Federal Updates
FMLA Forms Updated to Expire in 2021
On Sep. 4, 2018, the DOL released the updated FMLA forms, signaling the Office of Management and Budget's (OMB) three-year approval of the forms and notices used to manage the FMLA. As background, these forms were scheduled to expire on May 31, 2018. However, the DOL requested 30-day extensions until the OMB approved the forms. (We discussed the pending OMB approval in the June 12, 2018 edition of Compliance Corner .)
As we mentioned before, the DOL submitted the forms to the OMB back in April and requested a three-year extension to the forms in their current layout (that is, they requested no changes). Since the OMB has formally approved the forms, they are now set to expire on Aug. 31, 2021.
Employers should utilize the updated forms and notices.
Wage and Hour Division. "FMLA: Forms." www.dol.gov >>
The DOL Issues Two Opinion Letters That Address FMLA Compliance
On Aug. 28, 2018, the DOL issued two new opinion letters related to the FMLA. One opinion letter relates to an employer's no-fault attendance policy during an employee's FMLA leave and the second outlines how an organ donor may qualify for FMLA leave. As a quick reminder, an opinion letter is an official, written opinion on how an employer can maintain compliance in specific circumstances that are presented by the person or entity requesting the letter. An employer can use the provided guidance when handling similar situations.
No-Fault Attendance Policy Can Be Compliant Under the FMLA (FMLA2018-1-A)
Opinion letter FMLA 2018-1-A responds to a request for a ruling on whether an employer's no-fault attendance policy violates the FMLA. The policy effectively freezes the number of attendance points that an employee accrues prior to taking FMLA leave. The DOL determined that, as long as the policy is nondiscriminatory, it doesn't violate the FMLA.
FMLA generally prohibits employers from "interfering with, restraining, or denying" an employee's exercise of FMLA rights. Further, an employer cannot discriminate or retaliate against an employee for having taken FMLA nor can the taking of FMLA be a negative factor in employment actions. As such, employers are required to provide an employee who takes FMLA leave with the same benefits that an employer on leave without pay would otherwise be entitled to receive. An employee's entitlement to benefits is determined by the employer's policy for providing benefits when the employee is on other forms of leave (paid or unpaid).
This opinion letter reviewed an employer's attendance policy wherein employees accrue points for tardiness and absences and those that accrue eighteen points within a twelve month period of "active service" are automatically discharged. There are certain absences, including FMLA-protected leave, that don't accrue points. Upon return from such a leave, employees each have the same number of points that they accrued prior to the leave. The leave essentially pauses "active service" and the points are extended for the duration of the FMLA leave. So, an employee returns from leave with the same number of points that he or she accrued prior to the leave. The employer's policy is applied in this same manner for other types of leave, including leave related to workers' compensation.
In the letter, the DOL points out that removal of absenteeism points is a reward for working and therefore an employment benefit under the FMLA. Under this employer policy, an employee neither loses a benefit that accrued prior to taking the leave nor accrues any additional benefit. So, as long as employees on equivalent types of leave receive the same treatment, the practice doesn't violate FMLA.
This opinion letter is a good reminder for employers obligated to comply with FMLA that FMLA can interact with many different policies. Employers can take this opportunity to review existing policies to ensure that they don't discriminate against any employee on FMLA leave.
Organ donation eligibility for FMLA (FMLA2018-2-A)
Opinion letter FMLA 2018-2-A responds to a request asking whether an organ-donation surgery can qualify for FMLA leave even though such an employee is choosing to donate the organ solely to improve someone else's health. Secondarily, the letter addresses whether an organ donor can use FMLA leave for post-operative treatment. The DOL determines that both situations can qualify for FMLA leave.
As background, the FMLA allows an employee to take unpaid, job-protected leave for specific family and medical reasons, including leave for a "serious health condition" that renders the employee unable to perform the functions of their job. A "serious health condition" may include an illness, injury, impairment, or physical or mental condition that involves either inpatient care in a hospital, hospice or residential medical care facility. The regulations define "inpatient care" as an overnight stay in an above-mentioned facility or any subsequent treatment in connection with such inpatient care.
