1Willis North America | October 2015

HRFocus

HR CORNERNEW PAID SICK LEAVE REQUIREMENT FOR FEDERAL CONTRACTORS… COMING IN 2017 By Marina A. Galatro, PHR-CA, SHRM-CP Sr. HR Consultant, Willis HR Partner Willis Human Capital Practice

The idea of mandatory paid sick leave has been around for more than 10 years. In 2004, the Healthy Families Act was introduced in Congress, proposing a paid sick leave law at the federal level. The minimum requirement would allow workers to accrue up to seven days annually of paid sick leave to stay home while sick or seeking preventative care, or while caring for a sick family member. It would also include victims of domestic violence, stalking and sexual assault, allowing them to take paid time off to recover or to seek assistance.

The Act did not pass, despite being reintroduced to Congress numerous times. President Obama has recently called upon Congress again to pass the Healthy Families Act, which would require all businesses with 15 or more employees to offer up to seven paid sick days each year.

Even without federal legislation in place, state and local jurisdictions have started to take the matter into their own hands and have passed their own bills. As of August 2015, many cities and four states have passed mandated provisions for paid sick leave, and a few states and localities have pending legislation.

Most employers were challenged with keeping up with the flood of new paid sick leave laws passed this year. When there are multiple sets of rules, some at the municipal level and some at the state level, employers are more likely to make a mistake. Although such laws vary by jurisdiction, most follow a basic formula to allow workers paid time off to care for themselves and their family members.

Now federal contractors have something to look forward to. On Labor Day (September 7, 2015), President Obama signed an executive order requiring that federal contractors and their subcontractors provide paid sick leave to their employees performing work on covered contracts with the federal government.

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HR CORNER New Paid Sick Leave Requirement for Federal Contractors…Coming in 2017 ................................................. 1

HEALTH OUTCOMES Willis Survey Reveals More Employers Are Embracing Value on Investment for Wellness Programs ..........................3

LEGAL AND COMPLIANCE San Francisco’s 2016 Employer Expenditure Rates .................5

Transitional Reinsurance Fee Counts Due by November 16 ................................................................5

SINCE YOU ASKEDAre Employers with 50 – 99 Employees Subject to Health Care Reform Reporting? ..............................................7

WEBCASTS ..................................................................... 9

CONTACTS ..................................................................... 10

HUMAN CAPITAL PRACTICE

October 2015 www.willis.com

PAIDLEAVE FOR FEDERAL CONTRACTORS

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According to the executive order, providing access to paid sick leave will improve the health and performance of employees of federal contractors and bring benefit packages at federal contractors in line with model employers, ensuring that they remain competitive employers in the search for dedicated and talented employees. These savings and quality improvements will lead to improved economy and efficiency in government procurement. Click HERE to read the White House fact sheet.

What the executive order requires. The executive order requires that employees performing work on covered federal contracts and subcontracts earn one hour of paid sick leave for every 30 hours worked, accruing up to 56 hours (or 7 days) of earned paid sick leave per year.

Paid sick leave may be used by an employee for: � A physical or mental illness, injury or

medical condition � Obtaining diagnosis, care or preventive care from a

health care provider � Caring for a child, a parent, a spouse, a domestic

partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship who has any of the conditions or needs for diagnosis, care, or preventive care from a health care provider or is otherwise in need of care

� An absence resulting from domestic violence, sexual assault or stalking, if the time absent from work is to seek medical attention, obtain counselling, seek relocation, seek assistance from a victim services organization, or take related legal action, including preparation for or participation in any related civil or criminal legal proceeding; or to assist an individual related to the employee in any of these activities

Carryover and reinstatement of leave. Paid sick leave will carry over from year to year and must be reinstated for employees rehired by a covered contractor within 12 months after a job separation. However, the executive order does not require payment upon a separation from employment for accrued sick leave that has not been used.

