967 Spaulding Ave, SE
Ada, MI 49301
tel  (616) 956-1199
fax  (616) 956-1214
 


Frequently Asked Questions

Does a company have to allow employees to work from home (exempt or nonexempt) if the office is closed due to bad weather?

How should we handle a situation at a partner’s worksite where our employee claimed she was sexually harassed and there were witnesses?

Are there tax or IRS implications if we choose to offer our employees a gift certificate or gift card?

We are seeking to better understand what is considered protected health information (PHI). Can you provide best practices for separating employment and PHI files?

Are employers required to offer benefits to employees eligible for Medicare (65 or older)?

If an employer health plan is a § 125 plan that deducts employee contributions on a pretax basis, must the employer allow for an annual open enrollment where employees may add, change, or terminate benefits for themselves and their eligible dependents?

We have an employee who went on disability with a workers’ compensation claim and came back to work on restricted duty. However, we cannot accommodate the restrictions. Can we terminate his employment because we cannot accommodate the restrictions?

I have a question about I-9 form reverification. I know that there is a spot on the form to reverify, but what if we never filled out the complete information when the employee was hired? If we do fill out the reverification part on an incomplete form, will we now be in compliance even though we never recorded the original documents? Or, can we just ask the employee to fill out a completely new form? Will that bring us into compliance?

Can we hire an intern on an F-1 student visa to be a regular employee once the internship is completed? Are F-1 students authorized to work in the United States?

If the company is closed for Labor Day on Monday, and an employee who works on Sundays wants to take Sunday off and work on Monday while the business is closed, is this okay?

We want to put a policy in place regarding reimbursing expenses for telecommuting employees. Specifically, does the company have to reimburse Internet and electricity expenses since the employee is working from home doing company work?

What is the waiting period requirement for benefits after hiring a long-term temporary agency worker as a regular employee?

Should we report the poor results from a company-conducted hearing test on our OSHA 300 log for the temporary agency employees working here?

Our company provides a bonus to all employees based on overall company performance. Do we have to pay an employee who is out on a leave of absence (LOA), and would the payment of the bonus impact his or her disability payments?

We have an employee who does not qualify for federal Family and Medical Leave Act (FMLA) leave. We would like to know what other types of leave are available to the employee. What are the eligibility requirements for the various leaves?

When an employee is on a leave of absence (LOA), must the employer continue health insurance or is this a COBRA event?

If we remove the question “Have you ever been convicted of a crime?” from our employment application, is there a concern if that question is on the background check authorization form provided by the third party administrator?

If an employee is adding a new baby to his healthcare plan, can this employee also add his spouse at the same time?

Is it legal to ask candidates if they have lived outside the U.S. since the age of 18?

If an exempt employee gives a two week resignation notice, do we have to honor it or can we separate early without compensating the employee for the two weeks?

Can an employee request a second opinion for Family and Medical Leave Act (FMLA) certification if the employee disagrees with the one completed by her or his physician?

We have an employee with a documented health issue that is treated with medication that makes her drowsy. Recently she was found passed out at work and we would like to know what steps we can take to protect her and the safety of our other employees.

If our facility temporarily loses power for an hour or less, and no work is done by the hourly workforce during the time the power is off, are we obligated to pay our workers their regular hourly wage? Do you know what other companies do in similar situations?

Can an employee take vacation time while on intermittent Family and Medical Leave Act (FMLA) leave?

Can executives or board members review our company payroll register upon request?

How does an employer handle a potential issue where an employee is suspected to be using illegal drugs?

Can we still provide executive physicals or is that now considered discriminatory?

What is stop loss insurance?

What is an insured plan versus a self-funded plan?

Who in the company is the right individual to investigate a harassment complaint?

Is it permissible to communicate directly with an employee’s spouse regarding an employee’s leave of absence and benefits?

If an employee states he is going to retire but “will stay on” until a replacement is found and doesn’t give the company a retirement date, can we let the person go? We plan to move another employee in to replace the retiring individual right away. Would the individual be eligible for unemployment?

Outside of our Workers’ Compensation carrier, does our business need to track and report on workplace injuries?

What is an employer’s legal obligation when a new hire has not provided documents to complete the Form I-9 by the 3rd business day?

Is it discriminatory if an employer requires a domestic partner affidavit for same sex marriages but does not require marriage certificates for opposite sex married employees?

Is an employer obligated to maintain an annual salary for an employee if a position is changed from exempt to non-exempt after being hired?

Can an employer terminate a manager’s employment during a performance improvement plan period?

Should an employer ask an employee who injured himself at home to document in writing that the injury is not work-related? Does the employee need to provide a note from his doctor releasing him to return to work?

Can an employer terminate an employee if he refuses to transfer to a new location (5 miles away) unless he is given a salary increase?

If our office closes due to a snow day or bad weather, how do we handle pay for our employees?

Can an employer require an employee to use two weeks of accrued PTO or vacation before using Paid Family Leave (PFL)?

Must an employer report Health Care, Short-term Disability and Long-term Disability premiums paid 100% by the employer on employees’ Forms W-2 because of health care reform?

What are the employer requirements for Form 5500 filing with less than 100 participants?

An employee notified his employer of a serious health condition that would require him to be out of office for some time. The employer took it as a notice of resignation and processed. A week later, the employee indicated that he wanted to go on FMLA, not resign. How should the employer proceed?

My boss would like to pay an independent contractor a “bonus”. I am concerned about using the term “bonus” within the IRS definitions of the independent contractor classification. Is there any way we can provide specific recognition for a job well done and maintain compliance with the IRS classification?

While on maternity leave, do employees still continue to accrue vacation/sick time?

Can an employee who terminates employment but still has money in his flexible spending account (FSA) continue to use it for claims? Or could that money be rolled over into his current HSA with his new employer?

Can an employer change eligibility rules to no longer allow dependents of dependents on the plan? Is there a time frame for announcing and implementing the changes?

Can you provide a list of states that have approved same-sex marriage, as well as domestic partnerships? Are benefits required in these states?

On an employee's W-4 he claimed "Single 1" AND "exempt". Now he is stating it should have been "exempt", NOT "Single 1". What is our obligation to make adjustments?

Does an employer need to pay an exempt employee for time off for a doctor’s appointment if all PTO has been used?

Can an employer require exempt employees to use a vacation day or unpaid time off if the employer closes the office and does not want to pay for an additional holiday?

Do students on J-1 visas count towards full time employees relative to FMLA compliance?

Does an employer need to accommodate a reduced work scheduled, as suggested by a doctor, if FMLA has been exhausted?

If an employer discontinues a PPO, which is part of a grandfathered plan made up of two PPOs and an HDHP, will the entire plan lose the grandfathered status?

Can an employer require that vacation time be used as part of an FMLA leave?

Is a new hire training program subject to ERISA if it is all-expenses paid, including salary?

Should an employer re-verify an employee who has renewed his/her employment permit?

We have a non-exempt employee that has been missing several hours a week of work due to “treatments” for an on-the-job injury. Are we required to pay the employee for this time or can PTO be used instead?

Can we hire an exempt employee with defined start and end dates?

Does a contracting employer need to provide temporary agency employees with a letter stating that the position with the contracting company is temporary?

What exposure to overtime pay does the company have when exempt employees clock in and out per company policy?

How does pay work for on-call nonexempt employees?

An employee on an approved FMLA leave waived coverage during annual enrollment. Can she enroll in benefits upon her return to work?

Does a surrogate pregnancy fall under FMLA?

When PPACA’s guidelines on excessive waiting period limits go into effect, can groups no longer have a waiting period that is “1st of the month following 90 days”?

If a multiemployer plan collective bargaining union agreement does not comply with health care reform requirements, what is an employer’s available recourse?

Can an employee being called to active military duty until March 2014 cancel his insurance while on leave?

Does a public employer who has a health reimbursement account (HRA) need to pay the PCORI fee for the HRA plan?

We have a salaried employee who is using too much personal time and has no sick time left. Can we deduct the time from her vacation balance?

Can we advertise for a specific gender for home health aide positions?

The dependent day care portion of the FSA is maxed at $5000. Is this per household or could each parent elect $5000 through their employer?

How is reporting of the MLR being handled with respect to the 5500 filing? Will it require an amended Schedule A for 2011 or a new one in 2012?

Is there any special guidance for temporary staffing agencies regarding the employer mandate under the Affordable Care Act and definitions of seasonal employees?

Is there a reason to have a supervisor’s name in an offer letter? In other words, is an offer letter that only lists a new hire’s supervisor as a title acceptable?

What is the effective date of Medicare, the date the employee turns 65 or the month before?

Can we rescind an employment offer via email?

Our employee waived health coverage for himself and family under our plan and has been covered on his spouse’s employer plan. The spouse recently lost her job. Would this qualify the employee and his family to come on our plan?

With respect to domestic partners, medical, dental and vision benefits would incur imputed income based on cost of coverage. How this is handled if a domestic partner is also covered as a dependent under an Executive Medical Reimbursement plan?

Are employers with both unionized and nonunion employees covered by different health plans responsible for the employer shared responsibility provisions of health care reform?

Can you help us understand what is required for the continuation of group life insurance for employees on FMLA or military leaves of absence?

I have an employee who is getting divorced and the court order is to put the spouse on COBRA. Who signs the COBRA paperwork, the employee or the ex-wife (qualified beneficiary) who was on the plan prior to them getting divorced?

Can you designate FMLA leave retroactively in order to include someone that is on Work Comp?

How long should an employee be out before we start FMLA?

Does an employee earn vacation while on FMLA or does the “clock” stop for accruing benefits?

How do you process FMLA if an employee does not request it or refuses to submit paperwork with the doctor's certification due to fees for processing?

What are an employer’s responsibilities to its 401(k) plan if the employer terminates the contract with the third party administrator managing the plan?

For a self-insured client with a 12/1/12 plan year renewal date, do they have to pay the CER fee on July 31, 2013 on IRS form 720? Or should the fee be paid sooner, since the plan year begins prior to the start of the fiscal year?

Can you provide me with more information about employer notification requirements for Medicare Part D coverage and any penalties for noncompliance?

For a self-insured employer that offers medical coverage and an HRA as part of its plan, does the CER fee apply to both the medical insurance and the HRA separately?

We have an employee who elected not to continue benefits while she is out of the country on an extended, non-FMLA leave. How will the carrier view the HIPAA preexisting conditions rules upon her return from the leave?

It has always been my understanding that Workers’ Compensation injuries that are accepted by the carrier are not to be charged against their potential FMLA leave because the injury is not the employee’s fault. Is this correct?

We have a client that will be closing next year. They administer their own COBRA. What are the rules surrounding plan closings for plans with less than 100 participants?

Can an employer deny COBRA coverage if the employee is terminated for theft?

We have an employee that can enroll on her husband's plan. Can we reimburse the employee for the amount of premium we contribute to other employees enrolled on the group plan?

I work for a company with 20 or more employees and cover a domestic partner. How does Medicare coordinate with this group coverage for my partner?

We are hiring an employee into a job that we would typically hire as a contractor, with a defined start and ending date. But this time we would like to hire him as an exempt employee on our payroll. Is that OK?

Because our business is seasonal, may we restrict the times that employees may take paid time off to our slow times?

We have an employee out on FMLA leave who has requested that we cancel her health benefits while she is on leave because she cannot afford the employee share of the premium. Is that allowed under FMLA rules?

We have employees working in various states where different coverage (and premiums) are available to our employees working in that state. Can we vary our company premium contribution for all of the employees in that coverage area?

Do the Section 125 mid-year election change rules allow for the addition of “tag along” dependents when a child is added mid-year due to a Qualified Medical Child Support Order?








 

Does a company have to allow employees to work from home (exempt or nonexempt) if the office is closed due to bad weather?

No, employers do not need to allow employees to work from home, regardless of their FLSA status (exempt or nonexempt). The employer can make those decisions based upon the work that can be done remotely and based on the needs of the business. The employer should have clearly communicated policies and expectations regarding working from home during office closures.


 

How should we handle a situation at a partner’s worksite where our employee claimed she was sexually harassed and there were witnesses?

Handle this investigation the same as you would any other investigation of harassment on the job. This is a serious offense and needs to be taken seriously.

Various states have regulations specifying such practices as unlawful, including the harassment of an employee directly by the employer or indirectly by agents of the employer with the employer’s knowledge. These states generally require employers to ensure a workplace free of sexual harassment by implementing certain minimum requirements, including posting sexual harassment information posters at the workplace and providing information about sexual harassment. Some states require harassment training for supervisors.

In this situation we recommend that you involve the other employer’s HR contact with your investigation. Since the event occurred at that employer’s premises, that employer also has the responsibility to prevent future occurrences.

Notify the employee that you are fully investigating this matter and that you will work with the HR contact and management at the other company to take appropriate action. Document each conversation and create a separate file for this investigation. Offer assistance to the other company so that the investigation is thorough and ask to be advised of the final actions taken so that you can communicate with your employee as to the outcome. Consider other actions your company could take to ensure this employee’s safety, including not requiring her to work in that partner’s worksite in the future.

If no action is taken, your company and the other company may be exposed to legal ramifications. Employees and job applicants who believe that they have been sexually harassed may file a complaint of discrimination within one year of the harassment. If an employer has failed to take such preventive measures, that employer can be held liable for the harassment. A victim may be entitled to damages, even though no employment opportunity has been denied and there is actually no loss of pay or benefits.


 

Are there tax or IRS implications if we choose to offer our employees a gift certificate or gift card?

According to the IRS, cash or “cash equivalents” (such as gift cards) are always taxable. However, you can exclude the value of a de minimis benefit you provide to an employee. If you offer the employee a different type of recognition reward (such as a dinner out or tickets to an event), it may not be taxable. While the IRS doesn’t specifically put a dollar value on what constitutes “de minimis,” the definition of a de minimis benefit is “any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare.”

For more information, the IRS Publication 15-B Employers Tax Guide to Fringe Benefits offers a chart that shows the tax excludable value of some fringe benefits.


 

We are seeking to better understand what is considered protected health information (PHI). Can you provide best practices for separating employment and PHI files?

Most all “individually identifiable health information” held or transmitted by a covered entity or its business associate — in any form or medium, whether electronic, on paper, or oral — is considered to be private and protected. The Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule calls this information protected health information (PHI). PHI is information, including demographic information, which relates to any of the following:

  • An individual’s past, present, or future physical or mental health or condition.

  • The provision of health care to the individual.

  • The past, present, or future payment for the provision of health care to the individual and that identifies the individual, or for which there is a reasonable basis to believe can be used to identify the individual. PHI includes many common identifiers (e.g., name, address, birth date, Social Security number) when they can be associated with the health information listed above.

For example, a medical record, laboratory report, or hospital bill would be PHI because each document would contain a patient’s name and/or other identifying information associated with the health data content.

By contrast, a health plan report that only noted that the average age of health plan members was 45 would not be PHI because that information, although developed by aggregating information from individual plan member records, does not identify any individual plan members and there is no reasonable basis to believe that it could be used to identify an individual.

For all employers, even those not subject to HIPAA privacy rules, it is a best practice to have a confidential medical file for any personal or health related documents to ensure privacy of documents that are not business related. This would be a separate file folder, kept in a separate file cabinet or drawer than the personnel files, for each employee. Generally, managers and executives have access to personnel files, but the confidential medical files are limited to a small number of people whose job role requires access to such information.


 

Are employers required to offer benefits to employees eligible for Medicare (65 or older)?

An employee who is entitled to Medicare may:

  • Remain enrolled in a company’s group health plan and delay enrollment in Medicare;

  • Elect enrollment in Medicare and remain enrolled in the group health plan at the same time; or

  • Voluntarily revoke group health plan coverage and enroll in Medicare.

Regulatory guidance states that the Medicare Secondary Payer (MSP) statute prohibits a group health plan from taking into account the Medicare entitlement of active employees or their family members if such employees are still considered in current employment status. The MSP rules relating to group health plans cover those working who are 65 or older and applies to employers with 20 or more employees. Under the MSP statute, employers are prohibited from discouraging employees from enrolling in their group health plan or from offering financial or other incentives for an individual entitled to Medicare not to enroll (or to terminate enrollment) under a group health plan that would otherwise be a primary plan. An employer must be able to prove that an employee or spouse aged 65 or older has been given the option to remain covered by the employer-provided health plan. Any entity found in violation is subject to a civil monetary penalty of up to $5,000 for each found violation.


