HUMAN CAPITAL PRACTICE HRFocus - Willis · These are only general guidelines and this framework can vary by organization; therefore, each company should define roles and career levels

HRFocusHUMAN CAPITAL PRACTICE

August 2011 — Issue 50 www.willis.com

HR CORNER

CAREER LEVEL GUIDESDEFINE WORK, JOB ROLES,CAREER PATHS ANDREWARDSThe recession has forced organizations to cut back on staff and askmore of their employees. The marketplace has become morecompetitive, and everyone is under pressure to respond faster,improve quality and reduce costs.

If organizations are to meet these challenges, they need a flexibleway to ensure that employees understand business objectives andwhat they need to focus on in order to be successful. To this end,many organizations are moving away from traditional jobdescriptions that can quickly become outdated and toward a morestreamlined “Career Level Guide” approach for defining the natureof work, job roles, career paths and compensation/reward systems.

WHAT ARE CAREER LEVEL GUIDES? Career Level Guides provide a concise framework for defining jobs’work content and environment. They can be useful for quicklyintegrating jobs during a merger or acquisition, providing aneffective vehicle for career development and planning discussions,and improving the communication of job structures to managers andemployees. The framework can expand to include definitions forparticular job families, which can serve as a replacement fortraditional job descriptions or as a supplement to them.

Depending on the size of the organization and the use it intends tomake of a Career Level Guide, Guides might include one or more ofthe following elements:

n ROLES. Jobs may initially be grouped based upon the role ornature of work performed – support, professional or leadership.

n CAREER LEVELS represent major steps in an employee’scareer progression. This progression should reflect a significantincrease in responsibilities and the associated competenciesneeded to address more complex work problems and challenges.The number of career levels may vary among organizationsdepending on the overall span of work complexity andresponsibility levels that exist.

HR CORNERCareer Level Guides Define Work,Job Roles, Career Paths and Rewards 1

WELLNESSResilience: The Art of Bending So You Don’t Break 6

LEGAL & COMPLIANCERules on Handling Medical BenefitClaims Amended 7

New York Enacts Same-Sex Marriage Law 8

Annual Limit Waiver Process Amended 10

Connecticut Enacts Paid Sick Leave Law 11

HHS Releases Proposed Changes to HIPAA Privacy Rule 12

PPACA Amendments to Plan Materials 13

SINCE YOU ASKEDDo I Really Need Plan Documentsand SPDs? 14

WEBCASTS 15

CONTACTS 16

The typical career level progression by role is illustrated below, although these can vary by organization.

SUPPORT ROLES

PROFESSIONAL ROLES

LEADERSHIP ROLES

n JOB FAMILIES represent a series of jobs distinguished by progressively higher levels of similar knowledge,skills, abilities, work activities, competencies, work complexity, organizational impact and other relevantfactors. The number and type of job families within an organization may change as organizations, markets andtechnology evolve.

EXAMPLES OF JOB FAMILIES

• Accounting/Finance• Administration/Office Services• Environmental Safety/Health• Facilities/Maintenance• Human Resources• Information Technology• Legal

DEVELOPMENT PROCESSHR should involve subject matter experts and managers when developing Career Level Guides since managers andemployees will be the prime users of the Guides, and their input is important.

STEP 1: DEFINE CAREER LEVEL FRAMEWORKThe first step in creating Career Level Guides is to define, at a high level, the nature and level of work that exists acrossthe organization. Start with the roles that will be used throughout your organization. Typically, all organizations havesupport, professional and leadership roles. Next, define the career levels that will apply to each role.

Although most organizations have entry, intermediate and senior career levels for support and professional roles,organizations that employ engineers, research scientists and information technology professionals may have five orsix career levels. Higher career levels in these occupations are reserved for subject matter experts that design highlyadvanced applications or products having strategic importance to the organization or to the professional field of work.

For leadership roles, organizations often employ supervisors, mid-level managers, directors and vice presidents, but defining differences between these levels is often challenging. Sometimes management titles are assigned toemployees who do not manage people; other times, higher level management titles are granted as a reward ratherthan based upon the nature of work. Establishing clear criteria helps organizations be objective and consistent intheir use of leadership titles. For example, supervisors can be defined as those who provide day-to-day supervisionfor a work unit of hourly support or a small group of entry-level professional employees. Managers, on the otherhand, typically supervise supervisors of work units and/or manage a large department comprised of professionalemployees. Directors and vice presidents are often responsible for multiple departments, profit centers or lines of business.

s s s

s s s s

s s s s

ENTRY INTERMEDIATE SENIOR SPECIALIST/LEAD

ENTRY INTERMEDIATE SENIOR SPECIALIST/LEAD TECHNICAL ADVISOR

SUPERVISOR MANAGER DIRECTOR VICE PRESIDENT EXECUTIVE VP

• Marketing• Procurement• Quality Assurance/Testing• Research and Development• Sales • Supply Chain/Logistics• Warehousing/Materials Management

Willis North America • 8/112

These are only general guidelines and this framework can vary by organization; therefore, each company shoulddefine roles and career levels pertinent to their own entity. While some companies form a design team to makethese decisions, in others Human Resources may propose an initial list of roles and career levels that are thenshared and refined with department managers and other subject matter experts knowledgeable about theorganization and work performed.

