©2019 Arthur J. Gallagher & Co. All rights reserved. 1

HCR Update • December 17, 2018

Technical Bulletin • 2018 Year-end

Review & Reminders November 15, 2018

Recorded Webinars • Labor &

Employment Law Update: 2018 in Review and a Look Ahead to 2019 December 12, 2018

• 2018 Year-end Review & Reminders November 1, 2018

Coming Soon! • Section 6055/6056

Reporting – Jan. 2019

Archived Resources • HCR Update • Recorded Webinars • Directions

Newsletter • Technical Bulletin • AJG Healthcare

Reform

January 2019

Health & Welfare EEOC Issues Regulations Removing Incentive Provisions under the ADA and GINA Gallagher

HHS Proposes Rescinding the HPID Gallagher

Indexed Values for 2019 Gallagher

PCORI Fee Winding Down Gallagher

More Employers Are Investing in Employee Benefits Gallagher

Multinational Vietnam: New rules require employers to enroll foreign national employees in Social Insurance Gallagher

Retirement Missing participants and fiduciary responsibility Gallagher

Human Resources Analysis reveals blue-collar workers now scarcer than white-collar workers CCH, Incorporated

State Law Review Repeal of Michigan’s Health Insurance Claims Assessment Gallagher

Michigan’s Paid Medical Leave Act Gallagher

What’s New in State Laws CCH, Incorporated

Important Reminder Upcoming Deadlines Gallagher

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Health & Welfare EEOC Issues Regulations Removing Incentive Provisions under the ADA and GINA Gallagher

On December 19, 2018, the Equal Employment Opportunity Commission (“EEOC”) issued final rules removing the incentive provisions from the May 2016 rules applicable to wellness programs under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”).

As you may remember, the AARP sued the EEOC in October 2016 to challenge the incentive limits in the ADA and GINA wellness program rules. In August 2017, the U.S. District Court for the District of Columbia sided with AARP and ordered the EEOC to reconsider the rules. A few months later, after the EEOC stated that new rules would not be effective until 2021, the Court vacated the incentive limit provisions, effective January 1, 2019. In the final rule, the EEOC appears to be taking an administrative step to implement the Court’s decision to vacate the incentive limits. The other requirements of the ADA and GINA wellness program rules are still applicable.

For employers and plans sponsoring wellness programs subject to the ADA and GINA rules, it is still unclear how the absence of an incentive limit might apply. Before the EEOC issued the ADA and GINA regulations that included the 30% incentive limit, some interpreted the statutes to mean that employers could not condition the receipt of any incentive on employee disclosure of ADA-protected information or a spouse’s information (considered to be family medical information protected by GINA). Others argued that, in the absence of clear guidance, there were no limits on these types of incentives (other than those under the HIPAA rules, which apply separately to wellness programs requiring an individual to meet a standard related to a health factor). It is unclear what the EEOC will do in the future – whether they will take one of these approaches or choose a different (likely lower) incentive limit. Based on the EEOC’s fall 2018 Regulatory agenda, the EEOC is scheduled to issue proposed regulations in June 2019,however, that date is not guaranteed.

Until the EEOC proposes and finalizes new incentive limits under the ADA and GINA rules, the most conservative approach is to design wellness programs so that no incentive is offered in exchange for medical examinations or disability-related inquiries. Employers who design their wellness programs to provide rewards for biometric screenings and health risk assessments, and do not want to eliminate these features from their plan designs, should consult with legal counsel to understand the risks of continuing with a wellness program design while incentive limits under these laws are not clearly defined.

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We will continue to monitor developments on these wellness program regulations and provide you with relevant updated information as it becomes available.

Relevant Resources:

• EEOC Final Rule – Removal of Final ADA Wellness Rule Vacated by Court: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-27539.pdf

• EEOC Final Rule – Removal of Final GINA Wellness Rule Vacated by Court: https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-27538.pdf

• Gallagher Article - EEOC Ordered to Reconsider Wellness Incentives: http:ajg.adobeconnect.com/eeoc_reconsiders_wellness_incentives

HHS Proposes Rescinding the HPID Gallagher

On December 18, 2018, the Department of Health and Human Services (“HHS”) proposed rescinding the requirement under Health Insurance Portability and Accountability Act (“HIPAA”) that covered entities, such as health plans, adopt and use a standard Health Plan Identifier (“HPID”) in HIPAA transactions.

Background For administrative simplification purposes, HIPAA added requirements that encouraged the electronic processing of health care claims and standardized the format and content of certain types of electronic transactions. One of the newly added requirements was that employer sponsored group health plans obtain a unique HPID. Large group health plans (generally those with annual claims of more than $5 million) were originally required to obtain an HPID no later than November 5, 2014 and to use the HPID in certain standard HIPAA transactions beginning on November 7, 2016. Small plans were initially required to obtain an HPID by November 5, 2015. The HPID is a 10-digit numeric identifier which employers would obtain from HHS. Non-health plan entities, such as third party administrators, claim re-pricers, and rental networks, could obtain an “other entity identifier" (“OEID”) for use in certain HIPAA electronic transactions.

HHS issued the regulation adopting the HPID and OEID in September 2012 and organizations began applying for HPIDs as early as October 2012. However, in September 2014, the National Committee on Vital and Health Statistics (“NCVHS”) Standards Committee sent a letter to HHS recommending the rescission of the HPID requirement. On October 31, 2014, several days before the November 5, 2014 deadline for large group health plans, HHS announced an immediate delay in enforcement of the requirement to obtain and use an HPID.

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Feedback from the NCVHS in 2014 and stakeholder responses to a May 2015 HHS request for information contained numerous comments from which several common themes emerged:

• The industry already has mechanisms to route claims and other HIPAA transactions using existing Payer IDs;

• Implementing an HPID would be costly, complicated, and burdensome; and • The HPID framework does not provided added value for other anticipated

purposes such as including addition information in transactions (e.g., the name of the plan or cost-sharing information.)

During a May 2017 hearing, commenters almost unanimously suggested that the HHS should rescind the HPID requirement. Subsequently, the NCVHS again recommended rescission of the HPID requirement in a June 21, 2017 letter to HHS.

Proposed Regulation In response to feedback and based on the recommendations from the NCVHS, HHS now believes that the HPID and OEID cannot serve the purpose for which they were adopted. HHS has determined that the organization that needs to be identified in HIPAA transactions is the payer, rather than the health plan. As a result, HHS is proposing to rescind the HPID requirement.

Next Steps Assuming that HHS finalizes this proposed regulation, employers that did not obtain an HPID based on HHS’s October 31, 2014 enforcement delay will not need to obtain one. Employers that already have an HPID for their health plan (or plans) would not be required to deactivate their HPID (other entities such as third party administrators would not need to deactivate their OEID). Instead, HHS is proposing to deactivate all of the HPIDs and OEIDs in its Health Plan and Other Entity Enumeration System.

The regulations are in proposed form and there is a comment period which closes on February 19, 2019. Information about submitting comments is available on the HPID page at https://www.cms.gov/Regulations-and-Guidance/Administrative-Simplification/Unique-Identifier/HPID.html HHS is requesting comments to assist in the preparation of the final rule.

