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EEOC Receives Record Number of Discrimination Complaints

November 30, 2011 – 2:20 pm | By Kathryn McGovern | No comments yet

Employees filed a record number of discrimination charges with the U.S. Equal Employment Opportunity Commission this year, according to a report released by the enforcement agency. The 99,947 charges received account for all claims of discrimination based on race, sex, national origin, religion, age and disability, as well as claims filed under the Equal Pay Act and the Genetic Information Nondiscrimination Act. The EEOC also obtained a record-high $364.6 million in relief for individuals alleging discrimination during the fiscal year. Additionally, the commission made historic progress on its charge backlog. According to the report, the number of pending charges has been reduced by ten percent. This marks the first time in several years the commission has not lost ground in dealing with its inventory. During fiscal year 2009, the commission’s backlog of charges grew by 15.9 percent. In fiscal year 2010, the EEOC was almost able to keep the backlog from growing. Despite receiving an extra 6,645 claims that year, the commission’s private-sector charge inventory increased by only 570 charges, which amounted to less than a one percent increase. Now, the commission has closed fiscal year 2011 with fewer charges pending than when the year began. In a statement, commission chair Jacqueline A. Berrien said she is proud of this “significant progress.”

San Francisco Expands Employer Health Reimbursement Role

November 30, 2011 – 12:10 pm | By John Iekel | No comments yet

On Jan. 1, employers in San Francisco will have to make sure that employee health reimbursement accounts the city requires them to fund are available to employees for two years, not just one. Amendments to the  Health Care Security Ordinance (HCSO) add to the requirements the city already has in place to establish access to universal health care in the City by the Bay. It was signed into law by Mayor Edwin Lee (D) on Nov. 28. City Amends Rules for S.F. Employers City law had provided that unused funds in health reimbursement accounts at the end of the coverage period could not be carried over; the amendment to the ordinance allows accounts to exist for two years. The amendment requires that funds left in accounts at the end of 2011 will be carried over to 2012 and will be available through Dec. 31, 2012. The amendment also states that:

• if the employer makes contributions because a court has ordered it to do so, the employer must make the reimbursements itself and not by providing funds to the city;
• employers that impose surcharges on customers to provide funds they can use to cover the reimbursements must use the full amount collected through the surcharges for that purpose;
• employers must provide written account summaries to employees 15 days after a quarterly contribution is made;
• employers must provide written notice about account balances to employees who leave their jobs within three days of termination;
• employers must allow reimbursements up to 90 days after employment ends; and
• employers must post notifications from the city about the law.

When HRAs Are Not HRAs Health reimbursement accounts are not the same thing as health reimbursement arrangements. Health reimbursement arrangements are established under federal law. Through health reimbursement arrangements, employers can reimburse employees, their spouses and their dependents for medical expenses as defined by Section 213 of the federal tax Code up to a set maximum amount during a specified coverage period. Unused funds at the end of the coverage period roll over into the next one. Unlike health reimbursement arrangements — which an employer may, but is not required, to establish — health reimbursement accounts are compulsory for employers in San Francisco. City law requires employers to cover, through those accounts, health care expenses incurred by employees who work at least eight hours a week. Employers do have an alternative: They can pay the city, which then establishes the accounts and makes the reimbursements. The Ordinance May Clash with ERISA The amended San Francisco HCSO only applies in San Francisco. Nonetheless, federal law may affect it. Back in 2009, the ordinance survived several ERISA challenges. It is still uncertain whether the latest amendment might be challenged in court and if there will be a ruling that ERISA preempts it. ERISA, which regulates the operation of pension, health and welfare benefit plans, preempts almost all state laws that relate to benefit plans. The amended San Francisco HCSO recognizes that; it includes a provision that it does not authorize the city to impose duties or obligations that conflict with state or federal law.  