STEP 2: CREATE A UNIVERSAL CAREER LEVEL GUIDEOften, an organization will begin with a “universal” Career Level Guide that provides a foundation for consistentcriteria across the enterprise. Career levels may be broadly defined on the basis of such dimensions as impact,knowledge, autonomy and independent judgment, problem complexity, skills and qualifications, or other criteriaimportant to the organization. It is essential that the organization reaches agreement on what differentiates eachlevel in a career level progression.

For example, an entry-level professional would be one who has recently graduated from college, who has littleexperience, whose skills are being developed, and who is given basic or less complex responsibilities at a lower levelthan those with experience. On the other hand, a senior level professional would have many years of experienceand the level of skills and expertise to handle more complex work and responsibilities, with less supervision. Thevalue of these jobs in the marketplace varies based on experience, competencies and level of work performed.

STEP 3: TAILOR UNIVERSAL CAREER LEVEL GUIDES FOR SPECIFIC JOB FAMILIESThe verbiage in the universal Career Level Guide can be tailored for particular job families or occupational groupsthat may exist within the organization. Job family-specific Guides are often easier to write than traditional jobdescriptions and are more meaningful for managers and employees. For example, when writing traditional jobdescriptions for different levels of jobs within a job family, it is not always easy to clearly distinguish between theresponsibilities from level to level because there is often overlap. Frequently, the main difference between jobs is“how” the job is performed rather than “what” is performed. The complexity of work assignments, the degree ofsupervision given/received, and the impact that the job has on the organization and its customers are key driversof career level decisions. When customizing Guides for particular job families, include brief examples thatdistinguish between career levels, rather than including long lists of duties and responsibilities that can quicklybecome outdated. Competencies, such as communication, project management, teamwork, strategic orientationand innovation can also be incorporated as dimensions on the Career Level Guide.

Establish Career Ladders Create Job Documentation

Impact Knowledge Autonomy and Independent

Judgment

Problem Complexity

Skills and Qualifications

Senior Manager

Directs large, highly-complex company-wide or…

Possesses expert knowledge of and exceptional …..

Operates with considerable latitude…..

Requires a high-level of critical thinking

Typically requires BS/BA in related discipline.

Manager Manages complex projects or programs with….

Strong technical and functional …..

Independently performs assignments ….

Works on more or unusually complex problems …

Typically requires BS/BA in related discipline ….

Senior May be responsible for entire projects or functions having…

Possesses and applies comprehensive…

Independently performs assignments to…

Performs advanced level professional work…

Typically requires BS/BA in related discipline…

Specialist Works independently on larger, …

Possesses and applies a broad knowledge of…

Nature of work requires increasing independence…

Performs professional level work that…


Associate Following established policies and procedures, …

Performs basic tasks and functions…


Representative Under limited supervision, relies ..

Applies advanced skills to resolve…

HS diploma or equivalent …

Directs large, highly-complex company-wide or interdepartmental projects or programs having strategic business importance. Translates high-level direction into specific action plans to remedy issues. Directly impacts overall Company and department’s performance by directing the function and working closely with business functions’ leadership teams.

Independently performs assignments to achieve stated objective. Determines and develops approach to solutions.

Receives technical guidance only on unusual or complex problems or issues.


LIMITATIONS OF CAREER LEVEL GUIDES

Although Career Level Guides that include job family-specific definitions are easy to developand maintain and have a longer shelf life than traditional job descriptions, there are somelimitations in their use. Because of their broad nature, Career Level Guides with job familydescriptions are not as detailed as traditional job descriptions and small differences in thenature of work between jobs may not be captured. In addition, you may need a separatedocument to define ADA essential functions and physical/mental requirements of the job.Nevertheless, for many organizations, Career Level Guides serve as a systematic andstreamlined approach to communicate job structures and facilitate employee movementwithin and across job families.

The data used to prepare the job family-specific Guide may include current job descriptions, training materials or jobinformation questionnaires from the relevant work unit(s), supplemented by sources like position summaries fromcompensation surveys or job descriptions found on the internet from other organizations. Position descriptions andrelated information from the Department of Labor’s O*NET system (http://online.onetcenter.org) and theOccupational Outlook Handbook (http://www.bls.gov/oco/) provide good sources of information about jobs andresponsibilities. In addition, most professional occupations offer certifications to demonstrate acquired knowledge andexpertise, and detailed bodies of knowledge for these certifications are documented and readily available online.

Keep the basic “universal” career level criteria consistent across job families, but to tailor it for a specific family, createan overarching job family summary at the top of the Career Level Guide and add representative responsibilities on acareer level basis.


Remember, not all jobs can be placed in a job family. Smaller organizations may create somejob family-based Career Level Guides for jobs that make up the majority of the workforce,but in other occupations, there may not be enough jobs or levels to warrant a formal jobfamily. In those cases, the universal guide is still a useful tool for making leveling decisions.

STEP 4: MAP PEOPLE AND JOBS TO THE NEW FRAMEWORKEmploy the new Career Level Guides in making decisions as to where to slot existing jobsand employees into the new framework. Often HR will create a spreadsheet that lists allemployees and job titles by department, with their experience, education, and performancelevels. Blank columns are inserted to allow for Job Family and Career Level assignment. HRor job family expert panels may conduct initial slotting, with more senior level managersreviewing and refining the slotting decisions in an interactive, collaborative process.Documentation of all placement decisions should be made. The final spreadsheet(s) can bean excellent tool to import job family/career level decisions into your HRIS or payroll systemfor each employee.

