Amongst all the things that 2020 brought to the foreground of our attention, the importance of having a benefits plan that puts employees first is more important than ever. In a recent study, research showed that COVID-19 has had a major impact on how important the majority of employees view their benefits plan. In fact, more than 77% of employees claim that their benefits plan is an important part of their overall compensation, with approximately 73% claiming that benefits play a major role in their decision to stay with their current employer. And with 75% of employees claiming that being provided benefits from their employer is more important than ever, the effects that COVID-19 has had on the way employees view benefits are clear.
Employee benefits are now viewed in ways unlike ever before. For example, benefits that in the past have seemed more like rewards than necessities (i.e. remote work) are now seen as essential by employees. While healthcare benefits are clearly a top priority, the list doesn’t stop there – including those benefits that don’t always get the most attention.
In today’s article we’ll explore several tax-advantaged benefits programs that must be on the radar for modern employers in 2021 and beyond.
Did you know that more than 28 million Americans had a health savings account last year? Health savings accounts or HSAs are accounts that are designed to help employees with higher deductible health plans better save for their medical expenses, and the number of employees that have HSAs has been steadily growing for years. In fact, 95% of employers now provide HSAs to their employees. Because they give employees the opportunity to set aside pre-tax dollars to better manage healthcare costs that are unexpected, HSAs have become increasingly more popular.
Additionally, flexible spending accounts or FSAs have also become more popular in the last decade, with a reported 32 million Americans currently having an FSA. FSAs, like HSAs, give employees the opportunity to set aside pre-tax dollars for unexpected healthcare costs. The difference being that FSAs allow employees to access the entire amount that they decide to set aside from the first day of their plan year.
Another increasingly popular tax-advantaged benefit is health reimbursement arrangements or HRAs, with approximately 14 million Americans having an HRA. HRAs are self-insured arrangements that help to minimize premiums and allow employees to have more control of their healthcare expenses. They are also completely funded by the employers and reimbursements are not taxable.
Pros of Tax-Advantaged Benefits
1. HSAs Remain After a Lost Job
As we endured the worst of the COVID-19 pandemic, HSAs certainly helped many American employees. While many people were laid off due to closures and downsizing, many Americans lost their jobs. However, because they did not lose their HSAs, they were able to use their existing funds on qualified medical expenses.
2. Feminine Care Products are Included
The CARES Act allowed for HSAs and FSAs to include feminine care products for the first time ever. This allowed women to spend tax-free dollars on all feminine products (i.e. tampons, pads, liners, cups).
3. FSAs Continue to Update
Last year was full of all kinds of unforeseen changes and with it, FSAs continued to update. For example, employees with FSAs were able to open or close accounts and change their contributions last year, without the stipulation of having a life-changing event. Additionally, for the purposes of maintaining their FSAs, furloughed employees were able to be considered full-time employees.
4. Over-the-Counter Meds
Another major pro of HSAs and FSAs is the eligible expenses with over-the-counter medicines. Thanks to the CARES Act, individuals no longer have to have a prescription for over-the-counter meds in order to use FSA or HSA money.
5. New HRAs
HRAs helped employers maintain their benefits throughout the worst of COVID-19. In 2020, the US Government gave employers an opportunity to offer employees a new type of HRA called an ICHRA or individual coverage health reimbursement arrangement.
Cons of Tax-Advantaged Benefits
1. Ensuring PPE is Considered a Qualified Medical Expense
While medical professionals have recommended the use of PPE and sanitizers in order to slow the spread of COVID-19, it remains unclear if they fall under qualified medical expenses under current provisions of the tax law.
2. Dependent Care Needs to Be Improved
Dependent care FSAs allow individuals to set aside pre-tax dollars to balance work-related dependent care costs (i.e. preschool, before and after school programs, etc.). Unfortunately, their effectiveness is diminished due to the fact that limits have not been updated in over 20 years. Because they have never adjusted for inflation, their amounts do not meet the dependent care needs in most areas of the country. Throughout the COVID-19 pandemic, several parents had to leave their jobs or significantly reduce their hours due to a lack of childcare, though, many essential workers didn’t have that option and were left scrambling for childcare.
3. COBRA is lacking
With unemployment still rampant across the country, several Americans are left wondering how they will manage to pay for their medical expenses this year. Most of those who were furloughed or lost their job in 2020 were placed in the Consolidated Omnibus Budget Reconciliation Act or COBRA. Not only is COBRA expensive, but it is also confusing for both employees and their employers. COBRA is simply not working for several Americans and is a high-priority health care concern in an economy ravished by COVID-19.
