Compliance News
Check this section frequently to stay abreast of the latest compliance news and updates that affect you, including state and federal legislative updates, industry trends, recent surveys, and other topics of interest to HR managers.
National Updates
Retiree Reinsurance Program Draft Application Released
The PPACA's Early Retiree Reinsurance Program, according to the interim final regulations, went into effect on June 1, 2010. To become eligible to participate in the program, plan sponsors must submit a timely application for certification to HHS. On June 1, 2010, a draft application and set of instructions for the program was posted to the website of the Office of Information and Regulatory Affairs. According to the draft application, employers will have to provide an estimate of how much they expect to receive in reimbursement during a two-year period and the programs employers have in place to reduce the cost of chronic and high-cost conditions (defined as a condition for which $15,000 or more in health care claims are likely to be incurred by one plan participant). In addition, plan sponsors must provide information on how they expect to use the reimbursement (e.g., to reduce the plan sponsor's costs, the plan enrollees' costs, or a combination of the two). A final application will be available at a later date in June, prior to the date on which the HHS will begin accepting applications.
Click here to learn more.
COBRA Subsidy Ends Without Further Extension
On May 31, 2010, the COBRA subsidy expired. Those employees (and dependents) who lost coverage due to an involuntary termination on or before May 31, 2010 will continue to receive up to 15 months of the subsidy. However, those who are involuntarily terminated on or after June 1, 2010, are currently not eligible for the subsidy.
On May 28, 2010, the House of Representatives narrowly approved a scaled-back version of the American Jobs and Closing Tax Loopholes Act (H.R. 4213), referred to as the "Tax Extender" bill. Due to the measure's escalating cost estimate, however, an extension to the COBRA 65 percent premium subsidy was entirely omitted. The Senate had previously recessed for the Memorial Day break and has not taken action on this legislation. Notably, the Senate passed an earlier version of the Tax Extender Act in March 2010, calling for an extension until December 31, 2010 of the COBRA subsidy. However, there has been growing concern over the federal deficit and the cost of continuing the subsidy. Despite this, there is still the chance that Congress may attempt to pass another short-term extension upon their return from the legislative recess. We will continue to provide updates as this continues to develop.
Courts, DOL Provide Further Definition of Gross Misconduct
Employers who deny COBRA based on "gross misconduct" are advised to seek legal counsel before doing so. The term "gross misconduct" has not been defined and instead, case law is generally referred to when determining if COBRA may be denied on the grounds of gross misconduct. As illustrated by the two court cases decided recently, it is clear that "gross misconduct" and being fired "for cause" are separate terms, not to be confused.
-
In Stormont-Vail Health Care, Inc. v. U.S. Department of Labor EBSA, a female employee was employed by Stormont-Vail Health Care as a nurse in February 2010. Stormont-Vail received a report that the nurse participated in a single, isolated and impulsive incident and was subsequently fired and that the incident constituted "gross misconduct" and denied COBRA. The nurse appealed to the DOL, requesting an expedited review of her eligibility to receive the COBRA premium subsidy.
In a determination letter to Stormont-Vail Health Care, the DOL told the employer that "gross misconduct" generally must be something that would rise to the level of a felony or something that might lead to criminal charges. Although the incident merited being fired "for cause", the DOL determined that it was not considered "gross misconduct" as it was not a criminal act.
Click here to learn more.
-
In Moore v. Williams College, an employee was terminated from his position as assistant professor. newsdescription provided a termination letter listing four reasons for his dismissal: a guilty plea to bank, Social Security, and student aid fraud; failure to notify the employer of the crimes; misuse of a college credit card; and use of fraudulent credentials to obtain employment. The employee sued the employer claiming, among other things, that the college improperly denied him COBRA coverage when he was terminated. The college argued that it properly denied the employee's COBRA coverage because he was terminated for gross misconduct.
The court agreed that the employee was not entitled to COBRA, finding the employee's conduct in this case constituted gross misconduct. The court stated that in order to find gross misconduct, the behavior must be "outrageous, extreme, or unconscionable" and that some courts have determined that there must be an "evil design" or "intentional and substantial disregard of the employer's interests."
Click here to learn more.
IRS Announces 2011 HSA/HDHP Annual Limits
In Revenue Procedure 2010-22, the IRS announced the 2011 annual limits for HSAs and high deductible health plans. The limits will remain the same as the 2010 limits, which means a maximum annual contribution of $3,050 for single coverage and $6,150 for family coverage. The minimum deductibles remain at $1,200 (single) and $2,400 (family).
Click here to learn more.
