The IRS recently issued Revenue Procedure 2023-29, which significantly decreases the affordability threshold for ACA employer mandate purposes to 8.39% for plan years beginning in 2024. The new 8.39% level marks by far the lowest affordability percentage to date.
The affordability percentages apply for plan years beginning in the listed year. A calendar plan year will therefore have the 8.39% affordability threshold for the plan year beginning January 1, 2024.
The ACA employer mandate rules apply to employers that are “Applicable Large Employers,” or “ALEs.” In general, an employer is an ALE if it (along with any members in its controlled group) employed an average of at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year.
There are two potential ACA employer mandate penalties that can impact ALEs:
a) IRC §4980H(a)—The “A Penalty”
The first is the §4980H(a) penalty—frequently referred to as the “A Penalty” or the “Sledge Hammer Penalty.” This penalty applies where the ALE fails to offer minimum essential coverage to at least 95% of its full-time employees in any given calendar month.
The 2024 A Penalty is $2,970 annualized multiplied by all full-time employees (reduced by the first 30). It is triggered by at least one full-time employee who was not offered minimum essential coverage enrolling in subsidized coverage on the Exchange.
The “A Penalty” liability is focused on whether the employer offered a major medical plan to a sufficient percentage of full-time employees—not whether that offer was affordable (or provided minimum value).
b) IRC §4980H(b)—The “B Penalty”
The second is the §4980H(b) penalty—frequently referred to as the “B Penalty or the “Tack Hammer Penalty.” This penalty applies where the ALE is not subject to the A Penalty (i.e., the ALE offers coverage to at least 95% of full-time employees).
The B Penalty applies for each full-time employee who was:
Only those full-time employees who enroll in subsidized coverage on the Exchange will trigger the B Penalty. Unlike the A Penalty, the B Penalty is not multiplied by all full-time employees.
In other words, an ALE who offers minimum essential coverage to a full-time employee will be subject to the B Penalty if:
The 2024 B Penalty is $4,460 annualized per full-time employee receiving subsidized coverage on the Exchange.
Many employer handbooks and policies likely should be reviewed and revised following a landmark Aug. 2 ruling by the National Labor Relations Board (NLRB), Stericycle.
“This ruling, in a word, is huge,” said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis. “This decision may invalidate countless workplace rules maintained by private-sector employers—whether they are unionized or not. It applies to all companies covered by the National Labor Relations Act [NLRA], which is the vast majority of employers in America.”
The NLRA does not apply to federal or state governmental units, railroads or airlines.
Employers need to create documentary evidence of the justification for their work rules before an unfair labor practice charge is filed, recommended Harry Johnson III, an attorney with Morgan Lewis in Los Angeles and former NLRB member.
In Stericycle, an administrative law judge found that the employer violated the NLRA by maintaining certain rules for its employees that addressed personal conduct, conflicts of interest and confidentiality of harassment complaints. The NLRB announced a new standard for whether work rules violate the NLRA and sent the case back to the judge to consider the ruling in light of the new standard.
Under that standard, if an employee could reasonably interpret the work rule to have a coercive meaning, the NLRB general counsel would have met her burden to prove that the rule has a reasonable tendency to chill employees from exercising their NLRA rights. The general counsel, currently Jennifer Abruzzo, is independent from the board and responsible for the investigation and prosecution of unfair labor practice cases under the NLRA.
The employer’s intent in maintaining a work rule is immaterial, the NLRB wrote. The board instead clarified it will interpret the rule from the perspective of an employee who is subject to the policy, economically dependent on the employer and contemplates engaging in protected concerted activity.
Concerted activity includes talking with one or more co-workers about wages and benefits or other working conditions, circulating a petition asking for better hours, participating in a concerted refusal to work in unsafe conditions, openly talking about pay and benefits, and joining with co-workers to talk directly to the employer, an agency or the media about problems in the workplace, according to the NLRB.
It’s hard to imagine the general counsel won’t be able to prove that a rule has a reasonable tendency to chill employees from exercising their NLRA rights, said Phil Wilson, president and general counsel with the Labor Relations Institute, a labor and employee relations consulting firm in Broken Arrow, Okla.
If the general counsel provides such proof, the rule is presumptively unlawful. However, the employer may counter the presumption by proving that the rule advances a legitimate and substantial business interest and that the employer can’t advance that interest with a more narrowly tailored rule. If the employer proves this, the work rule will be found lawful.