The events of the past year have altered many aspects of daily life, with none more jarring than the switch from in-person to remote work. As organizations of every size and industry have pivoted to accommodate this “new normal”, they and their workforce have come to intimately understand the benefits and drawbacks of a remote working environment. Whether your organization chooses to adopt this practice in perpetuity, or offer remote work as an option to your employees after it’s safe to return to the office, your organization should consider altering its benefits package to meet the health-related changes presented by a remote work setting.
With a new environment come new challenges, and your employee benefits should both reflect and seek to address those new challenges in order to retain your current talent, entice new talent, and save on healthcare costs at both the individual and organizational level.
In this post, we’ll cover:
- New difficulties to employee health presented by a remote work setting
- Benefit adjustments that address these difficulties
- How to meaningfully implement these changes
New Environment, New Challenges
While there are many advantages to working from home, there are also several critical obstacles that can negatively impact employees. The most immediate threat is, namely, stress. Workers are currently inundated with uncertainty, from concerns about their own health and the health of loved ones to unexpected financial strain. Employees may also be feeling alienated from their coworkers, friends, and family, causing a decrease in both happiness and productivity in multiple areas of their lives. According to recent research emanating from the CDC, Americans reporting feelings of anxiety, depression, and loneliness in 2020 have tripled in comparison to the previous year.
While some of these feelings may eventually be alleviated by the widespread adoption of a vaccine for the virus that causes Covid-19, remote work environments still present many obstacles that can lead to increased emotional and mental strain. A lack of social interaction with coworkers and misunderstandings stemming from inadequate or poor communication are just some of the hindrances that can increase feelings of anxiety, estrangement, and hurt job performance.
There are numerous studies outlining the direct, negative impact that emotional and mental stress can have on one’s physical health, including heart disease, high blood pressure, and abnormal cholesterol levels. Better mental health advocacy and the increasing amount of evidence that directly links mental and physical health are leading many organizations to offer additional or better benefits that seek to address mental and emotional health in order to drive down healthcare costs now and in the future.
Adjusting Benefits to Meet New Needs
Remote work environments, while convenient, can be mentally and emotionally isolating. These feelings of isolation can often progress into chronic health conditions that can be expensive to both the employee and the employer provided health plan. Mental and physical health are inextricably linked, and the effects of the pandemic have only accelerated the acceptance of this fact and the adoption of programs to address it. As more and more organizations are making the partial or full switch to an entirely remote workforce, employers are simultaneously beefing up their benefits that address the mind-body connection.
One of the simplest, most cost-effective ways to redesign your benefits to include mental and emotional health resources is to adopt a single solution that combines mental wellbeing and chronic condition management through preventative wellness. According to recent research, employee wellness programs provide a 6:1 return on investment in healthcare cost savings.
Chronic diseases often emerge through poor preventative care, costing employers millions of dollars every year. By refocusing your benefits to be employee-centric and encouraging your employees to adopt healthier mental and physical lifestyle habits, employers can achieve monumental cost savings now and in the future. Some examples of wellness programs are those that incentivize employees to keep track their own health data through general physical assessments and friendly competitions. Stimulate your employees to discover and improve their body mass index by offering them a financial reward or paid time off if they complete an annual physical each year. Additionally, creating some friendly competition between employees to engage in healthy habits in exchange for a prize is another great way to engender adoption of good lifestyle choices. By incentivizing employees to participate in preventative care, they may discover they are at risk for certain chronic conditions early enough to redirect the path they’re on.
Support the Transition to Yield Best Results
Open and honest communication is always important in the workplace, but it is especially critical in a remote environment. Most employees are currently working remotely, and there is an increasing likelihood that many companies will decide to go fully remote for the foreseeable future.
One of the most important things that your HR team and organizational leaders can do during the adoption of new benefits programs in any setting is to maintain transparency and open lines of communication between themselves and their employees. Providing employees with the freedom and safety to discuss the obstacles they may be struggling against can help employers to understand the needs of their employees and the resources they may need to be connected to, such as mental health counseling or a one-on-one meeting with your company’s benefits specialist. In addition, open and authentic lines of communication between employees and leaders helps to engender a deeper level of trust. Getting on your employees’ level and being receptive to their needs will increase the likelihood that employees will take advantage of new wellness programs that your organization will offer.