Indexed Values for 2019 Gallagher

Many of the dollar values applicable to employer-sponsored health and welfare and retirement plans are indexed annually to reflect the impact of inflation. Every year federal agencies provide indexed values for the upcoming year. Unfortunately, the new values are provided by different agencies at different times during the year. For

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example, agencies and time frames for many of the most commonly used values for 2019:

• High Deductible Health Plans – deductibles and out-of-pocket limits—and Health Savings Accounts – maximum contributions were announced by the Internal Revenue Service (“IRS”) in April 2018.

• Maximum out-of-pocket values for non-grandfathered medical plans under the Patient Protection and Affordable Care Act were issued by the Centers for Medicare and Medicaid Services (“CMS”) in April 2018.

• Medicare Part D (drugs) values – parameters for the standard plan and indexed values for the Retiree Drug subsidy were made available by CMS in April 2018.

• Income-adjusted premiums for Medicare Part D were made available by CMS in July 2018.

• The Social Security base wage was announced by the Department of Health and Human Services in October 2018.

• Medicare Parts A and B values – cost-sharing amounts, premiums, and income-adjusted premiums were provided by CMS in October 2018.

• Retirement plan values such as limits for defined benefit and defined contribution plans and certain welfare benefits such as the salary reduction maximum for health flexible spending accounts, Long Term Care premiums and per diem maximums, and transportation assistance benefit limits were announced by the IRS in November 2018.

Given the extended time frame over which indexed values are provided by different federal agencies, it is challenging to keep track of all of the new numbers. Employers that have not already done so, may want to check their records and materials to make sure that dollar values have been updated for 2019 as needed. We have a helpful chart that summarizes the most common 2019 indexed dollar values (click here to access). PCORI Fee Winding Down Gallagher

The Patient-Centered Outcomes Research Institute (“PCORI”) fee will be winding down soon for many employers. The fee generally applies to health plans that are not excepted benefits. For insured plans, the insurance company pays the fee. For self-insured plans, the employer pays the fee. The fee applies to both active and retiree plans.

The PCORI fee applies to health plans with plan years that end after September 30, 2012 and before October 1, 2019. In 2013, the fee was $2.00 per covered life (it had been $1 in 2012). However, similar to other fees, the dollar amount of the fee is indexed annually. The fee for plan years that end after September 30, 2018 and before October 1, 2019 is $2.45 (up from $2.39 for plan/policy years ending after September 30, 2017

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and before October 1, 2018). Regardless of the plan year, the PCORI fee is due annually on July 31. Employers sponsoring self-insured health plans subject to the fee must complete and file Form 720 (Quarterly Federal Excise Tax Return) when paying the fee.

The good news is that unless Congress enacts legislation to extend the fee it is set to expire soon. Since the fee only applies to plan years (policy years for insured plans) that end before October 1, 2019, it is not payable for plan years that end after that date. For a calendar year plan this means that the last fee payable will be for the plan year ending December 31, 2018 which will be due on July 31, 2019. Some non-calendar year plans will need to make one additional payment by July 31, 2020. For example, a plan with a September 1 through August 31 plan year will need to make a payment for the September 1, 2018 through August 31, 2019 plan year which will be due on July 31, 2020.

Although the dollar amount of this fee is relatively modest, employers with self-insured plans will welcome the reduction in administrative tasks because they will not need to track covered lives, calculate the amount payable, and complete and file Form 720.

Additional information about the PCORI fee including a timeline, worksheets to calculate the amount of the fee, and the completion of Form 720 is available in our Healthcare Reform fees toolkit (click here to access).

More Employers Are Investing in Employee Benefits Gallagher Faced with record-low unemployment, more employers are investing in employee benefits rather than reducing costs. Gallagher's 2018 Benefits Strategy & Benchmarking Survey details how 4,200 organizations are leveraging employee benefits to attract, retain and engage talent at a sustainable cost structure. Attracting and retaining talent remains the number one operational priority of 60 percent of employers according to the forthcoming 2018 Gallagher Benefits Strategy & Benchmarking Survey. That figure has increased two percentage points from 2017, and is in sharp contrast to the 37 percent of employers who ranked controlling benefit costs as the top priority, a figure that declined six percentage points from 2017. And nearly half (45 percent) of employers chose not to increase employee cost sharing of healthcare benefits.

"While keeping a lid on costs is always important, we are seeing a clear shift in the market as employers are having to compete more aggressively for talent in the face of the lowest unemployment rate in nearly 50 years," said William F. Ziebell, President, Gallagher Employee Benefits Consulting and Brokerage. "Today's workforce is comprised of five very different generations, meaning it is no longer good enough to simply offer standard medical coverage and a competitive retirement plan. The 2018

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Benefits Strategy & Benchmarking Survey uncovered best practices that address employees' total wellbeing, which will positively impact organizational retention and recruitment efforts."

Employers Taking a Holistic View of Employee Wellbeing

The Benefits Strategy & Benchmarking Survey found forward-thinking employers are taking a more holistic view of employee wellbeing and developing strategies that both engage and appeal to their team. For example, more than half of employers (55 percent) now provide a telemedicine component, allowing employees to virtually connect with clinicians. That is an increase of more than 100 percent from 2016, when just 24 percent of employers utilized telemedicine. In addition to saving employees time, telemedicine has been shown to reduce expenses for both employers and employees.

The report also found employers are looking for ways to reduce medical expenses by encouraging their employees to live healthy lifestyles. The most popular physical wellbeing benefits include flu shots, tobacco cessation programs, health risk assessments and biometric screenings.

Because financial stressors can negatively affect productivity, financial wellbeing proved to be another area of interest for employers. More than six out of ten employers (62 percent) now offer employees access to financial advisors and nearly half (47 percent) provide financial-literacy education to help employees make better saving and spending decisions. The research also showed 43 percent of employers are taking steps to gauge employee retirement readiness, compared to previous years (33 percent in 2016).

Identifying and Changing Benefits Based on Employee Preferences

Because the tightening labor market has made it easier for top employees to leave their jobs voluntarily, more employers are tweaking existing benefits or adding new offerings. The goal is to provide employees with more choices that will better fit their own lifestyles and needs. Examples include:

Health Benefits Choice: More than one in five employers (22 percent) now offer employees three medical insurance plans, and 13 percent offer four or more options.

Tuition Assistance: Nearly half (46 percent) of employers provide tuition assistance, which is up from 42 percent in 2017. The most common tuition reimbursement amount totaled $5,250 annually per employee.

Life Insurance: Nine of ten (89 percent) employers said they now offer employees life insurance, which is a five percent increase from 2017.

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Employee Assistance Programs (EAPs): 70 percent of employers provide access to EAPs, which is an 11 percent jump from 2017.

Small Segment of Employers Fully Engage Employees around Workplace Benefits

Given many employee rosters include a multigenerational workforce, it has become increasingly important for employers to offer benefits that appeal to each segment of their workforce. Surprisingly, just 13 percent of employers said they have a comprehensive communication strategy to guide how they collect and share benefits information with employees, and most (74 percent) noted they have a communication strategy for just some of their benefits and wellbeing offerings.