However, “with little actual guidance about the meaning of the phrases above, needless to say, it is an incredibly uphill battle if an employer finds itself trying to rebut the presumption,” said Jason Reisman, an attorney with Blank Rome in Philadelphia.
In addition, the Stericycle opinion discarded previous NLRB decisions holding that certain types of policies were inherently lawful, regardless of the precise language in which the policy is expressed, in favor of evaluation of each challenged policy on a case-by-case basis, said Peter Spanos, an attorney with Taylor English Duma in Atlanta. Policies that are no longer deemed by the board always lawful to maintain are investigative-confidentiality rules, nondisparagement rules and rules prohibiting outside employment.
“Employee handbooks and policies that were adopted or revised based on prior guidance from the NLRB may now be subject to challenge,” he said.
The decision probably will be appealed. The appellate process can take many months or even years, Pryzbylski added. “In the meantime, the board will be enforcing this new standard, so employers face the risk of having their policies invalidated if they do not revisit them to ensure they are drafted in a compliant manner,” he said. “To the extent they are found to have unlawful rules, it could result in backpay awards in the event an employee is terminated pursuant to such a rule, have negative effects on a union election outcome, as well as other penalties.”
Plus, in most cases, the NLRB does not follow a federal appeals court ruling outside of that court’s jurisdiction until the Supreme Court weighs in, if it does. “So, that may favor companies taking a fresh look at their policies sooner rather than later,” Pryzbylski said.
Examples of policies that likely need to be reviewed and rewritten to be aligned with the new board standard, according to Spanos, include work rules:
All HR professionals should work with their labor counsel to audit current employment policies for compliance with the new standard and to keep up-to-date on board decisions that will apply the Stericycle standard in coming months.
The bottom line is that many policies will be under new and intense scrutiny by the NLRB, and employers should be aware of the new standard and review and update their policies accordingly.
Whether your organization has deployed a generative AI tool for your employees or hasn’t (yet) hopped on the bandwagon, the time is now for you to create a workplace policy governing the use of the technology. Many organizations are exploring ways their workforces can harness the revolutionary advances in productivity, efficiency, and creativity that generative AI (GenAI) products like ChatGPT, Google’s Bard, or Microsoft’s Bing can bring. And, even if you aren’t doing the same, your employees almost certainly are. But how can you do so in a responsible way? A first step is developing a workplace GenAI policy. Read on for the 10 things you should include.
First Things First: What is GenAI?
Recent advances in GenAI, kicked off most prolifically by the release of ChatGPT and soon thereafter joined by Bard and the reformulated Bing, have captured the attention of a broad audience. Almost immediately, employees and employers alike began thinking about the ways the technology can be used in the workplace, seemingly limited only by our imaginations. How is this different, however, than other forms of AI which have been around for years?
You’ve probably been living and working with some form of AI for some time now. Does your company have any sort of chatbot providing answers to simple questions about where to find a resource? No doubt you have an auto-complete feature when you type into your email platform. Those are all examples of artificial intelligence – just in rudimentary form.
Unlike this prior technology, GenAI is able to generate original human-like output and expressions in addition to describing or interpreting existing information. In other words, it appears to “think” and respond like a human. However, GenAI is limited by the data upon which it was trained, and will not have the judgment, strategic thinking, or contextual knowledge that a human does. These and other technological limitations and risks are why having a sound GenAI policy is so important.
The 10 Components Your GenAI Policy Should Include
While each company should customize a GenAI policy to suit its own needs and priorities, there are 10 topics to consider at a bare minimum.
What’s Next?
Once you publish your GenAI policy, your work is not over – it’s just beginning. Besides the all-important work of training your workforce on the policy parameters and ensuring continued and consistent enforcement, you should use the creation of a policy as the right time to establish a framework for GenAI governance and oversight.
Please let us know if you would like a copy of a complimentary GenAI policy provided courtesy of Fisher Phillips LLP.
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 2022 calendar year. For plan years that ended Jan. 1, 2022 – Sept. 30, 2022, the fee is $2.79 per covered life. For plan years that ended Oct. 1, 2022 – Dec. 31, 2022 (including calendar year plans that ended Dec. 31, 2022), the fee is calculated at $3.00 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 2022 PCORI fee is due by July 31, 2023)
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 2021 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.
