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Paid Parental Leave – Gaining Traction?

Paid Parental Leave - Gaining TractionOne important employee benefit that I increasingly hear about, both in Iowa and nationally, relates to paid parental leave.

This topic made headlines this past December when paid leave was included for federal civilian workers in the National Defense Authorization Act for Fiscal Year 2020. This Act provides up to 12 weeks of paid parental leave in connection with the birth, adoption, or foster care placement of a child for employees covered by the Family and Medical Leave Act (FMLA). This new law applies to leave taken in connection with a birth or placement occurring on or after October 1, 2020.

Paid Parental Leave Offered by Private Employers

The United States is the only industrialized country without a nationwide guarantee of paid parental leave. Private employers in the U.S. can voluntarily offer paid leave benefits. One national survey found that 40 percent of employers offered a standalone paid parental leave plan for employees, and of those, 63 percent offered full wages during the entire leave duration.

As of March 2019, the U.S. Bureau of Labor Statistics reported that 18 percent of all workers have access to paid family leave while 35 percent of the highest wage earners have access. Part-time employees are less likely to enjoy this benefit. Additionally, larger organizations with over 500 employees and certain industries are more likely to offer access to paid family leave.

Paid Leave in Iowa?

In Iowa, data about the prevalence of paid parental leave offered by private Iowa employers is seemingly difficult to find. Perhaps it is available, but this information does not appear to be easily accessible. Overall results from our 2019 Iowa Employer Benefits Study© revealed that 73 percent of Iowa employers offered ‘maternity leave’ while 51 percent offered ‘paternity leave.’ However, the survey questions did not specifically relate to whether or not these benefits were ‘paid’ by employers – so clarifying research is needed. (More about this at the end of this blog)

Only a few states mandate paid maternity leave. Iowa is not one of them. For women employees in the state of Iowa, Iowa law (Chapter 216 of the Iowa Code) prohibits employers with four or more employees from denying a woman’s request for up to eight weeks of unpaid leave to address a physical disability due to pregnancy, childbirth or related medical outcomes. There is no requirement that a woman works a previous amount of time or hours prior to unpaid leave. Again, employers can voluntarily pay for this leave.

The Family and Medical Leave Act (FMLA)

The FMLA requires covered employers with at least 50 covered employees (among other criteria) to provide up to 12 work weeks of unpaid leave in a 12-month period for new parents after the birth or adoption of a child. The focus is on job protection, not income replacement. The FMLA is gender neutral, but in order to qualify, the employee must meet certain requirements.

An estimated 60 percent of employees have access to leave under FMLA. Generally, employees who work for employers with under 50 employees or work part-time schedules do not have access to FMLA. But in Iowa, as mentioned earlier, covered employees have unpaid coverage up to eight weeks if employed by employers with four-plus employees.

Proponents of Paid Leave

Proponents of paid leave believe that the new federal employee law should serve as a guide to private employers. However, federal employees do not receive paid leave while caring for a sick family member or recovering from a serious illness. Advocates for paid leave desire a broader approach to include both paid family and medical leave that would cover time off for illness and caregiving.

Proponents argue that paid leave boosts morale and productivity, in addition to labor force attachment to the employer. Mothers who receive maternity leave return to their employers and are more likely to stay. Having a paid parental leave policy can be a powerful tool to attract job seekers, especially when a majority of employers do not currently offer paid leave. Currently, paid family leave on a national basis is gathering interest by both Republicans and Democrats, specifically through the House Ways and Means Committee on Capital Hill. The big stumbling block, however, is how such a program would be financed.

Summary

Because paid parental leave remains a mainstream discussion that employers wish to learn more about, and given the lack of Iowa-specific data on the prevalence of this important benefit, our upcoming 2020 Iowa Employer Benefits Study© will address this topic with Iowa employers. From this, we will learn how popular (or not) this benefit is, and about the many components found within paid leave, such as the number of weeks offered and percentage of pay. Additionally, we also hope to discover why employers may not consider offering paid parental leave in the future.

To stay abreast of employee benefits, we invite you to subscribe to our blog.

Dental and Vision Benefits Remain Popular and Stable in Iowa

Dental and Vision Benefits Remain Popular and Stable in IowaIowa employers continue to offer two important ancillary benefits within their workplace setting – dental insurance and vision coverage. Both benefits are perceived by employees to be of high value and important to their overall health. And, there is good evidence that the long-term benefits to employee well-being can outweigh the associated costs of offering these plans.

Dental Coverage in Iowa

Overall, our 2019 study revealed that almost two-thirds (64 percent) of Iowa employers offer dental coverage – whether or not the cost was subsidized by employers. This offering compares to 60 percent in 2012. Organizational size usually determines whether these benefits are offered in the workplace. For Iowa employers with 101+ employees, 94 percent offered dental coverage, compared to 87 percent in 2012. However, 43 percent of employers with fewer than 101 employees offer dental, compared with over 50 percent seven years ago. It should be noted that employers with fewer than 10 employees are less likely to offer dental coverage, which greatly affects the <101 size category.

In addition to organizational size, location of employers can also determine whether dental coverage is offered: 69 percent of urban employers offer dental compared to 57 percent of rural organizations. In urban settings, a higher-populated geographical area, competition for personnel can be very intense, which usually results in more benefits being offered than in rural communities. NOTE:  Prior to the 2016 survey year, urban and rural employers were not broken out for comparison purposes.

Unlike the instability of health insurance costs, dental premiums have remained relatively stable over a large time period – providing a great amount of budget certainty for both employers and their employees. For example, dental insurance premiums reported by Iowa employers in 2012 were at $35 for Single and $92 Family, while in 2019, seven years later, the premiums were at $34 for Single and $99 for Family – very marginal differences.