CAREER LEVEL GUIDES AND CAREER PATHING Career Level Guides are excellent tools for communicating career path progression toemployees, because they define the qualifications, experience and skills required formovement to the next career level within the job family. To supplement the Guide, someorganizations depict career level movement by using flowcharts or diagrams of therelationships between jobs within and between job families. Employees can see the possibleways they can progress and the different jobs that they may consider moving to as theircareer develops. Often organizations will ask employees to define their career aspirationsthrough formal Individual Development Plans (IDPs). Working with their managers andmentors, employees develop action plans to prepare them for future career opportunities.Skills and capabilities can be acquired through on-the-job training, shadowing, rotationalassignments, job enlargement, self-study and other developmental activities. Career LevelGuides serve to facilitate these career planning and developmental discussions.

KEYS TO SUCCESS Career Level Guides benefit managers and employees alike. Keys to success includeinvolving management and employees in Career Level Guide development, creating aneffective communication and implementation strategy, and monitoring results. Someorganizations create communication materials that clearly explain why job families andCareer Level Guides are being introduced and how they will benefit employees, managersand the organization. Handouts can also be given to employees about their own personal jobfamily/career level assignment and ways they can build their skills and capabilities toprogress to higher levels.

The real test of success will be how the establishment of career levels and job familiesfacilitates organizational growth and capability and improves career satisfaction in theworkforce. Tracking career level progression, conducting employee and manager focusgroups and/or satisfaction surveys, and measuring organizational results over time will helpdetermine if Career Level Guides are truly making a difference.


WELLNESS

RESILIENCE: THE ART OF BENDING SO YOU DON’T BREAKThe American Psychological Association defines resilience as“the process of adapting well in the face of adversity, trauma,tragedy, threats, or even significant sources of stress – such asfamily and relationship problems, serious health problems, orworkplace and financial stressors.” The ability to “bounce back”from the challenges of home and work is important to an overallsense of wellbeing. In the workplace, resilience and mentalwellbeing are two of the best predictors of an employee’s abilityto be productive. Some employees seem to deal better thanothers with challenges and changes in the worksite; simply put,they are more resilient. Focusing on mental health in a worksitewellness program can be a challenge for employers apprehensiveabout appearing too meddlesome and for many employees whofear the stigma associated with mental illness, even in today’smore enlightened times.

Chesapeake Energy, the second largest producer of natural gas inthe U.S., is a Willis client whose worksite wellness program hasmany facets. They recently created an innovative approach tomental health awareness through their Your Life Matterscampaign. Headquartered in Oklahoma City with employees in17 states, their goal was to remove the stigma associated withmental health issues and promote resources available to theiremployees. With senior leadership support for the campaign,Chesapeake worked with several high profile athletes, communityleaders and celebrities to tape video messages about the impactof substance abuse, depression and stress on their families untilthey received help. Alongside the video testimonials, experts inthe field of psychology offered insights into the issues andavenues for treatment. Chesapeake also added mental healthscreening questions to their health risk assessmentquestionnaire and coordinated a link between their EmployeeAssistance Program (EAP) and their wellness vendor to provideoutreach when needed. They sent a kit to every employee’s homewith information about where to get help and created an internalwebsite to feature additional resources. Calls to the EAPprogram have increased dramatically as a result of their program.

Chesapeake’s Director of Wellness, Colleen Dame, shared one ofthe keys to their success. “Our leadership was already committedto addressing the physical aspects of health through our wellnessprogram. When our program began in 2009, we knew theeconomic downturn was affecting our employees as much as itwas the rest of the country. We knew we had to start with aneducational approach to raise awareness and share the resources

that were available to employees to supportthe emotional and mental aspects of health.The videos and print materials we createdreally helped remove the stigma associatedwith mental health issues.” You can readmore about their efforts by clicking here.

While Chesapeake’s program involved thedevelopment of many new materials andpartnerships, employers can support theiremployees on the road to resilience in anumber of simple, low-cost ways. Below aresome areas to consider.

HELP MAKE CONNECTIONS Promote employee support groups or amentoring program for those making lifestylechanges, such as walking more, quittingtobacco or managing stress. Encourage yourregular wellness program attendees to “bringa friend” and earn additional incentives to getbroader employee engagement. Whenappropriate, invite families and friends to joinyour employees who are working on theirpersonal health goals. Sponsor communitywalks or help facilitate a team to participateand represent your organization. Shareinformation about local support groups andconnect employees to community resources.

KEEP IT POSITIVE ANDREALISTICHelp your employees recognize that lifestylechanges are difficult and that multipleattempts at change are normal. Let themknow that everyone has personal goals theycan work toward and that it can often beeasier to work toward them together.Encourage your senior leaders to share theirpersonal stories of lifestyle changes. Focus onhopeful, helpful and positive language in all ofyour wellness program communications.

ENCOURAGE SELF DISCOVERYEncourage your employees to try somethingnew as part of their participation in yourworksite wellness program. Bring in outsideexperts or find internal team members whocan help teach novice employees a newactivity, such as yoga, Pilates or tai chi. If youhave an onsite fitness facility, set aside timefor employees to learn how to use theequipment and machines or to try a newfitness class for free.