Supreme Court to Hear Arguments on Outside Sales Exemption

November 28, 2011 – 6:08 pm | By Chad Hudnall | 1 comment

The Supreme Court today agreed to hear a Fair Labor Standards Act case to decide if drug company reps should qualify for the outside sales exemption. Specifically, Christopher v. SmithKline Beecham Corp. is about whether pharmaceutical sales reps working more than 40 hours in a week are eligible for overtime under the FLSA. A key question for the court to decide: Can an employee who appears to never make a sale be an outside salesman? The FLSA exempts from its minimum wage and overtime requirements any “employee employed in the capacity of outside salesman” (29 U.S.C. §213(a)(1)). Pharmaceutical sales representatives who try to persuade doctors to prescribe certain drugs do not actually make “sales” and thus do not qualify for the FLSA’s outside sales exemption, according to the U.S. Department of Labor. DOL filed a friend-of-the-court brief more than a year ago urging the 9th U.S. Circuit Court of Appeals to reverse a district court’s ruling in Christopher v. SmithKline Beecham Corp. That appeals court found that pharmaceutical sales reps did qualify as outside salespeople. While the sales reps in question provide information to doctors with the goal of convincing them to prescribe the company’s drugs, the actual sale of drugs takes place between the company and pharmacies, DOL said, and the sales reps are in fact prohibited from making direct sales. The court is expected to hear the case between February and April 2012. The ruling may have affect sales professionals outside of the pharmaceutical industry.  The 10th Cir., for instance, a number of years ago found that military recruiters were not exempt as outside salespeople because they could not sign the recruits to contracts. "These people too were involved in ‘selling’ something — that is the idea of Army service to teenagers — and they should have been found to be exempt," said Shlomo Katz, counsel in the Washington, D.C. office of Brown Rudnick, LLP.

Big Government Teams Up With Small Business to Rein in Health Insurer Rate Inflation

November 23, 2011 – 3:38 pm | By Todd Leeuwenburgh | No comments yet

Using a new power under the Affordable Care Act (ACA) for the first time, the U.S. Dept. of Health and Human Services (HHS) has now ordered an insurance company to lower its rates. Since September 2011, HHS has been flagging any insurer that raises premiums on small businesses and individuals by 10 percent or more. Then HHS rules on whether the increases were justifiable and if not, the insurer must reduce them within 10 days, or else HHS can launch enforcement tools. The dragnet has yielded its first result. Everence Insurance's premium hike (11.6 percent) on 4,800 covered lives at small businesses in Pennsylvania was “excessive,” HHS says here, because:

After reviewing the rate, independent experts determined the choice of assumptions the company based its rate increase on reflected national data rather than reliable and available state data. These assumptions resulted in an unreasonably high premium in relation to the benefits provided..

“We have called on this insurer to immediately rescind the rate, issue refunds to consumers or publicly explain their refusal to do so,” said Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight. Learn more about rate reviews. Rate review does not apply to grandfathered plans, and the acceptable rate of inflation will be allowed to vary from state to state. Starting September 2011, health insurance companies must inform individual or small group policyholders of premium increases of 10 percent or more. The same ACA provisions require insurers to give small businesses a written explanation of the increase and the factors contributing to it, the HHS official for consumer information and insurance oversight says here. The Indiana-based financial services company has 10 days to change its rate or post an explanation on its website.  

