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IRS Issues Federal Guidance Regarding Tax Issues for Legal Same-Sex Marriages

By Laura Kerekes, Chief Knowledge Officer for ThinkHR Corporation

Following up with the promise to issue clarifying guidance after the Supreme Court overturned the Defense of Marriage Act on June 26, 2013, the U.S. Department of the Treasury and the Internal Revenue Service announced on August 29th that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. This decision applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or one that does not.

According to the announcement, same-sex couples will be treated as married for ALL federal tax purposes, including income, gift, and estate taxes. The ruling goes on to state that this applies to all federal tax provisions where marriage is a factor, including filing status, personal/dependent exemptions, and standard deductions, employee benefits, contributing to an IRA and claiming tax credits.


Any same-sex marriage legally entered into in one of the 50 states, Washington D.C., a U.S. territory or a foreign country will be covered by the ruling. Currently, there are 13 states, plus the District of Columbia, that allow legal same-sex marriages: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington State.

This ruling does not apply to registered domestic partnerships, civil unions or any other similar formal relationships recognized under state laws.

The Treasury and the IRS will begin applying this ruling on September 16, 2013 but have said that “taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so (as long as the statute of limitations for the earlier period has not expired)”.

What does this really mean?

Legally-married same-sex couples generally must file their 2013 FEDERAL income tax returns using either the “married filing jointly” or “married filing separately” filing status. State rules will govern state tax filings. Employers offering spousal benefits to legally married same-sex couples may stop calculating the imputed income for federal tax purposes.

The Impact for employers and what you can do:

  • Unlike the August 9th Department of Labor ruling that employees in states that recognize same-sex marriage only must be provided FMLA leave to take care of their same-sex spouse with a serious health condition (the law of the state where the employee resides applies, not the law of the state where the employee works), the Treasury Department and the IRS have broadened the federal tax rules to include all states. This means that the address where the couple resides or location of the same-sex couple’s wedding does not matter as long as the marriage is legal. For FMLA purposes, a legally married same-sex couple residing in New Jersey but working in New York would not necessarily be eligible for FMLA but will be eligible for all federal tax benefits that are attributed to married couples, regardless of where they live or work.
  • In one of the 37 states that do not recognize same-sex marriage, employees in legal same-sex marriages who previously filed federal and state tax returns as individuals will now have to file their federal returns as other married couples do, but may be required to file their state tax returns as individuals.
  • For you as the business owner in one of those 37 states, this may mean that if you offer benefits to same-sex married couples you may still need to calculate the imputed income of those benefits for state tax purposes (but not for federal tax purposes).
  • For you as the business owner in one of the 13 states or the District of Columbia that recognizes legal same-sex marriages, you may stop calculating the imputed income.
  • Couples in legal same-sex marriages prior to this ruling may file original or amended returns as “married” for federal tax purposes. Generally, the statute of limitations for filing refund claims is three years from the date the return was filed or two years from the state the tax was paid, whichever is later.
  • Employees interested in filing amended returns for refunds should consult with their tax advisors and use Form 1040X for income taxes, “Amended U.S. Individual Income Tax Return” (available at http://www.irs.gov/uac/Form-1040X,-Amended-U.S.-Individual-Income-Tax-Return) and Form 843 for refund claims for gift or estate taxes, “Claim for Refund and Request for Abatement” (available at http://www.irs.gov/uac/Form-843,-Claim-for-Refund-and-Request-for-Abatement).

We recommend that you review your benefits and other employment policies, procedures, and forms to ensure compliance with the updated guidance. We will continue to monitor and report on developments in this area.

You can review the entire Revenue Ruling 2013-17 at http://www.irs.gov/pub/irs-drop/rr-13-17.pdf and the frequently asked questions at www.irs.gov/uac/Answers-to-Frequently-Asked-Questions-for-Same-Sex-Married-Couples for more information.

DOL Issues FMLA Guidance on DOMA Decision

By Rick Montgomery, JD, Senior Legal Editor for ThinkHR Corporation

On August 9, 2013, U.S. Department of Labor (DOL) issued regulatory guidance on the Family and Medical Leave Act (FMLA) regarding benefits of same-sex couples. The guidance comes on the heels of the United States Supreme Court’s decision in United States v. Windsor that struck down section 3 of the Defense of Marriage Act (DOMA). The new guidance comes in the form of an updated Fact Sheet #28F: Qualifying Reasons for Leave under the Family and Medical Leave Act. The updated Fact Sheet now defines “spouse” as “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including ‘common law’ marriage and same-sex marriage.”

Under FMLA regulations (29 CFR 825.122), the term “spouse” is defined as “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including ‘common law’ marriage and same-sex marriage.” However, prior to the Supreme Court’s decision in Windsor, the FMLA’s provisions were also controlled by Section 3 of DOMA, which provided that “…the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or wife”. Therefore, even if a state recognized same-sex marriage, DOMA did not recognize the marriage and employers could lawfully deny employees in same-sex marriages FMLA leave to care for their same-sex spouse with a serious health condition.