CMS Issues Alert for Section 111 Reporting of HRAs
The Centers for Medicare and Medicaid Services (CMS) has issued an alert regarding Section 111 Medicare Mandatory Reporting for health reimbursement arrangements (HRAs). The responsible reporting entities (RREs) for an HRA must begin reporting data to CMS in the fourth quarter of 2010. The third party administrator is the RRE for an employer that outsources their HRA administration. The employer is the RRE for an employer that administers the HRA in-house. However, HRAs with an annual benefit amount of less than $1,000 are exempt from reporting.
Click here to learn more.
Red Flags Rule Delayed
The Federal Trade Commission (FTC) has announced that it is again postponing its enforcement of the Identity Theft Red Flags Rule, this time through December 31, 2010. The Red Flags Rule was issued jointly by several federal agencies and became effective on January 1, 2008. The FTC, however, has delayed its enforcement on multiple occasions with the previous delayed date of June 1, 2010. The announcement notes that if Congress passes legislation limiting the scope of the Red Flags Rule with an effective date earlier than December 31, 2010, the FTC will begin enforcement as of that effective date. The Red Flag Rules require financial institutions and creditors with "covered accounts" to implement written identity theft prevention programs that are designed to detect the warning signs ("red flags") of identity theft in their day-to-day operations and to reduce the risk of identity theft. The delay is good news for plan sponsors of employee benefit plans as it is still unclear on how the rules affect consumer driven plans such as health FSAs, dependent care accounts and HRAs.
Click here to view the Red Flags Rule.
Click here to view the press release.
State Updates
Georgia
Effective May 20, 2010, employers that have group health plans subject to Georgia's Health Care Continuation Coverage law must permit employees, their spouses, and employees' dependents who are assistance eligible individuals (as defined by the federal American Recovery and Reinvestment Act of 2009) to elect to continue coverage for the remainder of the month in which coverage terminates plus the maximum number of months such individuals are eligible for premium assistance under ARRA. Additionally, the maximum number of months of premium assistance is available is adjusted to correlate with federal law, including any extension that occurs on and after May 5, 2010. This was enacted as part of H.B. 1268.
Click here to view H.B. 1268.
New Jersey
On January 14, 2010, New Jersey enacted Senate Bill No. 3065 which amended the law governing contributions for family temporary disability leave benefits. Beginning in calendar year 2011, and continuing each subsequent calendar year, a worker's annual contribution rate into the "Family Temporary Disability Leave Account" must be at least:
- 125 percent of the estimated benefits to be payable for family disability leave benefits during the calendar year; plus
- 100 percent of the estimated necessary amount for administration costs; less
- the amount of net assets that will remain in the account as of December 31 of the immediately preceding year.
A worker with more than one employer will be entitled to a refund if his or her combined contributions exceed the family temporary disability leave contribution rate set by the law.
Click here to learn more.
Source: Littler Mendelson
New York
New York Labor Law Section 193 provides: "No employer shall make any deduction from the wages of an employee, except deductions which: are made in accordance with the provisions of any law or any rule or regulation issued by any governmental agency; or are expressly authorized in writing by the employee and are for the benefit of the employee." The NY Department of Labor previously held that certain deductions from pay could be considered "for the benefit of the employee" within the meaning of Section 193 if they were repayments of a debt to the employer incurred by the employee's receipt of an overpayment, loan, or other advance which the employee did not earn. The NYDOL now takes the position that deductions for overpayments from an employee's wages are not permitted, even with the employee's written consent.
Employers may only make deductions not required by law from an employee's paycheck — even with the employee's written consent — for very limited purposes, including payments for insurance premiums, pension or health and welfare benefits, contributions to charitable organizations, payments for United States bonds, payments for dues or assessments to a labor organization and any payments that are nearly identical to these types of payments. All other payments including, but not limited to, overpayments, loans, salary/benefit advances and tuition, may not be deducted from an employee's paycheck. To recover such money owed by the employee, the employer should request the money from the employee without threatening disciplinary or retaliatory action. If the employee refuses to pay back the money, then the employer's recourse is to initiate a legal action against the employee to recover the money.
Click here to learn more.
Source: Littler Mendelson
Rhode Island
Health Insurance Commissioner Koller has issued Health Insurance Bulletin 2010-1 as a reminder of the state's requirement that every individual and group health insurance policy providing medical coverage must provide coverage for smoking cessation treatments. Treatment includes prescription drug therapies (if the policy provides for prescription drug benefits), over the counter drug therapies, and counseling sessions.
Click here to learn more.
Texas
The Department of Insurance has developed a Health Care Reform Resource Page on its website. The page includes information regarding what the Department is doing to comply with PPACA. The online resource also provides information on how the reform provisions will affect certain consumers and the Texas High Risk Pool Program.
Click here to learn more.
The above links are provided for your information only. NFP does not endorse, nor accept any responsibility for the content, products and/or services provided at non-NFP sites. Some information contained in the NFP site is provided by third parties. We do not independently verify this information, nor do we guarantee its accuracy or completeness. Information provided from governmental agencies is subject to change.