 

If an employer health plan is a § 125 plan that deducts employee contributions on a pretax basis, must the employer allow for an annual open enrollment where employees may add, change, or terminate benefits for themselves and their eligible dependents?

When the health plan is part of a cafeteria plan (sometimes called a flexible benefits plan) which is governed by § 125 of the Internal Revenue Code, § 125 provides significant tax benefits both to the employer and employees. Paying health coverage contributions on a pretax basis saves the employee income taxes and FICA fees, while also saving the employer from FICA contribution amounts.

In exchange for these tax advantages, § 125 imposes clear requirements on how the plan must be set up and administered. One requirement is that employees must have an opportunity prior to the beginning of every 12-month plan year to elect or modify benefits under the plan. In the event that a plan failed to comply with the IRS requirements, it would be subject to losing its tax-preferred status.


 

We have an employee who went on disability with a workers’ compensation claim and came back to work on restricted duty. However, we cannot accommodate the restrictions. Can we terminate his employment because we cannot accommodate the restrictions?

If you have an employee who has been out on workers’ compensation and has received clearance to return to work on restricted duty, you have the obligation to make every effort to provide the employee with a reasonable accommodation as set forth by the Americans with Disabilities Act (ADA). If there is no way to reasonably accommodate the employee’s restricted duty based on the job functions in your company, you may need to consider alternatives such as providing the employee with other job duties within the organization, or even allowing him additional time off until he can return to his regular duties.

Under the ADA, employers may not refuse to allow a disabled employee to return to work because the employee is not fully recovered as long as he can perform essential job functions within the company. Although the employer has the right to set job prerequisites concerning education, skills, and other job-related requirements, employees are presumed to have already met these. Therefore, the focus should be on whether an injured employee can perform the job’s essential functions, with or without accommodations.

Return-to-work programs that incorporate modified duty can help employers avoid ADA or workers’ compensation lawsuits. Document all attempts to reasonably accommodate persons with disabilities and apply the return-to-work program equally to all employees.

Until the employer has explored and exhausted all accommodations as outlined in the ADA and under any state workers’ compensation statutes, there should not be any adverse action taken against the employee. We recommend consulting with legal counsel should you choose to move forward with employment termination.

See the following resources for further information regarding reasonable accommodation and the requirements under the ADA:


 

I have a question about I-9 form reverification. I know that there is a spot on the form to reverify, but what if we never filled out the complete information when the employee was hired? If we do fill out the reverification part on an incomplete form, will we now be in compliance even though we never recorded the original documents? Or, can we just ask the employee to fill out a completely new form? Will that bring us into compliance?

When it is discovered that an I-9 was not completed by an employee, a new I-9 may be completed. According to guidance from the U.S. Citizenship and Immigration Services (USCIS), the old, incomplete form should be retained and stapled to the new, properly completed I-9 Form. The guidance recommends attaching to the new form a brief memo explaining the error, when it was discovered, and how it was corrected.

The Reverification Section of the I-9 Form (Section 3) is a limited use section. Section 3 should only be completed if an employee is rehired or for an employee whose employment authorization requires reverification.

Sources:

uscis.gov/faq-page/i-9-central-self-audits#t17081n47005
uscis.gov/i-9-central/complete-correct-form-i-9


 

Can we hire an intern on an F-1 student visa to be a regular employee once the internship is completed? Are F-1 students authorized to work in the United States?

This practice is permissible only for a limited period of time following graduation. If a student on an F-1 visa does not obtain an employer-sponsored visa (for example an H1-B or other specialized worker visa) in the chosen field of study in the year following graduation, generally the former student is no longer eligible to work in the United States. F-1 visas are limited to student-related employment and education in the United States only. Any full-time employment after graduation or leaving school should be in the student’s chosen field with a sponsoring employer following the end of Optional Practical Training (OPT) work that is allowable under the F-1 student visa.

The job must meet one of the following criteria to qualify as a specialty occupation available for employer sponsorship under an H-1B, E-class or TN (NAFTA) visa:

  • Bachelor’s or higher college degree or its equivalent.

  • The degree requirement for the job is common to the industry or the job is so complex or unique that it can be performed only by an individual with a degree.

  • The employer normally requires a degree or its equivalent for the position.

  • The nature of the specific duties is so specialized and complex that the knowledge required to perform the duties is usually associated with the attainment of a bachelor’s or higher degree.

  • The prospective employer must file an approved Form ETA-9035, Labor Condition Application (LCA), with the Form I-129, Petition for a Nonimmigrant Worker to begin the process.

When considering sponsoring a foreign worker, employers almost always work with an attorney specializing in this area to ensure that the appropriate documentation and filings are made.

Sources:

uscis.gov/eir/visa-guide/f-1-opt-optional-practical-training/f-1-optional-practical-training-opt
uscis.gov/sites/default/files/USCIS/Resources/E2en.pdf
uscis.gov/working-united-states/temporary-workers/tn-nafta-professionals
uscis.gov/eir/visa-guide/h-1b-specialty-occupation/understanding-h-1b-requirements


 

If the company is closed for Labor Day on Monday, and an employee who works on Sundays wants to take Sunday off and work on Monday while the business is closed, is this okay?

Yes. In most states and under federal rules, private employers may establish and administer holiday policies to meet the needs of their business and their employees. Some employers include provisions in their holiday policies for floating or alternate holidays for those who generally would not benefit.

If an employee who would normally not benefit from a paid holiday policy requests to “swap” a day off for a paid holiday, allowing that would be at the employer’s discretion.

While allowing a request such as this would likely set a precedent and open the door for similar requests in the future, it is a good way to boost morale of employees who would otherwise not benefit from the paid holiday policy.


 

We want to put a policy in place regarding reimbursing expenses for telecommuting employees. Specifically, does the company have to reimburse Internet and electricity expenses since the employee is working from home doing company work?

Establishing a fair reimbursement arrangement with employees for Internet and electricity services is a best practice. Most employees who telecommute will need the use of a computer and related equipment and services. This obviously raises the issue of who pays for the hardware, the software, and any special monthly charges.

In some states, such as California, employers are required by law to reimburse employees for all business-related expenses.

If a telecommuting employee utilizes the Internet to log into work during the day, a best practice is to provide a monthly stipend of a percentage of an employee’s Internet and electricity services. This could be established by reviewing broadband (Internet) and wattage (electricity) use among telecommuting employees to determine an average percentage. Another method would be to review employee statements for utilities with them, and divide the charges by number of hours spent telecommuting, and average this among the employees surveyed to establish percentages for the reimbursement policy. Either way, reimbursement of some of these expenses makes good business sense and is required by law in some states.


 

What is the waiting period requirement for benefits after hiring a long-term temporary agency worker as a regular employee?

A temporary agency employee is not an employee of the contracting company; he or she is employed by the agency and would be subject to the agency’s compensation and benefits policies as an employee of that agency. The period of time that the agency worker worked for your company as a temporary employee before he or she was hired on a regular full-time basis would not meet the definition of an “active employee” in satisfying the waiting period requirements under your group health plan. Upon hire with your company, this employee would need to meet the eligibility requirements of the plan including the waiting period required of all regular employees.

If you are considering waiving the waiting period requirements to include the time he or she worked as a temporary agency employee, please review your plan requirements and consult with your broker or legal counsel.


 

Should we report the poor results from a company-conducted hearing test on our OSHA 300 log for the temporary agency employees working here?

If the tests/results are an occupational requirement for your regular and/or temporary agency employees performing duties under your supervision, then those results would need to be recorded on your OSHA 300 report.

According to OSHA instructions for the OSHA 300 log regarding temporary agency employees:

29 C.F.R. § 1904.31(a)

Basic requirement. You must record on the OSHA 300 Log the recordable injuries and illnesses of all employees on your payroll, whether they are labor, executive, hourly, salary, part-time, seasonal, or migrant workers. You also must record the recordable injuries and illnesses that occur to employees who are not on your payroll if you supervise these employees on a day-to-day basis. If your business is organized as a sole proprietorship or partnership, the owner or partners are not considered employees for recordkeeping purposes.”


 

Our company provides a bonus to all employees based on overall company performance. Do we have to pay an employee who is out on a leave of absence (LOA), and would payment of the bonus impact his or her disability payments?

The Family and Medical Leave Act (FMLA) requires that employees be restored to the same or an equivalent position with the same benefits and compensation. If an employee was eligible for a bonus before taking FMLA leave, the employee would be eligible for the bonus upon returning to work. The FMLA leave may not be counted against the employee. For example, if an employer offers a perfect attendance bonus, and the employee has not missed any time prior to taking FMLA leave, the employee would still be eligible for the bonus upon returning from FMLA leave.

On the other hand, the FMLA does not require that employees on FMLA leave be allowed to accrue benefits or seniority. For example, an employee on FMLA leave might not have sufficient sales to qualify for a bonus. The employer is not required to make any special accommodation for this employee because of the FMLA. The employer must, of course, treat an employee who has used FMLA leave at least as well as other employees on paid and unpaid leave (as appropriate) are treated.

Therefore, if the bonus is based purely on the company’s performance without specific individual employee productivity metrics to qualify that employee for the bonus, then the employee on leave would be entitled to such a bonus.

The bonus would likely not impact the disability payments, but it is best to check with the specific plan documents or with the carrier to determine what, if any, impact it may have.


 

We have an employee who does not qualify for federal Family and Medical Leave Act (FMLA) leave. We would like to know what other types of leave are available to the employee. What are the eligibility requirements for the various leaves?

This answer would largely depend on the company size and/or location, as many states have enacted their own leave laws. However, many mirror the eligibility requirements of the federal Family and Medical Leave Act (FMLA). In addition to individual state leave laws, the Americans with Disabilities Act (ADA) will also typically recognize a leave of absence as a “reasonable accommodation” for someone with a disability or medical condition. Therefore, even if the particular state doesn’t have a specific leave law, it may be in the employer’s best interest to approve a reasonable leave in order to satisfy requirements under the ADA.


 

When an employee is on a leave of absence (LOA), must the employer continue health insurance or is this a COBRA event?

It would largely depend on the type of leave of absence (LOA). If it is a qualifying Family and Medical Leave Act (FMLA) leave, the answer is yes, the employer would continue health coverage. Although employers need not pay employees on FMLA leave (with the exception of substitution of paid leave), an employer must maintain the employee’s coverage under any group health plan on the same conditions as coverage would have been provided if the employee had been continuously employed during the entire leave period. All employers covered by the FMLA, including public agencies, are subject to this requirement.

If it is a personal or company leave or other “unprotected” LOA it is usually a matter of company policy or practice whether the benefits will be maintained on the active group health plan or if the employer will terminate the benefits and offer COBRA continuation coverage.


 

If we remove the question “Have you ever been convicted of a crime?” from our employment application, is there a concern if that question is on the background check authorization form provided by the third party administrator?

No. Most, if not all, authorization forms for background check purposes will list this question. The difference between having this question on the background check authorization form and having it on the employment application is that the background check process should be reserved for candidates who have already been offered a position. Background checks should be run post-offer as a condition of employment, rather than as a tool to weed out candidates based on their backgrounds.


 

If an employee is adding a new baby to his healthcare plan, can this employee also add his spouse at the same time?

Yes. Under the Health Insurance Portability and Accountability Act (HIPAA), group health plans are required to offer mid-year special enrollment for the spouse and/or new baby (and the employee if not previously enrolled) upon birth, adoption, or placement for adoption of the child.

The HIPAA rules require letting the employee add himself, spouse, and/or new baby, but the rules do not require letting the employee add any other children at the same time as the new baby. However, most plans also are cafeteria plans (§125 plans) which may offer enrollment opportunities that are more liberal than the HIPAA rules. The IRS rules for cafeteria plans allow letting the employee add other eligible children along with the new baby and/or spouse if the employer’s cafeteria plan has adopted this provision. This is called the “tag along” provision for cafeteria plans.

Lastly, beware of discrepancies between the group health insurance policy and the cafeteria plan document. Carriers are required to include the HIPAA special enrollment rules in group policies, but the employer needs to confirm that the policy also includes any optional provisions that the employer has adopted for its cafeteria plan.


 

Is it legal to ask candidates if they have lived outside the U.S. since the age of 18?

If the question relates to a bona fide work requirement, then it is permissible to ask the question. If there is no direct relation between prior residences or travels and the requirements for the job, then it would not be appropriate to ask the question. Be cautious in asking any questions that do not directly relate to determining whether or not a person is qualified for the position for which he or she is interviewing.


 

If an exempt employee gives a two week resignation notice, do we have to honor it or can we separate early without compensating the employee for the two weeks?

An employer may accept the employee’s voluntary resignation, or release the employee in advance of the stated resignation date, or in extreme situations determine if cause exists for early termination (sometimes employees disregard policies after submitting a resignation).

If the employee works through to the resignation date, the employee must be paid for all wages earned through the resignation date. If the employee is released earlier, then the employer must pay wages for all time worked through the termination date. The employer is not obligated to pay the employee for any days not worked through the resignation period when no work is performed, and final wages need only include wages earned through the actual last day worked.

Please note that when letting the employee go prior to the end of the resignation period, the company has effectively changed the resignation into a discharge for the purposes of wage payments, if in fact pay is not provided through the original resignation date, regardless of hours or days worked. The employee may also then be able to file for unemployment since he or she will be missing wages during the resignation period. This liability may not be in the best interest of the employer.

Therefore, it is up to the company whether or not to pay through the resignation period; however, doing so permits the resignation to stand as a voluntary decision on the employee’s behalf.


 

Can an employee request a second opinion for Family and Medical Leave Act (FMLA) certification if the employee disagrees with the one completed by her or his physician?

Yes, the employee has the right to obtain and manage his or her own medical care, including the right to a second opinion. The employer still has the right to examine the medical certification provided and make a determination of whether or not to designate the Family and Medical Leave Act (FMLA) leave.


 

We have an employee with a documented health issue that is treated with medication that makes her drowsy. Recently she was found passed out at work and we would like to know what steps we can take to protect her and the safety of our other employees.

Based upon the fact that you found her passed out on the premises, you should question the employee as to what happened. If she does not know, file a workers’ compensation claim to protect the company in this matter. If she said that her medication made her drowsy and she just was resting, then there would be no need for a workers’ compensation investigation. The employee should be required to obtain a physician’s release to work as a response to a job description, and if not available, corrective action should be initiated, as it is never acceptable to sleep while clocked in on the job, especially if there is no medical concern involved.

Our next recommendation is that the employee be provided a job description, which outlines responsibilities, tasks and physical requirements, and advised that it is critical, based on her prior condition and this incident, that she meet with her physician and provide a statement outlining what she can and cannot do after the physician has reviewed the job description to ensure both her safety and the safety of others while on the job. If the physician already provided such a document, it is then appropriate to provide the job description to the physician along with a memorandum stating that the release to return to work is insufficient given recent incidents, and you are requesting that the physician review the attached job description to determine if there are any restrictions to be considered further. If in fact, you found the employee sleeping while on the job, it would be appropriate to initiate progressive discipline, advising the employee that regardless of extenuating circumstances, sleeping while clocked in is unacceptable.

Her illness may be provided protection under the Americans with Disabilities Act (ADA), and it would be appropriate to consider what can be provided to support her until such time that she has recovered as defined by a physician and determined reasonable by the company. Obtaining a physician’s statement that truly defines what can and cannot be reasonably accomplished to release the employee to work should provide further guidance on this matter. However, if the medication is extending side effects causing an altered state, risking the safety of the employee while on the job, this is a matter for the employee to discuss with the physician. It may be as simple as altering the time of administration. If an Employee Assistance Program is available, it may be beneficial to also explore that option for additional resources and support for the employee, such as medication cost saving alternatives or otherwise. Counseling with your legal advisor may also be prudent considering the many factors involved to mitigate any risk.


 

If our facility temporarily loses power for an hour or less, and no work is done by the hourly workforce during the time the power is off, are we obligated to pay our workers their regular hourly wage? Do you know what other companies do in similar situations?