"More than half of employers (59 percent) expect to increase their headcount over the next two years. That will be a challenge considering there are currently more job openings than individuals to fill those positions," Ziebell said. "As a result, employers must get smarter about working within their budgets to offer benefits and compensation packages that engage their teams. At the same time, it will be imperative for organizations to clearly communicate the offerings and measure their effectiveness. The days of 'set it and forget it' in regards to compensation and benefits are over."

For more information about the 2018 Benefits Strategy & Benchmarking Survey, visit: www.ajg.com/NBS-2018.

About Gallagher

Arthur J. Gallagher & Co. (NYSE: AJG), a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Illinois. The company has operations in 34 countries and offers client service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants.

About the Benefits Strategy & Benchmarking Survey

Gallagher Benefit Services, Inc., the employee benefits consulting and brokerage operation of Arthur J. Gallagher & Co., developed the Benefits Strategy & Benchmarking Survey to provide employers with insights into how their peers are addressing benefit and human capital challenges. The 2018 survey, conducted from January to April of this year, aggregates responses from 4,241 organizations across the U.S. Additional survey results can be found at www.ajg.com/NBS-2018.

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Multinational

Vietnam: New rules require employers to enroll foreign national employees in Social Insurance Gallagher

Effective 1 December 2018, employers in Vietnam are required to enroll some foreign national employees in the national social security system. The requirement includes coverage for old age retirement, survivors, sickness, disability, workers’ compensation and maternity, which are bundled together under a single program. It does not include health insurance or unemployment insurance.

Applicable legislation

Decree No. 143/2018/ND-CP was released on 15 October 2018. It takes effect under the Law on Social Insurance and the Law on Occupational Safety and Health.

Affected employers

All employers operating in Vietnam who hire foreign nationals will be affected.

Affected employees

The law applies to foreign nationals with a work permit, certificate or license and a contract with an employer that is either indefinite or at least one year long. It does not apply to transferees, employees above the statutory retirement age (60 for men and 55 for women), or people who work fewer than 14 days per month.

Contributions

Contributions for foreign nationals are being introduced at a lower rate than for Vietnamese nationals. From 1 December 2018 to 31 December 2021, the employer contribution rate will be 3.5 percent of the employee’s salary. There will be no contribution from employees during this time.

On 1 January 2022, the contribution rate will be increased to be equal to that for Vietnamese nationals for both employers and employees – 17.5 percent for employers and 8 percent for employees. Contributions will be capped at 20 times the basic salary (currently VND 27,800,000, making the cap VND 556,000,000). At that time, the employee’s 8 percent contribution will be routed to the retirement and survivors benefits funds, while the employer’s 17.5 percent contribution will be routed to retirement and survivors benefits (14 percent), sickness and maternity (3 percent), and workers’ compensation (0.5 percent).

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Foreign nationals with multiple employers pay employee contributions only once, for the first contract. However, each of their employers are required to pay workers’ compensation.

Benefits

The sickness, disability, workers’ compensation and maternity benefits available to foreign nationals are equivalent to those available to Vietnamese nationals.

Employees who have met all contribution and age requirements for retirement pensions or disability allowances, but who have left the country, can designate a current Vietnam resident to receive their benefits. This may be in the form of a lump sum.

Retirement benefits

On 1 January 2022, foreign national employees will be able to elect a lump sum benefit from the retirement pension fund. This benefit will be available to employees who do not qualify for a pension, such as those who:

• Have not made 20 years of contributions at retirement age

• Have been diagnosed with a fatal illness

• Meet the contribution requirements, but have left Vietnam

• Are entitled to social security retirement benefits from another country

• No longer can legally work due to a terminated contract, expired work permit, or expired license

Survivors benefits

The survivors benefits available to foreign nationals will be equivalent to those available to Vietnamese nationals, with the addition of a lump sum benefit available to eligible family members of the employee who live outside the country.

About GVISOR

GVISOR tracks changes in local employee benefits regulations and trends. All Compliance Alerts include suggestions of next steps a company should consider taking in order to comply with reported changes. GVISOR also includes Country Manuals, which are comprehensive guides to employee benefits in various countries. Covered topics include retirement, death, disability, workers’ compensation, unemployment, maternity, medical, leave, holidays, employment conditions, termination, and incentives and perquisites.

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For more information on GVISOR, contact us at +1.202.299.9377 or stacy_hayashi@ajg.com.

Disclaimer: The information contained herein is of a general nature and is not intended to address the circumstances of any specific individual, entity or situation. No one should act upon such general information without obtaining appropriate professional or legal advice. We endeavor to provide accurate and current information, but we cannot guarantee that such information is accurate at the time of publication or at any later time. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Arthur J. Gallagher & Co., the publisher of GVISOR. Retirement

Missing participants and fiduciary responsibility Gallagher

Missing participants are a pain point for plan sponsors as they create a long-term liability for the plan, add to costs and incur fiduciary risk. The DOL is aggressively investigating the practices and procedures of plan sponsors for locating and distributing benefits to missing participants. Even though the DOL has not issued clear specific guidance, in some cases, the DOL has asserted breaches of fiduciary duty for failure to perform regular searches for missing and unresponsive participants.

Missing participants can be defined as:

• Participants and beneficiaries for whom the plan administrator does not have a valid address or contact information.

• Individuals for whom the plan administrator has a valid address, but refuse to accept, or are otherwise unresponsive to communications and/or distributions from the plan.

Sponsors of qualified retirement plans often need to locate missing or unresponsive participants or beneficiaries. A plan fiduciary’s choice of a distribution option for a missing participant’s account is a fiduciary decision subject to the general fiduciary responsibility provisions of ERISA. Lacking specific DOL guidance on this subject, following is a discussion of what are considered to be reasonable search methods.

DOL Policy The Department of Labor (DOL)’s Field Assistance Bulletin (FAB 2014-01) addresses the missing participant issue in the context of a terminated 401(k) or other defined contribution plan. The FAB was prompted by the termination of both the IRS’ and the

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Social Security Administration’s letter forwarding programs. While the FAB focused on a terminated plan, the DOL’s comments have equal application to an on-going plan.

Minimum Search Steps

Under ERISA, sponsors of qualified retirement plans have a fiduciary responsibility to make a reasonable effort to find missing or unresponsive participants. The following search methods are the minimum steps the fiduciary of a terminated defined contribution plan must take to locate a participant.

• Send a notice using certified mail • Check the records of the employer or any related plans of the employer • Send an inquiry to the designated beneficiary of the missing participant • Use free electronic search tools.

Additional Search Steps

If the search steps above are not successful in locating the missing participant, the plan administrator must consider whether additional search steps are appropriate. Factors to consider in making this determination include the size of a participant’s account balance and the cost of further efforts such as:

• Internet search tools • Commercial locator services • Credit reporting agencies • Information brokers • Investigation databases

The plan administrator may be able to charge reasonable search expenses to the participant’s account.

Distribution Options If a missing participant is not found after taking the required search steps and any additional steps determined to be appropriate, the plan fiduciary will need to select a distribution option.

