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ACA Employer Mandate / Reporting and Tracking Hours

June 30, 2014


ACA Employer Mandate / Reporting and Tracking Hours

June 30, 2014

Authored by: benefitsbclp

As if compliance with the ACA’s market reforms and complex plan design rules (including an assessment of affordability and minimum value), hasn’t caused enough headaches – now you have to prepare to track and report detailed information about your compliant offers of coverage?  Unfortunately, the answer is “yes”.  Time spent now tracking information and making decisions about how an employer plans to report in early 2016 (for the 2015 plan year) will make completion of those yet-to-be-released forms more feasible in the future.

Shakespeare TiredTo track or not to track, that is the question….

ACA reporting may not be required until the first quarter of 2016, but employers need to get prepared now to comply with those requirements due to the detailed information required.  While tracking hours may be inevitable for certain employers (by use of hour tracking software or internal systems) either for assessing who must be offered coverage and/or affordability of coverage, even those employers who are comfortable with their plan designs and cost structures for these purposes may still need to track hours in order to report the information mandated by applicable large employers under Code Section 6056.

What reporting is required that could cause employers to need to track hours?

The annual reports that must be filed with the IRS pursuant to Code Section 6056 (on yet to be released IRS Forms in the 1095 series) are

Do you know the Yard-Man (inference, that is)?

As a child, you may have sung “do you know the Muffin Man?,” but as an employer you should make sure you know the Yard-Man inference.

Read the Small PrintThe “Yard-Man inference” comes from the Sixth Circuit’s decision in Auto Workers v. Yard-Man, Inc.  In that opinion, the Sixth Circuit created a presumption that retiree welfare benefits vest on retirement, unless a collective bargaining agreement clearly states otherwise.

However, the inference that these types of benefits vest has not been well received in all courts. For example, the Third Circuit has held the exact opposite: that retiree welfare benefits granted under a CBA expire with the CBA unless the agreement explicitly states otherwise.  Auto Workers v. Skinner Engine Co..

The split between the Circuits has likely contributed to the Supreme Court’s recent decision to review the case of M&G Polymers USA, LLC v. Tackett, which directly addresses the “Yard-Man inference.”

Enter Sen. Rockefeller (D-WV), with the “Bankruptcy Fairness and Employee Benefits Protection Act of 2014” which aims to turn the “Yard-Man inference” into a rebuttable presumption and to require employers to include information about modification of benefits in their summary plan descriptions, among other items.  The Act has been seen by some as an effort to get out in front of the Supreme Court’s review of the “Yard-Man inference.”  The Act would:

  • Require employers to

Final Rule Clarifies Application of 30-Day Maximum for Orientation Periods

Late Friday afternoon, the Departments of Treasury, Labor and Health and Human Services (the “Departments”) issued final regulations (the “Final Rule”) clarifying the interaction between a reasonable and bona fide employment-based orientation period and the 90-day waiting period limitation under the Affordable Care Act (“ACA”).


For plan years beginning on or after January 1, 2014, ACACircle a Date prohibits a group health plan from applying a waiting period of more than 90 days. Contemporaneous with the February 24, 2014 issuance of final regulations on the 90-day limitation, the Departments issued proposed regulations addressing employee orientation periods.  Such proposed regulations provide that conditioning plan eligibility on an employee’s completion of a reasonable and bona fide employment-based orientation period would be permissible if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.

Final Rule

The Final Rule adopts the proposed orientation period rule and offers some additional clarification.  Although a plan may impose substantive eligibility criteria (i.e., being in an eligible job classification, achieving job-related licensure requirements specified in the plan, or satisfying a reasonable and bona fide employment-based orientation period) , it may not impose conditions that are mere subterfuges for the passage of time.

Under the Final Rule, the conditioning of plan eligibility on an employee’s completion of a reasonable and bona fide employment

Modifying the Affordable Care Act to Make It Better

Modifying the Affordable Care Act to Make It Better

June 25, 2014

Authored by: benefitsbclp

One of my law school professors and now good friends, Professor Burt Brody, has been contemplating beneficial changes to the Affordable Care Act.  I think he is on to something beneficial.

Professor Brody has written an op-ed piece published in the Desert Sun on May 21, 2014.  In the column, he supports the notion of having the health insurance industry participate fully in the correction, and he eschews the notion of “national health care” in its pejorative sense.  Professor Brody, without saying so, realizes that the Act is a health insurance reform act, not truly a health care reform act.

