Category Archives: benefits

SHRM in the Big Easy

The heat and humidity of New Orleans in mid-June didn’t keep folks away from the Society for Human Resource Management’s 2017 annual conference, which, according to the association, drew a crowd of more than 15,000 attendees.

In her Monday morning remarks, the SHRM Board Chair Coretha Rushing noted that it was the largest SHRM ever.

If you’re an HR leader, I suppose you can read this to mean that employers are continuing to invest in their HR teams.

Held under the theme “All In,” reflecting the need for HR professionals to be fully engaged in what they do, the conference represents the final one under the stewardship of SHRM President and CEO Hank Jackson. In January, Jackson, 65, announced he would be retiring at the end of the year as head of the 290,000-member association. Earlier this month, SHRM announced his replacement: one-time SHRM chair Johnny Taylor, who is currently chairman and president of the Thurgood Marshall College Fund.

SHRM continued its tradition of releasing its annual Employee Benefits survey at the conference.

According to the latest study, one-third of the 3,227 HR professionals who responded said their organizations increased their overall benefits in the past 12 month, suggesting that benefits continued to be an important tool for recruiting and retaining talent. Health and wellness were the two areas most likely to experience increases, cited by 22 percent and 24 percent of those responding, respectively.

Roughly one-third of organizations (34 percent) indicated they offered healthcare coverage to part-time employees, compared to 27 percent in 2014. Meanwhile, about three of every five organizations (59 percent) said they have a general wellness program for employees.

Just 6 percent of the organizations decreased their overall benefits, with healthcare and wellness topping the list of areas being cut.

Workplace flexibility also experienced a modest uptick, with telecommuting and flextime both experiencing increases from a year earlier. Roughly three out of five organizations (62 percent) allowed some type of telecommuting, and 57 percent offered flextime, allowing employees to choose their work hours within limits established by the employer.

Ellen Galinsky, a senior research advisor to SHRM who also serves as president of the Families and Work Institute and is chief science officer for the Bezos Family Foundation, noted that the flexibility findings are consistent with other research she’s done.

“Why are companies helping employees with flexibility?” Galinsky asked during a press conference that gave a first look at SHRM’s Effective Workplace Index, which uses seven components to measure workplace effectiveness. “We found it’s retention, retention, retention.”

In a national study of employers, she said, 39 percent identified retention as the major reason for adding these initiatives. Recruiting was naturally a key factor as well.

Of course, as Laszlo Bock suggested in his Monday morning keynote at the conference, giving employees the freedom to choose what they’re working on also goes a long way to keep them engaged in what they’re doing—and inevitably will lead to greater retention.

Bock, the former senior vice president of human resources at Google who recently announced the launch of a jobs startup called Huma, told those in the audience that “you want to give people a little more freedom than they’re comfortable with.”

The end result, he said, will be increased “productivity and happiness.” (Bock will be keynoting our HR Tech Conference this October, focusing on the role HR can play in building organizations that innovate.)

Bock shared three principles during his remarks.

First, Bock said, companies need to give work meaning. “The most important thing you can do is create an environment that … instills meaning in the work people are doing,” he explained. “If you can connect your work to something more meaningful, [people] will be more productive.”

Second is trust, he said. “Trust comes down to a fundamental question: Do you think people are good or evil? If you believe people are fundamentally good, you’re going to treat them that way. But most organizations [structure themselves in such a way that they] actually don’t assume that they’re good.”

Instead, Bock said, companies need to be more open and transparent with their employees. “One of the things Eric Schmidt at Google always used to do [at every quarterly meeting] was share his entire presentation,” he said. “I don’t know if they’ve been doing it in the last six months, but it never leaked while I was there, and it let people know they were trusted.”

A third principle Bock shared is to “always, always, always, always hire people better than you.”

Know what you’re interviewing for, he said. “I don’t mean the job description. I mean, What are the attributes a job needs.”

