Compliance Recap - June 2019

June was a relatively busy month in the employee benefits world. The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury published final rules that removed the prohibition against integrating a health reimbursement arrangement (HRA) with individual health insurance coverage and recognized certain HRAs as limited excepted benefits.

A U.S. District Court issued a permanent injunction against the Patient Protection and Affordable Care Act contraception mandate. The President signed an executive order directing federal agencies to issue guidance and regulations regarding high deductible health plans with health savings accounts, Section 213 medical care expenses, flexible spending arrangements, health plan communication of out-of-pocket costs, and surprise billing.

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued frequently asked questions (FAQs) regarding HIPAA compliance for health plans during care coordination and continuity.

UBA Updates

UBA released a new Advisor: Tri-Agency Final Rules on Health Reimbursement Arrangements

UBA updated or revised existing guidance: Contraception Mandate Rolled Back for Employers

DOL, HHS, and Treasury Publish Final Rules on Health Reimbursement Arrangements

On June 20, 2019, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of Treasury (Treasury) (collectively, the Departments) published their final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. The DOL also issued a news release, frequently asked questions, model notice, and model attestations.

The final rules’ goal is to expand the flexibility and use of HRAs to provide individuals with additional options to obtain quality, affordable healthcare. According to the Departments, these changes will facilitate a more efficient healthcare system by increasing employees’ consumer choice and promoting healthcare market competition by adding employer options.

To do so, the final rules expand the use of HRAs by:

  • Removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA)
  • Expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA)
  • Providing premium tax credit (PTC) eligibility rules for people who are offered an HRA integrated with individual coverage
  • Assuring HRA and Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) plan sponsors that reimbursement of individual coverage by the HRA or QSEHRA does not become part of an ERISA plan when certain conditions are met
  • Changing individual market special enrollment periods for individuals who gain access to HRAs integrated with individual coverage or who are provided QSEHRAs

The final rules will be effective on August 19, 2019, and generally apply for plan years beginning on or after January 1, 2020.

However, the final rules under Section 36B (regarding PTCs) apply for taxable years beginning on or after January 1, 2020, and the final rules providing a new special enrollment period in the individual market apply January 1, 2020.

Read more about the final rules.

District Court Issues Permanent Injunction against ACA’s Contraception Mandate

On June 5, 2019, the U.S. District Court for the Northern District of Texas issued a permanent injunction against the Patient Protection and Affordable Care Act (ACA) contraception mandate. The injunction prohibits the federal government from enforcing the contraception mandate against an employer, group health plan, or health insurer that objects, based on sincerely held religious beliefs, to establishing, maintaining, providing, offering, or arranging for coverage or payment for some or all contraceptive services. The injunction also exempts objecting entities from the accommodations process.

The permanent injunction also prohibits enforcement of the contraception mandate for individuals who object to coverage or payments for some or all contraceptive services based on sincerely held religious beliefs and who are willing to obtain health insurance that excludes coverage for payments for some or all contraceptive services.

Employers who object to contraceptive coverage based on sincerely held religious beliefs are no longer required to comply with the ACA’s contraception mandate for those contraceptives to which they object.

Read more about the contraception mandate and court case.

Executive Order on Improving Healthcare Price and Quality Transparency

On June 24, 2019 President Trump signed an executive order directing federal agencies to increase healthcare quality and price transparency. The executive order does not create any new laws or regulations.

The executive order directs the Department of Treasury to:

  • Issue guidance that would expand individuals’ ability to enroll in high deductible health plans that can be used with a health savings account to cover low-cost preventive care before the deductible is met
  • Propose regulations that would treat certain expenses associated with direct primary care arrangements and healthcare sharing ministries as Section 213 medical care expenses
  • Issue guidance that would increase the amount of flexible spending arrangement funds that can be carried over to the next plan year without penalty

The executive order directs the Department of Health and Human Services to:

  • Seek comments on a proposal to require health insurance issuers and self-insured group health plans to provide or give patients access to expected health care out-of-pocket costs before receiving care
  • Report steps that can be taken to implement principles announced in a fact sheet on protecting patients from surprise billing

HHS Issues HIPAA FAQs

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued two frequently asked questions (FAQs) clarifying how the Health Insurance Portability and Accountability Act (HIPAA) privacy rules permit health plans to share protected health information (PHI) for care coordination and continuity.

If certain conditions apply, a health plan may disclose PHI, without an individual’s written authorization and subject to the minimum necessary standard, to another health plan for its own health care operations purposes, or for the other health plan’s health care operations. OCR provides two examples:

  • If Covered Entity A provides health insurance to a person who receives access to the provider network of another plan provided by Covered Entity B, Covered Entity A is permitted to disclose the person’s PHI to Covered Entity B for care coordination.
  • If a person was enrolled in a health plan of Covered Entity A and switches to a health plan of Covered Entity B, Covered Entity A can disclose PHI to Covered Entity B to coordinate the person’s care.

If certain conditions are met, HIPAA permits a covered entity to use PHI in its possession about individuals to inform them about the availability of other health plans it offers, without the person’s authorization. For example, when Plan A discloses a person’s PHI to Plan B, Plan B is permitted to send communications to the person about Plan B’s health plan options that may replace the person’s current plan, if Plan B receives no remuneration for sending the communication and complies with applicable business associate agreements. 

Question of the Month

  1. Which group health plans must file a Form 5500 and when is it due?
  2. Currently, group welfare plans generally must file Form 5500 if:
  • The plan is fully insured and had 100 or more participants on the first day of the plan year (dependents are not considered “participants” for this purpose unless they are covered because of a qualified medical child support order).
  • The plan is self-funded and it uses a trust, no matter how many participants it has.
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year.

