Benefits Counsel

The Supreme Court has issued its opinion in the case of AT & T Corp. v. Hulteen. The case focuses on calculation of pension accruals under the Pregnancy Discrimination Act.

The district court decision, which had been affirmed by the Ninth Circuit and held for the employee, is reversed in a 7-2 opinion by Justice Souter. Justice Stevens filed a concurring opinion. Justice Ginsburg filed a dissenting opinion, joined by Justice Breyer.

The IRS has come up with some new rules to “ease the pain” of these dire economic conditions and has issued some proposed regulations allowing employers to reduce or suspend their 401(k) or 403(b) safe harbor nonelective contributions mid-year in the case of a “substantial business hardship described in section 412(c) [of the Internal Revenue Code].” The IRS notes in the preamble to the proposed regulations (in today’s Federal Register) that the new rules will “provide an employer an alternative to the option of terminating the employer’s safe harbor plan in such a situation” (i.e. better to ease the rules a bit, than have employers ditch the plans altogether in an attempt to get rid of the mandatory contribution). There is a 30-day advance notice requirement and a requirement that employees be allowed to change their salary deferral elections in order to take advantage of the new rules.

Please note the following regarding the proposed effective date of the new rules:

These regulations are proposed to be effective for amendments adopted after May 18, 2009. Taxpayers may rely on these proposed regulations for guidance pending the issuance of final regulations. If, and to the extent, the final regulations are more restrictive than the guidance in these proposed regulations, those provisions of the final regulations will be applied without retroactive effect.

The National Law Journal reports that the Employee Plans Division of the Internal Revenue Service has started an internship program for law students. This is a great opportunity for law students to break into the employee benefits arena and receive law school credit at the same time. However, the bad news is that the positions appear to be unpaid–not an uncommon scenario in this economy.

RIA indicates:

Joseph Tiberio, IRS Program Manager, Employment Tax Policy, has confirmed that the IRS will not require COBRA subsidy payments to be reported on Form W-2 or Form 1099. Tiberio made his comments on the May 12th IRS Tax Talk Today webcast entitled Specialty Taxes: Estate and Gift, and Employment Taxes.

When asked how a tax practitioner would know that some or all of the subsidy should be reported on a personal income tax return if the “Assistance Eligible Individual” does not receive a Form W-2 or Form 1099, Tiberio advised practitioners “to ask their clients about the subsidy before the practitioner begins preparation of the return.”

The Seventh Circuit did not feel that the new Glenn standard made a difference in the outcome of this long-term disability case–Jenkins v. Price Waterhouse Long Term Disability Plan. However, the court did, in a footnote, issue a warning about “independent medical examinations”:

. . . [W]e don’t want the phrase independent medical examination to pass without a comment. IMEs are designed to turn a spotlight on claims that are exaggerated or downright fraudulent. They are advertised as, and often passed off as, completely neutral examinations by disinterested medical professionals. But that is not always the case, especially when the professionals bill is paid by an insurance company (or a self-insured employer) with an interest in receiving a report that minimizes, or discounts, a disability claim. How much an IME professional is paid, and how often he or she is used, are certainly important considerations that bear on what weight should be attached to their reports.

With bankruptcy filings soaring during this economic downturn, it is always of great interest to benefits practitioners to learn how bankruptcy courts are dealing with the unmet employee benefit obligations that get thrown in the mix. The Ninth Circuit in the case of Consolidated Freightways Corp. v. Aetna, Inc. dealt a blow to retirees (and the insurer who had advanced amounts in payment of retiree claims) by ruling that the retirees’ claims for benefits under a self-funded retiree medical portion of the employer’s health plan were not entitled to “priority” in determining the number of employees under Section 507(a)(5) of the Bankruptcy Code, even though active employees’ claims were so entitled. The court looked at the history of the Bankruptcy Code and determined the outcome based upon what the court determined to be the intent of Congress:

The next question is: For purposes of this priority, what is meant by employees and arising from services rendered? While at first blush there may be some ambiguity in that regard, we think that a consideration of

One CEO reveals: “How to Keep Your Staff and Your Bottom Line Intact.” (And your benefits.)

The Workforce Prof Blog raises concerns about FLSA here.

The IRS has posted its fourth installment of Q & A’s concerning the ARRA COBRA Subsidy.

See also these links from the Department of Health and Human Services (“HHS”):

HHS’s webpage on the COBRA Subsidy here.

Helpful Information About State Continuation Coverage (Mini-COBRA Programs) and the American Recovery and Reinvestment Act of 2009 (ARRA)

COBRA Helpful Tips

The DOL has posted a draft of the new Application which it will use to review private employer group health plan denials of the COBRA subsidy. The applications have apparently been submitted to the federal Office of Management and Budget for approval by May 15, 2009. In this DOL Supporting Statement here, the DOL provides this estimate of how many applications the agency expects to receive:

The Department estimates that approximately 40.8 million individuals will initially file for Unemployment Insurance between September 1, 2008 and December 31, 2009 from the private-sector. Of these, 11.4 million will be eligible for a COBRA subsidy due to the following factors: their enrollment in employer sponsored insurance (ESI); their employment by a firm of 20 or more employees; and their lack of other options for health insurance coverage. Of those, 50 percent or 5.7 million are expected to actually apply for the subsidy and enroll in COBRA. National Unemployment Insurance data reported a 5.8 percent appeal rate of initial claims in 2008. The Department assumed that roughly half that share, or 3 percent, of those that applied for the subsidy would contact the Department to appeal a denial, or 172,000. Of these, it was assumed that 45 percent, or 77,000, would involve an initial call to an EBSA benefits advisor who would be able to resolve the issue without going through a formal appeal. The remaining 55 percent, or 95,000, would go through a formal appeal.

The Supporting Statement also indicates:

The information provided on the Application will be used by EBSA to make a determination regarding the applicant

The FTC has announced that it will delay enforcement of the Red Flags Rule (discussed in previous post here) until August 1, 2009. Access the FTC’s press release here.

Today the Senate Finance Committee held a Roundtable Discussion on Financing Comprehensive Health Care Reform. The Wall Street Journal Health Blog reports here on how single-payer advocates apparently staged a protest at the meeting.