Regulatory clarity makes ID Protection a more attractive employee benefit


Identity theft is the fastest growing crime and consumer complaint in America, and benefit industry experts say concerned employees are seeking protection as an employer perk more than ever. New regulatory certainty about how identity theft protection benefits are taxed could increase the popularity of the benefit as an employer offering.

More than 13 million Americans fall victim to identity theft every year, which means every three seconds someone’s identity is stolen. Increased concern about the crime has individuals clamoring for identity theft protection benefits. How that benefit would be taxed, however, had been a topic of some debate in the benefit industry, with some employers eager to offer the benefit but concerned about the impact on employee income taxes.

Just before the new year, the Internal Revenue Service announced some good news and cleared the confusion, further incenting employers to offer the perk to employees.

In its Dec. 30 announcement, the IRS said it will allow preferential tax treatment for employer-provided identity theft benefits, despite the absence of a data breach. Generally, all benefits provided to an employee by an employer must be treated as income, unless the Code provides an exclusion. Previous guidance from the IRS created an exclusion for identity protection services, but only after a breach and only for individuals whose personal information might have been compromised.

“Identity theft coverage is growing in popularity as an employee benefit and being requested by clients more now than it ever has in the past in light of recent data breaches.  Standalone ID theft and legal carriers are also enhancing the features of their plans and reducing the cost on the group market to meet market demand. The clarification from the IRS regarding the taxability of this benefit is only going to drive sales of this product even more,” says Heather Garbers, vice president of Voluntary Benefits & Technology for Hub International’s western region. “We project this to be our fastest growing product in 2016 due to these reasons.”

“We view identity theft as a threat that will affect likely affect all of us throughout our lives and identity theft coverage will be a key benefit to have to identify data breaches earlier and make the process to restore identities less of a burden on the employees taking them less time away from the workplace,” she adds.

The IRS’s latest announcement notes that several commenters requested guidance regarding the tax treatment of identity protection services provided before a data breach. According to the commenters, these services are being provided with increasing frequency in order to allow early detection of data breaches and minimize the impact of breaches when they occur. In response, the IRS has concluded that its previous guidance should be extended. 

“The IRS will not assert that an individual must include in gross income the value of identity protection services provided by the individual’s employer or by another organization to which the individual provided personal information (for example, name, social security number, or banking or credit account numbers). Additionally, the IRS will not assert that an employer providing identity protection services to its employees must include the value of the identity protection services in the employees’ gross income and wages. The IRS also will not assert that these amounts must be reported on an information return (such as Form W-2 or Form 1099-MISC) filed with respect to such individuals,” the guidance states.

“This guidance is welcome news for employers that want to offer identity protection services to employees as part of their data security strategy. They may now offer these services without increasing their (or their employees’) federal tax liability.  However, employers should be mindful of state and/or local tax laws as they may differ from federal tax law,” according to Tzvia Feiertag, a senior associate in the Labor & Employment Law Department of the global law firm Proskauer.

The preferential tax treatment does not apply to cash received in lieu of identity protection services or to proceeds received under an existing identity theft insurance policy, the guidance says. 

Melissa A. Winn
Published EBN
January 20 2016, 8:47am EST

Employers Getting More Proactive on Cyber Security, ID Theft

While Affordable Care Act compliance and other healthcare concerns topped the minds of business executives and benefits professionals, cyber security also took center stage this year as employers looked to develop policies and procedures to protect themselves – and employees’ personal health information – from cyberattacks.

Data from The Graham Company released earlier this year noted that nearly three quarters of business leaders are most concerned about potential risks associated with cyber security threats to their organizations. And in a year that saw health insurer Anthem be the subject of a cyberattack in which the personal information of 80 million people was breached, employers have been taking more proactive approaches to mitigating risks of security breaches.

“I do see more employers reassuring employees about HIPAA [Health Insurance Portability and Accountability Act] focused data security,” says Jennifer Walton-Faifer, an employee benefits attorney in Mercer’s Chicago office and member of the firm’s Regulatory Resources Group.

Also see: “What the Anthem breach means for employers.”

In the end, the cost of maintaining the best security that an employer can is usually significantly less than the cost of a breach, she says, pointing to three main costs of a breach: reputation, financial costs and employee relations costs.

“I often talk with employers and they ask if they’re protected in the event of a breach, then when they’re asked where their policy and procedure document is or the last time they did a security risk assessment, often times they don’t know,” she says. “So they are not prepared.”

Identity theft

In another survey by Eastbridge Consulting Group, one in five employees was found to have been a victim of identity theft. Further, employees who travel for work were found to be 66% more likely to be a victim of identity theft, the study found.

“It’s been a really interesting evolution,” says Nick Rockwell, director of benefit solutions at LifeLock. “If you look at benefits from both a prevalence and severity state, a lot of current benefits take into account the likelihood that something bad can happen to you and how severe it will be. A cancer or disability policy, those have a huge severity contingent to them, but ID theft has a huge prevalence perspective.”

