by Carolyn Kick | Jun 30, 2021 | Compliance, COVID-19 Resources
The coronavirus pandemic has proven a broad and nearly universal view that American’s relationship with technology will deepen, including their ability to work from almost anywhere.
If you work remotely in the same state as your business location, you can follow the same state laws for income taxes and employment taxes. But as a remote employee, you need to weigh in the tax implications of cross-border work arrangements.
Below are the laws and taxes considerations to make as a remote employee working abroad:
Be Aware of Your Tax Obligations
You will want to consider your current tax situation and see how it may change if you leave the country. While the U.S. tax code applies to all tax citizens and green card holders no matter how long they live and work remotely outside the United States, some exclusions are available.
You may qualify for a foreign tax credit or the Foreign Earned Income Exclusion (FEIE), which lets you reduce or eliminate all or a portion of your foreign earned income (up to $108,700 from U.S. taxes). This exclusion is not valid for passive, or investment income such as interest and dividend and only includes earned income, such as:
- Salary
- Wages
- Bonuses
- Commissions
- Self-employed income
Generally, many countries have bilateral tax treaties which prevent you from paying tax on the same thing twice.
Determine Your Primary Residence or Tax Home
Before you qualify using the credit or FEIE, it’s crucial to make sure your tax home is outside the United States.
For instance, countries like Portugal will let you claim to be their tax resident if your primary residence is registered there, and you stay for 183 days or more in any tax year. On the other hand, the U.K. implements a “Statutory Residence Test,” which considers the amount of time you spend and work in each tax year, separately.
According to the IRS,
- Your tax home is the general area of your principal place of business, employment, or post of duty, regardless of where you maintain your family home
- Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual.
- Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.
- If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live.
- If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant, and your tax home is wherever you work.
As U.S. citizens, the foreign income exclusion comes into effect only if you spend at least 330 days of the tax year abroad, not including time on planes. Then, if you qualify, you can use Form 2555 to figure your foreign earned income exclusion and your housing exclusion or deduction.
Comply With Foreign Reporting Requirements
Many digital nomads and expats may also be subject to additional tax reporting, such as filing a Foreign Bank Account Report (FBAR).
An FBAR reports your money that resides in offshore bank accounts. Any U.S. tax resident with a foreign account balance of $10,000 or more during a specific tax year needs to file an FBAR.
This account balance is calculated in its totality, which means it is a sum of all your foreign bank accounts. Individuals who have signing authority for an overseas account or a joint account also need to file an FBAR.
FBAR is filed individually to the Dept. of Treasury and submitted electronically through the BSA e-filing site.
Know Regulations Around State Taxes
Certain U.S. states require ‘verified’ state residents who work outside to pay state taxes, or they have to prove they are no longer state residents. For example, the state of Colorado requires proof of non-resident status, and other places such as California need you to pay state taxes even if the federal government has certified you as a foreign resident.
If you plan to work abroad, this can be a problem for many reasons. In some cases, owning personal property such as a car or even a library card can make you liable to pay state income tax.
That’s why know more about state taxes and/or relocate to a low or no-tax state before you depart, rather than being caught unaware by years of unpaid penalties.
Self-Employment Taxes
Whether in the U.S. or abroad, if you have an employer, they are required to pay social security and Medicare for you. But as a self-employed digital nomad, you may be liable for SECA (Self-Employed Contributions Act), based on your country of residence.
However, you may be exempt from SECA tax if the U.S. has a Totalization Agreement with the country you are residing in. Under this agreement, SSA will account for your periods of U.S. coverage that qualify for benefits under the social security program of an agreement country.
Depending on your situation and the period spent in a foreign country, you may have freed yourself of commutes, but knowing your tax obligations will help you navigate through the complexities of U.S. taxes no matter where your work takes you.
by Carolyn Kick | Jun 23, 2021 | Future of Work, Human Resources
We are now more than a year since major news organizations first began sounding the alarm for the emerging COVID-19 pandemic and looking back on articles from that time can be quite jarring. In mid-March of 2020, Pennsylvania Governor Tom Wolf gave a speech asking for “two weeks to flatten the curve”. That optimism was echoed in American workplaces, with expectations of employees needing to work from home for perhaps a few short months. Over a year later, and companies are only now announcing plans to bring employees back into their physical workplaces. As we watched the pandemic stretch from weeks into months, and from months to years, it became evident that the changes brought about in the business world were here to stay.
A long year of uncertainty and upheaval has left many organizations without a sense of clarity regarding what their employees want and need.
