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US District Court in Texas Sets Aside Overtime Rule
A rule that was set to dramatically boost the salary threshold for the so-called “white collar” overtime exemptions was just halted by a federal judge on Friday (Nov. 15th) less than two months before the full effective date. According to the court, the U.S. Department of Labor (DOL) exceeded its authority by raising the threshold too high and allowing for automatic adjustments every three years. The judge not only struck down the phase-two increase to $59K set to take effect on January 1, 2025 but also knocked down the first boost that took the salary floor to $44K in July and the automatic three-year adjustments – setting the threshold back to $684 per week. While it is expected that the DOL will appeal the ruling, many believe it’s not likely to gain any traction the incoming Trump administration. It’s also possible that an appeals court could step in and quickly reverse Judge Jordan’s ruling before President Trump takes office, but only time will tell.
In simplest terms- yes.
The Gag Clause Prohibition Clause Attestation (GCPCA) submission must be made annually. The GCPCA attests to a health plan’s (or insurer’s) compliance with the prohibition against “gag clauses” in any agreements with providers, provider networks, or entities offering provider network access. (A gag clause is any contractual term directly or indirectly restricting the plan or insurer from disclosing specified data and information, such as cost or quality of care data.) A group health plan with more than one benefit package may submit a single attestation even if some coverage types are insured and others are self-insured. For employers that sponsor multiple group health plans, a separate attestation is required for each plan.
An attestation must be made by December 31 each calendar year. Submissions are made through CMS’s Health Insurance Oversight System (HIOS) and are accepted throughout the year. After the initial attestation that was due Dec 31, 2023, each subsequent attestation covers the period from the date of the prior attestation through the date of the subsequent attestation. For example, if a plan submitted its first GCPCA on November 30, 2023, and submits its second GCPCA on November 15, 2024, the second GCPCA’s “attestation period” would be December 1, 2023, to November 15, 2024, and the “attestation year” would be 2024.
You should make sure that the attestation is filed annually (and of course that the plan complies with the underlying prohibition), either by confirming if your medical carrier is filing on your behalf or if you (the employer) will need to file.
The IRS has announced the 2025 contribution limits for items like flexible spending accounts (FSA). Here’s a look at some of the items changing:
The IRS announced that the affordability percentage for the 2025 calendar year will increase to 9.02% (up from 8.39% which is the rate for the 2024 calendar year).
Under the Affordable Care Act’s employer mandate, an applicable large employer is required to offer at least one health plan that provides affordable, minimum value coverage to its full-time employees (and minimum essential coverage to their dependents) or pay a penalty. For this purpose, “affordable” means the premium for self-only coverage cannot be greater than a specified percentage of the employee’s household income. Based on this recent guidance, that percentage will be 9.02% for the 2025 calendar year.
Employers with non-calendar year plans will still have to use the affordability percentage for 2024 until the start of their 2025 plan year.
Employers need to remember the old “family glitch” was removed starting in 2023. This rule previously prohibited family members of the employee from being eligible for subsidies when the employee was offered affordable, minimum value medical coverage. The removal of the family glitch did not carry new penalty exposure for employers, but it did open the door to subsidy eligibility for family members when the employee’s offer of family coverage is not affordable based on household income. The increase in the affordability percentage for 2025 may lead to some family members who were eligible for subsidies in 2024 no longer being eligible in 2025.
Prior to each year’s Medicare Part D annual enrollment period, plan sponsors that offer prescription drug coverage must provide notices of creditable or noncreditable coverage to Medicare-eligible individuals.
The required notices may be provided in annual enrollment materials, separate mailings or electronically. Whether plan sponsors use the federal Centers for Medicare & Medicaid Services (CMS) model notices or other notices that meet prescribed standards, they must provide the required disclosures no later than Oct. 15, 2024.
Group health plan sponsors that provide prescription drug coverage to Medicare Part D-eligible individuals must also disclose annually to the CMS (within 60 days following their plan renewal) whether the coverage is creditable or noncreditable. The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees.
