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When employees leave unused FSA funds on the table, that money goes to the company. But there are a number of rules that dictate how those funds can be used.   

And not following those rules can be costly.

‘Exclusive Benefit Rule’

According to the IRS’ proposed regs on the subject, employee FSA forfeitures can be:

• retained by the company
• used to reduce required salary reduction amounts for the immediately
• following plan year, on a reasonable and uniform basis
• used to increase the annual coverage amount, or
• used to defray administrative expenses.

While these options are pretty straightforward, employers also need to be aware of the ERISA impact.

The majority (but not all) of health flex spending accounts are subject to ERISA’s fiduciary duty rules, which include the “exclusive benefit rule.”

That rule essentially says that plan assets – in this case leftover FSA funds – must be used for the exclusive purpose of providing benefits to participants/beneficiaries and paying reasonable administration expenses.

So despite IRS regs on retaining funds, the exclusive benefit rule may create situations where firms aren’t able to simply retain this money.

Handling the leftovers

After determining whether the FSA is subject to ERISA, employers should take these steps with leftover funds.

First, review the plan document. It may spell out exactly how forfeitures should be handled and what steps you must take.

The next step is documentation. If you decide to use to workers’ leftover funds to pay FSA administration expenses, you’ll need detailed records showing exactly how the payments relate to the FSA.

You’ll also want documentation on the nature/amount of the expenses and the date they were incurred and paid.

Employee recognition programs have kind of become old hat these days. So how can you pump new life into this morale-building effort?

The most common characteristics of high-ROI recognition programs — regardless of their monentary value — are their spontaneity and perceived value by employees themselves.

In reality, the cost of some of most effective spot awards and bonuses often amount to less than 1% of base pay — and the awards don’t even have to be given in cash.

Less sense of entitlement

Part of the problem with traditional end-of-year or quarterly bonuses (apart from the fact that they cost employers an average of 10% of base pay) is that employees expect to receive them for reaching certain goals.

Sometimes employees simply expect it no matter what. For example, at many firms, an annual holiday bonus is viewed as an entitlement and people inevitably grumble that it’s not high enough. On the flip side, with spontaneous awards and bonuses, workers are often pleasantly surprised.

Here’s what the experts suggest to make the latter type of awards work, even if they’re lower in cost:

1. Creativity is crucial

The most effective programs typically give out awards weekly or monthly. To avoid over-stretching the budget – and avoid a ho-hum attitude setting in – creativity is a must.

One way that never gets old: combining time off with a second, non-cash award. Example: One firm gives a half-day off in combo with movie passes once a month.

Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people’s personal needs or interests. Two examples:

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and
• another company with a lot of sports nuts took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent in terms of creating ongoing enthusiasm.

3. Add structure

The awards may seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out. Example: One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise.

By letting people bank points for more valuable rewards, the employer saw a solid jump in retention.

Other organizations prefer to let employees reward each other. For instance, a small healthcare provider keeps a “goodies box” onsite – paid for in petty cash and stocked by employees themselves.

When someone spots a co-worker going the extra mile, he or she pulls out a prize and awards it. The program is a huge hit: It’s immediate and personal, yet structured.

Learning Management Systems (LMS) software helps educational institutions and businesses better manage online learning programs. Using a LMS, organizations can create curricula to educate students and/or employees, and allow them to demonstrate competencies or gain certification in areas relevant to their role. Analytics and reporting functionality also gives organizations more insight into training or learning program success. If you need help making an informed buying decision for your organization, let the unbiased experts at Software Advice help. They’ve reviewed nearly 40 learning management systems and can help you find the vendors that best match your needs.

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If your company is tracking employee information and processing payments manually, payroll solutions could save you time, money and a lot of headaches by mitigating compliance risks. There are many payroll solutions available to streamline the task, but determining which solution is best for you can be overwhelming. Software Advice’s team of independent experts have reviewed 30 payroll software systems and are ready to provide you with reviews and price quotes from the vendors that best meet your needs.

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Human resource departments and hiring managers are pressed for time and need reliable tools, partners, and resources to quickly find the talent they need. Companies are filling 1 in 10 of their vacant positions through headhunters, usually when they are unable to find the right candidate for a critical vacancy in their organization. Download this white paper to engage with your headhunters more effectively today.

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A recent study found that when asked whether or not workers ever exaggerate the number of hours they worked on a shift, nearly half said they had committed time theft at least once.

Learn more!  

In the wake of the Great Economic Meltdown — and the cheating that preceded it — business schools began using an ethics test before sending grads into the real world. Would you pass it?

The test — based on real-life situations — was developed by Babson College, Yale and the Aspen Institute, and was offered to 80 colleges nationwide. Ready for it? Here goes (answers at the bottom):

Scenario #1

You’re a rising executive just promoted to corporate controller. Shortly after you land the new job, several senior executives pressure you to distort the company’s restructuring charges in a way that would be misleading but not criminal.

What do you do?

1. Politely explain to the senior execs that you won’t stand for fudging the numbers.
2. Modify the charges. Since it’s not illegal, you can draw the line later when you have more experience in the job.
3. Research what the company has done in similar situations in the past and follow suit.
4. Go over the senior execs’ heads right to the CEO.

Scenario #2

You join a nonprofit firm in a junior accounting role. As you review the year’s corporate donations, you quickly realize that no standard procedure exists to determine the value of in-kind donations (gifts in the form of goods or services rather than cash). Some of your most prolific donors inflate valuations to deceive the IRS. Your overworked executive director makes a point of emphasizing relationships above data.

What do you do?