There are several exemptions to Form 5500 filing. The most notable are:

  • Church plans defined under ERISA 3(33)
  • Governmental plans, including tribal governmental plans
  • Top hat plans which are unfunded or insured and benefit only a select group of management or highly compensated employees
  • Small insured or unfunded welfare plans. A welfare plan with fewer than 100 participants at the beginning of the plan year is not required to file an annual report if the plan is fully insured, entirely unfunded, or a combination of both.

A plan is considered unfunded if the employer pays the entire cost of the plan from its general accounts. A plan with a trust is considered funded.

A plan’s Form 5500 must be filed electronically by the last day of the seventh month after the close of the plan year. The filing date is based on the “plan year,” which is designated in the Summary Plan Description (SPD) or other governing document. If a plan does not have an SPD, the plan year defaults to the policy year.

For calendar year plans, the due date for Form 5500 is July 31. Employers may obtain an automatic  2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

7/3/2019


Tri-Agency Final Rules on Health Reimbursement Arrangements

Final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans were recently released by the Department of the Treasury (Treasury), Department of Labor (DOL), and Department of Health and Human Services (HHS). Read this compliance update to learn more.


The Department of the Treasury (Treasury), Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, the Departments) released their final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. The DOL also issued a news releasefrequently asked questionsmodel notice, and model attestations.

The final rules’ goal is to expand the flexibility and use of HRAs to provide individuals with additional options to obtain quality, affordable healthcare. According to the Departments, these changes will facilitate a more efficient healthcare system by increasing employees’ consumer choice and promoting healthcare market competition by adding employer options.

To do so, the final rules expand the use of HRAs by:

  • Removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA)
  • Expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA)
  • Providing premium tax credit (PTC) eligibility rules for people who are offered an HRA integrated with individual coverage
  • Assuring HRA and Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) plan sponsors that reimbursement of individual coverage by the HRA or QSEHRA does not become part of an ERISA plan when certain conditions are met
  • Changing individual market special enrollment periods for individuals who gain access to HRAs integrated with individual coverage or who are provided QSEHRAs

The final rules will be published in the Federal Register on June 20, 2019, be effective on August 19, 2019, and generally apply for plan years beginning on or after January 1, 2020.

However, the final rules under Section 36B (regarding PTCs) apply for taxable years beginning on or after January 1, 2020, and the final rules providing a new special enrollment period in the individual market apply January 1, 2020.

An HRA is a type of account-based group health plan funded solely by employer contributions that reimburses an employee for Section 213(d) medical care expenses incurred by the employee, or the employee’s spouse, dependents, and children who are not age 27 as of the end of the taxable year, up to a maximum fixed-dollar amount during a coverage period.

These reimbursements are excludable from the employee’s income and wages for federal income tax and employment tax purposes. An HRA can allow amounts that remain at the end of the year to be available to reimburse medical care expenses incurred in later years.


CMS Publishes 2020 Benefit Payment and Parameters Final Rule

The Centers for Medicare and Medicaid Services (CMS) has released its final rule and fact sheet regarding benefit payment and parameters for 2020. Read this blog post from UBA to find out which topics this final rule addresses.


The Centers for Medicare and Medicaid Services (CMS) published its final rule and fact sheet for benefit payment and parameters for 2020. Although the final rule primarily affects the individual market and the Exchanges, the final rule addresses the following topics that may impact employer-sponsored group health plans:

  • The 2020 maximum annual limitation on cost sharing is $8,150 for self-only coverage and $16,300 for other-than-self-only coverage.
  • For fully-insured plans, any indication of a reduction in the generosity of a benefit for individuals that is not based on clinically indicated, reasonable medical management practices is potentially discriminatory.
  • Amounts paid toward cost sharing using direct support by drug manufacturers (for example, coupons) to insured patients to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have a generic equivalent are not required to be counted toward the annual limitation on cost sharing.
  • Federally Facilitated Small Business Health Options Programs (FF-SHOPs) may operate a toll-free hotline rather than a more robust call center.

The final rule is effective on June 24, 2019. The final rule generally applies to plan years beginning on or after January 1, 2020.

SOURCE: Hsu, K. (13 June 2019) "CMS Publishes 2020 Benefit Payment and Parameters Final Rule" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/cms-publishes-2020-benefit-payment-and-parameters-final-rule


IRS Seeks Comments on Form W-4 Overhaul for 2020

Recently, the IRS released a draft of the 2020 Form W-4 that included major revisions that were designed to make accurate income-tax withholding easier for employees. Read this blog post to learn more.


On May 31, the IRS released a draft 2020 Form W-4 with major revisions designed to make accurate income-tax withholding easier for employees, starting next year. The IRS also posted FAQs about the new form and asked for comments on the changes by July 1.

The form is not for immediate use, the IRS emphasized, and employers should continue to use the current Form W-4 for 2019.

"The primary goals of the new design are to provide simplicity, accuracy and privacy for employees, while minimizing burden for employers and payroll processors," IRS Commissioner Charles Rettig said.

The new form reflects changes made by the Tax Cuts and Jobs Act, which took effect last year. For instance, the revised form eliminates the use of withholding allowances, which were tied to the personal exemption amount—$4,050 for 2017, now suspended. It also replaces complicated worksheets with more straightforward questions.

Addressing a key employer concern, the IRS said that employees who have submitted Form W-4 in any year before 2020 will not need to submit a new form because of the redesign. Employers can compute withholding based on information from employees' most recently submitted Form W-4, if employees choose not to adjust their withholding using the revised form.

Easier for Employees, More Complex for Employers

"Generally, the new Form W-4 is an improvement for employees," said Pete Isberg, vice president of government relations at payroll and HR services firm ADP. It shifts the burden of several calculations from employees to the employer, he noted. "For example, previously. employees would complete a difficult worksheet to convert expected deductions to a number of withholding allowances. With the new form, they'll just enter their full-year expected deductions over the standard deduction amount."