KEEP HELP ACCESSIBLERemind employees often of the resources available through your EAP, those that are open to the community andthe benefits available through your health plan. Make sure that these materials are part of your new hireorientation as well as part of your ongoing communications.

CONSIDER FORMAL TRAININGEmployees can learn various stress management and coping skills that help to foster resilience in individuals and inthe workgroup as a whole. Skills such as time management, progressive relaxation and deep breathing can bevaluable tools for employees to deal with stressors at work and at home. If you lack internal training resources tapinto your EAP provider, local mental health association or other community training professionals to providespecific and focused educational opportunities for staff.

Most importantly, let your employees know that you care about them; you recognize life is busy and you want themto prioritize their mental wellbeing in their overall health. Promote the menu of resources that are available tothem and their families often and in various ways through your worksite wellness program communications.

LEGAL & COMPLIANCE

RULES ON HANDLING MEDICAL BENEFIT CLAIMS AMENDEDOn June 22, 2011, the federal agencies responsible for implementation of the insurance reform provisions of thePatient Protection and Affordable Care Act (PPACA) amended their interim final regulations (IFR), which wereoriginally issued July 23, 2010, regarding standards for internal claim and appeals procedures and external reviewof denied claims. Highlights of the changes include:

n Plans are permitted up to 72 hours to decide urgent care claims so long as certain conditions are met. Theoriginal IFR required a benefit determination for an urgent care claim be made within 24 hours.

n Plans are not automatically required to include diagnosis and treatment codes in claim denial notices.However, claim denial notices must include notice of the opportunity for the claimant to request diagnosiscodes and their meanings. The original IFR required that claim denial notices include any diagnosis andtreatment codes and a description of the meaning of such codes.

n Notices provided in the course of the claims and appeals process must be provided in a culturally andlinguistically appropriate manner. The threshold for determining compliance with this requirement is set at10% of the population residing in the claimant’s county (as determined by federal census data) being literate inthe same non-English language.

n Under the original IFR a claim could immediately move to external review if the plan failed to adhere to all ofthe regulatory requirements for internal review. The amended rule relaxes the strict adherence compliancestandard by allowing for minor compliance errors that meet specified requirements.

n The scope of claims eligible for federal external review is temporarily (it is expected to remain in place untilJanuary 1, 2014) narrowed to those involving medical judgment as determined by the external reviewer (e.g.,medical necessity) or rescission of coverage. This change is effective for claims for which an external review hasnot been initiated before September 20, 2011.


n Regardless of whether the plan intends to seek judicial review of a final external review decision, it must provide,without delay, benefits to comply with the decision.

n The enforcement safe harbor policy provided by the Department of Labor and Internal Revenue Service for thefederal external review process is extended for self-insured plans (including third-party administrators for suchplans) if they contract with at least two independent review organizations (IRO) by January 1, 2012 and at leastthree IROs by July 1, 2012 (and rotate assignments among them).

n The model notices for an adverse benefit determination, final internal adverse benefit determination and finalexternal adverse benefit determination have been updated.

BACKGROUNDPPACA requires non-grandfathered health plans – including non-grandfathered employer-sponsored group healthplans – to have:

n Internal claim and appeals procedures that meet the current ERISA standards for health benefit claims as well assome additional requirements

n External review processes for denied claims that meet certain standards

Interim final regulations on the new claim rules were released on July 23, 2010. These regulations are explained in moredetail in Willis Human Capital Practice Alert, Vol. 3, No. 16, “Rules on Handling Claims for Medical Benefits.”The agencies subsequently extended the grace period for certain internal claim processing requirements. This isexplained in HR Focus, Issue #47, May 2011, “Agencies Extend Regulatory Grace Period for Some New InternalClaim Processing Requirements.”

NEW YORK ENACTS SAME-SEX MARRIAGE LAWNew York Governor Andrew M. Cuomo (D) signed the MarriageEquality Act (A08354) on June 24, 2011. The law, which is effectiveJuly 24, 2011, amends New York’s Domestic Relations Law to provideas follows:

n A marriage that is otherwise valid shall be valid regardless ofwhether the parties to the marriage are of the same or different sex

n No government treatment or legal status, effect, right, benefit,privilege, protection or responsibility relating to marriage shalldiffer based on the parties to the marriage being the same sex or adifferent sex

n No application for a marriage license shall be denied on theground that the parties are of the same or a different sex

EMPLOYEE BENEFITS PLAN ISSUESUnder federal law, the Defense of Marriage Act (DOMA) andEmployee Retirement Income Security Act (ERISA) state that lawsregarding the definition of marriage and the provision of employeebenefits are preempted. This allows employers to continue to definemarriage as between a man and a woman for purposes of providingbenefits under their employee benefit plans. DOMA and ERISApreempt state laws that would seek to define what coverage has to beprovided to what individuals in an employer-sponsored plan.