What does this really mean?   The updated guidance simply clarifies that an employee in a same-sex marriage who was married and resides in a state that allows same-sex marriage is entitled to take FMLA leave to care for the employee’s same-sex spouse with a serious health condition.

The Impact:   Here’s what we know:

  • Employees in states that recognize same-sex marriage must be provided FMLA leave to take care of their same-sex spouse with a serious health condition.
  • As of August 20, 2013, California, Connecticut, Delaware, the District of Columbia, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington recognize same-sex marriage.
  • Please note that the law of the state where the employee resides applies, not the law of the state where the employee works (29 C.F.R. § 825.102). This could mean that an employer could have employees in the same company location where one employee could be eligible for FMLA and the other not eligible based on state of residence.
  • According to the Department of Labor Secretary Thomas Perez, the guidance is “one of many steps the Department will be taking over the coming months to implement the Supreme Court’s decision.”

Employers are strongly encouraged to review their FMLA policies, procedures and forms to ensure compliance with the updated guidance.

We will continue to monitor and report on developments in this area.

Click here to visit the U.S. Department of Labor’s FMLA resources.

Health Reform
From the Blues Office of National Health Reform

Patient Protection and Affordable Care Act
Taxes and Fees
Frequently Asked Questions

The following answers are for general educational and informational purposes only and not for the purpose of providing legal, actuarial, accounting or other advice. The information in this document is based on the Michigan Blues’ current understanding of the Patient Protection and Affordable Care Act; however, interpretations of PPACA vary and the federal government continues to issue guidance on how it should be interpreted and applied.

Blue Cross Blue Shield of Michigan and Blue Care Network are working to determine how best to comply with PPACA’s taxes and fees mandate, so these answers are subject to change as we get further guidance from the federal government.

Please advise customers to consult with their attorney for legal advice on complying with PPACA mandates.

As required by United States Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.

April 2013

Click Here to View FAQ's

Littler Survey Finds Misclassification Litigation Remains A Key Area Of Concern For Employers

Employers express concerns over costs and disruption of exemption litigation; majority have faced employees who misrepresented exempt job duties

As employers continue to grapple with the surge in wage and hour related lawsuits, exempt misclassification claims are a key concern according to a national survey conducted by Littler Mendelson, P.C. (Littler), the world’s largest employment and labor law firm representing management. The survey, completed by 325 human resources professionals, C-suite executives and in-house counsel, measured how employers are being impacted by litigation and Department of Labor (DOL) audits focused on the classification of employees as exempt from overtime pay and certain wage and hour laws.

Concern with Exemption Challenges Drives Employers to Take Action

Roughly half of respondents (49 percent) are concerned about the threat of misclassification litigation or a DOL audit in the near future. In reflecting on their biggest concerns in this area of employment law, respondents emphasized the potential financial impact associated with these types of claims, as well as the business disruption.

In response to these concerns, many of the responding organizations have either conducted their own audits to assess exempt classifications (54 percent) or intend to do so in the next year (14 percent). In addition, the majority of respondents are monitoring trends in exempt misclassification litigation to some degree, with 43 percent monitoring these trends closely.

“The best defense to exemption litigation is advance preparation,” said Lee Schreter, co-chair of Littler’s Wage and Hour Practice. “Employers can plan ahead for this type of litigation and build the necessary evidence today to defend against these claims in the future.”

Employees Misrepresenting Exempt Job Duties Highlights Need for Strong Evidentiary Records

Among the respondents who have recently been involved in misclassification litigation or a DOL audit, 57 percent have encountered employees who misrepresented exempt job duties. Mid-level management was the position most frequently cited as driving the dispute in 43 percent of cases.

“Employers often lose or settle exemption cases not because the position was misclassified, but because the employer cannot marshal sufficient evidence to counter the plaintiff’s self-serving efforts to down play decision-making responsibilities,” said Schreter. “Employers can effectively counter ‘job deflation’ by creating contemporaneous business records of exempt duties as those tasks are performed rather than attempting to reconstruct those activities after a lawsuit is filed.”

When asked about whether their organizations were creating these type of records, 33 percent indicated having employee self-assessments on record. One of the more effective means for tracking exempt duties can be performance evaluations that ask employees to describe and assess their own performance. This type of evidence provides a written affirmation of job responsibilities in the employee’s own words and can be used to impeach any contradictory testimony. In addition, the majority of respondents indicated having up-to-date job descriptions (82 percent) and employee performance reviews (73 percent). However, the ability of their job descriptions to support exempt classifications was commonly cited as one of their biggest concerns in this area in verbatim feedback from respondents.

Zombies, Ghouls, and Unpaid Wage Claims: The Top 5 HR Horrors This Season
by Hera Arsen   -   Ogletree, Deakins, Nash, smoak & Stewart, P.C.

As the group that shepherds employees from the application stage through the end of the employment relationship, human resources (HR) departments administer programs and policies that could greatly impact a company if a misstep results in litigation. HR regularly has to deal with some of the creepiest, crawliest issues for any employer—hiring, firing, leave, discipline, handbooks, payroll, benefits, and employee classifications. Here are the top five trendiest, most bloodcurdling issues your HR department might be dealing with on this, the spookiest (or sexiest) day of the year.