Because existing employees won't have to complete a new Form W-4, "employers must still observe their current Form W-4 withholding allowances," Isberg said. "However, for employees hired after 2019—and anyone that wants to adjust their withholding after 2019—the 2020 version will be the only valid Form W-4."

Not requiring employees to submit the new W-4 will ease HR's burden, but it also means that "payroll systems will need to accommodate the existing withholding allowance calculation, as well as the new method," which could make reprogramming payroll systems more arduous, said Mike Trabold, director of compliance at Paychex, an HR technology services and payroll provider.

In addition to supporting two distinct withholding systems, employers will need to accommodate three sets of withholding calculations, Isberg said:

  • The old system based on withholding allowances.
  • The 2020 system with a checkbox for optional higher withholding.
  • The 2020 system that allows employees to input new data, listed below in the W-4 forms comparison chart.
2019 Form W-4 2020 Form W-4 (draft)
Number of withholding allowances. Checkbox for multiple jobs or optional higher withholding.
Per-payroll additional amount to withhold. Full-year child and dependent tax credits.
  Full-year other (non-wage) income.
  Full-year deductions (over the standard deduction amount).
  Per-payroll additional amount to withhold.

"One interesting question is how long employers might need to support the old and new systems simultaneously," Isberg said. "It will probably be many years before the last withholding allowances [used by current employees] drop off."

Addressing Privacy Concerns

In June 2018, the IRS issued an earlier revision of Form W-4 and instructions for 2019. But in September 2018, the IRS said it would delay major revisions until 2020 to respond to criticism about the form's release date and complexity.

"We anticipate this version will be better received than the prior draft," Trabold said. The earlier version "asked for much more specific information on other sources of income, such as second jobs, spousal income, non-earned income, etc., which was intended to increase withholding accuracy but which many taxpayers may have felt to be invasive and wouldn't necessarily want to share with their employer."

With the new version of the form, taxpayers can check a box "to indicate their desire to have more tax withheld, without having to share details with their employer," Trabold said. Although this may lead to too much withholding for some taxpayers, "it will help address concerns of those who prefer to get a refund check every year or who may have had to unexpectedly pay tax when filing this year," he explained.

While there will be a worksheet to help taxpayers with the new form, "it will not be provided to the employer, further assuring privacy," Trabold noted.

What's Next

The IRS said it plans to release a "close to final" version of the form in late July, after which employers and payroll administrators can start making programming changes to their systems. A final version, expected in November, will contain only minor adjustments.

The IRS also plans to release instructions for employers in the next few weeks for comment.

In the meantime, the IRS encouraged employees to use its online Paycheck Checkup tool to ensure they're having the right amount of tax withheld. While useful in its current form, the tool will be updated to reflect the new W-4 when it becomes final.

SOURCE: Miller, S. (6 June 2019) "IRS Seeks Comments on Form W-4 Overhaul for 2020" (Web Blog Post). Retrieved from https://www.shrm.org/ResourcesAndTools/hr-topics/compensation/Pages/IRS-seeks-comments-on-Form-W-4-overhaul-for-2020.aspx


Compliance Recap - May 2019

May was a busy month in the employee benefits world. The Internal Revenue Service (IRS) released health savings account annual contribution limits and high deductible health plan minimum annual deductibles and annual out-of-pocket maximums for 2020.

The Department of Labor (DOL) released questions and answers (Q&As) to clarify its enforcement of the association health plan final rule. The Department of Health and Human Services (HHS) published a final rule that implements conscience rights protections contained in federal laws.

The Department of Health and Human Services’ Office for Civil Rights (OCR) released a proposed rule to revise its regulations implementing the Patient Protection and Affordable Care Act’s Section 1557. The IRS released an information letter on how to determine whether an item is a Section 213 medical care expense.

The OCR released a fact sheet clarifying when business associates are directly liable for violations of the Health Insurance Portability and Accountability Act (HIPAA). The OCR also released frequently asked questions regarding HIPAA liability when an app uses or discloses protected health information.

UBA Updates

UBA updated or revised existing guidance:

IRS Releases 2020 HSA Contribution Limit and HDHP Deductible Minimum and OOP Maximum

The Internal Revenue Service (IRS) released the annual contribution limits for health savings accounts (HSAs) and the high deductible health plan (HDHP) minimum annual deductibles and the HDHP annual out-of-pocket (OOP) maximums for the 2020 calendar year.

The HSA contribution limit will be $3,550 for self-only coverage and $7,100 for family coverage. The HDHP minimum annual deductible will be $1,400 for self-only coverage and $2,800 for family coverage. The HDHP OOP maximum will be $6,900 for self-only coverage and $13,800 for family coverage.

Update on DOL Enforcement Policy Regarding Association Health Plans

On March 28, 2019, the U.S. District Court for the District of Columbia (Court) found that the Department of Labor (DOL) association health plans (AHPs) final rule exceeded the statutory authority delegated by Congress under the Employee Retirement Income Security Act (ERISA) and that the final rule unlawfully expands ERISA’s scope. In particular, the Court found the final rule’s provisions – defining “employer” to include associations of disparate employers and expanding membership in these associations to include working owners without employees – were unlawful and must be set aside.

On May 13, 2019, the DOL issued Questions and Answers – Part Two (Q&As) as follow up to the DOL’s April 2019 AHP enforcement statement. In the Q&As, the DOL clarifies two points.

First, although new AHPs formed under the DOL’s final rule cannot market to and sign up new employer members, existing AHPs can continue to enroll new employees upon HIPAA special enrollment events (for example, upon marriage, birth, adoption, placement for adoption, or loss of eligibility for other coverage) and consistent with the plan’s eligibility terms (for example, enrolling new hires) while the DOL’s enforcement relief remains in effect.