The federal Fair Labor Standards Act (FLSA) defines two types of “waiting times.” Whether waiting time is considered hours worked under the FLSA depends upon whether the worker was:

  • “Engaged to wait” (which is compensable work time); or

  • “Waiting to be engaged” (which is not compensable work time).

In your situation, the employees were engaged to wait for the power to return so that they could continue doing their jobs. The examples offered by the Department of Labor to illustrate this principle include situations such as secretaries reading books while waiting for dictation/phones to ring or firemen playing checkers while waiting for an alarm.

As to best practices from other companies, we are aware that some companies extend pay for the remainder of the day, regardless of whether the employee is sent home. Other companies tend to provide not less than half of a day’s pay or up to the maximum hours worked if in excess of the four hours. While neither are required by your state regulations, both are considered a best practice. Regardless, the employer is obligated to pay hourly employees until such time that they are physically released from the work premises to go home.

We suggest that you review your OSH (Occupational Safety Hazard) policies to ensure a common policy or practice is defined so that employees and management know how to respond in the event of office closures due to power outages or a state of emergency.


 

Can an employee take vacation time while on intermittent Family and Medical Leave Act (FMLA) leave?

Family and Medical Leave Act (FMLA) regulations do not provide any restrictions in the area of utilizing vacation time for personal time off while on intermittent FMLA leave. However, the regulation does define deducting vacation pay to offset FMLA days unpaid. Therefore, depending upon the employer’s vacation or PTO policy, the employee may take vacation while on intermittent FMLA. If the employee meets all eligibility for approval of time off for vacation purposes (for example, sufficient accrual balance and proper notification, and approval from management to be gone during that work period) the employee should be granted the requested time off. Such time taken would not count against FMLA usage. Should the employee not meet eligibility requirements under the company’s vacation policy, document and provide the denial in a written format outlining the request, the reason for denial, and what needs to transpire before such a vacation can be granted. This may include business reasons to deny time off. It is important to be consistent in how every employee is treated, regardless of the employee’s intermittent FMLA leave, as any decision(s) to the contrary may be perceived as retaliatory or discriminatory, and the burden to justify such a decision is the responsibility of the employer.


 

Can executives or board members review our company payroll register upon request?

Yes. You may wish to inquire as to what types of compensation information they need so that you are providing the detail and data that is relevant for their review and discussion. You will want to ensure the privacy of your employees’ personal information, such as concealing Social Security numbers, garnishments, etc.

Executives typically need relevant summary compensation information for decision-making with revenue and cost considerations. Reviewing the actual intent of how the data will be used may enable you to provide a summary report without revealing data that could potentially be perceived as inappropriate to reveal.


 

How does an employer handle a potential issue where an employee is suspected to be using illegal drugs?

While you would want to have “just cause” or reasonable suspicion prior to “accusing” an employee in this case, nothing bars you from having a conversation about observed behavior in the work place. Exercise caution as to the business necessity, in the event a prescription medication may be at cause, as this can be covered under the Americans with Disabilities Act (ADA).

Reasonable suspicion is not merely rumor or speculation but rather based on specific, objective facts and rational inferences from observing an employee’s behavior. Specific objective facts and rational inferences drawn from those facts must justify reasonable suspicion. Evidence sufficient to justify reasonable suspicion does not need to rise to the level of full probable cause. This may include alcohol on the breath, lapses in performance, inability to appropriately respond to questions, and physical symptoms of alcohol or drug influence.

According to various sources, examples of drug and/or alcohol abuse include, but are not limited to, the following signs:

  • Odor of alcohol

  • Odor of marijuana

  • Slurred speech

  • Fast speaking out of the ordinary

  • Flushed, swollen face

  • Red or runny eyes or nose

  • Pupils dilated or constricted, or unusual eye movement

  • Lack of coordination

  • Tremors or sweats

  • Weariness, exhaustion

  • Sleepiness, or unusual hyper action

In reference to testing for substances based upon this, even with an accumulation of facts and rational implications to be used for conducting a “reasonable suspicion” test, it can be dangerous for the employer to order an employee to submit to drug testing. It is wise to have two separate witnesses to the behavior, including a supervisor; to have all supervisors trained to detect signs of usage (this does not have to be a certified training); and to escort the employee to and from the lab involved. Important to note, is that the employer must have a substance abuse plan and policy in place before taking any such action related to testing.


 

Can we still provide executive physicals or is that now considered discriminatory?

There are existing regulations under the Internal Revenue Code Section 105(h) nondiscrimination rules that allow benefits for “medical diagnostic procedures” to be paid to highly compensated employees without giving the same benefit to the non-highly compensated employee group. Under 26 CFR 1.105-11 (g) – SELF-INSURED MEDICAL REIMBURSEMENT PLAN., the rules allow that distinction for an employee class if the procedures are:

  • Performed at a facility that only provides medical or “ancillary services”;

  • For routine medical examination, blood tests, X-rays and similar tests; and

  • Do not include treatment, cure, or testing of a known illness or disability, or treatment or testing for a physical injury or specific symptoms.

Most benefits experts believe that this section of the Code allows for executive physicals that feature routine medical exams, blood and other diagnostic tests, and as long as no treatment is provided, then the nondiscrimination rules will not apply. The Affordable Care Act contains provisions to extend nondiscrimination requirements to fully insured plans, but that portion of the regulation has been delayed until further notice.


 

What is stop loss insurance?

According to the Department of Labor, stop loss insurance protects against health insurance claims that are catastrophic or unpredictable in nature and provides coverage to self-insured group health plans once a certain level of risk has been absorbed by the plan.

Stop loss protection allows an employer to self-insure for a set amount of claims costs, with the stop loss insurance covering most or all of the remainder of the claims costs that exceed the set amount, generally referred to as the “attachment point.” Attachment points can be either “specific” or “aggregate”:

  • Specific attachment points protect the plan against a high claim for any one individual (e.g., an employer self-insures up to $500,000 in claims per year for any one enrollee and stop loss insurance covers claims amounts above the $500,000 attachment point).

  • Aggregate attachment points define the maximum dollar amount of claims that an employer will pay, in total, during a specific period (e.g., an employer self-insures up to 125 percent of expected claims per year across all employees and stop loss insurance covers claims amounts above the 125 percent attachment point).


 

What is an insured plan versus a self-funded plan?

Employers that offer health and welfare benefits typically will pay for those benefits in one of two ways: either by purchasing health insurance from an insurance company (fully insured plans), or the employer provides the benefits directly to employees (self-funded plans). Most employers with self-insured plans work with a third party administrator (TPA) to write and administer the plan. Two of the main differences between the two types of plans are based on which entity assumes the risk, and certain plan characteristics:

  • Insured: The employer pays the entire premium and, in return, transfers all of the risk and responsibility for claims payments to the insurance company.

  • Self-Funded: An arrangement under which all or some of the risk associated with providing coverage is not covered by an insurance contract. Self-funded is usually the most appropriate term because true self-insurance means a complete reliance on internal assumption of liability. While many use the term self-insured, self-funding more accurately describes arrangements where some liability is covered directly by the plan sponsor and the plan sponsor purchases a stop-loss policy to limit upper liability.


 

Who in the company is the right individual to investigate a harassment complaint?

In most companies, the individual who investigates these complaints is the human resources person. Generally, if there is not an HR person, there should be an experienced manager, an impartial high-level administrative professional (payroll or benefits person, office manager, etc.), or an external HR/legal investigator to manage the process. If the complaint is low-level, and the employer is small, a manager may be able to do the investigation (as long as the manager is not named in the complaint).

The key issue is to insure that the company has a fair and impartial person who can provide an objective review of all facts and make a determination regarding the complaint.


 

Is it permissible to communicate directly with an employee’s spouse regarding an employee’s leave of absence and benefits?

The short answer would be that it could be permissible as long as the employee has expressly requested that type of communication, preferably via email or in writing that it is permissible to speak to his/her spouse regarding the leave of absence or other employment matters stemming from the leave.

If the employee is incapacitated and cannot communicate, and you can confirm this is the employee’s legal spouse (and has Power of Attorney) and that the employee is truly incapacitated, you may be able to communicate. Be sure to document why you chose to communicate with the spouse (i.e. based on the confirmation the employee is unable to communicate).


 

If an employee states he is going to retire but “will stay on” until a replacement is found and doesn’t give the company a retirement date, can we let the person go? We plan to move another employee in to replace the retiring individual right away. Would the individual be eligible for unemployment?

This is a situation that should be approached with sensitivity for several reasons. This employee may feel he is “needed” which is why he has not officially resigned. Simply separating the employee could create risk under The Age Discrimination in Employment Act (ADEA) as a “forced retirement.”

A best practice would be to be honest with this employee regarding your replacement efforts. Simply let him know that you have ideas in mind for filling the position as part of your “overall succession planning strategy” and that he has no reason to be worried since you have a plan in place.

Let the employee know that once he is ready, that you would appreciate the standard notice including resignation date so you can process it appropriately, and that you cannot fill the position while he is still in in the position. You could also ask for his ideas for the transition, get a sense of his planning and time parameters and determine if you can work within that time frame.

This should help protect against age discrimination claims that could arise by simply asking for his resignation or terminating employment without cause.


 

Outside of our Workers’ Compensation carrier, does our business need to track and report on workplace injuries?

OSHA (the federal Occupational Safety and Health Administration) does require businesses to keep records of work-related illnesses and injuries, unless the business employs 10 or fewer workers and/or the business is in a low-hazard industry. Detailed information about the posting requirements and businesses excluded can be found on the OSHA website at www.osha.gov.

Your state may also have additional safety requirements. For more information for your particular location, you can check the state laws on our resource portal or give us a call. You must report significant injuries or illnesses diagnosed by a physician or other licensed health care professional and any other work-related illnesses or injuries if they result in any of the following: death; days away from work; work restrictions or transfer to another job; medical treatment beyond first aid; or loss of consciousness. If you have any questions about whether an illness or injury is work-related, contact your broker or attorney.

OSHA has three forms for illness/injury records:

  1. OSHA Form 300, “Log of Work-Related Injuries and Illnesses” (annual record of all injuries/illnesses);

  2. OSHA Form 300A, “Summary of Work-Related Injuries and Illnesses”. This report is an annual summary and you must post a copy of this summary in a conspicuous place where notices to employees are customarily posted no later than February 1st of the year following the year covered by the records and keep it posted until April 30th; and

  3. OSHA Form 301, “Injury and Illness Incident Report” (individual incident report of an employee’s injury or illness on the job).

These forms should be updated within seven calendar days of learning of a recordable incident and retained for five years after the end of the year in which the incident occurred. Do not post the Form 300 or the Form 301, as these records have information relating to each specific injured/ill employee and you want to protect the employee’s personal health information. The only form that must be posted for public inspection is Form 300A, which summaries the incidents for the year.

 

What is an employer’s legal obligation when a new hire has not provided documents to complete the Form I-9 by the 3rd business day?

The Immigration Reform and Control Act of 1986 (IRCA) makes it illegal for an employer to knowingly hire or to continue to employ an individual who is or may become an unauthorized alien (not legally able to work in the United States). The employer may not continue to employ a person without a completed Form I-9 by the third day of employment. Failure to comply with all Form I-9 requirements could result in civil penalties against the employer. When new employees are unable to produce documentation of the legal right to work in the country, the United States Citizenship and Immigration Services (USCIS) requires that employment be discontinued until such appropriate documentation is presented for the completion of the Form I-9.

According to the USCIS, the penalties for hiring unauthorized workers can be high. Employers who violate the law may be subject to civil fines, criminal penalties (when there is a pattern or practice of violations), debarment from government contracts, court orders requiring the payment of back pay to individuals discriminated against as well as court orders requiring the employer to hire the individuals subject to unlawful employment discrimination. For more information about the rules relating to work hire authorization and for fines and penalties, click here.


 

Is it discriminatory if an employer requires a domestic partner affidavit for same sex marriages but does not require marriage certificates for opposite sex married employees?

The best practice would be consistency in the application of your employee policies relating to documentation requirements so as not to create the appearance of different treatment for different groups of employees.

In general, if employers are not asking for proof of relationship for other dependents for benefits purposes and there is no carrier requirements to do so, then the employer should not be asking this of “domestic partners”. An alternate general practice that allows for “loose” interpretation is to have all employees assert via signed affidavit that dependents they are enrolling meet the definitions as set forth in the insurance plan. Then the employer can define dependents more specifically including domestic partners. This practice can mitigate claims of unlawful discrimination based on local, state, or federal law.

Contact your benefit plan administrators or benefits counsel to ensure that benefits are being administered in accordance with the plan requirements as well as to ensure consistency with applicable state and federal laws relating to same-sex spouses and registered domestic partners.


 

Is an employer obligated to maintain an annual salary for an employee if a position is changed from exempt to non-exempt after being hired?

Provided there is no collective bargaining agreement setting the rates of pay and pay schedules or no employment contract in place expressly obligating certain levels of compensation or benefits for a set period of time within the terms of the contract, employers generally have the right to set pay rates as long as those rates adhere to are above minimum wage.

If you have determined the job has less duties/responsibility and therefore should be non-exempt, it makes sense that a rate reduction may be commensurate with that change. However, if a salary agreement was given to the employee in an offer letter or in some other written form, the employee could potentially have a claim for breach of contract. In situations like these, the manner in which you communicate any changes can be critical in managing the employee relations impact of any type of compensation.

This that in mind, consider whether the salary truly needs to be reduced – an annual salary does not necessarily provide that one must be exempt if the hourly rate is above a certain amount. A weekly wage DOES have to be a minimum amount if you are classifying someone AS overtime-exempt, not the other way around.

When planning your communications with your employee, you can make the overtime exemption test and other information available to explain the change, and let him/her know about opportunities to earn overtime. Keep in mind that when changing someone to non-exempt, there could be potential for a back-overtime claim. With that, another consideration is to put aside some sort of amount to offset what this person will be losing in salary based on what past overtime he/she may have earned.

As with any type of classification or contract issue, consult with your legal and HR advisors for appropriate guidance in managing the details of the situation.


 

Can an employer terminate a manager’s employment during a performance improvement plan period?

With any termination of employment situation, we recommend that you consult with your legal counsel to review the facts and circumstances of the situation to mitigate any potential risks. At-will employers generally have the right to terminate the employment relationship at any time; however, if this employee is covered by a collective bargaining agreement, you should review the terms of the contract. In addition, ensure that you are following your company discipline rules as well.

An employer can make such employment-related decisions based upon business necessity and in accordance with Company policy and based on past precedent for consistency. If you are considering immediate employment termination, then ensure that this follows your policies. If the performance improvement plan (PIP) is written in such a way that seems to guarantee employment through the “expiration” date of the PIP that can be problematic. Generally, PIPs should have some sort of caveat that failure to improve, including violation of ANY company policies, can result in immediate employment termination. In other words, ensure that the “punishment fits the crime.”

Communicate the business reasons for the decision for immediate employment termination rather than progressive discipline to the employee and document all discussions in the event of a claim of wrongful or discriminatory termination.


 

Should an employer ask an employee who injured himself at home to document in writing that the injury is not work-related? Does the employee need to provide a note from his doctor releasing him to return to work?

It is fairly common for employers to have an employee complete some form of time off request for days missed from work that could include a section about the time off requested and general reason why, such as “illness or injury” for non-work related causes and “illness or injury – work-related”. Next to that “work-related” section, employers may include a notation alerting employees to follow the company’s workers’ compensation reporting/treatment policy. This could be useful in the event of managing work-related treatment and claims early and/or reducing late claim filing. As a caution, however, for employee privacy reasons, refrain from encouraging or requiring the employee to document on that form the exact nature of the illness or injury.

It is important to be consistent in terms of the return to work medical release request and exercise caution not to assume that someone cannot work due to a condition he/she discloses. In short, unless the employee is requesting accommodations and/or you normally ask for a note after a short absence from work, don’t single an employee out with a request for a medical release in order to reduce your risk for a discrimination claim.


 

Can an employer terminate an employee if he refuses to transfer to a new location (5 miles away) unless he is given a salary increase?

A best practice is to find a mutually agreeable solution. Unless there is some contractual agreement to the contrary (i.e. an employment contract stating the employee cannot be transferred or special arrangements under a collective bargaining agreement), reassigning an employee to a new job in a new work location that does not impact the employee’s pay, benefits, or work schedule with a minimal impact on the commute would be considered a reasonable condition of employment.

