Does your benefits broker approach benefits as one-size-fits-all?
Today's labor pool is comprised of 5 distinct generations, each presenting unique challenges, and perspectives for employers that have not existed in the past for a singular workforce. Because each group possesses a very different approach to employment and employee benefits, having a fresh approach to your benefits strategy will not only keep you in the game within your industry but help you win high-performing talent over your competitors.
The 5 Generations Working Alongside Each Other in Today’s Workforce:
Centennials or Generation Z
|Smallest percentage of workforce||Third largest percentage of workforce||Second largest percentage of workforce||Largest percentage of workforce||Second smallest percentage of workforce|
|Experienced; Dedicated; Loyal||Service and team-oriented; Dedicated||Adaptable; Independent; Creative||Optimistic; Multi-task; Tech savvy||Entrepreneurial; Cautious; Tech savvy|
Based on their generation, workers often have particular characteristics and needs that employer should be mindful of when organizing their employees plan design and administration. Here are the top 5 benefits concerns to look out for in your multigenerational workforce:
Health Reimbursement Arrangements (HRAs)
Whether reviewing the results of an aging employee population and their spouses or taking into consideration younger employees who place less value on employer-provided health coverage, employers often find themselves in a position of seeking avenues to lower their healthcare spend. One solution that arises is to limit or forego a group health plan in favor of reimbursing employees, their spouses, or retirees for health coverage obtained through another source. The Affordable Care Act (ACA), however, prohibits an employer from reimbursing individual premiums, but exceptions are made in limited situations:
- Spousal HRA: The employee must be covered on the spouse’s group health plan for the employer to reimburse the cost of being covered by the spouse’s plan.
- Medicare HRA: For small employers for which the employer plays secondary to Medicare, the employer can reimburse all or part of the cost of Medicare-related coverage.
- Retiree HRA: The employer can reimburse all or part of the individual or Medicare-related costs for former employees eligible as retirees.
- Qualified Small Employer HRA: If the employer is not an applicable large employer (ALE) or ALE member and does not offer a health plan, it can reimburse individual premiums up to a limit.
To round out a total rewards strategy, employers may seek to implement certain value-add benefits intended to target specific aspects of a multigenerational workforce, such as telemedicine, employee assistance programs (EAP), wellness programs, and various supplemental or voluntary benefits. While these benefits may seem cost-effective and straightforward, it is important to remember that these plans often come with not-so-simple compliance obligations that are frequently overlooked. For example, many of these plans have to comply with ERISA, HIPAA, the ACA, COBRA, and IRS regulations for Health Savings Accounts (HSAs).
Mid-Year Election Changes
With each generation comes certain everyday life changes, such as marriage, divorce, the birth of a child, changes in employment, changes in dependent custody, and the opportunity to transition to other coverage such as Medicare or a spouse’s health plan. When an employer receives a request for a mid-year election change, it is essential to confirm that:
- the event is covered under the employer’s Section 125 plan document;
- the employee requests the change within the required notice period;
- the change requested is consistent with the event that occurred; and
- the employee provides documentation supporting the requested change.
The Medicare Secondary Payer rules outline certain protections for Medicare-eligible employees, the most stringent of which is the prohibition of financial and any other incentives for Medicare-eligible employees to forego the employer’s group health plan in favor of Medicare. If the employer is the primary payer, it should be mindful of common errors under the Medicare Secondary Payer rules, such as offering benefits or perks in exchange for Medicare-eligible employees foregoing the group health plan or offering and paying for a Medicare Supplement Plan.
The most common benefits compliance issue to arise with a multigenerational workforce occurs when an employer seeks to vary its benefits for different groups of employees. Most notably, attempts to reward seniority may create nondiscrimination issues despite the employees being distinct groups of employees that are not similarly situated under HIPAA. Compliance with the HIPAA nondiscrimination rules does not guarantee compliance with other nondiscrimination requirements under Section 105(h) for self-insured plans and Section 125 for cafeteria plans.
Under the Section 105(h) and Section 125 nondiscrimination rules, an employer is prohibited from discriminating in favor of highly compensated individuals. Accordingly, when designing a plan with different eligibility provisions, benefits restrictions, or costs, it is critical to assess whether to plan design based on class differentiations complies with all benefits nondiscrimination rules.
Being aware of the unique generational differences, characteristics and needs of your employees is critical when creating a benefits plan. Make sure you’re aware of the challenges and compliance concerns when designing your plan to avoid headaches while ensuring your benefits are as valuable and applicable to your employees as possible. Our team of compliance experts is hosting a webinar to explain more about tailoring your plan design to suit the needs of your multigenerational workforce.