Second, although AHPs are not required to obtain an advisory opinion from the DOL, AHPs with questions about whether they meet the DOL’s pre-rule guidance for sponsoring an AHP can either request an official advisory opinion from the DOL or have an informal discussion with the DOL’s employee benefits law specialists by contacting the DOL.

In the upcoming months, the U.S. Court of Appeals for the District of Columbia Circuit will consider the legal arguments in this case. Employers in AHPs should keep apprised of future developments in this case.

Read more about the DOL’s enforcement of the final rule.

HHS Publishes Conscience Rights Final Rule

On May 21, 2019, the Department of Health and Human Services (HHS) published a final rule and released a fact sheet to implement the conscience rights protection provisions contained in federal laws such as the Church Amendments, the Coats-Snowe Amendment, the Weldon Amendment, and the Patient Protection and Affordable Care Act (ACA).

Although the final rule does not create any new conscience rights protection, individuals, health care entities (including health plans and plan sponsors), and providers are protected from discrimination in health care (based on their religious belief or moral conviction) by government or government-funded entities. The final rule requires applicants for and recipients of federal financial assistance from HHS to attest that they will comply with conscience rights and anti-discrimination laws. The final rule implements enforcement tools, such as investigating complaints, compliance reviews, and withholding federal funds, similar to other civil rights laws, to ensure compliance with federal conscience rights protection laws.

OCR Releases Proposed Rule to Revise ACA Section 1557 Regulations

The Department of Health and Human Services’ Office for Civil Rights (OCR) released a proposed rule and fact sheet to revise its regulations under the Patient Protection and Affordable Care Act’s Section 1557. The current Section 1557 regulations remain in effect until a final rule is published.

The proposed rule would eliminate:

  • Certain definitions, including the definition of “covered entity”
  • Specific nondiscrimination definitions based on sex and gender identity
  • Translated taglines in significant consumer communications, the requirement to post information about Section 1557 and nondiscrimination at a covered entity’s locations and website, use of language access plans, and certain video standards for individuals with limited English proficiency (LEP)
  • Any reference to a private right of action to sue covered entities for violations of the proposed rule
  • The requirement to have a compliance coordinator and written grievance procedure to handle complaints about Section 1557 violations
  • Enforcement-related provisions

Public comment on this proposed rule will close 60 days after the proposed rule is published in the Federal Register. After considering public comments, OCR will issue a final rule. The final rule will be effective 60 days after it is published in the Federal Register.

Read more about the proposed rule in our “Updated on Nondiscrimination Regulations Relating to Sex, Gender, Age, and More” Advisor and our “Update on Nondiscrimination Regulations Relating to Sex, Gender, Age, and More – for Health Care Providers” Advisor.

IRS Releases Information Letter on Section 213 Medical Care Expenses

The Internal Revenue Service (IRS) released an information letter in response to a question of whether menstrual care products’ costs qualify as medical care expenses under Internal Revenue Code Section 213 for purposes of health savings accounts, health flexible spending accounts, and other tax-preferred accounts.

Although the IRS declined to specifically answer the question, it indicates that medical care expenses under Section 213 are limited to expenses paid primarily for the prevention or alleviation of a physical or mental defect or illness. Generally, an expense that benefits a person’s general health is a personal expense and not a medical care expense. A personal expense will only qualify as a medical care expense if the person would not have incurred the expense but for the person’s disease or illness.

The IRS lists some objective factors to use in determining whether an expense may qualify as a Section 213 medical care expense:

  • The motive or purpose for making the expenditure
  • A medical condition diagnosis and a physician’s recommendation of the item as treatment or mitigation
  • The relationship between the treatment and the illness
  • The treatment’s effectiveness
  • The proximity in time to the disease’s onset or recurrence.

OCR Releases Fact Sheet on Business Associate Liability

The Department of Health and Human Services Office of Civil Rights (OCR) recently released a fact sheet listing ten HIPAA violations for which business associates are directly liable.

Read more about business associate liability.

OCR Releases FAQs on HIPAA Applicability to Health-Related Apps

The Department of Health and Human Services Office for Civil Rights (OCR) recently released five Access Rights, Apps and APIs frequently asked questions (FAQs) regarding covered entities’ liability under HIPAA and HITECH for an application’s (app) use or disclosure of an individual’s protected health information (PHI).

If the app is not provided by or on behalf of the covered entity, the covered entity will not be liable for a PHI breach experienced by the app. However, if the app was developed for or provided by or on behalf of the covered entity, the covered entity could be liable under HIPAA because the app developer would be a business associate. A covered entity will not be liable for a PHI breach that occurs due to a person’s request that unencrypted PHI be transmitted to an app.

Question of the Month

Q: Who must pay the Patient-Centered Outcomes Research Institute (PCORI) fee and when is the fee due?

A: The fee must be determined and paid by:

  • The insurer for fully insured plans (although the fee likely will be passed on to the plan)
  • The plan sponsor of self-funded plans, including HRAs
    • The plan’s TPA may assist with the calculation, but the plan sponsor must file IRS Form 720 and pay the applicable fee
    • If multiple employers participate in the plan, each must file separately unless the plan document designates one as the plan sponsor

The fee is due by July 31, 2019 for the following plan/policy years:

Plan/Policy Year Year Fee Is Due

($2.39, indexed/person)

Feb. 1, 2017 – Jan. 31, 2018 July 31, 2019
March 1, 2017 – Feb. 28, 2018 July 31, 2019
April 1, 2017 – March 31, 2018 July 31, 2019
May 1, 2017 – April 30, 2018 July 31, 2019
June 1, 2017 – May 31, 2018 July 31, 2019
July 1, 2017 – June 30, 2018 July 31, 2019
Aug. 1, 2017 – July 31, 2018 July 31, 2019
Sept. 1, 2017 – Aug. 31, 2018 July 31, 2019
Oct. 1, 2017 – Sept. 30, 2018 July 31, 2019
Plan/Policy Year Year Fee Is Due

($2.45, indexed/person)

Nov. 1, 2017 – Oct. 31, 2018 July 31, 2019
Dec. 1, 2017 – Nov. 30, 2018 July 31, 2019
Jan. 1, 2018 – Dec. 31, 2018 July 31, 2019

 

6/3/2019


3 summer workplace legal issues and how to handle them

Summer is right around the corner, leaving employers little time to brush up on seasonal employment law issues. Issues such as hiring interns, dress code compliance and handling time off requests can cause legal issues for employers. Read this blog post to learn more.