Employers using or thinking about using artificial intelligence (AI) to aid with workplace tasks received another reminder from the federal government that their actions will be closely scrutinized by the EEOC for possible employment discrimination violations. The federal agency released a technical assistance document on Thursday warning employers deploying AI to assist with hiring or employment-related actions that it will apply long-standing legal principles to today’s evolving environment in an effort to find possible Title VII violations. What are the five things you need to know about this latest development?
1. EEOC Confirms That Employers’ Use of AI Could Violate Workplace Law
The EEOC started by confirming its crystal-clear position in its technical assistance document: an improper application of AI could violate Title VII, the federal anti-discrimination law, when used for recruitment, hiring, retention, promotion, transfer, performance monitoring, demotion, or dismissal. The EEOC outlined four instances where the use of AI during the hiring process – and one example during an employment relationship – could trigger Title VII violations:
The agency didn’t say that these are the only types of workplace-related AI methods that could come under fire – or that these types of tools are inherently improper or unlawful. It did say, however, that preexisting agency regulations (the Uniform Guidelines on Employee Selection Procedures) that have been around for over four decades can apply to situations where employers use AI-fueled selection procedures in employment settings.
The agency said this is especially true in “disparate impact” situations – where employers may not intend to discriminate against anyone but deploy any sort of facially neutral process that ends up having a statistically significant negative impact on a certain protected class of workers.
2. “Four-Fifths Rule” Can Be Applied to AI Selections
The EEOC pointed out that employers can use the “four-fifths” rule as a general guideline to help determine whether an AI selection process has violated disparate impact standards (and we apologize in advance for the impending use of math). The test checks to see if a selection process is having a disparate impact on a certain group by comparing the selection rate of that group with the most “successful” selection rate. If it’s less than four-fifths of that selection rate, then you might be subject to a disparate impact challenge. If that sounds confusing to you, here is the example provided by the EEOC.
Assume your company is using an algorithm to grade a personality test to determine which applicants make it past a job screening process.
Note, however, that the EEOC said that this kind of analysis is merely a rule of thumb. It’s a rudimentary way to draw an initial inference about the selection processes. If you end up finding problematic numbers, it should prompt you to acquire additional information about the procedure in question, according to the EEOC, and isn’t necessarily indicative of a definitive Title VII violation. Similarly, just because your numbers clear the four-fifths hurdle doesn’t mean that the particular selection procedure is definitely lawful under Title VII. It can still be challenged by the agency or a plaintiff in a charge of discrimination.
3. EEOC Encourages Proactive Self-Audits
In a statement accompanying the release of the technical assistance document, EEOC Chair Charlotte Burrows said that employers should test all employment-related AI tools early and often to make sure they aren’t causing legal harm. This doesn’t mean just using the four-fifths rule, but also using a thorough auditing process involving a variety of potential examination methods on all AI functions. “I encourage employers to conduct an ongoing self-analysis to determine whether they are using technology in a way that could result in discrimination,” she said.
But not mentioned by the EEOC: a reminder that you should approach any self-audit with the help of legal counsel. Not only can experienced legal counsel help guide you about the best methodologies to use and assist in interpreting the results of any audit, but using counsel can help cloak your actions under attorney-client privilege, potentially shielding certain results from discovery. This can be especially beneficial if you identify changes that need to be made to improve your process to minimize any unintentional impacts.
4. You’re On the Hook For Problems Caused by Your AI Vendors
The agency also noted quite clearly that you can’t duck your responsibilities by using a third party to deploy AI methods and then blaming them for any resulting discriminatory results. It said that you may still be responsible if the AI procedure discriminates on a basis prohibited by Title VII even if the decision-making tool was developed by an outside vendor.
“In addition,” said the EEOC, “employers may be held responsible for the actions of their agents, which may include entities such as software vendors, if the employer has given them authority to act on the employer’s behalf.” This may include situations where you rely on the results of a selection procedure that an agent administers on your behalf.
The EEOC recommends that you may want to specifically ask any vendor you are considering to develop or administer an algorithmic decision-making tool whether steps have been taken to evaluate whether that tool might cause an adverse disparate impact. And it also recommends asking the vendor whether it relied on the four-fifths rule of thumb or whether it relied on a standard such as statistical significance that is often used by courts when examining employer actions for potential Title VII violations.
