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Updates required for COBRA notices for employers
Proskauer

On May 2, 2014, the Department of Labor released a proposed rule on Health Care Continuation Coverage, which amends regulations on required notices of the Consolidated Omnibus Budget Reconciliation Act, known as COBRA.

The proposed rule is intended to better align the COBRA notice requirements with the Affordable Care Act provisions already in effect. More specifically, the revised notice will advise covered employees and individuals who are qualified beneficiaries for COBRA, that instead of COBRA, they can select coverage from a federally facilitated or state-based Health Insurance Marketplace.

Click Here for full PDF version of the alert.





ACA’s Deductible Limits for Small Groups Repealed
Proskauer

On April 1, 2014, President Obama signed into law the Protecting Access to Medicare Act of 2014. The primary purpose of the law was to provide a one-year delay of a 24% reduction in payment rates for physicians who participate in the Medicare program.

Of interest to small employers, Section 213 of the law repeals a provision of the Affordable Care Act (ACA) that limited deductibles in small group health insurance plans to no greater than $2,000 for single coverage and $4,000 for family coverage. For purposes of the ACA’s insurance market reforms, an employer in the small group market employs an average of 50 or fewer full-time equivalent employees (in 2016, the definition of small group changes to 100 or fewer employees).

Click Here for full PDF version of the alert.





Guidance Released on Coordination of Health FSA Carryover with HSAs; FSA Correction Procedures
Proskauer

On March 28, 2014, the Internal Revenue Service’s (IRS) Office of Chief Counsel released two memoranda that provide guidance on certain administrative issues affecting employers that sponsor health flexible spending arrangements (health FSAs).

Memorandum number 201413005 provides guidance on various issues relating to the $500 health FSA carryover and its effect on employees’ health savings account (HSA) eligibility. The memorandum addresses several issues including the transfer of funds from a “general purpose” health FSA to a “limited purpose” health FSA for employees who wish to establish an HSA after participating in a health FSA the prior year.

Memorandum number 201413006 addresses common issues associated with health FSA claim substantiation requirements. Notably, it clarifies that Form W-2 (rather than Form 1099) is the correct form on which to report improper payments to an employee that the employer treats as includible in the employee’s income.

Click Here for full PDF version of the alert.





IRS Releases Final Regulations on ACA Reporting for Employers and Insurers
Proskauer

On Wednesday, March 5, 2014, the Internal Revenue Service (IRS) released final regulations (Final Regulations) on two reporting requirements under the Affordable Care Act (ACA) effective in 2015.

The ACA added Sections 6055 and 6056 to the Internal Revenue Code (Code). Code § 6055 requires reporting by all entities that provide insurance (insurance companies, self-insured employers, governmental entities and others) which is filed with the IRS and given to the individuals to whom they provide "minimum essential coverage" (MEC). Code § 6056 reporting is filed with the IRS and given to individuals and is used to report whether applicable large employers - those with 50 or more full-time employees, including full-time equivalents (FTEs) - offered coverage to their full-time employees that meets the affordability requirements of the ACA’s pay-or-play mandate.

The IRS released proposed regulations (Proposed Regulations) last year. The Final Regulations largely follow the Proposed Regulations but also simplify the proposed rules for both employers and issuers. A single, combined form is available for self-insured employers, which are generally subject to both reporting requirements. Large employers with fully insured group health plans will complete only the top half of the form for Code § 6056 reporting, while the insurance company will complete a separate form to satisfy its Code § 6055 obligation. The rules are particularly streamlined for employers that make highly affordable coverage available to employees, including an offer of coverage to their spouses and dependents.

Click Here for full PDF version of the alert.





FINAL REGULATIONS ON EMPLOYER “PLAY OR PAY” MANDATE RELEASED – IRS PROVIDES TRANSITION RELIEF TO EMPLOYERS WITH 50-100 EMPLOYEES
By Proskauer

On Tuesday, February 10, 2014, the IRS released final regulations on the Affordable Care Act’s (ACA) employer “shared responsibility” provisions, also known as the “Play or Pay” mandate.