Options Galore
Perhaps the most consequential topic of conversation and debate within the workplace going forward will revolve around how to manage the changing expectations and demands of employees. The general trend is toward a growing number of options for handling schedules, workplace flexibility, and benefits. If the changes brought about by the pandemic were short lived, one might expect a relatively quick and graceful return to normal routines and procedures. We all would have happily returned to our physical workplaces and continued with business as usual.
That obviously is not what happened. It took many of us months to become acclimated to remote work, and enough time has gone by now that these changes are quickly becoming a durable part of the modern world. After more than a full year, many of us have become quite accustomed to working from home, and some have even made drastic changes to their lifestyles and are now dependent upon the flexibility of these new work arrangements. Because of this, it is impractical, perhaps untenable, for us to expect the workplace to return to pre-pandemic norms.
Many organizations are already realizing this, marking an incredible transformation in the perception of remote and hybrid workforces. In the early stages of the pandemic, very few organizations would have taken seriously the notion that these changes would become permanent. Only a small percentage of companies were utilizing remote work at scale, but the experiment of the last year has proven its feasibility, and now there really is no going back.
This subject is complex and multi-faceted, but the primary concern on most people’s minds is scheduling. Of course, not every organization is going to make remote work the norm going forward, but it will likely remain an option in the vast majority of them even after physical workplaces reopen. Many of the world’s largest companies have already announced plans to embrace remote work as at least part of their plans going forward, such as Microsoft, Spotify, Dropbox, and Uber, among others. It is not uncommon to hear of companies that have decided to end their leases and get rid of their physical offices altogether. This trend has spawned office vacancy crises in major cities throughout the US and, considering that more than half of employees currently working remotely would like to continue to do so, this is not expected to be a short-lived phenomenon. If organizations want to remain competitive in the labor market and retain their talented employees, they need to embrace the hybrid workforce transformation.
Remote work is not for everyone, however, and it is important to keep in mind that many are eager to return to their physical workplaces. Pandemic related safety measures are relaxing in many parts of the country, but where they remain in place organizations are exploring creative strategies to keep occupancy to recommended maximums. Staggered schedules and compressed workweeks have emerged as popular approaches because they allow employees to return to the workplace if they wish by rotating who is coming in at various times. Flextime, a strategy that allows employees to work at the times that work best for them, is another option to keep an eye on as it is likely to be in high demand as physical offices and workplaces reopen.
Despite their hesitation, organizations are realizing that strategies like flextime and remote work come with tangible benefits, such as increased employee productivity, retention, and engagement.
Organizational Challenges Incoming
It is no secret that at the top of the list of any business’s concerns is ensuring that the policies they follow protect and benefit their bottom line, and this topic is no different. It simply is not feasible to expect every company to accommodate 100% of their employees working remotely going forward, but expectations have changed, and the smart move will be to try to meet those expectations where possible.
Many of the changes we have seen in easily adapted work like IT and Human Resources are generally here to stay, as are video conferencing tools like Zoom and Skype. We should also expect to see new tools emerge to better meet the needs of the new hybrid workforce. Solving the major pain points of remote work, like communication and organization, will be a new frontier in software development going forward. Because of these changes, companies are likely to start aggressively seeking out management and staff that have experience working with distributed teams.
As the pendulum swings in the direction of remote work, we should all be wary of a potential pitfall: overcompensation. The desire to be at the leading edge of this transition is understandable, but we currently only have a year of data to verify the feasibility of hybrid workforces, and the practicality of it is likely to vary widely from organization to organization. Many will be drawn to the promise of lower expenses and reduced complexity, but the results are sure to be mixed.
Organizations should be leery of changing too much too quickly despite the pressures that they are likely to face. The first order of business should be to get those who want to work in a physical workplace and those who want to continue to work remotely set up to do so as quickly and efficiently as possible. It is important to let the dust settle and a sense of normalcy to return before any further drastic changes are made. Given where much of the country remains regarding COVID-19 precautions, simply reopening workplaces to any degree is going to be a significant enough challenge already.
Many employees will prefer to continue working from home, but that does not mean that it should become the new standard just yet. The importance of the social component of life and work is not to be underestimated, as we have seen over the last year, so it comes as no surprise that many of us yearn to see their coworkers and customers in person again.
As companies make decisions about how to handle the emergence of remote work, the key will be for them to focus on providing options to their employees, not requirements. Regardless of what they decide, it is important that their decisions are calculated and deliberate. Most organizations spent the last year simply trying to ride the wave and not drown amid the chaos – leaving aside, of course, the companies that were already working remotely before the pandemic.