It is important to note that paid sick leave mandated by the executive order is required in addition to a contractor’s obligations under the Service Contract Act and the Davis-Bacon Act, and contractors may not receive credit toward their prevailing wage or fringe benefit obligations under those Acts for any paid sick leave provided in satisfaction of the requirements of the executive order.

What if there is an existing paid sick leave policy? If a contractor has an existing paid leave policy (provided in addition to the fulfillment of Service Contract Act or Davis-Bacon Act obligations), it will satisfy the requirements of the executive order if leave is made available to all covered employees, the amount of paid leave meets the requirements of the executive order, and if it may be used for the same purposes and under the same conditions as required under the executive order.

Final note. The executive order states that it does not supersede other federal, state or local laws or collective bargaining agreements that provide greater benefits.

Pursuant to the executive order, federal contractors and subcontractors will be required to update their purchase order and contract language referencing this new policy. This requirement will apply to new contracts entered after the January 1, 2017 effective date.

For more information on paid leave, the U.S. Department of Labor has established a paid leave resource page, claiming “It’s Time for America to #LeadOnLeave,” which advocates expansion of paid sick leave.

Willis is not in the position to determine if an organization is required to abide by this executive order. Please seek guidance from legal counsel.

HR Corner – continued from page 1

3Willis North America | October 2015

HEALTH OUTCOMESWILLIS SURVEY REVEALS MORE EMPLOYERS ARE EMBRACING VALUE ON INVESTMENT FOR WELLNESS PROGRAMS

BUT MEDICAL COST CONCERNS LOOM GREATER THAN EVER Ronald Leopold, MD, MBA, MPH

According to the recently released 2015 Willis Health and Productivity Survey, this year will be remembered as a watershed year for employer-sponsored health and wellness programs. Organizations continue to evaluate the need to implement and/or enhance their health and wellness programs as the business demand for such programs grows. In previous years, organizations have focused on determining program return on investment (ROI): how many medical dollars were saved for every dollar spent on wellness. What is emerging this year are two very distinct mindsets with regard to how organizations approach the measurement of wellness program success.

In 2015, survey results indicate for the first time that more organizations are increasingly focused on the VOI (value of investment) of health management and wellness programs. Employers are recognizing that there is considerable value to a healthier workforce beyond the value of lower medical costs. VOI-focused organizations embrace a wider set of metrics that include absenteeism, worker morale, employee turnover, presenteeism costs, workers’ compensation, short- and long-term disability, employee loyalty and tenure.

Nearly two-thirds (64%) of employers with wellness programs were more value-of-investment-focused versus 28% of respondents who were more return-on-investment-focused.

Return on Investment Based (ROI) organizations looked to justify investment in health management and wellness programs purely based on medical cost reduction.

Value of Investment Based (VOI) organizations looked to justify investment in health management and wellness programs based on many factors, including employee morale, worksite productivity, employee absence and workplace safety, in addition to medical cost reduction.

More organizations are realizing that the expectation of an immediate return on investment (ROI) for their wellness programs through medical cost reduction may be unlikely. Worksite wellness requires a sustained effort, including annual program review and long-term program management. Companies who adopt a true culture of health better position themselves for increased profitability in the long run.

Employers who described themselves as more VOI-focused were: � More likely to value “building a culture of health” (66%) than organizations with an ROI focus (51%) � More likely to value building teamwork and morale (48%) than organizations with an ROI focus (25%) � More likely to be concerned about improving productivity with their health management programs (51%) than

respondents from organizations with an ROI focus (40%)

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Wellness programs across the board appear to be more entrenched in employer strategies. Some findings to support this include:

� Most organizations with wellness programs (58.5%) have had their program in place for three or more years � 43% percent of organizations with wellness programs view their program as “comprehensive” or “intermediate”

in terms of program maturity

This year, half of employer respondents (50%) said that they were “more concerned about medical costs in the next three years than in the last three years.” Only 2% said they were less concerned about medical costs.