The transfer is based on a business requirement, and the decision to adjust pay should be based upon performance or difference in work responsibilities and not necessarily because of a 5-mile change in commute. If this change is causing the employee to find alternative transportation arrangements, then you might consider that in your transfer offer. For example, if the employee could easily take public transportation to the current office but the new office is not available by public transportation and requires the employee to drive his car to the new location, you may want to offer some form of temporary transportation allowance. Similarly, if the employee’s current child care arrangement is located further away from the new work location, you may want to consider flexible scheduling to allow the employee to manage child care.

If the employee refuses the transfer and there is no other work available for him, then the employee has voluntarily decided to separate from the company. As with any termination of employment situation, consult with your labor counsel to ensure that all facts and circumstances surrounding this situation have been considered prior to termination.


 

If our office closes due to a snow day or bad weather, how do we handle pay for our employees?

Pay questions under the Fair Labor Standards Act (FLSA) for partial (or full) day absences that are outside of both the employer’s and the employee’s control due to weather or other natural disasters naturally surface at this time of year. Many states have laws covering this issue as well. What follows below are the basic FLSA rules, so please check with your state rules for additional information.

Nonexempt/hourly employees. Under the FLSA, employers are not required to pay nonexempt, hourly employees if those employees perform no work, either for full or partial days. This is true for most partial day closures, such as when employees report for work and then are told that there is no work for them (office closing due to bad weather). In addition, the FLSA does not require an employer to “keep” employees working for any specific number of hours or to pay them for hours they were assigned to work, but didn’t. Some states may have additional rules that may require additional pay. But even in states where this is not a requirement, many employers do pay something (minimum 2 hours, for example) for time not worked when an emergency or snow day forces an early closing. However, if the company operation is being kept open and employees are voluntarily allowed to leave early, these employees are usually not paid for the time off.

If, however, management asks the employees who do come to work in bad weather to remain while the office closing situation is being assessed, then those employees should be paid for the time spent at the office, even if they do no work.

Exempt employees. The rules for exempt employees are more difficult because the FLSA provides that employees classified as exempt are paid for the jobs they do on a “salary basis”, not the hours they work. Under the FLSA, exempt employees should be paid their full salary for any work performed in that workweek.

Even though the FLSA does not require employers to provide any type of paid time off (vacation, personal time, sick leave, or holidays) to any workers, if the employer does have those programs, then the employer may substitute any paid time off (PTO) as a deduction from the exempt employees PTO bank to cover the pay for the time not worked due to the facility closure, even if it is less than a full day without affecting the salary basis of payment. This is true as long as the employee still receives a paycheck equal to the employee’s guaranteed salary.

What this means if the employer closes the office for less than a full workweek, the employer must pay the exempt employee’s full salary even if:

  • There is no Paid Time Off program “leave bank”;

  • The employee has no accrued benefits in a company-provided leave bank or not enough paid time left in the bank (that would take the balance negative); or

  • The balance in the bank is already negative.

Further, if the company remains open during the bad weather, and an exempt employee is absent for 1 or more full days for personal reasons (transportation issues, weather-related housing or child care, etc.), then the salaried status will not be affected if deductions are made from the employee’s salary for such absences.

We recommend that you consider the FLSA and state requirements impacting your business, formulate your policy for handling office closures, outline how employees’ time off will be paid and managed, and communicate it to all employees. Advance notice of what employees may expect in the event of an office closure can help to create a more open and positive employee relations environment.


 

Can an employer require an employee to use two weeks of accrued PTO or vacation before using Paid Family Leave (PFL)?

The employer may require an employee to use 2 weeks of the accrued unused PTO or vacation to supplement the State of California’s Paid Family Leave (PFL) benefit. Paid Family Leave requires a seven (7) calendar day unpaid waiting period (except for claimants who are new mothers transitioning from Disability Insurance benefits to Paid Family Leave benefits). If PFL has a waiting period, the employer may require the use of PTO during the waiting period and then once PFL benefits begin, the employer may require the employee to use PTO or Vacation to supplement the PFL wage replacement benefit (55%) up to 100% of the employee’s regular wages. PFL benefits are paid for up to 6 weeks; for baby bonding these benefits may be used during the first year of the baby’s birth or child’s placement with the family.


 

Must an employer report Health Care, Short-term Disability and Long-term Disability premiums paid 100% by the employer on employees’ Forms W-2 because of health care reform? The group has under 30 lives on its plans.

At this time, W-2 reporting of these items listed is optional. STD/LTD plans are not included in the W-2 reporting requirement under the Affordable Care Act, but employers may choose to report the cost of coverage if they wish to do so. The reporting requirement for health care premiums is optional at this time for employers who filed less than 250 Form W-2s for the previous year.

The IRS has provided a helpful chart to assist employers with assessing their W-2 reporting requirements that can be accessed via the link provided below.

Online Resources:
http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage


 

What are the employer requirements for Form 5500 filing with less than 100 participants?

In general, Form 5500 is not required for a welfare benefit plan that is unfunded, fully insured, or a combination of unfunded and insured, if there are fewer than 100 participants. In some cases, Form 5500-SF may be used instead of Form 5500 for certain small pension and welfare benefit plans.

In the filing instructions (links provided below), there is additional guidance to determine whether the plan covers fewer than 100 participants for purposes of these filing exemptions for insured and unfunded welfare plans. Instructions for lines 5 and 6 on counting participants in a welfare plan include the following:

“Line 5 asks for: Total number of participants at the beginning of the plan year.

“Line 6 (a-h) asks for: Number of participants as of the end of the plan year (welfare plans complete only lines 6a, 6b, 6c, and 6d).

  • (6a): Active participants

  • (6b): Retired or separated participants receiving benefits

  • (6c): Other retired or separated participants entitled to future benefits

  • (6d): Subtotal. Add lines 6a, 6b, and 6c to determine total number of participants as of the end of the plan year.”

For reporting purposes, the IRS recommends using the “80-120 Participant Rule” that states “If the number of participants reported on line 5 is between 80 and 120, and a Form 5500 annual return/report was filed for the prior plan year, you may elect to complete the return/report in the same category (‘‘large plan’’ or ‘‘small plan’’) as was filed for the prior return/report. Thus, if a Form 5500-SF or a Form 5500 annual return/report was filed for the 2012 plan year as a small plan, including the Schedule I if applicable, and the number entered on line 5 of the 2013 Form 5500 is 120 or less, you may elect to complete the 2013 Form 5500 and schedules in accordance with the instructions for a small plan, including for eligible filers, filing the Form 5500-SF instead of the Form 5500. “

Your benefits broker can be a great source of information regarding your benefits filing requirements, so please contact them for additional information about your plans.

Guidance to assist you in determining if your plans are subject to filing requirements include the following:


 

An employee notified his employer of a serious health condition that would require him to be out of office for some time. The employer took it as a notice of resignation and processed. A week later, the employee indicated that he wanted to go on FMLA, not resign. How should the employer proceed?

The Family and Medical Leave Act (FMLA) regulations state that once an employer has been notified or has knowledge of an employee’s serious health condition, the employer is required to inform the employee of his rights and responsibilities under the FMLA. The employee does not have to specifically ask for an FMLA leave – it is up to the employer to determine eligibility and advise the employee accordingly. Additionally, if an employee has a condition that qualifies as a disability under the American with Disabilities Act, the employer has a strict responsibility to work with the employee and his medical provider in an “interactive process” to determine any “reasonable accommodations” unless those accommodations present an undue hardship to the company. Reasonable accommodation could include a recuperative leave during and beyond FMLA, job reassignment, job modification, etc.

In your situation as described, the employee informed his supervisor of his absence due to hospitalization and the nature of the serious health condition, so the employee’s initial notification requirement was met. It would appear from that conversation and the employee’s subsequent follow up a week later that his intent was not to resign but to let the company know that he would not be at work for some period of time due to this health condition. Based on the FMLA regulations and the facts of the situation, the company would have a responsibility to provide the employee with the information about FMLA, the requirements for applying for FMLA leave including medical certifications and information regarding company-specific leave, time off, and benefits rules.

We are not labor attorneys and cannot provide you with specific legal advice but offer the following as general information. In situations similar to yours, the best practice would be to reinstate the employee, place him on the company’s leave status as of the date of the initial notification pending completion of the FMLA certification process, provide him with all of the information concerning the rights and responsibilities for taking leave including how benefits and time off are managed, and then follow the company’s process for managing the FMLA leave, including any follow up accommodation needs after the leave concludes. Additionally, companies typically provide FMLA leave training to the management team that covers the basics of FMLA so that leave issues are handled promptly and smoothly from the beginning, both from a risk mitigation as well as a positive employee relations perspective.

For more information about FMLA and the ADA accommodation rules, visit:

Online Resources:
Text of the FMLA regulations: §825.220 Protection for employees who request leave or otherwise assert FMLA rights.


 

My boss would like to pay an independent contractor a “bonus”. I am concerned about using the term “bonus” within the IRS definitions of the independent contractor classification. Is there any way we can provide specific recognition for a job well done and maintain compliance with the IRS classification?

Depending upon how the additional payment is structured, it could be classified as a payment for exceeding the terms of the contract and could be done without triggering undue compliance concerns. You are correct, however, in being careful not to treat independent contractors like employees, especially as it relates to the form and method of pay or benefits (the two components subject to taxation and of most interest to the IRS).

The key is to ensure that the workers you have classified as independent contractors are truly independent. The IRS has good definitions and other tools to help businesses make those determinations that can be found at: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee

Therefore, while this answer does not constitute legal advice, we cannot find any prohibition in the statutes that disallows paying an independent contractor that meets the IRS criteria for independence an additional contract or service fee for work or performance excellence. Make sure that the payment is not structured or considered a bonus for which employees would also be eligible. In addition, report all contracted amounts paid (plus the additional payment) via IRS Form 1099; it is up to the contractor to file and pay taxes on all earnings.


 

While on maternity leave, do employees still continue to accrue vacation/sick time? Our company handbook states: ”Vacation time will not accrue when an employee has been on an unpaid leave of 30 calendar days or longer, except as required by law.” Is that policy still valid?

The quick answer to your question about the employee’s entitlement to time off accruals while on maternity leave is that it depends on your policy. Based on the information you provided regarding your policy, then no accrual of time off is required. Unlike the rules under the federal Family and Medical Leave Act and state leave rules that may require continuation of health benefits for a period of time as if the employee was actively at work during the approved leave, there is no requirement to continue paid time off benefits.


 

Can an employee who terminates employment but still has money in his flexible spending account (FSA) continue to use it for claims? Or could that money be rolled over into his current HSA with his new employer?

Internal Revenue Code §125 regulations governing health care flexible spending accounts (HC FSA) do not permit “disbursements”, transfers or rollovers. (Prior to 2007, there had been a limited time when a HC FSA participant had the option to rollover funds to his/her Health Savings Account (HSA) but that is no longer the case). HC FSA contributions elected for the plan year can be used only for eligible expenses incurred during the employee’s coverage period in that plan year (or during a grace period or carryover period, if the particular employer’s HC FSA plan includes one of those provisions). In the event that the employee terminates, the employee’s coverage period ends unless s/he elects COBRA continuation coverage. For instance, if the plan year is January 1 and John’s last day of employment is June 30, he may submit claims for eligible expenses incurred between January 1 and June 30 only. If, however, John elects COBRA to continue making HC FSA contributions (on an after-tax basis), he may continue to incur claims eligible for reimbursement.

In summary, unused HC FSA contributions cannot be “rolled over” to another FSA nor to an HSA.


 

Can an employer change eligibility rules to no longer allow dependents of dependents on the plan? (For example, if an employee’s 17-year old daughter has a baby and the baby is currently covered). Is there a time frame for announcing and implementing the changes?

For general information, we note that employers considering changing the group health plan’s dependent eligibility provision typically review issues related to compliance, competitiveness, communications and logistics.

Compliance

The Affordable Care Act (ACA) requires group health plans that offer coverage to any child of the employee to extend eligibility to all children up to age 26. (This ACA requirement does not apply to “HIPAA-excepted benefits”, such as stand-alone dental or vision plans.) Plans cannot impose any conditions on the child’s eligibility other than the child’s relationship to the employee.

For purposes of the ACA requirement, “child” is the employee’s child (including a child placed with the employee for adoption), stepchild and foster child. There is no requirement to extend eligibility to the employee’s grandchild. (Reference: Prop. Federal Regulation FR Doc 2010-11391 as published in Federal Register 5/13/2010; copy available at: http://www.gpo.gov/fdsys/pkg/FR-2010-05-13/pdf/2010-11391.pdf)

In addition to the federal ACA, health benefits provided through a group insurance contract are subject to any applicable state insurance laws or regulations. Self-funded plans, however, generally are exempt from all state insurance requirements.

Competitiveness

Employers usually view group health benefits as an important tool in recruiting and retaining a high-quality workforce. For this reason, many employers compare or “benchmark” their plans and plan provisions against those of other employers with whom they compete for labor talent. For effective benchmarking, you will want to consider your competition in each geographic area in which you operate and in each employee strata (employees, mid-management, executive, etc.)

Communications/Logistics

Employer-sponsored group health plans are subject to ERISA (unless sponsored by governmental employers or certain church plans). ERISA requires the group health plan to provide a “Summary of Material Reduction” to plan participants within 60 days of any change or amendment that is a “material reduction in covered services or benefits”. The SMR is not required in advance but is required within 60 days of the change.

Further, the Affordable Care Act (ACA) requires the plan to provide a Summary of Benefits and Coverage (SBC) describing the plan’s benefits in a standardized format. The SBC is required by the first day of the open enrollment period. (The SBC also is required upon the participant’s request, upon special enrollment, etc.) Plans also are required to provide 60 days’ notice in advance of any change being made in the information described in the SBC. The 60-day rule does not apply, however, with respect to changes being made in connection with a renewal.

In any case, we do recommend that you provide a lengthy advance notice period before any change that “takes away” coverage or eligibility for coverage so that families can secure replacement coverage. Fortunately, due to the Affordable Care Act, health plans, whether sold in the individual or group market, can no longer deny coverage based on health status or impose pre-existing condition exclusions on a child.

Lastly, note that many group health plans currently provide “automatic coverage” for newborns during the first 30 or 31 days of life. This type of provision originally came out of state insurance laws in many jurisdictions, although they did not apply to self-funded plans. Over the years, though, automatic newborn coverage has become somewhat common which may lead hospitals and healthcare providers to confuse their patients by mistakenly assuming that all plans provide automatic newborn coverage. You will need to decide whether to continue short-term automatic coverage for newborns (including an employee’s grandchild) regardless of whether the plan extends eligibility for the employee to enroll the grandchild on an ongoing basis. Care should be taken to ensure that the terms of any stop-loss insurance policy are consistent with the terms and provisions of the self-funded plan.


 

Can you provide a list of states that have approved same-sex marriage, as well as domestic partnerships? Are benefits required in these states? Are benefits required in other states which do not recognize same-sex marriage and/or domestic partnerships?

Here is a listing of the states that currently recognize same-sex marriage:

  • California* (June 28, 2013)

  • Connecticut (November 12, 2008)

  • Delaware (July 1, 2013)

  • Hawaii (law will take effect December 2, 2013)

  • Illinois (law will take effect June 1, 2014)

  • Iowa (April 24, 2009)

  • Maine (December 29, 2012)

  • Maryland (January 1, 2013)

  • Massachusetts (May 17, 2004)

  • Minnesota (August 1, 2013)

  • New Hampshire (January 1, 2010)

  • New Jersey (October 21, 2013)

  • New York (July 24, 2011)

  • Rhode Island (August 1, 2013)

  • Vermont (September 1, 2009)

  • Washington (December 9, 2012)

  • Washington, DC (March 3, 2010)

What follows below is a state-by-state listing of the domestic partnership status of each state:

-Benefits and registries maintained in the cities of Ann Arbor, East Lansing
Alabama -Not Recognized
Alaska -Not recognized
Arizona -Benefits extended in the cities of Tucson and Phoenix
Arkansas -Not recognized
California -Benefits extended in the cities of Berkeley, Laguna Beach, Los Angeles, Oakland, Petaluma, Sacramento, San Diego, San Francisco, Santa Cruz, and West Hollywood

-Benefits extended in the counties of Alameda, Los Angeles, Marin, San Francisco, San Mateo, Santa Cruz, and Ventura

-Registries maintained in the cities of Arcata, Berkeley, Cathedral City, Davis, Laguna Beach, Long Beach, Oakland, Palo Alto, Sacramento, and San Francisco; and in the counties of Los Angeles and Santa Barbara
Colorado -Benefits extended and domestic partner registry maintained in the city of Denver Connecticut -Benefits extended throughout state.