Now that the experiment has been run and the results are coming in, everyone is starting to look toward the future. This should be considered a great opportunity to evaluate the success and failures of what was tried and make decisions based on those results through the lens of what is best for that particular organization going forward. We are no longer improvising on the fly. Companies are going to start learning from what has happened and it is the companies that are deliberate about their decisions regarding remote work and carefully develop their plans that will be most competitive.
The first step in making such a plan should be to collect and analyze as much data as possible from your employees about their interests and expectations regarding remote work. This could take the form of interviews, group discussions, company-wide surveys, one-on-one conversations, or some combination of these options. Regardless of the method, management needs to get a scope on what their employees want before they will be able to assess what is feasible to offer them.
Tough compromises are almost inevitable because, in most situations, neither the employer nor the employee is going to come away with everything that they want. Consider more complex situations, like the companies that will not be able to offer the same remote work options to all their employees because of differences in the type of work that they do. Ford recently offered 86,000 of their employees the option to continue working from home permanently, but this is not possible for its 100,000 plus factory workers. The cost of workforce infighting can be substantial, so to prevent conflict, organizations may consider offering other benefits to the employees who work in roles that cannot be adapted to remote work. Whatever they do, it is imperative that they reaffirm the importance of those workers.
Taking all of this into consideration is going to be overwhelming for a lot of organizations, especially small businesses. Management should remind themselves that they are not going to be able to please everyone. All that can be reasonably expected is that they make good-faith efforts to meet the needs of as many of their employees as possible.
The knock-on effects from the pandemic, such as the emergence of remote work, have forced organizations and employees to completely re-evaluate their priorities and needs. Tough decisions are going to be made and, in many cases, both employers and employees are going to have to look elsewhere to have those needs met. Disruptions like this are undoubtedly stressful, but if the situation is managed strategically, at the end of the day we might all be better off.
by Carolyn Kick | May 13, 2021 | COVID-19 Resources, Employee Benefits
As we enter the halfway point in the year following the year of the pandemic, by now most of us are familiar with the term “return to work.” Many businesses have brought their employees back to the workplace, while some have adopted a more hybrid model of maintaining some people on-site and allowing others to remain remote work employees.
Even though we have begun to return to a pre-COVID way of life, the way of 2021 is not the same as that of 2019. According to writer, Amy Quarton, “Trying to make the workplace what it used to be before the pandemic is not only impractical and untenable for many reasons, it is just as (if not more) disruptive than the initial work-from-home transition.”
Post-Pandemic Employee Benefits Trends
The way employees view benefits has changed. Some benefits that were high priority a year and a half ago are no longer as important as they once were, while benefits that may have seemed unnecessary or less important have made their way to the top of the priority list for many employees.
Reporter, Kristen Beckman states, “This shift in the work environment is an ideal time for employers to begin thinking about how they want to work with employees to help them recover financially and emotionally from the disruptions and stress of the pandemic.”
With this new perspective on benefits in mind, here are a few that will have an impact on how employee benefits evolve moving forward.
Employee Financial Health Benefits
For most employees, the financial impact brought by the pandemic was heavy. While some were fortunate enough to have retirement or emergency savings to fall back on, they likely had to use a good portion of those funds to maintain their lives. According to Beckman, “The resulting financial instability can cause a strain on employees that can impact productivity especially at a time when they are transitioning back to work.”
Here’s what we are seeing as a result:
- Increasing numbers of providers are offering education and coaching, budgeting and savings tools, and financial advising and planning.
- Various emergency savings programs are now offered by payroll vendors, retirement plan providers, and others, but no matter the vendor, the key feature is easy employee access to those funds.
- Typically administered through a third party, student loan repayment assistance benefits are enabling employers to make regular contributions directly to workers’ student loan servicer.
More Benefits Options
For several employees, there was a realization of just how flexible the workplace could be when businesses were forced to begin working remotely. Flexibility in the workplace and having more options provides the employee to have more control of their daily life and the work/life balance.
Here’s what we are seeing as a result:
- Flexible work hours ”will likely be made widely available and be in high demand as physical workplaces reopen,” writes Quarton, and many new scheduling tools have been launched to help employers maintain social distancing.
- The most helpful option for addressing mental health is to offer better insurance coverage for mental health care. Other options include adding more visits via EAPs and providing apps for meditation, mindfulness, and stress relief.
- Help with caretaking includes reimbursements for or assistance finding daycare, elder care, after-school care, remote tutoring, remote safety monitoring, and more.
- Vendors have brought telehealth capabilities not just to computers but to phones, and virtual appointments are remaining an option, post-pandemic.