5. EEOC’s Guidance is Part of Bigger Trend
This technical assistance document is part of a bigger trend we’re seeing from federal agencies that are increasingly interested in the ways that AI may lead to employment law violations. Just last month, in fact, EEOC Chair Burrows teamed up with leaders from the Department of Justice, the Federal Trade Commission and the Consumer Financial Protection Bureau to announce that they would be scrutinizing potential employment-related biases that can arise from using AI and algorithms in the workplace.
And within the past year, the EEOC teamed up with the DOJ to release a pair of guidance documents warning that relying on AI to make staffing decisions might unintentionally lead to discriminatory employment practices, including disability bias, followed by the White House releasing its “Blueprint for an AI Bill of Rights” that aims to protect civil rights in the building, deployment, and governance of automated systems.
While none of these guidance documents create new legal standards or can be relied upon with the force of law like a statute or regulation, they do carry weight, may signal where the agencies are focusing their enforcement efforts, and can be cited to by agencies and plaintiffs’ attorneys as best practices that employers should follow. And states have gotten into the action too, with New York City’s law set to take effect in July, and a new bill advancing towards the Governor in California. And for that reason, you should take this guidance seriously and adapt your employment practices as necessary to stay up to speed with the pace of change that is rapidly unfolding before our eyes.
The U.S. Department of Labor Wage and Hour Division (WHD) published Field Assistance Bulletin No. 2023-02 providing guidance to agency officials responsible for enforcement of the “pump at work” provisions of the Fair Labor Standards Act (FLSA) including those recently enacted under the 2022 PUMP Act.
The PUMP Act was adopted along with the Pregnant Workers Fairness Act when President Biden signed the Consolidated Appropriations Act, 2023 in December 2022.
This guidance provides employers a glimpse into how the WHD understands and will enforce the rights now available to most employees under the Fair Labor Standards Act for reasonable break time and a place to express breast milk at work for a year after a child’s birth.
Here are a few highlights from the WHD’s bulletin.
The WHD also provides additional resources for employers on its Pump At Work webpage.
Thanks in part to persistent high inflation, employees will be able to sock away a lot more money in their health savings accounts (HSAs) next year.
Annual health savings account contribution limits for 2024 are increasing in one of the biggest jumps in recent years, the IRS announced May 16: The annual limit on HSA contributions for self-only coverage will be $4,150 in 2023, a 7.8 percent increase from the $3,850 limit in 2023. For family coverage, the HSA contribution limit jumps to $8,300 in 2023, up 7.1 percent from $7,750 in 2023.
Participants 55 and older can still contribute an extra $1,000 to their HSAs.
Meanwhile, for 2024, a high-deductible health plan (HDHP) must have a deductible of at least $1,600 for self-only coverage, up from $1,500 in 2023, or $3,200 for family coverage, up from $3,000, the IRS noted. Annual out-of-pocket expense maximums (deductibles, co-payments and other amounts, but not premiums) cannot exceed $8,050 for self-only coverage in 2024, up from $7,500 in 2023, or $16,100 for family coverage, up from $15,000.
The increases are detailed in IRS Revenue Procedure 2023-23 and take effect in January 2024.
While expected, the increase in 2024 HSA limits is significant for passing certain symbolic financial thresholds. For the first time, including catch-up contributions for those age 55 and older, a couple on family coverage can now contribute more than $10,000, and a single person on self-only coverage can now contribute more than $5,000.
Many industry experts tout health savings accounts as a smart way for employees to save for medical expenses, even in retirement, citing their triple tax benefits: Contributions are made pretax, the money in the accounts grows tax free and withdrawals for qualified medical expenses are tax free. This is very good news to help more Americans understand and use HSAs as a powerful tool in their healthcare spending and long-term savings.
HSA enrollment continues to grow, and more employers also are offering contributions to employees’ accounts. At the end of 2022, Americans held $104 billion in 35.5 million health savings accounts, according to HSA advisory firm Devenir.
Despite the benefits, most holders aren’t taking full advantage of their accounts and are missing out on substantial rewards, according to the Employee Benefit Research Institute. The average account holder has a modest balance, contributes far less than the maximum and does not invest their HSA, recent EBRI data found.