• Rollover to an IRA (DOL preferred method) • Distribution to the Pension Benefit Guarantee Corporation’s Missing Participants

Program (terminated plans only)

Alternative distribution options (if above not available)

• Opening an interest-bearing federally insured bank account in the name of the missing participant or beneficiary

• Escheat to an unclaimed property program

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Note that 100% income tax withholding is NOT an option.

Once a plan fiduciary properly distributes the entire benefit to which a missing participant is entitled, the distribution ends the individual’s status as a participant covered under the plan and the distributed assets are no longer plan assets under ERISA.

Uncashed Checks There is a hidden danger in uncashed checks. Uncashed checks are plan assets. According to DOL FAB 2002-03, “Until the instrument (check) is negotiated and ‘constructive receipt’ is made by the participant, beneficiary or rollover IRA…the DOL considers uncashed checks plan assets.”

When a participant is forced out in cash, the consequences are additional work for the plan sponsor as searches are required for participants with uncashed checks. When the DOL overhauled the Form 5500 in 2016, they required the reporting and number of uncashed checks and procedures for handling uncashed check management.

To help avoid uncashed checks, plan sponsors should make sure that the rollover process is easy and well communicated. A study by Boston Research Technologies showed that of those participants who cashed out of their plan, only 37% had done so to meet a true financial emergency. Reasons for cashing out included that the rollover experience was too difficult and that participants had not been educated about a cash-out’s high cost.

Required Minimum Distributions (RMDs) The Internal Revenue Service (IRS) has a “non-enforcement policy” concerning missing participants who are required to start receiving required minimum distributions. In an October 2017 memorandum, the IRS directed its auditors to not challenge a qualified plan for failure to make RMDs to missing participants, but only if certain conditions are satisfied. The IRS memorandum requires that fiduciaries perform at least three steps:

(1) Search related plan, company, and publicly available records for alternative contact information.

(2) Use one or more of these search methods: a commercial locator service; a credit reporting agency; or a proprietary internet search tool for locating participants.

(3) Attempt to contact the participants through the United States Postal Service (USPS) certified mail to the last known mailing address and attempt to contact the missing participants through appropriate means for any other address or contact information (including email addresses and telephone numbers).

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If a plan takes those steps, the IRS will not attempt to disqualify the plan for failure to make RMDs. The failure to take those steps—and, therefore, the failure to obtain the relief afforded by the IRS guidance, will result in asserted plan disqualification and, ultimately, a sanction under CAP – the IRS’s Closing Agreement Program – in order to avoid disqualification.

What Should Plan Sponsors Do? Plan administrators should review their procedures for maintaining contact information for current and former participants and beneficiaries. They should identify and act on any issues, such as when a communication is returned or a check is uncashed.

They should review their plan document and attempt to rollover all accounts under $5,000 (not just those with account balances over $1,000) into an IRA and transfer uncashed checks using one of the distribution options listed above. Many recordkeepers offer automatic rollover features and third party firms can also be employed.

The plan administrator should, at a minimum, adopt and consistently employ missing participant procedures that are designed to show a reasonable effort to satisfy the steps outlined by both the IRS and DOL.

This material was created to provide accurate and reliable information on the subjects covered, but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

Gallagher Benefit Services, Inc., a subsidiary of Arthur J. Gallagher & Co., (Gallagher) is a non-investment firm that provides employee benefit and retirement plan consulting services to employers. Securities may be offered through Kestra Investment Services, LLC, (Kestra IS), member FINRA/SIPC. Investment advisory services may be offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Certain appropriately licensed individuals of Gallagher are registered to offer securities through Kestra IS or investment advisory services through Kestra AS. Neither Kestra IS nor Kestra AS are affiliated with Gallagher. Neither Kestra IS, Kestra AS, Gallagher, their affiliates nor representatives provide accounting, legal or tax advice.

Human Resources

Analysis reveals blue-collar workers now scarcer than white-collar workers CCH, Incorporated

Reversing a decades-long trend in the U.S. jobs market, companies are now having a

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more difficult time finding blue-collar workers than white-collar workers. Conducted by The Conference Board, the new analysis forecasts that growing blue-collar labor shortages will continue in 2019 and beyond. Companies can expect growing shortages in sectors that include transportation, health care support, manufacturing, agriculture, mining, and construction. In addition to increasing wages, companies may have to expand their pools of potential workers.

As the report details, growing blue-collar labor shortages result from converging demographic, educational, and economic trends in the U.S. economy. As the U.S. population has attained more education, the group of working-age individuals with a bachelor’s degree has grown, while the number of those without one has shrunk. Moreover, the Baby Boom generation, a segment of the workforce that once held many blue-collar jobs, continues to retire in droves. Only adding to the challenge, since the mid-1990s millions of non-college graduates have left the labor force due to disability. And while the pool of blue-collar workers has shrunk, the demand for their services has continuously grown since the 2008 financial crisis.

Tight labor markets are especially visible in the following blue-collar and low-pay service sectors:

• Transportation. As just one example, the rapid growth in online shopping is creating robust demand for delivery drivers. In addition, workers in transportation jobs tend to be older, a trend that has led to many retirements in recent years.

• Production/Manufacturing. Between 2010-2018, fewer manufacturing jobs were offshored and less productivity growth from automation took place than in the previous decade. This combination has led to continuous demand for U.S. workers.

• Health Care Support. The demand for health care support jobs, such as nursing aides and home health aides, has skyrocketed due to the proliferation of retiring Baby Boomers needing health services.

“In certain instances, companies looking to attract enough blue-collar workers will have to continue increasing wages and, as a result, possibly experience diminished profits,” said Gad Levanon, lead report author and Chief Economist of North America at The Conference Board. “But the picture looks very different for the workers themselves. Compared to a few years ago, blue-collar workers are now much more likely to have a job they are satisfied with and experience rapid wage growth.”

Over the next decade, the extent of the challenges caused by blue-collar labor shortages will depend largely on three factors: To what extent employers can further automate blue-collar jobs; how many additional individuals are brought back into the labor force; and, how many workers move into blue-collar jobs from other parts of the labor market. As the report discusses, companies should consider the following actions

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to help alleviate current or potential shortages in the future:

(1) Invest more in automation. Many blue-collar jobs have the potential to become automated in the next decade. Food preparation, manufacturing, and cleaning and maintenance occupations are particularly likely to be automated and, to some extent, already have been.

(2) For certain jobs, reduce education requirements. Amid tightening labor markets, many companies are expanding the supply of talent by lowering education requirements during recruitment and providing basic internal training.

(3) Find locations with greater availability of blue-collar labor. In some occupations, most notably manufacturing, employers have more discretion on where to locate operations and can thus shift some of the work to areas with increased availability of blue-collar labor.

Source: The Conference Board.

State Law Review

Repeal of Michigan’s Health Insurance Claims Assessment Gallagher

On June 11, 2018, Governor Snyder signed a series of bills that repeals Michigan’s Health Insurance Claims Assessment (“HICA”), an act that imposes a 1% assessment on health care claims paid by insurers and third party administrators of self-insured plans in the state of Michigan. The repeal was contingent on the approval of a new tax, described below, by the federal Centers for Medicare and Medicaid Services (“CMS”). CMS provided the approval on December 10, 2018. The Michigan Department of Treasury recently provided a short Notice on its website, and promised to provide additional information soon.