Background
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to disclose annually to individuals eligible for Medicare Part D whether the plan’s coverage is “creditable” or “noncreditable.” Prescription drug coverage is creditable when it is at least actuarially equivalent to Medicare’s standard Part D coverage and noncreditable when it does not provide, on average, as much coverage as Medicare’s standard Part D plan. The CMS has provided a Creditable Coverage Simplified Determination method that plan sponsors can use to determine if a plan provides creditable coverage.
Disclosure of whether their prescription drug coverage is creditable allows individuals to make informed decisions about whether to remain in their current prescription drug plan or enroll in Medicare Part D during the Part D annual enrollment period. Individuals who do not enroll in Medicare Part D during their initial enrollment period (IEP), and who subsequently go at least 63 consecutive days without creditable coverage (e.g., they dropped their creditable coverage or have non-creditable coverage) generally will pay higher premiums if they enroll in a Medicare drug plan at a later date.
Who Gets the Notices?
Notices must be provided to all Part D eligible individuals who are covered under, or eligible for, the employer’s prescription drug plan—regardless of whether the coverage is primary or secondary to Medicare Part D. “Part D eligible individuals” are generally age 65 and older or under age 65 and disabled, and include active employees and their dependents, COBRA participants and their dependents, and retirees and their dependents.
Because the notices advise plan participants whether their prescription drug coverage is creditable or noncreditable, no notice is required when prescription drug coverage is not offered.
Also, employers that provide prescription drug coverage through a Medicare Part D Employer Group Waiver Plan (EGWP) are not required to provide the creditable coverage notice to individuals who are eligible for the EGWP.
Notice Requirements
The Medicare Part D annual enrollment period runs from Oct. 15 to Dec. 7. Each year, before the enrollment period begins (i.e., by Oct. 14), plan sponsors must notify Part D eligible individuals whether their prescription drug coverage is creditable or non-creditable. The Oct. 14 deadline applies to insured and self-funded plans, regardless of plan size, employer size or grandfathered status
Part D eligible individuals must be given notices of the creditable or non-creditable status of their prescription drug coverage:
According to CMS, the requirement to provide the notice prior to an individual’s IEP will also be satisfied as long as the notice is provided to all plan participants each year before the beginning of the Medicare Part D annual enrollment period.
Model notices that can be used to satisfy creditable/non-creditable coverage disclosure requirements are available in both English and Spanish on the CMS website. Plan sponsors that choose not to use the model disclosure notices must provide notices that meet prescribed content standards.
Notices of creditable/non-creditable coverage may be included in annual enrollment materials, sent in separate mailings or delivered electronically. Plan sponsors may provide electronic notice to plan participants who have regular work-related computer access to the sponsor’s electronic information system. However, plan sponsors that use this disclosure method must inform participants that they are responsible for providing notices to any Medicare-eligible dependents covered under the group health plan.
Electronic notice may also be provided to employees who do not have regular work-related computer access to the plan sponsor’s electronic information system and to retirees or COBRA qualified beneficiaries, but only with a valid email address and their prior consent. Before individuals can effectively consent, they must be informed of the right to receive a paper copy, how to withdraw consent, how to update address information, and any hardware/software requirements to access and save the disclosure. In addition to emailing the notice to the individual, the sponsor must also post the notice (if not personalized) on its website.
In Closing
Plan sponsors that offer prescription drug coverage will have to determine whether their drug plan’s coverage satisfies CMS’s creditable coverage standard and provide appropriate creditable/noncreditable coverage disclosures to Medicare-eligible individuals no later than Oct. 15, 2024.
With a presidential election coming up in three months, politics are a hot topic of conversation nearly everywhere you go—including the workplace. As a result, many employers are considering whether to issue or adjust policies to address civility among employees, set rules for political discussions, and even clarify dress codes.
One common question: Can employees wear political gear into the office or display other paraphernalia supporting a candidate or political cause?
As long as speech and images are not violating anti-discrimination and anti-harassment laws, political statements and images can legally be permitted in the workplace.