The DOL determines that an organ donation can qualify as a "serious health condition" under the FMLA when it involves either "inpatient care" or "continuing treatment." The employer included a statement within the request that organ donation surgery typically requires an overnight hospital stay. The DOL opined that in such case, the organ donation surgery and any related post-operative treatment would be considered a "serious health condition" to qualify for FMLA leave.
This opinion letter provides guidance for employers that an otherwise healthy employee may use FMLA leave for a voluntary organ donation surgery. It also serves as a good reminder to employers that each FMLA leave request is fact-specific and can involve a facts and circumstances-based analysis.
Bryan Jarrett. "Opinion Letter FMLA2018-1-A", www.dol.gov. >>
Bryan Jarrett. "Opinion letter FMLA2018-2-A", www.dol.gov. >>
Retirement Update
Pres. Trump Issues Executive Order on Retirement Plans
On Aug. 31, 2018, Pres. Trump issued the Executive Order on Strengthening Retirement Security in America ("the Order"). The Order seeks to expand access to workplace retirement plans for American workers and reduce the regulatory burdens and complexity associated with sponsoring a retirement plan.
Specifically, the Order directs the DOL to examine policies which would allow more small employers to band together to provide retirement plans through the use of multiple employer plans (MEPs). It further directs the DOL to promulgate rules that would redefine 'employer' under ERISA, in an effort to allow more employers to participate in MEPs. Currently, unrelated employer groups that wish to band together to offer retirement plans must meet stringent requirements concerning their relation to each other. The Order makes it clear that the Administration would like to amend those rules to allow for more small and mid-sized businesses to have access to MEPs. (Any subsequent changes in this regard would likely be very similar to the changes made to allow for more employers to participate in association health plans for health and welfare benefits.)
The Order also directs the DOL to review actions that could be taken to make notices and distribution requirements less costly and burdensome. There are a number of disclosures that are required for retirement plans, and while the Order doesn't specify which disclosures could potentially be changed or altered, it does seem to be aimed at reducing the number of disclosures or making them less complex. Additionally, the Order explicitly mentions that the DOL's review should explore the potential for broader use of electronic delivery as a way to distribute the necessary disclosures.
Finally, the Order instructs the Treasury to review the life expectancy and required minimum distribution tables to determine if they should be changed to reflect current mortality data. As background, retirees must withdraw minimum amounts of money from their retirement account beginning at age 70 1/2 . In essence, the Order directs the Treasury to review updated information to determine if the age of 70 1/2 is still appropriate or should be increased.
Although the Order ultimately signals the administration's policy on these topics, it's likely that the DOL and IRS will promulgate the rules requested by the President. Until those rules are finalized, the current rules remain in place and employers should continue to follow them. We will provide updated information as the rules are published in their proposed and finalized forms.
IRS Private Letter Ruling Allows Student Loan Repayment Contribution in 401(k) Plan
On Aug. 17, 2018, the IRS issued private letter ruling 201833012 (the "PLR"). The PLR addressed an individual plan sponsor's desire to amend their 401(k) plan to include a program that allows matching contributions to be made for employees that are repaying student loans. The design endorsed in the PLR is meant to allow employees who cannot afford to both repay their student loans and defer into the 401(k) at the same time the ability to avoid missing out on the "free money" being offered by their employer in the 401(k) plan.
Specifically, the plan sponsor requesting the PLR sought IRS permission to implement a design in which a nonelective employer contribution equal to 5 percent of an employee's compensation could be made for every 2 percent the employee paid to student loans. Additionally, the PLR states that the program could allow a participant to both defer into the 401(k) and make a student loan repayment at the same time, but they would only receive either the match or the nonelective employer contribution -- not both for the same pay period. However, if an employee enrolled in the student loan repayment program and later opted out without hitting the 2 percent threshold necessary for a nonelective employer contribution, they would be eligible for matching contributions for the period in which they opted out and made deferrals into the 401(k) plan.