He advised HR professionals to not let hiring managers make the hiring decision. Why? “If you’re a hiring manager, you are susceptible to not just the bias inside your own brain, but pressure from outside people.”

Instead, Bock said, establish a hiring committee, one that doesn’t including anyone who’s going to work with the person. The committee’s whole job is to ensure quality, he explained. Was the assessment fair and unbiased? Was it valid?

Over time, he said, companies that hire better than their competitors will emerge as winners.

The ‘Why’ Behind Wellness Programs

It isn’t always about the money.

Or, at least it’s not when it comes to why many companies offer wellness programs, according to a new survey from the International Foundation of Employee Benefit Plans.

For its new Workplace Wellness 2017 Survey Report, the Brookfield, Wisc.-based nonprofit organization polled 530 members of the IFEBP as well as the International Society of Certified Employee Benefit Specialists and the National Wellness Institute.

Overall, more than 90 percent of these organizations offer at least one wellness initiative. Among them, 75 percent report that improving overall worker health and well-being is their company’s No. 1 reason for doing so, with just one in four saying that controlling or reducing health-related costs is their primary motivation for implementing wellness programs.

As for what these wellness initiatives consist of, “traditional” offerings such as free or discounted flu shots “continue to gain steam,” according to an IFEBP statement.

But the aforementioned report also highlights some “popular emerging wellness benefits” that employers are weaving into their wellness initiatives, such as chiropractic services coverage, currently offered by 62 percent of respondents. In addition, 59 percent said they provide employees with opportunities to participate in community charity drives and events, attend onsite wellness-related events and celebrations (58 percent), and take part in wellness competitions such as walking/fitness challenges (51 percent).

Whatever form a wellness program takes, the effort seems to be paying off for many organizations. More than half of the responding companies that measure their wellness offerings, for example, say they’ve seen a decrease in absenteeism since putting a wellness program in place. An even larger number (63 percent) indicate that they are experiencing financial sustainability and growth in the organization, while 67 percent say their employees are more satisfied and 66 percent report increased productivity.

“Employers are realizing that wellness is not just about cutting healthcare costs, because wellness is not only about physical health,” says Julie Stich, associate vice president of content at IFEBP, in a statement.

“Embracing the broad definition of wellness has led to a tremendous impact on organizational health and worker productivity and happiness.”

It would stand to reason that a happier, more productive workforce translates to a bigger, better bottom line, of course. And, for those HR and benefits leaders who haven’t yet made the business case for developing workplace wellness programs, the numbers to emerge from this report could certainly provide them with some strong ammunition.

Homing in on Behavioral Health

Just over two years ago, we posted a piece on this site highlighting findings from a Disability Management Employer Coalition study on behavioral health in the workplace.

The DMEC’s research painted what HRE described at the time as a “somewhat incongruous picture.” For example, more than 60 percent of the 314 employers polled said the stigma surrounding mental health issues at work had either stayed the same or gotten worse in the past two years. On the other hand, 37 percent of those same companies said that management had “become more open” about assessing behavioral health in that time. In 2012, 25 percent of respondents said the same, according to DMEC.

Here we are in 2017, and the findings of a new Willis Towers Watson survey suggest that the picture is starting to come into focus for employers, the overwhelming majority of which say they plan to keep upping their efforts to address mental health issues among the workforce.

The firm’s 2017 Behavioral Health Study, which polled 314 U.S. employers, finds 88 percent of respondents saying behavioral health is an important priority for their organizations over the next three years.

More specifically, 63 percent count locating more timely and effective treatment of behavioral health issues as an area of primary concern in that same span. Sixty-one percent said the same about integrating behavioral health case management with medical and disability case management. In addition, 56 percent said their organizations are concentrating on providing better support for complex behavioral health conditions, and 52 percent of employers are looking to expand access to care for mental health issues between now and the year 2020.