With a projected increase in medical trend in 2016 and the looming Cadillac Tax in 2018, the business imperative to lower medical costs will continue to be a top priority. In fact, the 2015 Willis Health and Productivity Survey suggests that more employers are broadening their strategies beyond the scope of traditional wellness and employing more focused, data-driven solutions to achieve sustained cost reduction. Some of these solutions include telemedicine, patient advocacy, specialty case management, expert opinions and cost/quality transparency.

Willis conducted its ninth annual Health and Productivity survey from May through June 2015. The study asked employer organizations about health management and wellness program design, challenges, priorities, incentives, medical costs, and health and program evaluation.

The survey was delivered to employer-based respondents electronically. All U.S.-based organizations were eligible to participate, regardless of employee size. Participating organizations ranged from fewer than 100 to more than 10,000 employees. Survey respondents included organizations from various industries and geographic regions, which provided a comprehensive sample of responses.

Some other notable findings include: � Twenty-seven percent of respondents reported their wellness program was “partly” or “entirely” funded by their

medical carrier � Only 35% were satisfied with participation in their wellness programs � Only 35% were satisfied with participation in their wellness programs � Only 25% were satisfied with the business impact of their wellness programs

The study also tracked many of the fundamentals of employer-based wellness programs, including senior management buy-in, efficacy of communications, use of biometric screening and health risk assessments, use and activity of wellness committees and what metrics are being employed to track success.

Health Outcomes – continued from page 3

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LEGAL AND COMPLIANCESAN FRANCISCO’S 2016 EMPLOYER EXPENDITURE RATESThe 2016 employer health care expenditure rates are available from San Francisco’s Office of Labor Standards Enforcement (OLSE). In 2015, the health expenditure rate for a large employer (100 or more employees) was $2.48 per hour. For 2016, this rate will be $2.53. For medium-sized employers (20 – 99 employees), the 2015 rate was $1.65; for 2016, the rate will increase to $1.68 per hour.

BACKGROUND

San Francisco’s Health Care Security Ordinance (HCSO) requires that medium and large businesses make certain minimum contributions toward their San Francisco employees’ health care. Under this mandate, an employer may either contribute at least the minimum amount to a medical plan or other health benefits or pay that amount into the publicly available program established by the HCSO. (Additional details on the HCSO’s requirements can be found here.)

TRANSITIONAL REINSURANCE FEE COUNTS DUE BY NOVEMBER 16The transitional reinsurance fee is one of several implemented under the Patient Protection and Affordable Care Act (PPACA). The fee was established to stabilize premiums and mitigate the impact of potential adverse selection in the individual and small group markets.

DEADLINES

The enrollment count for 2015, used to calculate the reinsurance fee, is due by November 16, 2015 (as November 15, 2015 is a Sunday). The reinsurance contribution rate for 2015 is $44 (approximately $3.67/ month) per enrolled individual, including dependents. The Department of Health and Human Services (HHS) offers employers with self-insured plans the option to pay: (1) the entire 2015 benefit year contribution in one payment no later than January 15, 2016 reflecting $44.00 per covered life; or (2) in two separate payments for the 2015 benefit year, with the first remittance due by January 15, 2016 reflecting $33.00 per covered life, and the second remittance due by November 15, 2016 reflecting $11.00 per covered life.

Note: For employers with self-insured group health plans that opted to pay the reinsurance fee in two installments for the 2014 benefit/calendar year, the second payment is due by November 15, 2015.

APPLICABLE BENEFITS

The reinsurance contribution applies to major medical coverage that is considered part of a commercial book of business. This coverage includes catastrophic plans, individual or small market plans (subject to actuarial value requirements) and health coverage for a broad range of services and treatments in various settings that provides minimum value (having a 60% actuarial value).

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RESPONSIBLE PARTIES

Health insurance issuers and third-party administrators (TPAs) on behalf of self-insured health plans, referred to as “contributing entities,” are responsible for contributing to the transitional reinsurance program. Note that for self-insured plans, ultimate liability for the reinsurance fee rests with the plan, but a TPA can remit the fee on its behalf.