Summer is almost here and with that comes a set of seasonal employment law issues. Top of the list for many employers includes hiring interns, dress code compliance and handling time off requests.

Here’s how employers can navigate any legal issues that may arise.

Summer interns

Employers looking to hire interns to work during the summer season or beyond should know that the U.S. Department of Labor recently changed the criteria to determine if an internship must be paid. In certain circumstances, internships are considered employment subject to federal minimum wage and overtime rules.

Under the previous primary beneficiary test, employers were required to meet all of the six criteria outlined by the DOL for determining whether interns are employees. The new seven-factor test is designed to be more flexible and does not require all factors to be met. Rather, employers are asked to determine the extent to which each factor is met. For example, how clear is it that the intern and the employer understand that the internship is unpaid, and that there is no promise of a paid job at the end of the program? The non-monetary benefits of the intern-employer relationship, such as training, are also taken into consideration.

Though no single factor is deemed determinative, a review of the whole internship program is important to ensure that an intern is not considered an employee under FLSA rules and to avoid any liabilities for misclassification claims.

Companies also should be aware of state laws that may impact internship programs. For example, California, the District of Columbia, Illinois, Maryland and New York consider interns to be employees and offer some protections under various state anti-discrimination and sexual harassment statutes.

All employers should be clear about the scope of their internship opportunities, including expectations for the relationship, anticipated duties and hours, compensation, if any, and whether an intern will become entitled to a paid job at the end of the program.

Summer dress codes

Warmer temperatures mean more casual clothing. This could mean the line between professional and casual dress in the workplace is blurred. The following are some tips when crafting a new or revisiting an existing dress code policy this summer.

If the dress code is new or being revised, the policy should be clearly communicated. Sending a reminder out to employees may be helpful in some workplaces. In all cases, the policy should be unambiguous. List examples to make sure there is no confusion about what is considered appropriate and explain the reasoning behind the policy and the consequences for any violations.

To serve their business or customer needs, companies may apply dress code policies to all employees or to specific departments. They should also make sure the dress code does not have an adverse impact on any religious groups, women, people of color or people with disabilities. Company policies may not violate state or federal anti-discrimination laws. If the policy is likely to have a disparate impact on one or more of these groups, employers should be prepared to show a legitimate business reason for the policy. Also, reasonable accommodations should be provided for employees who request one based on their protected status. For example, reasonable modifications may be required for ethnic, religious or disability reasons.

Finally, failure to consistently enforce a neutral dress code policy or provide reasonable accommodations can expose a company to potential claims. As always, dress codes and any discipline for code violations should be implemented equitably to avoid claims of discrimination.

Time off requests

Summer time tends to prompt an influx of requests for time off. Now is a good time to review policies governing time off, as well as the implementation of those policies to ensure consistency. Written time off policies should explicitly inform employees of the process for handling time off requests and help employers consistently apply the rules.

An ideal policy will explain how much time off employees receive and how that time accrues. It also will include reasonable restrictions on how time off is administered such as requiring advance approval from management, and how to handle scheduling so that business needs and staffing levels are in sync.

Most importantly, time off policies and procedures must not be discriminatory. For instance, if a policy denies time off or permits discipline for an employee who needs to be out of the office on a protected medical leave, the policy could be seen as discriminating against employees with disabilities. Companies should train their managers on how to administer time off requests in a non-discriminatory manner. Employers generally have the right to manage vacation requests, however protected leave available to employees under federal, state and local laws adds another layer of complexity that employers should consider when reviewing time off requests.

To minimize employment issues this summer and all year around: plan ahead, know the relevant employment laws and train managers and supervisors to apply HR best practices consistently throughout the organization.

SOURCE: Starkman, J.; Rochester, A. (23 May 2019) "3 summer workplace legal issues and how to handle them" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/how-employers-can-handle-summer-workplace-legal-issues


Employers Must Report 2017 and 2018 EEO-1 Pay Data

Employers are required to report their pay data, broken down by race, sex and ethnicity, from 2017 and 2018 by September 30. Read this blog post from the Society for Human Resource Management (SHRM) to learn more.


The Equal Employment Opportunity Commission (EEOC) has announced that employers must report pay data, broken down by race, sex and ethnicity, from 2017 and 2018 payrolls. The pay data reports are due Sept. 30.

Employers had been waiting to learn what pay data they would need to file—if any at all—as litigation on the matter ensued. A federal judge initially ordered the EEOC to collect employee pay data for 2018. The National Women's Law Center (NWLC) and other plaintiffs wanted the EEOC to collect two years of data, as the agency was supposed to under a new regulation before the government halted the collection in 2017.

Judge Tanya Chutkan of the U.S. District Court for the District of Columbia sided with the plaintiffs and gave the EEOC the option of collecting 2017 pay data along with the 2018 information by the Sept. 30 deadline or collecting 2019 pay data during the 2020 reporting period. The EEOC opted to collect the 2017 data.

The agency said it could make the collection portal available to employers by mid-July and would provide information and training to employers prior to that date.

Immediate Steps

"We are awaiting confirmation from the EEOC or the contractor it is hiring to facilitate the pay-data collection on how to lay out the data file for a batch upload," said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va.