Remote working environments present unique challenges, but these challenges also offer new opportunities to encourage employee self-care that can save everyone time, effort, and money. Employees that understand and use the resources available to them are more likely to be productive, long-term members of your team-and will act as great ambassadors to new prospective talent. By offering employee-centric benefits that address both the mind and the body, employers can ensure the wellbeing of their employees. Remember:
- Employers should acknowledge the new challenges to employees presented by remote work environments and adjust their benefits packages accordingly to meet these challenges.
- Employer benefits packages should include wellness programs that offer incentivized programs and resources for those struggling with mental and emotional health issues, as these issues often manifest as chronic physical conditions. Studies have shown that preventative care programs save employers millions of dollars healthcare costs.
- Facilitate and encourage the regular use of the wellness program and other new employee resources through open and honest communication between leaders and employees.
In the year 1970, per capita annual health care costs averaged around $1,848 (in today’s dollars). In 2019, that number increased to $11,582.
Over the last forty years, this increase in health care costs has reached the pockets of employers—on average health care costs are more expensive now than they have ever been before.
This change has led company CFO’s to take a much more active and expended role in health plan design. In this post, we’ll discuss this trend.
Specifically, we’ll talk about:
- The Ongoing and Increasing Trend of CFO Involvement in Health Plan Design
- What Is Causing This Trend
- What Should Business Leaders Do About This
The data covered in this article was collected by cutting-edge benefits firms that collectively support thousands of employers across the U.S.
The Ongoing and Increasing Trend of CFO Involvement in Health Plan Design
A recent survey has produced significant evidence that supports the idea that CFO involvement in health plan design will continue to increase. Consider the following findings from the survey:
- Over the past three years, only 32% of organizations have made changes to manage health care costs. However, 55% of organizations expect to make changes over the next three years.
- 74% of business leaders indicate that their finance department has had an active role in making decisions related to their health care program over the last three years. However, this number increases to 87% when asked if their finance department will have an active role in the health care program over the next three years.
- 48% of business leaders stated that their finance and HR departments shared responsibility for the organization’s overall health care management and strategy over the last three years. When asked the same question about what they expect over the next three years, the number increased to 58%.
The data is clear. Health care costs are increasing, and organizations will be making changes in the near-term future to adapt. These changes will involve an increased role of the CFO (and the finance department in general) in the management of the organization’s health care program.
What Is Causing This Trend
The driving forces behind the trend explained in the previous section are both simple and complex at the same time.
From a simple perspective, the trend is being caused by a decades-long increase in health care costs for employers. In order for company leadership to manage the rising costs of their health care plan, they must instruct the CFO and the finance department to have an increased role in decisions related to the plan.
However, recent events have made this trend even more complex. The COVID-19 pandemic has created many questions about the future of health care around the globe and the associated costs. Unfortunately, many of these questions remain unanswered. CFOs must become increasingly involved in health care plan management in order to brace for whatever storm lies ahead in the industry.
What Should Business Leaders Do About This Trend?
It may seem as if an increased role of the CFO in what has traditionally been an HR realm will be sure to cause contention within many organizations. The minds of CFOs and HR managers functions differently, there is no doubt about that.
Fortunately, there are many trusted sources of support to help organizations adapt to these structural and responsibility changes.
According to findings from the same survey that was cited earlier, “Nearly all employers think strategic conversations and innovative solutions are valuable in their relationship with a consultant or broker.” In other words, business leaders are becoming increasingly willing to work with benefits consultants and brokers to help them navigate the uncertain future of the health care industry.
The following solutions which are traditionally provided by benefits consultants and brokers were specifically mentioned in the survey:
- Innovative solutions
- Strategic conversations
- Market developments and industry trends
- Actuarial and financial advice
- Fully bundled services and solutions
Business leaders who took the survey overwhelmingly indicated that they will find significant value in discussing the above items with benefits consultants or brokers moving forward.
If you and your business find yourself in need of a more hands-on benefits consultant, be sure that you know what to look for when considering different options. Consider the following tips:
- Make sure the broker offers services that can be adapted to your specific needs and business model.
- Consider the broker’s approach to cost-savings. Will they offer your business cutting-edge plan design options in order to control benefits spend?
- Take a close look at the pricing model of the consultant or broker. Do they work on a commission or fee only basis?