The repeal of the HICA is effective on the first day of the calendar quarter in which approval was granted, which is October 1, 2018. The 2018 tax is computed on all paid claims prior to October 1, 2018. The final quarterly return (covering July, August, and September) was due on October 31, 2018. A 2018 quarterly return (which would have been due on January 30, 2019) is not required for the 4th quarter in 2018. However, an annual return for 2018 is still due on February 28, 2019.

The HICA tax is being replaced by a new fee on insurance providers, called the Investment Provider Assessment. The replacement tax will be imposed on health insurers for fully insured plans, but will not apply to self-insured plans or their third party administrators. The Michigan Department of Treasury will notify insurers of the amount of the initial tax, which will be payable in two installments due January 31, 2019 and April

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30, 2019. Thereafter, the Treasury Department will notify insurers of the amount of the annual assessment by June 15, which will then be payable in quarterly installments beginning July 30. It is likely that the tax imposed on health insurers will continue to be passed on to employer plan sponsors of fully insured group health plans.

Michigan’s Paid Medical Leave Act Gallagher

On December 13, 2018, Governor Snyder approved the Michigan Paid Medical Leave Act (the “Act”), replacing the initiative that was enacted earlier to require Michigan employers to provide paid medical leave to employees. The Act applies to employers that have 50 or more employees. The Act is anticipated to take effect on April 1, 2019.

An individual is eligible for paid medical leave if engaged in service to an employer in the business of the employer and the employer is required to withhold income tax, subject to a number of exceptions, including: employees who worked on average fewer than 25 hours per week during the prior calendar year, variable hour employees as defined under the Patient Protection and Affordable Care Act, employees employed for 25 weeks or fewer in a calendar year for a job scheduled for 25 weeks of fewer, individuals exempt from overtime requirements under the FLSA, individuals whose primary work location is not in Michigan, and individuals who are covered under a collective bargaining agreement (and are not employed by a public agency).

Employees must accrue at least one hour of paid leave for every 35 hours worked, and employers may limit accrual to one hour per week. Paid leave accrual may be limited to 40 hours per benefit year,1 and an employer may limit paid leave to 40 hours per year. Employees may carry over 40 hours (or more, if the employer allows) from one benefit year to the next. As an alternative, an employer may provide at least 40 hours of paid medical leave at the beginning of each benefit year, in which case, carry over of hours is not required.

Leave begins to accrue on the later of the effective date of the Act, or the first day of employment. However, an employer may require an employee to wait until the 90th day after starting employment before using leave.

Paid medical leave may be used for a variety of reasons, including: (1) the employee’s own medical condition or preventative medical care, (2) an employee’s family member’s (including spouse, children, parents, siblings, grandparents and grandchildren) medical condition or preventative medical care, (3) for certain purposes for an employee or family member who has been the victim of domestic violence or sexual assault, and (4)

1 A “benefit year” is any consecutive twelve month period used by an employer to calculate an eligible employee’s

benefits.

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for closure of the employee’s workplace or a child’s school due to a public health emergency.

Employers must establish notice, procedural and documentation requirements for requesting leave. Employees must be given at least three days to provide documentation. Leave must be used in one hour increments, unless the employer has a different increment policy that is in writing in an employee handbook or other employee benefit document. Employers will be required to post a notice regarding the leave; a model poster will be provided by the Department of Licensing and Regulatory affairs prior to the Act’s effective date. What’s New in State Laws CCH, Incorporated

For busy Human Resources professionals who want ready access to what is new and what has recently changed in State laws, here is a brief update.

Arkansas Minimum Wage

The minimum wage in Arkansas will increase to $9.25 per hour on January 1.

Election results. Voters in the November 6, 2018, General Election approved (Ballot Issue No. 5) amending the Arkansas Code to raise the current state minimum wage from $8.50 per hour to $9.25 per hour on January 1, 2019; to $10 per hour on January 1, 2020; and to $11 per hour on January 1, 2021. The Arkansas minimum wage applies to employers with four or more employees.

Tipped employees must be paid a minimum wage rate of at least $2.63 per hour. Tips plus wages must equal at least the state minimum wage rather; otherwise, employers must pay the difference.

Arkansas Posters

The Department of Labor has published a Fact Sheet on the “Increase of the Arkansas Minimum Wage Act,” at https://www.labor.arkansas.gov/Websites/labor/images/19FactArkansasMinimumWage.pdf; In addition, the required minimum wage poster has been revised and is now available online at https://labor.publishpath.com/Websites/labor/images/AMWA%20POSTER%20010119.pdf

California Fair Employment and Housing Act

California law requiring specified businesses to post a notice relating to slavery and

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human trafficking is expanded to require specified employers to provide at least 20 minutes of prescribed training and education regarding human trafficking awareness to employees who are likely to interact or come into contact with victims of human trafficking. Compliance deadline is set for January 1, 2020 (Ch. 842 (S. 970), L. 2018, effective January 1, 2019).

California Family and Medical Leave

Under California's Education Code, during each school year, a person employed by a school district in a position requiring certification qualifications and a person employed in an academic position by a community college district, as well as a classified employee of a school district or community college, are authorized to use sick leave for purposes of parental leave for a period of up to 12 workweeks.

Requirements as to use of differential pay systems where an employee has exhausted all available sick leave and continues to be absent on account of parental leave are amended to require that, regardless of the type of differential pay system used by the school district or community college district, such employees receive no less than 50% of their regular salary for the remaining portion of the 12-workweek period of parental leave (Ch. 954 (A. 2012), L. 2018).

California Farm Labor

Law requiring certain businesses, including farm labor contractors, airports, intercity passenger rail or light rail stations, bus stations, truck stops, emergency rooms, urgent care centers, and privately operated job recruitment centers, to post notice regarding slavery and human trafficking near the public entrance of such establishments, in clear view of customers and employees, is amended to add new training requirements.

On or before January 1, 2021, certain businesses or other establishments that operate an intercity passenger rail, light rail, or bus station must provide training to new and existing employees who may interact with, or come into contact with, a victim of human trafficking or who are likely to receive, in the course of their employment, a report from another employee about suspected human trafficking, in recognizing the signs of human trafficking and how to report those signs to the appropriate law enforcement agency (Ch. 812 (A. 2034), L. 2018, effective January 1, 2019).

California Health Insurance

Private companies that employ emergency ambulance employees such as EMTs and paramedics must provide such employees with paid mental health services through an employee assistance program (EAP). The EAP coverage shall provide up to 10 mental health treatments per issue, per calendar year. A covered “issue” means mental health conditions such as stress, depression, grief, loss, relationship struggles, substance abuse, parenting challenges, and other mental health conditions.

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Employees who are eligible/qualified to receive employer-provided health insurance must have access to health insurance plans that offer long-term mental health treatment services.

This law is added by Initiative Proposition 11, approved by voters in the November 6, 2018, General Election, and effective on the fifth day after the Secretary of State files the final statement of vote (certified December 14, 2018).