Employers purchasing insured plans in NewYork (New York insurance law generally onlyapplies to policies actually sitused in thestate) will likely not see much of a change intheir policies due to this law. This is becauseNew York, in accordance with a 2008 directivefrom then-Governor David Paterson (D),already recognized same-sex marriages legallyperformed in other jurisdictions andconferred upon such relationships the samerights and responsibilities as provided toopposite-sex marriages. As a result, forinsurance purposes same-sex spouses andopposite-sex spouses are to be treated thesame. The fact that New York now allows forsame-sex marriage does not change thisresult. A copy of the Circular Letterexplaining these rights issued by New York’sInsurance Department can be found here:http://www.ins.state.ny.us/circltr/2008/cl08_27.htm.

Due to ERISA preemption, as discussedabove, self-funded plans that are subject toERISA are not affected by state insurance law.As such, a self-insured plan would not berequired to provide coverage to a same-sexspouse. That being said, employers notwishing to extend coverage to a same-sexspouse should review their plan’s eligibilityand amend as necessary to exclude same-sexspouses. A typical plan might state that itprovides coverage for any spouse that isrecognized by state law. This language wouldopen the door to a participant’s asserting thathis or her same-sex spouse should be entitledto health coverage.

Regarding COBRA and other rights providedto spouses under federal law, same-sexspouses are not spouses. Therefore, they haveno independent right to COBRA, and that istrue even though the employer permits themto participate in the plan. If the employerwants to provide same-sex spouses anindependent right to continuation coverage, itcould do so (although the insurer or stop losscarrier will have to be involved in anydetermination). Under an insured plan, thesame-sex spouse may be entitled to coveragecontinuation benefits granted under stateinsurance law.

TAX ISSUESOver the past few years more and more employers have revisedtheir benefits plans to add benefits for non-traditional familymembers. For example, many plans allow employees to covertheir same-sex spouses, domestic partners and civil unionpartners. Often, however, employees (and even some employers)mistakenly assume that because these individuals are eligiblefor the employer’s plan that the benefit taxation issues are thesame as those for an employee’s legal spouse. However, that istypically not the case. Federal law does not recognize same-sexmarriage and does not confer any special tax benefits to theparties of such relationships.

Generally, even if health benefits would have been excludedfrom income if they were provided to an employee’s spouse (asdefined under federal law), an employer may be obligated totreat health benefits provided to a same-sex spouse as part of theemployee’s taxable income. Health benefits are excluded froman employee’s income for federal income tax purposes onlywhen they are provided for an employee, the employee’s legalopposite-sex spouse, the employee’s child who will be under age27 at year-end, or the employee’s dependent as defined in the taxcode for purposes of health benefits. Same-sex spouses are notincluded in the definition of a spouse for this purpose, so a same-sex spouse’s benefits are taxable at the federal level unless thesame-sex spouse qualifies as the employee’s dependent (this israre).

For each individual that an employee enrolls in a health plan,the employer must impute income to the employee unless theindividual is the employee’s opposite-sex spouse, the employee’schild who will be under age 27 at year-end or the employee’sdependent (as defined in the tax code for health plan purposes).The amount to impute is the value of the coverage provided lessthe amount of after-tax contributions that the employee haspaid toward the cost of coverage. If the employer has paid thefull cost of the coverage (or if all of the employee’s contributionshave been made on a pre-tax basis), then the employer willimpute to the employee 100% of the value of the coverageprovided to the individual who is neither a spouse, dependentnor a child under age 27 at year-end.

While the employee must be taxed on the fair market value ofcoverage, the appropriate means of determining the value of thecoverage is debatable (the IRS has not provided a formal answerto this question). In most cases, the COBRA cost of the coverage(minus the 2% add-on) provided to the individual is a reasonableestimate of the value. For example, if an employee elected familycoverage that included the employee, a non-dependent domesticpartner and the employee’s 16-year-old child, and the employeepaid the required contributions for the coverage on a pre-taxbasis, the COBRA valuation method would impute to theemployee the COBRA premium for individual coverage (less the


2% add-on). If the employee pays thecontribution on a pre-tax basis (thecafeteria plan rules allow such coverageto be elected as a taxable benefit), keep inmind that it will be necessary to imputeincome on a current basis (i.e., in thesame paycheck as the pre-tax deductionis taken) so that payroll tax deposits aremade as if the imputed income were paidat the time the coverage is provided.Additional information about thecafeteria plan rules can be found inChapter 3 of the Willis on-lineCompliance Manual.

As discussed above, New York wasalready recognizing same-sex marriageslegally performed in other jurisdictions(same-sex marriage is also recognized inConnecticut, Iowa, Massachusetts, NewHampshire, Vermont and Washington,D.C.). However, the New York StateDepartment of Taxation and Finance hadtaken the position that same-sex spouseswere not entitled to state income taxbenefits. This is because New York stateincome tax law adhered to the federal taxlaw and federal law does not recognizesame-sex spouses. With the enactmentof the Marriage Equality Act, however,New York will have to change its tax lawsto provide the same state tax benefitsthat are conferred to opposite-sexspouses.

CONCLUSIONThe general issue is that, regardless ofwhat New York law says, federal lawgenerally trumps state law. Therefore,same-sex spouses are treated as non-spouses for all federal laws – thatincludes COBRA, federal tax, FMLA, etc.However, same-sex spouses will beeligible for those benefits and rightsconferred by New York state law. WhileNew York was already recognizing same-sex marriages legally performed in otherjurisdictions, employers will want toreview any policies that extend benefitsto spouses to determine what needs to beamended to ensure that the samebenefits are provided to same-sexspouses who are married in New York.