His suggestion is to take the amount that the federal government spends today on health care, and dole it out to everyone with a Social Security card – that’s every legal American – based on age brackets and veteran status that reflects perceived need for  health insurance.  The funds would be used to buy health insurance.  Professor Brody assumes that younger people are going to pay less for health insurance than older Americans, and, based on age cohorts, the amounts would increase with age.  Note that this does not require that there be any tax increase to implement, although there would likely be administrative costs in setting up and running the system, probably through the Social Security Administration since it already has our social security numbers, addresses, and dates of birth.

ACA Read More

U.S. Supreme Court: Inherited IRAs Are Not Exempt from Bankruptcy Estate

June 24, 2014


Retirement Fund JarThe Bankruptcy Code allows debtors to exempt from their bankruptcy estate certain “retirement funds”, including amounts held in an individual retirement account (IRA) or Roth IRA.  The Code is silent, however, on whether amounts held in an inherited IRA are subject to creditors’ claims in bankruptcy.  The U.S. Supreme Court resolved that issue recently in Clarke v. Rameker, holding that funds held in inherited IRA accounts are not exempt from creditors’ claims.

The debtor in this case inherited her mother’s IRA and was receiving periodic distributions from the account.  At the time of the debtor’s bankruptcy filing, the inherited IRA had just over $300,000 left in it.  The debtor claimed that the exemption under the Bankruptcy Code for “retirement funds” covered her inherited IRA.  Her creditors challenged this assertion, and ultimately, the U.S. Supreme Court agreed with them.  The exemption for “retirement funds” does not apply to amounts in an inherited IRA.

An IRA, whether personal or inherited, may be one of the only sources of assets of the debtor in a bankruptcy proceeding.  Creditors now have a clear means of attacking an attempt to exclude inherited IRA assets from the bankruptcy estate.


DOL Proposes to Adopt State of Celebration Rule to Determine FMLA Rights of Employees in Same-Sex Marriages

Presently, the federal government uses different rules for different purposes when determining whether a same sex marriage will be recognized. The IRS and the majority of other government agencies use the state of celebration rule for purposes of determining whether a same sex marriages will be recognized.   Under this rule, a same sex marriage is recognized so long as it was recognized in the state in which is was performed.  However, the DOL uses the state of residence rule for Family Medical Leave Act (FMLA) purposes. Under this rule, a same sex marriage is recognized only if it is recognized in the state in which the couple resides.  The resulting inconsistency is confusing and complicates administration of employee benefits.

Secretary of Labor Thomas E. Perez announced on Friday that the Department of Labor (DOL) is proposing a rule to revise the definition of spouse under the FMLA to include all eligible employees in same-sex and common-law marriages.  “Under the proposed revisions, the FMLA will be applied to all families equally, enabling individuals in same-sex marriages to fully exercise their rights and fulfill their responsibilities to their families,” states Perez. The proposal is in keeping with the Supreme Court’s June 26, 2013 ruling to strike down Section 3 of the Defense of Marriage Act in the Windsor decision.

The main highlights of the DOL’s proposal are as follows:

  • Moving from the current state of residence rule to place of celebration rule; and
  • Revising the

Another Same-Sex Marriage Ban Falls: FMLA Implications

On June 6th, a Wisconsin federal district court held that state laws prohibiting same-sex marriage are unconstitutional in the matter of Wolf v. Walker.  This decision is the latest in a series of rulings in favor of same-sex marriage since the Supreme Court overturned section three of the Defense of Marriage Act in United States v. Windsor, nearly one year ago.  Since Windsor, judges in eight states (AR, ID, MI, OK, TX, UT, VA, and WI) have overturned same-sex marriage bans, and judges in four other states (IN, KY, OH, and TN) have issued more limited rulings in favor of same-sex marriage. On June 13th, the district court judge issued an injunction against enforcement of the ban, but stayed the order pending the outcome of the defendant’s appeal to the Seventh Circuit Court of Appeals.