(1) Workplace Violence
An employer’s legal responsibilities to its workforce make violence prevention and intervention a top priority. In 2011, the U.S. Department of Justice released statistics related to workplace violence indicating that certain types of workplace incidents have declined in number. An incident of workplace violence can nevertheless spell ruin for employers on the liability and public relations fronts.

A well-prepared employer should assess the risks to the workplace (including the types of employee behaviors that are cause for concern), take steps to prevent violence, make a plan of action to have on hand once an incident is over, and review the workplace violence directive issued by the Occupational Health and Safety Administration (OSHA). For these and other tips on handling violence at work, see “Workplace Violence: Assessing the Risk and Dealing with the Consequences.”

(2) Unpaid Interns
Does your company have an internship program? If so, you should be aware of the U.S. Department of Labor’s (DOL) strict rules on whether interns at for-profit private sector employers should be paid. The great threat for employers is that a mistake in determining whether an individual truly qualifies as an unpaid intern could result in a violation of the federal (and, sometimes, state) minimum wage and overtime laws—and leave employers on the hook for a large sum of unpaid wages. A number of class actions have recently been filed by interns who were not paid but who are now seeking back wages, leading at least one high-profile company to end its internship program for good.

There are more reasons to be careful. First, employers that have violated —or have been accused of violating—the rules on internships have recently been the center of media coverage. Second, the determination about whether your interns are actually employees is important because employees are protected by laws that don’t necessarily apply to interns. Case in point: a federal court in New York recently ruled that interns were not protected by state and city harassment laws.

Employers with internship programs should take this opportunity to audit their programs to ensure compliance with the DOL’s six-factor test.

(3) Technology, Trade Secrets, and the Mobile Workforce
Technological advancements have created a host of problems in the modern workplace. For one thing, they have drastically increased employers’ exposure to wage and hour claims by facilitating employees’ ability to work off-the-clock. Examples of off-the-clock work that employees might engage in with the advancement of technology include remote communications and remote work. While one might think that this is only a problem for off-the-clock work claims brought by non-exempt employees, the problem exists for both non-exempt and exempt employees.

The proliferation and availability of technological devices also implicate individual privacy issues as some companies have considered using GPS tracking devices to monitor their employees. Telecommuting is a much more viable option than it was in the past, but work-from-home arrangements come with their own wage and hour risks.

Finally, the use of technology makes the transfer of information extremely easy. This ease of communication makes companies vulnerable to the possibility that employees might take valuable or closely-guarded information with them at the end of the employment relationship or that unauthorized users will be able to access confidential or proprietary information. Best practice behaviors that employers can adopt include technology policies that prevent both the use of confidential information and access to company databases for improper or competitive purposes and using layered security codes and computer passwords.

(4) Crisis and Disaster Management
One of the biggest, but least planned for threats to the modern workplace comes in the form of a natural or human disaster. Whether it’s a hurricane, an earthquake, a flu pandemic, or a terrorist attack, employers need to have an emergency response plan in place that they can quickly deploy. Employers should also make sure that all of their electronic data is backed up, preserved, and accessible and that they have a communication plan in place.

(5) Social Media
Social networking and media websites such as Facebook, Twitter, and LinkedIn have created a number of new challenges for employers related to employees’ privacy rights. At least three states—California, Illinois, and New Jersey—have passed laws preventing employers from collecting employees’ social networking login information.

In addition to these privacy concerns, employers’ electronic communications policies and procedures might interfere with employees’ rights under the National Labor Relations Act (NLRA). Generally, the NLRA gives employees the right to discuss their terms and conditions of employment, including voicing concerns about the workplace through social networking sites. The National Labor Relations Board (NLRB) has recently taken a stance against attempts to interfere with or chill employees’ concerted activity rights through overreaching communications policies. Employers thus should carefully craft their social media policies to avoid interfering with employees’ rights.

Employer “Medicare Part D” Notices are due before October 15

Are you an employer that offers or provides group health coverage to your workers? Does your health plan cover outpatient prescription drugs – either as a medical claim or through a card system? If so, be sure to distribute your plan’s “Medicare Part D” notice before October 15.


Medicare began offering “Part D” plans – optional prescription drug benefit plans sold by private insurance companies and HMOs —to Medicare beneficiaries many years ago. Persons may enroll for a Part D plan when they first become eligible for Medicare. If they wait too long, a “late enrollment” penalty amount is permanently added to the Part D plan premium cost when they do enroll. There is an exception, though, for individuals who are covered under an employer’s group health plan that provides “creditable” coverage. (“Creditable” means that group plan’s drug benefits are actuarially equivalent or better than the benefits required in a Part D plan.) In that case, the individual can delay enrolling for a Part D plan while he/she remains covered under the employer’s creditable plan. Medicare will waive the late enrollment premium penalty for individuals who enroll for Part D plan after their initial eligibility date if they were covered by an employer’s creditable plan. To avoid the late enrollment penalty, there cannot be a gap longer than 62 days between the group plan and the Part D plan.