Also see: “Cyber threats continue to plague concerned employers.”

The big question to consider is the number of people that experience identity theft every year, he says. “I think the employee demand is only going to continue to grow and I think the big employer shift we see is [toward] the [benefit being] subsidized or employer-paid.”

Empowering employees

One employer has taken a more active role in helping employees protect their own data.

“One of our big initiatives this calendar year and rolling forward into the next calendar year, we’ve implemented a behavior-based information security initiative,” says Kathy Herndon, Kimball International’s director of HR systems and privacy compliance manager. “You can’t just tell [employees] what they should and should not do at work. You want to actually teach them a behavior that they want to carry with them outside of work to protect themselves.”

Some other things done recently, particularly with the Anthem breach, has been forming a close working partnership with Anthem to obtain sharable communications for employees, such as specifics on how to sign up for the free monitoring services.

“We had sessions here internally within our organization [that] employees could attend either in person or virtually that explained what happened, and how to sign up for tools and how to use them going forward,” adds Herndon, also a member of the Society for Human Resource Management’s technology panel. “There was a big effort to work with Anthem to get as much information to the hands of employees to empower them to take control … since this was their own personal data.”

Also see: “Benefit departments cautioned on hacking threat.”

A recent initiative from Kimball, which Mercer’s Walton-Faifer says is on the “front line,” involved the company sending out a phishing email as part of a training exercise.

By Nick Otto
December 28, 2015

How Employers Can Use One-on-One Enrollment for Benefits Success

A good first step for employers seeking to develop a successful benefits program is to explore one-on-one enrollment. Not only do one-on-one meetings result in higher participation rates, but they are also preferred by employees, who rank it as one of the top three resources they perceive as effective when making their benefit elections, according to MetLife’s 13th annual Employee Benefit Trends Study.

The power of one-on-one enrollment lies in relationships. When employees receive guidance from experienced benefits counselors, they are able to see the value of voluntary products and to connect them to their needs. This is a win-win-win for the employees, employers and brokers:

•  Employees benefit from the education they receive;

•  Employers are empowered to offer an enhanced benefits package;

By investing in one-on-one enrollment, employers can ensure that employees receive the benefits they need and can be confident in their benefits decisions. The power of one-on-one enrollment lies in relationships. 

Many elements contribute to the success of an employer’s benefits program, but without an effective communications and enrollment strategy, an offering may be doomed from the start.

The MetLife Study found that two key drivers are involved in establishing employee benefit selection confidence: the benefit information needs to be easy to understand and the benefit communication needs to help explain how much the employee would pay for special services. The study also found that less than half of employees strongly agree their company’s benefit communications meet these requirements, pointing to an opportunity for employers to better address these areas. One-on-one enrollment support can assist with the benefit education process.

For brokers and employers, selecting a partner that can help implement an effective one-on-one enrollment approach is a good first step in delivering on benefit objectives. By looking for a carrier that offers customer-focused solutions and expertise and with a strong track record of successful partnerships, brokers and employers can ensure that employees receive the information they need to be confident in their benefits decisions.

Original Post by Cynthia Coverson, published January  27, 2016  EBN


Top 10 Compliance Issues for Employers in 2016


As employers prepare their health benefit packages for 2016, they must be up-to-date with current ACA and other developments that impact health plans.

Here are the top 10 compliance-related issues employers should address during their planning, according to Mercer:

1) Employer shared-responsibility (ESR) strategy

Ensure the intended goal of avoiding or paying ESR assessments for 2016 coverage is supported by coverage offers, administrative and recordkeeping processes, and benefit documents.

2) ESR reporting

Arrange data sources, systems and administrative processes to collect all information about enrollees with minimum essential coverage (MEC), full-time employees, and coverage offers needed for reporting on 2016 coverage. Create a process for correcting any erroneous IRS filings and personal statements.

3) Preventative care

Ensure “non-grandfathered” group health plans comply with the final ACA rules and recent guidance on cost-free preventive services.

4  Other ACA reporting and disclosure requirements

Review delivery operations for summaries of benefits and coverage (SBCs) and watch for revised SBC templates. Prepare for round two of online submission and payment of ACA’s reinsurance fee.

5) Mid-year changes to cafeteria plan elections

Decide whether to permit mid-year changes to cafeteria plan elections for either or both of the status-change events in IRS Notice 2014-55.

6) ACA’s out-of-pocket maximum

Verify that self-only and other (e.g., family) coverage tiers in “non-grandfathered” plans meet ACA’s 2016 out-of-pocket (OOP) limits for in-network care. Confirm that family coverage also satisfies ACA’s self-only OOP limit for each enrollee.

