IRS Affirms Employer Mandate Enforcement Efforts
On June 28, 2019, the IRS sent a letter (number 2019-0008) to Senator Susan Collins, reaffirming that they will continue enforcing the employer mandate. Senator Collins, on behalf of several of her constituents, had written to the IRS asking whether the IRS might waive or reduce employer mandate penalties based on hardship or other factors. Senator Collins had also asked whether the IRS might be willing to extend transition relief for employers with fewer than 100 employees.
In the letter, the IRS, via Associate Chief Counsel Victoria Judson, responded by saying that the employer mandate does not provide for a waiver of penalties. The IRS also stated in the letter that no transition relief is available for 2017 and future years.
The letter also addresses a January 20, 2017 White House executive order directing federal agencies to exercise authority and discretion permitted to them to waive, defer, grant exemptions from, or delay regulatory burden imposed by the ACA. The IRS states that the legislative provisions of the ACA are still in force until Congress changes them, and therefore taxpayers (employers, when it comes to the ACA’s employer mandate) must follow the law and pay what they may owe.
The letter contains no new employer obligations, but does serve as a reminder that the IRS continues to enforce the ACA’s employer mandate. Recently, employers have been receiving letters from the IRS for failure to comply with the employer mandate and for late-filing the related forms (Forms 1094/95-C). Employers should continue to diligently comply with the employer mandate and reporting.
DOL Proposes Revised FMLA Forms and Requests Comments
On August 5, 2019, the DOL’s Wage and Hour Division published revised FMLA forms. The changes have only been proposed and are not yet final. The DOL is soliciting comments on the proposed changes through October 4, 2019.
The purpose of the changes is to simplify the forms in a manner that would minimize the current burden on employees and health care providers completing the forms. The DOL also stated a desire to improve the quality and clarity of the information collected.
Proposed Form WH-380-E, Certification of Health Care Provider for Employee’s Serious Health Condition, would request the health care provider’s email address, the date that the form must be returned to the employer (15 calendar days), and the date that the employer first learned of the employee’s need for leave. The health care provider is not asked to provide details of treatment and is specifically advised that treatment and diagnosis is not required to be provided and is actually not permissible in some states. The definition for serious health condition (inpatient care, continuing treatment, pregnancy, chronic condition, permanent/long-term condition, and multiple treatment conditions) is included in the form to assist employees and health care providers.
Proposed Form WH-381 will require the employer to enter hours worked by an employee if they are denying the request based on the fact that the employee has not met the 1,250 hour service requirement. The form requires the employer to indicate whether FMLA is being used at the same time as short-term disability, long-term disability, workers’ compensation, or state-required family leave.
All of the forms have been reworded and reformatted to make them easier to understand. Most entry fields have been changed to check boxes. Also, all forms include a hyperlink to the DOL’s FMLA website.
Again, these forms are not yet finalized. Until further notice, employers should continue to use the version of forms with an expiration date of August 31, 2021.
DOL Opinion Letter: Child’s Individualized Education Program Meeting is FMLA-Qualifying Reason
On August 8, 2019, the DOL’s Wage and Hour Division released opinion letter FMLA2019-2-A. The requester asked whether a parent’s attendance at a school’s Committee on Special Education (CSE) meeting to discuss a child’s Individualized Education Program (IEP) was covered under FMLA as intermittent leave. The DOL agreed that it was indeed a qualifying reason for leave under FMLA. However, the opinion was based on very specific facts.
The party requesting the opinion letter had two children with serious health conditions. The employee had a certification from a health care provider indicating her need to take intermittent leave to care for the children and take them to medical appointments. The children received pediatrician-prescribed occupational, speech, and physical therapy provided by their school district. Four times annually, the school holds a CSE/IEP meeting to review the children’s educational and medical needs, well-being, and progress. In attendance at those meetings are a speech pathologist, school psychologist, occupational therapist, physical therapist, teachers and school administrators.
The opinion was based on the fact that FMLA provides for leave to care for a family member with a serious health condition and that includes making arrangements for change in care.
It’s important to remember that opinion letters are based on specific facts presented by an inquiring party. This letter does not extend to all parent/teacher school meetings. In application, employers should review requests for leave related to CSE/IEP meetings with careful consideration. If the facts are similar to the ones in the opinion letter, the leave is likely covered under FMLA. This would include the child having a serious health condition, the employee having a certification from the child’s health care provider, and certification of the meeting.
Fourth Circuit Reinstates Widow’s Fiduciary Breach Claims
On July 24, 2019, in Dawson-Murdock v. National Counseling Group , the US Court of Appeals for the Fourth Circuit set aside a district court’s dismissal of a spouse’s fiduciary breach claims against her deceased husband’s employer. The case was remanded back to the lower court for further proceedings.
