Month: April 2009

The Third Circuit has officially opined in the case of Schwing v. Lilly Health Plan (3rd Cir 04/14/2009) that MetLife v. Glenn overruled the “sliding scale” standard of review previously adopted by the Third Circuit in reviewing decisions of ERISA fiduciaries:

Test

The IRS has issued Announcement 2009-34 which provides details regarding a new program for the pre-approval of prototype plans under Section 403(b) of the Internal Revenue Code.

Campaign Diaries appears to have the latest tally regarding the Employee Free Choice Act here. One senator cites the looming health care debate as one reason why he has concerns about EFCA in its present form, i.e. if supporters of the bill splinter relationships over EFCA, there might not be enough supporters left for the current administration’s proposed health care agenda.

Employers and their advisors will want to keep an eye on some legislation that has been introduced and referred to Committee called the “Emergency Retiree Health Benefits Protection Act of 2009″ (H.R. 1322). The bill would effectively prevent employers from terminating or reducing retiree medical after participants retire, or even passing additional costs of the coverage along to retired participants. In other words, the legislation would attempt to “vest” retirees in their retiree medical benefits upon retirement, regardless of any provisions in the Plan documents to the contrary.

Here is a portion of the language in the legislation:

Notwithstanding that a group health plan described in subsection (b) may contain a provision reserving the general power to amend or terminate the plan or a provision specifically authorizing the plan to make post-retirement reductions in retiree health benefits, it shall be prohibited for any group health plan, whether through amendment or otherwise, to reduce the benefits provided to a retired participant or his or her beneficiary under the terms of the plan if such reduction of benefits occurs after the date the participant retired for purposes of the plan and reduces benefits that were provided to the participant, or his or her beneficiary, as of the date the participant retired. Any group health plan provision which purports to authorize the reduction of benefits in a manner inconsistent with the foregoing prohibition shall be void as against public policy.

The American Benefits Council, SHRM, and ERIC and others have expressed their concern over the legislation in a letter.

The concern, of course, is that employers will jettison these programs if the legislation is passed (retirees would be vested under the legislation, but employers would likely be able prevent future vesting for active employees by terminating the programs.)

With many employers weathering the economic slump by cutting jobs, pay and/or benefits, employers also fear the repercussions that could come from such actions. Particularly, the Wall Street Journal today notes that employers are gearing up for how such actions might make them vulnerable to workers seeking to unionize:

U.S. businesses, fearful of rising union influence and a crackdown by the Obama administration on workplace practices, are scrambling for legal advice and training. . .

Labor consultants and lawyers are . . briefing companies large and small on a range of matters such as complying with current and recently enacted legislation, and how to detect union organizing and prevent it without breaking the law. Another pressing issue is whether companies have opened themselves to union organizing drives because they have cut jobs, pay or benefits to weather the economic slump.

You can order your National Employee Benefits Day t-shirt here.

Yesterday, the House passed (422 Ayes, 3 Nays) “H.R. 1253, the Health Insurance Restrictions and Limitations Clarification Act of 2009” which amends ERISA, the Code, and the Public Health Service Act to require that limitations and restrictions on coverage under group health plans be timely disclosed to group health plan sponsors and timely communicated to participants and beneficiaries under such plans in a form that is “clear and explicit.”

To get a good understanding of what this bill is supposed to accomplish, I refer you to the floor speech given by Representative Michael Burgess [R-TX]:

Mr. Speaker, in January 2001, the Department of Labor, the Internal Revenue Service, and the Health Care Finance Administration issued a rule in accordance with the Health Insurance Portability and Accountability Act, better known as HIPAA, of 1996 that was designed to guard against discrimination in coverage in the group health market. While addressing the issue of discrimination based upon participation in certain activities, these rules allowed continued discrimination in the form of nonpayment based upon the source of the injury.