ANNUAL LIMIT WAIVERPROCESS AMENDEDThe Department of Health and Human Services (HHS) recentlymodified the annual dollar limit waiver program. The following arehighlights of the changes:

n Makes waivers granted under the program valid until the end ofthe 2013 plan year, if applicants submit annual information abouttheir plan and comply with notice requirements to ensure thattheir enrollees understand the limits of their coverage

n Requires all existing waiver recipients to apply for extension oftheir current waivers by September 22, 2011

n Requires any new plans, where applicable, to apply for the waiverprogram no later than September 22, 2011

BACKGROUNDAs part of the Patient Protection and Affordable Care Act (PPACA)group health plans must eliminate any annual or lifetime dollar limitson “essential benefits.” The effective date for most plans was the 2011plan year, but PPACA included a phase-in for the annual limitprohibition. In addition, a waiver process was instituted under which,for a limited time, approved plans could have annual limits lowerthan those permitted under the phase-in provisions. For moredetailed information on the annual dollar limit rules, see WillisHuman Capital Practice Alert, Vol. 3, No. 13, “Patient’s Bill ofRights Guidance Issued.”

The annual limit waiver program permits insurers, as well as employers and unions, to seek relief fromthe annual dollar limit requirements. In order toreceive a waiver, insurers and plan sponsors mustdemonstrate that compliance with the annual dollarlimits would result in a significant decrease in accessto benefits or a significant increase in premiums.

The waiver process was intended to permit plan sponsors whooffered affordable limited medical plans (sometimes referred to as“mini-med” plans) an opportunity to continue offering that coverageuntil more comprehensive coverage becomes available through thestate insurance exchanges that are expected to become operational in2014. The annual limit waiver program, which initially providedwaivers on a plan year basis, is available only until the 2014 plan year.


Remember that if an employer plan is insured (rather than being self-funded) the insurer will typically apply for thewaiver for its contracts and the waiver will be applicable to all the insureds that use that contract. The list ofapproved waivers for the current year appears here, and employers can also ask the insurer whether they areplanning to have the waiver extended.

HHS REVISES WAIVER PROGRAMOn June 17, the HHS’ Center for Consumer Information and Insurance Oversight (CCIIO) released informationregarding the waiver program, including a Fact Sheet that will assist employers with their 2012 and 2013 planning.Under the new guidance, CCIIO announced that insurers and employers must request waivers (and extensions ofwaivers) no later than September 22, 2011. Applications for waivers received after this date will not be accepted.Information on how to apply for a waiver, including an extension of an existing waiver, is available by clicking here.

Once approved, the waiver is intended to be valid until 2014. However, there are certain conditions that must be metin order for this to occur. Those plan sponsors or insurers that receive a waiver (this includes those receiving anextension of an existing waiver as well as new waiver applicants) and wish to extend it to 2014 must file two AnnualLimit Updates. The first update must be submitted by December 31, 2012 and the second is due by December 31,2013. The Annual Limit Updates must include the same information as an original waiver extension application,but with updated information and an updated attestation.

All waiver recipients, including those who applied under the earlier guidance, must distribute an updated annualnotice to eligible participants. Employers and insurers may not use language different from the model noticeprovided in the guidance unless they receive CCIIO’s written consent. The model language can be found here.

Additional information about the revised waiver program can be found in Willis Human Capital Practice Alert, June2011, “Limited Medical Plan Waiver Guidance Released.”

CONNECTICUTENACTS PAID SICKLEAVE LAWConnecticut Governor Dannel P. Malloy (D)recently signed legislation (Senate Bill 913)that gives certain employees in Connecticutpaid sick leave. The law, which is effectiveJanuary 1, 2012, applies to servicecompanies with 50 or more workers inConnecticut during any one quarter of theprevious year. Covered employers arerequired to provide service workers onehour of sick time for every 40 hours worked,up to a maximum of 40 hours (five days) per

calendar year. The term “service worker” is defined as an hourly, nonexempt employee who primarily works in oneof the 68 Standard Occupational Classification titles specifically listed in the legislation. Day and temporaryworkers are not eligible for benefits.

The sick leave can be used for the employee’s own illness, injury or health condition, for the care or treatment of aspouse or child, or to address personal needs resulting from family violence or sexual assault. Employees arepermitted to carry up to 40 hours of unused accrued paid sick leave from year to year but may only use 40 hours ofpaid sick leave in any one year. Employees must have worked for the employer for at least 680 hours and worked anaverage of least 10 hours per week for the employer in the most recent calendar quarter before the service workerwill be entitled to use accrued sick leave.


Certain manufacturers and specified nationally chartered tax-exempt organizations are excluded from the mandate. Inaddition, employers will be deemed to be in compliance with the mandate if they offer any paid leave (e.g., paid time off,vacation, etc.) that accrues at a rate that is at least as generous as the mandate (up to 40 hours) and that can be used forthe same purposes as the law requires.

