid Shared Responsibility penalties). The definition of minimum value coverage retains the requirement that plans provide 60% of the total allowed cost of benefits and newly adds the clarification that plan benefits must include substantial coverage of inpatient hospital and physician services. To the extent that minimum value coverage is not being offered to dependent children, employers will need to address this issue.
       
    2. Marketplace Responsibilities: The marketplace would be required to assess:
      • Whether an employee has an offer of affordable employee-only coverage,
      • Whether family members have an offer of affordable family coverage, and
      • Whether any of those family members have an offer of affordable coverage from more than one employer (either as an employee or a dependent).
     

    What is the effective date?

    The new rule becomes effective for tax years beginning in 2023. This means that dependents who are offered unaffordable employer-sponsored family coverage would be eligible for premium tax credits beginning in 2023 (with enrollment to begin in November 2022).
    • ACA
  3. Paid Leave Oregon: Everything Employers Need to Know

    System Administrator – Sat, 15 Oct 2022 15:00:00 GMT – 0
    The state of Oregon has enacted a new paid family and medical leave program which goes into effect on January 1, 2023. The program is known as Paid Leave Oregon. Paid Leave Oregon is a state-run wage replacement program meant to provide short-term compensation to employees who need to take time off work for medical or family reasons. Covered employers will want to start preparing for and understanding the new law now.
     

    Basics of the Program

    Who are Covered Employers? Employers with 25+ employees anywhere in the world with at least one eligible employee in Oregon are subject to the new law. Importantly, “one employee in Oregon” does include remote employees.

    What are the Qualifying Leave Reasons? Taking time off for any of the following reasons qualifies under this law:
     
    • Family Leave
      • To care for and bond with a child following the child’s birth, adoption, or foster care placement (must be taken within 12 months of birth/placement)
      • To care for a family member with a serious health condition
    • Medical Leave
      • To recover from a serious health condition or care for a family member with a serious health condition
    • Safe Leave
      • To take leave if the employee or an employee’s family member has experienced domestic violence, sexual assault, harassment, or stalking.

    Who is Eligible? Oregon employees may be eligible to take leave whether they work full-time, part-time, a seasonal job, or for more than one employer. The following criteria must be met for an employee to be eligible for Paid Leave Oregon benefits:
     
    • Must be employed in Oregon.
    • Must have earned at least $1,000 in wages in the four out of five quarters before starting leave under Paid Leave Oregon.
    • Cannot simultaneously receive workers’ compensation and/or unemployment insurance benefits.
    • Independent contractors, volunteers, and work training/work-study program participants are not considered employees and, thus, are excluded from the program.

    Who are Covered Family Members? The law includes an expansive list of family relationships that qualify as individuals needing care for whom an employee may take Paid Leave. This includes:
     
    • Child (of any age)
    • Spouse or Domestic Partner
    • Sibling (including step-siblings and in-laws)
    • Parents (includes step-parents and in-laws)
    • Grandchild
    • Grandparent
    • Any individual related by blood or affinity whose close association with a covered individual is the equivalent of a family relationship
     

    Program Benefits

    What are the Benefits? Paid Leave Oregon benefit highlights include:
     
    • Employees may take up to 12 weeks of paid leave per year.
    • In certain situations, an employee may take an additional two weeks (for a total of 14 weeks)
    • Leave may be taken continuously or in partial increments (one week, one day, etc.).
    • Benefit amounts are based on a formula that considers the income of the individual.
    • Leaves are job-protected for employees who have been employed with an employer for at least 90 days.

    What is the Benefit Amount? Paid Leave Oregon is responsible for calculating benefit amounts paid to employees. The below information is for general education purposes. The benefit payable under the law depends on the ratio of the individual’s Average Weekly Wage (AWW) to the State Average Weekly Wage (SAWW).
     