The IRS also confirmed that such a design wouldn't violate the contingent benefit prohibition under the IRC. As background, the contingent benefit prohibition essentially states that the only benefit that can be conditioned upon an employee's elective deferrals is a matching contribution. In response to the plan sponsor's request, the IRS ruled that the proposed design doesn't violate the contingent benefit prohibition, therefore allowing nonelective employer contributions to be made when employees pay student loans. While the IRS gave their opinion regarding the contingent benefit prohibition, they stated definitively that all other qualification rules (such as testing and coverage) would remain operative.
Keep in mind, though, that a PLR is directed to a specific taxpayer requesting the ruling, and it's applicable only to the specific set of facts and circumstances included in the request. That means other retirement plan sponsors cannot rely on the PLR as precedent. It's not a regulation or even formal guidance. However, it provides insight into how the IRS views certain arrangements. While any plan sponsor that wants to replicate this design could likely assume that they would not run afoul of the contingent benefit prohibition, they would be most protected by seeking the assistance of outside counsel in designing their program.
Any employer plan sponsor considering adding a student loan repayment program to their benefits package should contact their plan advisor for additional information.
Jason E. Levine. "Private Letter Ruling 201833012." IRS Static Files Directory >>
Announcements
It's MLR Rebate Time Again!
The ACA requires insurers to submit an annual report to HHS accounting for plan costs. If the insurer doesn't meet the medical loss ratio standards, they must provide rebates to policyholders. Rebates must be distributed to employer plan sponsors between Aug. 1, 2018, and Sept. 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.
For more information, please contact your advisor for a copy of " Medical Loss Ratio Rebates: A Guide for Employers " or " Medical Loss Ratio: PPACA's Rules on Rebates. "
FAQ
If an employee experiences a qualifying event, do they have the right to switch benefit plan options (for example, from HMO to HDHP)?
The answer depends upon which qualifying event is involved, but yes, the employee has the right to switch benefit plan options under certain circumstances.
As a reminder, when an employer offers coverage through a Section 125 cafeteria plan, employee elections cannot be changed mid-year without a permissible qualifying event. It's called the irrevocable coverage rule and applies any time employees contribute to the cost of health coverage on a pre-tax basis with salary reductions. There are two types of qualifying events: HIPAA Special Enrollment Rights (SER) and the optional Section 125 qualifying events.
The HIPAA SER events are:
- Birth
- Adoption
- Marriage
- Loss of eligibility for other group coverage
- Loss of Medicaid or CHIP
- Gain of eligibility for Medicaid or CHIP premium assistance program
Employees currently enrolled in the group medical plan who experience a HIPAA SER have the right to switch benefit plan options. For example, if an employee is enrolled in HDHP single coverage and gets married, they have the right to add the spouse and switch to a different medical plan option (such as an HMO plan). This is an entitlement under HIPAA. Neither the employer nor the insurer may deny the employee the right to switch plans under these circumstances.
Please note that the HIPAA SER rules don't apply to stand alone dental or vision plans, which are generally excepted from HIPAA portability governance.
The second type of qualifying events are the optional events under Section 125:
- Change in status (employment, marital status, number of dependents, residence)*
- Change in cost (significant* and insignificant)
- Significant coverage curtailment*
- Addition or significant improvement of benefits package option*
- Change in coverage under other employer plan
- Loss of coverage sponsored by governmental or educational institution
- Certain judgments, orders or decrees
- Medicare or Medicaid entitlement
- FMLA leaves of absence
- Reduction of hours without loss of eligibility
- Exchange enrollment
These events are optional for both an employer and an insurer. If an employer intends to permit mid-year election changes based on these events, their written Section 125 Plan Document would need to provide for such and the insurer's policy would need to be in agreement. Those events identified with an asterisk allow for an employee to switch benefit plan options (including not only medical, but also dental and vision) based on the employer and insurer election rules. Where there's overlap between the HIPAA SER and optional Section 125 rules (for example, between the HIPAA SER event of marriage and the Section 125 event of change in marital status), remember that the HIPAA SER events along with the right to switch medical plan options are an entitlement to an eligible employee and cannot be denied by employer or insurer practice.
Lastly, remember that employers must operate the plan in accordance with the Section 125 rules and their written Section 125 Plan Document. Allowing employee election changes outside of those guidelines would put the employer at risk for disqualification of the plan's tax status. On the other hand, denying an employee a HIPAA SER could result in DOL enforcement, an IRS excise tax penalty or legal action against the plan.