California Meal and Rest Periods

Election results. Voters in the November 6, 2018, General Election unofficially have approved a measure relating to emergency-sector emergency ambulance employees to remain on-call during work breaks.

Proposition 11 amends a provision of the California labor law that entitles hourly workers to take work breaks without being on call inapplicable to private sector emergency ambulance workers and provides for private ambulance companies to reschedule meal and rest breaks that are interrupted by a 911 call.

The measure also exempts employers from potential liability for violations of existing law regarding breaks. Further, employers will be required to pay for training regarding certain emergency incidents, violence prevention, and mental health and wellness.

The “Emergency Ambulance Employee Safety and Preparedness Act” is added to the California Labor Code, Division 2, Part 2, Chapter 7, by Initiative Proposition 11, approved by voters in the November 6, 2018, General Election, and effective on the fifth day after the Secretary of State files the final statement of vote (certified December 14, 2018).

California Minimum Wage

Under legislation to increase the minimum wage to $15 per hour over time, California's minimum wage will increase on January 1 to $12 per hour for employers with 26 employees or more and $11 for employers with 25 or fewer employees.

State law requires that most California workers be paid the minimum wage. Some cities and counties have a local minimum wage that is higher than the state rate. Workers paid less than the minimum wage can file a wage claim through the local Labor Commissioner's Office.

Governor Edmund G. Brown Jr. signed S.B. 3 on April 4, 2016 making California the first state in the nation to commit to raising the minimum wage to $15 per hour statewide by 2022 for large businesses, and by 2023 for small businesses. The legislation increases the minimum wage over time, consistent with economic expansion, while providing safety valves to pause wage hikes if negative economic or budgetary

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conditions emerge (State of California, Department of Industrial Relations, News Release No. 2018-98, December 10, 2018).

San Francisco. The Office of Labor and Standards Enforcement for the City of San Francisco has issued updated information regarding recent changes to the Minimum Compensation Ordinance (MCO) with regard to nonprofit rate information.

The MCO rate applicable to nonprofit corporations is to be no less than $16.50 per hour on July 1, 2019. Beginning on July 1, 2020, and annually after that, the minimum wage rate for nonprofit corporations is to be determined by any increase in the cost of living, based on the Consumer Price Index for the prior year.

For public entities (IHSS), the MCO rate is to be no less than the following: $16 per hour on February 1, 2019; $16.50 per hour on July 1, 2019; $17.50 on July 1, 2020; $18 per hour on July 1, 2021; and $18.75 per hour on July 1, 2022 (City and County of San Francisco, Office of Labor Standards and Enforcement; Ordinance No. 232-18 (Board File No. 170297), passed by the Board of Supervisors on October 2, 2018, and signed by the Mayor on October 12, 2018).

California Posters

California employers must post information on wages, hours and working conditions at a worksite area accessible to employees.

Updated minimum wage posters are available on the California Department of Industrial Relations (DIR) Internet website, in both English and Spanish, and can be downloaded and printed from the workplace posting page on the site, https://www.dir.ca.gov/wpnodb.html.

California Minimum Wage Notice (MW-2019), in English, https://www.dir.ca.gov/IWC/MW-2019.pdf and in Spanish, https://www.dir.ca.gov/IWC/MW-2019-Spanish.pdf

California Prevailing Wages

The California Labor Code requires contractors and subcontractors to keep accurate payroll records showing the name, address, social security number, work classification, straight time, and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by him or her in connection with the public work. The law provides that a joint labor-management committee is authorized to bring an action against any employer who fails to pay prevailing wages as required by state law. The law also requires that copies of payroll records on public works projects be made available for inspection, including a limit on redactions if made available for inspection by, or furnished to, a joint labor management committee.

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This law is amended to authorize a joint labor-management committee to bring an action against an employer for failure to provide required payroll records, as well as for failure to pay the prevailing wage to employees (Ch. 682 (A. 3231), L. 2018).

California Training Requirements

Private companies that employ emergency ambulance employees such as EMTs and paramedics will be required to provide paid training on an annual basis in each of the following areas: (1) responding to active shooter and mass casualty incidents; (2) responding to natural disasters; and (3) preventing violence against emergency ambulance employees and patients.

In addition to required training, emergency ambulance employees must receive employer-paid mental health and wellness education within 30 days of being hired and shall receive employer-paid mental health and wellness education each calendar year thereafter. Mental health and wellness education shall inform emergency ambulance employees of available mental health treatments and support services and provide general information regarding common mental health illnesses.

New law, added by Proposition 11, approved by voters in the November 6, 2018, General Election, and effective on the fifth day after the Secretary of State files the final statement of vote (certified December 14, 2018).

California Unemployment Insurance

The interest rate charged on all delinquent taxes for the period of January 1, 2019, through June 30, 2019, will be 5.0% (EDD Communication).

Colorado Labor Relations

Election results. Amendment A. Colorado voters unofficially approved Amendment A in the November 6, 2018, General Election, to remove a part of the state Constitution that says slavery and involuntary servitude are allowable for the punishment of a crime. This removes an exception to slavery prohibition for criminals from Section 26 of Article II of the state constitution, which would be amended to read “There shall never be in this state either slavery or involuntary servitude.” House Current Resolution 18-1002.

Colorado Minimum Wage

The Colorado minimum wage is scheduled to increase to $11.10 per hour on January 1, 2019.

In conjunction with the scheduled increase, the Colorado Department of Labor and Employment, Division of Labor Standards and Statistics, on November 27, 2018, permanently adopted Minimum Wage Order Number 35 to reflect the new minimum

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wage rate, pursuant to Article XVIII, Section 15, of the Colorado Constitution. The minimum wage order covers certain employees in the industries of retail and service; commercial support service; food and beverage; and health and medical. Other than reflecting the new minimum wage rate, MWO 35 is identical to the current Minimum wage Order Number 34. MWO 35 is effective January 1, 2019 (Colorado Register, Vol. 41, No. 23, December 10, 2018).

Colorado Unemployment Insurance

The taxable wage base in Colorado for 2019 is $13,100, up $500 from the 2018 taxable wage base amount of $12,600 (DLE Communication).

Contribution rates in Colorado for 2019 fall under the Standard Premium Rate Schedule providing for reserve ratios from “0.006 to 0.008.” These rates range from 0.62% to 3.48% for positive employers and from 4.47% to 8.15% for negative employers, with unrated employers paying 3.73%. The base rates for new employers in 2019 are as follows: 1.7%, nonconstruction; 1.77%, general construction; 7.43%, heavy construction; 1.77%, trades; and 0.3%, political subdivisions (DLE Communication).

Idaho Unemployment Insurance

The tax rates for 2019, including the UI rate, the Administrative Rate, and the Workforce Development Tax, as applicable, range from 0.251% to 0.836% for positive-balance employers and from 1.505% to 5.4% for deficit-balance employers. The standard rate is 1.0% for 2019 (DOL Communication).

Illinois Drug Testing

The State Police Act and Unified Code of Corrections are amended regarding zero tolerance drug policies. The law provides that anyone employed by the Department of State Police or the Department of Corrections who tests positive in accordance with established Departmental drug testing procedures for any substance prohibited by the Illinois Controlled Substances Act or the Methamphetamine Control and Community Protection Act shall be discharged from employment. Such employees who test positive in accordance with established Departmental drug testing procedures for any substance prohibited by the Cannabis Control Act may be discharged from employment (Public Act 100-1130 (S. 3136), L. 2018).