For the 2015 and 2016 benefit/calendar years, employers with self-insured group health plans that do not use a TPA for claim processing, claim adjudication or plan enrollment will not be treated as contributing entities and therefore will be exempt from reinsurance contributions. This exemption also extends to plans that use TPAs only for the following ancillary administrative functions/services: (1) provider network and related claim repricing services, (2) a de minimis percentage (no more than 5%) of a plan’s core administrative functions, or (3) core administrative functions relating only to pharmacy or excepted benefits.

CONTRIBUTION PROCESS

Employers with self-insured plans have several different options for calculating the fee. A detailed discussion of the available methods can be found in the Willis Human Capital Practice Alert from October 2014, which can be found here. Employers can also refer to Transitional Reinsurance Program Operational Guidance, recently updated by the Centers for Medicare and Medicaid Services (CMS) for the 2015 year. Contributing entities are required to use pay.gov to submit enrollment information and to pay the reinsurance fee. The 2015 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form is available on https:// pay.gov/public/home/. Information on how to submit required data using pay.gov can be found here.

NEXT STEPS

Employers with self-insured plans should promptly determine whether they are eligible for an exemption from the reinsurance fee for 2015. If they are not exempt (and many will not qualify), employers should gather the required enrollment information and prepare to submit it through pay.gov by November 16, 2015.

Legal and Compliance – continued from page 5

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7Willis North America | October 2015

ARE EMPLOYERS WITH 50 – 99 EMPLOYEES SUBJECT TO HEALTH CARE REFORM REPORTING? Under the Patient Protection and Affordable Care Act (PPACA) employer shared responsibility mandate, applicable large employers (ALEs) must offer minimum essential coverage (MEC) to their full-time employees (average 30 hours or more per week), and the coverage must be affordable and provide minimum value, or the ALE may be required to pay a corresponding penalty. An employer that has at least 50 full-time employees, including full-time equivalent (FTE) employees, on average during the prior year, is an ALE for the current calendar year.

In order for the federal government to monitor ALE compliance with this coverage obligation, the law requires that ALEs meet certain reporting obligations to the Internal Revenue Service (IRS) and to full-time employees. Under Internal Revenue Code (IRC) section 6056 regulations, ALEs are directed to use Form 1094-C (transmittal form that also summarizes employer shared responsibility compliance) and Form 1095-C (addressing each full-time employee’s coverage) to report how they are meeting their shared responsibility obligations. That mandatory reporting begins during the first quarter of 2016.

The IRS temporarily delayed the employer shared responsibility requirements for certain employers with 50 – 99 full-time (including FTE) employees, but the reporting requirements were not delayed. Accordingly, employers with 50 – 99 full-time employees are still subject to the section 6056 reporting requirements beginning in 2016 for 2015 plan data.

TRANSITION RELIEF BACKGROUND

The final employer shared responsibility regulations granted a one-year delay (until 2016) to employers with 50 – 99 full-time employees (including FTEs). This means that for 2015, a large employer is one that employs at least 100 full-time (including FTEs) employees. The same rules that determine an employer’s status as a large employer, including the controlled group aggregation rules, apply for purposes of determining whether an employer has 50 – 99 full-time employees (including FTEs).

For an employer that is eligible for this 2015 transition relief, no assessable payment under section 4980H(a) or (b) will apply for any calendar month during 2015 and, if the employer has a non-calendar-year plan, will not apply for the portion of the 2015 plan year that falls in 2016. An employer seeking to take advantage of this transitional guidance must meet certain conditions:

� Limited Workforce Size – The employer employs on average at least 50 full-time employees (including FTEs) but fewer than 100 full-time employees (including FTEs) on business days during 2014.

� Maintenance of Workforce and Aggregate Hours of Service – During the period beginning February 9, 2014 and ending on December 31, 2014, the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition except for bona fide business reasons, such as reductions of workforce size or overall hours of service because of business activity (e.g., the sale of a division, changes in the economic marketplace in which the employer operates, terminations of employment for poor performance, or other similar changes unrelated to eligibility for the transition relief ).