The final regulations weigh in at 227 pages. We will review them over the coming days and will release additional communication pieces once we fully digest these new regulations. In the meantime, below are some highlights of the new guidance.

TRANSITION RELIEF

  • For 2015, the rules will apply to employers with 100 or more full-time employees. Employers in the 50-100 range will need to certify eligibility for this transition relief and must meet other requirements, including not reducing the employer’s workforce to qualify for transition relief and maintaining previously-offered coverage.

  • For 2016, the rules will apply to employers with 50 or more full-time employees.

  • To avoid a penalty in 2015, employers subject to the mandate must offer coverage to 70% of their full-time employees.

  • To avoid a penalty in 2016, employers subject to the mandate must offer coverage to 95% of their full-time employees.

  • Employers with non-calendar year plans are subject to the mandate based on the start of their 2015 plan year rather than on January 1, 2015, and the conditions for this relief are expanded to include more employers. The IRS is evaluating whether this relief will extend to employers who first become subject to the mandate in 2016.

  • Other transition relief contained in the proposed regulations was also extended, including the ability to use a short timeframe (at least 6 months) to determine whether an employer is large enough to be subject to the mandate, a delay in the requirement to provide coverage to dependent children to 2016 (as long as the employer is taking steps to arrange for such coverage to begin in 2016), and the permitted use of a short measurement period in 2014 to prepare for 2015.

VARIOUS EMPLOYEE CATEGORIES

  • Volunteers: Hours contributed by bona fide volunteers for a government or tax-exempt entity, such as volunteer firefighters and emergency responders, will not cause them to be considered full-time employees.

  • Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer.

  • Seasonal employees: Those in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.

  • Student work-study programs: Service performed by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.

  • Adjunct faculty: Until further guidance is issued, employers of adjunct faculty may credit an adjunct faculty member with 2 ¼ hours of service per week for each hour of teaching or classroom time.

The IRS is also evaluating how to best simplify the employer reporting requirements set to apply in 2015. The IRS expects to release additional guidance shortly that aims to substantially simplify and streamline these reporting requirements. The final regulations are available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf An IRS Q&A is available here: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act#Liability





"USE-OR-LOSE” RULE FOR HEALTH FLEXIBLE SPENDING ARRANGEMENTS RELAXED
By Laura Kerekes, SPHR, Chief Knowledge Officer, ThinkHR Corporation

The Internal Revenue Service and Treasury Department issued a notice on October 31st loosening the almost 30-year old “use-or-lose” rule for health flexible spending arrangements (FSAs) by allowing Plan sponsors to include an option to allow participants to carry over up to $500 of unused FSA dollars remaining at year end. Until now, unless the Plan allowed for an up to 2 ½ month grace period into the next year for spending the funds, the employee forfeited that money.

The intent of this governmental change is to make health FSAs more flexible and consumer-friendly based on public feedback. Consumers informed the regulators about the difficulties employees face in predicting their future needs for medical expenditures and potentially losing the funds they put into their FSAs at year end if their health care spending projections are inaccurate.

Key Highlights of this Notice

  • The Plan Sponsor (employer) can decide whether or not to offer this option to employees. This change is not automatic for all health FSA plans.


  • The health FSA cannot have both the up to $500 carryover provision AND the grace period for up to 2 ½ months following year-end to permit employees to spend funds remaining unused at the end of the year to pay for qualified FSA expenses incurred in that calendar year.


  • Plan sponsors can decide to have one or the other – or neither — option.


  • Plan sponsors must also amend their IRC Section 125 plan documents to reflect any changes that are made to allow for the new provision and ensure that the same carryover limit applies to all plan participants. The amendment must be adopted on or before the last day of the plan year from which amounts may be carried over and may be effective retroactively to the first day of that plan year, as long as the Section 125 cafeteria plan informs participants of the change.