To help Medicare-eligible persons make informed decisions about whether and when to enroll for a Part D drug plan, they need to know if their employer’s group health plan provides “creditable” prescription drug coverage. That is the purpose of the federal requirement for employers to provide an annual notice – commonly called the “Employer’s Medicare Part D Notice” – to all Medicare-eligible employees and spouses.

Employer Requirements

Federal law requires all employers that offer group health coverage including any outpatient prescription drug benefits to provide an annual notice to plan participants. This notice requirement applies regardless of the employer’s size or whether the group plan is insured or self-funded.

  • Determine whether your group health plan’s prescription drug coverage is “creditable” or “noncreditable” for the upcoming year (2014).
If your plan is insured, the carrier/HMO will confirm “creditable” or “noncreditable” status. Keep a copy of the written confirmation for your records. For self-funded plans, the plan actuary will determine the plan’s status using guidance provided by the Centers for Medicare and Medicaid Services (CMS).
  • Distribute a Notice of Creditable Coverage or a Notice of Noncreditable Coverage, as applicable, to all group health plan participants who are or may become eligible for Medicare in the next year.
“Participants” include covered employees and retirees (and spouses) and COBRA enrollees. Employers often do not know whether a particular participant may be eligible for Medicare due to age or disability. For convenience, many employers decide to distribute their notice to all participants regardless of Medicare status.
  • Notices must be distributed at least annually before October 15. Medicare holds its Part D enrollment period each year from October 15 to December 7, which is why it is important for group health plan participants to receive their employer’s notice before October 15.
  • Notices also may be required after October 15 for new enrollees and/or if the plan’s creditable versus noncreditable status changes.

Preparing the Notice(s)

Model notices are posted on the CMS website. Start with the model notice and then fill in the blanks and variable items as needed for each group health plan. There are two versions: Notice of Creditable Coverage or Notice of Noncreditable Coverage and each one is available in English and Spanish. For copies, use the following links:

Model Notice for Group Plan that is Creditable Coverage (English)

Model Notice for Group Plan that is Noncreditable Coverage (English)

Model Notice for Group Plan that is Creditable Coverage (Spanish)

Model Notice for Group Plan that is Noncreditable Coverage (Spanish)

Employers that offer multiple group health plans options, such as PPO, HDHP and HMOs, may use one notice if all options are creditable (or all are noncreditable). In this case, it is advisable to list the names of the various plan options so it is clear for the reader. On the other hand, employers that offer a creditable plan and a noncreditable plan, such as a creditable HMO and a noncreditable HDHP, will need to prepare separate notices for the different plan participants.

Distributing the Notice(s)

You may distribute the notice by first-class mail to the employee’s home or work address. A separate notice for the employee’s spouse or family members is not required unless the employer has information that they live at different addresses.

The notice is intended to be a stand-alone document. It may be distributed at the same time as other plan materials, but it should be a separate document. If the notice is incorporated with other material (such as stapled items or in a booklet format), the notice must appear in 14 point font, be bolded, offset or boxed, and placed on the first page. Alternatively, in this case, you can put a reference (in 14 point font, either bolded, offset or boxed) on the first page telling the reader where to find the notice within the material. Here is suggested text from CMS for the first page:

“If you (and/or your dependents) have Medicare or will become eligible for Medicare in the next 12 months, a Federal law gives you more choices about your prescription drug coverage. Please see page XX for more details.”

E-mail distribution is allowed but only for employees who have regular access to e-mail as an integral part of their job duties. Employees also must have access to a printer and be notified that a hard copy of the notice is available at no cost upon request.

CMS Disclosure Requirement

Separate from the participant notice requirement, employers also must disclose to the Centers of Medicare and Medicaid Services (CMS) whether their group health plan provides creditable or noncreditable coverage. The plan sponsor (employer) must submit its annual disclosure to CMS within 60 days of the start of the plan year. For instance, for calendar-year group health plans, the employer must comply with this disclosure requirement by March 1 (or February 29 if leap year).

Disclosure to CMS also is required within 30 days of termination of the prescription drug coverage or within 30 days of a change in the plan’s status as creditable coverage or non-creditable coverage.

The CMS online tool at http://www.cms.hhs.gov/creditablecoverage is the only method allowed for completing the required disclosure. Click on the link then follow the prompts to respond to a series of questions regarding the plan. The link is the same regardless of whether the employer’s plan provides creditable or noncreditable coverage. The entire process usually takes only 5 or 10 minutes to complete.

This material is offered for general information only. It does not provide, and is not intended to provide, tax or legal advice.

HIPAA’s HITECH and Omnibus Rule Compliance Deadlines Fast Approaching

By Erin DeBartelo, PHR, Lead HR Advisor, ThinkHRLive

With the deadline fast approaching for compliance changes in health information privacy under the Health Information Portability and Accountability Act of 1996 (HIPAA), employers and “business associates” must take additional precautions with the new rules.

What is HITECH and the Omnibus Rule?

In short, the Health Information Technology for Economic and Clinical Health Act (HITECH Act) adds new changes under HIPAA that provide the public with increased protection and control of personal health information. The Health Information Technology for Economic and Clinical Health (HITECH) Breach Notification requirements clarify when breaches of unsecured health information must be reported.