Illinois Equal pay

The Illinois Equal Pay Act is amended to prohibit employers from discriminating between employees by paying wages to African-American employees at a rate less than the rate at which the employer pays to another employee who is not African-American for the same or substantially similar work on a job that requires equal skill, effort and responsibility and is performed under similar working conditions, except

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where payment is made under: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than: (i) race or (ii) a factor that would constitute unlawful discrimination under the Illinois Human Rights Act (Public Act 100-1140 (H. 4743), L. 2018, enacted November 28, 2018 (Amendatory veto override), and effective January 1, 2019).

Louisiana Unemployment Insurance

The taxable wage base in Louisiana remains at $7,700 for 2019 (LWC Communication).

Michigan Minimum Wage

Governor Rick Snyder signed has signed into law legislation (S. 1171) that greatly scales down on a recently enacted minimum wage law.

Under Public Act 337, the “Improved Workforce Opportunity Act” (not yet in effect), Michigan's minimum hourly wage would have increased to $10.00 on January 1, 2019; $10.65 in 2020; $11.35 in 2021; and $12.00 in 2022. Beginning in October 2022, the rate would have been adjusted annually to the rate of inflation.

That changes with the governor's approval of S. 1171, which substantially trims back the scheduled wage boosts. Under the initial Senate-passed version, the hourly minimum wage would have increased to only $9.48 on January 1, 2019, and beginning on January 1, 2020, would increase annually by $0.23 until it reaches $12.00—10 years later than under Public Act 337. Under the final version of S. 1171, as amended, the schedule of increases is a little different, with the $12.00 rate still reached a decade later than provided under the initiative petition, with an increase to $9.45 in 2019; $9.65 in 2020; $9.87 in 2021; $10.10 in 2022; $10.33 in 2023; $10.56 in 2024; $10.80 in 2025; $11.04 in 2026; $11.29 in 2027; $11.54 in 2028; $11.79 in 2029; and $12.05 in 2030. The bill also delays any increases when the unemployment rate in the state is 8.5 percent or greater (Public Act 368 (S. 1171), L. 2018, signed by the governor on December 13, 2018, filed with the Secretary of State on December 14, 2018, and effective on the 91st day after sine die adjournment of the regular session of the state legislature (expected to adjourn on December 20, 2018)).

Michigan Paid Sick Leave

Governor Rick Snyder signed has signed into law S. 1175 to provide workers in Michigan with the right to earn sick time for personal or family health needs or issues due to domestic violence or sexual assault. S. 1175 strips down the recently enacted Earned Sick Time Act (P.A. 338).

Under S. 1175, the “Earned Sick Time Act” becomes the “Paid Medical Leave Act” and provides for paid leave that may be used for personal or family health needs, as well as

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purposes related to domestic violence and sexual assault.

S. 1175 also changes the definition of “employer” to include only those with 50 or more employees, as opposed to the Earned Sick Time's single employee threshold. In addition, domestic partners and their children would no longer be considered “family members” under S. 1175, as they are in Public Act 338.

The amount of paid leave that covered employers must provide also changes to “one-size-fits-all” under S. 1175, with only 40 hours of paid leave mandated, as opposed to the 72 hours required for large employers and 40 hours for small employers provided for in Public Act 338. Further, paid leave is to accrue at the rate of one hour for every 35 hours worked under S. 1175, rather than the one hour for every 30 worked required under Public Act 338 (P.A. 369 (S. 1175), L. 2018, signed by the Governor on December 13, 2018, filed with the Secretary of State on December 14, 2018, and effective on the 91st day after sine die adjournment of the regular session of the state legislature (expected to adjourn on December 20, 2018)).

Minnesota Minimum Wage

A $15 minimum wage ordinance has been adopted in Saint Paul. This is the second city in the Midwest to adopt a $15 minimum wage rate for workers. Minneapolis was the first. Mayor Melvin Carter signed the citywide minimum wage ordinance on November 14 following a unanimous vote from the Saint Paul City Council to adopt it. According to Mayor Carter, the minimum wage increases will affect over 56,000 workers.

The City of Saint Paul Minimum Wage Ordinance sets the minimum wage at $15.00 per hour, indexed to inflation through a phase-in process that will begin in 2020. The phase-in period length for employers will be dependent on business size, as determined by numbers of employees. No tip credit may apply toward payment of the minimum wage (Saint Paul, Minnesota, News Release, November 14, 2018; Ordinance 18-54, creating Chapter 224 of the Legislative Code).

Minnesota Unemployment Insurance

The taxable wage base in Minnesota will be $34,000 in 2019, up $2,000 from the 2018 taxable wage base amount of $32,000 (DEED Communication).

Missouri Minimum Wage

Effective January 1, 2019, the state minimum wage rate is $8.60 per hour.

All private businesses are required to pay, at minimum, the $8.60 hourly rate, except retail and service businesses whose annual gross sales are less than $500,000. Pursuant to Proposition B, which was approved by Missouri voters November 6, 2018, the minimum wage will increase 85 cents per hour each year through 2023. Missouri

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law does not apply to public employers, nor does it allow the state's minimum wage rate to be lower than the federal minimum wage rate.

Compensation for tipped employees must also total at least $8.60 per hour. Employers are required to pay tipped employees at least 50 percent of the minimum wage ($4.30 per hour), plus any amount necessary to bring the employee's total compensation to a minimum of $8.60 per hour (Missouri Department of Labor and Industrial Relations, Press Release, November 26, 2018).

Missouri Posters

A printable version of the updated minimum wage poster is available for businesses on the Missouri Department of Labor and Industrial Relations, Division of Labor Standards, Internet website at labor.mo.gov/posters (https://labor.mo.gov/sites/labor/files/pubs_forms/LS-52-AI-2019.pdf). Posters can also be requested by mail from: Missouri Department of Labor and Industrial Relations, Division of Labor Standards, 3315 W. Truman Blvd., Room 205, P.O. Box 449, Jefferson City, MO 65102-0449; telephone 573-751-3403 (Missouri Department of Labor and Industrial Relations, Press Release, November 26, 2018).

New Jersey Unemployment Insurance

The UI and temporary disability maximum weekly benefit amounts are $696 and $650, respectively, for 2019.

The UI and temporary disability alternative earnings test amount for 2019 will be $8,600.

The 2019 UI base week amount will be $172 (DLWD Communication).

New Mexico Unemployment Insurance

The maximum and minimum weekly benefit amounts in New Mexico for 2019 are $442 and $82, respectively.

The taxable wage base in New Mexico for 2019 is $24,800, up $600 from the 2018 taxable wage base amount of $24,200.

For 2019, the reserve factor is 1.5955 and rates for experienced-rated employers range from 0.33% to 5.4%. New employers pay rates by industry; they range from 1.0% to 1.62% for 2019 (DWS Communication).

