While Congress and the Trump administration continue to mull over health care reform and other issues impacting employers, states and municipalities are busy implementing their own initiatives regulating employee pay, hiring and benefits such as retirement plans and insurance.
“The Trump administration is actively moving forward with its plans to create a more business-friendly environment. Part of that agenda is the reduction of current regulations impacting employers,” says Martin Mucci, Paychex president and chief executive. “With the intent of advancing worker protections, state and local governments are responding, ushering in a new wave of employer-facing regulations.”
Paychex has collected a list of the top regulatory issues gaining traction with states and municipalities across the U.S., and we add a bit of color to some of the most topical issues.
8. Payroll cards
Even as the federal Consumer Financial Protection Bureau works to implement new disclosure rules for payroll cards next year, states continue to introduce their own rules governing the use of the cards by employers, according to Paychex.
Pennsylvania and Kentucky recently put payroll card laws into effect, and there are bills currently pending in Massachusetts, New Jersey, and New York.
The new law in Kentucky permits the use of payroll cards, but employees cannot not be charged an activation fee, and the payroll card account must provide the employee with the ability -- without charge -- to make at least one withdrawal per pay period for any amount up to and including the full account balance, according to the HR360 blog.
Employers utilizing payroll cards must also comply with certain other laws and regulations, including guidance from the federal Consumer Financial Protection Bureau, according to the blog.
7. Multiple employer plans
Vermont has passed legislation for the creation of the Green Mountain Secure Retirement Plan, the first multiple employer plan design among state plans, which will allow for employer participation as well as higher contribution limits than IRA programs allow, according to Paychex.
Some municipalities are following suit, with Philadelphia and New York City working on legislation to establish retirement savings programs.
Vermont’s plan is unique to those established in other states, and could stand as a more moderate template for state-run options going forward. Language in the legislation underscores the voluntary nature of the program and goes to some lengths to assure cohesion with private sector retirement plan providers.
At the outset of the program, pre-tax contributions will only come from employees, but lawmakers crafted language that leaves open the possibility for employer contributions down the road, a feature that is also distinct from the programs in California, Oregon, Illinois, and Connecticut.
The auto-IRA safe harbor created in the Obama administration prohibited employer contributions.
When an employer does make the choice to participate in the MEP, all of its workers will be automatically enrolled, then given the ability to opt-out of the plan.
6. State-sponsored retirement plans
So far, nine states have passed legislation to create individual retirement plans, according to Paychex. Oregon, Illinois, and California have all passed Roth IRA programs with specific contribution and enrollment criteria, set to take effect in the next two years.
The OregonSaves Retirement Program will operate such that employers who do not sponsor a qualified retirement plan will be required to automatically enroll employees into the OregonSaves program, and employees will be required to contribute 5 percent of their compensation to a Roth IRA account, Joseph P. Yonadi, Jr. and Nancy R. Chawla, attorneys at Benesch Friedlander Coplan & Aronoff LLP, write in Lexology.
However, employees will be able to opt-out, or choose a different savings rate.
“It remains to be seen whether these programs are challenged as preempted by ERISA,” the attorneys write. “For now, employers with employees in the State of Oregon will need to comply with the requirements of the OregonSaves program. Employers who already sponsor a retirement plan, such as a 401(k) plan, will need to file a Certificate of Exemption.”
5. Single payer
Several states, including Colorado and California, have introduced single-payer proposals in their current legislative session, but many have already hit roadblocks, according to Paychex.
“Policy experts like me were not surprised when efforts in California petered out, not the least due to the massive price tag of $400 billion annually,” Simon Haeder, an assistant professor of political science at West Virginia University, writes in Newsweek.
“To the dismay of progressives, future efforts are likely equally doomed to failure,” Haeder adds. “While states have been innovators with regards to many policies, fiscal issues and regulatory limitations will most likely preclude states from pursuing sweeping health reform.”
4. Health care reform
States such as Minnesota and Alaska have either implemented or proposed laws to stabilize their exchanges, Hawaii and other states are working to maintain elements of the Affordable Care Act in the event of a repeal, while Massachusetts and other states are seeking flexibility on specific ACA mandates, according to Paychex.
Many of the states are taking advantage of the ACA’s “state innovation waivers,” and currently Hawaii and Alaska have approved waivers, three states have pending waivers with the federal government, and 14 states have enacted healthcare laws addressing these waivers.
Iowa’s waiver would restructure the ACA’s tax credits, eliminating tiered levels and instead instituting a flat credit to help anyone who enrolls pay for his or her premiums, based on age and income, according to the Washington Examiner.
The state would also create a reinsurance program, which would take funding from federal tax credits for premiums and cost-sharing reduction subsidies that go to out-of-pocket costs, and put it toward the claims of more costly enrollees.
Currently Medica is the only insurer slated to sell plans on the exchange in Iowa, but Wellmark Blue Cross and Blue Shield says it would return if the waiver is approved and would sell plans in all 99 of Iowa’s counties. Other insurers might also enter the exchange if the waiver is approved, according to officials at the Iowa insurance division, who are also hopeful that the measure might lower premiums for 2018.
3. Paid leave
Currently, 45 different states and local jurisdictions have passed paid sick leave laws, and more are in the process, according to Paychex.
Five states -- California, New Jersey, New York, Rhode Island, and Washington – as well as the District of Columbia, have passed paid family leave laws that either require or permit employee payroll deductions and in some cases require more complex coordination with the Federal Family and Medical Leave Act or other paid time off.
The city of Berkeley in California will hold a town hall in September to hear input on a new ordinance that could bring 100 percent paid family leave to the city, according to East Bay Express.
The measure calls for private businesses with 25 or more employees to supplement the state’s new family leave program that pays either 55 percent of their wages or a maximum of $1,173 per week, so that workers receive full wages for up to six weeks.
2. Limiting salary history inquiries
Delaware, Massachusetts, New York City, Oregon, Philadelphia, and San Francisco have passed legislation limiting salary history inquiries until a certain stage of the recruiting process and prohibit the use of salary information in employment decisions, according to Paychex.
Many others, including California, New York, Illinois, North Carolina, and Pennsylvania, have similar bills in the works.
Illinois Republican Gov. Bruce Rauner last week vetoed the legislature’s bipartisan No Salary History bill, but advocates believe lawmakers can override the bill, according to the Chicago Tribune.
In a message issued with his veto, Rauner said the “gender wage gap must be eliminated.” He is urging state lawmakers to craft legislation similar to the Massachusetts law, which prohibits salary history inquires unless it is a matter of public record or the applicant is a current employee applying for another position within the company.
Massachusetts employers can, however, can seek pay history after they have offered a candidate the job and salary – “which, on the plus side, could allow employers to increase an offer to make it more appealing, but, on the down side, could reduce an employee's raise or bonus down the road if it is revealed he or she was earning much less before,” the Chicago Tribune writes.
1. Equal pay
While employers across the country must comply with the Equal Pay Act enforced by the Equal Employment Opportunity Commission, nearly every state and the District of Columbia also have equity laws and a number of them are now stiffening their statutes, according to Paychex.
Several states, including Massachusetts, Maryland, California, New York, and Oregon, recently passed legislation to expand their existing equal pay laws to increase employer obligations and penalties, and change the way claims of pay discrimination are analyzed under the law.
San Diego last month became the largest city in the nation to pass an equal pay ordinance, requiring city contractors and consultants to pay employees equally regardless of gender or ethnicity, according to the San Diego Union-Tribune. “To avoid overburdening local businesses,” the ordinance exempts public works contracts under $500,000 and all contractors with 12 or fewer full-time employees.