7) Same-sex marriages and domestic partnerships

Assess how the U.S. Supreme Court’s Obergefell v. Hodges ruling that legalizes same-sex marriage nationwide affects your benefit programs and employment policies. Also consider the decision’s indirect implications for domestic partner coverage.

8) Mental health parity

Check that plan designs and operations provide parity between medical/surgical and mental health/substance use disorder (MH/SUD) coverage. Federal audits of health plans now evaluate compliance with the final Mental Health Parity and Addiction Equity Act (MHPAEA) rules that took effect in 2015. In addition, state legislative activity and litigation around parity issues continue.

9) Wellness

Review employee wellness programs against the proposed Equal Employment Opportunity Commission (EEOC) rules requiring voluntary participation and restricting incentives for completing health risk assessments and/or bio-medical screenings. Be prepared to make changes after EEOC finalizes these rules for nondiscriminatory wellness plans under the Americans with Disabilities Act.

10) Fixed-indemnity and supplemental health insurance

Review fixed-indemnity and supplemental health insurance policies to ensure they qualify as excepted benefits under the ACA and the Health Insurance Portability and Accountability Act (HIPAA).

The preceding article was published on January 11, 2016 on the Employee Benefit Adviser website.

5 Trends Driving 2016 Employee Benefit Budget Planning

The time has come for 2016 budget planning and, as always, the newest trends are driving decision making. One of the biggest areas experiencing significant change is employee benefits. The past few years have brought paramount changes in health care, benefit technology and workforce trends and they’ve all culminated to this moment. Here are five major benefit trends for 2016:

1) Consumerized health plans. Rising medical costs and (although delayed) the pending Cadillac tax have increased interest in consumer-driven health plans. Employers are starting to lean toward high-deductible health plans with HRAs or HSAs to help employees with out-of-pocket expenses that would help them keep costs down.

2) Customizable benefits. Gone are the days of a one-size-fits-all benefit package. The blended workforce has complicated the world of employee benefits. There are four generations in our workforce, all of which have different backgrounds and preferences. What employers offer as benefits should seek to accommodate those differences. For example, members of Generation X place a lot of importance on compensation, but the Baby Boomer generation values retirement and health care. The main areas of customization employee benefits will start to see is more voluntary benefits options to choose from like dental, vision, and accident insurance as well as an increase in high-deductible-health-plans.

3) Healthcare consumer engagement. As employers and employees alike are suffering the high costs of healthcare, there’s increased efforts toward making healthcare benefits not just more affordable, but also easier to understand and track. The creation of patient portals, online resources and personal health devices has sparked an engagement trend in the healthcare industry that is only increasing. Deloitte’s 2015 Survey of Health Care Consumers provides some interesting insights:

• 34% of healthcare consumers believe doctors should encourage patients to research and ask questions about their treatment;

• 58% of healthcare consumers feel doctors should explain treatment costs to them in advance;

• 60% of healthcare consumers that use technology to measure fitness and health improvement say that utilizing health technologies has improved their behavior.

The report also revealed an increase in patient portals and the use of performance scorecards for consumer research purposes. This new trend toward technologies and processes that streamline benefits takes consumer engagement to another level, and the HR tech industry is picking up on this. For example, Oration is a prescription management platform that uses data analytics to help people find the best deals on their health care purchases. The industry will no doubt see more and more ventures like this in employee benefits engagement.

4) Concerns for the future. Even though 66% of U.S. workers are satisfied with their healthcare benefits, 59% don’t see them as affordable in the next five years, according to a new study by Mercer. There’s also more demand from younger workers for employers to make benefits more flexible. In fact, 70% of respondents ages 34 and younger would like to reduce the value in some benefits while increasing value in others. The study revealed retirement benefits ranked higher than low healthcare cost in this age group. These new concerns, particularly in the younger generations, indicate a potential need for a shift in how benefits are valued and what kind of financial planning the workforce might benefit from to ease their worries about the future of healthcare.

5) Financial wellness programs. The trends for 2016 all revolve around the idea that customization leads to a more personal experience. Employers are moving toward this because they understand that engagement leads to satisfaction and happy employees perform better. Financial wellness programs are another way employers are trying to increase engagement and satisfaction. It makes sense. Money is the No. 1 source of stress in America, and stressed out employees can’t be fully engaged in their work. With effective financial wellness programs, employees can learn how to better manage their finances, or better yet, earn more money by making valuable investments, and hopefully, these efforts will reduce the amount of stress induced by financial worries.

The workforce is changing so rapidly it’s hard for the industry to keep up. There’s a storm of change approaching the employee benefit landscape and if employers want to ensure an engaged and retained workforce, it’s time they started planning their 2016 budget with these key trends in mind.

This article was published on the Employee Benefit News website on January 11, 2016 by Tim Olson, CEBS, CMFC, is managing partner at The Olson Group in Omaha, Neb

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