Department of Labor Issues New Ruling on Overtime Pay

Important Updates on Overtime Pay and Changes in the QAAF
This article provides information on two current issues of concern to TD&T clients:
  • The Department of Labor’s New Overtime Pay Ruling
  • Changes to the Quality Assurance Assessment Fee (QAAF)
Department of Labor Issues New Ruling on Overtime Pay
In mid-May, the White House announced changes to the rules regarding who qualifies for overtime pay.  Many workers and employers immediately wondered how this might affect them.  Here’s an overview of the new ruling’s key points, as summarized in the May 23rd issue of the Iowa Health Care Association Bulletin:
  • Increases the weekly salary threshold for exempt executive, administrative, and professional employees to $47,476 per year (or $913/week). This means that salaried employees earning less than this amount, regardless of job duties, must be compensated for overtime work.
  • Automatically updates the salary level for the “white collar” exemptions every three years, beginning on January 1, 2020.
    • Each update will index the salary level for exempt employees to the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region.
    • The Department of Labor (DOL) projects that the 2020 update will raise the salary threshold to $51,168/year ($984/week).
    • Beginning August 1, 2019, the DOL will post the new salary levels 150 days in advance of their effective date.
  • Allows up to 10% of the salary threshold for exempt executives, administrators, and professionals to be satisfied by non-discretionary bonuses, incentive pay, or commissions, provided that such payments are made on at least a quarterly basis.
  • Increases the annual compensation level for the “highly-compensated employee” exemption from $100,000 to $134,004 (of that, at least $913/week must be paid on a salary basis).
    • This will be updated every three years, also beginning on January 1, 2020, by indexing such compensation to the 90th percentile of income for full-time salaried workers nationally.
    • The Department of Labor projects the salary threshold for this exemption to rise to $147,524/year in 2020.
  • Does not modify the duties tests associated with the “white collar” exemptions.
The new regulations take effect on December 1, 2016.
How does this affect Employers?
The Department of Labor website provides much detail on the background, rationale and implementation of this new ruling.  The DOL summarized some of the options available to employers regarding the updated standard salary level. For each employee who will now qualify for overtime pay, employers may:
  • Increase the salary of an employee who meets the duties test to at least the new salary level in order to retain his or her exempt status
  • Pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked
  • Reduce or eliminate overtime hours
  • Reduce the amount of pay allocated to base salary (but no lower than the applicable hourly minimum wage) and add pay to account for overtime for hours worked beyond 40 in the workweek, to maintain the same level of weekly pay
  • Use some combination of these responses
Some Organizations May Need to Conduct a Full Compensation Review
The Iowa Health Care Association recognized that this change will affect some groups in particular.  In their Bulletin, they called attention to one example: “The National Association for Home Care & Hospice (NAHC) recommends that home care agencies and hospice conduct full evaluation of their compensation methods and outcomes in relation to work hours to determine whether comparable circumstances will create overtime obligations in the future when the rule takes effect on December 1.” 
Other companies and organizations may need to conduct similar reviews in order to prepare for the implementation of the new regulation.
For More information…
The DOL has a document that provides significant details on this subject, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees.”
You can find additional information including questions and answers at the DOL website:
Change in Quality Assurance Assessment Fee (QAAF) 
In February, the Iowa Department of Human Services issued an information letter to Iowa Medicaid Nursing Facilities regarding a change in calculating the Quality Assurance Assessment Fee (QAAF).  While the change affects calculations going back to July 1, 2015, the actual adjustment began to show up based on payments after March 31, 2016.  Health Care facilities submit their reporting and payment quarterly, so the first updated amounts will appear this quarter.

Here are some details from the Iowa DHS Letter:

  • Effective Date – Effective July 1, 2015, the pass-through and assessment fee increased from $5.26 ($1.00 for waiver class) to $7.13 ($1.36 for waiver class). Providers that were notified of rate changes due to the rebase beginning July 1, 2015, included the updated amounts into their per diem rates.
  • Payments Due at the End of Each Quarter – The QAAF is due to the state by the 30th day following the end of each calendar quarter. The most recent rate notification did not include the amounts of the increased pass-through in the per diem rate. Because of this, facilities should use either $5.26 or $1.00 as the basis for the QAAF amount to be remitted to the state for the quarter ended December 31, 2015.
  • The Iowa Medicaid Enterprise (IME) will review the bed day information submitted for the quarters ended September 30, 2015, and December 31, 2015. An additional amount due will be calculated using bed day information and retroactive claims adjustment for each quarter which will be invoiced to each facility and is due 30 days from the date of the invoice.
  • Facilities that have not received notification of their updated July 1, 2015 per diem rate including the change in the QAAF pass-through will be invoiced shortly after notification of the rebased per diem rates and retroactive claims adjustment.

The QAAF Was Designed to Improve the Quality of Care

“The QAAF was set up to provide additional compensation and benefits to Certified Nursing Assistants (CNAs) and other direct nursing employees to improve the quality of work,” TD&T’s Josh Buckingham, CPA, explained. The facility pays into the fund based on all patient days at the end of the quarter and receives an additional monthly Medicaid rate amount for all Medicaid patient days during that period.  Josh provided this example:
  • Facility has 20,000 annual patient days
  • Half of those days (10,000) are for Medicaid patients
  • The balance of the days cover Medicare, private pay and other services
  • Under the new rates, the facility pays $7.13 per patient day for all days: $142,600
  • The QAAF funding reimburses the facility $7.13 plus $10 per Medicaid patient day.  For 10,000 Medicaid patient days, that’s $171,300.
  • The QAAF funding therefore provided a net of $28,700 in funding.  The facility is required to spend 60% of that $28,700 difference for all direct nursing employees (of which 35% for CNAs) to raise salary and/or benefits, or to provide continuing education.  
TD&T can provide assistance in understanding the requirements of this and other aspects of the Medicaid program.  Let us know when and how we can assist you.