By: Darla Rose, CBC
drose@bankersinsurance.net | (434) 327-1652
Does your business provide different levels of benefits to different groups of employees? If so, be careful the arrangement cannot be viewed as discriminatory. The Affordable Care Act, along with other federal and state regulations, stipulate that businesses cannot discriminate against employees in wages or employee benefits based on age, race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, disability, or genetic information. Employee benefits include sick leave, vacation leave, insurance, access to overtime and overtime pay, and retirement programs. In fact, the Equal Employment Opportunity Commission (EEOC) says that any employment practice that affects individuals based on age is discriminatory unless justified by a “reasonable factor other than age”, and similar rules apply to other protected groups.
Common employment situations we see that can be viewed as discriminatory include:
- Offering better benefits to higher paid employees
- Providing lesser healthcare packages to older employees
- Paying a foreign worker less because you can – national origin discrimination
- Men and women in the same workplace receiving unequal pay for the same or equal position
However, the following practices have been ruled acceptable:
- Full Time and Part Time Employees: A full time employee is anyone working thirty or more hours per week. Offering benefits to full time employees that are not available to part time employees is OK.
- Location: Providing different benefits based upon employee location is acceptable. In fact, this may be required since certain benefits may be available in one state and not another.
- Length of Service: Employers are free to incentivize longevity by providing different benefits based upon length of employment if everyone is treated in the same manner.
How Does Discrimination Get Reported?
A discrimination investigation is typically started when an employee files a complaint with the Department of Labor (DOL). Filing a complaint is easy and, once reported, the DOL has a duty to investigate. Investigations can also be triggered from other federal departments, resulting from employee complaints to OSHA or the EEOC, or financial findings from the IRS. Triggers can be errors in the filing of the form 5500, excessive fees paid to benefit service providers, or even nonstandard investments in the plan. Investigations can lead to lawsuits from one employee or a group.
Recently a small business client requested a review of their insurance program. At this meeting, we learned this client was no longer compliant in their group health participation. They offered health benefits only to their new younger workers, not older ones. They thought they were compliant because some older workers had coverage elsewhere, either through their spouse’s plan or with Medicare. However, even with coverage provided in this manner, their plan did not meet participation requirements. After explaining the situation and rules to the owners, they chose a plan of action and are now compliant.
Navigating Younger & Older Age Groups
Under the ACA, an employer with less than fifty employees may offer reduced health insurance options to allow all workers access to affordable options…if the employer’s cost of providing these reduced benefits is the same for all workers. To do this, two options exist:
- Adding a High Deductible or High Out of Pocket Plan: Such plans cost less, therefore providing a lower cost option for all workers. Again, the employer must contribute the same amount per employee to both plans. Assuming the employee pays a portion of their monthly health insurance bill, an older employee may choose this high deductible plan to keep their contributions down.
- Composite Rates: Composite rating is where the health insurance company looks at all employees as a group and charges based on an average cost per employee. In this way, the business is charged the same rate no matter how old the employee is. This arrangement has benefits, but it means higher premiums for younger employees and lower premiums for older.
Compliance Solutions
And although benefit compliance issues tend to be more prevalent in smaller organizations, large businesses with full human resource departments are not immune. Bankers Insurance offers several layers of compliance protection resources to our clients, many at no cost. We offer compliance education, benefits planning, and implementation tools, helping our clients navigate the challenges of managing their groups. Also available are resources to help clients remain compliant, such as legal briefings, notices, and announcements for new developments. And when the need exceeds even those resources, we provide phone and email support from SESCO Management Consultants, a national HR consulting firm. To ensure seamless transitions and renewals, we offer online onboarding with compliance document tracking, protecting clients if audited by the Department of Labor. Reference Value Added Tools & Services for more detail on these resources.
But despite your company’s best efforts, should a claim for discriminatory employee benefits practices arise, employee benefits liability insurance can provide protection. This coverage is affordable and easy to purchase, so be sure to ask your insurance agent.
Our experience with helping clients navigate employee benefits plans is unparalleled. We are ready to assist with all your employee benefits needs. Not a client of ours? Let us earn your business! Each client is assigned a personal agent in our office, given their email address, and provided a phone number that rings right on their desk.
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