In updated guidance on its letter-forwarding program, the IRS has announced it will no longer offer the program to benefit-plan administrators for the purpose of locating missing individuals who may be entitled to plan benefits.

"Under this revenue procedure, the Service will no longer provide letter-forwarding services to locate a taxpayer that may be owed assets from an individual, company, or organization. The letter-forwarding program is now limited to situations in which a person is trying to locate a taxpayer to convey a message for a humane purpose . . . or in an emergency situation."

The IRS's rationale appears to be that, with the proliferation of locator services available over the internet, use of the letter-forwarding program is no longer necessary for efficient and cost-effective administration of private benefit plans.

As a result of this guidance, many retirement-plan sponsors will need to re-visit plan provisions that direct the plan administrator to use, or consider using, the IRS's letter-forwarding program when searching for missing participants or beneficiaries. This became a particularly popular approach after the DOL issued a Field Assistance Bulletin in 2004 regarding the fiduciary obligation to attempt to locate certain missing participants. That bulletin advocated using the IRS's letter-forwarding program as one of several tools available to search for missing individuals.

The 10th Circuit Court of Appeals (the federal appellate court responsible for Kansas and other midwestern states) decided a case involving leave as an accommodation under the Americans with Disabilities Act (ADA).  In the case, the employer provided significant amounts of leave time for a disabled employee over a several-year period. After providing leave as an accommodation, the employer eventually discharged the employee because of the uncertainty surrounding her return to work. In its decision, the 10th Circuit confirmed that an employer is not required to provide an indefinite leave of absence as an accommodation under the ADA. In addition, the court referenced the reasonableness of a leave of absence, mentioning that a leave of four months is reasonable and that a leave of six months may not be reasonable. Employers can utilize these guideposts in assessing whether to provide an employee a leave of absence as an accommodation for a disability.  

Finally, congratulations to Jim Oliver, Bud Cowan, and Tara Eberline of Foulston Siefkin's Overland Park office for their successful defense of the defendant in this particular case. To read the opinion in its entirety click here.  

As most of you are aware, the NLRB has been very active with respect to employer policies and their impact on the rights of employees under the NLRA. The most widely publicized of those policy-related forays are the NLRB's various decisions and memoranda regarding employer social media policies. In a recent decision, the NLRB weighed in on employer requirements of confidentiality with respect to internal employer investigations. The NLRB noted that a blanket prohibition on employee interaction with co-workers was a violation of the employees' right to engage in collective activity. With its decision, the NLRB noted that in some circumstances a confidentiality requirement may be crucial to the investigation to protect witnesses or preserve evidence; however, a blanket confidentiality requirement was not acceptable.

If you use such a blanket approach to workplace investigations, you might want to consider whether such a restriction is important to the overall investigation. If not, requiring the employee to keep quiet might very well lead you into a fight with the NLRB.

A federal appeals court has ruled against a Wisconsin employer seeking reimbursement under a stop-loss-insurance policy purchased in connection with its self-insured health plan.

The facts of the case are simple and all-too-common. An employee took FMLA leave and continued to receive health coverage through the employer's plan during the leave. At the end of the FMLA leave, the employee was unable to return to work, so the employer approved a further non-FMLA leave and continued to provide the employee with coverage under the health plan. But the plan language did not allow for continued eligibility during a non-FMLA leave of absence. The plan would have allowed for COBRA coverage to begin at the end of the FMLA leave, but no COBRA notice was issued and no COBRA election was made. (The employer subsequently offered COBRA when the employee was unable to return to work following the non-FMLA leave.) The employee incurred large claims under the health plan after the FMLA leave ended.

The stop-loss insurer argued - and the court agreed - that it was not obligated to reimburse the employer for claims incurred by the employee after the FMLA leave ended, because the stop-loss policy limited coverage to claims incurred by individuals who were eligible under the terms of the self-insured health plan, and the plan language did not extend eligibility during non-FMLA leaves. And even though the employee could have elected COBRA at the end of the FMLA leave and continued coverage for up to 18 (or even 29)      Continue Reading...

The House Oversight and Government Reform Committee has sent a letter to IRS commissioner Douglas Shulman asking the IRS to produce background information and analysis supporting the final premium-tax-credit regulations released in May. The tax credit is the federal subsidy provided by PPACA for insurance coverage purchased by qualifying individuals through an exchange.

The issue underlying this brouhaha is the IRS's position that the tax credit is available to qualifying individuals for coverage purchased through any exchange, including an exchange established and operated by the federal government in a state that has declined to establish its own exchange. (For a summary of the different ways in which exchanges may be established, click here.) Some have argued that this position is not supported by the statutory language in PPACA and the Internal Revenue Code, which says the tax credit is available for coverage purchased through an exchange established by a state.