    • If AWW <= 65% of SAWW, benefit = 100% of AWW
    • If AWW > 65% of SAWW, benefit = 65% of the SAWW + 50% of the AWW above that amount
    • Benefit Cap = 120% of SAWW (Initial benefit cap: $1,469.78 per week for 2023)
    AWW: Defined as the total wages earned in the base year divided by the number of weeks in the base year.
    SAWW: $1,224.82 for 2022 and 2023.

    For example, assume an average weekly wage of $1,000. This example illustrates how the formula works when the AWW exceeds 65% of the SAWW:
     
    Step #1: Take 65% of $1,224.82 (SAWW) = $796.13
    Step #2: Subtract the Step #1 result from the AWW ($1,000 - $793.13) = $203.87
    Step #3: Calculate 50% of the Step #2 result ($203.87*0.50) = $101.93
    Step #4: Add the Step #1 result to the Step #3 result ($796.13 + $101.93) = $898.06

    Program Funding and Contribution Details

    How is it Funded? Employers and employees must contribute to the Paid Leave Oregon state fund. The total contribution rate will be determined annually by the Oregon Employment Department (OED). There is a statutory maximum of 1% of wages.

    How is the Funding Split? The law outlines a split contribution between employers and employees as follows:
     
    • Employees contribute 60%
    • Employers contribute 40%

    Can Employers Pay More? Yes. Employers may choose to go beyond the statutory requirement of 40% and pay both the employer and employee contributions, as an employee benefit. If employers pay the employee portion of contributions, a written agreement with the employee must be in place.

    What is the Initial Contribution Rate? The contribution rate for 2023 is 1%. Contributions are paid on all compensation up to the wage base ($132,900 for 2023).

    What are the Contributions and Benefits? The following chart illustrates the contributions and benefits at various income levels:
     

    Annual Earnings

    Average Weekly Wages

    Annual Employee Contribution

    Annual Employer Contribution

    One Week’s Paid Leave Benefit

    Minimum Wage Employee

    $28,080

    $540.00

    $168.48

    $112.32

    $540.00

    Median Income Employee

    $67,058

    $1289.58

    $402.35

    $268.23

    $1,032.86

    High Income Employee

    $132,900

    $2,555.78+

    $797.40

    $531.60

    $1,469.78



    Who Collects Contributions? Employers are responsible for collecting and submitting employee contributions as well as their employer contributions.

    Who Pays the Benefits? Income replacement benefits while an employee is on a leave are paid by Paid Leave Oregon (not by employers).

    How Are Contributions Made? Employer contributions will be made through Frances Online, the Oregon Employment Department’s new employer portal for reporting employer taxes, unemployment insurance taxes, and Paid Leave Oregon contributions.

    What Must be Done Now? Employers should consider two action items for implementing this new law:
     
    • Register with Frances Online
    • Coordinate with the payroll service provider to ensure that correctly calculated employee contributions are withheld from paychecks starting January 1, 2023.
     

    Employer Obligations

    Employers have four important obligations in the administration of the Paid Leave Oregon program.
     
    Notice Requirement: Employers must display a notice in a public space at the worksite containing the disclosure information outlined below. The Oregon Employment Department will release a sample poster in the near future. Posters must display the following information:
     
    • Benefits of the program
    • Claims process
    • Notice requirements for leave
    • Rights to job protection and benefits continuation
    • Protection against retaliation
    • Right to appeal a decision
    • Confidentiality of information received related to a leave

    Job Protection and Anti-Retaliation: These protections apply to employees employed by their employer at least 90 days before taking leave:
     
    • Right to restoration to the same position (or equivalent if the position no longer exists)
    • No employee benefits loss, including seniority or pension rights, accrued before the date on which the leave commenced.

    Health Benefits: Employers must maintain health care benefits during the leave period on the same basis as if continuously employed.
     