Tech at the Center
Many have become far more comfortable interacting virtually whether it be through zoom meetings, virtual schooling, and even online court appearances. And while occasional technical difficulties can be problematic, reliance on tech is becoming more and more acceptable and even preferred for many tasks.
Here’s what we are seeing as a result:
- Going virtual can be made interesting and informative with the use of interactive tools such as webinars, virtual booths, and live chats. David Karlin writes that being able to access virtual open enrollment at home “allows family members, like spouses, to be easily included in the decision-making process.”
- “The range of digital health apps, platforms, services, and new products spawned or accelerated by the pandemic can hardly be mapped,” according to writer Dan Cook. Hundreds of employee benefits apps and tools are readily available, with new ones launching weekly for benefits and health monitoring and management, provider and pharmacy searches, 401(k) funds monitoring, wellness tracking, and more.
While some trends will come and others go, one thing we know for sure is that as we continue to define what normal looks like, employers and the benefits they offer to their employees will certainly have a pivotal role.
by Carolyn Kick | Apr 30, 2021 | Compliance
In a recent announcement from the IRS and the Treasury Department, the American Rescue Plan (ARP) is issuing tax credits to help small businesses, including providing paid leave for employees receiving COVID-19 vaccinations.
Eligible employers (businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers) can receive a tax credit for providing paid time off for any employees receiving and/or recovering from the COVID-19 vaccine.
“This new information is a shot in the arm for struggling small employers who are working hard to keep their businesses going while also watching out for the health of their employees,” said IRS Commissioner Chuck Rettig. “Our work on this issue is part of a larger effort by the IRS to assist the nation recover from the pandemic.”
Small, midsize, and specific government employers are now able to claim refundable tax under the American Rescue Plan Act of 2021 (ARP). These refundable tax credits reimburse employers for the expenses of providing paid sick and family leave to their employees due to COVID-19. This includes any paid leave taken by employees to receive and/or recover from COVID-19 vaccinations. The ARP tax credits are available for leave from April 1, 2021 – September 30, 2021 and are available to any eligible employer that provides sick and family leave.
The ARP tax credits are against the employer’s share of the Medicare tax and they are refundable. This means that eligible employers are entitled to payment of the full amount of the credits as long as it exceeds their share of the Medicare tax.
Eligible employers can keep the federal employment taxes that they otherwise would have deposited in anticipation of claiming the credits on the Form 94. This includes federal income tax withheld from employees, the employees’ share of social security and Medicare taxes, and the eligible employer’s share of social security and Medicare taxes with respect to all employees up to the amount of credit for which they are eligible. For eligible employers that do not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages, the eligible employer may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
by Carolyn Kick | Apr 30, 2021 | Compliance
Small, midsize, and specific government employers are now able to claim refundable tax under the American Rescue Plan Act of 2021 (ARP). These refundable tax credits reimburse employers for the expenses of providing paid sick and family leave to their employees due to COVID-19. This includes any paid leave taken by employees to receive and/or recover from COVID-19 vaccinations. The ARP tax credits are available for leave from April 1, 2021 – September 30, 2021 and are available to any eligible employer that provides sick and family leave. Below is the information you need to know about eligibility and how employers can claim the credit.
Eligible Employers
Any business with fewer than 500 employees, including tax-exempt organizations, is considered an eligible employer. This also included government employers, with the exception of the federal government and any agency of the federal government not described in section 501(c)(1) of the Internal Revenue Code.
Employers deemed eligible are entitled to tax credits for wages paid to employees for leave taken due to COVID-19. This includes leave taken to receive and/or recover from COVID–19 vaccinations. The ARP tax credits are available for wages paid for leave from April 1, 2021 – September 30, 2021.
Tax Credits Amounts
The ARP tax credits are against the employer’s share of the Medicare tax and they are refundable. This means that eligible employers are entitled to payment of the full amount of the credits as long as it exceeds their share of the Medicare tax.
The credit amount for sick leave is equal to the sick leave wages paid for COVID-19 related reasons for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100 percent of the employee’s regular rate of pay. The credit amount for paid family leave wages is equal to the family leave wages paid for up to twelve weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rds of the employee’s regular rate of pay.
Claiming the Credit
To claim credits, eligible employers must report their total paid sick and family leave wages for each quarter on their federal employment tax return, usually Form 941, Employer’s Quarterly Federal Tax Return. Form 941 is used by most employers to report income tax and social security and Medicare taxes withheld from employee wages, as well as the employer’s own share of social security and Medicare taxes.