Beyond increasing and improving the level of care received by those with behavioral health issues, the survey also found that organizations intend to address the root causes of these issues. More than one third of respondents (36 percent) say they have already addressed and taken steps to reduce stress and improve resiliency, while 47 percent are planning or considering action designed to do so over the next three years. Twenty-eight percent currently provide educational programs that touch on the warning signs of behavioral health issues or distress, and 41 percent are planning or considering such programs.

These employers are also showing more interest in mobile apps to help employees manage behavioral health needs, according to Willis Towers Watson. The survey finds the percentage of companies including mobile applications in their service offerings on the way up. For instance, 11 percent of those surveyed already offer stress reduction or resiliency apps; a number that is expected to increase to 38 percent within three years, the study finds. And, while just 7 percent provide apps designed to help curb anxiety, 31 percent of respondents said they plan to offer such applications between now and 2020.

However they plan to reach workers with mental health needs, “employers are concerned about behavioral health issues because of the impact on costs, employee health and productivity, and workplace safety,” says Julie Stone, a national healthcare practice leader at Willis Towers Watson, in a statement.

“The seriousness of the issues—both for employers and employees—has led to a deeper understanding of the problem and greater resolve to take action.”

Employers are now more committed than ever, says Stone, to “improving access to treatment, providing employees with better coordination of care across various health programs and reducing the stigma that could be associated with behavioral health through educational programs.”

Sad State of Parental Leave

Tuned into a pretty interesting, if not depressing, Facebook Live session on Wednesday. Seems the at-least-slow progress in paid parental leave we’ve been writing about here on HRE Daily and on our HREOnline website isn’t as promising as some think.

At least that’s according to the Society for Human Resource Management, which released during the session its National Study of Employers — a self-described “comprehensive look at employer practices, policies, programs and benefits that address the personal and family needs of employees.” (Here’s the press release for those of you who don’t have the time for an entire study right now.)

Ellen Galinsky, president and co-founder of the Families and Work Institute, talked during the session about the study’s key findings — namely that, despite reports from well-known companies (such as Netflix, Amazon, Microsoft, Johnson & Johnson and Ernst & Young — see our own posts linked above) announcing their expansions of paid-parental-leave benefits, the average amount of caregiving and parental leave provided by U.S. employers has not changed significantly since 2012.

Specifically, over the past 11 years, the number of organizations offering at least some replacement pay for women on maternity leave has increased from 46 percent to 58 percent. But the study also found that, among employers offering any replacement pay, the percentage offering full pay has continued to decline, from 17 percent in 2005 to 10 percent in 2016.

In fact, of all employers with 50 or more employees, only 6 percent offer full pay. In addition, daily flexibility, the kind needed for emergencies, has gone down actually, from 87 percent in 2012 to 81 percent in 2016, a statistic Galinsky called “critical.” She added:

“The fact that that kind of flexibility has gone down is a critical [and alarming] finding.”

According to Galinsky, HR has a major role in turning this around. As she put it during the session:

“Flexibility is now the norm. HR should be thinking this way. It used to be, ‘Should or shouldn’t we provide flexibility?’ Now it’s a given that we should.”

Unfortunately, she said, HR needs to do a better job of telling workers what is offered at their organizations. The study found only 23 percent of companies making a real effort to communicate the programs they have.

Here are some other key findings:

  • Small employers (50 to 99 employees) were more likely than large employers (1,000 or more employees) to offer all or most employees 1) traditional flextime, the ability to periodically change start and stop times (36 percent versus 17 percent), 2) control over when to take breaks (63 percent versus 47 percent) and 3) time off during the workday to attend to important family or personal needs without loss of pay (51 percent versus 33 percent).

  • Growth of workplace flexibility has been stable over the past four years. Out of 18 forms of flexibility studied, there were only four changes:

  1. An increase in employers that offer telework, allowing employees to work at least some of their paid hours at home on a regular basis (40 percent in 2016 versus 33 percent in 2012).
  2. An increase in employers that allow employees to return to work gradually after childbirth or adoption (81 percent in 2016 versus 73 percent in 2012).
  3. An increase in organizations that allow employees to receive special consideration after a career break for personal/family responsibilities (28 percent in 2016 versus 21 percent in 2012).
  4. A decrease in organizations that allow employees to take time off during the workday to attend to important family or personal needs without loss of pay (81 percent in 2016 versus 87 percent in 2012).