    Important Dates to Know

    • January 1, 2023: Employee contributions start
    • January 1, 2023: Employer contributions start
    • September 3, 2023: Employees may begin applying for Paid Leave Oregon benefits
       

    Claims Administration

    What Must Employees Do? To request leave, employees must initiate a claim under the Frances Online system. Standard claimant information, identification verification, employment information, and leave details must be provided. Employees must provide their employer with 30 days’ notice if the leave is foreseeable or 24 hours’ notice if the leave is unforeseeable.

    What Must Employers Do? Employers must engage with Paid Leave Oregon to administer the claims for employees who have filed a claim. Upon being notified of a claim (by Paid Leave Oregon), employers must provide verification details within 10 days.
     

    Private Plan Arrangements

    Can Employers Establish a Private Plan? Yes. Employers are permitted to opt-out of making contributions to the Paid Leave Oregon program if they establish an “equivalent” private program that is approved by the Oregon Employment Department.

    What is an Equivalent Plan? An equivalent plan is a plan the Oregon Employment Department approved, which provides benefits that are equal to or greater than the benefits Paid Leave Oregon provides. Employers who already offer paid leave to their employees can apply for it to be considered an equivalent plan. To be an equivalent plan, the following criteria must be met:
     
    • Offer the same or more benefits than Paid Leave Oregon offers
    • Employee contributions less than or equal to contributions to the Paid Leave Oregon program
    • Be approved by the Oregon Employment Department.

    What is the Application Process? The Paid Leave Oregon website provides detailed information on the requirements for private/equivalent plans and on submitting an application (Paid Leave Oregon Website). Plans may be fully insured or employer-administered (proof of solvency is required for employer-administered plans). The approval process takes approximately 30 days, so the Oregon Employment Department recommends that applications be submitted by November 30, 2022, to avoid withholding contributions as of January 1, 2023. Approved plans must then reapply annually for the first three years. The Oregon Employment Department has released an Equivalent Plan Checklist and an Equivalent Plan Guidebook to assist employers in the application process.

    What is a Declaration of Intent? If an employer intends to submit an application but is not yet ready, it may submit a Declaration of Intent form through Frances Online certifying that the employer will have an approved equivalent plan by May 31, 2023.

    By submitting a declaration of intent, the employer will not have to withhold contributions starting January 1, 2023. However, if the employer’s equivalent plan application is denied, the employer will be liable for contributions from January 1, 2023, until an approved plan is in effect. The last day an employer may file a declaration of intent is November 30, 2022.

    If an employer does not use an equivalent plan in 2023, it may submit equivalent plan applications in future years. Similarly, employers may choose to cease using an equivalent plan and use Paid Leave Oregon in future years.

    When is an Equivalent Plan Most Advantageous? As a rule, smaller employers will likely not establish an equivalent plan or apply to have an existing paid leave/disability insurance program approved as an equivalent plan. Larger employers are more likely to engage in this process. Also, to the extent that disability insurance premiums plus the cost of self-funded paid leave programs (for non-disability related leaves) exceed the initial 1% premium, an employer may be better served by simply participating in the Paid Leave Oregon program, especially in the initial years as the program establishes itself and actual claims experience becomes solidified.

    Are there Insurance Company Solutions? Many insurance companies are working to put together consolidated solutions for employers that handle leave management, combining both the disability element and the leave management for non-disability leaves. Expect to see new solutions in this space to address this growing need for employers.

    Now or Later? Many employers are taking a “wait and see” approach to the equivalent plan option, at least for the first year. Employers that have existing programs that would likely be deemed equivalent may want to amend their current plans to clarify that internal self-funded leave benefits will be integrated with the Paid Leave Oregon program. This is necessary to avoid paying directly for leaves (in addition to paying the employee/employer contributions for all or a portion of the leave).
     

    Small Employer Exemption and Grants

    What is the Small Employer Exemption? Small employers (with fewer than 25 employees) are exempt from making the 40% required contribution under the Paid Leave Oregon program.