Eligible employers can keep the federal employment taxes that they otherwise would have deposited in anticipation of claiming the credits on the Form 94. This includes federal income tax withheld from employees, the employees’ share of social security and Medicare taxes, and the eligible employer’s share of social security and Medicare taxes with respect to all employees up to the amount of credit for which they are eligible.
For eligible employers that do not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages, the eligible employer may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19. The eligible employer will account for the amounts received as an advance when it files its Form 941, Employer’s Quarterly Federal Tax Return, for the relevant quarter.
by Carolyn Kick | Apr 23, 2021 | Compliance
Violations of the Fair Labor Standards Act (FLSA) now come with harsher penalties. According to a recent announcement by the US Department of Labor (DOL), when negotiating settlements with employers in violation of the law, they will return to a policy of seeking “double damages.”
Typically the DOL will first attempt to reach a voluntary settlement when an investigation has determined that an employer is in violation of the FLSA. In part with agreeing to pay future wages in accordance with the FLSA, the settlement usually includes paying back wages for two years prior. That said, during the Obama administration, the DOA also sought liquidated damages in the amount equal to the unpaid wages due. These “double damages,” in most instances, effectively doubled the back wages to the employees that were entitled. Under the Trump administration, however, it was announced that in many instances the DOL would not assess any pre-litigation liquidated damages.
Now, the DOL is turning back yet again under the Biden administration. In a bulletin released on April 9th of 2021, the DOL announced that it will in fact return to assessing pre-litigation liquidation damages during any investigations provided that the designated Regional Solicitor (RSOL) agrees with the request. Alternatively, if the RSOL determines the matter to be not appropriate for litigation or the employer under investigation presents credible evidence of a good-faith defense, the DOL will not assess liquidated damages.
by Carolyn Kick | Apr 23, 2021 | COVID-19 Resources, Return to Work
The global COVID-19 pandemic that has altered operations for nearly every business in one form or another is finally beginning to subside. Although concerns over continued spread and new variances continues, cases are trending downward and vaccinations are trending upward.
Because of these encouraging trends, many employers are now asking themselves what they should do in terms of getting their employees back to the workplace. Some businesses may choose to permanently allow some or all of their employees to work from home. However, many other businesses are realizing that it’s time to start making plans to bring their remote workers back to the office on a regular basis.
In this post, we’ll discuss some key things that employers should consider as they make decisions and coordinate the logistics of safely bringing employees back to work.
Specifically, we’ll talk about:
- Testing
- Vaccinations
- Public Health Best Practices
- Acknowledging the Adjustment Period for Employees
Testing
Testing for COVID-19 in employees has been a very expensive task for most businesses throughout the pandemic. Most businesses have left the testing to their local health departments and encouraged employees who have felt unwell to go through the standard public testing process rather than providing on-site or direct-to-employee testing. Fortunately, this is changing due to recent advances in rapid testing.
Advancements in our understanding of COVID-19 have led to rapid, at-home antigen tests that can be taken by consumers without requiring a prescription from a physician. These tests cost far less that other testing methods, and provide a much more practical tool for employers to encourage regular employee testing.
Vaccinations
Employers should work with their HR and legal teams to determine how to best encourage or require that employees receive the COVID-19 vaccinations. Some ideas for encouraging vaccination include:
- Be flexible with time off for employees who may need to temporarily leave work to receive the vaccine, or who may need to take time off to take a dependent to get vaccinated.
- Consider providing an extra day of sick leave for employees who experience side effects from receiving the vaccine. If possible, expand this benefit for employees who may need to care for one of their dependents who experiences vaccine side effects.
- Offer cash bonuses or other prizes for employees who choose to be vaccinated.
- Reach out to local health departments to see what educational vaccine materials they have that you could share with employees. This will eliminate the need for staff to create such materials, and you’ll know that the information is accurate.
Public Health Best Practices
Even though the pandemic seems to be nearing its end, the reality is that we will still live in a “new normal,” at least for a period of time. This new normal will require special attention to basic public health best practices to ensure that there is no chance of a late-stage COVID outbreak in your office. Employers should consider the following public health best practices as employees return to the workplace:
- Continue to encourage or require masks at the office. The CDC will most likely continue to recommend that masks be worn for several more months as the pandemic subsides.
- Invest in an improved ventilation system. Studies have shown that buildings with higher quality filtration in their ventilation systems can reduce the spread of COVID-19.
- Encourage hand washing and sanitizing. This can be done by setting up extra hand cleansing stations or putting up signage in restrooms and other common, high-touch areas.
- Promote physical distancing. Consider rearranging the setup of your office so that employees can work at least six feet away from each other throughout the day. If it makes sense given the layout of your office, tape directional arrows on the floor to decrease close interactions as people move around.