In Galinsky’s words:

“Whether high-profile companies offering paid [parental] leave are out of step with the majority of employers or leading the way remains to be seen. Given our findings that 78 percent of employers reported difficulty in recruiting employees for highly skilled jobs and 38 percent reported difficulty in recruiting for entry-level, hourly jobs, these high-profile companies could be leading the way in the strategic use of leave benefits.”

And, apparently, that’s not happening. Not yet anyway.

DOL Wants to Delay Fiduciary Rule

The U.S. Dept. of Labor is seeking to delay the implementation of a rule that is intended to protect the best interests of retirement savers but has drawn the ire of many in the financial-services sector. The fiduciary rule, which would apply the “fiduciary standard” to all those who provide retirement investment advice in order to prevent conflicts-of-interest (which the Obama administration’s Council of Economic Advisers said costs retirement savers $17 billion a year), was set to go into effect on April 10. The DOL is seeking a 60-day delay of the rule, to June 9. The proposed delay (which is itself a new rule) will have a 15-day public comment period ending on March 17.

President Donald Trump expressed his concerns about the fiduciary rule in a memo issued on Feb. 3, in which he directed the DOL to examine the rule and “determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.” It directed the DOL to propose a new rule “rescinding or revising” the fiduciary rule if it determines that the regulation is likely to harm investors by limiting their access to certain financial products or services and cause an increase in litigation.

The Financial Services Roundtable, a lobbying group, issued a statement praising the delay. “The fiduciary rule will lead to fewer retirement savings choices for many Americans and we are encouraged the DOL is proposing to delay the rule.”

However, Lisa Donner, executive director of Americans for Financial Reform, told the Los Angeles Times that the delay is merely a preamble to the Trump administration’s plan to ultimately scrap the rule.

“Blocking the common-sense, long-overdue rule, which requires retirement advisors to act in their customers’ best interests, would allow Wall Street to continue to grab more than $17 billion a year —  tens of millions of dollars a day —  from retiree savings,” she said. “This decision is not justified by the facts, and it is a betrayal of the public interest.”

More 401(k) Bashing, and a Fix

I posted here earlier this month about a provocative Wall Street Journal piece in which the creators and early adopters of the 401(k) retirement-savings vehicle lament the revolution they started.

Their point: They had no intention of watching the concept turn into the sole — and highly inadequate — savings receptacle for employees.

Now, on the heels of that, comes this piece on the October Three site by benefits expert Larry Sher taking that discussion even further, to a whole lot more wrong with the defined-contribution approach and the people who support it — i.e., the people with skin in its game. As Sher writes:

“For instance, the government tried, unsuccessfully so far, to nudge DC plan sponsors to give participants some sense of how much life annuity their account balances might be able to provide. The push-back was immediate and severe from stakeholders in the DC system.

“Some objected on technical grounds —  the annuity estimate could vary widely depending on a number of assumptions including life expectancies, market interest rates and inflation. Others viewed this initiative cynically, believing that it was just a first step toward mandating annuity availability in DC plans, thus leading to the prospect of huge sums of assets shifting from mutual funds and other asset managers to insurers.”

The chief concern of policymakers, employees and even some of the employers that have embraced the 401(k) concept, Sher says, “can be summed up as the total shifting of risks to employees — the risks that they won’t save enough, the risk that they will use the savings for non-retirement purposes, the risk of unfavorable investment results — culminating in inadequate retirement savings and the prospect of outliving such savings.”

To mitigate the problem of employees dipping into their funds for non-retirement purposes, he suggests employers impose greater restrictions on such withdrawals. Of course, he also writes,

“The best way to close this loop would be to provide a core company contribution for everyone — not just for those who are willing or able to save.”

