Employment Law: Pension, Benefits, Liability & Policies

The Insurance Perspective of Employment Issues

October 19, 2012Presented By:

- Todd Whiteman Property Casualty - Rick Enscoe Employee Benefits

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OverviewEmployment Practices Liability – EPLI

• Definition &Types of claims• Claim Scenarios

Directors & Officers – D&O• Definition & Types of claims• Claim Scenarios

Policy Structure & Coverage• Process and requirements

Protection Prior To Claims

Employee Handbooks• What to include

Workers Compensation• Overview• Compliance

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OverviewTypes of Employee Benefits

• Group Benefits – Disclosure Requirements and Compliance• Pension Plans – Disclosure Requirements and Compliance

Employee Benefits Legal Compliance• Cafeteria Plans• PPACA• COBRA• FMLA• ERISA• Fringe Benefits• Health Insurance• HIPAA• HSA’s, FSA’s and other Tax Favored Plans• Medicare Secondary Payer• Summary Plan Description

Introduction to Disclosure Requirements for Defined Contribution Plans

Introduction to Disclosure Requirements for Defined Benefit Plans

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EPLI

Employment Practices Liability – EPLI

Definition: Coverage for suits or claims brought against an employer for:

- Wrongful Termination

- Wrongful Hiring Practices

- Sexual Harassment

- Failure To Promote

- Employee Rights Violations

- Breach Of Contract

- Emotional Distress / Stress

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EPLI

Scenarios

1. The executive assistant to the Chief Financial Officer was terminated for divulging confidential information to staff regarding impending company layoffs. A suit was brought by the assistant for retaliation and sexual harassment as she claimed the CFO always made suggestive comments and improperly touched her. $420,000 claim payment

2. A claim was brought by a former employee for religious discrimination. She alleged the hiring practices of the Insured were unlawful because they

stated they would only hire Christian workers. Once it was learned that the plaintiff was not a Christian, she was passed up for a promotion. $345,000 claim payment.

3. An overnight supervisor at a residential facility for disable adults was found sleeping on the job. After an immediate termination the claimant alleged racial discrimination even though the majority of the supervisors employed by the insured were the same race. The insured was not found liable but defense costs exceeded $30,000.

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D&O

Directors & Officers – D&O

Definition: Coverage for suits or claims brought against an employer and the individual Directors and Officers for:

- Organization Mismanagement

- Supervisory Actions / Inactions

- Lack Of Due Diligence By The Board Or Committees

- Breach Of Duty

- Misappropriation Of Funds

- Breach Of Contract

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D&O

Scenarios

1. A grant making foundation receiving private donations was alleged to have used those funds for purposes not associated with the foundation’s underlying mission. A group of supporters sued the foundation’s board alleging misappropriation of funds and breach of duty. Defense costs exceeded $65,000.

2. Government grant given to the foundation to finance an international event was not enough to cover the expenses of the event. Government brought suit against the foundation as monies were used for other purposes than financing the event.

3 The Executive Director was terminated due to unauthorized spending of the center’s funds. The executive director then sued for wrongful termination.

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EPLI / D&O

Policy Structure & Coverage

Limits – typically $1,000,000 per claim with the same amount in the aggregate

Limits – Shared aggregate over all coverages can be provided to lower the cost

Deductible / Retention – amount the insured will pay in advance of the carrier covering the claim or amount the claim payment will be reduced at settlement

Claims Made – type of policy triggering coverage when the claim is made, not when the occurrence happened

Retro Date – date coverage was first purchased

Full Prior Acts – coverage back to the inception of the organization

Reporting Period – determines when the claim must be reported for coverage to apply. In a claims made and reported policy the claim must be turned in during the same policy period that the insured receives notice of claim

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EPLI / D&O

Policy Structure & Coverage

Definition Of Insured:

- Company / Organization

- Individual Insureds Including:

* Directors

* Officers

* Trustees

* Employees

* Committee Members

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EPLI / D&O

Protection prior to claims

- Employee Handbooks

- HR Department Policies and Procedures

- Board and Management

What should be included

Employment Policies

- Drug Free Workplace- Employment Authorization- Employees With Disabilities- Equal Employment Opportunity- Life Threatening Illnesses- No Solicitation/Distribution- Open Door- Introductory Period- Sexual Harassment- Whistle Blower- Anti-Discrimination

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Employee Handbook

What should be included

Leave and Benefits

- Annual Leave- Benefits Overview- Cobra- Compensation- Military Leave- Tuition Reimbursement- FMLA (Family and Medical Leave Act)- General Policies / Absences- Jury Duty- Holidays- Leave without Pay- Paid Tim Off (PTO)

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Employee Handbook

What should be included

Conditions Of Employment

- Email / Internet / Social Media- Confidentiality- Harassment- Personal Conduct- Safety & Security- Discipline- Resignation- Standards Of Professionalism- Termination

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Employee Handbook

What should be included

Compensation and Administrative

- Emergency Procedures- Employee Information- Employee Departure- Reference Checks- Employee Privacy- Hours- Overtime- Performance Appraisals- Punctuality and Attendance- Smoking- Employee Acknowledgment

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Employee Handbook

Overview

Generally, workers’ compensation insurance coverage is mandatory for all employers who have one or more employees, whether they’re part-time or full-time, including family members.

Coverage ensures medical and wage-loss benefits to employees who are injured during the course of their job. Employers who so provide coverage are protected against lawsuits filed by injured workers.

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Workers Compensation

ComplianceThe requirement to insure workers’ compensation liability is mandatory for any employer who:

- employs at least one employee who could be injured or develop a work- related disease in this state, or - could be injured outside the state if the employment is principally localized in Pennsylvania, or

- could be injured outside the state, while under a contract of hire made in Pennsylvania, if the employment is not principally localized in any state, if the employment is principally localized in a state whose workers’ compensation laws do not apply, or the employment is outside the United States and Canada

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Workers Compensation

Penalty & ExampleSection 305 of the Pennsylvania Workers’ Compensation Act specifies that an employer’s failure to insure its workers’ compensation liability is a criminal offense and classifies each day’s violation as a separate offense with a fine up to $500 per offense, either a third-degree misdemeanor or, if intentional, a third-degree felony.

CAS Home Health Care Inc., owned by Sean Williams, in Philadelphia, pleaded guilty to five misdemeanor counts of the third degree on Nov. 9, 2011, in Philadelphia County Court of Common Pleas for failing to insure its workers' compensation liability. Judge David C. Shuter placed CAS Home Health Care Inc. on probation for a period of five years, ordered it to pay all court costs and restitution to the Uninsured Employers Guaranty Fund in the amount of $71,397.43. The bureau's Compliance Unit reports that CAS Home Health Care Inc. is now in compliance with Pennsylvania workers' compensation law.

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Workers Compensation

Employee BenefitsThere are two types of employee benefits:• Those that the employer must provide by law (social sec./workers comp.)• Those that the employer offers to compensate their employees ( health

and retirement

Both have legal and tax implications for the employer

EMPLOYERS MUST KEEP THE FOLLOWING IN MIND:• Which Benefits covered by law (such as FMLA)• Which Benefits that are voluntary and the laws that apply to each (COBRA)• For each benefit determining who is the covered• Making sure that each is classified in the correct class• Which benefits are regulated by federal/state laws

Health and retirement plans fall under ERISA.