But ultimately, employers are allowed to dictate what’s appropriate and allowed, just as they often regulate work hours or have rules about dress codes.
In the private-sector workplace, employees traditionally do not have First Amendment rights to express their political views through office decorations or apparel.
But in the current climate, the definition of what is considered political has broadened to include many topics for which an employee may indeed have the right of expression in the workplace. For example, if employees are joining together to improve their working conditions—such as protesting gender, race, or religious discrimination in the workplace—then wearing so-called political apparel could be protected speech under the National Labor Relations Act. And the act provides such protection even in workplaces where employees are not currently represented by a labor union, he noted.
The difficulty for an employer in defining what is meant by political speech means that the employer risks being overbroad, which creates a bigger problem than was present with the original decoration or clothing. Instead, employers are well served to remind all employees of existing anti-harassment or respectful-workplace policies and take action if there is a complaint about unwelcome, offensive, or intimidating behavior by an employee toward a co-worker.
For the most part, when it comes to the upcoming presidential election, employers will most likely want to avoid allowing workers to wear or decorate with obvious political paraphernalia—such as a Donald Trump shirt or a Kamala Harris sign in one’s office.
Even an employer that champions engagement and self-expression should consider whether it should be allowed. Simple parameters such as prohibiting names and images of politicians, names and logos of political parties, and identifiable campaign slogans are a good place to start as such prohibitions can help minimize the emotional heat that is often an unintentional consequence of political expression.
In general, most employees prefer that politics not play a big role in the workplace. Recent data from jobs site Monster found that 68% of workers are not comfortable discussing politics at work. While 64% of workers say they respect their co-workers’ rights to their political beliefs without passing any judgment, 33% say they have judged co-workers negatively based on their political beliefs.
Richard Birke, chief architect of JAMS Pathways, a conflict resolution firm that works with employers, said permitting employees to wear clothing with overt political statements may be offensive to colleagues or stir up arguments or incivility in the workplace.
“At our company, for example, we want to help you solve your problem; we don’t want to incidentally get in a fight with you on the way in by wearing a T-shirt advocating for a particular candidate,” he said.
Leading up to the election—and even afterward—employers should communicate clear policies around political gear and paraphernalia to employees and enforce those policies, experts said.
The policies should apply to all workers, including remote workers who may appear on video calls. If you’re on a Zoom call for work, you’re at work.
As a best practice, if a private-sector employer issues a policy about restricting political decorations or apparel, the employer should ensure it applies the same restriction to all nonwork-related decorations or apparel.
The employer has to be diligent about enforcing the same restriction when it comes to charitable causes, community events, religious organizations, and even favorite sports teams or entertainers.
A Texas federal court just struck down the FTC’s proposed ban on non-competition agreements on a nationwide basis mere weeks before it was set to take effect, meaning employers across the country can breathe a sigh of relief and continue to maintain non-competes as their state laws allow. While there is a slim chance the rule could be resurrected by a federal appeals court in the future, what’s for certain after the ruling on 8/20/24 is that you will not have to comply with the rule by September 4 as originally scheduled. What do you need to know about this significant development and what should you do now that the landscape has shifted once again?
What Happened?
A Texas employer, the U.S. Chamber of Commerce, and a handful of other business organizations sued the Federal Trade Commission (FTC) in federal court seeking an order blocking the non-compete rule from taking effect on September 4 as scheduled.
Judge Ada Brown from the Northern District of Texas initially agreed that the rule was an invalid exercise of the agency’s power on July 3, but only blocked the rule as it applied to the parties in the case and left open the question of whether the FTC could proceed with the ban. She later promised to issue a final ruling on the matter by August 30.
Judge Deploys 2 Main Arguments to Kill Non-Compete Ban
The judge took a two-pronged attack to the FTC’s non-compete ban. Her first line of attack was ruling that the agency didn’t have the power to issue the rule because Congress only authorized it to issue procedural rules to address unfair methods of competition, not substantive rules. “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” she said.
