Effective Strategies for Mitigating Risk in

Administering Wage Parity and Employee

BenefitsPaul Essner, CFP®, CLU, ChFC, Principal – Homecare Specialty Group

TSG Financial, A Division of Risk Strategies

Emina Poricanin, Esq., Partner – Home Care Practice Leader,

Hodgson Russ LLP

Friday September 6, 2019

HCA Senior Financial Managers Retreat

Mohonk Mountain House – New Paltz, NY

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HCA SFMR 2019

COMMERCIAL MESSAGE (DISCLAIMER)

All proposals and related materials presented by RSC Insurance Brokerage, Inc. represents a proprietary work product in which

RSC Insurance Brokerage, Inc. retains any and all copyrights and trademarks. The information contained herein and in any

other proposals is intended for the use of CDPAANYS Wage Parity & Provider Intensive Attendees Only, and may not be

shared with any other person or entity without the express prior written consent of RSC Insurance Brokerage Inc.

The information contained herein is for general reference only without warranty of any kind, express or implied, and with the

understanding that RSC Insurance Brokerage, Inc. and its affiliates (collectively “RSC”) are not engaged in rendering legal,

accounting, tax or other professional advice. RSC, cannot and does not warrant the accuracy or completeness of any

information contained herein, and assumes no liability for damages incurred, directly or indirectly, as a result of errors,

omissions or discrepancies in such information.

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HCA SFMR 2019

WHO’S MONITORING WAGE PARITY

COMPLIANCE?

• NY Attorney General, Medicaid Fraud Unit

• NY Attorney General, Labor Bureau

• NY Office of Medicaid Inspector General

• New York Department of Labor

• U.S. Department of Justice

• Government agencies are sharing information in conjunction with specific

initiatives, such as wage parity compliance.

Don’t forget lawsuits. There are approximately 200 wage and hour class

action lawsuits in New York, against home care agencies, and almost all

of those lawsuits assert some sort of wage parity noncompliance.

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WHAT DOES THE GOVERNMENT WANT?

• All payroll records for a specific period of time

• All employee handbooks and policies

• All timesheets/EVV records

• All wage parity benefit plans and documents

• Proof that aides received $4.09/$3.22 per hour

worked on eligible Medicaid cases

• Any communications to employees, explaining

the slate of wage parity benefits

• All communications between agency

owners/managers and any other party

concerning wage parity benefits

(e.g., benefit card vendors)

• Bank statements, general ledgers

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SAMPLE OMIG LETTER INITIATING AUDIT

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WHAT HAPPENS THEN, IN OMIG AUDITS?

• An initial conference with two to three auditors from OMIG

• Follow up-request for timesheets and payroll records for 10 employees, selected by the Company

• Follow-up questions

- Examples of questions asked by auditors in follow-ups:

Specific questions about compensation for aides, such as, calculation of overtime by the agency

Whether the Company paid travel time

Policies between benefit brokers and the benefits providers (e.g., the life insurance company)

• Referral to NYS DOL for further review of the matter

- DOL notifies the provider that they are reviewing the case and requests additional information

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WHAT IS OMIG LOOKING FOR?

COMMON AREAS OF FOCUS:

• Is overtime paid after 40 hours/week?

• Is the overtime rate computed correctly?

• Are aides paid weekly?

• Are wage parity benefits adding up to $4.09/$3.22 per hour for employees?

• Are Wage Notices provided to employees at the outset of employment?

• Are aides paid for in-service?

• Does the Agency pay for travel time?

• Are home care owners benefiting from wage parity benefits, directly or indirectly?

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WHAT DOES THE ATTORNEY GENERAL WANT

TO SEE? In addition to the items that are requested by OMIG, the Attorney

General wants to see:

**All this information is requested for the time period beginning on

January 1, 2012 to the present.

• QIVAPP applications

• Any and all communications with MLTCs and the DOH

regarding wage parity

• MLTC contracts

• Wage parity certifications

“…IF IT’S BROKEN, FIX IT,

IF IT A’INT BROKEN, MAKE IT

BETTER…”

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HCA SFMR 2019RISK STRATEGIES TODAY

Privately held - 50+ offices nationally

‐ Headquarters: Boston, MA

1,100+ employees

Risk Strategies places over $3B in premiums on

behalf of its 50,000+ clients

Business Insurance

‐ 17th largest US broker in 2018

‐ 7th fastest growing firm in 2017/18

Insurance Journal

‐ 11th largest privately-held US P&C broker

‐ 10th largest personal lines broker in US

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HCA SFMR 2019

Risk Strategies is a privately held,

national brokerage

and consulting firm.

Ranked in the top 20 brokers in

the country, the company offers

sophisticated risk management

advice and insurance placement

for health care, property &

casualty, and employee benefits

risks.