It is unlikely the House Committee's inquiry will amount to much more than political theater. But it will highlight what has become a popular line of attack on the health-care-reform law since it was upheld by the Supreme Court in June.

Wichita is one of the few large cities in the U.S. that does not fluoridate its water. The battle over fluoridating the city’s water supply has waged, on and off, for over half a century. This week the City Council declined to decide the issue, leaving it up to public vote. Proponents argue that water fluoridation is a proven safe and effective way to prevent tooth decay that would save Wichitans millions of dollars a year in costs for preventable dental reconstruction. But can fluoridation also improve wage-earning potential for women?

Women who grow up in communities with fluoridated water earn about four percent more than women who do not (after accounting for all other variables). This is according to a study featured in the book SuperFreakonomics (follow-up to Freakonomics, the best-seller that applies economic analysis to everyday issues). The effect is mostly concentrated among women from families of low socioeconomic status (who are less likely to prevent or fix dental problems that stem from lack of fluoride). Employer and consumer discrimination are the likely factors that cause oral health to impact earnings, according to the research. This could be based not only on less attractive physical appearance, especially for positions that involve customer interaction, but also on a perception that bad teeth equate to poor health or poor personal hygiene. Access to fluoridated water during childhood did not have a negative effect on men’s incomes, however. (See The Economic Value of Teeth.) 

The existence of a labor market penalty for bad teeth is not surprising. Economists have long-recognized that physical appearance affects wages—the so-called “beauty      Continue Reading...

The August 30 deadline for initial annual disclosures under the DOL's participant-level fee-disclosure regulation is fast approaching. Employers with participant-directed 401(k) plans should be putting the final touches on their notices (or confirming that their service providers have done so) and making sure all systems are "go" for distributing them by next Thursday.

If you need a refresher, take a look at the DOL's fact sheet on the final rule, as well as our prior coverage (here).

The Department of Health and Human Services (HHS) has issued an enforcement safe harbor relating to the content of benefit-claim denial notices issued by non-federal governmental health plans.

Under health care reform, all non-grandfathered group health plans are required to follow the DOL's rules and regulations regarding the content of notices of adverse benefit determinations. Among other things, those rules require providing (1) a statement about a participant's right to bring suit under ERISA, and (2) contact information for the federal Employee Benefits Security Administration (EBSA) or a state insurance department.

Non-federal governmental plans are not subject to ERISA, so participants do not have the right to sue under ERISA to seek recovery of benefits. In addition, participants in non-federal governmental plans are not provided services by the EBSA, because they do not have rights under ERISA. 

The enforcement safe harbor clarifies that non-federal governmental plans can exclude ERISA right-to-sue language and EBSA contact information from their benefit-denial notices and they will not be treated as violating the health-care-reform mandates. Contact information is not required to be provided for a state insurance department either, unless the plan actually uses an insurance policy issued by a carrier subject to regulation by a state insurance department.

There are some nuances to the safe harbor, so HHS's notice should be carefully reviewed by any non-federal governmental plan intending to rely on the safe harbor. But on the whole this should come as a welcome (and practical) clarification for affected plans.

HHS has updated its enforcement safe harbor relating to required contraceptive coverage and non-profit organizations that object to such coverage for religious reasons. The updated safe harbor clarifies three items:

1. The safe harbor is available to non-profit organizations with religious objections to some but not all contraceptive coverage.
2. Organizations that took some action as of February 10, 2012 that was intended to limit or exclude contraceptive coverage but that was unsuccessful are not, solely for that reason, precluded from relying on the safe harbor.
3. Organizations that are not sure whether they qualify for the broader religious-employer exemption may utilize the safe harbor without prejudicing their ability to rely on the religious-employer exemption in the future.

With regard to item 1, the specific language of the revised notice says that since February 10, 2012, the plan must have "consistently not provided all or the same subset of the contraceptive coverage otherwise required at any point . . . ." Although this language will not win any awards for clarity, it appears to mean that the safe harbor is not an all-or-nothing rule. An employer may be able to offer some types of contraceptive coverage but exclude others on religious grounds and remain within the safe harbor.

With regard to item 2, the guidance does not provide any examples of situations where, despite its best efforts, an employer might be unable to exclude contraceptive coverage. Perhaps it contemplates a case such as one where the employer directs an insurance carrier to cease providing      Continue Reading...

The use of pre-employment testing by employers has become more common in recent times. In most cases, the testing is conducted by outside vendors offering these types of services to multiple groups of employers. While these tests seem to be a good idea to most employers, it is important to make sure they pass muster with the various administrative agencies at the federal and state level.