The final omnibus rule sets new limits on how information is used and disclosed for marketing and fundraising purposes and prohibits the sale of an individuals’ health information without their permission.

What are the compliance deadlines?

Important Dates Under HIPAA’s HITECH Omnibus Final Rule (Source: Office of the Secretary for the US HHS OCR) include:

  • Published in Federal Register – January 25, 2013
  • Effective Date – March 26, 2013
  • Compliance Date – September 23, 2013
  • Transition Period to Conform Business Associate Contracts – up to September 22, 2014, for Qualifying Contracts

According to the US Department of Health and Human Services (HHS), the HIPAA Privacy Rule establishes national standards to protect individuals’ medical records and other personal health information and applies to health plans, health care clearinghouses, and those health care providers that conduct certain health care transactions electronically. The Rule requires appropriate safeguards to protect the privacy of personal health information, and sets limits and conditions on the uses and disclosures that may be made of such information without patient authorization. The Rule also gives patients’ rights over their health information, including rights to examine and obtain a copy of their health records, and to request corrections.

For non-health care industry private employers, there is no explicit simple guidance on policy, procedure, and training under HIPAA’s Privacy Rule. If the employer is in the healthcare industry, then the requirements are more specific, as they are specifically dealing with patients and patient records. There is not a one-size-fits-all solution, but a number of resources are available to assist employers. HHS is the agency that regulates and enforces the Privacy Rule under HIPAA, offers extensive information including FAQs at  www.hhs.gov/ocr/privacy. You can also find online training materials and courses from various vendors, including benefits industry groups, law firms and accounting firms, etc.

Who Does This Affect?

This information is geared to the majority of our business partners and end user clients that are non-healthcare industry private employers. If the employer is in the healthcare industry, then the requirements are more specific, as they are specifically dealing with patients and patient records. If your company is an insurance brokerage firm, healthcare benefits third party administrator (TPA) or if you use the services of an insurance broker or TPA, you probably already have most of your bases covered.

Group health plans are typically exempt from some of the Privacy Rule requirements because group health plans are providing health benefits exclusively through an insurance contract with a health insurance issuer or a Health Maintenance Organization (HMO), and the only Protected Health Information (PHI) exchanged is usually limited to summary health information or enrollment information.

One of the biggest changes related to the HITECH rules is regarding Business Associate Contracts. A Business Associate Contract is basically a document between the 2 parties that clearly demonstrates both entities’ responsibilities and commitment to maintaining the HIPAA privacy rule because the parties are sharing information regarding healthcare coverage about individuals through the employer sponsored group health plans.

HHS says a business associate is “a person or organization, other than a member of a covered entity’s workforce, that performs certain functions or activities on behalf of, or provides certain services to, a covered entity that involve the use or disclosure of individually identifiable health information”. Business associate functions or activities on behalf of a covered entity include claims processing, data analysis, utilization review, and billing. Also according to HHS, when a covered entity uses a contractor or other non-workforce member to perform ”business associate” services or activities, the Rule requires that the covered entity include certain protections for the information in a business associate agreement (in certain circumstances governmental entities may use alternative means to achieve the same protections). In the business associate contract, a covered entity must impose specified written safeguards on the individually identifiable health information used or disclosed by its business associates.

According to the Official HHS News Release on January 17, 2013, “some of the largest breaches reported to HHS have involved business associates. Penalties are increased for noncompliance based on the level of negligence with a maximum penalty of $1.5 million per violation. The changes also strengthen the Health Information Technology for Economic and Clinical Health (HITECH) Breach Notification requirements by clarifying when breaches of unsecured health information must be reported to HHS.

Individual rights are expanded in important ways. Patients can ask for a copy of their electronic medical record in an electronic form. When individuals pay by cash they can instruct their provider not to share information about their treatment with their health plan. The final omnibus rule sets new limits on how information is used and disclosed for marketing and fundraising purposes and prohibits the sale of an individuals’ health information without their permission.”

What Should You Do?

  • Make sure you have a HIPAA privacy policy in your employee handbook.
  • Make sure all managers, benefits administrators, human resources, and other staff members who may come in contact with benefits-related information are trained on the basics of HIPAA privacy. Document that training was completed.
  • Make sure all enrollment forms, bills and anything related to GHP is maintained in a locked private area with limited access to those with a need to know basis. Be sure any electronic information is password protected and not available on a companywide intranet or access point.
  • Be sure to have a Business Associate Contract with any person or vendor your company does business with who may come into contact with benefit related information including IT vendors and personnel, and accounting vendors and staff who may likely will have access to PHI via technology or billing systems.

Where Can You Go For More Information?

HHS has some specific information available regarding Business Associate Contracts and the final omnibus rule.

Employer Notification of Exchange / Marketplace
CERF Fee Periods and Payment Schedule
  • The fee per average covered life changes on October 2nd of each year.
  • The fee is payable on July 31 of the calendar year following the plan year end date.