Health, Accident, Life, Disability, Insurance and Reinsurance

Qualified and Non-Qualified Retirement Planning and 401(k)

Property & Casualty, Medical Malpractice, and Employee Benefits Insurance

Mid-Market to Global Commercial, and High Net Worth Individuals

Industry verticals include: Entertainment, Fine Arts, Real Estate, Health Care, Private Equity, Higher Education, Construction, Manufacturing, Professional Liability, Public Entity

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HCA SFMR 2019

DISCUSSION OBJECTIVES

Examination of Popular Wage Parity Strategies

Options and Risks

Reminder about the objective of Wage

Parity

Best practices for designing and delivery Employee

Benefits for Wage Parity

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HCA SFMR 2019

TAKE OUT YOUR CELL PHONES…

Paul Essner, CFP® CLU ChFC Emina Poricanin, Esq.

Bryan Pendrick, CFP® CLU ChFC

Sean Rosenfeld

Mobile | 516-790-5068

srosenfeld@tsgfin.comOffice | 516-747-7373

Mobile | 516-790-5068

Office | 516-336-5962

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HCA SFMR 2019

WAGE PARITY – OLD NEWS - OVERVIEW

Since 3/1/12, NYC and LI/Westchester Home Care Agencies are Required to provide a Prevailing Wage and Benefits Package to all covered employees

Known as NY Home Care Worker Wage Parity

Effective 10-13-17, this applies to CD PAP

NYC Req’t*LI/Westchester Req’t*

Employers have a

choice of providing

this as compensation

or as an employer

paid benefit

*Source - https://www.health.ny.gov/health_care/medicaid/redesign/mrt_61.htm

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SO THE EMPLOYEE BENEFITS MARKET BEGAN

REACTING…

Mandatory MEC Plans

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WE ARE REMINDED OF

THE BASIC PURPOSE OF THE LAW

*Source -https://www.health.ny.gov/health_care/medicaid/redesign/2012-02-17_worker_parity_faqs.htm

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SO – WHAT’S WRONG WITH THOSE STRATEGIES?

A PROPERLY structured Wage Parity Benefit SHOULD have three core elements

“…primarily benefit the employee.”

Tax Favored to Employee and Employer

Properly Distributed to the Employees

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HCA SFMR 2019

“…PRIMARILY BENEFIT THE EMPLOYEE.”

Did you give to them?

Did you properly

communicate it?

Did they understand

it?

Did they use it?

Did they appreciate it?

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HCA SFMR 2019

SO – WHAT WORKS?

Just pay the wage in full (less PTO, et

al)!

Benefits that are priced on a per

hour basis

Benefits that are fully funded

Benefits that do not expire or

require a true-up

Benefits that properly represent a responsible FI or

LHCSA

Benefits supported and reviewed by

counsel!

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STILL NEED TO CONSIDER EMPLOYER SHARED

RESPONSIBILITY (PP)ACA REQUIREMENTS FOR

EMPLOYERS/FIS?

Your must make an offering at least once per

year to ELIGIBLE HHAs – This is how to

decide when…

Brand New Terminology -

easurement

Period

Initial and Standard

dministrative

Period

tability Period

Initial and Standard

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What if you fail to file the Forms – or, there is a

challenge to your data…

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ERISA AND DOL NOTIFICATIONS –

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily

established pension and health plans in private industry to provide

protection for individuals in these plans.

Employers must provide a series of notices to employees pertaining to

the offering of benefits and, in many cases, file reporting with the DOL

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EXAMPLES OF COMPLIANCE NOTICES

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FORM 5500 – IF YOU HAVE 100 OR MORE

COVERED PAs OR HHAs OR A RETIREMENT PLAN

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- HOW TO USE THE $4.09/$3.22

TO FUND HEALTH INSURANCE – NOT SO SIMPLE…

Premium level does not allow for consistent hourly spend for employees electing health insurance

• Unless the HHA/PA works consistent hours each month, how do you calculate the spend per hour?

• What if the hours are so low for a health insurance eligible HHA/PA that the cost of coverage is greater than the $4.09/$3.22?

• Average Cost of Single HMO coverage/budget liability for Northeast Employers is $598 per month*

• After subtracting as $0.35 per hour average accrual for PTO, a NYC HHA/PA would need to work 159.9 hours per month (every month) for the cost of coverage to benefits to equal EXACTLY $4.09. (185.7 hours for LI and Westchester)

Is there a solution?

• If agencies could adopt a similar strategy to that of a union – wherein they contribute an hourly cash contribution to a trust and “spread” the cost of health insurance to only those that elect it.