-Registry maintained in the city of Hanford
Delaware -Not recognized
Florida -Benefits extended in the city of West Palm Beach

-Benefits extended and registry maintained in Broward County
Georgia -Benefits extended and registry maintained in the city of Atlanta
Hawaii -State extends benefits and maintains a domestic partnership registry
Idaho -Not recognized
Illinois -Benefits extended in the city of Chicago, and Cook County

-Benefits extended and registry maintained in Oak Park City
Indiana -Benefits extended in the city of Bloomington
Iowa -Benefits extended and registry maintained in Iowa City
Kansas -Not recognized
Kentucky -Not recognized
Louisiana -Benefits extended in the city of New Orleans
Maine -Benefits extended and registry maintained in the city of Portland
Maryland -Benefits extended in the cities of Baltimore and Takoma Park, and in Montgomery County
Massachusetts -Benefits extended in the cities of Boston, Brookline, Brewster, Nantucket, Springfield, and Provincetown

-Domestic partner registries maintained in the cities of Boston, Brewster, Brookline, Nantucket, Cambridge, and Northampton
Michigan -Benefits extended in the city of Kalamazoo, and in Washtenaw and Wayne Counties
Minnesota -Benefits extended and registry maintained in the city of Minneapolis
Mississippi -Not recognized
Missouri -Registry maintained in the city of St. Louis
Montana -Not recognized
Nebraska -Not recognized
Nevada -State extends benefits and maintains a domestic partnership registry
New Hampshire -Not recognized
New Jersey -Benefits extended in the city of Delaware
New Mexico -Benefits extended in the city of Albuquerque
New York -Benefits extended in the cities of Brighton, Eastchester, Ithaca, Rochester, New York City, as well as Westchester County

-Registry maintained in the cities of Ithaca, Albany, New York City, and Rochester
North Carolina -Benefits extended and registry in the city of Chapel Hill

-Registry maintained in the city of Carrboro
North Dakota -Not recognized
Ohio -Not recognized
Oklahoma -Not recognized
Oregon -Benefits extended throughout entire state

-Registry provided in the city of Ashland
Pennsylvania -Benefits extended in the city of Philadelphia
Rhode Island -Not recognized
South Carolina -Not recognized
Tennessee -Not recognized
Texas -Benefits extended in Travis County
Utah -Not recognized
Vermont -Benefits extended throughout state
Virginia -Benefits extended in Arlington County
Washington -Benefits extended throughout state

-Registries maintained in the city of Lacey and the city of Seattle
West Virginia -Not recognized
Wisconsin -Benefits extended in the city of Madison, the city of Sherwood Hills Village, and in Dane County

-Registry maintained in the city of Milwaukee
Wyoming -Not recognized
(Source: National Council of State Legislators [NCSL])

Please be advised that the Supreme Court’s ruling regarding the Defense of Marriage Act (DOMA) impacts same-sex couples in states that legally recognize these relationships. The Court’s ruling does not require employers to provide benefits to same-sex spouses, even in states that recognize same-sex marriage. However, whether spousal coverage has to be extended to same-sex spouses may be dictated by the terms of the plan document or insurance policy.

With regards to employee benefit plans, an individual will be considered a “spouse” if he or she was lawfully married in any state. Where the individual is domiciled has no effect on the determination. In addition, the term “marriage” will apply to same-sex marriages that are legally recognized under state law. Civil unions and domestic partnerships will not be treated as marriages. Please review your plan’s definition of “spouse” to determine whether it encompasses same-sex spouses and consult with counsel to determine how to proceed.


 

On an employee’s W-4 he claimed “Single 1” AND “exempt”. This was back in July. He is just now coming to us stating it should have been exempt, not single 1. What is our obligation to make adjustments?

It is the employee’s sole obligation to determine his/her withholding and tax liability. Given you made deductions in accordance with the provided Form W-4, we do not recommend “retro-actively” adjusting withheld income tax based upon the employee providing a new form. He can submit a new form now and you can start the amended deductions with the next payroll. The employee can reconcile any overages paid on his income tax filing at year end and work with his tax professional to determine his liability for the year as well as adjust the future withholding accordingly.

In general, to know how much federal income tax to withhold from employees’ wages, you should have a Form W-4 on file for each employee. A Form W-4 remains in effect until the employee gives you a new one. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4.

You can also advise your employees to use the IRS Withholding Calculator on the IRS website at www.irs.gov/individuals for help in determining how many withholding allowances to claim on their Forms W-4.


 

Does an employer need to pay an exempt employee for time off for a doctor’s appointment if all PTO has been used?

You may deduct from an exempt employee’s salary only if the employee is absent due to illness or personal reasons for an entire work day. You may not deduct the pay of an exempt employee for a partial-day absence. Nevertheless, you may require exempt employees to use PTO time for partial-day absences if it is stated in your policy, even if it creates a negative balance in that PTO account. The employee should be compensated for the full day even for a medical appointment of short duration. The text of the wage and hour regulations state the following:

“Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.”

The regulations can be found at: http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.pdf


 

Can an employer require exempt employees to use a vacation day or unpaid time off if the employer closes the office and does not want to pay for an additional holiday?

According to the Federal Department of Labor (DOL), the Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations or holidays (federal or otherwise). These benefits are generally a matter of agreement between an employer and an employee (or the employee’s representative).

However, there is a catch when it comes to your exempt employees when you choose to close the business for a partial week. In order to be exempt from the FLSA’s minimum wage and overtime pay requirements under the Regulations, Part 541, employees must meet certain criteria related to their primary job duties and, in most cases, be paid on a salary basis of not less than $455 per week.

Because employees who are exempt from the overtime and minimum wage provisions of the FLSA must be paid on a salaried basis, deducting pay when the employer shuts down results is an improper deduction due to the fact that the employee is no longer receiving a fixed salary.

As a matter of policy or general practice, you can require substitution from time off banks, given all exempt employees have time off available, and the employer gives advance notice of the requirement. If an employer offers his or her employees some number of days to be used for personal absences, taking deductions from an exempt employee’s accrued leave account to cover an absence subject to the policy (in any amount, including partial days) does not violate the salary basis test. In addition, special rules regarding leave apply to exempt employees of public agencies.

When the state laws differ from the federal FLSA, an employer must comply with the standard most protective to employees.

Links to your state labor department can be found at www.dol.gov/contacts/state_of.htm.

Additional Resources and References from the DOL:

http://www.dol.gov/dol/topic/wages/holiday.htm

http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.htm

http://www.dol.gov/elaws/esa/flsa/overtime/cr1.htm

http://www.dol.gov/elaws/esa/flsa/overtime/cr4.htm


 

Do students on J-1 visas count towards full time employees relative to FMLA compliance?

If these individuals on J-1 visas are being paid as W-2 employees, regardless of the duration of their employment, and meet the definition of “employee” under the Fair Labor Standards Act (FLSA), then you would count them for purposes of Family and Medical Leave Act (FMLA) compliance. According to the FMLA guidelines: “An employer covered by the FMLA is any person engaged in commerce or in any industry or activity affecting commerce, who employs 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or past calendar year”. (Reference section for the full text of the regulation can be found at: §825.105 Counting employees for determining coverage).

To be eligible for FMLA leave, an employee must be an employee of a covered employer who:

  • Has been employed by the employer for at least 12 months,

  • Has been employed for at least 1,250 hours of service during the 12-month period immediately preceding the commencement of the leave, and

  • Is employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite.


 

Does an employer need to accommodate a reduced work scheduled, as suggested by a doctor, if FMLA has been exhausted? If so, do benefits need to be maintained if hours have fallen below full-time?

Yes.  As long as the reduced hours or other restrictions can be reasonably accommodated without posing undue hardship for the employer, then Workers’ Compensation, FMLA and the Americans with Disabilities Act regulations expect employers to work with employees to return them to work following a disability. However, even while medical treatments under the Workers’ Compensation claim may continue for the duration of the claim, there is no requirement to continue regular employer group health benefits once the FMLA leave has been exhausted if the employee no longer qualifies for the benefit. In this case, the employer may consider offering the employee COBRA continuation coverage due to the reduced work schedule making the employee no longer eligible for full-time employee health benefits coverage.


 

If an employer discontinues a PPO, which is part of a grandfathered plan made up of two PPOs and an HDHP, will the entire plan lose the grandfathered status?

The Affordable Care Act (federal health care reform) specifies that a health plan is a grandfathered plan if (a) it was in existence on March 23, 2010, (b) it covered at least one person on that date and has continuously covered at least one person (although not necessarily the same person), and (c) it has not made any changes that would result in loss of grandfathered status. Federal regulations issued in connection with the Act specify the types of changes that cause loss of grandfathered status.

The Act does not define “plan” with respect to an employer-sponsored health program offering different benefit options. Fortunately, this matter was clarified by the federal regulators in an FAQ issued in October 2010. Each plan option available for the employee to choose is a separate “benefit package” and each benefit package is treated separately for purpose of the grandfather rule. Therefore, in your example, PPO 2 and the HDHP will not lose grandfathered status when PPO 1 loses status.

Excerpt: Q&A #2 from “FAQS ABOUT THE AFFORDABLE CARE ACT IMPLEMENTATION – PART II” issued jointly by the Departments of Health and Human Services, Labor and the Treasury, October 8, 2010:

“Q2: My plan offers three benefit package options – a PPO, a POS arrangement, and an HMO. If the HMO relinquishes grandfather status, does that mean that the PPO and POS arrangement must also relinquish grandfather status?

A2: No. The grandfather analysis applies on a benefit-package-by-benefit-package basis. In this situation, it is permissible to treat the PPO, POS arrangement, and HMO as separate benefit packages. Accordingly, if any benefit package ceases grandfather status, it does not affect the grandfather status of the other benefit packages.”


 

Can an employer require that vacation time be used as part of an FMLA leave?

Under the FMLA regulations, if an employee chooses to substitute accrued paid leave for FMLA leave, he or she may do so. If an employee does not choose to substitute accrued paid leave, the employer may require the employee to substitute accrued paid leave for unpaid FMLA leave pursuant to the employer’s established policies for use of paid leave.

In other words, if the company has an established written policy that they require the use of accrued paid time off (paid leave) then the answer is yes. If the employer has no established policy, then it is the employee’s choice whether or not to do so.

The other caveat to this is if there is any other pay (such as a short term disability STD plan) that is due the employee, then you cannot require the use of their accrued paid time off other than for periods that are unpaid, such as the waiting/elimination period or the amount over and above the benefits payments from the STD carrier.

Pertinent FMLA regulation on the substitution of paid leave:    http://www.ecfr.gov/


 

Is a new hire training program subject to ERISA if it is all-expenses paid, including salary?

The quick answer to your question is no.

Apprenticeship and training programs that cover private sector workers may be ERISA-covered plans. Not all private sector employment-based educational programs, however, are ERISA plans. According to the Department of Labor, scholarship programs paid from an employer’s general assets, payments of compensation out of the employer’s general assets for time spent in training, and in-house professional development programs financed out of the employer’s general assets are not ERISA plans. Most private sector collectively-bargained apprenticeship and training programs are covered by ERISA because the Labor-Management Relations Act requires that the expenses of any joint labor/management apprenticeship committee be defrayed out of monies placed in a separate fund. So depending upon your program, it may or may not be an ERISA plan.

ERISA establishes certain rules that must be adhered to by plans that are subject to its requirements. For more information about how the DOL views training programs under ERISA, visit   http://www.dol.gov/ebsa/faqs/faq-ATP.html.


 

Should an employer re-verify an employee who has renewed his/her employment permit?

The quick answer to your question is no.

According to the E-Verify Customer Guide and the Quick Reference Guide from I-9 Central, E-Verify should not be used to re-verify employees who have temporary work authorization. Instead, you can use Section 3 of the I-9 form. You may see alerts in E-Verify for these individuals who have documents expiring, however, you cannot re-submit their cases for re-verification purposes.

Source: E-Verify Quick Reference Guide available at    http://www.uscis.gov/USCIS/Verification/E-Verify/E-Verify_Native_Documents/E-Verify%20Manuals%20and%20Guides/guide-employer_comp.pdf.

 

We have a non-exempt employee that has been missing several hours a week of work due to “treatment” appointments for an on-the-job injury. Are we required to pay the employee for this time or can PTO be used instead?

There are two issues here: (1) time off scheduling and (2) pay for the time off.

With regard to the employee scheduling his treatment appointments during times that will require him/her to miss a lot of work, you can request that the employee schedule the appointments either at the beginning or end of the day or at other times that are more convenient to the work. You can also reset his/her work hours to better accommodate the treatment schedule too.

With respect to the pay issue: Typically when the employee is first treated by a health care provider for a workers’ compensation illness or injury, you must pay for the employee’s time. After the initial treatment, the employee is under the health care provider’s control. You are not required to pay for treatment-related absences from work. You can require that the employee use paid time off (PTO), such as sick pay, for further physician’s appointments or physical therapy. The employee can also choose to use PTO for this purpose. Check your state Worker’s Compensation rules regarding payments.

We recommend that you are consistent in your application of your rules. If you require other employees with non-work related injuries or illnesses to adhere to certain scheduling requirements and/or use their PTO for their time off, then you may do the same for the employees returning from work-related injuries and illnesses.


 

Can we hire an exempt employee with defined start and end dates?

As long as you are following all of the rules under the Fair Labor Standards Act relative to the exemption from overtime (the position requirements meet the exempt duties tests and the job pays a salary not less than $455 per week), then entering into an employment contract for a regular employee with a finite duration of work is permissible.

We would recommend that you put in writing to this employee the beginning and ending dates of employment with no expectation of continued employment past that date so that the terms and conditions of the offer leave no room for misunderstandings later.


 

Does a contracting employer need to provide temporary agency employees with a letter stating that the position with the contracting company is temporary?

Typically the temporary agency will ensure that their employees know the position they are filling is a temporary assignment. However, if you want to make it perfectly clear, you could ask the temporary agency to give them a letter of understanding structured like an offer letter (on the agency’s letterhead) outlining that the position is temporary through the agency and is expected to continue through [date], that they are ineligible for the contracting company benefits as they are not employees of [company], their employer of record is XX temporary agency, etc. This should ensure that there is no confusion concerning the promise of employment with the contracting company.


 

What exposure to overtime pay does the company have when exempt employees clock in and out per company policy?

There is no requirement under the federal Fair Labor Standards Act (FLSA) that prohibits an employer from requiring exempt employees to clock in or out. However, this practice could signal potential misclassification issues. If you have any employees whose exempt status is questionable, then tracking their time in and out might cause the exempt status to be lost, creating overtime pay and penalties. From a best practice perspective, we recommend limiting this type of tracking for hours worked. However, if you need to track all employee time for project, billing or accounting purposes, then having the same methodology for both exempt and nonexempt purposes would be an acceptable practice for bona fide business reasons.


 

How does pay work for on-call nonexempt employees?

If you require an employee to stay at home or at work on an on-call or standby status, that time may qualify as hours worked. On-call time is not compensable if the employee can use the time spent on-call primarily for his/her own benefit. In determining if on-call time is work time, consider the following:

  • Geographic restrictions on the employee’s movements

  • Required response time (sufficient time is generally 20 – 30 minutes to respond, depending upon geography)

  • The employment relationship and industry practice

  • Any other limitation on the employee’s ability to use the time for his/her own benefit

If you require the employee to carry a cell phone or pager but the employee is free to come and go as s/he pleases, then it is generally not compensable time, and all time spent on call-backs during a standby period is counted as time worked. Time worked includes a reasonable time for travel both to and from the worksite from the point at which the employee is summoned to return to work.