    Do Small Employers Need to Do Anything? Yes. All Oregon employees participate in the Paid Leave Oregon program (regardless of the size of their employer). While small employers do not need to make the 40% employer contributions to the program, they still must collect and submit the required 60% employee contributions. Even though employers do not make contributions, employees of small employers still receive the same benefits.

    What are the Small Employer Assistance Grants? Small employers who elect to pay the 40% employer contribution (even though they are not required to do so), are eligible to receive assistance grants. Key elements of the assistance grants include:
     
    • If an employee takes family and medical leave, a small employer who pays their share of contributions may apply for one grant per employee, up to a maximum of 10 grants per year.
    • Employers must continue to pay their share of contributions for 8 consecutive calendar quarters.
    • Small Employer Assistance Grants provide up to $3,000 towards the cost of hiring temporary workers to replace employees on leave and up to $1,000 to reimburse the employer for significant additional wage-related costs incurred while an employee is on leave.
     

    Interaction with Other PTO/Sick Leave Benefits

    How does the Plan Interact with Other Programs? Paid Leave Oregon benefits are in addition to benefits payable under other leave programs such as the Oregon Family Leave Act (OFLA) and the Family and Medical Leave Act (FMLA.) Employees cannot receive Paid Leave Oregon benefits if they are receiving worker’s compensation or unemployment insurance benefits.

    How do the Programs Differ? Paid Leave Oregon’s requirements are similar, but not identical, to the requirements of the OFLA and the FMLA, which respectively provide protected but unpaid state leave and federal leave. For example, leave related to domestic violence survivors is covered under Paid Leave Oregon, but not under the OFLA or the FMLA.

    If an employer does not use an equivalent plan, the OED will administer Paid Leave Oregon benefits. The OED will notify the employer when an employee applies for or is approved to take leave under Paid Leave Oregon. The employer administers OFLA and FMLA benefits, and it must track an employee’s use of OFLA, FMLA, and Paid Leave Oregon leaves. Given the overlay of these three leave programs, employers would be prudent to review policies and procedures to see whether they need to be updated and/or how they need to be harmonized.

    How is Sick Leave and PTO Integrated? Employers may permit an employee to use accrued paid sick leave, vacation leave, or any other paid leave to top off Paid Leave Oregon benefits up to 100% of the employee’s weekly wages. Employees may not receive more than 100% of their average weekly wage.

    An employee may also use accrued paid time off and paid sick leave to top off Paid Leave Oregon benefits if the weekly benefits are less than the employee’s weekly wages.

    How Do Leave Programs Differ? There are differences in essentially every category of comparison between the Paid Leave Oregon program, the Oregon Family Leave Act, and FMLA as summarized below:
     

    Paid Leave Oregon
    Oregon Family Leave Act
    FLMA
    Covered Employer
    All employers
    25+ Oregon employees in 20+ calendar weeks
    50+ employees in 20+ workweeks in current or preceding calendar year
    Employee Eligibility
    • $1,000 in base period
    • 180 days tenure
    • 25 hours/week average
    • 12 months of service
    • 1,250 hours of service during preceding 12 months
    • 50+ employees within 75 miles
    Amount of Leave
    • 12 weeks
    • Additional 2 weeks for pregnancy-related limitations
    • 12 weeks
    • Additional 12 weeks for pregnancy disability
    • Additional 12 weeks for sick child if 12 weeks of parental/bonding leave used
    • 12 weeks
    Intermittent leave
    • May be taken in one workday increments
    • Not specified
    • Smallest increment allowed for other types of leave
    • No greater than one hour
    Reasons for Leave
    • Birth, adoption, or foster placement of a child
    • Serious health condition of employee
    • Care for family member with serious health condition
    • Safe leave
    • Birth, adoption, or foster placement of a child
    • Serious health condition of employee
    • Care for family member with serious health condition
    • Pregnancy disability leave
    • Sick child or if school or childcare provider is closed due to a statewide public health emergency
    • Military family leave
    • Bereavement leave (up to 2 weeks)
    • Birth, adoption, or foster placement of a child
    • Serious health condition of the employee
    • Care for family member with a serious health condition
    • Qualifying exigency for family member due to military active duty

     
    How Does it Interact with Other Paid Time Off? Employees may choose to exhaust their accrued paid time off or protected sick leave under the Oregon Paid Sick Time Law before applying for Paid Leave Oregon benefits. However, employers may not require employees to exhaust paid time off and paid sick time before applying for Paid Leave Oregon benefits.
     