  • As before, health FSA funds may be used only to pay or reimburse certain medical expenses outlined under IRC Section 213(d). Unused amounts relating to a health FSA cannot be cashed out or converted to any other taxable or nontaxable benefit.


  • This change does not affect another provision of the Affordable Care Act restricting the use of health spending accounts (HSAs) for buying over-the-counter drugs and other health care items without a doctor’s prescription.



For more information, you may review the entire text of the notice at http://www.irs.gov/pub/irs-drop/n-13-71.pdf, and the Treasury Department press release and fact sheet can be found at:
http://www.treasury.gov/press-center/press-releases/Documents/103113FSA%20Fact%20Sheet.pdf.





5 important documents that appear in employment lawsuits
by Mauro Ramirez

Although simple and oftentimes overused, sports metaphors can provide insight into complicated topics. When it comes to employment litigation, cases often boil down to "blocking and tackling." In other words, the fundamental (but unglamorous) activities often make a far greater difference than sophisticated lawyering.

Five key documents arise most frequently in employment litigation, especially in cases involving an alleged adverse employment action: the job description; the handbook; performance evaluations; disciplinary documents; and responses to administrative charges. Like tackling and blocking in football, these documents are fundamental but not glamorous - generally requiring meticulous drafting or frequent revision. The impact that they make in litigation, however, can lead directly to success or defeat.

Job descriptions
With positions often evolving or with companies changing structures, it can be difficult to keep up with an employee's core duties and functions.

But a fundamental question in litigation is going to be, "What did this person do?" Although a supervisor can provide this information through testimony at a later time, it is always best to have a contemporaneous document that clearly sets out both the employee's job duties and expectations.

The essential functions of a job are an important aspect in many litigations involving the Americans with Disabilities Act. As well, although not determinative, the job description helps in establishing duties or responsibilities in misclassification claims under the Fair Labor Standards Act.

Handbooks
Handbooks serve a critical role in any place of employment since they set out basic policies for employees. Unfortunately, however, handbooks can negatively impact employment litigation as much as they can help support important arguments.

Handbooks often serve as the document establishing that the employer has policies prohibiting the conduct the employee complains about, such as policies on equal employment opportunities, medical leave and requesting accommodations. But a handbook that fails to provide succinct and relevant policies does not serve as good guidance for employees; it even poses a danger during potential litigation. This most often occurs where handbook policies set out intentions or expectations that are not consistently applied or were not applied properly in the events resulting in the lawsuit. This could involve policies related to attendance, tardiness or general expectations regarding behavior.

Of course, policies should be updated and revised regularly. Even if there is no discriminatory motive, a manager's reliance on an outdated - or unlawful policy - will undoubtedly assist an employee in mounting a challenging case.

Many times handbook revisions should include trimming down the existing document. Handbooks sometimes become the storage place for an overabundance of policies or procedures (some of which are best kept in a separate operations manual), which could provide a roadmap for counsel to explore areas that might not arise otherwise.

Performance evaluations
Performance evaluations are routine documents usually included in an employee's personnel file. This document becomes important in cases involving a termination for poor performance.

Often, a manager's reluctance to provide an honest and thorough evaluation results in documents stating that most employees are "meeting expectations" or "exceeding expectations." This high rating will pose a contradiction when trying to convince a jury or judge that, in reality, the employee was actually not meeting expectations.

A skeptical third party will likely take these documents at face value and believe that the employee met expectations or exceeded expectations. If the manager has to explain the inconsistency by admitting that the evaluation is inaccurate, a judge or jury may surely begin to question whether the manager is being truthful.

Disciplinary documents
Disciplinary documents or termination sheets generally serve as a key piece of evidence detailing the employer's reasons for taking the actions that the employee claims were done for discriminatory or retaliatory motives.

