Anti-discrimination Laws and The Effect on Employee Benefit Packages

A balanced benefits package can attract and keep valued employees, but the cost of offering benefits can skyrocket if not monitored

In 2017, the Bureau of Labor estimated that the average cost of providing benefits for each employee is $11.38 per hour. However, costs for these packages ultimately depend on factors such as geography, industry, workforce size, health plans offered, and the overall health of the workforce.

Employers looking for savings might wonder whether they can save money by providing certain benefits only to certain employees. And, while there are situations when employers are able to offer specified benefits to certain employees, employers should have a good understanding of federal and state anti-discrimination laws or seek professional guidance. It is illegal for employers to discriminate against employees on the basis of race, color, religion, sex (including gender identity, sexual orientation and pregnancy), national origin, age (40 or older), disability or genetic information.

What's Legal

There are no federal laws requiring that plans provide the same benefit coverage to all employees as long as benefit eligibility is based on tenure, work location, full- or part-time status, exempt/nonexempt status, job group or department. Here are a few exceptions:

Health Plans

• In certain welfare plans, including self-insured medical and group term life insurance plans, taxable income is created for employees if they receive a disproportionate amount of tax-advantaged benefits. These situations could cause a company plan to fail the nondiscrimination test.
• The Patient Protection and Affordable Care Act (PPACA) requires employers with 50 or more employees to either offer employees health care coverage or pay a fee. The law does not apply to part-time workers, except in determining if the employer has 50 or more "full-time equivalent" employees.
• A plan also may be able to offer different benefits to employees, their spouses and their dependents. A plan also can make distinctions between the beneficiaries themselves if the distinction is not based on a health factor. However, under the PPACA, adult dependents must be covered to age 26. To avoid fees, employers must offer adult dependents the same level of coverage at the same price as currently offered to other similarly situated dependents.

Vacations

• It is legal to offer three weeks of vacation to exempt employees and only two weeks to nonexempt employees because the benefit is offered based on Fair Labor Standards Act (FLSA) categories and is not based on any protected category or other applicable law.

Paid Sick Leave

• While federal laws might not require all coverage to be the same, some states have laws covering certain benefits, including paid sick leave, that apply to all of an employer's employees.

It's the Law

There are a variety of federal and state laws that govern the establishment and operation of employee benefits. Consult with your broker for each of your plans or with an attorney if you have questions as to whether you are administering benefits fairly under state and federal laws.

The Employee Retirement Income Security Act (ERISA) was passed in 1974 to protect employees whose employers offer retirement and health plans. ERISA requires plan sponsors to provide detailed benefit information to covered employees and beneficiaries; follow a strict fiduciary code of conduct; and provide detailed reporting through Form 5500, if required.

ERISA ensures that employers cannot:

• Deny an employee benefits because they are about to incur significant medical expenses.
• Offer different coverage benefits for pregnancy.
• Improperly manage investment accounts.
• Fail to provide notice of employees' rights by not providing them with plan documents.
• Retaliate against an employee for raising issues about their benefits.

A law governing health care benefits, the Consolidated Omnibus Budget Reconciliation Act (COBRA), requires that employers with 20 or more employees offer employees who lose their jobs the option of continuing to have group health care plan coverage for a certain time period.

Title VII of the Civil Rights Act of 1964, also known as Equal Employment Opportunity (EEO) mandates, prohibits employers with 15 or more employees from discriminating against applicants and employees in all aspects of employment — including recruiting, hiring, pay, promotion, training and termination — on the basis of race, color, national origin, religion or gender. Parental leave benefits that do not relate to a pregnancy-related disability must be applied equally to men and women under Title VII and the FMLA. If an employer does not limit the availability of maternity leave to the period of disability, male employees must be granted paternity leave under the same terms and conditions as females.

The Health Insurance Portability and Accountability Act (HIPAA) makes it illegal to charge some employees more than other employees based on their medical conditions, claims experience, health services received, genetic information or disability.

All states have enacted at least one law pertaining to employment discrimination, but the law may only apply to companies of certain size. In addition, state laws may be broader in scope than the federal laws, with the result that protection is provided to groups in addition to individuals with a particular sexual orientation.

Please contact us if you have questions about how anti-discrimination laws might affect your health plan administration.

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In this issue:

This Just In ... IRS Makes it Easier to Correct Retirement Plan “Failures”

Anti-discrimination Laws and The Effect on Employee Benefit Packages

Tackling Obesity in the Workplace

529 Savings Plans: An Easy Way to Help Bring College Within Reach

A Retirement Plan for Hard-to-Replace Employees

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