Here’s one of my favorites of Sher’s points:

“And perhaps one of the most disturbing aspects of a DC-only retirement system is the fruitless attempt to make employees into competent investors. Even if investment education works to an extent, the idea of employees spending time, probably mostly work time, to figure out how to best navigate the investment markets is an exercise in futility.

“When someone is sick they go to a doctor, not to medical school. Investment professionals have gone to investment school — a crash course in investments does little, or no more, than give employees a false sense that they know what they are doing. It’s like self-diagnosing a medical issue based on information on WebMD.

“The response from the DC world is default investments, such as target date funds. That helps but it still leaves employees vulnerable to temptations to time the market and apply their [inadequate]knowledge to making investment choices. Inevitably, the result is wide disparity in outcomes among plan participants — those with better outcomes being the better, or more likely luckier, investors.”

Sher’s solution to this DC mess is to establish a combination of a type of cash balance plan with a “market-return,”  so interest is credited based on real-market investment returns rather than high-quality bond yields. He calls this the MRCB. Here’s how it would work, according to him:

“The MRCB will provide much better cost control than a typical CB design — because account balances will tend to move in tandem with the plan’s assets, and regardless of changes in market interest rates. The employer can tune the degree of investment risk it is willing to share with employees by providing more downside protections, possibly in exchange for retaining a portion of the upside investment returns.

“By providing some of the employer benefits through an MRCB, the employer is accomplishing all of the goals that the government and some employers are trying to achieve by changing DC plans to be something they are not meant to be. Employer pay credits would automatically be provided to all participants — no dependency on employee contributions. There would be no diversion of the benefits during employment — no loans or withdrawals. Annuities would be provided directly by the plan — thus avoiding the extra cost of retail-insured annuities.

“Yes, that means the employer retaining some long-term longevity risk — but even that is controllable by how the factors are set and managed over time to convert accounts to annuities. The MRCB typically would allow employees to elect lump-sum distributions upon termination or retirement [equal to account balances, with spousal consent], although the ability to elect lump sums can be restricted by plan design to the extent the employer considers that to be desirable.”

And where would such an approach leave the 401(k)-DC plan? In Sher’s words:

“Just where it should be –as a short-term and supplemental long-term savings vehicle … “

not the only show in town.

401(k) Creators Lament Creation

A most interesting regret highlighted in the Wall Street Journal on Monday! (Subscription required.) Seems the handful of champions of the 401(k) retirement-savings vehicle now see the errors of their ways. Or the vehicle’s ways, anyway.

None of those mentioned and quoted in the compelling piece foresaw that the 401(k) would essentially replace pensions. And they see this as quintessential to the demise of the overall retirement picture in this country, and employees’ inabilities to save what they need.

We’ve certainly written our fair share of stories raising major red flags about the state of retirement and workers’ diminishing abilities to retire at all — both here on this HRE Daily site and in our magazine and on its website, HREOnline.com. But this is the first time any of us have heard from the horses’ mouths — the authors and early promoters of the savings vehicle — that they had no intention to launch and herald it as the nation’s sole retirement receptacle, if you will.

Ted Benna, a benefits consultant with the Johnson Cos. and one of the first to propose the vehicle back in 1980 — ergo his nickname, the father of the 401(k) — puts it this way in the piece:

“I helped open the door for Wall Street to make even more money than they were already making. That is one thing I do regret.”

Herbert Whitehouse, a former human resource executive for Johnson & Johnson and one of the earliest proponents of the 401(k) for employees, tells the WSJ that he and others were hoping and assuming back in 1981 that the savings approach would be a kind of supplement to company pensions.

What he and his co-horts didn’t imagine, he says, is that the idea would actually replace pensions as employers looked to cut costs and survive during subsequent downturns. As he puts it in the story:

“We weren’t social visionaries.”

The story is also rife with recommendations from today’s experts on how best to fix the problem and help employees save for retirement according to what they will actually need.

But as Benna tells WSJ,  he doubts “any system currently in existence” will be effectual for the majority of Americans.