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Employee Benefits

Employee Benefits Legal ComplianceCAFETERIA PLANS• Also known as Section 125 plans • POP plans• FSA’s (2013 law limits contributions to $2500)• PPACA has a number of laws that impact cafeteria plans

PPACA enacted March 23, 2010• Minimum Value• Information Reporting on Health Insurance Coverage• Disclosure of Return Information• Small Business Health Care Tax Credit• FSA’s (eliminated OTC drugs unless prescription is obtained)• Medical Device Tax• Health Insurance Premium Tax (2014)• Health Coverage for older children (< age 27)• Tax on Indoor Tanning Salons• W-2 Health Coverage Reporting

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Employee Benefits Legal Compliance

Employee Benefits Legal Compliance PPACA (cont.)• Medical Loss Ratio (rebates to consumers)

COBRA - Consolidated Omnibus Reconciliation Act of 1985• Group health plans with 20 or more employees (50% rule)• Part time employees are counted fractionally by hours• Qualified Beneficiaries are eligible• Review of Qualifying Events• QB must notify plan administrator within 60 days• The QB has 45 days from that date to pay initial premium• Premium charges can be 102% of the premium• Cobra disabled persons may extend the coverage 11 more months (29

months) plans may charge 150% of the premium]• Medicare Entitlement 36 months• State Mini Cobra

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Employee Benefits Legal Compliance

Employee Benefits Legal ComplianceFamily and Medical Leave Act of 1993• Unpaid job protected leave for certain family and medical events• Events include; childbirth, adoption, serious health condition of the

employee or immediate family member (spouse, child or parent)• 12 weeks unpaid during any 12 month period• Health Benefits must be maintained• Military Caregiver and Qualifying Exigency Leave recently expanded• 26 weeks for military care giver to a covered service member (includes

veterans• Be mindful of State variations of the law• Be mindful how FMLA defines the terms• Incapable of Self Care or Instrumental Activities• Physical or mental disability• “in loco parentis”• Posting notices/notice from employees• Medical Recertification's

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Employee Benefits

Employee Benefits Legal ComplianceFringe Benefits • Major forms of fringe benefits are health insurance plans, retirement plans

and paid time off• Employees Gross income can be effected (auto usage) but will not be

reflected for benefits like moving expenses, retirement planning services, meals etc.

Health Insurance – Related Laws• CHIPRA• COBRA• ERISA• FMLA• GINA• Mental Health Parity Act• Mental Health Parity and Addiction Equity Act

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Employee Benefits Compliance

Employee Benefits Legal Compliance• Newborns’ and Mothers’ Health Protection Act• USERRA• Women’s Health and Cancer Rights Act of 1998• HIPAA

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Employee Benefits Compliance

Employee Benefits Legal ComplianceTax Advantaged Plans (see comparison chart)• HSAs• HRAs• FSA’s• Archer MSAs

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Employee Benefits

Employee Benefits Legal ComplianceSummary Plan Description • Employers over 100 lives must provide to all benefits participants• What the plan provides • How it operates• When the employee can participate• How service and benefits are calculated• How to file claims and appeals• Cost Sharing provisions• How preventive services are covered• Provisions for the use of network providers• Provisions requiring pre-authorizations• Annual 5500 filings required; plan numbers must match

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Employee Benefits Compliance

Employee Benefits Legal ComplianceMedicare Secondary Payer• Medicare is not responsible for paying first• Your group health plan pays first if the following conditions apply: - 65 or older covered by your current employer - Employer has 20 or more employees and covers the same services as Medicare - Medicare will pay amounts not paid by your group plan up to the Medicare approved amounts.• Medicare is secondary payer to: - Group Health Insurance - Auto/liability insurance - Workers Comp - Federal Black Lung - Veterans Administration’ - End Stage Renal Disease

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Employee Benefits

Pensions• Defined Benefit Plan Disclosure Requirements (handouts)• Defined Contribution Disclosure Requirements (handouts)• 401 (k) Disclosure Requirements (handouts)• 403 (b) Disclosure Requirements (handouts)

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Pensions

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Contact Information

Todd WhitemanProperty Casualty

Enscoe Long Insurance Group, LLC80 Emerson Lane, Suite 1305 Bridgeville, PA 15017412-206-0364

twhiteman@enscoelong.comwww.enscoelong.com

Rick EnscoeEmployee Benefits

Enscoe Long Insurance Group, LLC80 Emerson Lane, Suite 1305 Bridgeville, PA 15017412-206-0363

renscoe@enscoelong.comwww.enscoelong.com