Wednesday, September 13, 2017

Wellness Plans Face Significant New Scrutiny from the Department of Labor

 From EBN:
Employers who sponsor a wellness plan and service providers that offer wellness plans to their customers should be aware of recent enforcement activity by the U.S. Department of Labor, as well as a recent court ruling regarding Equal Employment Opportunity Commission regulations applicable to wellness plans. 
The DOL recently brought suit for various violations under the Employment Retirement Income Security Act of 1974, as amended against Macy’s Inc., along with the third-party administrators of the retailer’s health plan. 
The suit alleges that the Macy’s wellness plan does not meet the applicable wellness plan non-discrimination requirements because the plan failed to provide a reasonable alternative standard for participants to avoid the tobacco surcharge levied by the wellness plan. It also alleges the plan continued to charge participants a tobacco surcharge even when they participated in the tobacco cessation program offered under the plan. 
The non-discrimination rules under the Health Insurance Portability and Accountability Act, as amended by the Affordable Care Act, require participatory wellness programs to offer a reasonable alternative standard to participants who cannot meet the initial standard. 
According to the complaint, the Macy’s plan did not offer an alternative to the tobacco cessation program for those individuals for whom it was unreasonably difficult to complete the offered tobacco cessation program due to a medical condition, or for whom it was medically inadvisable to attempt to achieve the standards of the tobacco cessation program. 
In addition, the complaint alleges that the plan continued to charge the tobacco surcharge to participants who entered a tobacco cessation program. The only way for a participant to avoid the surcharge was to remain tobacco free for six consecutive months during the plan year. 
The DOL claims that amounts collected by the plan in the form of tobacco surcharges were used by Macy’s to pay claims and administrative expenses associated with its self-insured medical plan. 
The complaint asserts that these actions resulted in Macy’s violating several of ERISA’s fiduciary and prohibited transaction requirements, including failing to act solely in the interest of the participants and beneficiaries of the medical plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of plan administration, and engaging in transactions that constituted a direct or indirect transfer to, or use by or for the benefit of a party in interest, of plan assets. 
The DOL also alleged HIPAA non-discrimination violations in Macy’s requiring participants to pay a premium or contribution that was greater than the premium or contribution for a similarly situated participant enrolled in the medical plan on the basis of a health status-related factor. 
The suit also alleges that Macy’s and the third-party administrators of its health plan breached their fiduciary duties under ERISA based on changes made to the plan’s methodology for calculating reimbursement of out-of-network claims. 
In the complaint’s prayer for relief, the DOL requests that Macy’s be ordered to reimburse all participants who paid a tobacco surcharge during the time period at issue, with interest, and be enjoined from collecting any tobacco surcharge until it revises its wellness plan to comply with the nondiscrimination requirements for wellness plans, including the requirement to offer a reasonable alternative standard. 
In addition, the DOL requests that Macy’s be required to disgorge all unjust enrichment or profits received as a result of the alleged fiduciary breaches it committed or for which it is liable.

More employers are requiring same-sex couples to marry to receive health benefits

From Wolters Kluwer: 
Employers are increasingly requiring same-sex couples to legally marry to receive health care benefits, data from the International Foundation of Employee Benefit Plans reveals. The trend follows the June 2015 Supreme Court ruling that legalized same-sex marriage. 
Immediately after the 2015 Supreme Court ruling that legalized same-sex marriage, three in ten employers reported they were likely to discontinue providing benefits to same-sex domestic partners. 
Findings were drawn from Employee Benefits Survey: 2016 Results, Domestic Partner Benefits After the Supreme Court Decision: 2015 Survey Results and Employee Benefits for Same-Sex Couples: The DOMA Decision One Year Later. 
Larger organizations are the most likely to be maintaining same-sex domestic partner benefits. Three in four organizations (77 percent) with 10,000 or more employees continue to offer domestic partner benefits. 
In 2014, one year before the ruling, employers reported that:
  • 51 percent provided benefits to same-sex partners in a civil unions
  • 59 percent provided benefits to same-sex domestic partners
  • 79 percent provided benefits to same-sex spouses.
In 2016, one year after the ruling, the number of employers offering health care benefits to unmarried same-sex couples has dropped. Employers report that:
  • 31 percent are providing benefits to same-sex partners in civil unions (down 20 percent from 2014)
  • 48 percent are providing benefits to same-sex domestic partners (down 11 percent from 2014).

AT&T Health Plan Must Cover Girl’s Horse-Based Therapy

From Bloomberg BNA
An AT&T Inc. health plan must pay for an employee’s daughter’s mental health treatment at a residential center that combines psychotherapy with riding horses ( Lynn R. v. ValueOptions , 2017 BL 293893, D. Utah, No. 2:15-cv-00362-RJS-PMW, 8/22/17 ). 
The health plan was wrong to deny more than $117,000 in medical claims for treatment the girl received at Utah-based Equine Journeys, a federal judge ruled Aug. 22. The plan said it denied coverage because the facility wasn’t nationally accredited, but the judge rejected this rationale. “Nowhere does the Plan state a provider must be nationally accredited for the treatment to be medically necessary,” the judge said.

