Welfare Plans

Final regulations issued recently clarify and confirm the contraceptive coverage exemption and accommodation for religious institutions.  The Affordable Care Act generally requires non-grandfathered group health plans and insurance policies to cover the cost of contraceptives.  A religious employer, however, is entirely exempt from this requirement under the final regulations and under related guidelines issued by the Health Resources and Services Administration.

The final regulations also confirm that certain other organizations with religious objections to the coverage are eligible for an “accommodation.”  Under the accommodation, the organization does not need to provide the coverage under its health plan, but its insurer or third party administrator does.  Student health plans arranged by eligible organizations are also eligible for the religious accommodation.  The regulations, which were issued by the Departments of Treasury, Labor, and Health and Human Services, explain who ultimately pays for coverage under the accommodation.
Continue Reading Final Rules Confirm Contraceptive Coverage Exemption and Accommodation for Religious Institutions

The Department of Treasury announced today that it is delaying the effective date of the tax imposed on employers (with at least 50 full-time employees) who fail to provide health coverage to full-time employees and their child dependents.  Under the Affordable Care Act, an employer that does not provide adequate…
Continue Reading Treasury Delays ACA’s Employer Mandate until 2015

Earlier today in United States v. Windsor, the Supreme Court struck down section 3 of the federal Defense of Marriage Act (“DOMA”).  Section 3 of DOMA limits the definition of marriage for purposes of federal law to marriage between individuals of the opposite sex.   The Court held that DOMA deprives same sex couples of due process in violation of the Fifth Amendment.   The Court’s ruling applies to marriages recognized under state law;   the Court did not address whether the Constitution requires states to recognize same sex marriage.

The Court’s opinion notes that DOMA affects over “1,000 statutes and numerous federal regulations.”   Many of the affected statutes and regulations relate to employee benefits.  As a result, the decision is likely to affect the benefits provided under employee benefit plans and the tax treatment those benefits receive.  In some cases, the Court’s decision could have implications for benefits that have already been paid. We encourage employers to review their benefit plans and plan administration to identify changes that might be required or desirable as a result of the ruling.
Continue Reading Supreme Court’s DOMA Decision Has Significant Implications for Employers and Employee Benefit Plans

Last Friday, the government asked the Supreme Court to review the Sixth Circuit’s decision in United States v. Quality Stores.  In that decision, the Sixth Circuit sided with taxpayers and concluded that certain severance payments that qualify as supplemental unemployment compensation benefit payments (or “SUB” payments) for federal income tax…
Continue Reading U.S. Seeks Supreme Court Review of Decision that Severance Pay for Layoffs Is Not Subject to FICA Tax

Two recently released reports indicate that the cost of healthcare will not increase as much as previously expected.  Milliman recently issued the 2013 Milliman Medical Index, showing that the total annual cost of healthcare for a typical family of four covered by an employer-provided plan increased in 2013 by…
Continue Reading Two Recent Reports Indicate Some Optimism Regarding Health Care Costs

Earlier this year we described the IRS’s Voluntary Classification Settlement Program (VCSP), which substantially reduces an employer’s liability for back taxes when the employer voluntarily reclassifies employees who have been treated as independent contractors.  Through June 30, the relief program is available even if the employer did not file Forms 1099 reporting the compensation paid to the workers.  Starting in July, however, an employer will be eligible for the program only if the employer filed all required Forms 1099 for the previous three years with respect to the workers it wishes to reclassify.

What does worker classification have to do with health reform?  Quite a lot, as it turns out.  Starting in 2014, employers with more than 50 full-time employees will owe a “shared responsibility” excise tax if they fail to offer group health coverage on every day of the month to at least 95% of their full-time employees and the employees’ dependent children.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week.  (You will find a more detailed description of the shared responsibility rules here and here.)
Continue Reading Misclassified Workers Create Penalty Risks Under Health Reform

We recently observed that ERISA gives employers considerable leeway to design plan rules that fill in gaps in ERISA.  A recent Second Circuit case, Thurber v. Aetna Life Ins. Co., illustrates two important ways that plan drafting can meaningfully affect the outcome of litigation involving the plan:

  • First, a plan may specify the standard of review that a court must apply in a dispute.
  • Second, plan language can affect a plan’s ability to recover overpayments.

The case illustrates that good language that fills in gaps can save a lot of money.  In contrast, not filling in gaps — or having language that is not clear — can prove costly.
Continue Reading Second Circuit Reinforces Plan Drafting Opportunity for Employers

The Equal Employment Opportunity Commission held a hearing this week on “Wellness Programs Under Federal Equal Employment Opportunity Laws.”  Amy Moore testified at the hearing on behalf of long-time Covington client The ERISA Industry Committee (“ERIC”), a non-profit association committed to the advancement of the employee retirement, health, and other benefit programs of America’s largest employers.

The hearing focused on the treatment of wellness programs under the Americans With Disabilities Act (“ADA”).  The ADA permits employers to offer voluntary medical examinations or request voluntary medical histories as long as they keep the information confidential and do not use it for discriminatory purposes.  The EEOC issued enforcement guidance in 2000 stating that voluntary wellness programs can qualify for this exception; but the EEOC has never made it clear whether a wellness program is “voluntary” if it offers employees incentives to participate in the program. 
Continue Reading EEOC Holds Hearing on Workplace Wellness Programs

The Departments of Treasury, Labor, and Health and Human Services (collectively, the “Departments”) recently issued a set of Frequently Asked Questions (Part XV) (the “FAQs”), which provide that, starting in 2014, employers and health insurance issuers must implement two new requirements under ACA that apply to non-grandfathered group health plans:

(1) a prohibition on discriminating against health care providers that are licensed or certified under state law; and

(2) a mandate to cover routine patient costs or services for participation in certain clinical trials for life-threatening diseases.

The FAQs state that the Departments do not intend to issue regulations implementing these two requirements in the near future and therefore employers and health insurance issuers must implement the requirements based on a good-faith, reasonable interpretation of the statutory provisions.  The FAQs also delay, until at least 2015, implementation of requirements to disclose publicly certain information regarding group health plans, such as financial information, cost-sharing requirements, and data on claim denials and enrollment.
Continue Reading New FAQs Issued on Nondiscrimination, Clinical Trial, and Reporting Requirements under the Affordable Care Act