But employers should take some steps immediately. They should reach out to their subject-matter and technical experts and pull together resources to ensure that the required data components can be captured, analyzed and reported by Sept. 30, said Annette Tyman, an attorney with Seyfarth Shaw in Chicago.

Filing the additional reports will impose unanticipated burdens for HR, IT and legal departments, as well as third-party consultants, she noted. "It is unclear whether any further litigation options will impact the Sept. 30 deadline, and we are instructing employers to assume they must comply."

Employers should keep in mind that they still must submit their 2018 data for Component 1 of the EEO-1 form by May 31, unless they request an extension. Note that the EEOC recently shortened the extension period for employers to report Component 1 data from 30 days to two weeks. So the extension deadline is now June 14.

Component 1 asks for the number of employees who work for the business by job category, race, ethnicity and sex. Component 2 data—which includes hours worked and pay information from employees' W-2 forms by race, ethnicity and sex—is the subject of the legal dispute.

Data Collection

Businesses with at least 100 employees and federal contractors with at least 50 employees and a contract with the federal government of $50,000 or more must file the EEO-1 form. The EEOC uses information about the number of women and minorities companies employ to support civil rights enforcement and analyze employment patterns, according to the agency.

The revised EEO-1 form will require employers to report wage information from Box 1 of the W-2 form and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands.

The reported hours worked should show actual hours worked by nonexempt employees and an estimated 20 hours per week for part-time exempt employees and 40 hours per week for full-time exempt employees.

"Filling out the added data in the EEO-1 form will present a large amount of work, especially as there's great potential for human error when populating the significantly expanded form," said Arthur Tacchino, J.D., chief innovation officer at SyncStream Solutions, which provides workplace compliance solutions.

Employers should start looking at their data now and conduct an initial assessment of their systems, said Camille Olson, an attorney with Seyfarth Shaw in Chicago. Identify the systems that house the relevant demographic, pay and hours-worked data and determine how to pull the information together, she said.

Pulling EEO-1 data is much simpler for Component 1, she noted, because it only involves reporting the employer's headcount by race, ethnicity and sex—whereas collecting pay information involves more data points. Additionally, employers may use different vendor systems at different locations, some employees may have only worked for part of the year, and other employees may have been reclassified to exempt or nonexempt.

"Employers may want to inquire with their current vendors—payroll or otherwise—or look for outside vendors that may be able to assist them with this reporting requirement," Tacchino said.

Under some circumstances, employers may be able to seek an exemption (at the EEOC's discretion) if filing the information would cause an undue burden. "Mega employers" may not be able to show an undue burden, but this could be an option for smaller businesses, said Jim Paretti, an attorney with Littler in Washington, D.C. But that will depend on how the parties decide to move forward.

The Court Battle

The EEO-1 form was revised during President Barack Obama's administration to add the Component 2 data, but the pay-data provisions were suspended in 2017 by President Donald Trump's administration. The NWLC challenged the Trump administration's hold on the pay-data collection provisions, and on March 4, Chutkan lifted the stay—meaning the federal government needed to start collecting the information.

On March 18, however, the EEOC opened the portal for employers to submit EEO-1 reports without including the pay-data questions. Chutkan subsequently told the government to come up with a plan.

The EEOC proposed the Sept. 30 deadline for employers to submit Component 2 data, claiming that the agency needed more time to address the associated collection challenges. Furthermore, the EEOC's chief data officer warned that rushing the data collection may yield poor quality data. Even with the additional time, the agency said it would need to spend more than $3 million to hire a contractor to provide the appropriate procedures and systems.

Robin Thurston, an attorney with Democracy Forward and counsel for the plaintiffs, said at an April 16 hearing that the plaintiffs don't want the agency to compromise quality. But they also wanted "sufficient assurances" that the EEOC will collect the data by Sept. 30.

On April 25, Chutkan ordered the government to provide the court and the plaintiffs with periodic updates on the EEOC's progress and to continue collection efforts until a certain threshold of employer responses has been received.

SOURCE: Nagele-Piazza, L. (2 May 2019) "Employers Must Report 2017 and 2018 EEO-1 Pay Data" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/eeo-1-pay-data-report-2017-2018.aspx


Compliance Recap - April 2019

Compliance Recap

April 2019

April was a busy month in the employee benefits world.

The Centers for Medicare & Medicare Services (CMS) issued its parameters for the defined standard Medicare Part D prescription drug benefit for 2020. In the court case challenging the Patient Protection and Affordable Care Act’s constitutionality, the court will hear oral arguments during the week of
July 8, 2019.

CMS released its 2020 Benefit Payment and Parameters final rule and fact sheet. The Department of Labor (DOL) started its appeal of the court case that invalidated portions of the DOL’s association health plans final rule. The DOL also released a statement regarding its enforcement of the final rule.

The Department of Health and Human Services (HHS) issued a notice that all Health Insurance Portability and Accountability Act of 1996 (HIPAA) enforcement actions will be governed by lower interim civil monetary penalty amounts as a matter of HHS’ enforcement discretion, pending rulemaking to change the current civil monetary penalty limits.

The Internal Revenue Service (IRS) released a memorandum regarding S corporation 2-percent shareholders’ deduction of group health plan coverage premiums paid or reimbursed by an S corporation.

UBA Updates

UBA released one new Advisor: Final 2020 Benefit Payment and Parameters Rule

UBA also updated existing guidance: Updates on DOL’s Association Health Plans Final Rule

 

 

CMS Releases 2020 Parameters for Medicare Part D Prescription Drug Benefit

The Centers for Medicare and Medicaid Services (CMS) released the following parameters for the defined standard Medicare Part D prescription drug benefit for 2020:

Deductible

$ 435

Initial coverage limit

$ 4,020

Out-of-pocket threshold

$ 6,350

Total covered Part D spending at the out-of-pocket threshold (for beneficiaries who are ineligible for the coverage gap discount program)

$ 9,719.38

Minimum cost-sharing in catastrophic coverage portion of the benefit

$ 3.60 for generic/preferred multi-source drugs

$ 8.95 for all other drugs

 

Generally, group health plan sponsors must disclose to Part D eligibility individuals whether the prescription drug coverage offered by the employer is creditable. Coverage is creditable if it, on average, pays out at least as much as coverage available through the defined standard Medicare Part D prescription drug plan.

