“You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes.”

Not to be uber-geeky but the quote by Morpheus in the glorious (yep, I’m that overly-dramatic!) 1999 film The Matrix is a perfect fit for the all-consuming world of HR Tech. You see, for the 2^nd week in a row, I’ve seen a major headline from the normal world (blue pill), look completely different when viewed by our team of HR Techies. It’s like now that we’ve taken the red pill, all we can see is HR Tech and all current events are translated through that filter.

So the way this went down is this: Yesterday our Compliance Service group at Lockton prepared an Alert  for all clients over the IRS Guidance over the implications of the US Supreme Court decision on DOMA (Defense of Marriage Act). I’m sure right now all the stuffed shirts on the news shows are raving on at loud volumes about the politics, implications and changes happening in our society. We all have opinions, including yours truly – buy me a Guinness and I will love to debate life and liberty with you until the sun comes up! Nevertheless, in our profession we have to see things differently. Instead of wondering the “why” of the headlines, it’s our job to figure out the “how.”

Cyndi is our newest Project Manager based in Dallas, TX. (And when I say “new”, I mean she joined Lockton 9 days ago!) Not one to be shy, she started a team confab through e-mail earlier today on whether or not the Benefits Administration systems out there would be able to handle this new guidance or would this be another important way to filter potential vendors for our clients. Pretty quickly it turned into a lively discussion, as all techie stuff does with our team.

It’s impossible for me to relay all the permutations we tried and rabbit trails we chased, but here’s a high-level summary of where we see this impacting our Benefits Administration systems and vendors out there. If you’d like to know more, please contact your local Lockton account team or comment below and we’ll have someone follow up with you right away.

The main implementation concern we had was around the guidance that same-sex couples who are legally married in jurisdictions recognizing same-sex marriages will be treated as married for federal tax purposes. So, if that’s the new reality, would that mean that employers are now going to have to track who is in a “qualified” same sex marriage (pre-tax) and those that would not qualify and therefore be a post-tax payroll deduction?

The first tenet we have is that a lot of this is going to be up to the employers in application. After all, nothing says employers have to offer any coverage to spouses at all, that I’m aware of. We’re starting to see a small increase in the number of employers just focusing on covering their employee population. We have worked for employers who ask for no documentation (honor system) and others who will instead outsource this verification to an outside third party. After all, isn’t that one of the unspoken secret justifications of “outsourcing”:  now someone else is the “bad cop”, while HR remains all sweet and good coppish (not sure that’s a word, but it could be up for Adjective Rookie of the Year!)

But the second tenet is that no matter how the employer implements this process-wise – honor, verification, etc. – they will need their Benefits Administration system to automate the enrollment process and ensure the right deductions are passed to payroll. For that, we’re going to need our Benefits Administration systems to have strong Eligibility Group determination abilities and ability to support multiple tiers of benefits. The employee-facing self-service module will also have to have some explanatory text covering this area. Some of the simpler systems will bog down on this or require HR to hand-code screens, but most of the more current systems of today should be configurable enough to handle this in stride.

The final tenet we arrived with is that we need to modify our team’s Discovery Process so we are asking employers about this up front before they’re choosing a solution, so we can ensure the right level of complexity support.

Here’s how we think today’s Benefits Administration systems could effectively deliver this guidance into their enrollment process:

Starting in Enrollment, we need to show Same-Sex Domestic Partner pre-tax and Same-sex Domestic Partner post-tax based on how they answer the question of when the union was held among other potential/employer-driven questions. Then the enrollment engine would run them into the right tier for their chosen dependents and coverage such as:

Pre-Tax Tiers

•             Tier 1 = Employee Only

•             Tier 2 = Employee + Spouse

•             Tier 3 = Employee + Child(ren)

•             Tier 4 = Employee + Family

Post-Tax Tiers

•             Tier 5 = Employee + Same-Sex Spouse/Domestic Partner

•             Tier 6 = Employee + Child(ren) + Same-Sex Spouse/Domestic Partner Child(ren)

•             Tier 7 = Employee + Same-Sex Spouse/Domestic Partner + Child(ren)

•             Tier 8 = Employee + Same-Sex Spouse/Domestic Partner + Child(ren) + Same-Sex Spouse/Domestic Partner Child(ren)

So if the employee has a Domestic Partner or is covering a Domestic Partner’s child, they get put in the tiers > 4 where the rates table stores the Employee Only portion as pre-tax and the dependent coverage is stored as after-tax.  If the Enrollment Engine / Employee Self-Service portal has a calculator for decision support the costs will increment accordingly (displaying both pre- and post-tax) and generally show on the Confirmation page.  Of course, tiers will vary from client to client in that some use Employee Only, Employee +1, Employee + 2 or more, etc.  However, how an employee answers specific questions may put them in tier 2 or 5; the tier names can be modified, but it’s the higher end tiers that will apply the post-tax amount. There are a handful of states which recognize registered Domestic Partners and would fall into a pre-tax tier. The tier mapping for Domestic Partners is currently in place for most vendors and may or may not require additional questions.

The questions will pop based on needs so that the tier can be mapped appropriately.  The logic should be robust enough that the questions would only display when the gender is the same as the employee and the relationship is Spouse or Domestic Partner. We have seen the Child relationship used in many ways where Child is broken out from a Domestic Partner Child.  It really depends on the Plan Design.

In summary, one or two additional questions up-front during the enrollment process and benefits communication would allow for the appropriate mapping for the Benefits Administration system’s eligibility engine.

Please let us know what you think in the comments section below. We’d love feedback – especially if we’ve over-complicated something that could be simpler. (We’re big believers that implementation failure often disguises itself as excessive complexity.)