State Updates
Connecticut
Association Health Plan Regulation of Out-of-state Plans
On Aug. 27, 2018, Insurance Commissioner Wade released Bulletin HC-123 to provide additional information regarding the regulation of association health plans (AHPs) that are established out of state but offered to Connecticut residents. Specifically, fully insured plans that are established outside of CT that sell products to CT small employers or sole proprietors must file rates and forms for prior approval with the Insurance Department. Further, employers should be aware that their participation in an out-of-state fully insured MEWA (or Multiple Employer Trust (MET)) will fall under CT's jurisdiction.
This bulletin supersedes HC-122, which was released Aug. 10, 2018. (We discussed that bulletin in the Aug. 23, 2018 edition of Compliance Corner ). That bulletin reminded insurers that the state retains the right to regulate MEWAs and METs regardless of changes to federal law.
This new bulletin also reminds employers of previous guidance regarding self-insured or self-funded MEWAs or METs. In 1990, the commissioner issued Bulletin HC-43, which required self-funded MEWAs and METs to be licensed as insurance carriers because they were considered as doing the business of insurance. If a self-funded MEWA or MET is doing the business of insurance without authority or license, then they are considered an illegal operation.
CT employers don't need to take any action, but just take note that CT is reaffirming the department's longstanding commitment to regulating unlicensed entities for the protection of consumers.
Katherine L. Wade. "Bulletin HC-123." Connecticut Insurance Department, www.ct.gov >>
Louisiana
Review of State and Federal Regulation of Association Health Plans
On Aug. 30, 2018, Commissioner of Insurance Donelon issued Advisory Letter 2018-03 ("the Letter"). The Letter discusses the state and federal regulation of association health plans (AHPs), after the DOL's final rules on AHPs were issued this summer. As background, AHPs are MEWAs and can fall under the jurisdiction of both federal and state law. The Letter identifies the different types of AHPs and how Louisiana law applies to them.
The Letter essentially confirms that Louisiana still has the same regulatory authority over MEWAs and AHPs as it did before the DOL published its final rule. Specifically, Louisiana still requires self-insured AHPs to be licensed under Louisiana state law. While fully insured AHPs don't have to be licensed, the insurer that issues the policy must file the association's constitution, by-laws, membership application, agreement and brochure for review when filing for a health insurance contract.
The Letter also includes a chart that lists some of the laws and regulations applicable to MEWAs and whether or not the different types of MEWAs have to comply. It ends by listing the applicability dates of the DOL's final rule.
While this Letter doesn't necessarily provide any new information, it's a reminder to entities that might want to establish an AHP for Louisiana employers that they must comply with Louisiana law.
James J. Donelon. "Advisory Letter 2018-03." Laws and Bulletins, www.ldi.la.gov >>
New Hampshire
Association Health Plan Guidance
On Aug. 31, 2018, Insurance Commissioner Elias issued Bulletin 18-045-AB regarding the association health plan (AHP) rule. The bulletin provides guidance on the current NH law applying to AHP coverage and explains the department's intention to convene a stakeholder group to develop legislation for consideration in early 2019. The goal of the group would be to update the current law with respect to AHP coverage and create clear standards that will enable NH employers to benefit from the availability of new coverage options, while minimizing negative impacts to other health insurance markets.
As background, on June 21, 2018, the DOL issued final regulations regarding association health plans (AHPs). Under the regulations, a group or association of employers may act as a single employer sponsor of an AHP under ERISA. The federal regulations attempted to encourage the creation of these associations but emphasized that the states retain their authority to regulate AHPs. This bulletin clarifies the coordination with NH law.
In NH, AHPs are currently subject to the same statutory and regulatory requirements as any other MEWA or group health insurance plan -- all group policies or certificates must have the prior written approval of the commissioner, including association coverage. Regardless of the new flexibility offered by the DOL, fully insured AHP coverage under current NH law must be rated in accordance with small group rating rules, if issued to a small employer (generally defined as an employer with at least one and up to 50 employees, including owners and self-employed persons, during the previous calendar year). Both the fully insured and self-insured rules for MEWAs apply equally to out-of-state association coverage, to the extent it's issued to an employer with a "brick and mortar" workplace in NH that employs one or more NH resident.