As background, there are generally two types of fiduciaries under ERISA. The first are those fiduciaries specified in the plan document, such as the "Plan Administrator" and "named fiduciary." These individuals or entities are fiduciaries by definition. The second type are functional fiduciaries, i.e., those not necessarily named in the plan documents, but who assume fiduciary roles by their actions. Such actions (or omissions) typically involve the exercise of discretionary authority (e.g., interpreting ambiguous plan terms or making final determinations regarding benefits eligibility), as opposed to performing purely ministerial duties. The two fiduciary types are not mutually exclusive, and either can be subject to fiduciary breach claims.
In this case, a widow asserted that her husband’s employer breached fiduciary duties in relation to its group life insurance plan. The insurance company had denied the spouse’s claim for benefits on the basis of ineligibility due to her husband’s transition to part-time employment status. However, the employer, which was responsible for eligibility determinations, had never informed the employee of the effect of his reduction in hours or the options to maintain coverage, and continued to collect premium payments from the employee. Furthermore, the employer’s VP of Human Resources instructed the widow not to file an appeal of the claim denial because the company would pay the claim and work the issue out with the insurer. Notwithstanding, the VP eventually informed the spouse that the employer would not pay the claim. By the time she received such notice, the ninety-day timeframe for filing an appeal had passed. The spouse then sued the employer for breach of fiduciary duties.
The trial court held that the employer had not acted in a fiduciary capacity with respect to its actions regarding the group life insurance coverage and claim. The fiduciary breach claims were dismissed, despite the employer being specified in the plan documents as both the "Plan Administrator" and "named fiduciary."
The Fourth Circuit clearly disagreed, reinforcing the ERISA principle that the individual(s) or entity identified as "Plan Administrator" and "named fiduciary" in the plan document are "automatic" fiduciaries. In other words, these parties cannot disclaim fiduciary status on the basis of a lack of discretionary actions. Furthermore, the court held that the employer’s actions and omissions were sufficient to support a functional fiduciary claim. Specifically, the VP had acted as a fiduciary in failing to notify the employee of his ineligibility and provide other options for coverage continuation. The VP had also assumed a discretionary role when advising the spouse not to appeal the claim denial. In finding a sufficient basis for the breach of fiduciary claims, the Fourth Circuit rejected the dismissal and sent the case back to the trial level for further proceedings.
This case serves as a reminder that the parties named in the plan document as "Plan Administrator" and "named fiduciary" are automatic ERISA fiduciaries against whom breach claims can be asserted. Accordingly, these individuals or entities should be selected with careful consideration and educated regarding their fiduciary duties and possible liabilities. Additionally, those parties not designated in the document, but who may perform discretionary plan responsibilities, should be aware of their potential functional fiduciary status.
IRS Clarifies Tax Treatment of Uncashed Retirement Plan Checks
On August 14, 2019, the IRS published Revenue Ruling 2019-19, clarifying the tax treatment of retirement plan distribution checks that are not cashed by the participant to which they are distributed. Specifically, the ruling discusses a fact pattern in which a participant receives a required distribution in 2019, but fails to cash that check by the end of the year.
In this situation, the IRS confirms that
- the distribution should be included in the employee’s gross income for 2019;
- the employer should withhold taxes from the distribution in 2019; and
- the employer should report on the distribution in 2019, by providing the employee with a 2019 1099-R.
So even if an employee fails to cash a distribution check in the year that the distribution was made, the distribution is still deemed to be made in that year (for tax purposes). Employers should consider this guidance to ensure that they are following the correct protocol in distributing retirement plan funds and taxing those distributions.
It’s MLR Rebate Time Again!
PPACA requires insurers to submit an annual report to HHS accounting for plan costs. If the insurer does not meet the medical loss ratio standards, they must provide rebates to policyholders. Rebates must be distributed to employer plan sponsors between August 1, 2019, and September 30, 2018. Employers should keep in mind that, if they receive a rebate, there are strict guidelines as to how the rebate may be used or distributed.
Can An Employer Provide Additional STD Benefits to Employees That Give Birth or Must They Provide the Same Amount of STD Benefits to All Employees?
Employers are generally free to determine the benefits available to employees, including the amount of any such benefit. Essentially, as long as there is no law that prohibits the employer’s benefit design, the employer could choose to offer additional benefits to certain employees. And we are not aware of any law that requires an employer to treat all forms of leave or disability the same. So, an employer could likely offer greater maternity benefits than are offered for parental leave or other disabilities.
The usual concern when an employer wants to offer a greater benefit for maternity leave is the idea that it could be discrimination based on gender (since only women would be able to receive such a benefit), which would run afoul of Title VII of the Civil Rights Act. With that said, there are common practices that allow employers to achieve the goal of providing additional wage replacement benefits to employees who take maternity leave. Specifically, many employers choose to subsidize short-term disability payments or pay a portion over and above the STD payments for employees who give birth.