Pay call-back or controlled standby time the same as regular hours worked at the regular wage as well as applicable overtime. Please note that you cannot enter into an agreement with your employee agreeing that there will be no on call pay if it would violate state law.


 

We have an employee on an approved FMLA leave who waived health benefits coverage during annual enrollment. Upon her return from FMLA, can she enroll in benefits if it is outside of the annual open enrollment period?

For an employee out on FMLA leave, the FMLA does include provisions for reinstatement if she chooses not to continue coverage while on leave. However, in this case, the employee did not have coverage before she went out on leave; therefore, there would be no right to reinstatement and the employee would have to wait until the next open enrollment period to enroll unless the plan allows for mid-year election changes based on qualifying life events.

For further reference, Part 825-The FMLA, Subpart B, §825.209 states:

“(e) An employee may choose not to retain group health plan coverage during FMLA leave. However, when an employee returns from leave, the employee is entitled to be reinstated on the same terms as prior to taking the leave, including family or dependent coverages, without any qualifying period, physical examination, exclusion of pre-existing conditions, etc.
See § 825.212(c).”


 

Does a surrogate pregnancy fall under FMLA?

Let’s start out with our assumptions: (1) the employee is voluntarily becoming a surrogate mother; (2) the employer is an FMLA-covered employer; and (3) this employee is or will become FMLA- eligible.

If these are correct assumptions, then yes, a surrogate pregnancy would be eligible for FMLA for medical reasons relating to the pregnancy. This employee would be eligible for up to 12 weeks of leave within the 12-month period as defined under the employer’s policy.

Besides being FMLA-eligible for “the serious health condition of the employee and pregnancy complications”, further complicating the issue is the possibility of baby bonding (if any) because the statute defines son or daughter to mean “a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is (A) under 18 years of age. . .” The regulations use the same definition. If the surrogate is helping the parents, then it is possible that she is standing in loco parentis (a child may have more than 2 people who fit this definition). Please contact an attorney for a legal interpretation if the employee requests baby bonding leave under these circumstances.

IF this employee will receive the child from a surrogate mother, then the employee would qualify for FMLA leave in order to bond with the child, because adoptions are specifically mentioned.


 

When PPACA’s guidelines on excessive waiting period limits go into effect for plan years on or after January 1, 2014, does this mean that groups can no longer have a waiting period that is “the first of the month following 90 days”?

The current thinking (absent explicit guidance from the IRS/DOL on the 90-day limitation on waiting periods) is that employers who have first of the month following 90 days of employment rules will need to amend them for plan years beginning on and after January 1, 2014. The language in the PPACA regulations prohibits eligibility waiting periods that exceed 90 days except in very specific circumstances.

The FAQs clarify the agencies’ current views on the following aspects of this rule: First, plans will not have to cover all employees after 90 days – i.e., exclusions by job category or classification, including part-time status, will still be permitted. Second (and the part that meets your question), the 90-day waiting period begins when the employee is otherwise eligible for coverage under the terms of the Plan. Thus, an otherwise eligible employee cannot be made to wait more than 90 days before coverage is effective. Third, plans may condition eligibility on an employee’s working a specified number of hours within a given period so long as the required hours do not exceed a certain number (to be specified in upcoming guidance).

The FAQs provide the following helpful example [full text of the FAQs can be found at http://www.dol.gov/ebsa/newsroom/tr12-01.html] underlined for your quick reading:

How do the Departments intend to address the application of the 90-day waiting period limitation in PHS Act section 2708 to an offer of coverage by an employer? Having reviewed the comments in response to IRS Notice 2011-36, the Departments intend to retain, for purposes of PHS Act section 2708, the definition in existing regulations that the 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan. This is the definition of waiting period used for purposes of Title XXVII of the PHS Act, Part 7 of ERISA, and chapter 100 of the Code. Under this approach, if a plan were to provide that full-time employees are eligible for coverage without satisfying any other condition, and an employee were hired as a full-time employee, the waiting period (if the employer were to choose to impose one) for that employee would begin on the date of hire and could not exceed 90 days. Consistent with PHS Act section 2708, eligibility conditions that are based solely on the lapse of a time period would be permissible for no more than 90 days.”

We recommend that you work with your benefits advisor and review your plan eligibility rules and plan documentation and consider amending waiting periods based on timing alone (like the first of the month following 90 days) to reflect that the total waiting period will be no more than 90 days in total.

 

When employers participate in a multiemployer plan subject to a collective bargaining union agreement, and the union does not comply with health care reform requirements (minimum value insurance, annual notices, etc) what is the employer’s available recourse?

In general, collectively bargained healthcare plans have to comply with the requirements of the PPACA at the same time other plans are required to comply in 2014. This is an issue for employers with unions regardless of whether they provide benefits through a union-sponsored plan (a Taft-Hartley multiemployer plan) or collectively bargained employer-sponsored benefits.

For multiemployer plans like the one you referenced, we are cautioning our clients to begin now to work with the unions to determine whether or not the plans will meet the PPACA requirements. Some experts are telling us that even with the Taft-Hartley plans, if the plans are not compliant with the PPACA, the employer pays the penalty. We are encouraging clients who are participants of such plans to ask the union benefit plan trustees whether they are in full compliance, so that the employer won’t be hit with penalties. You asked what an employer can do. They can ask the right questions and monitor the results and/or possibly open and renegotiate contracts and/or move away from multiemployer plans to single employer-sponsored plans that are compliant.

Another item for unionized small employers participating in Taft Hartley plans to consider – they miss out on tax benefits the PPACA provides when the PPACA-mandated state insurance exchanges start in 2014. At that time, small employers are eligible for tax credits for paying their employees’ health insurance premiums. However, to be eligible, the insurance must have been purchased on a state exchange. To be sold on a state exchange, health insurance must be available to all employees. Taft Hartley plans therefore cannot be included in the state exchange system because they are open only to union members, and a small employer misses out on the tax benefits of purchasing health benefits from an exchange.

We are encouraging our clients with union benefits plans to consult with benefits and labor counsel who can help determine the best way to approach the potential compliance issues and get them resolved before the laws take effect.

 

Can an employee being called to active military duty until March 2014 cancel his insurance while on leave? Is this a qualifying event that would allow the group to cancel coverage right now at the member’s request? How does this affect his USERRA benefit? When he comes back to work, can the group just re-enroll him on the plans?

If an employee leaves the workforce to perform military service, USERRA requires that the employee be able to continue his/her existing employer-based health plan coverage for the employee and dependents for up to 24 months while in the military.

Is this a qualifying event that would allow the group to cancel coverage right now at the member’s request? It isn’t a qualifying event until the employee starts his military leave.

How does this affect his USERRA benefit?

  • Individuals performing military duty of more than 30 days may elect to continue employer sponsored health care for themselves and their dependents for up to 24 months. They may be required to pay up to 102% of the full premium.

  • For military service of less than 31 days, health care coverage must be provided as if the service member had remained employed.

  • Even if covered service members do not elect to continue coverage during their military service, they have the right to be reinstated in your group health plan when they are reemployed, generally without any waiting periods or exclusions (e.g., pre-existing condition exclusions) except for service-connected illnesses or injuries.

When he comes back to work, can the group just re-enroll him on the plans? Yes – in fact, that is what the law allows, as long as he comes back to work on time.

You may wish to give the service member this chart that outlines rights and responsibilities during USERRA leave:
http://www.dol.gov/vets/programs/userra/USERRA_Federal.pdf.

 

Does a public employer who has a health reimbursement account (HRA) need to pay the PCORI fee for the HRA plan – even though they do not pay taxes?

From our review of the regulations, it would appear that would be the case unless the exceptions outlined below are part of your plan (http://www.gpo.gov/fdsys/pkg/FR-2012-12-06/pdf/2012-29325.pdf). “Section 4377(b)(1)(B) provides that: ‘‘[n]otwithstanding any other law or rule of law, governmental entities shall not be exempt from’’ the fees imposed by sections 4375 and 4376 unless the policy or plan is an exempt governmental program. Section 4377(b)(3) defines an exempt governmental program as (1) any insurance program established under title XVIII of the Social Security Act (42 U.S.C. 1395 et. seq.) (Medicare), (2) the medical assistance program established by title XIX (42 U.S.C. 1396 et. seq.) (Medicaid) or title XXI of the Social Security Act (42 U.S.C. 1397aa et. seq.) (Children’s Health Insurance Program), (3) any program established by Federal law for providing medical care (other than through insurance policies) to individuals (or the spouses and dependents thereof) by reason of such individuals being members of the Armed Forces of the United States or veterans, and (4) any program established by Federal law for providing medical care (other than through insurance policies) to members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act, 25 U.S.C. 1603). Under these special rules, a governmental entity (including a federally recognized Indian tribal government) that is the plan sponsor of an applicable self-insured health plan that does not meet the definition of an exempt governmental program must pay the fee imposed by section 4376.”

Further, under Section VI. Health Reimbursement Arrangements (HRAs) and Flexible Spending Arrangements (FSAs) in the same set of regulations, it confirms that HRAs are included in the PCORI fees as follows: “Section 46.4376–1(b)(1)(ii) of the proposed regulations defined an applicable self-insured health plan to include HRAs (as described in Notice 2002–45 (2002–2 CB 93)) and health flexible spending arrangements (as described in section 106(c)(2)) (FSAs) that do not satisfy the requirements to be treated as an excepted benefit (within the meaning of section 9832(c) and § 54.9831–1(c)(3)(v)).”

 

We have a salaried employee who is taking too much time off for personal reasons and has no sick time left. Can we deduct the time from her vacation balance?

If you have a bona fide time off plan, then you may deduct from that plan for this exempt employee’s absences for personal reasons. When that time is exhausted, then you can deduct from the exempt employee’s salary in full day increments. If the employee works any part of the day, however, and the sick pay and PTO is exhausted, then you will need to pay her the full day’s pay for that day.

In cases like that, however, many employers continue to deduct from the employee’s time off plan balance (taking the number negative). That way, as the employee “earns” additional hours, they are deducted from the negative balance until the employer is “paid back.”

 

Can we advertise for a specific gender for home health aide positions? (Some of our clients feel very strongly about having a same sex aide help them with their bathing and changing needs).

This question has been reviewed by the Equal Employment Opportunity Commission as it relates to employment discrimination, particularly in service and health-related professions. And while the courts have consistently ruled that employers in personal service firms cannot discriminate based on “client preference” relating to race or national origin, this issue of gender preference has been open to more interpretation. Here’s why:

  • While Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment on the basis of race (color), sex, religion and national origin, it does allow an employer to have hiring preferences based upon “bona fide occupational qualifications” (BFOQs).

  • Some employers have taken these BFOQs to mean that if a client or patient demands not to be taken care of by someone outside of the patient’s race or nationality, then the employer could use the client’s demand as a BFOQ. The EEOC and the courts have expressly said that race can never be a BFOQ and that there are very few instances where national origin could be a BFOQ (and those instances are generally around language barriers, not cultural or religious ones).

  • However, in the case of sex/gender, the courts have ruled that it is unlawful gender discrimination in employment for a healthcare employer to have a policy saying that female patients get only female caregivers while male patients may be assigned either male or female caregivers. However, a health care employer can honor a specific request from a patient for a same-sex caregiver, without violating the laws against discrimination, but only if the care to be given involves issues of intimate personal privacy, such as a patient’s preference not to have an opposite-sex caregiver assisting with toileting or cleansing the patient’s body in all of the private areas. The courts have gone on to say, however, that there must be a request from the patient for a same-sex caregiver, rather than a blanket policy excluding opposite sex caregivers. The blanket policy initiated by the employer could lead to legitimate charges of gender discrimination.

We would encourage you to review the types of work your employees are doing for your clients and document the instances of intimate personal care where the client has requested an aide of a certain gender. Do not institute a blanket policy where female clients are attended by female aides and male clients by male aides. Review each situation on a case-by-case basis to ensure that there is no unlawful discrimination or discriminatory intent.

 

The dependent day care portion of the FSA is maxed at $5000. Is this per household or could each parent elect $5000 through their employer?

The $5,000/$2,500 Dependent Care limit has not changed. The IRS limits the total amount of money an employee can contribute to a dependent care flexible spending account to $5,000 each year for married couples filing jointly, unmarried couples, and single individuals, and $2,500 if the employee is married and filing separately. The maximum is $5,000 for the family unit, not $5000 per parent.

 

How is reporting of the MLR being handled with respect to the 5500 filing? Will it require an amended Schedule A for 2011 or a new one in 2012?

In accordance with ERISA, Schedule A (“Insurance Information”) sets forth required information about a specific group insurance policy with respect to a specific policy period. The insurance carrier completes the policy-specific information and delivers the Schedule A to the ERISA plan sponsor (i.e., employer). The employer prepares the plan’s annual report (Form 5500) including any Schedules A. In the event that the carrier corrects information by delivering an updated Schedule A, the employer would need to revise its annual report and file an amended Form 5500 with the correct Schedule A.

Separately, the Affordable Care Act requires health insurers and HMOs to spend the majority of the premium they collect on medical care (excluding administration or overhead). The required minimum – called the Medical Loss Ratio or MLR – is 85% (or 80% for individual market and small market policies). This MLR requirement first applied with respect to calendar year 2011 and rebates, if any, were distributed to policyholders by August 1, 2012.

Note that the amount of a MLR rebate is not case-specific and does not reflect the employer’s group policy results; instead the rebate amount is based on the carrier’s total results for all policies issued in a market segment (individual; small group; large group). Also, MLR calculations are not based on the employer’s group policy period; instead MLRs are determined by calendar year.

Carriers are not expected to report MLR rebates on their Schedules A since the rebate amount is not attributable to the specific group policy or policy year. Employers will not need to file an amended Form 5500 since there will not be any new or corrected Schedule A information to report.

Please note that the typical employee welfare benefit plan is an “unfunded plan” as defined by ERISA. The plan’s “funding type” is reported on Form 5500. Unfunded plan means that all plan benefits are insured (group insurance policies) or uninsured (paid by employer from general assets) or a combination of insured and uninsured benefits. (It is unusual, although certainly possible, for a private employer to sponsor a “funded” welfare plan, which generally means that some or all benefits are paid from plan assets held in a trust.) Also note that employers that receive rebates needed to follow Department of Labor guidance (DOL TR 2011-04) regarding using all or a portion of the rebate for the benefit of plan participants within three months of receipt. If the employer sponsors a funded welfare plan, and/or if the employer used the rebate in a manner inconsistent with the DOL guidance, the employer should discuss its case with appropriate legal counsel specializing in ERISA compliance.

 

Is there any special guidance for temporary staffing agencies regarding the employer mandate under the Affordable Care Act and definitions of seasonal employees?

The Affordable Care Act (federal health care reform) includes provisions for “employer shared responsibility” often referred to the employer mandate of “play or pay”. Briefly, beginning in 2014, a large employer (50 or more full-time-equivalent employees) must offer all full-time (30 hours/week) workers at least one group health option that is affordable and provides minimum value. Affordable means the employee’s contribution for single coverage does not exceed 9.5% of wages; minimum value means the plan’s benefits are 60% or more of total allowable costs.

“Full-time employee” generally means an employee that works on average 30 hours/week. IRS regulations will govern methods for employers to define “employee and methods to count average work hours, including look-back measurement periods.

IRS has not yet issued final regulations, although proposed regulations are available on many aspects of the employer play-or-pay rules. IRS recently released a set of proposed regulations offering preliminary guidance regarding “staffing agencies”. However, this material is preliminary; IRS is requesting public comments and will hold hearings this spring to gather input. Prior to 2014, IRS is expected to update the guidance to resolve numerous grey areas.

Based on the preliminary guidance, IRS will apply the common-law standard to determine which entity (staffing agency or client-employer) is the employer of a particular worker. Under this standard, “an employment relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished but also as to the details and means by which that result is accomplished.” The IRS generally uses a 20-point test to determine who the common law employer is. Employers that use staffing agencies or leasing companies – which are different concepts – will need to work with their legal counsel to determine their status under the Act’s play-or-pay rules.

