Employment benefits, or fringe benefits, refer to various sources of cash and non-cash benefits that are paid out by an employer to an employee as part of their compensation package and in addition to an employee's salary. It is a term that is used broadly and as such, covers many different items that can be labeled as benefits.
For example, an employee's benefits package might include certain offerings, such as medical and dental insurance, life insurance, retirement accounts, pension plans, and disability provisions. Even items like company-sponsored vehicles or work clothes, can sometimes be included as part of an employee's benefits package.
Depending on how the benefits are characterized, some forms of employee benefits may impact how both the employer and their employees are taxed. For instance, generally most fringe benefits are taxable, however, there are certain categories of these benefits that can be excluded from an employee's tax return, such as educational assistance.
If you are unsure about whether or not you need to claim particular employee benefits on your tax return, you should consult with your accountant or a local tax law attorney for further guidance.
Obtaining Employment Benefits
There are certain employment benefits that employers are required to provide to their employees due to the guidelines set out under both state and federal laws. Some common examples of these benefits include the following:
- Family leave;
- Unemployment insurance;
- Medical leave (this includes pregnancy leave);
- Workers' compensation insurance; and
- Sometimes health insurance (note this is only mandatory when a company has 50 or more workers).
As previously mentioned, there are many different forms of employee benefits, but they may not always be required under the law. Instead, other benefits or perks will need to be negotiated between the employer and their employees in order to obtain them.
For example, in some cases an employer will present an employee with a benefit option that acts as an incentive to get the employee to accept a job, like free laundry services. Prior to the employee accepting the position, the parties will negotiate the terms of how this benefit will be distributed to the employee.
Most of the time, these types of negotiations will be settled before the employee begins work, and the parties will do this through what is called, an employment contract or employee agreement.
In addition, employment benefits may periodically be renegotiated as the needs of the company and the employee evolve.
Affordable Care Act
The Affordable Care Act or Obamacare is a 2010 health care reform law that is designed to give individuals better and affordable access to health care. The Affordable Care Act will also make substantial changes on employee benefits and healthcare since many people currently receive their health insurance through their employers.
How Are Employee Health Benefits Affected by the ACA?
Employers that have not previously offered healthcare insurance to their employees may now be required to offer it depending on how many employees are within the company. Businesses that have 50 or more full-time employees are required to offer healthcare insurance to all their employees staring January 1, 2015 or will face a penalty.
Small businesses that have 25 or fewer full-time employees are not subject to mandatory healthcare insurance requirements, but are eligible for a tax credit of they provides healthcare insurance to their employees.
When Are Employee Health Benefits Effected by the ACA?
Employer mandate regulations affecting healthcare benefits go in to effect starting January 1, 2015. Employers that have between 50 and 99 full-time full time employees have until 2016 to comply with the new regulations. Employers that have 100 or more full time employees must comply with starting January 1, 2015 or the month that the existing healthcare plan renews in 2015. Employers with fewer than 50 full-time employees do not need to comply with the new healthcare regulations that take effect in 2015
Employers who do not want to pay a penalty can take the following steps to comply with the new mandated employer regulations:
- Count the number of employees that are working full-time at your business
- Determine whether healthcare coverage is offered to at least 70% of your full-time employees
- If you have an existing plan, determine whether the plan will maintain for the 2015 plan year
- Determine if the existing plan has all the required additional patient rights and benefits required by ACA (e.g. preventive care, costs sharing)
- Review your existing plan's out-of-pocket maximum and make sure it complies with the ACA limits for 2015 ($6,000 for single and $13,200 for family coverage)
- Work with advisors to monitor additional requirements under the HIPAA and ACA requirement
Who Is Considered a Full-Time Employee?
Under the ACA laws, a “full-time employee” for penalty purposes are any employees who work an average of 30 hours or more per week or 130 hours or more hours per month. This includes any of the following paid hours: vacation, holiday, sick time off, paid layoff, jury duty, military duty and paid leave of absence under the Family and Medical Leave Act.
Employees who are not full-time include non-W-2 leased workers, contract workers, sole proprietors, partners in partnerships, real estate agents, and direct sellers.
Penalties that Employers May Face
Under the ACA employer penalty regulations, any large employers that do not offer the new mandated healthcare coverage to their full-time employees will be subject to penalties if any full-time employees receive a government tax credit. The employer who fails to provide healthcare coverage will have to pay a penalty of $3,000 for each full-time employee who receives a government premium tax credit.
To avoid penalties, employers must meet all requirements under the ACA by 2015 if they are currently have more than 50 full-time employees by 2015. This means that coverage must be offered to all full-time employees and their dependents. Dependents under the ACA are defined as children under the age of 26. Spouses are not determined to be dependents.
Do Employers Receive Tax Credit for Offering Health Insurance?
Not all employers are eligible to receive tax credits for offering healthcare insurance to their employees or paying their employees healthcare premiums. Federal law gives tax credit to only eligible small business employers who provide healthcare coverage to their employees. A small business employer is eligible to receive tax credit if:
Wrongfully Withheld Employment Benefits
Employers are generally prohibited from depriving an employee of the benefits to which they are lawfully entitled. This is especially true of benefits that are required by law, such as those discussed in the above list like family and medical leave.
Additionally, any benefits that have been negotiated or renegotiated under a valid employment contract, may also not be withheld from the employee.
An employee whose benefits have been withheld may have several options available to them when it comes to pursuing legal remedies.
For one, they may choose to report the unlawful withholding to an administrative governmental agency. Once the employee files the report, the agency will then conduct an investigation to determine whether the employer violated the relevant employment laws.
If, based on its findings, the agency does find that the employer is in violation, then they will most likely prescribe an appropriate remedy to prevent the employer from doing so again.
The wronged employee may also file a private lawsuit against their employer in order to recover any losses they suffered.
The legal recourse that the employee chooses, however, will depend on the type of violation that the employer committed. This is due to the fact that some cases require the employee to first report the misconduct to a government agency before initiating a private lawsuit.
Remedies for a Wrongful Withholding of Employee Benefits
There are several remedies for a wrongful withholding of employee benefits. These remedies can include:
- The recovery of benefits, including back pay and liquidated damages;
- Punitive damages if the employer intended to willfully withhold the benefits and has repeatedly violated the relevant laws; or
- An injunction that instructs the employer to adjust their company policies and procedures.
In addition, some benefits also mandate that the employee invest a portion of their paycheck into funds that will go towards retirement accounts, insurance plans, and so forth. Depending on the circumstances, it may be possible to recover those costs as well.
How Can a Lawyer Help With My Issues Involving Employment Benefits?
Cases involving issues with employment benefits can pose many challenges. Thus, it may be in your best interest to contact an experienced workers compensation lawyer for assistance.
Even if you are not involved in a case yet, consulting an employment lawyer for legal advice about your employment benefits can be a valuable asset. From the start, your lawyer can help you to negotiate, draft, and review any contracts that you potentially form with your employer.
Additionally, if you think that your right to receive benefits has been violated, then a lawyer can help you either to file a claim in court and provide representation on your behalf, or guide you through the process of how to report an employer's misconduct to the appropriate administrative agency.