Status of Court Case Challenging ACA Constitutionality

As background, in February 2018, twenty states filed a lawsuit asking the U.S. District Court for the Northern District of Texas (Court) to strike down the Patient Protection and Affordable Care Act (ACA) entirely. The lawsuit came after the U.S. Congress passed the Tax Cuts and Jobs Act in December 2017 that reduced the individual mandate penalty to $0, starting in 2019.

On December 14, 2018, the Court issued a declaratory order that the individual mandate is unconstitutional and that the rest of the ACA is unconstitutional. The Court granted a stay of its December 2018 order, which prohibits the order from taking effect while it is being appealed in the Fifth Circuit Court of Appeals (appeals court).

The appeals court will hear oral arguments during the week of July 8, 2019.

CMS Publishes 2020 Benefit Payment and Parameters Final Rule

The Centers for Medicare and Medicaid Services (CMS) published its final rule and fact sheet for benefit payment and parameters for 2020. Although the final rule primarily affects the individual market and the Exchanges, the final rule addresses the following topics that may impact employer-sponsored group health plans:

  • The 2020 maximum annual limitation on cost sharing is $8,150 for self-only coverage and $16,300 for other-than-self-only coverage.
  • For fully-insured plans, any indication of a reduction in the generosity of a benefit for individuals that is not based on clinically indicated, reasonable medical management practices is potentially discriminatory.
  • Amounts paid toward cost sharing using direct support by drug manufacturers (for example, coupons) to insured patients to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have a generic equivalent are not required to be counted toward the annual limitation on cost sharing.
  • Federally Facilitated Small Business Health Options Programs (FF-SHOPs) may operate a toll-free hotline rather than a more robust call center.

The final rule is effective on June 24, 2019. The final rule generally applies to plan years beginning on or after January 1, 2020.

Read more about the final rule.

DOL Appeals Association Health Plan Court Case

On March 28, 2019, the U.S. District Court for the District of Columbia (Court) found that the DOL’s association health plans final rule exceeded the statutory authority delegated by Congress under the Employee Retirement Income Security Act (ERISA) and that the final rule unlawfully expands ERISA’s scope. In particular, the Court found the final rule’s provisions – defining “employer” to include associations of disparate employers and expanding membership in these associations to include working owners without employees – were unlawful and must be set aside.

On April 26, 2019, the Department of Justice (DOJ) filed a notice of appeal. On April 29, 2019, the DOL issued a statement regarding its enforcement policy regarding the final rule. In light of the court’s decision, the DOL will not take enforcement action against:

  • employers and associations for potential violations stemming from actions taken before the court’s decision:
  • if the employer or association relied in good faith on the AHP final rule’s validity and
  • as long as the employers (and association) meet their responsibilities to association members and their participants and beneficiaries to pay health benefit claims as promised.
  • existing AHPs for continuing to provide benefits – to members who enrolled in good faith reliance on the AHP rule’s validity before the court’s order – through the remainder of the plan year or contract term that was in force at the time of the court’s decision.

This means that the DOL will not enforce potential violations that may have occurred before March 28, 2019. However, the DOL will enforce violations that occur on or after March 28, 2019. Because the DOL has not asked for a stay of the court order, associations cannot form self-funded AHPs under the final rule and existing AHPs must not market to new enrollees or sole proprietors.

Employers and their employees who are currently participating in an insured AHP under the final rule can generally maintain their coverage through the later of the end of the plan year or contract term. However, at the end of the plan year, the issuer will only be able to renew coverage for an employer if the coverage complies with the relevant market requirements for that employer’s size, rather than the association’s size.

For example, if a small employer and a sole proprietor joined an insured AHP under the final rule, then at renewal, an insurer can only sell coverage that complies with the small group market rules to the small employer and that complies with the individual market rules to the sole proprietor.

In the upcoming months, the U.S. Court of Appeals for the District of Columbia Circuit will consider the legal arguments in this case. Employers in AHPs should keep apprised of future developments in this case.

Read more about DOL’s enforcement of the final rule.

HHS Issues Notification Regarding the HIPAA Civil Monetary Penalty Tiers

On April 30, 2019, the Department of Health and Human Services (HHS) issued a notice that all Health Insurance Portability and Accountability Act of 1996 (HIPAA) enforcement actions will be governed by the following interim penalty tiers as a matter of HHS’ enforcement discretion:

Culpability

Penalty per violation

Annual limit

No knowledge

$100 – $50,000

$25,000

Reasonable cause

$1,000 – $50,000

$100,000

Willful neglect – corrected

$10,000 – $50,000

$250,000

Willful neglect – not corrected

$50,000

$1,500,000

 

The notice doesn’t legally bind HHS and doesn’t create legal rights for covered entities such as employers’ group health plans.

Practically speaking, the penalty amounts have not changed. The civil monetary penalties under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act, continue to be:

Culpability

Penalty per violation

Annual limit

No knowledge

$114 – $57,051

$1,711,533

Reasonable cause

$1,141 – $57,051

$1,711,533

Willful neglect – corrected

$11,410 – $57,051

$1,711,533

Willful neglect – not corrected

$57,051

$1,711,533

 

However, HHS may exercise discretion to impose a lower penalty amount if a covered entity, such as a health plan, is facing enforcement for violating HIPAA or HITECH.

HHS plans to engage in rulemaking to revise the penalty amounts. If and when final regulations are issued, then the revised penalty amounts will become law.