2011 New & Renewal Plan Dates
Plan Year Fee per average
covered life
When fee must
be paid
November 1, 2011 through October 31, 2012 $1 July 31, 2013
December 1, 2011 through November 30, 2012 $1 July 31, 2013

2012 New & Renewal Plan Dates
Plan YearFee per average
covered life
When fee must
be paid
January 1, 2012 through December 31, 2012$1July 31, 2013
February 1, 2012 through January 31, 2013$1July 31, 2014
March 1, 2012 through February 28, 2013$1July 31, 2014
April 1, 2012 through March 31, 2013$1July 31, 2014
May 1, 2012 through April 30, 2013$1July 31, 2014
June 1, 2012 through May 31, 2013$1July 31, 2014
July 1, 2012 through June 30, 2013$1July 31, 2014
August 1, 2012 through July 31, 2013$1July 31, 2014
September 1, 2012 through August 31, 2013$1July 31, 2014
October 1, 2012 through September 30, 2013$1July 31, 2014
November 1, 2012 through October 31, 2013CERF increases to $2 per
average covered life
July 31, 2014
December 1, 2012 through November 30, 2013$2July 31, 2014

Click Here to view the full schedule.

Employer Notification of Exchange / Marketplace

Among the key changes in health care reform is an employee's option, if eligible, to choose a plan from a state-run exchange. Beginning this Fall, you are required to inform all employees and new hires of the new exchanges. Employers will need to provide notice with information about the exchanges and an employee's ability to shop for coverage. The notice should also include eligibility rules for Premium credits and the differences between an exchange plan and an employer-sponsored plan.

On Thursday, May 9, 2013 the Employee Benefits Security Administration (EBSA) which is part of the Department of Labor, issued a “model notice” that employers may use to fulfill this requirement. You can find the notice for your customers that offer a health plan here: www.dol.gov/ebsa/pdf/flsawithplans.pdf.

For employers that do not offer a plan, they must still provide notice and that model notice can be found at www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf.

These notices must be provided to existing employees on or before October 1, 2013. Notice must be given to new employees within 14 days of their start date.

Topics covered and Information that must be provided includes:

  • General Information about the Health Insurance Marketplace
  • Potential for Employee to Save money via the Marketplace
  • How Employer Coverage may impact eligibility for premium savings
  • How to obtain additional information
  • General employer information including name, address, employer identification number, contact person for questions, etc.
  • Basic information about the employer’s plan and eligibility for employees and dependents

Additional information can be found at www.dol.gov/ebsa/newsroom/tr13-02.html.

Our advice is that employer‘s tailor their notice as closely as possible to the model notice provided by the Employee Benefits Security Administration to avoid running afoul of the Fair Labor Standards Act and to avoid any potential for fines.

The Federal Government Has Delayed The Exchange Notification Requirement
as of January 25, 2013

The Affordable Care Act requires employers to notify their employees of the existence of health benefits exchanges. The original act required the notification be issued by March 1, 2013. Information released on Thursday postpones the requirement likely until late summer or fall 2013. The goal is to coincide with open enrollment on the Exchanges, which begins Oct. 1, 2013 (for a Jan. 1, 2014 effective date.)

Two reasons were cited for the delay:

  1. To coordinate with educational efforts and guidance on minimum value (the rule that employer-sponsored coverage must be affordable and cover at least 60% of services)
  2. To provide employers with sufficient time to comply

Notification requirements
The written notification must inform the employee of the existence of the Exchanges including:

  • A description of the services provided by the Exchanges
  • The manner in which the employee may contact the Exchanges to request assistance
  • The availability of premium tax credit to the employee if the employer's plan doesn't cover 60% of services and the employee purchases coverage through the Exchanges
  • The employee may lose the employer contribution (if any) toward the cost of health benefits if the employee purchases coverage through the Exchanges

The Department of Labor is considering providing model, generic language that could be used to satisfy the notice requirement. Alternately, the government may make a template available on the Exchanges, which employers could download, complete and issue to employees.

Employee Exchange Notification - March 2013

Description: Employers must notify new employees in writing at the time of hire (or current employees no later than March 1, 2013) with information regarding:

  • The existence of a health insurance exchange
  • A description of the services provided by the exchange and how to contact the exchange
  • The potential availability of premium tax credits and cost-sharing reductions in the individual market exchange if the employer does not offer coverage with at least 60 percent actuarial value
  • The loss of the employer contribution to coverage (and the employer-sponsored coverage tax exclusion) if the employee purchases a Qualified Health Plan (QHP) through the exchange
Effective date: Beginning on and after March 1, 2013.

Although we expect model notices to be provided, none have been issued to date. We will provide new information as it becomes available.

Health Care Reform: Post-­-Election PPACA Implementation:   What Employers Should Be Thinking about for 2013

Client Alert
November 16, 2012

President Obama has been reelected, and although there were some changes in Congress, the political make-­-up of the House and Senate remains the same, with Democrats controlling the Senate and Republicans controlling the House of Representatives.

For employers and plan sponsors that have been adopting a "wait and see" approach before focusing on compliance with the Patient Protection and Affordable Care Act (PPACA), the time to wait is over. PPACA's insurance mandates, market reforms, and employer requirements generally will move ahead as scheduled, with most of PPACA becoming fully effective just a short year from now, in 2014. Since the law left the task of working out many of the details to the regulatory agencies (the Department of Labor, the IRS and the Department of Health and Human Services), employers can now expect that an enormous number of Regulations on many of the unanswered questions and other types of guidance will be issued between now and the end of 2013.