In a recent example of a test gone wrong, the OFCCP took issue with an employer's written testing program. The test had an adverse impact on minority applicants and failed to meet the EEOC's Uniform Guidelines on Employee Selection Procedures.  In this recent case, the OFCCP reached a $550,000 settlement with the employer. Click here for the OFCCP press release.

While having the OFCCP involved might suggest this is only an issue for written tests and government contractors, don't be misled. This is only an OFCCP issue because the problem was uncovered by an OFCCP audit of the employer. The EEOC's requirements in this area apply to all employers. In addition, the selection guidelines apply to all types of pre-employment testing, ranging from written testing to skills testing to strength-and-agility testing.

If your company conducts these types of tests, it is important to ensure there is not an adverse impact on a specific class of individuals. If there is an adverse impact, the employer can still defend the testing measure if the employer can show the test is an accurate predictor of a candidate's ability to perform a job. This is where      Continue Reading...

The Department of Health and Human Services (HHS) has released a "Blueprint" describing the process by which states must apply to obtain approval to operate an insurance exchange beginning in 2014. The document also details the features and activities an exchange will be required to offer.

Although the finer points of this document are primarily of interest to states that will be seeking to operate an exchange (either alone or in partnership with the federal government), it provides employers some sense of how and when the exchanges will come together. Among the highlights:

• There are three exchange models: (1) state-based exchanges (operated largely by the states); (2) state partnership exchanges (operated largely by the federal government but with some state involvement); and (3) federally facilitated exchanges (operated almost exclusively by the federal government).
• States wanting to participate under any of these models must receive approval or conditional approval from HHS by January 1, 2013. A "declaration letter" and "exchange application" must be submitted no later than November 16, 2012.
• An exchange must be operational for an open-enrollment period beginning October 1, 2013.
• Required exchange activities will include (1) providing consumer support for coverage decisions; (2) facilitating eligibility determinations for individuals; (3) providing for enrollment in qualified health plans (QHPs); (4) certifying health plans as QHPs; and (5) operating a Small Business Health Options Program (SHOP).

From this we can see that the exchange landscape will be better defined by January 1, 2013, once it is clear which states have received HHS      Continue Reading...

Last month a bill was introduced in the U.S. Senate to provide a limited federal cause of action for employer use in protecting a company's trade secrets from misappropriation. The Protecting American Trade Secrets and Innovation Act of 2012 was introduced and referred to the Senate Committee on the Judiciary.

The goal of the bill is to provide a federal cause of action to employers attempting to file litigation to protect a company's trade secrets. As currently structured, the new legislation would provide this cause of action under a limited set of circumstances. The current option for an employer is to bring claims in state courts with the underlying law varying significantly from state to state. This variance in state law can create complications and sometimes make it difficult for companies to effectively defend their confidential information. 

Stay tuned as this bill makes its way through the legislative process.

To track the legislation, click here.

Now that PPACA has been largely upheld and we steam full-speed-ahead toward 2014, one issue we are likely to hear a lot more about is "affordability" - specifically, what is the maximum amount an employee should be required to pay for employer-sponsored health coverage before the employee will be allowed to opt out of the employer plan and obtain federally subsidized health coverage through an exchange. This seemingly innocuous issue is turning into something of a multi-headed monster, as illustrated by an article in today's New York Times.

The rule at the center of this is disarmingly simple to state: If an employee is required to pay more than 9.5% of household income to obtain group health coverage through an employer-sponsored plan, the employee can instead obtain coverage through an exchange and receive a premium subsidy tax credit that will bring the out-of-pocket cost down to 9.5% of household income (or even less).

But then things get complicated.

• What does the 9.5% amount relate to? Employers typically offer multi-tier coverage under their plans, with options ranging from employee-only coverage to full family coverage (and often two tiers in between). Is the threshold 9.5% of the cost of employee-only coverage or something else?
• If a large employer has employees that obtain subsidized coverage through an exchange, the employer may be subject to a $3,000/year penalty for each such employee. Can an employer that wants to avoid all penalties structure its plan so that the plan is always considered "affordable" for all employees?
     Continue Reading...

The New York Times has an article today illustrating a practical problem for employers that receive MLR rebates with respect to their group health plans.

Employers have several options for using the portion of the rebate attributable to employee premium contributions, including: pay it back in cash, reduce future premiums, or enhance future benefits. But there are some nuances and administrative considerations that accompany each option, and in any case the employer may have a fiduciary obligation to use that portion of the rebate in a fair and reasonable manner for the benefit of the covered employees. So many employers are proceeding with due deliberation in their decision-making.

At the same time, however, the covered employees have all received notices from the insurance carrier that a rebate was paid (see our prior coverage of this notice rule here), and they're wondering where their money is. So the problem is that employers need a little time to figure out the right thing to do, but the longer they take, the more employees suspect something nefarious is going on.