1. Nothing. What the donors tell the IRS is their business and your organization can’t afford to alienate them.
2. Bring up the problem at the next staff meeting. Since you’re in a junior role, you can only do so much.
3. Find an ally in a senior position and keep pushing for a solution.
4. Develop your own system to value each major in-kind donation in time for next tax season, and present what you’ve done to the senior executives.

Scenario #3

You’re a junior employee at a large investment bank. Hours before a client meeting, a portfolio manager tells you to review the portfolio of one of the bank’s smallest customers and find a new benchmark that will make it look like the portfolio had performed better than it really had. You know that the client remains with the bank as a favor to a friend who works there.

What do you do?

1. Point out that misleading the client risks getting the manager in trouble, and the client isn’t going anywhere. Be frank: underperformance happens in uncertain markets.
2. Don’t take a chance with a manager who asks you to lie. Immediately take your concerns to another manager.
3. Find the new benchmark. As long as you footnote it, you haven’t done anything illegal.
4. Duck the request to mislead the client and prepare a presentation that encourages the client to focus on the future.

Answers

Scenario #1. Correct choice: 4.

Several arguments could justify inaction: You’re too new; you need to wait until you’re more settled into the role and have the trust and confidence of the senior execs. Plus, raving about ethics to the team is a sure way to establish antagonistic relationships only a few days into the job.

On the other hand, if you wait to speak up until you’re fully entrenched, it could be much more difficult to reverse course. In the real-life situation that inspired the case study, the comptroller used his newness in the position as a way to break with the status quo. He went directly to the CEO with a new guiding vision for the finance department emphasizing its commitment to integrity. He focused on wanting to ensure the long-term survival of the company and rather than ask, the comptroller simply assumed that he and the CEO would be on the same side. It worked; the CEO supported his plan and in the process the comptroller successfully established his authority in the new role.

Scenario #2. Correct choice: 3.

In this kind of a scenario, junior employees typically can’t get past the feeling of powerlessness, says Mary Gentile, a Babson College researcher who helped develop the ethics curriculum. They’re low on the totem pole, so they “question their standing, their judgment, and their legitimacy” in taking a stand against unethical behavior that has become part of the company culture, she says.

In this case, the new hire decided to use his naïveté to his advantage. He approached the executive director and simply asked, “How do we standardize our donation valuations here?” The director never did act on his concerns, and soon left the nonprofit. The junior employee finally took his questions to the lead accountant and an outside auditor. He worked with them to establish an “average cost per box” formula the company would use if donors didn’t submit a written audit. Since it was a formal policy change, donors did not see it as a personal affront.

Scenario #3. Correct choice: 4.

You could justify not saying anything because the bank creates the benchmark and as long as you footnote it, you’ve done nothing illegal. Plus, given the size and relative importance of the portfolio, in all likelihood the manager simply overlooked it. If you refuse to lie on moral grounds, you’ll offend the manager and he will just ask another associate to take care of it anyway.

The woman in the case tried a different approach. She explained to the portfolio manager that she wouldn’t have time to provide an analysis for the new set of numbers before the meeting. Instead, she offered to provide data explaining the portfolio’s underperformance, which the manager could use to suggest a more suitable investment plan for the client. To her surprise, he agreed.

When an employee asks for an accommodation for a disability, the EEOC expects management to go through the full process of determining whether or not a reasonable arrangement can be made. Two health-related firms recently learned that lesson the hard way.  

Brookdale Senior Living Communities, Inc. of Denver will pay $112,500 and furnish other relief to settle a disability discrimination lawsuit, the agency announced.

Bernadine Adams worked for Brookdale as a health and wellness director.  After Adams took leave from work due to symptoms of fibromyalgia, Brookdale refused her request for a temporary modified work schedule, an ergonomic chair, and adjustments to the lighting in her office, the EEOC alleged.

Brookdale also required Adams to remain on leave until she was able to return to work without any restrictions or accommodations.  After further requests for accommodation and a discrimination charge, Brookdale fired Adams via letter.

The EEOC filed suit in U.S. District Court for the District of Colorado after efforts to reach a settlement failed. After the lawsuit was filed, however, the company agreed to:

• pay $112,500 to Adams to resolve the case
• train employees and district managers on the ADA’s requirements, including the need to provide reasonable accommodation to qualified individuals with disabilities, and
• report to EEOC if there are any further complaints of disability discrimination or retaliation.

The court approved the settlement and will retain jurisdiction for purposes of compliance for two years.

According to its website, Brookdale Senior Living operates 1,150 communities nationwide, offering independent living, assisted living, dementia care and skilled nursing, with 80,000 associates serving about 100,000 residents.

Price tag for refusing ‘interactive process’: $100K

In a somewhat similar case, Mississippi HomeCare of Picayune, a major home healthcare provider in the Picayune, MS area, will pay $100,000 and enter into a consent decree to settle an EEOC disability bias lawsuit.

EEOC brought suit on behalf of Kristy Sones, a former Mississippi HomeCare employee, who suffered an epileptic seizure while working at the facility. Returning to work following her seizure, Sones requested an accommodation to help her perform certain job-related computer tasks — tasks she was having difficulty completing because of the temporary side effects of her seizure medication.

The lawsuit alleged that Mississippi HomeCare ignored Sones’ request, failed to engage in an interactive process to discuss reasonable accommodations, and provided no accommodation. Mississippi HomeCare then terminated Sones less than a month after her request for an accommodation.

In addition to $100,000 in monetary relief, the two-year consent decree requires the employer to provide training to its employees on its obligations under the ADA, and enjoins the company from engaging in any discrimination or retaliation on the basis of disability. The consent decree also requires the company to allow the EEOC to monitor compliance during the decree’s two-year term.