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Same-Sex Spouse Exclusion under Health Plan Does Not Violate ERISA

The LawEarlier this month,  a New York Federal District Court held that the exclusion of same-sex spouses from coverage under a health plan, even though coverage is provided to opposite-sex spouses,  does not violate the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  This is one of the first cases addressing equality of coverage for same-sex spouses under plans governed by ERISA since the U.S. Supreme Court held in U.S. v. Windsor that Section 3 of the Defense of Marriage Act was unconstitutional.  (Click here or here or here for more information)

The Health Plan Exclusion

Roe attempted to enroll her same-sex spouse in the self-funded health plan sponsored by her employer.  The plan provided spousal coverage, but did not define spouse.  However, the plan contained a specific exclusion for same-sex spousal coverage: “Same sex spouses and domestic partners are NOT covered under this plan.”

The Employee’s Claims

  1. Section 510 of ERISA.  The employee asserted that the employer violated Section 510 of ERISA by interfering with her right to cover her same-sex spouse under the plan.  Section 510 of ERISA prohibits an employer from discriminating against a participant for exercising a right to which she is entitled under the provisions of a plan.  However, the court said that since the employee was still employed and did not suffer any change

Autism Spectrum Disorder and ABA Treatment – New Legal Theories Facing Self-Insured Plans?

May 29, 2014


492969231Federal law governing mental health benefits is giving rise to a new wave of lawsuits against self-insured ERISA welfare benefit plans.  Plan sponsors should carefully consider their current scope of coverage to avoid litigation risk and ensure fair benefits for participants.

ERISA and other governing federal laws historically have not required that plan sponsors or insurers provide any particular coverage or level of benefits.  Thus, plans and insurers could pick and choose what type of benefits and coverage to offer.

Even with the passage of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “Parity Act”), plans and insurers were not required to offer any mental health benefits.  However, the 2008 Parity Act requires group health plans and health insurance issuers that offer mental health benefits to do so in a manner that meets the parity rules.  At a high level, the parity rules mandate that the financial requirements (such as co-pays and deductibles) and non-quantitative treatment limitations (such as visit limits) applicable to mental health or substance use disorder benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits.

Treatment for Autism Spectrum Disorders (“ASD”) has become a much-discussed and frequently-litigated topic in the wake of passage of the Parity Act and the advent of market reforms triggered with adoption of the ACA.  While the ACA

COBRA Participants: Act Quickly to Maximize Cost Savings with ACA Special Enrollment Opportunity

Health Insurance and MoneyIn a recent CMS Bulletin, the Department of Health & Human Services announced a one-time special enrollment period for individuals who are currently eligible for, or enrolled in, COBRA continuation coverage to enroll in qualified health plans in the Marketplace.  This special enrollment period applies to the Federally Facilitated Marketplace (FFM) and ends July 1, 2014.

A person eligible for, or enrolled in, COBRA coverage is generally permitted to enroll in the Marketplace only (i) when the person is initially eligible for COBRA or has exhausted his or her COBRA coverage rights, (ii) during annual open enrollment, or (iii) during some other special enrollment period.  This one-time special enrollment period allows eligible individuals in states that utilize the FFM to terminate their COBRA coverage and enroll in qualified health plans offered through the FFM without regard to the standard enrollment period restrictions.  In the absence of another special enrollment period, the next general enrollment opportunity would be the annual open enrollment period commencing November 15, 2014.

Such a switch may allow COBRA participants to realize savings by obtaining affordable (possibly subsidized) medical insurance coverage through a public exchange.  Employers, who also stand to benefit by moving COBRA participants to alternative coverage, should consider promptly notifying COBRA participants of this limited special enrollment opportunity.

Note:  This special enrollment period does not apply to a State-Based Marketplaces unless it

Designating Leave To Care For A Same-Sex Spouse As FMLA Leave Can Create Unintended Consequences

159289576Generally, benefits and employment attorneys emphasize the need for consistency in how employees are treated, whether such treatment relates to benefits, policies, or work rules.

But sometimes, “consistency” may not be the best answer.

Take, for example, the question of whether to designate leave taken by an employee to care for a same-sex spouse as leave under the Family and Medical Leave Act (“FMLA”).