DOL Clarifies Mental Health Parity’s Effect on Pre-Authorization

November 22, 2011 – 1:31 pm | By David Slaughter | 1 comment

The effect of the Mental Health Parity and Addiction Equity Act (MHPAEA) on prior authorization practices and other “nonquantitative treatment limitations” was clarified Nov. 17 in guidance from the U.S. Department of Labor (DOL). The MHPAEA interim final rules issued in February 2010 imposed a detailed numerical formula for determining whether quantitative limits such as copayments and deductibles meet the act’s standards for parity. For nonquantitative limits, the rules were naturally more nebulous; factors used to apply these limits to mental health and “substance use disorder” benefits must be comparable to, and no more stringent than, those used for medical/surgical benefits, unless justified by “clinically appropriate standards of care.” See The Employer's Guide to HIPAA by Thompson Publishing Group. A group health plan may not require prior authorization for all mental health benefits while not requiring it for any medical/surgical benefits, because prior authorization is a nonquantitative treatment limitation, according to one of the frequently asked questions (FAQs) DOL prepared jointly with the U.S. Departments of Health and Human Services (HHS) and the Treasury. And even if, for example, prior authorization is required for all inpatient benefits of either kind, a plan may not have a practice of routinely approving inpatient medical benefits for seven days, but mental health benefits for only one day. “The plan is applying a stricter nonquantitative treatment limitation in practice to mental health and substance use disorder benefits than is applied to medical/surgical benefits,” DOL explained. Requiring prior authorization for all outpatient mental health benefits but only a few types of outpatient medical/surgical benefits also would be prohibited. “It is unlikely that the processes, strategies, evidentiary standards, and other factors” that the plan used to decide that only the few medical benefits warranted pre-authorization, would at the same time require it for all outpatient mental health and substance use disorder benefits, DOL indicated. However, a plan may apply concurrent review to inpatient care where length of stay varies widely, even if in practice this affects mental health conditions more often, DOL noted, as long as “the evidentiary standard used by the plan is applied no more stringently for mental health and substance use disorder benefits than for medical/surgical benefits.” (The full text of the FAQs is available.)  

Bill Would Require Minimum Wage in Sheltered Workshops

November 22, 2011 – 8:46 am | By Chad Hudnall | No comments yet

For more than 70 years, the Fair Labor Standards Act has allowed employers to pay some workers with physical or mental impairments less than the federal minimum wage. H.R. 3086, introduced by Cliff Stearns (R-Fla.), Tim Bishop (D-N.Y.) and Gregg Harper (R-Mo.) earlier this fall, would change that. HR 3086 would phase out special wage certificates under the FLSA, thus requiring sheltered workshop employees to be paid at least the federal minimum wage. There is no consensus on whether the current FLSA exemption provides opportunities to individuals who would otherwise not have a chance to contribute and earn, or if the special wage provision is exploitive. Several congressional reports have criticized the U.S. Department of Labor’s oversight of sheltered workshop. The bill’s sponsors maintain that “the significant appropriation” that would be required to improve oversight of sheltered workshops would be better spent improving employment outcomes for people with disabilities. Washington, D.C. employment attorney Paul DeCamp of Jackson Lewis, LLP, a former U.S. Department of Labor wage and hour administrator, called the bill unnecessary, given the “extensive procedures” involved to make sure that individuals’ working capacity is being fairly and accurately evaluated. “Most commonly, we are talking about facilities that provide what amounts to day care for mentally impaired adults,” DeCamp said.

10-Year-Old Blueberry Picker Proves Costly for Employer

November 21, 2011 – 5:19 pm | By Rita Zeidner | No comments yet

[caption id="attachment_2132" align="alignleft" width="300" caption="Source: Nat'l Child Labor Cmte."][/caption] Federal investigators fined an Arkansas farm $8,000 for illegally hiring a 10-year old to pick blueberries and for other wage and hour violations . The Labor Department also has recovered $1,160 in back wages for four of the farm’s workers. "The laws and regulations for vulnerable young workers are very specific, and employers in violation will be penalized," said Cynthia Watson, regional administrator of the Wage and Hour Division in the Southwest. "Assessing penalties is one element of the Wage and Hour Division's comprehensive approach to ensuring the welfare of young workers." The investigation by the division's Little Rock District Office found that a 10-year-old was hired to pick blueberries at the Double Springs Grass Farm in Judsonia, Ark., in violation of the FLSA's child labor provisions. Investigators also found that four agricultural workers were not properly paid for all hours worked. The employer has agreed to comply with the FLSA in the future. DOL is currently revamping its 40-year old rules dealing with farm labor and has given the public until Dec. 1 to respond to proposed updates to the child labor regulations. At presstime, DOL had received nearly 200 comments,  mostly form letters with identical language protesting the proposed change: “Agriculture operations offer a safe work environment for all workers, especially youth,” dozens of letters stated. (Thompson subscribers:  See Tab 700 in Thompson’s Fair Labor Standards Handbook for more information about the FLSA’s child labor requirements for the agricultural sector.)