Draft Forms and Instructions For 2017 ACA Reporting Released

The Internal Revenue Service (IRS) recently released the draft instructions for  2017 Forms 1094-C and 1095-C used by applicable large employers (ALEs) to report under Internal Revenue Code (Code) Sections 6055 and 6056. The newly released instructions  incorporate  minor changes that were reflected in the 2017 draft forms, released on July 27, 2017.   
2017 forms are due to employees/covered individuals by Jan. 31, 2018, and must be filed with the IRS by Feb. 28, 2018 (or April 2, 2018, if filing electronically since March 31 is a Saturday). As a reminder, it appears ALEs will not have the extension to file they had for their 2016 forms.
Draft instructions provide employers with a few clarifications, including the following:
  • Transition Relief: Certain limited transition relief was available to ALEs for 2015 & 2016. Since no transition relief is available in calendar year 2017,  any reference to that relief has been removed.  Both boxes "B" and "C" on line 22  of form 1094 C are now labeled "Reserved". These boxes will never apply in 2017 as the transition relief for boxes "B" and "C"are no longer applicable. The second change is column (e) in Part III of the Form 1094-C is also labeled "Reserved". Column (e) in Part III of the Form 1094-C was tied to box "C".
  • Plan Start Month: Optional again in 2017 on form 1095C, Part II.
  • Penalty Information: The penalty remains at $260 per violation, but maximum was indexed to an annual maximum of $3,218,500 (up from a maximum of $3,193,000, for 2016).
  • Formatting Returns: Clarifies formatting must be in landscape.
  • Line 15: The instructions  added  for Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. ( see page 6)
  • Line 16: A note has been added in the instructions for Code 2 series " There is no specific code to enter on line 16 to indicate that a full-time employee offered coverage either did not enroll in the coverage or waived the coverage."   This question has been raised often and  employers can either enter appropriate affordability codes of 2F,2H or2G or leave blank to indicate unaffordable.
  • IRS HotlineInformation on an IRS website and IRS hotline phone number  (1-800-919-0452)  have been added to the recipient form back page instructions
For a more detailed discussion of both the finalized forms and their accompanying instructions, please see our legislative alert below.

Federal Court Strikes Down 2016 Overtime Rule

  • A federal court struck down the 2016 overtime rule that was supposed take effect on Dec. 1, 2016.
  • The salary level limit for EAP employees remains at $455 per week or $23,660 per year.
  • The salary level limit for HCEs remains at $100,000 per year.
Important Dates:
  • November 22, 2016 - A federal judge issued a preliminary injunction blocking enforcement of the overtime rule.
  • August 31, 2017 - The final rule was struck down.

On Aug. 31, 2017, a federal judge in Texas struck down the Department of Labor’s (DOL) 2016 overtime rule, stating that the DOL had exceeded its authority by issuing a new salary level requirement for white collar exempt employees. 

The DOL is unlikely to appeal this court decision because the ruling does not put into question the DOL’s general authority to set any type of salary limit. 

However, the DOL has also signaled its intention to propose a new overtime rule. The DOL has published a request for information (RFI) to invite the public to comment on the issues the DOL should consider before proposing a new overtime rule. 

Action Steps 
Employers are not required to comply with the 2016 overtime final rule. This ruling ensures that the rule will not take effect. Employers should monitor developments on a new overtime rule proposal. 

DOL Rule on White Collar Exemptions 
The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, the FLSA exempts certain workers, such as white collar employees, from these protections. The white collar exemptions apply to certain executive, administrative, professional, outside sales, computer and highly compensated employees. 

To qualify for the executive, administrative or professional (EAP) exemption, an employee must meet a salary basis test, a salary level test and a duties test. The DOL’s 2016 overtime rule would have increased the required salary level from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Highly compensated employees (HCEs) must also satisfy the salary basis and duties tests to be considered exempt, but a different salary level applies to them. The DOL rule would have increased the required salary level for highly compensated employees from $100,000 per year to $134,004 per year

Challenges to the 2016 Overtime Rule
In September 2016, a coalition of 21 states and a number of business groups filed two separate lawsuits challenging the new rule. These two lawsuits were combined in October. On Nov. 16, 2016, the court held a hearing on whether to grant an emergency injunction blocking the implementation of the rule. The judge presiding over the case issued his written ruling granting the injunction on Nov. 22, 2016.

On Aug. 31, 2017, the same federal court struck down the 2016 overtime rule stating that the DOL exceeded its authority when imposing the $913 per week ($47,476 per year) and $134,004 per year salary level limits.

The Future of FLSA Overtime Regulations
On July 26, 2017, the DOL published an RFI regarding the overtime exemptions for executive, administrative, professional, outside sales and computer employees. The purpose of the RFI is to gather information from the public before formulating a proposal to amend the FLSA or its regulations.

The RFI does not place any responsibilities on employers. However, any individual or organization interested in responding to the RFI must submit their comments to the DOL by Sept. 25, 2017. The DOL is encouraging individuals and organizations to submit their comments electronically, using the instructions in the Federal eRulemaking Portal.

When submitting a comment, employers should remember that, once submitted, comments are considered public records and will be published without editing. This includes any personal information provided.