As an added bonus, these strategies should also keep employees safe from other illnesses, such as influenza, moving forward.
Acknowledging the Adjustment Period for Employees
Employers should remember how hard the transition was for many employees when they shifted to primarily working from home. The sudden lack of face-to-face interaction with coworkers, the juggling of at-home school for children, and the sharing of office space with spouses were challenging adjustments to make.
Unfortunately, transitioning back to in-office work will most likely come with similar challenges. Consider the following examples that can be anticipated:
- Employees will have to readjust to a daily commute, which can cause stress because of lost time during the day.
- Some employees who are more introverted may have a hard time reengaging themselves socially around the office.
- Simple office norms and etiquette that were long taken for granted might have to be relearned in some workplaces.
- After avoiding gathering of people for so long, there will be some employees who experience anxiety as they return to being physically closer to more people throughout the day.
Employers should ask for feedback from employees to determine other company-specific challenges that employees anticipate with returning to the office. Plans should be made to take appropriate steps to help employees manage these challenges as they readjust to working on-site.
Key Takeaways
The light at the end of the pandemic tunnel is near. Within a few short months, many business leaders will start to encourage or require their employees to return to working in-person at the office. However, there are some key things employers should consider as they make these organizational adjustments:
- Provide rapid, affordable COVID-19 testing for employees.
- Encourage vaccinations by being flexible with time off, offering cash or other prizes for employees who get vaccinated, and curating existing vaccination educational materials. Of course, HR and legal council should be involved with any such program to ensure there are no violations of health privacy laws.
- Implement public health best practices such as requiring masks, improving ventilation systems, encouraging hand washing, and promoting physical distancing.
Remember that there will be an adjustment period before many employees feel fully comfortable returning to the office. Consult with employees to learn what challenges they anticipate with returning to the office, and make plans to help them overcome those challenges as comfortably as possible.
by Jim Taylor | Apr 14, 2021 | Employee Benefits
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.
Tax-Advantaged Benefits
1. HSAs
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.
2. FSAs
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.
3.HRAs
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.
by Carolyn Kick | Mar 26, 2021 | COVID-19 Resources, Employee Benefits, Human Resources, Mental Health in the Workplace
Every year, the US spends $3.8 trillion on healthcare. What’s more, 90% of this goes to caring for chronic conditions. In an effort to reduce costs, improve the quality of life for their employees, and improve employee retention, for years, employers have shown support for five major chronic conditions: high blood pressure, diabetes, lack of physical activity, obesity, and smoking. These chronic issues cost employers an estimated $36 billion annually. Therefore, making advances towards addressing these issues can result in a significant impact financially. This is more important than ever because – the inconvenient truth is – that $36 billion is only expected to increase.
The pandemic revealed many issues facing employers. Among them is employee behavioral health. While behavioral health has often been ignored by employers, it’s all but certain that it will emerge as a sixth vital chronic care condition. With all of the challenges brought on by the pandemic, it’s no surprise that employees are reporting higher levels of stress, anxiety, and depression than ever before. Research shows that the pandemic could result in a 50% increase in behavioral health issues. This would mean that one-third of all Americans would be in need of care in 2021 and is projected to cost an additional $100-140 billion this year alone.
With healthcare costs on the rise, the list of conditions growing larger, and the increasing demand for a remote workforce, many employers are turning to technology for solutions. With a growing list of mobile apps that offer guidance for cognitive behavioral therapy in a market that is rapidly expanding, tech solutions are more available than ever before. Here are a few considerations that employers need to be making as they address these new issues:
Behavioral Health is a Chronic Condition
It can no longer be ignored. Behavioral health issues are at an all-time high with 67% of Americans reporting to have increased stress levels in 2021. This comes with a significant financial impact. The global economic losses related to behavioral health are estimated at $16.3 trillion between 2011 and 2030, almost equal to that of cardiovascular disease and surpassing other chronic conditions. In addition, research shows that employees with these behavioral health conditions spend roughly $6,500 more annually than employees without.
Regardless of the growing awareness of this critical issue, studies revealed that there is a looming disconnect among employers. When asked to rank chronic conditions by importance, only 33% ranked behavioral health as being a significant concern, putting it seventh on the list overall. Meanwhile, diabetes was ranked number one for 61% of employers surveyed, despite the fact that data shows behavioral health to have a significantly higher impact financially. In a recent study, research showed that behavioral health conditions cost employers $17 each year per employee in disability wage replacement costs. The next most costly chronic condition is diabetes, costing employees $2 each year per employee. In another study, research showed that lost productivity for those experiencing behavioral health issues cost employers roughly $109 per employee, compared to those with diabetes, costing employers $9 per employee.