If that is the employer’s goal, it would likely be better to structure this type of program by paying additional paid leave to women who have given birth to a baby. This is because the EEOC actually allows employers to distinguish between leave related to any physical limitations imposed by pregnancy or childbirth and leave for purposes of bonding with a child and/or providing care for a child.
Specifically, leave benefits related to pregnancy, childbirth, or related medical conditions can be limited to women affected by those conditions. However, parental leave must be provided to similarly situated men and women on the same terms (see the EEOC’s enforcement guide on pregnancy discrimination for more information). To the contrary, employers that simply offer baby bonding time should offer it equally to women and men (as underscored by the EEOC’s settlement with Estee Lauder).
So it’s possible for an employer to offer additional wage replacement or STD benefits to employees who give birth. We would just caution the employer to work with their legal counsel to ensure that their policy is compliant and to include the STD/wage replacement policy in the employee handbooks/communication to the employees, so that the policy is clear to everyone involved. The employer would also want to consider allowing all women employees who give birth the same level of benefits under the policy to avoid any arguments of disparate treatment or discrimination.
Voting Leave Repealed
On June 28, 2019, Governor Ige signed HB 1248 into law. Effective with the 2020 primary election, the law requires all elections statewide to be conducted by mail. Because of this requirement, an employee’s absence during the day will not be necessary in order to visit a polling location. Thus, the new law also repeals the voting leave law, which provided employees with up to two hours of leave for the purpose of voting.
New Bulletin Revises Counting Methodology for Small and Large Group Markets in Maine
On July 23, 2019, the Bureau of Insurance published Bulletin 436, which supersedes Bulletin 409. According to the bulletin, whether a particular employer is considered “large” or “small” depends on the counting methodology; the bulletin withdraws previous guidance (issued under Bulletin 409) and reinstates the so-called “head count” methodology formerly used in Maine.
As background, Maine’s small group health plan law applies to all employers with 50 or fewer eligible employees. By contrast, ACA and CMS rules require carriers offering small group health plans on the SHOP exchange to determine eligibility by using full-time equivalent (FTE) counting methodology for part-time employees. Thus, it would be possible for a business that has a significant number of employees, but only a few of them working enough hours to be eligible for coverage, to be a “small” employer under pre-ACA Maine law, but ineligible to participate in the SHOP exchange because it’s a large employer under the ACA and CMS rules.
According to an example, if an employer has 10 full-time employees and 75 employees working 20 hours per week, it has 10 eligible employees but has 60 or more FTE employees. Use of the FTE methodology means that this employer is ineligible for community rated small group coverage and must be individually rated, even if there can never be more than 10 covered employees on the plan. According to the bulletin, it’s unfair to both the employer and the carrier to require experience rating when the employer’s risk pool is too small to generate any credible loss history — employers, producers, and carriers have all expressed concerns to the Bureau.
As a result, the Bureau is using its discretion to reinstate the old methodology, which accounts for part-time employees by including them if and only if they are eligible for coverage under the group health insurance policy. All employers with in-force policies are entitled to maintain that coverage until the end of the current policy term, if they choose, and carriers can honor all outstanding offers of small or large group coverage.
Except for employers with offers of new or renewal coverage outstanding or in progress, or employers applying for coverage through the SHOP exchange, carriers should transition at the earliest date (and no later than September 1, 2019) to consistent application of the “eligible employee” counting methodology for purposes of access to community-rated coverage under Maine’s small group health plan law.
ACA Consumer Protections Incorporated into Maine Law
On July 23, 2019, the Maine Bureau of Insurance published Bulletin 437, which relates to incorporation of the ACA’s consumer protections into Maine law. According to the bulletin, Public Law 2019, Chapter 5 (LD 1), preserves some of the ACA’s major consumer protections by incorporating them into Maine law and harmonizes state and federal laws in areas where Maine law was already similar to the ACA.
According to the bulletin, Maine law now incorporates ACA and additional protections on the following items:
- Rating restrictions
- Dependent child coverage up to age 26
- Pre-existing condition exclusion prohibitions
- Prohibition on rescissions of coverage
- Plan descriptions — similar to the ACA’s SBC rules
- Prescription drugs — prohibits carriers from reducing or terminating benefits for an ongoing course of treatment during the course of an appeal
- Minimum medical loss ratio rules
- Guaranteed issue
- Prohibition on lifetime and annual limits on essential health benefits
- Nondiscrimination on the basis of race, color, national origin, sex, sexual orientation, gender identity, age, or disability.
- Mental health coverage.
For employers with fully insured plans in Maine, the new law and bulletin signals Maine’s intent to solidify the ACA’s protections through Maine law. The guidance contains no new employer obligations; employers should work with carriers on any questions relating to the bulletin.
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.
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Can An Employer Provide Additional STD Benefits to Employees That Give Birth or Must They Provide the Same Amount of STD Benefits to All Employees?