The Vita Blog October 2018

The New York State mandate applies to all employers, regardless of their size, who employ anyone in the state of New York. The New York City mandate applies to all employers with 15 or more employees. 

Overview

Earlier this year, both New York State and New York City enacted sexual harassment prevention laws, with different provisions for employee communication and training along with various dates for compliance. As of note, New York State passed a law requiring employers to provide sexual-harassment training to all workers by October 9, 2019. An overview of the laws can be found here.

Employer Requirements

The New York State law applies to all employers, regardless of their size, who employ anyone in New York State. Furthermore, it applies to all contractors who bid on New York State contracts and to all employees (not just supervisors). It also requires that the training is provided annually. It's important to note that if an individual works a portion of their time in New York State, even if they’re based in another state, they must be trained.

The New York City law applies to all employers with 15 or more employees, and requires annual sexual harassment training for all employees, beginning on April 1, 2019.

The sexual harassment training must provide the following:

• An explanation of sexual harassment and specific examples of inappropriate conduct.
• Detailed information concerning federal, state and local laws and the remedies available to victims of harassment.
• An explanation of employees' external rights of redress and the available administrative and judicial forums for bringing complaints
  

Employer Action Items

In New York State:

• All sexual harassment training must be completed by October 9, 2019 (applies to all employers regardless of size and all employees, including transient)
• Annual training is required
• Employer policy must be posted
• New hire training as quickly as possible

In New York City*:

• Effective September 6, 2018, policy and posters must be posted
• Sexual harassment training is effective April 1, 2019 and all training must be completed by April 1, 2020 (applies to all employers with 15 or more employees and all employees, working more than 80+ hours/calendar year)
• Annual training is required
• Prominently displayed English & Spanish posters
• Provide information fact sheet to every new hire
• New hire training within 90 days
• Maintain training records for 3 years

*New York State law covers New York City employers and their employees. Where New York State law provides greater protections, it takes precedence over New York City law.

Solution for Vita Clients

Vita provides online employee training at no additional cost as part of our client service offering, including California and New York mandated harassment training. For more information about this solution, reach out to your account team, or contact us at 650-968-8811.

This requirement applies to employers of all sizes in New Jersey. 

Overview

On May 2, 2018, a statewide mandatory paid-sick-leave law in New Jersey known as the New Jersey Paid Sick Leave Act was signed into law. It will go into effect on October 29. Once in effect, it will require New Jersey employers of all sizes to provide up to 40 hours of paid sick leave per year to covered employees. A copy of the legislation can be found here.

Required Notice for Employers Released 

Recently, New Jersey released its Earned Sick Leave Notice for all employers to use in connection with the newly implemented sick leave law.

Employer Action Items

• The notice must be distributed to all existing employees by November 29, 2018
• The notice must be distributed to all new employees at the time of hire 
• The notice must be posted in a place frequented by employees (i.e. a break room or communal area) by October 29, 2018
  

A copy of the employer notice can be viewed here.

401(k) News
Welcome Scott Strauss, our new Compliance Specialist!
Scott Strauss joined Vita Planning Group this week as our Compliance Specialist.  He brings more than 20 years of experience working with a wide range of qualified retirement plans.

His experience covers both defined contribution 401(k) plans and defined benefit pension plans.  Scott has worked both as an advisor, with American Benefit Plan Administrators and Wellman & Murray Lawyers, and an administrator, for the City of Portland and Precision Castparts Corp. benefit plans.  This gives Scott an unparalleled perspective on retirement plan design as well as experience across the broadest range of compliance and operational issues.  Scott is a native Oregonian and proud alumni of the University of Oregon in Public Administration.

Administration
10 Days Left to File Your Form 5500!
For calendar-year plans currently on extension, Monday, October 15, 2018 is the deadline to file the Form 5500 and Form 8955-SSA.  Please note, the DOL website is subject to high traffic on October 15th so be sure to file as soon as you are available to and avoid the last minute rush!  If you are unsure as to the status of your Plan’s Form 5500 or Form 8955-SSA, you are invited to contact our team for assistance.

Year-End Participant Notifications
As we wrap up 2018, we would like to remind you of some important annual notices that may need to be delivered to Plan participants, depending on the provisions of your Plan.  Below is an outline of these notices, along with the corresponding due dates, based on a calendar-year Plan.

View our online Compliance Calendar to see other important administrative tasks. 

Market Update
There is very little ‘new’ to report in this quarter’s market update. The same pattern that we saw in Q2 continued in Q3. The US economy remains strong, the Fed continues to raise interest rates and the trade war looms. The result was another positive quarter for US equity markets, but continued struggles in the US bond and international equity markets. The S+P 500 was up 7.7% in the third quarter, resulting in a year-to-date (“YTD”) rise of 10.6%. The BarCap Aggregate US Bond Index was up ever so slightly: 0.02% in Q3, bringing the YTD result to down 1.60%. Emerging Market equities also improved somewhat in the Q3, helping the MSCI All World Country Index (“AWCI”) ex-US to gain 0.71% in Q3, and paring its loss down to -3.09% YTD. The economic data suggests that Q4 markets will be little different, unless politics get in the way – the mid-term elections or trade rhetoric that turns into a trade war.