    Annual Reporting Requirements

    All employers, including those using approved equivalent plans, must abide by Paid Leave Oregon’s reporting requirements related to employee population and contributions withheld from employee wages. Employers must renew their applications for equivalent plans every three years. All mandatory reports and applications must be submitted through Frances Online.
     

    Integration with Short-Term Disability

    Will Premiums be Reduced? Employers can expect the Paid Leave Oregon program to reduce the cost of insured short-term disability insurance premiums. It stands to reason that when a significant portion of the benefit under a disability insurance policy will now be integrated with the Paid Leave Oregon program, the premiums will be commensurately reduced. But how much of a premium reduction can employers expect? Importantly, only two of the four qualified reasons for a leave would be covered under a disability insurance policy (disabilities related to the birth of a child or the serious illness of an employee). The other qualified leave reasons wouldn’t trigger a disability benefit in the first place.

    How Much Might Premiums be Reduced? Because of the complexities outlined above, it is difficult to project at this early juncture how much of a premium reduction might be expected. Insurers have experience with integrating disability benefits with state-paid leave programs, such as those in CA, HI, NY, NJ, and RI. However, the actual experience of the Paid Leave Oregon program must ultimately be taken into consideration. Lastly, to the extent that average wages exceed or significantly exceed the Paid Leave Oregon income threshold, the impact of the program on disability premiums will be lessened. Said another way, the potential premium reduction will be higher to the extent that a higher percentage of wages will be replaced by the Paid Leave Oregon program.
     

    Action Items for Employers

    For Employers with No Employees in Oregon: Pay attention anyway. It is likely that other liberal states will follow Oregon’s example and pass new paid leave programs in the future. Both the program’s structure and administrative processes are likely to be mirrored, so there may be early lessons to be gleaned by observing and understanding Oregon’s program.

    For Employers with Employees in Oregon: There are important preliminary steps to take in the last months of 2022 to prepare for this law to become effective:
     
    • Confirm Covered Employer status
    • Register with Frances Online
    • Confirm if a private/equivalent option is right for you (submit an application if necessary)
    • Work with payroll vendor to implement payroll contribution process
    • Create an internal procedure for payment of ongoing employee/employer contributions
    • Communicate with employees regarding new payroll contributions that will be happening in 2023
    • Post required notifications in the workplace(s)


    • Compliance
  4. 125 Plans: Additional Election Change Opportunity for Non-Calendar Year Plans

    System Administrator – Wed, 12 Oct 2022 15:00:00 GMT – 0

    The IRS and Treasury department have released Notice 2022-41 which corrects an inconsistency in the regulations for non-calendar year plans. This inconsistency follows along with the regulatory corrections of the “family glitch” for ACA coverage that were just finalized by the DOL. 
     

    Which employers does the change apply to?

    The change is only relevant for employers with non-calendar year Section 125 plans. Employers who have a calendar year Section 125 plan do not need to pay attention to this.
     

    What is the change?

    The newly permitted election change applies to individuals covered under a non-calendar year cafeteria plan who have elected family coverage and have dependents who become newly eligible to enroll in a Qualified Health Plan under an Exchange. The new guidance allows plans to allow participants to revoke family coverage under the group health plan to enroll dependents in coverage through the Exchange (thus changing their own election to self-only coverage under the plan.) Note that the change only applies to health plan election changes; it does not allow participants to make a change in a health FSA plan.
     

    Why was this necessary?

