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FMLA Final Rule Defining Spouse Will Not Be Enforced in Four States – For Now

On the eve of the March 27, 2015 effective date for the DOL’s final rule amending the definition of “spouse” under the federal Family and Medical Leave Act (“FMLA”), a Texas district court preliminarily enjoined the rule’s application to the states of Texas, Arkansas, Louisiana and Nebraska. The case is Texas v. U.S., No. 7:15-cv-0056 (N.D. Texas 2015) and the full opinion may be found here.

Under the final rule, employers must look to the state where the marriage was entered into (instead of the state in which the employee resides) to determine the employee’s spouse. The revised definition of spouse includes same-sex marriages, common law marriages, and same-sex marriages entered into abroad that could have been entered into legally in at least one state. The rule was enacted in response to the Supreme Court’s Windsor decision, which held that the definition of marriage (between one man and one woman as husband and wife) in Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional. However, Section 2 of DOMA, the Full Faith and Credit Statute, which allows states to refuse to recognize same-sex marriages from other jurisdictions, was unaffected by the ruling.

In their pleading, the states argued that the final rule should be enjoined because it contradicted the Full Faith and Credit Statute, the statutory definition of marriage in the FMLA, and their individual state laws – which do not recognize same-sex marriages. The district court found that in issuing the

DOL’s Expansion of the Definition of Investment Advice (or “Fiduciary”)

Who's Holding Your Piggy Bank?Acting on reaction to a proposed and subsequently withdrawn regulation from October 2010 and attempting to address concerns expressed by both interested parties to the initial proposed regulation and an economic analysis by the Council of Economic Advisors (that the Investment Company Institute considers flawed), the Department of Labor has issued a new proposed regulation expanding the definition of investment advice. The DOL’s stated purpose in doing so is to protect retirement plan and IRA investors from practices engaged in by some advisors whose interest in providing investment advice is conflicted and not in the best interest of the participant or IRA owner.

The proposed rule does not expand the definition of fiduciary per se, but instead it expands the areas of advice that are rendered by ERISA fiduciaries and covers most significantly investment recommendations, investment management recommendations and recommendations of parties who provide advice for a fee or manage plan assets. This has the effect of expanding the net to cover more advisors as fiduciaries. People who provide advice in these areas will fall under the ambit of “fiduciary” in the following situations:

  1. They represent that they are acting in a fiduciary capacity; or
  2. The advice they give is provided pursuant to an agreement, arrangement or understanding that the advice is individualized and directed to the plan participant or IRA owner for consideration

EEOC Finally Lets the Wellness Cat Out of the Bag

WellnessOn April 16, the Equal Employment Opportunity Commission (the “EEOC”) finally gave a peek into its thinking about what constitutes a “voluntary” wellness program under the Americans with Disabilities Act (the “ADA”). Recall that, while there are extensive wellness rules under HIPAA and ACA for these types of programs, there was always a gray area with regard to whether these programs were considered “voluntary” for ADA purposes. The EEOC recently started suing companies over their programs and was heavily criticized for doing so without issuing any guidance (aside from a couple of non-binding opinion letters). These proposed regulations are the beginnings of the guidance the critics have requested. While not binding, they are a good starting point for understanding where the EEOC may end up.

Under the proposed rules, a workplace wellness program will be “voluntary” if:

  1. It does not require employees to participate.
  2. It does not deny coverage under a plan or benefit package for non-participation. It also cannot limit benefits for employees who do not participate.
  3. The employer does not take an adverse employment action against employees (presumably for not participating).
  4. If the program is part of a group health plan, the employer must provide a notice in understandable language that describes the type of medical information that will be obtained, how it will be used, and the restrictions on the disclosure of that information. The

IRS issues updates to the Retirement Plan Correction Program

IRS issues updates to the Retirement Plan Correction Program

April 15, 2015

Authored by: benefitsbclp

In response to comments from the employee benefits community, the IRS has issued two updates in quick succession for the Employee Plans Compliance Resolution System (EPCRS). The new procedures – Rev. Proc. 2015-27 and Rev. Proc. 2015-28 – do not replace, but provide modifications and clarifications to Rev. Proc. 2013-12.

Rev. Proc. 2015-27

Issued on March 27, 2015, Rev. Proc. 2015-27 clarifies the methods that may be used to correct overpayment failures and makes changes to various provisions of Rev. Proc. 2013-12. For overpayment failure corrections, plan sponsors are no longer required to only recoup large overpayments from plan participants and beneficiaries, but may explore alternative methods of correction. A brief summary of the Rev. Proc. 2015-27 modifications is available here. The modifications are effective July 1, 2015, but plan sponsors may apply these provisions beginning on March 27, 2015.

The IRS will accept comments from the public until July 20, 2015.

Rev. Proc. 2015-28

Rev. Proc. 2015-28, issued on and effective April 2, 2015, modifies EPCRS by adding safe harbor correction methods for employee elective deferral failures in both 401(k) and 403(b) plans. A plan sponsor who discovers a failure quickly is either relieved of making a QNEC to restore missed elective deferrals or is required to make a lesser QNEC.