New York Wage Payment

Changes made to the New York Labor Law relating to permitted deductions from wages, amended by Chapter 451 of 2012, and by Chapter 386 of 2015, that were scheduled for repeal in 2018 have been extended another two years until November 6,

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2020. This allows the additional deductions (with employee permission; e.g., deductions for service provides such as health clubs, day care centers and parking vendors) to be extended another two years and also provides for wage deductions to recapture overpayments of wages due to clerical or mathematical errors and for repayment of advances on wages paid to employees (Ch. 368 (A. 10615), L. 2018).

North Carolina Unemployment Insurance

The taxable wage base in North Carolina for 2019 is $24,300, up $800 from the 2018 taxable wage base amount of $23,500.

For 2019, the base rate is 1.9%, the new employer rate is 1.0%, and rates range from 0.06% to 5.76% in North Carolina. Also, the ERRP is the employer's reserve ratio multiplied by 0.68 (DES Communication).

Ohio Unemployment Insurance

For 2019, Ohio contribution rates will range from 0.3% to 9.2%. The mutualized rate is 0.0%. The new employer rate for 2019 will be 2.7%, except that new employers in the construction industry will pay a rate of 5.9%. The maximum rate (delinquency rate) will be 11.5% (ODJFS Communication).

Oklahoma Unemployment Insurance

The 2019 taxable wage base in Oklahoma will be $18,100, up $500 from the 2018 taxable wage base amount of $17,600 (ESC Communication).

Oregon Unemployment Insurance

For 2019, the taxable wage base is $40,600, up $1,300 from the 2018 taxable wage base amount of $39,300.

In addition, Rate Schedule III is in effect in Oregon for 2019. Contribution rates range from 0.9% to 5.40%. The base rate is 2.4% for new employers. The special payroll tax offset for 2019 is 0.09% for all quarters (ED Communication).

Texas Paid Sick Leave

On October 1, 2018, the City of Austin enacted a Paid Sick Leave Ordinance to provide for employees to accrue paid sick leave. However, this Ordinance has been challenged in the courts. Most recently, the Texas Court of Appeals for the Third District on November 18, 2018, reversed a lower court decision to deny a temporary injunction of the Ordinance, determining that the paid sick leave ordinance violates the Texas Constitution because it is preempted by the Texas Minimum Wage Act. The court noted that because the ordinance increases the pay of employees using paid sick leave, it establishes a Texas Minimum Wage Act defined wage. The Texas Minimum Wage Act

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preempts the ordinance as a matter of law, making it unconstitutional. In addition, the state legislature has introduced legislation, H. 222 (filed Nov. 12, 2018), that, if enacted, would prohibit a local government from requiring an employer to provide paid sick leave. If passed, H. 222 would take effect on September 1, 2019, and would also impact a San Antonio paid sick leave law enacted this year (August 16, 2018) (Texas Office of the Attorney General, News Release, November 16, 2018; Texas Association of Business et al. v. City of Austin, Texas, et al., Tex Ct. App. 3rd Dist., No. 03-18-00445-CV, November 16, 2018).

Utah Unemployment Insurance

The taxable wage base in Utah for 2019 will be $35,300, up $1,000 from the 2018 taxable wage base amount of $34,300 (DWS Communication).

Important Reminder

Upcoming Deadlines Gallagher Keeping track of all of the compliance requirements that face employers sponsoring health and welfare plans has always been a challenge. The additional requirements imposed on employers by the Patient Protection and Affordable Care Act (“PPACA”) has added significantly to the burden. Each month this article will provide information on deadlines that are coming up in the next three months for a calendar year plan. Key requirements for February, March, and April 2019 are listed below.

Dates are based on the timing for a calendar year plan (except as noted); employers with non-calendar year plans will need to modify dates as appropriate.

Deadlines for February, March, and April 2019

• February 28, 2019 – deadline to submit paper copies of Forms 1094-B and 1095-B (reports from insurers and certain self-insured plans on Minimum Essential Coverage provided in 2018), and Form 1094-C and Forms 1095-C (reports by Applicable Large Employers on offers of coverage to full-time employees in 2018) to the IRS. (Electronic filing deadline is April 1, 2019 since March 31, 2019 is a Sunday). Employers who are unable to file Forms 1094-B and Forms 1095-B, or Forms 1094-C and Forms 1095-C with the IRS by the applicable deadline may apply for a 30-day extension by the filing deadline to avoid incurring late filing penalties.

• February 28, 2019 – deadline for disclosure of creditable/noncreditable drug coverage to CMS on the CMS website.

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• March 1, 2019 – due date for submitting report of HIPAA privacy and security breaches discovered in calendar year 2018 that involved fewer than 500 individuals.

• March 4, 2019 – extended due date for providing Form 1095-B Health Coverage (by certain insured health plans), and Form 1095-C Employer-Provided Health Insurance Offer (by applicable large employers) to employees for coverage and offers of coverage in 2018.

• April 1, 2019 – deadline for filing Forms 1094-B, 1094-C, 1095-B, and 1095-C with the IRS. The deadlines for filing Forms 1094-B, 1094-C, 1095-B and 1095-C electronically, which is normally March 31, will be April 1, 2019 because in 2019 March 31 is a Sunday.

• April 30, 2019 – last day to file the San Francisco Healthcare Security Ordinance Annual Reporting Form. This requirement applies to employers with respect to employees that work in San Francisco regardless of the employer’s primary location. Click here for more detailed information.

Indexed Medicare and HSA Values The Medicare Part D parameters for 2019 were released in early April. See our April 2018 Directions article “Medicare Part D Benefits Parameters for 2019” for more information (click here).The 2019 indexed dollar values for HSAs were released in April 2018. See our May 2018 article “IRS Releases 2019 HSA Dollar Values” (click here) Updated values for Medicare Parts A and B for 2019 were released in October 2018; see our article “CMS Announces 2019 Medicare Parts A and B Values” in December 2018 Directions (click here).

Ongoing Activities (Selected)

Many compliance requirements apply every month. Some of the key ongoing requirements are:

• Marketplace notices - to all newly hired employees within 14 days of hire

• Provide the following materials when an employee becomes eligible for/enrolled in the health plan:

– Summary of Benefits and Coverage (“SBC”) – upon eligibility

– HIPAA Notice of Privacy Practices – upon enrollment

– COBRA General (Initial) Notice – to employee (& spouse if married) – upon enrollment

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– HIPAA Special Enrollment Rights Notice – upon eligibility

– Medicare Part D certificate of creditable/non-creditable drug coverage – upon enrollment

In addition to federal requirements, some states have additional requirements such as reporting on the availability of dependent health coverage. Employers should check with their state(s) to determine what requirements and deadlines will apply.

Note: We include information about the above required communications indicating whether the requirement is triggered by the employee’s eligibility or enrollment in the plan. Exact timing varies by requirement.

The intent of this Newsletter is to provide general information on employee benefit issues. It should not be construed as legal advice and, as with any interpretation of law, plan sponsors should seek proper legal advice for application of these rules to their plans. © 2019 Arthur J. Gallagher & Co.

Our list focuses on major federal and, in some cases, state requirements that will impact a significant number of employers. It is not intended to be a comprehensive list.