Pay or Play? Pros and Cons

Gillihan is counsel in the Atlanta office of Alston & Bird LLP. His tips came at a recent webinar sponsored by BLR® and HR Hero®.

Reasons for having insurance from employee’s perspective:

• Risk mitigation
• Negotiated discounts

Reasons to Get Insurance Through the Employer:

• The income tax/Federal Insurance Contributions Act (FICA) exemption for employer premiums and employee premiums.
• Exchange coverage may not be offered through the employer’s cafeteria plan. Thus, the employee pays for exchange coverage with after-tax dollars. (There are exceptions for tax subsidy employees.)
• The employer may be better equipped to make complex purchasing decisions.
• It may be easier to get coverage through the employer.
• The individual market has higher premiums due to antiselection and individual underwriting/selling costs.
• The employer’s coverage may be better than coverage in the Exchange.

Reasons for Employers to Maintain Coverage

• Sledgehammer penalty.
• FICA tax savings on employer/employee health plan premiums coupled with employer tax deduction for employer health plan costs may exceed the difference between the sledgehammer penalty and the cost to provide health coverage.
• Increased salary needed if no insurance is offered. (“Equalizing” through compensation will cost more than the cost of coverage due to income/employment tax associated with compensation.)
• Business reasons:
  • Company cultural imperatives,
  • High value workforce,
  • Impact on productivity, and
  • Public relations/government relations.

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Deductions a hassle? Join us on December 11, 2013 for an interactive webcast Pay Deductions Explained: What You Can and Can’t Legally Deduct from Employees’ Pay. Learn More

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Reasons for Employers to Maintain Coverage:

• Sledgehammer penalty.
• FICA tax savings on employer/employee health plan premiums coupled with employer tax deduction for employer health plan costs may exceed the difference between the sledgehammer penalty and the cost to provide health coverage.
• Increased salary needed if no insurance offered. (“Equalizing” through compensation will cost more than the cost of coverage due to income/employment tax associated with compensation.)
• Business reasons:
• Company cultural imperatives,
• High-value workforce,
• Impact on productivity, and
• Public relations/government relations.

If Coverage is Dropped:

• Nondeductible excise tax of $2000 per full-time equivalent (FTE) (The real cost is higher due to loss of deduction.).
• Pressure to increase taxable wages to pay for exchange coverage.
• Uncertainty as to whether coverage is purchased.
• Exchange risk of higher cost:
• Adverse selection and
• Mandated benefits.

If Coverage Continues:

• Cost of continuing coverage:
• Costs are deductible.
• Subsidy is variable.
• Potential competitive advantage of offering better/lower cost coverage.
• More freedom over coverage options.
• Potential risk pool advantage.

Comp and benefits—the challenges just keep coming. But here’s one you can master next week—the tricky territory of pay deductions. Income tax, health insurance, and social security contributions, those are pretty clear, but there are many other areas that may cause confusion for even the savviest comp and benefits manager, like pay deductions for:

• Loans
• equipment
• jury duty
• uniforms
• equipment damage

Just one example: A California-based salon agreed to pay $750,000 to settle a class-action lawsuit alleging that it unlawfully made pay deductions for 125 nail technicians for things like dropping nail polish.

Fortunately, there’s timely help in the form of BLR’s new webcast— Pay Deductions Explained: What You Can and Can’t Legally Deduct from Employees’ Pay. In just 90 minutes, you’ll get the practical guidance you need to manage all your payroll deductions.

Find out more

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Learn the tricky ins and outs of pay deductions. Join us December 11, 2013 for an interactive webcast, Pay Deductions Explained: What You Can and Can’t Legally Deduct from Employees’ Pay. Earn 1.5 hours in HRCI Recertification Credit. Register Now

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Participate in this interactive webinar, and you’ll learn:

• Types of pay-based deductions that are generally permissible and those that are not under federal law
• What to do if you receive a letter from the IRS or a court order to garnish wages
• Practical tips for making payroll deductions pertaining to
• cash shortages
• employer-owned property that is damaged or destroyed
• jury duty
• and more
• Whether you can require exempt employees to use vacation or PTO when your office is closed and you can’t legally dock their pay
• When you could be in danger of losing an exemption for making salary deductions for an exempt employee
• How to draft a Payroll deduction policy
• How to make deductions to pay back debts to your organization, such as
• employees’ loans
• advances
• purchases
• What to do if an employee leaves the company before his debt is fully repaid
• And much more!

Register now for this event risk-free.

Wednesday, December 11, 2013
1:30 p.m. to 3:00 p.m. (Eastern)
12:30 p.m. to 2:00 p.m. (Central)
11:30 p.m. to 1:00 p.m. (Mountain)
10:30 a.m. to 12:00 p.m. (Pacific)

Approved for Recertification Credit

This program has been approved for 1.5 recertification credit hours toward recertification through the Human Resource Certification Institute (HRCI).

Join us on December 11, 2013—you’ll get the in-depth Pay Deductions Explained: What You Can and Can’t Legally Deduct from Employees’ Pay webcast AND you’ll get all of your particular questions answered by our experts.

Find out more

Train Your Entire Staff

As with all BLR/HRhero webcasts:

• Train all the staff you can fit around a conference phone.
• You can get your (and their) specific phoned-in or emailed questions answered in Q&A sessions that follow each segment of the presentation.

Find out more