Employers don't have a firm legal deadline for deciding what to do with the MLR rebate (although many will need to do something within three months to avoid a compliance issue with the ERISA trust rule). But the practical pressure from employees may weigh in favor of doing something sooner rather than later. For prior coverage on considerations related to the MLR rebate, see here and here.

The DOL has posted one additional FAQ to its website addressing the narrow question whether a summary of benefits and coverage (SBC) must be provided with respect to a Medicare Advantage benefit option under a group health plan. The DOL takes a nonenforcement position, meaning a group health plan that offers a Medicare Advantage benefit option will not be treated as failing to satisfy the SBC requirement if it does not provide an SBC with respect to the Medicare Advantage option.

* Reminder: SBCs generally must be provided in connection with a plan's first open-enrollment period beginning on or after September 23, 2012. For prior coverage of SBCs, see here.

The recent uproar over employers demanding access to a prospective employee's Facebook account has now resulted in state laws prohibiting the practice in Illinois and Maryland.  For employers with employees in those states, it is now unlawful to demand an employee provide passwords or any other means of access to the employee's various social-media accounts.  If your company requires access to an employee's social-media accounts, stay tuned as this is likely to spread to additional states in the near future. 

Health insurance exchanges - marketplaces for the purchase of insurance policies - are a key piece of the health care reform legislation. The law contemplates that each state will operate its own exchange or will form regional exchange partnerships. But it is becoming increasingly apparent that many states (including Kansas) cannot or will not have exchanges in place by 2014, when that piece of the law goes into effect.

The New York Times is reporting that as many as half of the states will not have their own exchanges in place by 2014, leaving it to the federal government to set up and operate an exchange for residents of those states. And very little is known at this point about what the federal exchange will look like or how it will function.

Although the exchanges are viewed largely as a marketplace for individuals to purchase insurance coverage, there will be many important ways in which employers will interact with them. Small employers (generally 100 or fewer employees) will be able to purchase group coverage through the "SHOP" portion of an exchange. Employers will be sharing information with exchanges, so the employers will know whether any employees are receiving subsidized exchange-based coverage and the exchanges will know whether individuals have affordable coverage available to them through their employers. And employers will be required to provide employees with information about their right to obtain exchange-based coverage and the consequences of doing that.

I read an interesting article highlighting the statistics for claims filed under the FLSA over the last twenty years.  This year, FLSA claims reached a record high and we still have four months left in the year.  The statistics show claims for 2011 at 7,006 for the year and this year we are already at 7,064 claims.  By the time the numbers are all in, the claims filed in 2012 will dramatically exceed the numbers historically. 

While employers can't do much to stem the growing number of claims, they can be sure they are complying with the FLSA rules.  For most employers, the key risk areas involve the payment of overtime and proper classification of exempt employees.  Spending a little time this fall to make sure your company is in compliance may be time well spent considering the extra attention being paid to FLSA issues by the Department of Labor and the plaintiff's lawyers.

Federal government contractors’ costs to comply with proposed affirmative action regulations for individuals with disabilities could total $5.9 billion dollars in the first year, with recurring annual costs of $2.6 billion, according to a new study by Applied Economic Strategies.  These projected first-year costs are 200 times higher than the government’s estimate of $29.5 million.  (We all know the federal government has never underestimated the cost of anything before!) 

The Department of Labor has withdrawn the controversial "Q&A-30" in Field Assistance Bulletin 2012-02, which would have required some investment-specific disclosures regarding fees and expenses in 401(k) plans that offered only a brokerage window, self-directed brokerage account, or similar arrangement and did not designate any specific investment options beyond the brokerage platform. In an amended bulletin (Field Assistance Bulletin 2012-02R), the DOL replaced Q&A-30 with a new Q&A-39 that does not require any investment-specific disclosures in brokerage-window-only plans, but does contain strong language warning plan fiduciaries that merely offering a brokerage window to participants may not be fully consistent with the general fiduciary obligations imposed by ERISA.

As brief background, the DOL's participant-level fee-disclosure regulation (which goes into effect this year) requires specific annual and quarterly disclosures to participants in most participant-directed 401(k) and other individual-account plans regarding plan-level and investment-level fees and expenses. (The initial disclosures are due by August 30, 2012, for calendar-year plans.) The investment-level information applies only to investments that are "designated investment alternatives." A brokerage window is not a designated investment alternative. So the regulation generally has been read to mean that no investment-level disclosures are required in a plan that does not have any designated investment alternatives but rather offers participants a brokerage window or self-directed brokerage account through which investments may be made in a large number of publicly available investment securities.

Q&A-30 went beyond that by nonetheless requiring investment-level disclosures in brokerage-window-only plans with respect to investment options that were either designated      Continue Reading...