With the knowledge of the financial and personal impact that behavioral health conditions have on both employers and employees, employers need to identify solutions for the most prevalent diagnoses. As mentioned above, the solution may be found in tech for chronic care management. Studies have revealed that digital screenings, teletherapy, and digital CBT tools are effective for mitigating both symptoms and costs. Additionally, providing care early on has a significant impact, with the average cost for employees taking leave for a mild form of a condition like depression can be up to 52% lower than the average cost for a severe form of that same condition.
Traditional vs Modern Solutions
A recent analysis of the digital app space showed that there were roughly 300,000 health-related apps available for download on mobile devices. This market is projected to grow to over $230 billion in value by 2023. While new tools are welcomed and many of them show promise, the swift expansion of digital options can make it difficult to know which tools are worth utilizing. It is important that employers are thorough when selecting which tools they will use as it is likely that the more mature digital solutions will become the most robust and engaging tools, ultimately, making them the most effective.
That said, the focus of employers is to find a singular solution. In a recent study, research showed that 71% of employers said that a singular digital solution to behavioral health management was of high importance. The same is true for enterprise-level solutions, with each solution promising mitigated chronic conditions, optimized personal management, and a decrease in employer healthcare costs.
However, regardless of these solutions, the disintegrated nature of behavioral health management creates a significant challenge for employers. The single-issue solutions struggle to have widespread engagement among employees which has a significant impact on the long-term success of their adoption. Studies show that 47% of employers attribute lack of employee engagement as the main obstacle to the adoption of digital solutions. Another study revealed that engagement rates for health insurer’s behavioral health management programs were only 13% on average.
This is why it is important for employees to prioritize more mature digital solutions. The next few years are likely to see many large consolidations as the more mature solutions buy out the single focus tools, creating more robust solutions that deliver better returns. By sticking with more mature solutions, employers will see more engagement as the market and the tools within it grow.
Prevention Over Cures
The obvious real return on behavioral health solutions is that they are positive for both employers and employees. Not only do they improve the health and well-being of employees, but that, in turn, improves the employer’s bottom line. In a recent study from Harvard, research showed that effective workplace wellness programs resulted in a return of $2.37 for every dollar spent on average. Emerging tech solutions help treat behavioral health conditions in ways that were unimaginable before. Teletherapy can connect employees to licensed practitioners with just one click. While they might be costly upfront, immediate returns shouldn’t be the primary focus of employers. The long-term reduction in the cost of behavioral health treatments, drugs, and therapy will undoubtedly result in healthier, loyal employees.
Digital management solutions provide an opportunity to make a significant and real change for your employee’s mental well-being. While it’s easy to be discouraged by growing healthcare costs and troubling statistics on American mental health, now is the appropriate time to provide your employees with a comprehensive behavioral health management solution. In doing so, you will be making progress towards a healthier workforce and a brighter future for all.
The trajectory of behavioral healthcare might be daunting and more unpredictable than ever before, however, digital solutions bring promise. These tools not only help improve the health of your employees, but they can also have a positive impact on costs, retention, and resilience. Employers that embrace the behavioral health concerns, seek out a singular solution, and focus on long-term employee health will be better equipped to handle the issues of rising healthcare costs and the evolving needs of their employees.
by Carolyn Kick | Mar 26, 2021 | Compliance, COVID-19 Resources
The COVID-19 Pandemic, which began over a year ago, has changed the workplace in many ways. Some of these changes have been for the better, such as reduced office space overhead for employers. Other changes have been for the worse, like employee isolation, mental illness, and low team morale.
One alarming trend that has been shown in recent reports is that employee fraud, waste and abuse have increased during the COVID-19 Pandemic.
In this post, we’ll discuss this trend in detail. Specifically, we’ll cover:
- Reports show employee fraud, waste, and abuse have increased during COVID
- How This Trent Relates to the Fraud Triangle
- What Employers can do to Combat this Trend
Reports Show Employee Fraud, Waste, and Abuse have Increased During COVID
A recent report by the risk mitigation technology firm Oversight reveals that instances of employee fraud, waste, and abuse have increased during the pandemic. This report specifically describes such instances in terms of spending and purchasing.
According to the report, overall purchasing activity has decreased during the pandemic. This is probably due to reduced revenue and uncertainty about the future of many industries as a result of the world-altering year of 2020. However, the report also found that:
- Spending risk has nearly tripled in the last year. A comparison between 2019 and 2020 shows travel and expenses decreased by 55%, but violation rate increased by 29%.
