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Part 5: Can the family reduce the caregiver’s pay for “room and board” expenses?

Note: This post is part of an educational E-Series for Care Managers that outlines the Legal, Financial, and Practical sides of private-hire live-in care. Every other week, a new set of questions will be addressed. 

In Part 1 and Part 2 of the series we learned when private live-in care is an option for your clients, and just as importantly, when it is NOT an option. In Parts 3-4 we learned about some of the major costs are involved.

Today in Part 5, we will finish the FINANCIAL parts of the e-series by answering these questions:

  1. Can the family reduce the caregiver’s pay for “room and board” expenses? 
  2. Does LTC insurance or VA Aid and Attendance reimburse your clients for a private-hire live-in?
  3. Is the family required to provide the live-in with health insurance or other benefits?

1. Can the family reduce the caregiver’s pay for “room and board” expenses?

Yes, but we strongly advise against it.

According to the Dept. of Labor’s Fact Sheet 79G,

“Section 3(m) of the FLSA allows an employer to credit the fair value of the board, lodging, and other facilities towards the minimum wage requirement provided certain conditions are met. See the AI for a complete list of requirements for claiming this credit.”

AI 2014-1

“Under section 3(m) of the FLSA, 29 U.S.C. § 203(m), an employer may take credit toward minimum wage for the reasonable cost or fair value of lodging and food, provided certain conditions are met. Specifically, this credit is permissible if: (1) the employee has voluntarily accepted the lodging; (2) the lodging is furnished in compliance with applicable federal, state, or local law; (3) the lodging is provided primarily for the benefit of the employee and not the employer; (4) the employer maintains accurate records of the costs incurred in furnishing the lodging; and (5) the cost claimed does not exceed the reasonable cost or fair value of the lodging furnished.”

Sounds like great news for cash strapped clients. They could save a couple of hundred dollars a month by charging the live-in rent.

Don’t be fooled. Here is why:

If a client were to use the amount of rent to lower the live-in’s pay, they inadvertently create a legal tenant/landlord relationship.

Here is the problem as it was explained to me. In a traditional live-in arrangement, you have an employee/employer relationship which is governed by federal and state labor laws. In almost all states, the family may terminate their relationship with the caregiver for any reason “at will” and, except for a rare exemption, they are expected to leave work… i.e. your client’s house, asap.  Although I’m sure that there are occasionally some bumps on this road, it runs relatively smoothly. In the ten years I have been staffing private live-ins, I have never heard of a serious problem or delay.

BUT, if the live-in was paying rent to the family (which is what they are doing when you charge them for room and board by lowering their pay), they may not be able to just terminate the caregiver and expect them to pack and go away the next day. They are protected under the state’s tenancy laws! Evictions can take months, if not years, in some states. Granted, this is not likely to happen, but it opens your clients up to a risk that few even consider or understand. They have doubled their liabilities, as they are now legally a landlord.

Does the town even allow homeowners to rent a room? Do they need permits and inspections? Fire code regulations?, and what about the IRS reporting.  Collecting rent from a tenant is considered an income source on their 1040 income taxes. How will this affect their entitlements?

Do your clients a favor and advise them against using “room and board” expenses to reduce the live-in’s pay, so that there is no chance of these risks ever happening to them.

2. Does LTC insurance or VA Aid and Attendance reimburse your clients for a private-hire live-in?

Let’s start with the simple black-and-white one. If a client of yours qualifies for the VA Aid and Attendance program, then YES, they may use the reimbursement up to its maximum monthly amount towards a privately hired live-in caregiver.

According to VeteranAid.org: “For veterans and surviving spouses who meet VA eligibility requirements, A&A can help pay for the cost of daily senior care, whether it’s provided at home, in assisted living, or in a nursing home.”

A&A can pay up to:

  • $1,881 per month for a single veteran who needs care.
  • $2,230 per month for a veteran and his or her spouse.
  • $1,209 per month for a surviving spouse of a veteran.

To learn more about the program or to see if one of your clients qualifies for the program, visit:  https://www.veteranaid.org/aid-and-attendance-eligibility.php

Now for the more complicated one–Long Term Care Insurance. SOMETIMES. I must begin by stating that LTC insurance is not my expertise, as less than 10% of our clients have a policy, and we do not process any policies for them. The client is the employer in private-hire, so they (or you as a care manager in some cases) will need to fax the LTC company the weekly/monthly receipts for the live-in’s payroll along with the live-in’s ADL weekly log sheets (provided by the LTC company), and then the client is reimbursed up to the policy’s maximum per day for the receipted amount. Some families put a fax machine at the care recipient’s home so that the live-in can send in the weekly forms themselves.

The one company that ALWAYS covers private-hire live-ins is John Hancock. For all others, it will depend on the language of the specific policy. Does it allow for “independent or informal caregivers”? The family is best advised to call the insurance agent and inquire about their specific policy.

Have them ask:

  1. Does the policy cover home-care? If yes:
  2. Will the policy pay for an independent or informal caregiver who is employed directly by the policy holder, and paid through a payroll service?

I had a client a few months ago who had a Prudential policy. His policy had a clause that he could hire an informal caregiver, but if he did, his policy would only reimburse 50% of his policy’s daily maximum. Funny thing was that even at a 100% reimbursement, he was paying $7k more per month while using the home-care agency. Sounds crazy right? I know the agency was charging him $18k a month, and his new private live-in’s payroll was close to $8k. If his policy was for $200 per day, it would have reimbursed for ($200 x 30 days) = $6,000. The client’s out-of-pocket cost would still be $12k ($18k paid – $6k reimbursed). At a 50% payout, ($100 x 30) = $3,000. The client’s out-of-pocket with the informal caregiver was only $5k ($8k paid – $3k reimbursed). If you do the math, that’s $84k less per year, even with the LTC policy only paying 50%.

3. Is the family required to provide the live-in with health insurance or other benefits?

Health Insurance: No. Only employers with 50 or more employees fall under the ACA mandate.

As for other benefits, there are no federal requirements for any, but some states have passed “Domestic Worker Bill of Rights” that include some time-off and overtime requirements. MA and CT go the farthest, requiring that the live-in be given two weeks’ severance if they are laid off without notice. NY requires 3-5 PTO days after one year of service. 

We will discuss which states have special laws that you need to know about in the next part of the e-series.

That being said, most quality live-ins (experienced with recommendations) on the private market will expect some basic benefits. The industry norm is 5+ paid days off (PTO) per year, to use for whatever purpose they want (sick or planned event). PTO is usually set up through the payroll company to accrue and become available every 3 months.  Another common benefit is one to two weeks’ paid vacation after one year of service. Lastly, there may be either paid holidays or double time for holidays worked. All of these options are available on the legal contracts that we supply our clients. They can decide and check off on the benefits that they want to offer.

Well, that ends the FINANCIAL section of this e-series. Please join us for our next posting when we answer the following LEGAL questions:

Legal

  1. What federal laws govern live-in care?
  2. Which states have additional laws that your clients need to know about?
  3. What happens if the live-in gets hurt while working for your client?
  4. What are the critical things that need to be included in any live-in care contract?
  5. Why should clients never try to 1099 a live-in?

Thanks again for joining us, and feel free to call me if you want to discuss any part of the e-series. For those of you going to the ALCA NY conference, I will be there as a sponsor on Friday 9/13. Stop by my table and say hello!

David Petroski

888-250-2631 x 700

dp@grandmajoan.com

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