Currently, some states recognize same-sex marriage, while others do not.  Under the FMLA regulations, the “place of residence” rule determines whether a same-sex spouse meets the definition of “spouse” under the FMLA.  Thus, an employee is entitled to take FMLA leave to care for the employee’s same-sex spouse only when the state in which the employee resides recognizes same-sex marriage.

Despite the current FMLA definition, some employers, desiring to treat employees consistently – most times either out of a concern for fairness or for purposes of easing administration – choose to define “spouse” in their employment policies to include same-sex spouses.  Such employers then permit employees to take what they call “FMLA leave” to care for a same-sex spouse, even if the individual is not recognized as a “spouse” under applicable state law.

The potential problem with this approach is that only leave that fits within the circumstances that qualify for FMLA leave is permitted to be designated by an employer as FMLA leave and counted

With Retirement Policy, You Can’t Tell the Players Even with a Scorecard

The Washington Post reports that Senator Marco Rubio (R-FL), a Tea Party favorite and staunch conservative legislator, has proposed opening the Federal government’s Thrift Plan to all Americans who do not have the opportunity to participate in an employer-sponsored retirement plan.  The fact that a conservative Senator is expressing an interest in expanding government is surely paradoxical and confusing.  But what really comes from this ill-conceived notion is the obvious lack of sound retirement policy in Washington.

According to a recent survey, the number one concern of Americans is not health care or health care costs, it’s not unemployment, and it’s not a failed immigration policy.  It’s having money on hand in a sufficient amount to be able to retire in a dignified and proper manner.  Democrats and Republicans alike don’t seem to get this.

Congress views retirement plan deductions and deferrals as some sort of budget game.  Republicans (see the Camp Tax Overhaul) and Democrats (see the Obama Budget) have recently proposed methods of diminishing savings by reducing attendant tax benefits.

President Obama seems convinced that the current structure primarily benefits the wealthy.   So, in his 2015 budget proposal, he suggests putting caps on retirement savings apparently not realizing that most of the rules pertaining to tax-qualified plans do just that and provide consequential limiting opportunities for higher paid Americans.  Are the President’s proposed caps good retirement policy or simply efforts to enhance the Federal treasury?

And he proposed, and is implementing, the

New IRS Guidance on Retiree Health Benefits Funded Through Captive Insurance Subsidiaries

Risk InsuranceAn employer will sometimes form a captive insurance subsidiary to provide insurance coverage for workers compensation and a variety of other risks associated with the employer’s business.  For premium payments to a captive insurance company to be currently deductible, the underlying policy issued by the captive generally must constitute insurance under the tax laws.  To constitute insurance, the arrangement must, among other requirements, shift the risk of loss from the employer to the captive, and the captive must distribute that risk of loss among other insured parties.  To satisfy the “risk distribution” requirement, some captive insurance companies have issued policies to employee medical plans insuring the medical benefit risks associated with employees and retirees (and their dependents).

In Revenue Ruling 2014-15, the IRS addressed the application of the risk shifting and risk distribution requirements involving retiree health benefits and a voluntary employee’s beneficiary association (“VEBA”).  An employer voluntarily provided health benefits to its retirees by making contributions to a VEBA. The VEBA provided the health benefits, but instead of self-insuring, it entered into a contract with an unrelated insurance company.  That insurance company then reinsured the risks with a captive insurance company wholly-owned by the employer. The IRS concluded that it was the risks of the retirees (and not the employer) that were being insured. As a result, sufficient risk shifting and risk distribution existed such that this arrangement

Hurry and Get Your HPID — or NOT!

Health Plan

Update: See our subsequent post here.

On September 5, 2012, the U.S. Department of Health and Human Services (HHS) published final regulations governing the requirement that health plans obtain a Health Plan Identifier number (HPID).  The purpose of the HPID is to increase standardization within certain covered electronic transactions (e.g., claims, benefit payments and coordination of benefits), which is currently fraught with a system of multiple identifiers that differ in length and format.

So while the HPID is not a new development, it is gaining the attention of plan sponsors since the deadline for health plans to obtain an HPID is November 5, 2014 (a one-year extension is available for small health plans).