2013 is clearly a critical planning year for employers and plan sponsors. Cost containment and compliance have to be the main focus. With respect to compliance, deliberate focus must be on PPACA's many requirements that either are currently in effect or which will become effective soon, including:

  • Covering additional preventive care services for women with no cost-­- sharing, including coverage for contraceptives (non-­-grandfathered plans only; effective for plan years beginning on or after August 1, 2012);
  • Form W-­-2 reporting of the value of each employee’s health coverage (employers that issue fewer than 250 W-­-2s in a prior year are exempt; effective for the 2012 tax year);
  • Issuance of Summaries of Benefits and Coverage (SBCs) to all eligible enrollees (60-­-day advance notice required for changes made other than in connection with the plan's renewal; effective for open enrollment periods and plan years beginning on or after September 23, 2012);
  • $2,500 limit on employee contributions to health flexible spending accounts (FSAs) (limit applies on an individual basis; effective for plan years beginning in 2013);
  • Notifying employees of the availability of health insurance exchanges (guidance not yet released; intended to be effective March 2013); and
  • 0.9% Medicare payroll tax increase on highincome individuals (withholding required for employees earning over $200,000; effective for the 2013 tax year).

New 3.8% Medicare Tax Effective In 2013

In addition to the 0.9% increase to the existing Medicare payroll tax discussed above, there is a new, nonpayroll Medicare tax effective starting in 2013. This new Medicare tax of 3.8% applies to the lesser of (A) net investment income (defined below) or (B) the excess of modified adjusted gross income (AGI) over $200,000 ($250,000 for joint filers). Note that these threshold amounts are not indexed to inflation in future years, which means that this tax may apply to more taxpayers in future years. Also, for most taxpayers, their modified AGI is simply their AGI.

Generally, "net investment income" is the excess of gross income from interest, dividends, annuities, royalties, rents, passive activity income and capital gains, over any deductions allowed by the IRS that are allocated to such income. As such, net investment income does not include, for example, tax-­-exempt interest or distributions from tax qualified plans.

Note that this new 3.8% tax applies to an individual's investment income in excess of the $200,000 / $250,000 threshold described above on an uncapped basis. Individuals who may be subject to this 3.8% Medicare tax should consult with their personal tax advisor to determine if it might be advantageous to recognize capital gains in 2012, thus avoiding the 3.8% tax. This also may be attractive in light of the possibility of the maximum federal income tax rate increasing to 39.65% in 2013 and thereafter.

Mandates Taking Effect In 2014

Mandates and market reforms taking effect in 2014 include:

  • 90-­-day limit on eligibility waiting periods;
  • Complete prohibition on annual dollar limits for "essential health benefits";
  • Complete prohibition on preexisting condition exclusions for all individuals;
  • Increase in permitted outcome-­-based wellness incentives from 20% to 30%;
  • Guaranteed availability and renewability of insured group health plans;
  • Coverage under non-­-grandfathered plans for certain approved clinical trials;
  • Initial phase of the Medicare Part D "donut hole" fix, which will eliminate the Medicare Part D coverage gap by 2020;
  • Limiting out-­-of-­-pocket expenses to the level set for HSA-­-compatible high-­-deductible health plans (non-­-grandfathered plans only; out-­-of-­- pocket limits are $6,250 single / $12,500 family in 2013);
  • Limitations on cost-­-sharing (deductibles for non-­-grandfathered plans cannot exceed $2,000 single / $4,000 family; additional clarification is needed on the scope of this requirement);
  • Employer certification to the U.S. Department of Health and Human Services regarding whether its group health plan provides "minimum essential coverage" for purposes of the share responsibility payment under the employer "pay or play" mandate (reports are actually due in 2015 based on 2014 benefits); and
  • Availability of premium tax credits to reduce the cost of coverage purchased through a public health insurance exchange for citizens and legal U.S. residents who are not eligible for Medicaid and whose household income does not exceed 400% of the federal poverty level.

Post-Election Roundup

Now that the election is over, the federal regulators who have been holding off on issuing regulations that may have been viewed as controversial during the election will begin the process in earnest. Plan sponsors should expect a flood of regulations (maybe as early as the next 6-­-8 weeks) to be released that have been long anticipated, including:

  • Formal Regulatory guidance on the employer mandate, including additional clarification on the mandate’s definition of "full-­-time employee," rules for determining compliance with the mandate’s "minimum value" requirement, and the application of the 90-­-day limit on waiting periods to multiemployer plans (guidance to date on the employer mandate has been in the form of IRS notices);
  • Additional rules governing the health insurance exchanges established by the federal government in states that fail to establish an exchange;
  • Guidance on calculating fees payable under the Transitional Reinsurance Program (a temporary assessment applicable to the 2014 – 2016 plan years, which is imposed on insurance carriers and third-­- party administrators of self-­-insured plans on a per-­-member basis in order to stabilize premiums in the individual markets);
  • Rules governing increased wellness incentives under PPACA (in 2014, PPACA increases the reward available under an outcome-­-based wellness program from 20% of the total cost of coverage to 30% of the total cost of coverage); and
  • Rules prohibiting discrimination under fully-­-insured plans in favor of highly compensated employees with respect to eligibility or benefits (non-­-grandfathered plans only).