SINCE YOU ASKED

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� Maintenance of Previously Offered Health Coverage – During the period beginning February 9, 2014 and ending on December 31, 2014 (for an employer with a non-calendar year plan, the period beginning on February 9, 2014, ending on the last day of the plan year that begins in 2015), the employer cannot eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. An employer will meet this requirement if:

� It continues to offer each employee who is eligible for coverage during the coverage maintenance period an employer contribution toward the cost of employee-only coverage that is either at least 95% of the dollar amount of the contribution toward such coverage that the employer was offering on February 9, 2014, or is the same (or a higher) percentage of the cost of coverage that the employer was offering to contribute toward coverage on February 9, 2014;

� In the event there is a change in benefits under the employee-only coverage offered, that coverage provides minimum value after the change; and

� The employer does not alter the terms of its group health plans to narrow or reduce the class or classes of employees (or the employees’ dependents) to whom coverage under those plans was offered on February 9, 2014.

� Certification of Eligibility for Transition Relief – The employer certifies to the IRS that it meets the eligibility requirements described above. This certification will be done in conjunction with the section 6056 reporting requirement (annual reporting on health coverage by large employers under the pay or play mandate).

COMPLETING THE C FORMS

Eligibility for the 50 – 99 full-time employee transition relief is reported on Form 1094-C, line 22, box C, and the specific form of relief for which the employer is eligible must be reported on Form 1094-C, lines 23 – 35, column (e), using code A (50 – 99 Transition Relief ).

Since You Asked – continued from page 7

Willis North America | October 20159

Each of the above programs has been approved for 1 recertification hour toward PHR, SPHR and GPHR recertification through the Human Resource Certification Institute (HRCI). For more information about certification or recertification, please visit the HRCI homepage at www.hrci.org.

SUCCESSION PLANNING: HOW TO CREATE A ROADMAP FOR THE FUTURE GROWTH OF YOUR ORGANIZATIONTUESDAY, OCTOBER 20, 2015, 2 PM EASTERN

Co-Presented By Leann Hoene, SPHR-CA, GPHR, SHRM-SCP Senior Human Resources Consultant HR Partner Consulting Human Capital Practice

Megan Gaddy Human Resources Consultant HR Partner Consulting Human Capital Practice

Studies have shown that most companies have little or no defined succession plan in place – not for their mission critical positions, and not even for their CEO. The results can be traumatic when a key employee exits the organization, leaving skill gaps and a loss of valuable knowledge and expertise. By then, it is too late to start planning for the future. The future is now.Succession planning is more than having successors for the CEO. It’s an enterprise-wide perspective on leadership development that builds broader capability and a deeper pipeline of critical skills and talent – not just at the top, but in all levels of the organization. This session will describe how to build an eye-opening and compelling business case. We will discuss the “8-Step Action Plan” for creating a succession management process, including identifying key competencies and skills, defining high-potential and high performing employees, identifying mission critical positions, measuring and assessing the skill gaps, and engaging in the development and retention of key employees for the future.During this session, participants will learn:

� The key differences between replacement planning, succession planning, and succession management

� How to identify and prioritize critical positions based on impact and retention outlook

� What systems track developmental goals � Metrics used to gauge the impact and success of the program

To RSVP, click here.

NOTE: Advance RSVP is required to participate in this call. Registration ends 1 hour prior to the call start time.

WELLNESS INCENTIVES 2.0HOW TO CREATE THE RIGHTPROGRAM FOR YOUR POPULATIONTUESDAY, NOVEMBER 17, 2015, 2 PM EASTERN

Heidi Guetzkow Senior Consultant Health Outcomes Human Capital Practice

The art of wellness incentives is becoming more of a science. Employer organizations are becoming more sophisticated in developing wellness incentives that work for their workforce. Best practices need to be tailored to the demographics of your population, your organization’s culture and how your employee benefits program is configured and delivered.No two employer wellness incentive programs look the same. Understanding what behaviors an organization wants to change, and leveraging incentives in a way that resonate with a particular workforce, is critical to your organization’s success in this area.This presentation will present a roadmap for developing a wellness incentive program, which components to consider, and the data you need to monitor and measure success.During this session, participants will learn:

� What behaviors your organization should consider incentives for

� Incentive considerations — participation, engagement or outcomes-based?