Self-funded MEWAs are permissible in NH. To qualify, they must be: 1) nonprofit; 2) established by a trade association, political subdivision, religious organization or professional association organized and maintained for at least one year for a purpose other than providing health insurance; 3) operated pursuant to a trust by a board of trustees; 4) not offered or advertised to the public generally; and 5) operated in accordance with sound actuarial principles.
NH employers interested in MEWAs (either fully insured or self-insured) should be mindful of the current NH law limitations. This bulletin clarifies these limits within existing legislation, but also indicates that the department will work to convene a working group in September and October of 2018 to discuss options for legislative changes in 2019 that may further increase the ability for small employers to have access to AHP coverage.
John Elias. "Bulletin INS NO. 18-045-AB." 2018 Bulletins, www.nh.gov/insurance >>
New Mexico
Transgender Non-Discrimination in Health Benefits
On Aug. 23, 2018, Superintendent of Insurance Franchini issued Bulletin 2018-013. This bulletin outlines the nondiscrimination rules for the coverage of transgender benefits under New Mexico law. As background, the ACA, the New Mexico Human Rights Act and the New Mexico Insurance Code all have provisions that prohibit discrimination against transgender persons. In accordance with those laws, the New Mexico Office of the Superintendent of Insurance considers exclusions for gender identity or dysphoria-related treatment to be prohibited discrimination on the basis of sex.
As a result, insurers in New Mexico may not:
- Deny coverage to an individual because they are a transgender person
- Require different or additional payment from an individual on the basis that they are a transgender person
- Designate a person's perceived gender identity as a pre-existing condition for which coverage will be denied or limited
-
Deny or limit coverage for services because the person is transgender, including:
- Health care services related to gender transition if those services are available to others who are not transitioning gender (such as hormone therapy, counseling, hysterectomy, mastectomy and vocal training)
- Health care services that are ordinarily or exclusively available to individuals of one sex
This bulletin essentially confirms that New Mexico law seeks to mirror the requirements under the ACA's Section 1557. Although insurers are ultimately responsible for complying with these requirements, employer plan sponsors should familiarize themselves with these requirements as well.
Texas
San Antonio Ordinance Mandates Paid Sick Leave
On Aug. 16, 2018, the San Antonio City Council voted 9-2 to require private employers to offer paid sick leave to employees. The ordinance would require employers to provide employees with one hour of earned sick leave for every 30 hours worked. Eligible employees would be those that work at least 80 hours of work for pay within the City of San Antonio. Those hours could be used for the employee's illness or to care for a sick family member, and employees may use the hours as soon as they are accrued. The ordinance would take effect beginning Aug. 1, 2019 for employers with more than five employees and on Aug. 1, 2021 for employers with five or fewer employees.
Keep in mind that state congressional members have vowed to fight individual municipality paid sick leave laws in Texas. Austin passed a similar ordinance earlier this year, and that ordinance is currently on hold pending litigation. San Antonio employers should continue to follow the developments on this ordinance as they become available.
Change to Regulation of Small Employer Health Plans
On Aug. 3, 2018, Commissioner of Insurance Sullivan issued Bulletin #B-0013-18, which discusses the application of state insurance law to employer individual health policy reimbursement that isn't done using a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). As background, the federal Cures Act created QSEHRAs, which allow employers to reimburse employees for the cost of individual health insurance under limited circumstances.
This bulletin reminds employers that offer HRAs that pay for employees' individual health insurance, but don't use QSEHRAs, that those HRAs are still regulated as a group health plan under Texas Insurance law and must meet the requirements under those laws.
Keep in mind, though, that the ACA already prohibits employers from reimbursing the cost of individual health plans, so Texas employers already shouldn't have a plan design that provides for individual coverage reimbursement unless that HRA is a QSEHRA.
Texas Department of Insurance. "Bulletin #B-0013-18." www.tdi.texas.gov >>
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.