So, in other words, you could have an employer-sponsored health insurance, which many of us do, have your premiums deducted from your paycheck, and yet be responsible for paying your own medical treatment if you were harmed. Trip and fall at home, no problem. Trip and fall while skiing on vacation with the family, and you get the bill. This is simply unfair.

People are led to believe that care for a broken arm, for example, is the same regardless of how the injury happened, but in fact that is not the case.

The lack of clarity underlying these exclusions has created a confusing situation for individuals that may ride motorcycles, horses, snowmobiles, or participate in other activities that could result in an injury. Millions of American enjoy these activities safely every year within the framework of State laws and utilizing proper safety precautions. The bill we are voting on today will take away the ambiguity and make certain that people are aware of any such restrictions in their coverage.

Again, this is not a bill that would require anything new to be done other than people be told up front and in plain language if there are limitations on their health care policy.

We are going to stand up and shine the light on these exclusions so that Americans will not be caught off guard by exclusions buried deep within an insurance plan.

The legislation would retain HIPAA’s provision of allowing group health plans to establish limitations or restrictions on the amount, level, extent, or nature of benefits or coverage provided, but would require that any limitations and restrictions:

(1) Be disclosed in writing to the plan sponsor in advance of the point of sale to the plan; and

(2) Be disclosed by the plan sponsor to participants and beneficiaries in a form “that is easily understandable” by such participants and beneficiaries.

The legislation also provides that the plan sponsor and the issuer of the coverage must provide such description to participants and beneficiaries “upon their enrollment under the plan at the earliest opportunity that other materials are provided.”

The IRS has issued Notice 2009-27 addressing a lot of issues pertaining to the COBRA subsidy program under ARRA.

Please note that the Notice makes it clear about which entities are eligible to take the credit against payroll tax liabilities:

Under ARRA, the “person to whom premiums are payable” is based on the nature of the plan and which COBRA continuation coverage provisions apply. In the case of a group health plan that is a multiemployer plan, the multiemployer plan is allowed the credit. In the case of a group health plan subject to the Federal COBRA requirements or the temporary continuation coverage requirements under the FEHBP, or a group health plan under which some or all of the coverage is not provided by insurance, the employer maintaining the plan is allowed the credit. For any other group health plan subject to ARRA (generally, fully insured coverage subject to State continuation coverage requirements), the insurer providing coverage under the group health plan is allowed the credit. These are the exclusive rules for who may take the credit unless the Secretary provides otherwise pursuant to the authority in section 6432(b).

Also, Q & A 58 provides further coverage of this issue:

Q-58. In the case of an insured plan subject solely to State law requiring the insurer to provide continuation coverage, if the employer collects the reduced premiums from assistance eligible individuals and pays the full premium to the insurer, is the employer eligible to take the payroll credit directly?

A-58. No. Under section 6432(b)(3), in the case of an insured plan subject solely to State law with respect to the requirement to provide continuation coverage, the only person entitled to be reimbursed for the premium reduction through the payroll credit (unless and until provided otherwise in future guidance) is the insurer providing the coverage under the group health plan.

The Notice also provides helpful guidance regarding what constitutes an involuntary termination of employment, for purposes of determining whether a terminated employee is entitled to the COBRA subsidy. Included is a statement that an “involuntary termination” does not include a reduction in hours, but that an employee’s voluntary termination in response to an employer-imposed reduction in hours “may be an involuntary termination if the reduction in hours is a material negative change in the employment relationship for the employee.”

So, it appears from this statement, that an employer might, due to economic conditions, reduce an employee’s hours, causing them to lose health care coverage, but the affected employee would not be entitled to the subsidy unless he or she went ahead and voluntarily terminated.

Finally, the Notice makes it clear that an employer may allow an eligible individual to elect coverage different from the coverage under the plan in which such individual was enrolled prior to the involuntary termination, but that the premium for coverage offered under this option cannot exceed the premium for the coverage the individual had prior to the involuntary termination.