Employers will be required to provide service workers, at the time of hiring, a notice that explains:

Their entitlement to sick leave, the amount of sick leave provided and the terms under which sick leave may be used That retaliation by the employer is prohibitedThat the service worker has a right to file a complaint with the Labor Commissioner for any violations of the law

Employers can comply with the notice requirement by displaying a poster at their place of business in a conspicuousplace accessible to service workers, that contains the required information in both English and Spanish. The lawincludes an anti-retaliation provision that prohibits covered employers from retaliating against an employee forrequesting paid sick leave, for using paid sick leave or for submitting a complaint to the Labor Commissioner over aviolation of the paid sick leave law. A copy of the legislation can be found by clicking here.

Information about paid leave mandates in other cities and states can be found in Willis Human Capital Alert, Vol. 2, No. 1, “More Paid Leave Mandates.”

HHS RELEASES PROPOSED CHANGES TO HIPAAPRIVACY RULEThe Department of Health and Human Services (HHS) released a proposed rule to modify the Health InsurancePortability and Accountability Act (HIPAA) privacy rule’s standard for accounting of disclosures of protected healthinformation (PHI). The changes are intended to implement statutory requirements under the Health InformationTechnology for Economic and Clinical Health (HITECH) Act. HITECH requires covered entities (e.g., health plans) andbusiness associates to account for disclosures of PHI to carry out treatment, payment and health care operations if suchdisclosures are through an electronic health record.


The proposed rule makes changes to the existing accounting requirements which are intended to improve theirworkability and effectiveness. Under the current HIPAA privacy rule, covered entities are required to makeavailable, upon an individual’s request, an accounting of certain disclosures of the individual’s PHI made during thesix years prior to the request. The proposed rule limits the right to an accounting to disclosures of PHI in adesignated record set (DRS). For a covered health plan the DRS includes “the enrollment, payment, claimsadjudication, and case or medical management records,” and any other records used “to make decisions aboutindividuals.” The proposed rule reduces the accounting period to three years and it provides a very specific list ofthe types of disclosures that are to be included in the accounting (e.g., excludes all disclosures for treatment,payment and health care operations). HHS also proposes to exempt from the accounting those impermissibledisclosures for which the covered entity has provided notice under HIPAA’s breach notification rules. It alsoreduces the 60-day response time for an accounting request to 30 days (with one 30-day extension).

The proposed rule also expands the current accounting provision to provide individuals with the right to requestand receive an access report indicating who has accessed their electronic PHI in a DRS. The access report mustinclude the date and time of the disclosure, the name (and address, if known) of the person accessing theinformation, a brief description of the information disclosed and the user’s action (e.g., whether the user created,modified, deleted or merely accessed the record). The report must include any instances of access, both uses anddisclosures, regardless of the purpose (even if it is for treatment, payment and health care operations). As theHIPAA security rule already requires covered entities to track access to individuals’ electronic PHI, HHS believes itwould not be unduly burdensome for covered entities to provide this information to individuals upon request. Therule will also require a revision to a covered entity’s privacy notice to include a statement regarding an individual’sright to receive an access report.

The modifications to the accounting of disclosures requirements would become effective 240 days after publicationof the final regulations. Regarding the access reports provision, compliance would be effective January 1, 2013 forelectronic DRS systems acquired after January 1, 2009 and January 1, 2014 for electronic DRS systems acquiredprior to 2009. For additional information about the HIPAA privacy rules, please see Chapter 10 of the Willis onlineCompliance Manual.

PPACA AMENDMENTS TO PLAN MATERIALSMost employers are keenly aware of the changes made by the Patient Protection and Affordable Care Act (PPACA),but some may not have taken formal steps to show that they are complying with the PPACA requirements.

Plan sponsors need to evaluate their ERISA plan years and determine when plan amendments should be made.Calendar year plans became subject to many of the new PPACA requirements on January 1, 2011. Accordingly, plansponsors should have had plan amendments in place as of January 1.

Cafeteria plans were also impacted by the PPACA requirements and should have been amended on January 1.However, later guidance from the Internal Revenue Service indicated that plan sponsors could adopt cafeteria planamendments as late as June 30, 2011 and still comply with PPACA changes, as long as the amendments wereeffective retroactively in order to address health care expenses incurred.

Plan sponsors should have already adopted plan amendments. However, in the event that they have not done so,they should contact their local Willis office for a basic PPACA plan amendment for wrapper plan documents and abasic PPACA plan amendment for cafeteria plans as well as SMMs to coordinate with those plan amendments.


n The type of administration of the plan(e.g., contract administration, insureradministration, etc.)

n The name, business address, andbusiness telephone number of the planadministrator as that term is defined byERISA §3(16)

n The name and address of the persondesignated as agent for the service oflegal process, the address at whichprocess may be served on such person,and a statement that service of legalprocess may be made upon a plan trusteeor the plan administrator

n The plan’s requirements concerningeligibility and benefits

n A statement clearly identifying thecircumstances which may result indisqualification, ineligibility or denial,loss, forfeiture, suspension, offset,reduction or recovery of any benefits

SINCE YOU ASKED: DO I REALLY NEED PLANDOCUMENTS AND SPDs?When answering questions, the National Legal & Research Group(NLRG) frequently refers to the client’s plan documents andsummary plan descriptions (SPD). While those items are required byERISA, there is no specific penalty for not having them. Therefore,the industry practice has been to use substitutes, such as insurancecompany contracts, summaries of benefits, insurance certificates and the like.