A sad treatise, and no sadder than for those millions of Americans still in the workforce who can’t retire.

Amex Joins Parental-Leave Parade

American Express is the latest to board the parental-leave bandwagon. It is announcing today a significant step up in its 510042321-parents-newbornbenefits, not just to new moms and dads, but to those wishing to be.

The company will be making all of its 21,000 U.S.-based regular full-time and part-time employees (the company has 54,800 employees worldwide) eligible for 20 weeks of paid parental leave beginning on Jan. 1, 2017. In addition, it will be increasing its employee benefits for fertility, surrogacy, adoption and lactation.

Kevin Cox, Amex’s chief human resources officer, calls the step a reflection of the organization’s “continued investment in the overall well-being of our employees and their families.”

The new policy covers women and men welcoming a child through birth, adoption and surrogacy. In addition to the 20 weeks of paid parental leave, birthing mothers will be eligible to receive paid, medically-necessary leave related to the birth of their child, which is generally six to eight additional weeks.

In the words of David Kasiarz, senior vice president of global total rewards and learning at Amex, who I recently reached out to about the reasoning and motivation behind this move:

“In creating our new policy, we took a thoughtful approach. We looked at a variety of published research studies and gathered our employees’ overall thoughts on our current programs. We aimed to be inclusive of the needs of our diverse employee base. Most importantly, we wanted both women and men to feel like they can take the time they need to care for their families and bond with their children.”

He continues:

“Research shows that an increase in paid parental leave has a far-reaching, positive impact on the mental and physical health of employees and their families, as well as women’s career advancement. Better health for our employees and their families is good for them and it’s good for us.”

As mentioned above, “to help ensure employees feel supported from the moment they decide to become parents through their return to work and beyond,” as its release states, Amex is also increasing a variety of existing family benefits. Beginning Jan. 1, U.S.-based employees will be eligible for:

  • Benefits worth up to $35,000 per adoption or surrogacy event (up to a maximum of two events per employee) to help with the cost of surrogacy or adoption;
  • A lifetime maximum of $35,000 for infertility treatment, including advanced reproductive technology procedures, available under the company’s health plans;
  • Free 24-hour access to board-certified lactation consultants; and
  • Free breast-milk shipping while traveling on company business.

Added to all of the above, beginning in January, expectant parents will have access to a parent concierge, who will help employees understand and navigate parental leave and the wide array of parental resources and programs available to them.

Says Kasiarz:

“We have a long history of offering benefits to support [all employees] and continually invest in their overall well-being — it’s our signature cause. We believe these changes to our parental-leave policy are the next steps forward in our journey.”

Amex is certainly not the first to enter the parental-leave fray. A search of this site and our HREOnline.com site features numerous predecessors — “new-economy” companies (such as Microsoft, Amazon and Netflix) and older ones (such as Dow Chemical, Johnson & Johnson, Bank of America and Goldman Sachs). IKEA announced its expansion just last week.

Both searches also offer insights into the challenges still plaguing new working parents and the growing need for companies to find new and better ways to retain them.

As Kasiarz puts it:

” … parenting has changed — traditional parenting responsibilities have evolved and more LGBTQ families are having children. We feel the new policy strikes the right balance between our employees’ and our business’ needs.”

I anticipate — well, certainly hope — we’ll see more and more employers thinking along these lines.

High Anxiety for Plan Sponsors

It’s still unclear whether the incoming Trump administration will take aim at the Department of Labor’s new fiduciary rules, which are slated to go into effect on April 10.  As Joseph Urwitz, a partner in McDermott Will & Emery’s Boston office, told us late last month: “While it’s not possible to predict the future, the new Congress and president may overhaul, eliminate or at the very least delay implementation of the fiduciary rule. Time will tell whether or not any of these moves will come to pass.”

thinkstockphotos-468426388But what we do know is that litigation continues to be very much on the minds of plan sponsors.