IRS Releases Memo on 2-percent Shareholders’ Health Coverage Deductions

The Internal Revenue Service (IRS) released a memorandum to confirm that a person who is a 2-percent shareholder (through Internal Revenue Code §318’s attribution rules) in an S corporation is entitled to a deduction for the amounts paid by the S corporation under a group health plan.

For the 2-percent shareholder to deduct the health insurance premium amounts, the S corporation must report the health insurance premiums paid or reimbursed as wages on the 2-percent shareholder’s Form W-2 in that same year. Also, the shareholder must report the premium payments or reimbursements from the S corporation as gross income on the Form 1040, U.S. Individual Tax Return.

Question of the Month

  1. What are the penalties for failing to comply with Section 125 requirements, such as failing to follow a cafeteria plan document’s terms?
  2. An operational failure occurs when a plan fails to follow its cafeteria plan document’s terms. There are several potential penalties for operational failures, including:
  • Cafeteria plan disqualification
  • Requiring the cafeteria plan to comply with Section 125 and its regulations, including reversing transactions that caused noncompliance
  • Imposing employment tax withholding liability and penalties on the employer regarding pre-tax salary reductions and elective employer contributions
  • Imposing employment and income tax liability and penalties on employees regarding pre-tax salary reductions and elective employer contributions

 

5/1/2019


OSHA Penalty Schedule

HIGHLIGHTS

OSHA CITATIONS

  • Citations must describe the particular nature of the violation.
  • OSHA will provide a reasonable time to correct the problem.
  • Citations must be posted at or near the location where the violation occurred and must remain on display until the violation is corrected.

2019 PENALTIES

  • $13,260 per serious, other-than-serious and posting violation
  • $13,260 per day for failure to abate a violation
  • $132,598 per willful or repeated violation

OSHA Penalty Schedule

An employer receives a written citation when it violates OSHA standards or regulations. The citation will describe the particular nature of the violation and will include a reference to the provision of the chapter, standard, rule, regulation or order the employer violated.

In addition, the citation will provide a reasonable amount of time for the employer to correct the problem. When the violation does not pose a direct or immediate threat to safety or health (de minimis violation), OSHA may issue a notice or warning instead of a citation.

An employer that receives a citation must post a copy of it at or near the place where the violation occurred. The notice must remain on display for three days or until the violation is corrected, whichever is longer. Penalties may be adjusted depending on the gravity of the violation and the employer’s size, history of previous violations and ability to show a good faith effort to comply with OSHA requirements.

LINKS AND RESOURCES

CURRENT PENALTIES

Below is a list of potential citations employers may receive and a range of corresponding penalties for these citations.

Violation

Current Penalty

De minimis violation Warning
Other-than-serious violation Up to $13,260 per violation
Serious violation 

A violation where there is a substantial probability that death or serious physical harm could result from an employer’s practice, method, operation or process. An employer is excused if it could not reasonably know of the presence of the violation.

Up to $13,260 per violation
Willful or repeated violation 

A violation is willful when committed intentionally and knowingly. The employer must be aware that a hazardous condition exists, know that the condition violates an OSHA standard or other obligation, and make no reasonable effort to eliminate it.

Between $9,472 and $132,598 per violation
Repeated violation

A violation is repeated when it is substantially similar to a violation that was already present in a previous citation.

Up to $132,598 per violation
Willful violation resulting in death of employee Up to $10,000 and/or imprisonment for up to six months.

Penalties may double for a second or higher conviction.

Uncorrected violation Up to $13,260 per day until the violation is corrected
Making false statements, representations or certifications Up to $10,000 and/or imprisonment for up to six months
Violation of posting requirements Up to $13,260 per violation
Providing unauthorized advance notice of inspection Up to $1,000, imprisonment for up to six months or both

Current laws allow OSHA to adjust the maximum penalty amounts every year to account for the cost of inflation, as shown by the consumer price index (CPI). If OSHA plans to adjust penalty amounts, it must signal its intention by Jan. 15 of each year.

For more information regarding OSHA regulations, standard or penalties, contact us today.

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Provided by Hierl Insurance Inc.


District Court Vacates Portions of the Association Health Plans Final Rule

Recently, the U.S. District Court for the District of Columbia ruled that the Department of Labor's final ruling on the definition of "employer" exceeded the statutory authority delegated by Congress under ERISA. Read this blog post from UBA for more on this compliance update.


As background, on June 19, 2018, the U.S. Department of Labor (DOL) issued a Final Rule that broadened the definition of “employer” and the provisions under which an employer group or association may be treated as an “employer” sponsor of a single multiple-employer employee welfare benefit plan and group health plan under Title I of the Employee Retirement Income Security Act (ERISA).

On March 28, 2019, the U.S. District Court for the District of Columbia (Court) found that the DOL’s final rule exceeded the statutory authority delegated by Congress under ERISA and that the final rule unlawfully expands ERISA’s scope. In particular, the Court found the final rule’s provisions – defining “employer” to include associations of disparate employers and expanding membership in these associations to include working owners without employees – are unlawful and must be set aside.

The Court’s order vacates the specific provisions of the DOL’s final rule regarding “bona fide group or association of employers,” “commonality of interest,” and “dual treatment of working owners as employers and employees.” The Court order sends the final rule back to the DOL to consider how the final rule’s severability provision affects the final rule’s remaining portions.

Although the DOL issued Questions and Answers after the Court’s decision, the DOL has not indicated how it will proceed. The DOL could revise its final rule or could appeal the decision and request that the Court stay its decision pending the appeal. Employers in association health plans should keep apprised of future developments in this case.

SOURCE: Hsu, K. (2 May 2019) "District Court Vacates Portions of the Association Health Plans Final Rule" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/district-court-vacates-portions-of-the-association-health-plans-final-rule