- Out-of-pocket expenses that are considered to be “risky” have increased. Starting in March of 2020, they increased as high as 120% of what they were before the pandemic. One potential explanation for this spike is that many workers had to pay to set up virtual workspaces out-of-pocket. Reimbursements for this type of expenses are complex and inherently carry a lot of risk.
- Two other risky expense categories are “miscellaneous” and “mail/phone orders.” These two expense categories accounted for a greater portion of overall spending in 2020. The potential issues with these categories are obvious when considering the vagueness of expenses that are classified as “miscellaneous” and the ease of abuse with expenses classified as “mail/phone orders.”
Although the report we’ve referenced in this post only discusses financial abuse in terms of purchasing and expenses, it’s easy to consider how other forms of business fraud, waste, and abuse may have increased during the last year. In the following section, we’ll explore these causes.
How This Trend Relates to the Fraud Triangle
Organizational behavior experts have historically explained workplace fraud, waste, and abuse in terms of the “Fraud Triangle.” The Fraud Triangle presents three factors that heavily influence whether an employee will engage in behavior that could be considered fraudulent, wasteful, or abusive. The three elements in the fraud triangle are:
- Opportunity
- Pressure
- Rationalization
Let’s take a moment to consider each of these elements as they relate to working remotely during the pandemic. For the purposes of this section, we’ll refer to “fraud, waste, and abuse” simply as, “fraud.”
Opportunity
Employees are more likely to engage in fraud when the there are many opportunities to do so. Generally speaking, whenever there is less supervision over employees, there will be more opportunities for fraud. Fewer interactions with management and supervisors may cause an employee to feel like they will be able to get away with fraud more easily.
This presents a problematic dilemma for employers in the era of remote workers. With employees potentially scattered all over the country, how can an employer properly make sure employees are not wasting resources or participating in other abusive or fraudulent behavior?
Pressure
As we’ve explained in recent posts, employees are experiencing more stress now than ever before. This is especially true for younger workers who are working remotely. Uncertainty about the future can be a primary cause for this stress.
If employees feel worried about the future, those feelings will likely coincide with feelings of added pressure to care for themselves and their families. The fear of being laid off or experiencing other employment hardships could cause employees to make rash decisions to engage in fraud to help them mitigate perceived financial risk.
Rationalization
The third and final element of the fraud triangle is rationalization. Just like fear of an uncertain future can make an employee feel added pressure to commit fraud, the same fear could make them try to rationalize their fraudulent decisions.
For example, consider an employee who uses company money to purchase a personal item. The employee might say to themselves, “This has been a hard year for me and my family. I’ve had bad luck. I deserve this item. It’ll help me be a better employee in the long run, so it’s no big deal that I spent company money on it.”
What Employers Can Do to Combat This Trend
After reading the previous sections about the fraud triangle and trends related to fraud, waste, and abuse trends in the workplace, you may find yourself concerned about the status of your workforce. Managing these unique and unprecedented circumstances is no easy task. Consider the following tips:
- Make sure you are regularly checking in with your employees, especially if they are working remotely. Every employee should have a short phone call or virtual meeting with their immediate supervisor at least once a week, if not more. The more often they touch base with you about their projects and other priorities, the less likely they will be to seize an opportunity for fraud.
- Do everything you can to reduce stress for your employees. Talk with your company’s health care provider and your HR staff to make sure mental health options are available for your employees. Provide perks such as gym reimbursement or exercise incentives to help your employees relieve stress in healthy ways. Doing so will reduce the chances of employees committing fraud due to pressure or rationalization.
- Don’t be afraid to consider installing monitoring software on your employees’ computers to catch certain types of fraud, waste, or abuse. However, you’ll want to be fully transparent about this practice. If you decide to implement a new software to help the company reduce fraud, make sure employees are involved in that decision process and help them understand how it is for the good of the company.
Key Takeaways
The COVID-19 pandemic has created opportunities, pressure, and rationalization for employees in the modern workplace to commit acts of fraud, waste, and abuse. Data provided by leading risk mitigation firms shows that this is certainly the case for purchasing fraud. A thoughtful consideration of the “Fraud Triangle” makes it easy to see how other aspects of fraud are more common now as well.
To help reduce the chances of fraud in their workplace, employers should consider doing the following:
- Make sure you are regularly checking in with your employees.
- Do everything you can to reduce stress for your employees.
- Don’t be afraid to consider installing monitoring software on your employees’ computers to catch certain types of fraud, waste, or abuse. However, involve your employees in this process.