The Top 5 Reasons Employers Should Offer an FSA

November 18, 2011 – 6:13 pm | By John Iekel | No comments yet

Flexible spending accounts (FSAs) are a common feature of employee benefit plans. But why would an employer offer an FSA plan to its employees? Well, it’s extra money in your workers’ pockets that you and your employees probably don’t want to leave lying on the IRS’ table. Karen Kirkpatrick, senior compliance adviser for Infinisource, explained these points at an audioconference sponsored by Thompson Interactive. There she offered other key reasons why an employer may decide it wants to add an FSA plan to its benefits program.

• Health FSAs are not always subject to COBRA. Generally, an overspent health FSA is not subject to COBRA. Health FSA COBRA coverage only lasts through the end of the current plan year.
• Health FSAs can cover adult children. Because of the Patient Protection and Affordable Care Act (PPACA), participants can cover their adult children on a health FSA until the year in which the children turn age 27.
• You can save on orthodontia. Typically, an orthodontist provides a discount if payment is up front, instead of month to month. Health FSAs may now reimburse orthodontia expenses when paid, instead of when they are incurred.
• Dependent care expenses are a no-brainer. Dependent care expenses are usually a fixed cost that easily exceeds the $5,000 FSA limit in a year, even for just one child. Tax-free reimbursement makes a lot of sense.
• Debit cards make it even easier. Debit card auto-substantiation rates are usually over 90 percent, virtually eliminating the hassle of keeping receipts and waiting for reimbursement.

Nifty HHS Site Enables Small Employers to Shop for Health Insurance

November 18, 2011 – 5:44 pm | By Todd Leeuwenburgh | No comments yet

Are you shopping around for health insurance for your small company? The U.S. Department of Health and Human Services (HHS) just unveiled a computerized search engine for health insurance policies, so you can search plans in much the same way the Medicare Part D program enables elderly folks to search prescription drug plans (or the way many people can search for the deals on flights and hotels.) The site gives small business and individuals access to:

• Insurance product choices for a given ZIP code, sorted by out-of-pocket limits, average cost per enrollee, monthly premiums, etc.
• A summary of cost and coverage for small group products that shows the available deductibles, range of copay options, included and excluded benefits, and benefits available for purchase at additional cost.
• A filter that lets you selection products based on whether the plans are health savings account eligible, have prescription drug, mental health, or maternity coverage, or allow for domestic partner or same sex coverage.

Searching for zip codes in Maryland/Suburban Washington, D.C., premiums (for a single individual policy, male, non-smoker) ranged from $90 a month for Aetna’s PPO Value policy (with a $10,000 deductible and a $12,500 out of pocket annual limit) to $825 a month for CareFirst Blue Choice’s 10/20 Plan, which has a zero dollar annual deductible and a $2,000 in-network out of pocket annual limit. Searching the same zip code for a small business with 10 employees, we found premiums ranged from $123 per member per month (PMPM) for Coventry's POS $2,000 Deductible Plan, which has a $4,000 out of pocket maximum; to $959 PMPM for Coventry's pricey $250-deductible plan with a $2,500 out of pocket limit, according to the web site. Starting in 2014, the health reform law will limit the total amount that people have to pay out-of-pocket when they're insured by an essential-benefits policy. That cap is inflation-gauged to 2010 expenditures of $5,950 for single coverage and $11,900 for family coverage. More than 530 insurers provided information for more than 2,700 coverage plans across all states and the District of Columbia, HHS says in a press release.    