    Existing regulations allow for this election change opportunity for calendar year plans; however, the wording of the regulations constricted a parallel election change opportunity for participants in non-calendar year plans. The issue here is that, when dependents become newly eligible for Exchange coverage, the tax credit available to the family may make it more advantageous for the participant to opt dependents off of the group health plan in favor of Exchange coverage. This type of election change was previously prohibited under non-calendar year plans. The newly issued regulations conform to this type of election change for non-calendar year plans.
     

    Effective Date

    The effective date of this guidance is January 1, 2023.
     

    Vita Plans

    Vita will amend all Vita-created Section 125 Plan Documents to reflect this updated guidance for medical plan election changes.
    • Pre-Tax
  5. New San Francisco Public Health Emergency Leave Ordinance

    System Administrator – Tue, 11 Oct 2022 15:00:00 GMT – 0
    San Francisco repeatedly renewed its Public Health Emergency Leave Ordinance related to COVID-19 over the past two years. Public sentiment affirmed this direction when San Francisco voters passed Proposition G, a new Public Health Emergency Leave Ordinance (PHELO) which makes permanent the public health emergency leave requirement for employers operating within San Francisco.
     

    Ordinance Overview

    The following are the key tenets of the ordinance:
     
    • Effective Date: The ordinance becomes effective on October 1, 2022. 
    • Only for Public Emergencies: The leave is only available during a declared local or statewide health emergency related to a contagious, infectious, or communicable disease.
    • Covered Employers: Businesses with 100 or more employees worldwide are subject to the ordinance. 
    • Employees Covered: All employees who work in San Francisco for a covered employer are entitled to Public Health Emergency Leave (PHEL), regardless of the duration of employment or job title, including part-time, temporary, seasonal, and salaried employees.
    • Benefit Provided: Each employee who performs work in San Francisco must be provided up to 80 hours of paid Public Health Emergency Leave.
    • In Addition to PTO: The paid leave is in addition to any other paid time off, including paid sick leave under the San Francisco Paid Sick Leave Ordinance.
    • Teleworking Capacity: There are certain restrictions on using PHEL if an employee can telework without increasing exposure to disease or unhealthy air quality.
    • Declaration of Emergency: A qualifying public emergency may be declared by the City of San Francisco or California’s health officer or when the Bay Area Air Quality Management District issues a Spare the Air Alert.
     

    Leave Reasons

    Employees may use this leave when they are unable to work (or telework) due to the following reasons:
     
    • Order or Guidelines: The recommendations or requirements of an individual or general federal, state, or local health order (including an order issued by the local jurisdiction in which an employee or a family member the employee is caring for resides).
    • Symptoms: The employee, or a family member the employee is caring for, is experiencing symptoms, seeking a medical diagnosis, or has received a positive medical diagnosis for a possibly infectious, contagious, or communicable disease associated with the public health emergency.
    • Isolate or Quarantine: An employee, or a family member the employee is caring for, has been advised to isolate or quarantine by a healthcare provider.
    • School Closure or Unavailable Care Provider: The employee is caring for a family member whose school or place of care is closed or whose care provider is unavailable due to a public health emergency.
    • Air Quality Emergency: The employee is diagnosed with heart or lung disease, has respiratory problems, is pregnant, or is at least 60 years old and primarily works outside, and the Bay Area Air Quality Management District has issued a Spare the Air Alert.

    Special note on Teleworking Capability: If an employee can telework without increasing the employee’s exposure to disease or unhealthy air quality, the employee may not use PHEL if the declared reason is an order or guideline, advice from a health care provider, or in the event of air quality emergency. Teleworking employees may still utilize PHEL for other covered reasons.
     

    Benefit Calculations

    • Same Basis as SF Paid Sick Leave: The ordinance uses the same rate of pay calculations as San Francisco’s Paid Sick Leave Ordinance.
    • Exempt Employees: Employers pay PHEL in the same manner as they pay other forms of paid leave.
    • Non-Exempt Employees: Employers pay PHEL using one of two methods:
      • The regular rate of pay for the workweek in which the PHEL is used 
      • Divide total wages (not including overtime premium pay) by the total hours the employee worked in the pay periods for the 90 days of employment prior to the employee’s use of PHEL.
     

