HR’s Guide to Complying with New Employee Benefits Transparency Rules
The Consolidated Appropriations Act, 2021 of the United States seeks to promote fairness, efficiency, and accountability with employer-sponsored health insurance. It aims to enhance transparency of healthcare costs and coverage details, so employees can make informed decisions.
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Pay transparency is another trend in the corporate world. It involves sharing employee salary information and compensation structures, and promoting a fairer work environment. In this Pacific Prime article, we take an in-depth look at how organizations can adjust well to these two new trends.
The Consolidated Appropriations Act, 2021
The Consolidated Appropriations Act (CAA) of 2021 of the United States (US) requires employers to follow transparency-related obligations regarding health and welfare plans. These obligations aim to provide employees with clearer information about their healthcare benefits.
Under the CAA, employers are required to transparently report on target zones of their employee healthcare benefits. This includes disclosing information such as:
- Cost-sharing provisions
- Coverage limitations
- Prescription drug costs
- Out-of-pocket expenses
- And more
The objective is to improve participants’ understanding of the full extent of their benefits and expose waste, fraud, and inefficiencies in the system.
The requirements help employees make more pinpointed and better informed decisions about their healthcare and hold employers accountable for providing comprehensive and easily comprehensible information.
What Your Organization Should Do to Meet Its Obligations
Under the CAA, employers have responsibilities to fulfill in relation to employee benefits transparency. To meet them, employers can take the following steps:
- Transparency Reporting: Employers must transparently report target zones of their employee healthcare benefits.
- Compliance with the No Surprises Act (NSA): The NSA is a US federal law that protects consumers from unexpected medical bills resulting from out-of-network healthcare services. Employers need to ensure that their employees are not subjected to surprise balance billing.
- Eliminating “Gag Clauses”: The CAA introduces an annual reporting requirement that bans contractual restrictions, known as “gag clauses”, which disallow healthcare providers to disclose plan details to participants and sponsors.
Employers should certify their compliance through attestation. This enables better sharing of plan-related information, in particular cost details.
To stay in compliance and fulfill their fiduciary duty, HR departments should:
- Identify responsible internal parties
- Define roles and duties clearly
- Establish a dedicated health and welfare committee
- Assess compliance gaps
- Review vendors’ performance
- Maintain comprehensive compliance files
- Actively monitor for developments in compliance regulations
- And more
Trends in Pay Transparency
Pay transparency is an emerging concept aimed at promoting fairness and equity in the workplace, by openly sharing remuneration information with employees. It involves creating a culture of trust and open communication regarding pay practices in an organization.
The Pros and Cons of Pay Transparency
Pay transparency, like any other initiative, has its pros and cons:
- Pay transparency improves company culture by promoting trust and inclusivity: When staff have access to salary information, it helps uncover bias and results in a fairer work environment.
- Pay transparency can help with staff retention as it fosters a sense of fairness and recognition: It can also contribute to closing the gender pay gap by exposing any disparities and giving individuals an opportunity to advocate for themselves.
- Pay transparency can improve the job candidate experience: Job seekers appreciate knowing the salary range for a position upfront, and not having to worry about asking for too much or too little.
Naturally, there are also potential drawbacks to pay transparency, which include:
- Implementation of pay transparency can be tricky: This requires open communication and addressing individual opinions and concerns, and for many this openness will take some getting used to.
- Unhealthy competition among employees: As individuals compare their salaries with their peers, tension and dissatisfaction within the workforce could be created.
- Salary negotiations may become more common: This can strain businesses financially, especially during economic downturns.
- The risk of losing top talent to other companies offering higher salaries: The competition for talents will intensify when information becomes readily available.
How to Approach and Comply with the New Requirements
There are a few things employers can do to properly approach and comply with the new requirements in pay transparency. These can help organizations navigate the changing landscape, and ensure they are promoting fairness and equality with their compensation policies.
The rules and trends in pay transparency place the following obligations on employers:
- Compliance with Legal Requirements: Employers must stay up-to-date on pay transparency laws and regulations in their jurisdiction, such as the National Labor Relations Act in the US. These laws aim to protect employees’ rights to discuss pay and promote fair compensation practices.
- Sharing Compensation Information: Employers are expected to share relevant compensation information with employees. Examples include salary ranges, pay scales, and external benchmarking data, so that individuals can compare their compensation to market rates.
- Establishing Clear Compensation Policies: Employers ought to create transparent and consistent processes for deciding pay and promotion, including clear criteria for setting salaries and benefits. This helps ensure fairness and equal treatment across the whole organization.
- Training Managers: Employers carry a responsibility to educate and train managers on pay transparency practices. Managers should be ready to effectively communicate about remuneration, answer employee inquiries, and handle unpleasant conversations related to pay discrepancies.
- Progressing on the Transparency Continuum: There is no one-size-fits-all pay transparency solution. Employers should determine the level of transparency that aligns with their organization’s culture and strategy, and continually assess how well employees receive it.
- Encouraging Employees to Speak Up: Employees should be reminded that it is okay to voice out their own disagreement, even disappointment, with the pay policy of the organization, and express their views on how it can be made better and fairer.
- Providing Non-monetary Benefits and Perks: If necessary, this can go a long way toward compensating for any disparities in salaries.
About Pacific Prime
People are the key to the success of any organization. One way to attract top talents is by having a pay and promotion policy that rewards excellence and is fair, equitable, and transparent. Another way is by offering insurance and employee benefits that truly meet employees’ diverse needs.
With our long history in insurance and employee benefits, Pacific Prime is here to help you find the plans that meet your needs while fitting your budget. What’s more, you can be sure that the plans we recommend will provide the best value for money.
The cherry on the cake? If you secure insurance through us, you benefit from our unbiased advice and all-around support without having to pay an extra dime, compared to securing the same plan directly from the insurer!
Contact us for a FREE, no-obligation plan comparison today!
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