“Seasonal employees” traditionally has referred to certain workers in the agricultural and retail industries. For purposes of the Act’s play-or-pay rules, the IRS proposed regulations indicate that employers in other industries also may consider certain workers as seasonal. Seasonal workers (working less than four months (cumulative) in any 12-month period) may be excluded in determining whether the employer is a “large employer”. If the employer is a large employer, seasonal workers as considered variable-hour workers, which means health coverage generally must be offered if they average 30 hours/week over the look-back measurement period.

 

Is there a reason to have a supervisor’s name in an offer letter? In other words, is an offer letter that only lists a new hire’s supervisor as a title acceptable?

There is no definite reason to have a supervisor’s name on an offer letter or any requirement to have the title on the document either. The intent of the offer letter is to welcome the new hire and to ensure that the new hire has all of the information s/he will need regarding the terms and conditions of employment. If, in your environment, putting the supervisor’s name on the document does not make sense, then feel free to leave it off the document.

We do recommend, however, that you do include a contact person that the new employee can go to for questions about the position or for any assistance the new employee may need.

 

What is the effective date of Medicare, the date the employee turns 65 or the month before?

Under typical circumstances (no disability), then Medicare Parts A and B begins the first day of the month that the participant turns age 65. If the participant is already getting benefits from Social Security or the Railroad Retirement Board, enrollment in Parts A and B are typically done automatically. Otherwise, the participant may need to enroll.

The government has produced a useful publication entitled “Understanding Medicare Enrollment Periods” that can be found at http://www.medicare.gov/Publications/Pubs/pdf/11219.pdf and should answer any additional questions you may have.

 

Can we rescind an employment offer via email?

There is no formal requirement defining a required process for job offer rescissions. So what will follow is best practice information based upon common management techniques and practices.

Please consider, however, the issue of breach of contract with your employment attorney. If a formal offer of employment was made and accepted and the applicant relied in good faith on that “contract” and has been damaged as a result of that contract not being fulfilled (such as quitting a good job, moving households, spending money and time to obtain special certifications particular to your position, etc), then you may have to deal with the legal ramifications of that.

In addition, if the reason for the rescission of the offer is based upon an unsatisfactory drug test, credit report, etc., then you should give the applicant a copy of the report as a reason for the rescission.

You asked if it would be permissible for you to rescind the offer with an email or other form of written communication without direct contact with the applicant. The direct answer to your question is that the employer may use whatever form of contact they prefer. However, we do recommend a more direct method of communication for the simple reason that this individual, while perhaps not an employee now, may become an employee or a customer in the future. With the explosion of social media, it is so easy for this person to post an unfavorable account of his dealings with your company on Twitter, Facebook or YouTube (or other social media sites) that is picked up by your customers or by others in the community and causes your business to suffer damage. We have found that employers who go the extra mile to end an employment relationship with kindness and fairness generally suffer less loss of reputation, lawsuits, etc.

 

Our employee waived health coverage for himself and family under our plan and has been covered on his spouse’s employer plan. The spouse recently lost her job and lost health care coverage. Would this qualify as a mid-year election change under our plan to allow the employee and his entire family to come on our plan, even though our employee did not previously have coverage from us?

Under the IRS §1.125-4 permitted election change rules, as long as the Plan so allows for mid-year changes, then changes in employment status may be considered when allowing for the mid-year changes to the elections under the cafeteria plans and the entire family could enroll in your company’s group health plan upon losing coverage under the spouse’s plan.

For the full text of the Section 125 mid-year election change rules, visit:
http://www.irs.gov/pub/irs-regs/td8921.pdf.

 

With respect to imputed income for domestic partners, it is our understanding that medical, dental and vision benefits would incur imputed income with respect to cost of coverage. Would you be able to advise how this is handled if a domestic partner is also included for coverage as a dependent under an Executive Medical Reimbursement plan?

Under the federal rules, neither a domestic partner nor the dependent of a domestic partner will receive tax-favored treatment under any form of health reimbursement arrangement unless the individual is a dependent under section 152 of the IRC. The coverage for the domestic partner must be imputed to the employee’s gross income for federal purposes. State and local tax treatment of domestic partner benefits will vary. Consult the applicable laws and/or a tax professional for more detailed information as to how the state or local tax rules apply in your area.

 

Are employers with both unionized and nonunion employees covered by different health plans responsible for the employer shared responsibility provisions of health care reform?

Please note that the regulations that have been published to date for the employer shared responsibility provisions have been proposed rules (not final rules), with a comment period until March 2013 before the final regulations are issued. Here is what we do know as a result of the proposed rules and ”expert” analyses: In general, collectively bargained healthcare plans have to comply with the requirements of the PPACA at the same time other plans are required to comply: January 1, 2014. This can potentially create an issue for unionized employers with benefits offered through a union-sponsored plan (multiemployer plan) if the collective bargaining agreement does not expire before January 2014 and the benefits currently provided do not meet the minimum value and other PPACA requirements that might trigger the employer penalties.

For purposes of determining employer size (the 50-full time employee or equivalent rule), all employees of the employer are counted (union and non-union employees alike). The benefits offered under the company-provided plan for the nonunion employees and the plan offered through the multiemployer plan for the unionized employees would be evaluated separately to determine compliance with the PPACA rules and the penalties assessed separately based upon each plan. There is no requirement under the law for the employer to cover the union employees on the company plan AND provide for the union employee benefit under the union plan too. However, the experts seem to concur that as it is currently written, if the union health plan that is offered and available to the company union employees is not compliant with the PPACA, the employer pays the penalty just like the employer would for the company-sponsored plan for the nonunion employees.

We are encouraging all of our readers to continue to watch for the final regulations when issued after the March comments are evaluated, and if you have union benefit plans, make sure you know the rules surrounding the minimum value plans and negotiate those provisions in your collective bargaining agreements (to take effect on or before 1/1/14) so you don’t run the risk of having to pay any employer penalties under the “play or pay” rules.

 

Can you help us understand what is required for the continuation of group life insurance for employees on FMLA or military leaves of absence?

Employers do not have to provide any other benefits outside of group health insurance during leave, except as may be required under their own policies. FMLA or USERRA (military) leave, however, is to be treated as “continuous service” (i.e., no break in service) for purposes of vesting and eligibility to participate in benefit plans. If, for example, the plan requires an employee to be working on a specific date to be credited with a year of service for vesting or participation purposes, an employee on FMLA or USERRA leave who returns to work at the end of the leave will be considered as working on the specific date.

Employers also are not required to entitle the employee to accrue any employment benefits during leave, unless those benefits accrue under the employers’ policies for non-FMLA leaves. Employment benefits include benefits such as life insurance, disability insurance, sick leave, annual leave, educational benefits, vacation time, and pensions.

We advise our clients that allowing benefits, other than health benefits, to continue during leave is a policy decision to be made before employees take leave. There may be administrative as well as other problems in not continuing benefits. This is because the law requires that employees be restored to their former positions with equivalent pay, benefits, and seniority when they return to work after the leave. It may be simpler to continue contributions towards benefits such as life insurance because it may be administratively cumbersome to suspend and then resume such benefits.

 

I have an employee who is getting divorced and the court order is to put the spouse on COBRA. Who signs the COBRA paperwork, the employee or the ex-wife (qualified beneficiary) who was on the plan prior to them getting divorced?

The COBRA plan administrator must notify the divorced spouse of her rights for COBRA. Under COBRA, covered spouses and dependent children may continue their plan coverage for up to 36 months when they would otherwise lose coverage due to divorce or legal separation.

Typically, a qualified beneficiary (in this case, the soon-to-be ex-wife) must notify the plan administrator within 60 days after divorce or legal separation (if would appear that you already have the court order so that step has been satisfied). After being notified, the plan administrator must give notice, generally within 14 days, to the qualified beneficiary of the right to elect COBRA continuation coverage.

 

Can you designate FMLA leave retroactively in order to include someone that is on Work Comp?

Under the FMLA regulations, if an employer does not designate leave as required, the employer may retroactively designate leave as FMLA leave with appropriate notice to the employee, provided that the employer’s failure to designate leave in a timely manner does not cause harm or injury to the employee. The practical rule of thumb is that retroactively designating a leave that the employer “knew of or should have known about” (as in the case of an already designated workers’ compensation illness/injury may not be permissible if there is a negative impact to the employee with the retroactive designation.

In all cases where leave would qualify for FMLA protections, an employer and an employee can mutually agree that leave be retroactively designated as FMLA leave.

Regarding the “harm or injury to the employee” standard, the Department of Labor has illustrated this issue with the following example in its FAQs
(http://www.dol.gov/whd/fmla/finalrule/NonMilitaryFAQs.pdf).

 

How long should an employee be out before we start FMLA?

The general rule of thumb is that you can start the FMLA immediately if an employee is hospitalized; if not, then we recommend that you review the Department of Labor’s guidelines for what constitutes a “serious health condition” and follow those timelines. Under the DOL definition, a “serious health condition” is defined as an illness, injury, impairment, or physical or mental condition that involves inpatient care or continuing treatment by a health care provider. The “continuing treatment” test for a serious health condition under the regulations may be met through (1) a period of incapacity of more than three consecutive, full calendar days plus treatment by a health care provider twice, or once with a continuing regimen of treatment, (2) any period of incapacity related to pregnancy or for prenatal care, (3) any period of incapacity or treatment for a chronic serious health condition, (4) a period of incapacity for permanent or long-term conditions for which treatment may not be effective, or (5) any period of incapacity to receive multiple treatments (including recovery from those treatments) for restorative surgery, or for a condition which would likely result in an incapacity of more than three consecutive, full calendar days absent medical treatment.

The regulations specify that if an employee asserts a serious health condition under the requirement of a “period of incapacity of more than three consecutive, full calendar days and any subsequent treatment or period of incapacity relating to the same condition,” the employee’s first treatment visit (or only visit, if coupled with a regimen of continuing treatment) must take place within seven days of the first day of incapacity. Additionally, if an employee asserts that the condition involves “treatment two or more times,” the two visits to a health care provider must occur within 30 days of the first day of incapacity. Finally, the regulations define “periodic visits” for treatment of a chronic serious health condition as at least twice a year.

 

Does an employee earn vacation while on FMLA or does the “clock” stop for accruing benefits?

The short answer is that employers are NOT required to allow PTO or vacation time to continue to accrue while on FMLA unless the employer policy allows PTO/vacation to accrue for non-FMLA leave. (These employment benefits include PTO benefits in addition to life insurance, disability insurance, sick leave, annual leave, educational benefits, vacation time, and pensions). Employers are required to continue to offer employees on FMLA group health plan benefits (meaning any plan to provide health care, including medical, dental, eye, and pharmaceutical coverage) on the same basis as if the employee were continuously employed.

From an administrative and practical standpoint, however, some employers find it easier just to allow the “seniority” to accrue because the FMLA law requires that employees be restored to their former positions with equivalent pay, benefits, and seniority when they return to work after the leave.

 

How do you process FMLA if an employee does not request it or refuses to submit paperwork with the doctor's certification due to fees for processing?

An employee has an obligation to respond to an employer’s questions to determine if an absence is potentially FMLA-qualifying. And if an employee fails to respond to an employer’s reasonable questions regarding the leave request, the employer may deny FMLA protection if the employer is unable to determine whether the leave is FMLA-qualifying. It is up to the employee to get the information about his/her medical condition from the physician – not the employer’s responsibility. And if the doctor charges for the form, that is also the employee’s responsibility. If the employee does not provide the necessary documentation, the employer can follow company rules and policies for time off for non-FMLA leaves with respect to job and benefits protection.

 

What are an employer’s responsibilities to its 401(k) plan if the employer terminates the contract with the third party administrator managing the plan?

As the 401(k) plan sponsor, the employer is required (by ERISA) to provide fiduciary oversight to the plan. The employer never loses that fiduciary responsibility, even if the company uses a Third Party Administrator (TPA) to administer the plan. If the plan sponsor makes the determination that the current TPA is unsuitable, then employer can certainly make other arrangements to ensure continuity and prudent fiduciary management of the account.

You asked about the plan sponsor’s obligations for the 401(k) plan. The Department of Labor has produced a PDF booklet that does a good job of summarizing the key items you should know (http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html#.UMc7ene5UlQ). It covers the scope of ERISA’s protections for private-sector retirement plans (public-sector plans and plans sponsored by churches are not covered by ERISA) and provides a simplified explanation of the law and regulations. It is not a legal interpretation of ERISA and really isn’t intended to be a substitute for the advice of a retirement plan professional.

In summary, here are the major items that you will need to take care of if you plan on administering the plan in-house:

  • Ensure that the Plan has a written plan document that describes the benefit structure and guides day-to-day operations;

  • Ensure that there is a trust fund (or other funding vehicle)to hold the plan’s assets;

  • Ensure that the Plan has a recordkeeping system to track the flow of monies going to and from the retirement plan; and

  • Ensure that the plan has documents to provide plan information to employees participating in the plan and to the government.

If you decide not to retain another TPA and use an internal administrative committee or human resources department to manage some or all of a plan’s day-to-day operations, then that group will need to be aware of their fiduciary responsibilities. They will be responsible for the items listed in the bullet points above as well as the business decisions (not ERISA-governed) to establish the plan, to determine the benefit package, to include certain features in the plan, to amend the plan, and to terminate the plan.

Fiduciaries act on behalf of participants in a retirement plan and their beneficiaries and carry the following responsibilities (from the ERISA regulations):

  • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;

  • Carrying out their duties prudently;

  • Following the plan documents (unless inconsistent with ERISA);

  • Diversifying plan investments; and

  • Paying only reasonable plan expenses.

With these fiduciary responsibilities, there is also potential liability. The Company sponsoring the plan and the fiduciaries may face liability and penalties. Fiduciaries who do not follow the basic standards of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of the plan’s assets resulting from their actions.

 

For a self-insured client with a 12/1/12 plan year renewal date, do they have to pay the CER fee on July 31, 2013 on IRS form 720? Or should the fee be paid sooner, since the plan year begins prior to the start of the fiscal year?

Our understanding is that the PCORI fee applies to fully insured and self-funded medical plans covering U.S. residents; expatriate plans are excluded. It also applies to individual/family plans, voluntary/mini-med plans and retiree-only plans. With respect to the reporting and payment using IRS Form 720, that is required by July 31 of the calendar year immediately following the last day of the policy or plan year. For example, the fee for the policy or plan year ending on December 31, 2012 must be filed by July 31, 2013. Liability for a plan year ending on June 30, 2013 must be filed by July 31, 2014.

In the case you posed, the filing should be made by July 31, 2013.

The regulations can be found at: www.gpo.gov/fdsys/pkg/FR-2012-04-17/pdf/2012-9173.pdf.

 

Can you provide me with more information about employer notification requirements for Medicare Part D coverage and any penalties for noncompliance?

Plan sponsors of group health plans offering prescription drug coverage to Medicare eligible individuals have been responsible for issuing notices to Medicare Part D eligible individuals for several years now. The annual notice deadline is before October 15 of each year. What follows below are the employer notice requirements.

The Medicare Modernization Act (MMA) requires employers with policies including prescription drug coverage to notify Medicare eligible policyholders whether (or not) their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage.

For these employers, there are two disclosure requirements:

  1. The first disclosure requirement is to provide a written disclosure notice (the sample of the notices can be found at the link below to the CMS website) to all Medicare-eligible individuals annually who are covered under its prescription drug plan, prior to October 15th each year and at various times as stated in the regulations, including to a Medicare-eligible individual when he/she joins the plan. This disclosure must be provided to Medicare-eligible active working individuals and their dependents, Medicare-eligible COBRA individuals and their dependents, Medicare-eligible disabled individuals covered under your prescription drug plan and any retirees and their dependents. The MMA imposes a late enrollment penalty on individuals who do not maintain creditable coverage for a period of 63 days or longer following their initial enrollment period for the Medicare prescription drug benefit. Accordingly, this information is essential to an individual’s decision whether to enroll in a Medicare Part D prescription drug plan.

  2. The second disclosure requirement is for employers to complete the online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan. The Disclosure should be completed annually no later than 60 days from the beginning of a plan year (contract year, renewal year), within 30 days after termination of a prescription drug plan, or within 30 days after any change in creditable coverage status.