Her second rebuke was concluding that the rule itself was “arbitrary and capricious” for the following reasons:
Rule Blocked for All Employers Across the Country
Most importantly for employers, Judge Brown concluded that her order setting aside the non-compete ban should apply to all employers across the country. As noted above, she originally just blocked the rule from taking effect for those parties that had filed suit in the Texas case. In fact, in a separate decision just a week or so after her July 3 limited ruling, she again declined to extend the preliminary injunction nationwide – leaving employers in a state of uncertainty as the days dwindled down towards the effective date.
Following Judge Brown’s ruling, a Pennsylvania court in a separate lawsuit declined a motion to block the rule, and a Florida court granted a limited injunction similar to the Texas court’s original order, leaving employers in doubt about whether the rule might be vacated prior to its September 4 effective date.
But this updated ruling put an end to all of that concern. Brown noted that federal law required her to “hold unlawful” and “set aside” the non-compete ban with nationwide effect. All parties in all judicial districts across the country are equally covered by the ruling, she said.
Post-Chevron Shockwaves
The decision is one of the first prominent cases to demonstrate the evolving power of courts to overrule agency actions now the Supreme Court has struck down the Chevron doctrine. For those unfamiliar, SCOTUS issued the groundbreaking Loper Bright ruling on June 28 tossing out a decades-old standard that had required courts to give substantial deference to agencies like the FTC.
The new standard? Courts should instead exercise their independent judgment when deciding whether an agency’s actions are proper exercises of power – essentially enabling courts to strike down agency rules more easily.
And this decision is a perfect example of how this new standard will be deployed by courts to significant effect. The first sentence of Judge Brown’s analysis section quotes the Supreme Court’s Loper Bright case, in fact, noting that the Administrative Procedure Act should serve “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”
What’s Next?
The FTC could try to breathe new life into the rule by filing an appeal of this decision in the coming weeks. It could also seek an emergency order from the appellate court that would cause the rule to take effect as scheduled.
However, any appeal would be heard by the notoriously business-friendly 5th Circuit Court of Appeals, where the odds of the rule being resurrected are slim. And the next step after that would be a potential visit to the Supreme Court, which has taken direct aim at the regulatory state in recent years and is likely a hostile environment for any attempt by the FTC to wield such power.
What Should You Do?
Don’t Forget! An “old faithful” reporting requirement deadline is right around the corner: the Patient-Centered Outcomes Research Institute (PCORI) filing and fee. The Affordable Care Act imposes this annual per-enrollee fee on insurers and sponsors of self-funded medical plans to fund research into the comparative effectiveness of various medical treatment options.
The due date for the filing and payment of PCORI fee is July 31 for required policy and plan years that ended during the 2023 calendar year. For plan years that ended Jan. 1, 2023 – Sept. 30, 2023, the fee is $3.00 per covered life. For plan years that ended Oct. 1, 2023 – Dec. 31, 2023 (including calendar year plans that ended Dec. 31, 2023), the fee is calculated at $3.22 per covered life.
Insurers report on and pay the fee for fully insured group medical plans. For self-funded plans, the employer or plan sponsor submits the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee (for example, by the self-insured plan sponsor’s third-party claim payor) is not permitted.
An employer that sponsors a self-insured health reimbursement arrangement (HRA) along with a fully insured medical plan must pay PCORI fees based on the number of employees (dependents are not included in this count) participating in the HRA, while the insurer pays the PCORI fee on the individuals (including dependents) covered under the insured plan. Where an employer maintains an HRA along with a self-funded medical plan and both have the same plan year, the employer pays a single PCORI fee based on the number of covered lives in the self-funded medical plan and the HRA is disregarded.
The IRS collects the fee from the insurer or, in the case of self-funded plans, the plan sponsor in the same way many other excise taxes are collected. Although the PCORI fee is paid annually, it is reported (and paid) with the Form 720 filing for the second calendar quarter (the quarter ending June 30). Again, the filing and payment is due by July 31 of the year following the last day of the plan year to which the payment relates (i.e. filling for the 2023 PCORI fee is due by July 31, 2024)
IRS regulations provide three options for determining the average number of covered lives: actual count, snapshot and Form 5500 method.
