Starting August 1, 2016, the Minnesota minimum wage will increase to $9.50 per hour for large employers (those with gross revenue of $500,000 or more) and $7.75 per hour for small employers. The 90-day training wage (for employees under 20 years of age) and the youth wage (for employees under 18 years of age) will increase to $7.75 an hour. Minnesota employers should start preparing now for minimum wage changes, which will affect their payroll systems and personnel records. They also should remember there are exemptions from Minnesota’s minimum wage laws – including, for example, babysitters, taxicab drivers, nonprofit volunteers, and people providing police or fire protection. Additionally, they should remember that, in Minnesota, paid tips or gratuities do not count toward the minimum wage requirement.
The Affordable Care Act (ACA) may penalize Applicable Large Employers who do not offer their full-time employees (and employees’ dependents) affordable, minimum value health coverage. Some employers have implemented Opt-Out payments, sometimes referred to as Cash-in-Lieu of benefits, which incentivize employees to waive employer health benefits in exchange for a cash payment. The additional cash received by the employee is taxed. While the IRS recently stated that Opt-Out Payment programs are permissible under the ACA, these programs may impact the affordability of employer-sponsored coverage—which could lead to penalties for Applicable Large Employers.
On July 8, 2016, the IRS released proposed regulations that include a new rule (which is not yet effective) requiring employers who offer Opt-Out Payment Programs to do so under an “eligible opt-out arrangement” to avoid impacting the affordability of employer-sponsored coverage. For example, an Applicable Large Employer offers employees coverage which costs the employee $80 per month, for self-only coverage, and offers $350 to any employee that declines coverage for any reason. Under the proposed rules, the IRS will consider this to be an unconditional opt-out arrangement because the employee automatically gets cash for opting out without having to satisfy any additional condition. This is not an eligible opt-out arrangement. An “eligible opt-out arrangement” is one that conditions the opt-out payment on the employee providing reasonable evidence that the employee and any dependents have minimum essential coverage (other than coverage in the individual market). In this example, when the Applicable Large Employer calculates affordability under the proposed rules, the employee contribution toward the health plan will be $430 ($350 + $80), possibly making the coverage unaffordable and exposing the Applicable Large Employer to penalties. Employers should be prepared to review and revise Opt-Out Payment programs when the IRS releases the final rules.
The Cadillac Tax was designed to help ease the rising cost of healthcare and raise revenue by applying a 40% tax on employers who offer premium health insurance plans that exceed specific annual cost limits ($10,200 for self-only coverage and $27,000 for family coverage). The tax will only apply to the cost above the cost limit. The Cadillac Tax was originally supposed to take effect on January 1st, 2018; however, in late 2015, President Obama signed a tax bill pushing back the start of the Cadillac Tax until January 1st, 2020. This delay means the fate of the Cadillac Tax will not be decided until after the November election.
On May 17, 2016, the Equal Employment Opportunity Commission issued a final rule under the Americans with Disabilities Act (ADA) addressing when and how employers may incentivize employees to participate in wellness programs that include medical examinations or disability-related questions. The new rules, which become effective in January 2017, apply to all workplace wellness programs. Wellness programs are programs that promote health and prevent disease. The ADA generally prohibits an employer from obtaining employee medical information, but the final rule allows employers to perform medical examinations or ask health-related questions if the employee agrees to join a voluntary wellness or other health program.
The voluntary program cannot require an overly burdensome time commitment, unreasonably intrusive procedures, be a subterfuge for violating the law, or require significant medical examination costs for employees. Additionally, the program must be “reasonably designed to promote health or prevent disease.” Employers can provide up to a 30% incentive for the total cost of self-only coverage (even though the ACA allows employers to offer incentives based on the cost of whatever health plan the employee enrolls in, including family coverage) to employees who enter voluntary programs that ask health-related questions or require medical examinations. Employers should be aware that, in addition to the ADA, wellness programs must comply with Health Insurance Portability and Accountability Act, Affordable Care Act, and Genetic Information and Nondiscrimination Act rules and regulations.
Employers may have already started receiving notices from the State Health Insurance Marketplace (also referred to at the State Exchange) informing them that an employee received a Premium Tax Credit. These notices state that a particular employee or employees reported not being offered affordable minimum value coverage during 2016. Applicable Large Employers who receive these notices may be subject to penalties if they did not offer affordable, minimum value coverage to all full-time employees and their dependents. However, the State Exchange sends notices to small employers and notices relating to part-time employees and employees in initial measurement periods. As a result, not all notices require action or could trigger a penalty for an employer. Once a notice is received, the employer has 90 days from the date of the notice to appeal if they believe that they have offered appropriate coverage to the employee. Employers need to be prepared to submit documentation substantiating their appeal, when required.