Health care costs are increasing, both for individuals as well as businesses. A result of this trend is that company CFOs and finance departments are becoming increasingly involved with the management and decisions related to the company’s health care program. As we soon will enter the post-pandemic world, there is much uncertainty related to what effect the lingering effects of COVID-19 will have on the global health care system. Due to this uncertainty, it will become even more important for the CFOs to be involved moving forward. Businesses can adapt to this trend in healthy ways by working with a more hands-on benefits broker.
Many HR professionals would agree that the year 2020 was the most challenging year to date when it comes to managing human capital effectively. The COVID-19 pandemic forced businesses to adapt in a variety of ways, including restructuring workforces, transforming product offerings and operations, and doing everything possible to keep businesses open while physically distancing employees from one another. These challenges, among many others faced during the ongoing COVID pandemic, has led to burnout among many HR professionals.
We’ll address HR employee burnout in this post. Specifically, we’ll discuss:
- Identifying the Issue
- What HR Leaders Can Do to Improve the Situation
- How Company Leadership Can Better Support their HR Team Moving Forward
Identifying the Issue
As an HR leader, you need to be able to understand burnout in yourself, your HR teammates, and all employees at your company.
HR professionals are often expected to be the most empathetic people in an organization. If someone is having a stress/anxiety or interpersonal related issue, HR will often be their first stop. This can lead to something called compassion fatigue. Showing empathy is a skill, but it’s not an easy one. Even the most empathetic people can feel drained of energy when they are showing compassion to multiple people in a short amount of time. This is one of the primary reasons that so many HR professionals are feeling burnout.
During 2020, HR was asked to make a lot of hard decisions. They were also charged with communicating these decisions to employees. Telling everyone that they need to work from home and isolate themselves from as many people as possible is no easy task. And in worst case scenarios, HR leaders were tasked with implementing large-scale furloughs or layoffs. On top of this, federal regulations became a moving target for HR leaders during COVID. Adapting to FFCRA in the midst of transitioning to remote work or altered operations was a super challenging task. After making these tough decisions, dealing with any pushback from staff, and navigating incredibly complex compliance challenges, it’s no wonder that burnout has become so common for HR employees.
What HR Leaders Can Do to Improve the Situation
As an HR leader experiencing burnout, it may be time to consider burnout best practices that could apply to anyone in your workforce. Think about the advice that you would give to any non-HR employee who might approach you with concerns about feeling burned out. What would you tell them? Take that advice, and apply it to yourself. Here are some things you might consider:
- Don’t be afraid to take time off. HR employees too often feel like they have to be extra conservative with their vacation days. They feel like they have to set an example of when it is or is not appropriate to take time off. Throw this idea out the window! If you are experiencing burnout and you have PTO available, use it! Even if travelling is unrealistic right now due to COVID, taking a few days off and spending time exercising, doing hobbies, or relaxing with family and friends can go a long way towards quelling burnout.
- Find a listening ear. It’s very possible that the employees best equipped to listen and show empathy about employee burnout are your HR coworkers. If you don’t feel comfortable discussing your burnout with them, reach out to friends you have in the industry. Think about who you worked with at a previous job, who you met at a conference in recent years, or someone you might be connected with on LinkedIn. Join and online community of HR leaders in your local area. You’ll be surprised at just how willing people in your professional network will be to help you by listening to your challenges and providing guidance.
- Ask for the help you need. Most importantly, don’t be afraid to ask for help when you need it. HR employees don’t need to be examples of perfection. It’s okay to feel down and unmotivated during these troubling times. There is no shame in this. Whatever help you need, get it. A few months or years from now, you’ll thank yourself for doing whatever it took to get yourself back on track using healthy strategies.
How Company Leadership Can Better Support their HR Team Moving Forward
As counter intuitive as this might sound, HR isn’t always equipped to solve every people-related challenge in the workplace. Often the support of company leadership – the CEO, Founder, President, etc. – is needed.
Company leadership should go above and beyond to acknowledge HR accomplishments during this difficult time. Awarding the “employee of the month” title to someone in HR, sending a hand-written thank you note, or even a “shoutout” included in an internal company communication will go a long way towards making your HR team feel recognized for the hard work they have performed over the last year. Could you go as far as gifting your organization’s HR leader a gift certificate to a spa or have lunch delivered to their home form their favorite restaurant? Get creative in showing your HR teammates just how much their effort means to your company during this challenging time.
Also important, company leadership should consider potential gaps in employee benefits. Could your employee assistance program be expanded? What does your company’s mental health coverage lack? Understanding these gaps in benefits and acting on them will go a long way towards ensuring your entire team’s mental and physical health are cared for, and especially your HR staff during this challenging time.