Actual count: The average daily number of covered lives during the plan year. The plan sponsor takes the sum of covered lives on each day of the plan year and divides the number by the days in the plan year.
Snapshot: The sum of the number of covered lives on a single day (or multiple days, at the plan sponsor’s election) within each quarter of the plan year, divided by the number of snapshot days for the year. Here, the sponsor may calculate the actual number of covered lives, or it may take the sum of (i) individuals with self-only coverage, and (ii) the number of enrollees with coverage other than self-only (employee-plus one, employee-plus family, etc.), and multiply by 2.35. Further, final rules allow the dates used in the second, third and fourth calendar quarters to fall within three days of the date used for the first quarter (in order to account for weekends and holidays). The 30th and 31st days of the month are both treated as the last day of the month when determining the corresponding snapshot day in a month that has fewer than 31 days.
Form 5500: If the plan offers family coverage, the sponsor simply reports and pays the fee on the sum of the participants as of the first and last days of the year (recall that dependents are not reflected in the participant count on the Form 5500). There is no averaging. In short, the sponsor is multiplying its participant count by two, to roughly account for covered dependents.
The U.S. Department of Labor says the PCORI fee cannot be paid from ERISA plan assets, except in the case of union-affiliated multiemployer plans. In other words, the PCORI fee must be paid by the plan sponsor; it cannot be paid in whole or part by participant contributions or from a trust holding ERISA plan assets. The PCORI expense should not be included in the plan’s cost when computing the plan’s COBRA premium. The IRS has indicated the fee is, however, a tax-deductible business expense for sponsors of self-funded plans.
Although the DOL’s position relates to ERISA plans, please note the PCORI fee applies to non-ERISA plans as well and to plans to which the ACA’s market reform rules don’t apply, like retiree-only plans.
The filing and remittance process to the IRS is straightforward and unchanged from last year. On Page 2 of Form 720, under Part II, the employer designates the average number of covered lives under its “applicable self-insured plan.” As described above, the number of covered lives is multiplied by the applicable per-covered-life rate (depending on when in 2023 the plan year ended) to determine the total fee owed to the IRS.
The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.”
Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’ software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with IRS.
An employer that overlooks reporting and payment of the PCORI fee by its due date should immediately, upon realizing the oversight, file Form 720 and pay the fee (or file a corrected Form 720 to report and pay the fee, if the employer timely filed the form for other reasons but neglected to report and pay the PCORI fee). Remember to use the Form 720 for the appropriate tax year to ensure that the appropriate fee per covered life is noted.
The IRS might levy interest and penalties for a late filing and payment, but it has the authority to waive penalties for good cause. The IRS’s penalties for failure to file or pay are described here.
The IRS has specifically audited employers for PCORI fee payment and filing obligations. Be sure, if you are filing with respect to a self-funded program, to retain documentation establishing how you determined the amount payable and how you calculated the participant count for the applicable plan year.
Depression is no longer one of the top mental health issues in the workplace. However, the condition is surging among women and young workers, according to new analysis, as 38% of depression cases in the past two years were found in workers aged 20-29, while 60% of cases were found in women across all age groups.
That’s according to mental health services provider ComPsych, which analyzed a sampling of more than 80,000 depression cases from its U.S. 2022 and 2023 book of business.
Depression is now the fifth most common presenting issue in the American workforce, while anxiety has skyrocketed to the No. 1 issue nationally, according to ComPsych.
“On the one hand, it’s encouraging to see that depression has decreased in prevalence across the American workforce,” said Richard Chaifetz, founder, CEO and chairman of ComPsych. “However, our data shows that’s not the case for everyone.”
The data is the latest in a set of studies that look at how mental health issues are afflicting employees and serve as a call to action for employers. Industry experts, including Chaifetz, contend that organizations would be well served to take a hard look at their mental health benefits and resources—making sure they are robust and well utilized by employees. And women and younger employees should be an important target for extra resources.