This fact received further support earlier this week, when Cerulli Associates, a global research and consulting firm, released the findings of a study—titled “The Cerulli Report: U.S. Retirement Markets 2016”—that found more than half (57 percent) of more than 800 401(k) plan sponsors questioned are concerned about potential litigation.

While much of the litigation has targeted large plans with deeper pockets, the research found that smaller plan sponsors are also paying attention to today’s litigious environment.  Nearly one-quarter of small plan sponsors—those less than $100 million in 401(k) assets—describe themselves as “very concerned” about potential litigation.

As most of you know (and the Cerulli report points out), fee-related lawsuits, in particular, have been something of a theme in 2016, putting added pressure on plan sponsors to find ways to reduce fees. “Plan-sponsor-survey results show that the top two reasons for which 401(k) plan sponsors choose to offer passive (indexed) options on the plan menu are because of ‘an advisor or consultant recommendation’ or because they ‘believe cost is the most important factor,’ ” according to the Cerulli press release. But there is also no denying that lowering the risk of litigation factors into the decision making as well.

The Cerulli report suggests that the rash of litigation that has occurred in recent times is stifling innovation. Jessica Sclafani, associate director at Cerulli, notes that “plan sponsors feel they have little to gain by appearing ‘different’ from their peers due to the risk of being sued. This mindset can make plan sponsors reluctant to adopt new products … .”

The Zenefits Saga Continues

It appears Zenefits woes are continuing—and if the predictions of one consultant are correct, they aren’t likely to end anytime soon.

Yesterday, Washington State Insurance Commissioner Mike Kreidler ordered Zenefits to “cease free distribution of its employee benefits software, noting the tactic violates Washington state insurance law against inducements,” his office’s statement reads.zenefitslogo

Washington is said to be the first state to take action against the company for violating inducement laws. Under an agreement with Kreidler, Zenefits can challenge the order within 90 days.

The state took issue with the fact that Zenefits required clients to designate it as its broker of record and then collected insurance commissions from the products it sold in order for them to access its free software.

“The inducement law in Washington is clear,” Kreidler said. “Everyone has to play by the same rules.”

Following the announcement, Zenefits’ General Counsel Josh Stein posted the following on the company’s website

“Today, Zenefits has reached a compromise agreement with the Washington Office of the Insurance Commissioner (OIC) on how Zenefits will price its services in Washington State.  Beginning January 1, at the order of OIC, Zenefits may no longer provide free software services in Washington. As a result, Zenefits will charge all Washington state customers $5 per employee per month for our core HR product.”

Stein went on to say …

“The Washington viewpoint is a decidedly minority view. Since its founding, Zenefits has had conversations with regulators about our business model, which includes some free HR apps. Many states have looked into the issue and concluded that free software from Zenefits is not a problem; in fact, it’s in the interest of consumers. Only one state other than Washington has disagreed.  Utah’s department of insurance tried to force Zenefits to raise prices for consumers, and Utah’s state legislature and governor quickly took action, passing a bill to clarify that its rebating statute should not be interpreted to prohibit innovative new business models that deliver value to consumers.”

Earlier today, I spoke with Rhonda Marcucci, partner and consultant in Gruppo Marcucci, a Chicago-based HR and benefits technology consulting firm.

Zenefits has created its own regulatory scrutiny reputation for the rest of its life, Marcucci told me. In this case, she said, “I don’t think it is driven so much by the brokers but by the insurance departments who are extremely angry about the licensing piece—so that now invites more scrutiny in other places. Brokers may have brought it to [the attention of insurance regulators], but the way I look at this, Zenefits is a regulatory penalty box—and they will be, I think, forever.”

Marcucci noted that every state, except for California, has some kind of no rebating or inducement laws for transactions. But that doesn’t necessarily mean that every employer is following the law.

At the end of day, she said, states typically base their decision on enforcing these laws by “who screams the loudest.”

As far as Zenefits is concerned, Marcucci said, it’s realistic to expect that other states might follow Washington’s lead, especially those states with difficult regulatory insurance environments such as New York.