Burnout among HR employees is becoming very common in the wake of the challenging year 2020. Compassion fatigue, combined with the weight of having to make and communicate so many challenging decisions, are the primary reasons for this burnout. HR employees can help themselves overcome burnout by doing the following:
- Don’t be afraid to take time off.
- Find a listening ear.
- Get the help you need.
Company leadership should also take the initiative to help their HR team overcome burnout. Two ideal strategies for achieving this are:
- Going the extra mile to make sure HR is acknowledged and thanked for the challenging work they have been performing over the last year.
- Ensure that there are no gaps in benefits coverage that are limiting your team’s ability to take care of themselves and their mental health.
Launchways Provides HR Leaders the Support They Need So They Can Focus on Strategic Initiatives
At Launchways, we partner with organizations to help alleviate the administrative and compliance burdens placed on HR professionals. With Launchways’ support, HR leaders have more time to work on strategic initiatives rather than getting bogged down by tactical day-to-day items. Learn more about how Launchways helps HR leaders.
On Monday, Jan. 11th, The U.S. Department of Treasury and the U.S. Small Business Administration began accepting applications for the second round of Payment Protection Program (PPP) loans. This second round will continue until Mar. 31st, 2021.
Both new borrowers and certain existing borrowers are eligible for the second round of PPP loans. Now that applications have started, business leaders need to be prepared to follow the new requirements.
Information About the Second Round of PPP Loans
The rules for the second round of PPP Loans are, in many ways, similar to the initial round. That said, there are certain updates to the first round of funding that employers should be aware of. According to the U.S. Department of Treasury, the key updates include:
- PPP borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs;
- PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, and direct marketing organizations, among other types of organizations;
- The PPP provides greater flexibility for seasonal employees;
- Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
- Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
Last year, the U.S. Small Business Administration (SBA) covered six months of payments on loans that existed as of Mar 27th, 2020 in addition to any new loans issued before Sep. 27th, 2020 under the CARES Act. Under the new bill, beginning in February of 2021, these same borrowers will receive an additional three months of payments from the SBA.
Additionally, for existing borrowers as of Dec. 27th, 2020, the new bill provides another five months of payments for industries that were hit the hardest by COVID-19. Other temporary changes include a guaranty increase from 75% to 90% and fee waivers through Sep. 30th.
Am I Eligible for a Second PPP Loan?
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
- Has no more than 300 employees; and
- Can demonstrate at least a 25% reduction in gross receipts for any quarter in 2020 compared to 2019.
Those who are eligible can apply for up to 2.5 times the borrower’s average monthly payroll for 2019 or 2020, with a limit of $2 million. It’s important to note that this maximum is substantially less than the first round of the program which set the limit at $10 million.
Industries that were hit the hardest by COVID-19 (Accommodations, Food Service, etc.) can qualify for loans up to 3.5 times the borrower’s average monthly payroll.
What are the Rules for PPP Loan Forgiveness for Second Draw Loans?
While the application process will likely be easier for most, the forgiveness rules are, for the most part, the same as they were for the first round of PPP loans. Borrowers are eligible to have their loans forgiven in full provided they use the funds for eligible costs within the covered period (8-24 weeks from loan disbursement).
A minimum of 60% of the PPP loan must have been spent on payroll costs in order to qualify for full forgiveness. The rest can be used for business mortgage interest payments, rent, utilities, or other expenses under the new stimulus bill, such as specific operation expenses, supplier costs, and worker protection expenses.
Please note: in order to receive maximum loan forgiveness, detailed documentation of PPP spending is necessary, including paid checks, payroll documentation, receipts, and billing statements.
What is the Process to Apply for Loan Forgiveness?
The U.S. Small Business Administration has until Jan. 20th, 2021 to develop forms and instructions for a forgiveness application for loans of up to $150,000. Borrowers who qualify will be required to include details about the number of employees retained and the amount spent on payroll in addition to signing and submitting the form.
Borrowers must also attest to the accuracy of the certification and compliance with PPP requirements. Simplified forgiveness applications will not require supporting documentation, however, they must be retained for up to four years for future review by the SBA. The new PPP program launched this week does not change the forgiveness process for loans over $150,000.
Employers should review the criteria for this second round of PPP loans. Employers considering applying should prepare and have on hand all relevant documentation.
We will continue to monitor any additional developments regarding the PPP and deliver updates as necessary. For more information and support, contact Launchways.