Employer Penalties: The MMA does not include a specific penalty for failure to provide the required notices. If, however, the employer is requesting the Retiree Drug Subsidy (RDS) from CMS, then the required attestation that all applicable rules will be followed would require that the appropriate notices are sent to Medicare affected members. If the Medicare member can prove that they did not get adequate notice that their employer plan was not creditable, then CMS may not apply the premium penalty when the member enrolls in Part D.

However, employee relations issues may arise if employers fail to properly notify Medicare Part D-eligible employees of the plan’s creditable status. For example, if employees do not know whether their coverage is creditable or non-creditable, this might prevent them from making an educated choice in coverage options and could possibly result in the individual having to later pay higher Medicare Part D premiums.

More information about this requirement can also be found on the CMS website along with the sample disclosure notices:

http://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/

CC Disclosure 2 CMS Updated Guidance

 

For a self-insured employer that offers medical coverage and an HRA as part of its plan, does the CER fee apply to both the medical insurance and the HRA separately (meaning they pay the fee twice?) or is it assessed against them as a single unit, meaning they pay the fee of just $1?

The CER fee depends on whether all employer group health care arrangements are self insured or a combination of self and fully insured. Both the medical insurance and the HRA are considered group health plans under the ACA rules. The proposed regulations provide that if a plan sponsor has two or more arrangements that are all self-insured with the same plan year, then for purposes of calculating the fee, they may be treated as a single applicable self-insured health plan. Conversely, if a plan sponsor has a self-insured arrangement and a fully insured arrangement, then the plan sponsor will be responsible for the fee for the self-insured arrangement and the health insurer will be responsible for the fee for the fully insured arrangement.

In your example, we are assuming that the plan sponsor has an HRA that is integrated with another applicable self- insured health plan that provides major medical coverage and both have a calendar plan year. Since both arrangements are self-insured with the same plan year, the plan sponsor will have only to pay and report a single fee. If the plan sponsor is in a situation where the HRA and major medical coverage have different plan years, in order to avoid paying duplicative fees, the employer may want to consult with legal counsel and amend the HRA to conform its plan year to the medical plan year or consolidate the two programs under a “wrap plan.”

On December 6th, the IRS issued final rules that can be found at
https://www.federalregister.gov/articles/2012/12/06/2012-29325/fees-on-health-insurance-policies-and-self-insured-plans-for-the-patient-centered-outcomes-research#h-17.

The applicable section supporting the information provided above can be found in Section VI. “Health Reimbursement Arrangements (HRAs) and Flexible Spending Arrangements (FSAs)”.

 

We have an employee out on a non-FMLA leave who elected not to continue benefits because she is out of the country for her extended personal leave. How will the carrier view the HIPAA preexisting conditions rules upon reinstatement to benefits from the leave and would that be a COBRA qualifying event?

  • Under the Section 125 mid-year election change rules, this could be considered a status change allowable for a mid-year election revocation (if you plan allows for mid-year election changes). Under these rules, a “change in work schedule, such as a reduction or increase in hours of employment by the employee, spouse, or dependent, including a switch between part-time and full-time, a strike or lockout, or commencement or return from an unpaid leave of absence” would qualify for the change.

  • Because this leave is not protected under FMLA, it is our opinion that the break in coverage and subsequent re-enrollment may trigger potential pre-existing condition exclusions. The employee will need to weigh the costs of continuing coverage versus potential pre-existing condition liability. Please check with your carrier to see if they would invoke the pre-existing condition rules.

  • Under HIPAA, a “pre-existing condition” is defined as an illness or condition that is present before an individual’s first day of coverage under a group health plan (in this case, it may be upon re-enrollment in the group health plan). Further, a plan is allowed to look back only 6 months for a condition that was present before the start of coverage in a group health plan. Specifically, the rules say that a pre-existing condition exclusion can be imposed on a condition only if medical advice, diagnosis, care, or treatment was recommended or received during the 6 months prior to the enrollment date in the plan. In addition, under HIPAA, group health plans and issuers cannot exclude an individual’s pre-existing medical condition from coverage for more than 12 months (18 months for late enrollees) after an individual’s enrollment date. However, HIPAA also requires a new employer’s plan to give individuals credit for the length of time they had prior continuous health coverage, without a break in coverage of 63 days or more.

  • With respect to the COBRA question, we do not believe that a voluntary revocation of health benefits due to the leave would meet the “qualifying events” definition of COBRA; therefore, this would not be a COBRA event. “COBRA qualifying events” are events that cause an individual to lose group health coverage. The nature of the qualifying event determines which persons will qualify for COBRA continuation coverage as a result of the event and the length of that coverage. The following are qualifying events for a covered employee if they cause the covered employee to lose coverage: (1) Termination of the covered employee’s employment for any reason other than “gross misconduct”; or (2) Reduction in the covered employee’s hours of employment. Even though this unpaid leave reduces the employee’s “hours of employment” you are willing to continue benefits for the period she is gone from work and her revocation of the benefits under the 125 plan rules is voluntary. We would encourage you to consult with your benefits attorney for a complete review of the facts and circumstances surrounding this issue for a legal interpretation of your responsibilities to this employee.

 

It has always been my understanding that Workers’ Compensation injuries that are accepted by the carrier are not to be charged against their potential FMLA leave because the injury is not the employee’s fault, but my office colleague thinks that is not true. What is the right answer?

Your colleague is right. Employees eligible for FMLA and needing time off for any reason covered under FMLA (own serious illness or injury – WC cases would be part of this; child/parent/spouse serious illness or injury; baby bonding) should be designated as FMLA leaves. Most reasons for the need for FMLA (except maybe new children or elective surgeries) are not planned and not the employee’s fault.

This is the rationale for running the leaves concurrently:

  • FMLA is a federal leave law intended to protect employees who need to take time away from work to attend to certain family and medical problems. It is a job and benefits protected leave.

  • Workers’ compensation statutes are primarily state liability and income continuation laws that protect employees who are injured while working. Almost every state has a law that guarantees an income (funded by employers and the state) to employees injured on the job and at the same time places limits on the employer’s responsibility for the injury. Benefits vary from state to state but typically include medical treatment, rehabilitation, disability, and wage continuation. WC statutes generally are not leave laws, however. Most states do not require employers to give a specific amount of leave for workers’ compensation, and only a few states require reinstatement from WC leave.

  • Of course, having a work-related injury is never a good thing. However, running both leaves concurrently gives the injured worker the best of both worlds: income replacement from WC and job and benefits protection from FMLA.

 

We have a client that will be closing next year. They administer their own COBRA and are concerned about notification requirements to current participants, among other things. Can you let us know what rules there are surrounding plan closings for plans with less than 100 participants?

We encourage your client to consult with the transactions attorney they are working with to help them close the business now to better understand the issues surrounding the closing of the business (for example, will the health plans be discontinued?). The transactions attorney should be very well informed as to how to successfully close a business and provide the necessary notifications not only to employees but also to vendors and other stakeholders.

With that said, however, most employee benefits are covered by ERISA rules (both health and welfare as well as retirement plans), and at the bottom of this answer is the link for ERISA reporting and disclosure rules.

For most benefit plans involving a material reduction in covered services or benefits, the administrator of a group health plan is required to provide each participant covered under the plan with a summary of any modification to the plan or change in the information required to be included in the SPD that is a material reduction in covered services or benefits not later than 60 days after the date of adoption of the modification or change. A reduction in covered services or benefits generally would include any plan modification or change that eliminates benefits payable under the plan.

Where information is required to be provided under ERISA, the plan administrator must use measures “reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals.” Material which is required to be furnished to all participants covered under the plan must be sent by a method or methods of delivery likely to result in full distribution. Acceptable methods of delivery include:

  • In-hand delivery to an employee at his or her worksite;

  • First-class mail; and

  • Second or third-class mail, but only if return and forwarding postage is guaranteed and address correction is requested (note that any material sent by second or third-class mail which is returned with an address correction must be sent again by first-class mail or personally delivered to the participant at his or her worksite).

Electronic delivery may also be acceptable provided that certain requirements are satisfied.

If a retirement/pension plan terminates or becomes insolvent, ERISA provides participants some protection. In a tax-qualified plan, a participant’s accrued benefit must become 100 percent vested immediately upon plan termination, to the extent then funded. If a partial termination occurs in such a plan, for example, if an employer closes a particular plant or division that results in the termination of employment of a substantial portion of plan participants, immediate 100 percent vesting, to the extent funded, also is required for affected employees.

For more information about reporting and disclosure requirements, visit
http://www.dol.gov/ebsa/pdf/rdguide.pdf. This document covers health and welfare plans.

For their 401(k) plan, they might wish to review Section 2: Standard Terminations (for covered single-employer defined benefit plans) – (ERISA §§ 4041 and 4050; 29 CFR Parts 4041 and 4050); and/or Section 3: Distress Terminations (for covered single-employer defined benefit plans) - (ERISA §§ 4041 and 4050; 29 CFR Parts 4041 and 4050).

Please review the EBSA document provided at the link above for information about 5500 filings for both health and welfare and retirement plans. COBRA notices will also be needed if the plan is remaining intact for any surviving employees. Otherwise, the client should provide employees with the COBRA Unavailability Notice, letting them know that the plan is terminating so no continuation coverage will be offered.

 

Can an employer deny COBRA coverage if the employee is terminated for theft?

The term “gross misconduct” is not specifically defined in COBRA or in regulations under COBRA. Therefore, whether a terminated employee has engaged in “gross misconduct” that will justify a plan in not offering COBRA to that former employee and his or her family members will depend on the specific facts and circumstances. Generally, it can be assumed that being fired for most ordinary reasons, such as excessive absences or generally poor performance, does not amount to “gross misconduct.” In order to qualify for the exception, the conduct must not simply be “misconduct.” It has to be “gross.”

While individual employers decide what gross misconduct is, the courts are getting into the decision too.

Unfortunately, this can create confusion over what is gross misconduct for COBRA purposes and what employers should do to deal with terminated employees for COBRA administration purposes.

In some of the court decisions, the themes are similar:

  • Gross misconduct is an intentional, deliberate, extreme and outrageous that can be “reckless or in deliberate indifference to an employer’s interests.” Employees that routinely engage in unauthorized activities that are contrary to the interests of the employer or jeopardize the safety of other employees could be engaging in “gross misconduct.”

  • The employer has the burden of establishing proof that the termination was for “gross misconduct.” The presumption is that the termination was a qualifying event that entitles the employee to COBRA benefits. If the employer intends for the termination to act as a bar to the general COBRA continuation rights of the employee, it is incumbent upon the employer to create a record of the activity alleged and prove, if challenged, how that conduct rose to the level of “gross misconduct” to justify denying COBRA right. Then, the employer must establish that the gross misconduct was the actual basis for the termination. It must be the primary reason, not one of many.

  • The employee and potential COBRA beneficiaries have to be notified of the determination that COBRA is not being offered because of the termination for gross misconduct. The general COBRA notice provisions require that after a quality event occurs, the employee and any covered dependents eligible for COBRA coverage be notified of their option to elect continuation coverage. If that coverage is being denied, the employee and dependents must be notified of the decision and must also be given the right to appeal the determination by the plan administrator.

  • In your client’s case of considering denying an employee COBRA continuation coverage, here is what we recommend:

    1. Review the facts and circumstances leading up to the termination. If the theft is being prosecuted, then that would probably automatically be considered “gross misconduct”. If it is small theft, the client might want to consider the potential impacts of denying COBRA rights. Is the burden of proving the denial worth not offering a benefit that the terminated employee may not take/be able to afford anyway?

    2. In all cases, document the acts leading to the termination and how they impacted the business.

    3. Provide a “Notice of Unavailability of COBRA Coverage” to the employee and covered dependents with the right to appeal advising them that coverage is being denied because of the termination for gross misconduct.

 

We have an employee that can enroll on her husband's plan. Can we reimburse the employee for the amount of premium we contribute to other employees enrolled on the group plan? If so, can we deduct the cost of the reimbursement?

If you have a flexible cafeteria plan benefit, you may establish flex credits (or cash in lieu of benefits) for adopting certain benefits and denying others. In order to be nondiscriminatory, this type of benefit option – cash instead of a premium contribution to the group health plan – should be offered to all employees who are part of the group. That is the way to ensure that this would be done on a tax favored, nondiscriminatory basis. If you are simply paying the employee not to take the employer’s benefits by reimbursing that employee’s participation in other employer group health plan, it most likely would be taxable income. We would encourage you to discuss this benefit option with your tax advisors prior to implementing to determine the taxability of this reimbursement.

 

I work for a company with 20 or more employees and cover a domestic partner. How does Medicare coordinate with this group coverage for my partner?

For groups with more than 20 employees, Medicare pays first if a domestic partner is entitled to Medicare on the basis of age and has group health plan coverage based on the current employment status of his/her partner.

Medicare generally pays second:

  • When the domestic partner is entitled to Medicare on the basis of disability and is covered by a large group health plan on the basis of his/her own current employment status or the status of a family member (a domestic partner is considered a family member).

  • For a 30-month coordination period when the domestic partner is eligible for Medicare on the basis of End-Stage Renal Disease (ESRD) and is covered by a group health plan on any basis.

  • When the domestic partner is entitled to Medicare on the basis of age and has group health plan coverage on the basis of his/her own current employment status.

 

We are hiring an employee into a job that we would typically hire as a contractor, with a defined start and ending date. But this time we would like to hire him as an exempt employee on our payroll. Is that OK?

As long as you are following all of the rules under the Fair Labor Standards Act relative to the exemption from overtime (the position requirements meet the exempt duties tests and the job pays a salary not less than $455 per week), then entering into an employment contract for a regular employee with a finite duration of work is permissible.

We would recommend that you put in writing to this employee the beginning and ending dates of employment with no expectation of continued employment past that date so that the terms and conditions of the offer leave no room for misunderstandings later.

 

Because our business is seasonal, may we restrict the times that employees may take paid time off to our slow times?

There is no requirement for an employer to provide vacation (paid or unpaid), so employers that offer the benefit may create the rules surrounding the use of the benefit, including restricting time off for certain periods of the year and/or requiring that the time off be taken at a certain time of the year.

The keys are consistency in how you apply the rules and clear communications to your employees so that they understand your rules to avoid misunderstandings and/or concerns about discrimination.

 

We have an employee out on FMLA leave who has requested that we cancel her health benefits while she is on leave because she cannot afford the employee share of the premium. Is that allowable under the FMLA rules?

The short answer to your question is yes. The FMLA regulations allow employees to suspend their health benefits while on leave as long as the coverage is reinstated immediately without a waiting period upon her return from FMLA. (§ 825.209(e)) We recommend that you ask her to put her request for the suspension in writing for your records. Just make sure that you work with your carrier to reinstate her benefits upon her return on the same terms as prior to taking the leave, including family or dependent coverage, without any qualifying period, physical examination, exclusion of pre-existing conditions, etc.

 

We have employees working in various states where different coverage (and premiums) are available to our employees working in that state. Can we vary our company premium contribution for all of the employees in that coverage area as long as we are consistent in the benefits offered by geographic location?

As we understand the nondiscrimination rules, as long as the employer/plan sponsor treats “similarly situated individuals” in the same manner as it relates to health plan access, eligibility and cost, then the plan sponsor will not be in violation of the HIPAA nondiscrimination rules. In fact, there are frequently asked questions on the DOL website addressing this issue, including one that describes similarly situated individual as a “group of employees working in a certain geographic location.” (http://www.dol.gov/ebsa/faqs/faq_hipaa_ND.html).

Make sure that the rates are determined based upon a rational method, documented carefully , communicated clearly, and applied consistently to the affected employees in that location.

 

Do the Section 125 mid-year election change rules allow for the addition of “tag along” dependents when a child is added mid-year due to a Qualified Medical Child Support Order?

Under the IRS rules (http://www.irs.gov/pub/irs-regs/td8921.pdf), if the plan so allows for mid-year changes (not all plans do) and has “tag along” rules included as part of the plan provisions, then the IRS will permit “tag-along” changes for existing spouses and dependent children. While the plan may be more generous and allow pre-existing dependents onto the plan when only one is in a Special Enrollment period, the plan will need to include this language in the plan documents since it is not required by law.

The plan should consistently follow the same rules for all similarly situated participants in order to avoid adverse tax consequences to the plan participants and potential litigation and/or disqualification of the plan. Check your plan documents for the “tag along” provision and that should directly answer your question.






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