6 Compliance issues for qualified retirement plans to check on by the end of 2011

November 16, 2011 – 10:58 am | By Guest Contributor | No comments yet

With the year’s end fast approaching, employers that sponsor tax-qualified retirement plans should assess whether they may require amendments or administrative changes. To help with that process, Todd A. Solomon, a partner in the Employee Benefits Practice Group of McDermott Will & Emery’s Chicago office, and Brian J. Tiemann, also a member of that office, provided this list of top compliance issues and developments to verify and fix if necessary before New Year’s Eve. Defined Contribution Plans For defined contribution (DC) plans, employers should keep in mind the following matters. 1) Suspension of 2009 required minimum distributions

Required minimum distributions (RMDs) generally are amounts that must be distributed from a participant’s plan account beginning in the later of the year that the participant reaches age 70½ or retires. The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) permitted plans to suspend RMDs for 2009 and allowed 2009 RMDs to be treated as eligible rollover distributions. DC plans must be amended by the last day of the 2011 plan year (for example, Dec. 31, 2011 for calendar year plans) to reflect whether the plan suspended 2009 RMDs and whether the plan treated 2009 RMDs as eligible rollover distributions. IRS Notice 2009-82 provides sample language for plan amendments related to 2009 RMDs.

2) In-plan Roth conversions

The Small Business Jobs Act of 2010 (SBJA) permits plans to allow participants to convert tax-deferred contributions to Roth contributions within the plan. DC plans that permit in-plan Roth conversions must be amended by the last day of the plan year in which the amendment is effective or Dec. 31, 2011. See IRS Notice 2010-84 for more information.

3) Discretionary amendments

Discretionary amendments to implement plan design changes made during the 2011 plan year generally must be adopted by the last day of the 2011 plan year (for example, Dec. 31, 2011 for calendar year plans). In addition, amendments to implement certain plan design changes for the 2012 plan year may need to be adopted by the end of the 2011 plan year, such as amendments to implement automatic enrollment or to reduce the amount of the employer’s matching or profit sharing contributions.

Defined Benefit Plans An employer should keep in mind the following matters involving defined benefit (DB) plans. 4) Benefit restrictions based on plan funding

Final regulations under Code Section 436 were published in October 2009 and provide guidance on certain funding-based restrictions on benefit accruals and distributions for defined benefit plans. Amendments to implement the final regulations are required by the last day of the 2011 plan year (for example, Dec. 31, 2011 for calendar year plans). This deadline may be extended as the IRS has indicated its intent to issue a model plan amendment, which has not yet been published as of early November 2011. See Notice 2010-77 .

5) Extended deadline for cash balance/hybrid plans

Both final and proposed regulations applicable to cash balance/hybrid plans were published in October 2010. The regulations include many requirements, such as three-year vesting schedules, protections against benefit reductions based on age and standards for setting interest credits at a rate not greater than the market of return. The deadline for amendments to implement the regulations had been the last day of the 2011 plan year. However, the IRS recently extended the deadline to the last day of the plan year before the plan year that the 2010 regulations are finalized and applicable to the plan. See Notices 2010-77 and 2011-85 for more information.

6) Discretionary amendments

As with defined contribution plans, discretionary amendments to implement plan design changes made during the 2011 plan year and to implement certain changes for the 2012 plan year must be adopted by the last day of the 2011 plan year (for example, Dec. 31, 2011 for calendar year plans).

Determination Letter Filings All individually designed qualified retirement plans should be submitted to the IRS for a determination on the plan’s qualified status following a fixed five-year filing cycle. Employers with an Employer Identification Number (EIN) that ends in “1” or “6” should plan to submit an on-cycle Cycle A determination letter application by Jan. 31, 2012. The IRS recently published revised forms and instructions that must be used for Cycle A filings. See Revenue Procedure 2011-6 for more information. Todd Solomon is contributing editor for the Employer’s Handbook: Complying With IRS Employee Benefits Rules.