• This trust is known as a VEBA –Voluntary Employees’ Beneficiary Associations

*Source – Kaiser Family Foundation 2018 Employer Health Benefits Survey

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HCA SFMR 2019

WHAT IS A VEBA?

The VEBA is a mutual association of employees providing certain

specified benefits to its members or their designated beneficiaries. It may

be funded by the employees or their employer.*

Has existed in tax law since 1928.

The VEBA purchases benefits (i.e. medical, accident, life et al)

Fund all or part of your wage parity hourly contributions

into the VEBA…

and Satisfy ACA Compliance

A VEBA is created and established by your ATTORNEY

Provides some benefits to all participants and some only to

those electing medical insurance

* Source – IRS - https://www.irs.gov/pub/irs-tege/eotopicf84.pdf

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HCA SFMR 2019

In order to create QUALITY and

COMPLIANT Benefits –

Priced on a PER HOUR basis…

MUST Determine your ACA/Health

Insurance Strategy…

Fill in the blank – the rest of the wage

parity hourly spend!

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HCA SFMR 2019

CONCEPT – PRE-TAX RETIREMENT PLAN | 401(a)

Specially Designed Pre-tax, fully vested retirement plans

Hourly credited

FlexibleLow

Expense

Employees can see the

$ value grow

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CONCEPT – PRE-TAX RETIREMENT PLAN | 401(a)

Specially Designed Plan Document for

Wage Parity

Applies Only to Qualifying Hours

of Service

Permits only those Eligible employees

and Hours to qualify (No OT)

Low Cost Options to Co-Trustee/Co-

Fiduciary

Can be expanded to benefit admin

and executive staff

Audited Annually to ensure IRS and ERISA compliance

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CONCEPT – ENHANCED…401(a), PLUS…

Benefit Programs designed to help HHAs and PAs at the weakest moment

Specially administered Life, Accident and Critical Illness programs

FEATURING AFLAC, TRANSIT OR ANY COMPLIANT BENEFIT

Cash Payments to HHAs, PAs and their

family

Priced per hour, to ensure wage parity

compliance and valueLow expense programs

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PROGRAMS WITH ISSUES/PROBLEMS…

The Medical Reimbursement

The Cell Phone Benefit

The Transit Account

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THE MEDICAL REIMBURSEMENT

Version #1 The Flexible Spending Account

Allow the Employee Access to up to $500 in APPROVED unreimbursed expenses

Uniform Coverage Rule

Annual Rollover of Unused Balances

*Source -https://www.irs.gov/pub/irs-drop/n-13-71.pdf

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HCA SFMR 2019

THE MEDICAL REIMBURSEMENT

Version #2 The (limited purpose) HRA

Allow the Employee Access a specified amount of Dental or Vision Benefits during the plan year

Why would the majority use it?

What happens to the balance for a

terminated employee?

How does the ACA Market Reform

Statute apply here to full HRA?

Many/Most have Medicaid – Why do they need or want this

Can you effectively pay out unused benefits?

What happens if the employee does NOT have underlying Minimum Essential Coverage?

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THE CELL PHONE BENEFIT –

The PA/HHA love this

Is it clean?

So – unless it is an excludable fringe benefit, it is includable in the PA/HHAs Gross Income? Is that purposeful?

So – if it is a Working Condition Fringe, is it an employee benefit deductible from income?

Source – IRS Publication 15-BEmployer’s Tax Guide to Fringe Benefits

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HCA SFMR 2019

WHAT ELSE?

Transit Still Works!

Hourly credited

Up to $265 per month

Low Expense

PAs and HHAs use Mass Transit

Non-Dedutible to LHCSA and

FI

But, Corp. Tax Rates

dropped

Many Agencies continue using this

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HCA SFMR 2019

THE TRANSIT ACCOUNT – It still works, but since 1/1/18…

You also have the unused benefit/rollover issue –did you fund it in cash?

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OTHER STUFF THAT YOU NEED TO BEWARE OF…

PER OMIG/DOL/DOH…

TROUBLE!

High Admin

Expense

The Hour Bank

The Captive

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MORAL OF THE STORY…

You need counsel to review all

strategies and protect you from

the risk of non-compliance

You need informed Employee

Benefit consultants to assure

the program is executed and

administered properly

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HCA SFMR 2019

TAKE OUT YOUR CELL PHONES…

Paul Essner, CFP® CLU ChFC Emina Poricanin, Esq.

Bryan Pendrick, CFP® CLU ChFC

Sean Rosenfeld

Mobile | 516-790-5068

srosenfeld@tsgfin.comOffice | 516-747-7373

Mobile | 516-790-5068

Office | 516-336-5962

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HCA SFMR 2019

PREPARED BY YOUR RSC BENEFITS TEAM AND HODGSON RUSS, LLP

Thank you for your time and attention!