How Your Small Business Can Prepare for Changing Benefits Laws

In the world of government laws and regulations, the only constant is change. Trying to navigate benefits laws as a small business? We’re here to help. Here’s a breakdown of possible changes regarding paid leave, retirement, and healthcare in the United States, plus how they’ll affect your small business.  

Parental leave

Did you know out of 41 developed countries, the U.S. is the only one that doesn’t offer a nationwide form of paid parental leave? Right now, the Family and Medical Leave Act (FMLA) requires some employers to provide up to 12 weeks unpaid leave — but it doesn’t apply to employers with fewer than 50 employees. In fact, only 60% of US workers are covered by the FMLA.

To accommodate this, states and companies are considering enacting paid parental leave benefits. Currently, five states require employers to provide paid family leave: California, Rhode Island, New Jersey, New York, and Washington — while Massachusetts, Connecticut, Oregon, and the District of Columbia have passed laws that take effect in 2020 or 2021. 

You may be wondering: Should your small business take the initiative to offer paid parental leave, even if your state doesn’t require it or if your organization is fewer than 50 employees? While there is indeed a cost of providing guaranteed leave, not providing leave can affect your ability to recruit and retain talent. In fact, 83% of millennials would be more likely to join a company if it offered paid parental leave. 

So how can you balance offering paid parental leave, but still make sure it’s within your budget? 

Here are a few tips:

1. Lean on your team for help. Offer time off and find ways to have employees cover each other’s work. The best part? It’ll help employees grow and take on new tasks and ownership.

2. Try flexible work schedules. If you don’t have the staff, offer flexible work schedules. Whether that’s working part-time or working from home on certain days, find ways to get creative. 

3. Use technology. Make it easy for your employees to work remotely. Collaboration is easier than ever with today’s popular video chat and communications tools and software. Customer relationship management (CRM) systems help build a single source of truth and foster customer relationships from anywhere.

Pro-Tip: Parental leave is more than just time off to deliver a baby — it can encompass time off for either parent to participate in a child’s birth or adoption, or it may include paid leave  to take care of a child’s urgent needs, like illness.

Retirement

Having a retirement plan in place for your company also helps attract and retain employees, but laws are continually changing in this area too. In September 2019, the Internal Revenue Service (IRS) announced regulations that amended hardship withdrawal rules for employees with 401(k) and 403(b) plans. 

What are hardship withdrawals? It’s an emergency removal of funds from a retirement plan. Here’s a breakdown of the changes.

In the past, employees could choose to suspend contributions to their 401(k) or 403(b) for six months following a hardship withdrawal. But under new regulations, your business is prohibited from suspending employee contributions after a hardship withdrawal. You’re also not allowed to suspend contributions after any hardship withdrawal taken this year, in 2020. 

The new rules make it easier for employees to make hardship withdrawals in the face of losses in a federally-declared disaster. They also added a seventh safe harbor provision for hardship withdrawals. To qualify, your employee’s primary residence or principal place of employment must be within a FEMA-designated area. 

Under the new rules, your business may approve hardship withdrawals if the employee’s situation meets three specific criteria:

• The withdrawal amount is not larger than the amount the employee needs (including the amount to pay taxes and penalties on an early withdrawal).
• The employee has received all available non-hardship distributions from your business’s plan.
• The employee attests they don’t have enough cash or other liquid assets to meet their financial need.

How can you stay on top of the retirement laws?

1. Create policies to implement the IRS’s new three-part test for determining whether a 401(k) withdrawal is necessary.
2. Have a process that gathers relevant information and explains decisions. This can help protect your business from liability and also improve employee decision making.
3. Make sure 401(k) or 403(b) paperwork is updated, removing statements offering the suspension option, by December 31, 2021. 
4. If your small business offers 401(k) plans, ensure documents are updated to inform workers of this new safe harbor provision. 

Healthcare 

When choosing between a high-paying job and a low-paying one with better benefits, employees say health insurance might sway them to the latter. Hoping to find a healthcare plan that covers your employee needs, but isn’t complicated to implement? Given your small business may not have the bargaining power of its larger counterparts, you may feel stuck to pay more to provide health coverage. 

Staying in the loop on upcoming changes may help — here’s a breakdown of changes coming down the line in terms of healthcare that can help you make informed decisions in the future:

Washington recently announced its plan to become the first state to offer a public healthcare option. The bill, signed into law in May 2019, creates a program called Cascade Care. 

Cascade Care isn’t exactly the same concept as Medicare for All. For instance, Cascade Care doesn’t mean the state government would be running a health insurance system of its own. Instead, Washington would contract with private health insurance companies to provide health insurance to residents, and the state would manage costs by controlling the terms of the plans. Other states including Colorado and Connecticut are considering a public option.

In the meantime, you may be wondering how to provide the best healthcare experience for your employees.

1. When choosing insurance, loop your employees in and ask for their input.

2. Match the market average.

2. Try your best to keep out-of-pocket expenses low.

Feeling more informed about leave, retirement, and healthcare laws? Learn about a newly popular and trending employee benefit: education.

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