For the employee benefits community, this decision will have an impact on the eligibility of Wisconsin employees to take job-protected leave to care for their seriously ill spouse under the Family Medical Leave Act (FMLA).  Current FMLA guidance from the Department of Labor applies a “place of residence” rule that does not require employers to permit employee leave to care for a same-sex spouse if the employee resides in a state that does not recognize same-sex marriage.  If upheld on appeal, the decision would mean that an employee who resides in Wisconsin and was legally married in another state would be eligible for FMLA leave to care for her same-sex spouse.

New IRS Procedures for Waiver of Penalties for Delinquent Form 5500 Filings

June 12, 2014


ERISA Plans.     Plan administrators who fail to timely file an annual report on Form 5500 are subject to penalties under both ERISA and the Code.  In 1995, the Department of Labor (DOL) adopted the Delinquent Filer Voluntary Compliance program (DFVC), which permits late filers to file  delinquent Forms 5500 (including all required schedules) and pay a reduced penalty.  The IRS announced, in Notice 2002-23, that it will not impose penalties under the Code on plan administrators who are eligible for and follow the DFVC procedures.  Since 2002, the Department of Labor revised its procedures to require electronic filing of all Form 5500s beginning with the 2009 plan year.  Last year the DOL revised the DFVC program to require electronic filing for delinquent filings. In addition, beginning with the 2009 plan year Schedule SSA was replaced by Form 8955-SSA, which is a standalone form that is filed only with the IRS.  In its most recent guidance on DFVC, the DOL announced that delinquent filers may not submit a Schedule SSA or a Form 8955-SSA under the DFVC program, even for 2008 and prior years.

In light of these changes in procedure, the IRS recently issued Notice 2014-35 to provide that a plan administrator who has not timely filed Form 5500 and all schedules and Form 8955-SSA for a year or years will not be subject to penalties under the Code if the plan administrator:

  1. Is eligible for and satisfies all of the requirements of the DFVC program for the applicable

FMLA – Auditing the Administrator

FMLA – Auditing the Administrator

June 11, 2014

Authored by: Christy Phanthavong and Lisa Van Fleet

A few weeks ago, we discussed audits from the perspective of the Employer as the audit target.  Today our discussion is from the perspective of the Employer as auditor rather than audit target.

For many companies, the sheer size and complication of the task of Family and Medical Leave Act (“FMLA”) administration has led to a decision to outsource the work to a third-party administrator.  Whew, you can rest easy now that someone else is in charge of the hassle of FMLA forms, notices, tracking, etc., right?


As the employer, it will be you that is on the hook for FMLA violations, even when such violations occur as a result of a third-party administrator failing to properly perform FMLA administration.  You may have an indemnity clause, but such clauses may have limits and, in any event, won’t prevent the costs of fighting a claim in the first place.

Given this potential liability, have you taken steps to ensure that your third-party administrator is handling FMLA matters correctly?  Have you audited the administrator’s process?  Asked tough questions about how complicated situations are handled?  Inquired into the administrator’s training process for the representatives assigned to your account?  Ensured that the administrator is knowledgeable concerning your policies and preferences with respect to leave issues?

You have a right to expect your third-party administrator to be an FMLA expert and

Employee Takes the Cake…and Doesn’t Get COBRA

June 10, 2014


In a recent decision, the Federal District Court for Idaho found that a grocery store employee who  took a stale cake and shared it with her coworkers was properly denied COBRA for her “gross misconduct.”  (The decision does not say, but we assume “gross” does not refer to the quality of the stale cake.)

The employee alleged that she had been terminated because she was a woman, but the court disagreed finding no substantial evidence that the alleged basis for her termination was a pretext for gender discrimination.

Instead, the court said that she was terminated for “theft and dishonesty” in violation of company policy.  With regard to the claim that her termination was not for gross misconduct, the Court said:

Stealing from and/or lying to one’s employer, regardless of the value of the item, constitutes a willful and intentional disregard for the interests of one’s employer and is properly considered “gross misconduct” under COBRA….Ms. Mayes has made allegations that she should not have been fired for theft because she had permission to take cakes from the bakery and allegations regarding WinCo’s investigation….Whether or not Ms. Mayes had permission to use the cakes as she did or the taking of cakes was a commonly accepted practice is disputed. Regardless, WinCo’s written policy, which Ms. Mayes agreed to, is clear and provides that theft and/or dishonesty are considered gross misconduct.

There are relatively few cases involving gross misconduct, so each one is a helpful data point.  Even so, whether the

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