US economic fundamentals continue to be very strong. Q2 2018 US GDP growth was revised to 4.2% which translates to 2.3% year-on-year (“YOY”). Q3 growth looks to come in at between 2.5% to 3.0%, which would bring YOY growth to 2.8%. Consumer spending and corporate investment were strong in Q2 and the beginning of Q3, accounting for much of the GDP growth. Much of this is the result of tax cuts and fiscal stimulus enacted at the beginning of 2018, which is expected to underpin economic growth through the beginning of 2019. Unemployment remained low, at 3.9% in August and wage growth remained muted at 2.8% in August. For some perspective on these two figures, the US unemployment rate has averaged 6% over the past 50 years while wage growth averaged 4.2% in the same time.

The low level of wage growth has helped to keep inflation in check, even in the face of rising energy prices. Oil prices have more than doubled in the 18 months since the most recent low in January 2016. West Texas Intermediate was at $73.55 at the end of September 2018, up from $33.62 in January 2016. This has caused “headline” inflation to rise to 2.7% even though core inflation (excluding food and energy) remains at 2.2%. In theory, a trade war does have the potential to cause domestic prices to rise. However, the relative muted tariffs that are being suggested against China are estimated to raise consumer prices by approximately 0.4% if all those costs are passed through to the economy. Against this background of strong economic growth and the muted rise in inflation, the Fed has made it clear that it intends to maintain its policy of raising interest rates. The market is expecting at least three more rate increases between now and June 2019.

Overseas equity and bond markets have been quite hard hit by both the strong US dollar and the impact of rising trade barriers in 2018 but are starting to make a bit of a comeback. The rise in the US dollar that has been a feature of the global economy in the first half of 2018 stalled over the summer. This has brought some respite to emerging markets, which had been quite hard hit all year. Developed markets, Europe in particular, are showing good fundamentals. Eurozone GDP growth is tracking at 2.0% annualized and unemployment continues to fall, recording 8.1% in August. Demand for credit and the Purchase Manager Index in Europe both remain strong. This is supportive of overseas valuations. The ACWI ex-US forward P/E ratio is 12.9x compared with a 20 year average of 14.3x. This compares to the S&P 500 forward P/E ratio of 16.8x vs a 20 year average 15.9x.

Finally, one highly technical change that happened at the end of September is the reclassification of telecoms companies by the Global Industry Classification Standard (GICS). A new “Communications Services” sector has been created to replace “Telecoms”. Going forward, the Communication Services sector will include companies that had previously been in either “Technology” or “Consumer Discretionary”. As is shown in the chart below, this change will create the fourth largest sector in the S&P 500 Index. There is no action you need to take that relates to your 401(k) Plan’s investment array. However, we will most likely see higher volatility in index funds during Q4 2018 as they come to grips with the new classifications.

This requirement applies to all employers with prescription drug benefits within their group health plans. 

Overview

U.S. Department of Health and Human Services regulations require annual notice to all plan participants regarding the Medicare Part D Prescription benefit “creditability” of your group health plan. This notice must be provided prior to October 15 to coincide with the annual Medicare open enrollment period which runs from October 15 to December 7. This notification provides Medicare-eligible employees with important information to help determine whether they need to enroll in Medicare Part D.

Again?  Didn’t I just do this in January/February? 

Not quite.  Same law, different requirement.  In addition to this annual employee disclosure requirement each fall, plan sponsors must report creditability information directly to the Centers for Medicare and Medicaid Services (CMS) within 60 days of the first day of the ERISA plan year.  Many Vita benefits clients have a January 1 ERISA plan year (which may – or may not – coincide with your renewal or policy year); so for many employers, the deadline is the end of February

How Do We Know If Our Prescription Benefit Is “Creditable”?

A prescription drug plan is considered "creditable" if the prescription drug benefits are expected to pay as much as or more than standard Medicare Part D prescription drug coverage. If a plan will not pay out as much as Medicare prescription drug plans pay, it is considered "non-creditable".

If you are a Vita Benefits Group client, you can confirm the creditability of your own plan by referring to your ERISA Welfare Plan Summary Plan Description (SPD).

Employer Action Item

The ERISA SPD that Vita provides our clients has been designed to incorporate all of the necessary disclosure language for the Medicare Part D Creditability requirement.  If you have distributed this SPD to your employees in 2018 (or since October 15 of last year), you are already in compliance with the annual disclosure requirement.  If you have not already distributed the latest SPD, now would be a good time to do so! Not a Vita client and need some help? Let's chat!

If you prefer to send a separate Medicare Part D creditability notice, you may use the sample documents (model notices) available through the Center for Medicare & Medicaid Services website. There you can find sample documents for plans that are creditable or non-creditable for Medicare Part D purposes.  Please note that the vast majority of group health plans include prescription benefits that are creditable.