If the adverse action involved a termination, the termination sheet will unquestionably be a key document. A clear explanation of the reason for the termination that is articulated at the time the event occurred can help anchor your credibility.

Response to administrative charges
Responses to administrative charges, such as statements of position to the Equal Employment Opportunity Commission, differ from the other documents discussed since they are created after the underlying facts have taken place. These responses also usually incorporate the other common documents as exhibits or sources of information. Such responses are critical since they serve as precursors for the story that the employer will flesh out in litigation.

Since they serve as the initial opportunity for an employer to address allegations of unlawful conduct, these responses have long-lasting effects. Such documents lock the employer into certain positions. In other words, if a termination or disciplinary decision is not articulated accurately or fully in a response, clarifying or elaborating upon the reasoning at a later time may appear suspicious. Using the "blocking and tackling" metaphor here, responses to administrative charges should be concise and simple, addressing the allegations directly and accurately.

To sum up, the legal environment is often changing and uncertain. Nevertheless, these fundamental documents will usually appear during employment litigation, and the time and effort spent in drafting them will reduce later difficulties.


Mauro Ramirez focuses on labor law as an associate in Fisher & Phillips' Houston office.





Obamacare 'Glitch' Allows Some Families To Be Priced Out Of Health Insurance

By Ricardo Alonso-Zaldivar

WASHINGTON -- Some families could get priced out of health insurance due to what's being called a glitch in President Barack Obama's overhaul law. IRS regulations issued Wednesday failed to fix the problem as liberal backers of the president's plan had hoped.

As a result, some families that can't afford the employer coverage that they are offered on the job will not be able to get financial assistance from the government to buy private health insurance on their own. How many people will be affected is unclear.

The Obama administration says its hands were tied by the way Congress wrote the law. Officials said the administration tried to mitigate the impact. Families that can't get coverage because of the glitch will not face a tax penalty for remaining uninsured, the IRS rules said.

"This is a very significant problem, and we have urged that it be fixed," said Ron Pollack, executive director of Families USA, an advocacy group that supported the overhaul from its early days. "It is clear that the only way this can be fixed is through legislation and not the regulatory process."

But there's not much hope for an immediate fix from Congress, since the House is controlled by Republicans who would still like to see the whole law repealed.

The affordability glitch is one of a series of problems coming into sharper focus as the law moves to full implementation.

Starting Oct. 1, many middle-class uninsured will be able to sign up for government-subsidized private coverage through new health care marketplaces known as exchanges. Coverage will be effective Jan. 1. Low-income people will be steered to expanded safety-net programs. At the same time, virtually all Americans will be required to carry health insurance, either through an employer, a government program, or by buying their own plan.

Bruce Lesley, president of First Focus, an advocacy group for children, cited estimates that close to 500,000 children could remain uninsured because of the glitch. "The children's community is disappointed by the administration's decision to deny access to coverage for children based on a bogus definition of affordability," Lesley said in a statement.

The problem seems to be the way the law defined affordable.

Congress said affordable coverage can't cost more than 9.5 percent of family income. People with coverage the law considers affordable cannot get subsidies to go into the new insurance markets. The purpose of that restriction was to prevent a stampede away from employer coverage.

Congress went on to say that what counts as affordable is keyed to the cost of self-only coverage offered to an individual worker, not his or her family. A typical workplace plan costs about $5,600 for an individual worker. But the cost of family coverage is nearly three times higher, about $15,700, according to the Kaiser Family Foundation.

So if the employer isn't willing to chip in for family premiums – as most big companies already do – some families will be out of luck. They may not be able to afford the full premium on their own, and they'd be locked out of the subsidies in the health care overhaul law.

Employers are relieved that the Obama administration didn't try to put the cost of providing family coverage on them.

"They are bound by the law and cannot extend further than what the law provides," said Neil Trautwein, a vice president of the National Retail Federation.






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