HPID Requirement

Under the regulations, the requirement to obtain an HPID applies only to a Controlling Health Plan (CHP).  A CHP is a health plan that (1) controls its own business activities, actions or policies OR (2) is controlled by an entity that is not a health plan. Consequently, most employer-sponsored health plans meet the criteria of a CHP and must obtain a HPID.

In contrast, a Subhealth Plan (SHP) is eligible for but is not required to obtain a HPID.  An SHP is defined as a health plan whose business activities, actions or policies are directed by a CHP. Unfortunately, the regulations do not address what it means for a CHP to

The Sound of Silence: SCOTUS To Review Rules Governing Vesting of Retiree Health Benefits under CBAs

Old Woman ShhhhThe Supreme Court has granted review in a case that will resolve a long-standing circuit split concerning the vesting of retiree health care benefits.  On May 5th, the Supreme Court granted certiorari in the case of M&G Polymers USA, LLC v. Tackett. In reviewing Tackett, the Supreme Court will have the opportunity to decide whether silence concerning the duration of retiree health-care benefits in collective bargaining agreements means the parties intended those benefit to vest and therefore continue indefinitely or whether such benefits are vested only where there is a clear statement that health care benefit are intended to survive the expiration of the collective bargaining agreement.

There has long been a split among the circuit courts regarding the requirement for vesting of retiree health care benefits providing through a collective bargaining agreement.  The Sixth Circuit’s decision in Tackett represented the circuit’s long-standing view that such silence is evidence that the parties’ intended the health-care benefits to vest and continue for the retiree’s life (known as the “Yard-Man presumption,” named for an early retiree health care decision, UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983)).  On the other end of the spectrum, the Third Circuit requires a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement in order to to find that such benefits are vested. The

One Participant Plans Can Now Correct Late Form 5500 Filings, But Hurry!

462295231In Revenue Procedure 2014-32, the Internal Revenue Service (IRS) introduced a pilot correction program for plans which are subject to the Form 5500 filing requirement under the Internal Revenue Code, but which are exempt from Title I of ERISA.  This covers certain foreign plans and plans which are considered one participant plans.

HURRY – No fee or penalty applies under the pilot correction program!  However, if a permanent program is established, the IRS indicated that a fee or penalty will apply to receive the relief.  The pilot program is only open for one year – from June 2, 2014 through June 2, 2015.

The Department of Labor (DOL) sponsors the Delinquent Filer Voluntary Correction (DFVC) program, which allows plans which are subject to Title I of ERISA to make corrective Form 5500 filings for a reduced, set penalty, thereby avoiding the larger possible penalties for delinquent filings.  A plan sponsor that corrects under the DFVC program also avoids any penalties under the Internal Revenue Code.  However, the DFVC program is not available to plans that are not subject to Title I of ERISA.  Therefore, a plan with only one participant cannot correct delinquent Form 5500 filings under the DOL’s DFVC program.  While this type of plan could (and, in fact, still can) request relief from the IRS’s penalties if “reasonable cause” exists surrounding the failure and a statement

Mr. Spock, Social Influence, and Eliminating the ACA Employer Mandate

ACAHumans are not logical.  Consider popular Star Trek characters Mr. Spock or Lt. Cmdr. Data (depending on which generation of Star Trek you prefer).  Either by choice or by nature, each was constrained to view the world through the lens of dry, passionless logic.  This predilection made them stand out among their fellow characters who were more, well, human.

Why does this matter?  Well, a recent Robert Wood Johnson Foundation/Urban Institute Issue Brief suggests there would be a very minimal drop (0.3%) in employer-sponsored coverage if ACA’s employer mandate was eliminated.  It would also minimize labor market distortions that the mandate, anecdotally, seems to be creating, the brief says.

But the report fails to consider the psychological impact of the play or pay mandate.  Having the play or pay mandate (or the tax, as the Supreme Court said), sends a message that it is a bad act for an employer to drop coverage.

It’s a version of what psychologists call “normative social influence.” In short, we like to be liked so we will do what we think people want to achieve that goal, even if we don’t believe in it.  This influence goes beyond pure logic, and it is not something that is easily measurable in this context.

My contention is that the mandate is not simply a dollars-and-cents proposition. It also says that the government disapproves (and

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