� Workforce demographics — how can they tell you what will work with your population?

� The role of personal technology for your program

To RSVP, click here.

NOTE: Advance RSVP is required toparticipate in this call. Registration ends 1hour prior to the call start time.

WEBCASTS

10Willis North America | October 2015

NEW ENGLAND

Auburn, ME207 783 2211

Bangor, ME207 942 4671

Boston, MA617 437 6900

Burlington, VT802 264 9536

Hartford, CT860 756 7365

Manchester, NH603 627 9583

Portland, ME207 553 2131

Shelton, CT203 924 2994

NORTHEAST

Buffalo, NY716 856 1100

Morristown, NJ973 539 1923

Mt. Laurel, NJ856 914 4600

New York, NY212 915 8802

Stamford, CT203 653 2430

Radnor, PA610 254 7289

Wilmington, DE302 397 0171

ATLANTIC

Baltimore, MD410 584 7528

Knoxville, TN865 588 8101

Memphis, TN901 248 3103

Metro, DC301 581 4262

Nashville, TN615 872 3716

Norfolk, VA757 628 2303

Reston, VA703 435 7078

Richmond, VA804 527 2343

Rockville, MD301 692 3025

SOUTHEAST

Atlanta, GA404 224 5000

Birmingham, AL205 871 3300

Charlotte, NC704 344 4856

Gainesville, FL352 378 2511

Greenville, SC864 232 9999

Jacksonville, FL904 562 5552

Marietta, GA770 425 6700

Miami, FL305 421 6208

Mobile, AL251 544 0212

Orlando, FL407 562 2493

Raleigh, NC704 344 4856

Savannah, GA912 239 9047

Tallahassee, FL850 385 3636

Tampa, FL813 281 2095

Vero Beach, FL772 469 2843

MIDWEST

Appleton, WI800 236 3311

Chicago, IL312 288 7700

Cleveland, OH216 861 9100

Columbus, OH614 326 4722

Detroit, MI248 539 6600

Grand Rapids, MI616 957 2020

U.S. HUMAN CAPITAL PRACTICE OFFICE LOCATIONS

KEY CONTACTS

Milwaukee, WI262 780 3476

Minneapolis, MN763 302 7131763 302 7209

Moline, IL309 764 9666

Overland Park, KS 913 339 0800

Pittsburgh, PA412 645 8506

Schaumburg, IL847 517 3469

SOUTH CENTRAL

Amarillo, TX806 376 4761

Austin, TX512 651 1660

Dallas, TX972 715 2194972 715 6272

Denver, CO303 765 1564303 773 1373

Houston, TX713 625 1017713 625 1082

McAllen, TX956 682 9423

Mills, WY307 266 6568

New Orleans, LA504 581 6151

Oklahoma City, OK 405 232 0651

San Antonio, TX210 979 7470

Wichita, KS316 263 3211

WESTERN

Fresno, CA559 256 6212

Irvine, CA949 885 1200

Las Vegas, NV602 787 6235602 787 6078

Los Angeles, CA213 607 6300

Phoenix, AZ602 787 6235602 787 6078

Portland, OR503 274 6224

Irvine, CA949 885 1200

San Diego, CA858 678 2000858 678 2132

San Francisco, CA415 291 1567

San Jose, CA408 436 7000

Seattle, WA800 456 1415

14679/09/15

The information contained in this publication is not intended to represent legal or tax advice and has been prepared solely for educational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.

Willis North America Inc.

Brookfield Place 200 Liberty Street, 7th Floor New York, New York 10281-1003 United States Tel: +1 212 915 8888

www.willis.com