“As business leaders look to support their workers, I’d urge them to invest strategically in the groups who are struggling the most with this issue, emphasizing resources for younger age groups and in particular, women,” Chaifetz said.
Below are some additional stories from SHRM Online about the state of mental health in the workplace.
Nearly 1 in 3 employees say their job frequently causes them stress, according to new research from SHRM.
The data, released during Mental Health Awareness Month in May, shows that 30% of 1,405 surveyed employees say their job often makes them feel stressed, 26% often feel “overwhelmed” by their job, and 22% often feel disengaged from their job.
“Negative emotions are exceptionally more salient than positive emotions, and entirely more difficult for employees to let go of,” said Daroon Jalil, a senior researcher at SHRM who led the mental health research initiative. “When employees are experiencing these negative emotions, and experiencing them often, which is the real concern, it can lead to long-term negative consequences for the employee and the organization.”
The research also found that more than 1 in 3 employees (35%) said their job has a negative effect on their mental health, although nearly as many (34%) said their job has a positive effect on their mental health.
ComPsych’s data on depression comes shortly after it released data on anxiety in the workplace.
Its recent analysis of more than 300,000 U.S. cases found that nearly a quarter of people (24 percent) who reached out to ComPsych for mental health assistance in 2023 did so to get help with anxiety. That makes anxiety the No. 1 presenting issue reported by U.S. workers, topping depression, stress, relationship issues, family issues, addiction and grief, ComPsych said.
Anxiety has risen dramatically over the years, ComPsych said. In 2017, for instance, anxiety didn’t rank in the top five presenting issues for Americans.
ComPsych also recently reported that mental health-related leaves of absence are surging in the workplace, up 33 percent in 2023 over 2022.
Employee leaves of absence for mental health issues are up a whopping 300 percent from 2017 to 2023. A leave of absence, ComPsych said, can vary from a few days to weeks.
Female employees and younger workers, in particular, are driving the surge. In 2023, 69 percent of mental health-related leaves of absence were taken by women. Of these, 33 percent were taken by Millennial women, followed by Generation X women, who accounted for 30 percent of mental health-related leaves.
Although employers are making progress in mental health efforts, with more employers and employees seeking out mental health benefits, there is still much work to be done, said Colleen Marshall, chief clinical officer at Two Chairs in San Francisco.
“To have truly integrated mental health in organizations, there would be specific efforts to ensure employee wellness and mental health is a priority,” she said. “This looks different for different people and different industries. It usually includes making sure the job itself is reasonable and manageable and that employees are able to manage their mental health the same way they can manage their physical health.”
Evaluating mental health offerings, offering onsite or easy-to-access mental health professionals, giving employees paid time off to attend therapy appointments, organizing mindfulness groups in the workplace and more are some measures that can help lower barriers to mental health care, Marshall said.
Leadership should also communicate frequently and consistently that employee wellness and mental health are important to the organization, Marshall said.
The U.S. Department of Labor has increased the Fair Labor Standards Act’s (FLSA’s) annual salary-level threshold from $35,568 to $58,656 as of Jan. 1, 2025, for white-collar exemptions to overtime requirements. Effective July 1, 2024, the salary threshold will increase to $43,888. Employees making less than the salary-level threshold, such as hourly workers, can be eligible for overtime if they work enough hours.
Starting July 1, 2027, the department also will automatically increase the overtime threshold every three years..
To be exempt from overtime under the FLSA’s “white collar” executive, administrative and professional exemptions—the so-called white-collar exemptions—employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less or do not meet the tests, they must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.
Takeaway for employers: Employers now must decide whether to raise the salary of those employees who earn above the overtime threshold under the old standard but below it under the new standard so they remain exempt. Employers that choose not to raise these employees’ salaries should be prepared to pay overtime to these employees when they work more than 40 hours in a workweek. Schedules for those employees whose salaries are not raised above the new threshold may need adjusting to limit overtime costs. Careful communication should be rolled out to explain why employees formerly categorized as exempt are now nonexempt.