Rev. Proc. 2015-28 adds a new definition of “employee elective deferral failure” to EPCRS Appendix A, which includes

  • Affirmative elections, including the failure to inform of employees of eligibility

Discretionary Clawback Policies: Risk of Variable Stock Plan Accounting

ChartCompanies should be aware that at least some major accounting firms are questioning whether discretionary aspects of clawback policies trigger variable accounting for compensatory equity awards granted by those companies. Existing accounting guidance (ASC 718-10-30-24) would seem to suggest that clawback features should not disrupt fixed accounting treatment because of their contingent nature.

Now, however, PricewaterhouseCoopers and KPGM, at least, are publicly expressing concerns about clawback policies focusing on their discretionary, rather than contingent, nature. A 2013 PricewaterhouseCoopers survey of 100 companies indicated that nearly 80% of those companies had clawback policies that had problematic discretionary provisions. A clawback policy could involve discretion as to what circumstances it may apply; whether it should be applied; and, if applied, how severely it should be applied. It seems that all aspects of discretion may be problematic. Companies adopting or modifying existing clawback policies should evaluate the potential risks of discretionary provisions and consider consulting with their independent accountants before adopting or revising those policies. This will be particularly true for public companies when it comes time to evaluate compliance with the much-anticipated SEC guidance on clawbacks that will finally implement the Dodd-Frank legislation of 2010.

How to Avoid the “Kitchen Sink” Appeal and Other Nuances for A Self-Insured Health Plan

For many years, medical plan drafting was viewed as a commodity. Insurance companies, third-party administrators and brokers often prepared summary plan descriptions and plan documents for self-insured medical plans using form documents. With the passage of the Affordable Care Act and other health-care related laws, however, medical claims, appeals and litigation have increased exponentially. In many instances, the terms of the plan documents have been outcome-determinative with respect to these disputes. There never has been a better time for an employer to step back and take a comprehensive review of the terms of the employer’s self-insured medical plan document and summary plan description, not only for compliance reasons but also to put the employer in the best position in the event of any dispute. The following are three drafting tips which might be considered during such a review.

Kitchen SinkAvoiding the “Kitchen Sink” Appeal. Increasingly, our clients have been receiving lengthy appeals of denied claims for benefits. We refer to these epistles as “kitchen sink appeals” because the authors of the letters seemingly throw in everything but the kitchen sink. A typical kitchen sink appeal is prepared on behalf of an out-of-network provider who claims standing to appeal based on an assignment of benefits by a plan participant. A kitchen sink appeal is often a “cut-and paste” compilation of 25 pages or more, usually containing long passages and references to cases which appear

FMLA Rules for Couples: Can My Employee Take FMLA Leave Even Though She/He Has A Stay-At-Home Spouse?

BabyPreviously in this series of blog posts relating to the federal Family and Medical Leave Act (“FMLA”), we discussed which couples do not have FMLA rights under the definition of “spouse,” as well as the limitations that can be placed on couples’ leave rights when both spouses work for the same employer.

To wrap up this series, we ask a “couples” question that you may have been thinking but were afraid to ask: Do I have to let my employee take leave to care for a covered family member (such as a child or parent), when the employee has a stay-at-home spouse who may be available to provide the necessary care?

The bottom line: Yes.

The FMLA provides a right to eligible employees to take leave for qualifying reasons. In other words, if the employee is eligible for leave, the leave is needed for a reason covered by the FMLA, and the employee has leave time available, then the employee is entitled to take the leave.

There are no qualifiers on this right relating to whether the employee is the only person who can provide the necessary care. In fact, the DOL thought of this because the regulations expressly state that, “[t]he employee need not be the only individual or family member available to care for the family member or covered servicemember.”

Of course, if someone else is available

De-Risking? The PBGC Wants to Know About It

De-Risking? The PBGC Wants to Know About It

April 1, 2015

Authored by: Denise Erwin

Risk BoggleIn the past few years, several large pension plan sponsors have sought to decrease the risk associated with their pension plans by purchasing group annuities to cover future payments or by offering a lump sum window during which eligible participants were permitted to elect a cash lump sum buyout. Many other plan sponsors are considering following suit. This trend has been accelerating in response to higher PBGC premiums, lower interests rates and updated mortality tables reflecting increased longevity.

The PBGC has an interest in tracking this activity because the decrease in the number of participants reduces the per-participant premiums collected by the PBGC making it more difficult for it to fulfill its role in protecting pension benefits. As a result, beginning with the PBGC premium filings for 2015, due for most plans on October 15th, the PBGC has added a new requirement that plan sponsors provide data regarding risk transfer activities.

The instructions for the 2015 PBGC filing require plan sponsors to report group annuities purchased and lump sum windows offered in 2014 and 2015. However, a plan sponsor can disregard annuities and lump sum windows offered under certain routine circumstances as well as annuities purchased and lump sum windows closed less than 60 days before the filing.

The information that must be filed includes the following:

  • Annuities – Plan sponsors must report (1) the
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