When an NLRG attorney asks why there is no plan document, theclient is often unaware that the materials it has may or may not besufficient to comply with ERISA’s requirements. The client may thenask if it is really necessary to go to the bother of getting thedocuments in place (plan documents are often relegated to thebottom of the priority list due to the cost associated with draftingdocuments and the fact that there is no specific penalty associatedwith the failure to have a document, only for the failure to provideone to a participant if asked).

While it may not be an issue for many years, a request for plandocuments can arise at any time and from any source, withoutwarning or notice, and clients need to be aware of ERISA’srequirements and prepare for the unexpected.

DOL AUDIT REQUESTS The unexpected nature of a request for plan documents can behighlighted by a recent call to NLRG. An Associate of Willis’ HumanCapital Practice recently called NLRG on behalf of a client that hadbeen audited by the Department of Labor (DOL). The DOLdetermined after its investigation that the plan sponsor had notcomplied with ERISA. This is because the auditor determined thatthe materials presented to him did not comply with ERISA’s SPDrequirements. The client was upset about this as it had beencompletely cooperative with the auditor and gave him a host ofdocuments, including summaries of benefits from the carriers. Theclient was confused as to why the auditor had not looked for theinformation in all the various documents that the client provided.

The auditor’s letter specifically noted that the following informationwas not in the submitted materials:

n The name and address of the employer whose employees arecovered by the plan

n The employer identification number (EIN) assigned by theInternal Revenue Service to the plan sponsor, and the plannumber assigned by the plan sponsor

n The type of welfare plan (e.g., group health plan, disability plan, etc.)


n A description of the rights and obligations of participants andbeneficiaries with respect to continuation coverage

n The sources of contributions to the plan (e.g., employer,employee organization, employees)

n If a health insurance issuer is responsible, in whole or in part, forthe financing or administration of a group health plan, the nameand address of the issuer, whether and to what extent benefitsunder the plan are guaranteed under a contract or policy orinsurance issued by the issuer, and the nature of anyadministrative services provided by the issuer

n The date of the end of the fiscal year for purposes of maintainingthe plan’s fiscal records

n The procedures governing claims for benefits under the plann A statement of ERISA rights authorized by ERISA §104(c)

The Willis Associate asked if it was not incumbent upon the auditorto find that information in the supplied materials (without reallyknowing for sure that it was there). Unfortunately, that is not howmost DOL audits (or most others for that matter) are done. Theemployer will have to demonstrate compliance with the rules, clearlyand completely. The employer should point out to the auditor

specifically where all this information exists.NLRG’s discussion with the Willis officeassumed that the information actually wasprovided to plan participants at some point.Therefore, the client (through its attorney)should point out just where the requestedinformation was in the documentationprovided since the auditor did not see it in theso-called SPD. Doing so quickly andcompletely would go a long way to resolvingthe auditor’s concerns.

CONCLUSIONPlan audits are likely going to be increasing asthe various regulatory agencies are planningto add investigative personnel. Therefore,employers should take care to have requireddocumentation in place so that they will beable to quickly demonstrate compliancewhen asked rather than scramble to providerequested documentation.

WEBCASTSCOMMUNICATION ACTION PLANSAUGUST 16, 20112:00 PM EASTERN TIME

Presented by:AME MCCLUNEDIRECTOR – MARKETING & CLIENTCOMMUNICATIONSHUMAN CAPITAL PRACTICE

HR and benefits professionals typically create action plans for tackling any and everything ontheir hit list. However, employee communication planning often gets put on the back burneruntil annual open enrollment dates are set. Creating and following an action plan for employeecommunication is a step organizations should take alongside other important initiatives. Aneffective communication strategy is an important step to promote your benefits and make surethey are understood, appreciated and used wisely. A clear timeline, project list and a healthy mixof creativity and educational content will keep employees engaged and educated.

This webcast will address:

n Planning for open enrollment communicationsn Strategies for engaging employees year roundn Understanding communication as a process rather than an event

PARTICIPANT ACCESSAdvance reservations are required to participate. Click here to RSVP for this call.


MAKING MERIT PAY MATTER IN YOURORGANIZATIONSEPTEMBER 22, 20112:00 PM EASTERN TIME

Presented by:DEBBI DAVIDSON, CCP SENIOR HUMAN RESOURCES CONSULTANT

Even though incentives and other forms of variable pay are becoming the desired compensationmethods for rewarding high performance, merit pay increases have not gone away. In fact, asmerit budgets continue to stay flat at 2-3%, ensuring pay-for-performance alignment becomesan even bigger challenge. Merit increase planning is more than simply providing “a number” tothe Finance Department. The process calls for careful planning and special skills by HRprofessionals to model merit increase scenarios. and compels managers to differentiateperformance levels and rewards. Topics for discussion will include:

n Merit pay—what it is and what it isn’tn Key considerations when creating a merit pay policyn Merit increase budget projections for 2012n Difficulties with merit increases and strategies for overcoming themn Performance management design and linkage to merit pay n Merit “matrix” alternatives and the pros/cons of eachn Step-by-step guidance on how to design a budget-aligned, performance-based merit increase

guideline matrix n Metrics for evaluating pay-for-performance alignment in your organization

PARTICIPANT ACCESSAdvance reservations are required to participate. Click here to RSVP for this call.

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