When new guidance is released, the issuing agencies often extend a comment period, during which interested parties can comment on the guidance and recommend changes favorable to their position. We encourage employers and plan sponsors to take advantage of any comment periods and engage counsel for assistance with drafting comments.

Obviously with new guidance will come new compliance concerns. In addition, cost containment is going to be critical. Premiums, which increased significantly across the nation in 2011 when the initial mandates became effective, will rise, likely dramatically, in 2014 when PPACA is fully implemented. Fees (including those enforced through the Tax Code) will be levied against health plans to help pay for the new programs, particularly for coverage in the individual market. For example, beginning in 2013, health plans pay a fee to fund research to study outcomes of various medical approaches. In 2014, plans will be assessed a fee to help stabilize rate increases in the individual market. These fees (and others), of course, will be passed on to employers and employer-­- sponsored group health plans and these costs may be passed through in part to covered participants via increased costs and premiums.

In addition, 2014 sees the commencement of the shared responsibility payment, often referred to as the "pay-­-or-­-play" provisions. Employers will be required to play (by providing quality health care to their employees and dependents) or pay a "shared responsibility payment" to the federal government.

A shared responsibility payment generally applies when a full-­-time employee (using a 30-­-hour per week standard under PPACA) receives a federal premium subsidy and obtains coverage in a public health insurance exchange. The payment will be assessed against employers that either (A) fail to offer health coverage to all full-­-time employees and their dependents (an "opt-­-out" payment), or (B) provide coverage that fails to satisfy certain quality and affordability standards under PPACA (an "affordability" payment). To satisfy the standard for affordability, the plan's premiums for single coverage cannot exceed 9.5% of an employee’s household income (or W-­-2 wages as reported in Box 1, per the IRS' "affordability safe harbor"). The quality standard is satisfied if the plan has at least a 60% actuarial value, which is a measure of the plan's overall level of financial protection. A plan with a 60% actuarial value is designed to cover at least 60% of health care costs for the average participant, which assumes that the plan has both low and high utilizers of covered services. The 60% measure is not based on actual claims experience; rather, it is an actuarial estimate based on the design of the plan (e.g., its cost-­-sharing features, such as deductibles, copayments, coinsurance, and out-­-of-­-pocket limits). An employer's premium contribution is not considered for purposes of determining actuarial value, although it is considered for purposes of the affordability standard.

Some employers that have considered these provisions are already contemplating whether to reduce the number of full-­-time employees (30 hours or more under PPACA) in order to avoid the share responsibility payment with respect to those employees. But preplanning may be necessary to ensure compliance with the employer mandate, which is effective January 1, 2014 regardless of plan year. Under recent IRS guidance, employers with "variable hour" employees will use a "look back" period to determine who is full-­-time. Obviously, employers considering workforce realignment strategies should be discussing approaches now, with an eye toward implementation in 2013, so that they will have reduced numbers during the look back for 2014. Some employers who are contemplating whether to "pay" rather than "play" also are considering expanding the offering of nonmedical voluntary benefit options, such as dental, vision, accident, life and cancer policies. However, employers should be aware of the peril of making employment-­-related decisions without thoroughly examining the implications under employment law and ERISA.

State Action On Health Insurance Exchanges

Because employees may choose to obtain coverage through an exchange even if they have access to employer-­-sponsored group health plan coverage (although they’ll lose their employer's contribution toward its group health plan coverage) and because the health insurance exchanges are required to provide information to prospective enrollees about their eligibility for premium tax credits (and likely will request information from employers to determine such eligibility), employers also should have an understanding of whether the states in which they operate will have a state-­-run health insurance exchange. The health insurance exchanges are scheduled to begin operation in January 2014.

As of the date of this alert, a number of states (California, Colorado, Connecticut, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon, Rhode Island, Utah, Vermont, Washington and West Virginia) have established state exchanges. Arkansas, Delaware and Illinois are planning for a partnership exchange with the federal government. Several states have affirmatively decided not to create a state exchange (including Alaska, Florida, Louisiana, Maine, New Hampshire, South Carolina and South Dakota), which means the federal government will run the exchange on the state's behalf. The remaining states are studying their options but could end up with a federally run exchange at least for 2014 since the deadline to submit the state's plan for implementing an exchange is December 14 (recently extended from November 16). It remains to be seen whether the federal government will be able to implement so many exchanges on behalf of states electing not to operate an exchange. It also remains to be seen whether a change of various state public officers (such as governor or insurance commissioner) or control of a state legislature, will change a state's position on the implementation of an exchange.

Employers that have not begun work on cost containment and other strategies should begin now by talking with their Proskauer lawyer. Proskauer is committed to monitoring developments and providing its clients with the latest, up-­-to-­-date information on new developments under PPACA. Please contact your Proskauer lawyer for answers to your questions on health care reform.

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