The following graphic illustrates the great variance of employers offering dental coverage based on industry. All Colleges and Universities in Iowa responding to the 2019 survey indicate offering dental coverage, while only 49 percent of Construction and Retail organizations offer this benefit.

Vision Coverage in Iowa

Our 2019 study revealed that over 40 percent of all Iowa employers offer vision coverage – again, whether or not the cost was subsidized by employers. This offering compares to 39 percent in 2012. Similar to dental coverage, organizational size definitely determines whether these benefits are offered in the workplace. For Iowa employers with 101+ employees, 63 percent offered vision coverage, while only one-quarter of employers with fewer than 101 employees offer this benefit.

Again, urban employers are more likely to offer vision (45 percent) versus their rural counterparts (35 percent).

By industry, Financial Organizations and Iowa Colleges and Universities are most likely to offer vision coverage, while both Retail and Construction employers are least likely to provide this coverage.

For many obvious reasons, health insurance is often the most dominant topic of conversation (and concern) within employer-sponsored benefits. As a result, dental and vision benefits are regularly overshadowed. But, as demonstrated here, these two benefits continue to be both important and popular within the Iowa workplace.

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A New Employer-Financed Approach to Health Coverage

A New Employer-Financed Approach to Health CoverageAs we know, employer-sponsored health insurance consists of employers offering health plans that are purchased (or self-funded) from insurance companies (or third-party administrators). These health plan(s) are reviewed annually and rolled out to eligible employees and family members. Some employees may have only one plan to choose from, or if employed by a larger organization, have been given a handful of plan options. Employee decisions are usually based on premium cost and cost-sharing arrangements, such as deductibles, copayments and network provider selections.

Individual Coverage Health Reimbursement Arrangements (ICHRAs)

On June 13, 2019, the U.S. Departments of Health and Human Services, Labor and the Treasury issued a final rule that will allow employers (of all sizes) to fund a new kind of health reimbursement arrangement (HRA) – known as an individual coverage HRA (ICHRA). The ICHRA is a tax-free reimbursement that will help pay the insurance premiums for employees who purchase individual-market health insurance, including insurance purchased on the public exchanges that were formed by the Affordable Care Act (ACA). More about the Iowa individual insurance markets can be found at the Iowa Insurance Division website.

Employers may continue to sponsor their own health plans. But, using the ICHRA also provides tax-deferred funds to other employees who are not eligible for the employer-sponsored health plan. The ICHRA program was scheduled to begin January 1, 2020, allowing employers to pay all or a portion of the plan’s coverage cost purchased by the employee in the individual market.

To learn more, the departments posted FAQs on the new rule.

Employer-sponsored health coverage takes a great deal of employer time and expense to analyze, negotiate, communicate, comply with regulations and monitor throughout each plan year. It can be a huge headache to employers, who are, first and foremost, concentrating on their services and products to remain financially viable. Becoming a distributor of health insurance to their employees is secondary and, frankly, can be a costly distraction from the core business. Obviously, attracting and retaining qualified employees is critical to successfully remain in business. The ICHRA attempts to allow employers to focus on their core business strengths while finding new ways to subsidize the cost of employees’ health insurance.

More About ICHRAs

Employers who are interested in pursuing ICHRAs will need to know some key requirements:

  • Employers may either offer an ICHRA or a traditional group health plan, BUT MAY NOT OFFER EMPLOYEES A CHOICE BETWEEN THE TWO.
  • Employers can create classes of employees who are eligible for ICHRAs, using employment distinctions such as salaried versus hourly, full-time versus part-time, or employees located in certain geographic locations. Certain classes can be offered ICHRAs, while providing other classes with the traditional health plan.
  • Employers cannot discriminate within classes when offering ICHRAs, but they can increase the ICHRA reimbursement amount for older employees and for those with more dependents.
  • If desired, employers can keep their traditional group health plan for existing employees, but offer only new hires an ICHRA. This may invite adverse selection issues over time, but this is at least allowable.
  • If an employee purchases an individual health insurance plan outside an ACA-related exchange, and the employer reimbursement does not cover the full premium, the employer is allowed to permit the employee to pay the balance of the premium for coverage on a pre-tax basis through its cafeteria plan.
  • Employees who purchase individual coverage through ACA-related exchanges and receive premium reimbursements through ICHRAs may not qualify to receive any federal premium subsidies typically allowed through the ACA. Additionally, the tax code states the employer may not permit employees to make salary reduction contributions to a cafeteria plan to purchase coverage.
  • There are minimum-size requirements for the class of employees offered ICHRAs. This can be found in both the final rule and posted FAQs.
  • The Department of Labor has issued ICHRA Model Attestations that employees can sign to confirm they have purchased individual health insurance coverage. Medicare Part A and B, or Medicare Part C can also be covered by the ICHRA.

There are a number of other nuances that employers must know about before seriously considering whether or not to implement ICHRAs. There are just too many to mention in this particular blog.

As mentioned earlier, the ICHRA is yet another option for employers to financially assist their employees in purchasing health insurance coverage without having to fight the hassles of implementing and maintaining their own health plan – if they wish to completely relinquish offering traditional coverage. ICHRAs, however, are not designed to fundamentally cut healthcare prices and reign in bloated waste and eliminate inefficiencies. Combating these hefty issues goes well beyond the discussion of insurance products and how they are financed.

Because ICHRAs will expand employer options and employee choices for healthcare coverage in the future, our upcoming 2020 Iowa Employer Benefits Survey© will include a module of questions that will attempt to learn more about whether Iowa organizations are aware of ICHRAs and whether they may consider pursuing the ICHRA in the next few years. Stay tuned…

To stay abreast of employee benefits, we invite you to subscribe to our blog.