    Employer Obligations

    • Leave Payment Timing: PHEL payments must be made to employees by the next regular pay period after the leave is taken. 
    • Health Benefits: Health insurance benefits must be maintained while an employee is on a PHEL leave in the same manner as when the employee is an active employee.
    • No Rollover: Employers are not obligated to roll over any unused PHEL to the next year.
    • No Payout: Employers are not required to pay out any unused leave. 
    • Doctor’s Note Restrictions: Employers may require a doctor’s note or other documentation to confirm an employee qualifies to use PHEL for an air quality emergency. The ordinance does not provide for any other opportunities for an employer to require or request documentation of a need for PHEL. 
     

    Phased In Allocation of Hours

    • October 1 – December 31, 2022: The allocation must equal or average (depending on the employee’s schedule) the number of hours worked over a one-week period that the employee regularly worked, not to exceed 40 hours.
    • Beginning in 2023 Employees Working Full Time, Regular, or Fixed Schedules: The allocation must be equal to the number of hours the employee regularly works over a two-week period, not to exceed 80 hours.
    • Beginning in 2023 Employees Working a Variable Schedule: The allocation must be equal to the average number of hours the employee worked over a two-week period or since the employee’s start date if after the beginning of the previous calendar year, not to exceed 80 hours.
    • Future Employees: Future hired employees (who are not employed on these dates), must be allocated the maximum amount of PHEL available to the employee when a public health emergency commences.

    Notice and Recordkeeping Requirements

    • Employer Poster: Employers must post a poster notice in a conspicuous location. The poster should be posted in all available languages in the workplace and emailed to workers who do not frequent the workplace. 
    • Employer Leave Balance Notice: Employers must provide notice of the amount of PHEL available to each employee in the same way they provide notice of regular California Paid Sick Leave (whether on a wage statement or other writing). If the employer offers unlimited paid leave or paid time off, the employer must note “unlimited” on the employees’ wage statements.
    • Employer Recordkeeping: Employers must keep records documenting the hours worked and PHEL was taken for four years.
    • Employee Foreseeability: If the employee’s need for PHEL is foreseeable, the employer can require employees to follow reasonable notice procedures.

    Exemptions and Limitations

    • Healthcare Worker Limitation: An employer of health care providers or emergency responder employees may elect to limit the employee’s use of this leave but may not prevent the employee from using it if the employee is unable to work due to due to an order or guidelines, advice from a health care provider, or in the event of air quality emergency.
    • Non-Profit Exemption: The PHELO exempts certain non-profit organizations that do not engage in specific health care operations, and government entities other than the City of San Francisco.
    • Collective Bargaining Exemption: The only exception for otherwise covered employers is for employees subject to a collective bargaining agreement that expressly waives PHEL in clear and unambiguous terms.

    Penalties and Enforcement

    • Non-Retaliation: Employees who assert their rights to receive Public Health Emergency Leave are protected from retaliation. 
    • Governing Authority: San Francisco’s Office of Labor Standards Enforcement is responsible for the enforcement of the ordinance.
    • Penalties: If PHEL is unlawfully withheld, the employee will be awarded an administrative penalty of the dollar amount of PHEL withheld multiplied by three or $500, whichever amount is greater. Penalties also exist for failing to post the PHEL notice and for failing to retain records.

    Action Item for Employers

    Employers impacted by the San Francisco PHELO should address the following action items prior to October 1, 2022:
     
    • Update Policies: Review (and revise, if necessary) their leave of absence policies and processes.
    • Address Recordkeeping: Update leave record-keeping practices (in the payroll system or other methods).
    • Post Notice: Post the required Poster Notice.
    • Compliance
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