Saturday, March 21, 2009

Department of Labor Release Model COBRA Notices

By Rick A. Hanrahan

On February 17, 2009, the President signed the American Restoration and Recovery Act (“the Act”) into effect. The Act makes significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), and mandates that plans notify assistance-eligible individuals (e.g. certain employees and qualified beneficiaries) of their COBRA rights to receive a 65% subsidy on their premium payments.

The Department of Labor (“DOL”) just recently issued its model notices to help plans and individuals comply with COBRA’s new requirements. Each model notice is designed for a particular group of assistant-eligible individuals and contains information to help satisfy the Act’s notice requirements.

The three notices include: (1) a general notice (full and abbreviated version); (2) alternative notice; and (3) notice in connection with extended election periods.

The general notice should be used for assistance eligible individuals who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. The full version includes information on the premium reduction as well as information required in a COBRA election notice. The abbreviated version includes the same information as the full version regarding the availability of the premium reduction and other rights under the Act, but does not include the COBRA coverage election information. The abbreviated version may be used in lieu of the full version for individuals who experienced a qualifying event during, on, or after September 1, 2008, already elected COBRA coverage, and still have coverage.

The alternative notice should generally be used by insurance issuers that provide group health insurance coverage to persons who became eligible for continuation coverage under a state law.

The notice in connection with extended election periods should be used for individuals who: (1) had a qualifying event at any time from September 1, 2008 through February 16, 2009; and (2) Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA. Employer must provide this notification by April 18, 2009.

Failure to provide proper notice to assistant eligible individuals could subject the employer or plan to a penalty of up to $110 per day under ERISA § 502(c)(1) and/or other penalties.

To retrieve the DOL’s model notices, go to:
http://www.dol.gov/ebsa/COBRAmodelnotice.html.

For more details on the changes to COBRA read our firm’s prior alerts:
“The COBRA Clutch: The Stimulus Bill Alters COBRA"; and “IRS Releases Updated Form 941 For Employers To Report Cobra Premium Assistance Payments”.

As always, do not hesitate to contact our certified employment attorneys at Zashin & Rich for further details.

Friday, March 20, 2009

Ohio Court Holds Ohio Law Trumps Title VII For Pregnancy

By Lois A. Gruhin

The Fifth Appellate District recently held in Nursing Care Mgt. of Am., Inc. v. Ohio Civ. Rights Comm., 2009-Ohio-1107, that an employer violated R.C. 4112.02 by denying leave to a pregnant female employee who had not satisfied the employer’s 12 month length of service requirement.

The employer had a facially-neutral leave policy that provided 12 weeks of available leave, but required one-year of service before any employee was entitled to it. The plaintiff/employee had given her employer a doctor's note placing her off work for 6 weeks due to pregnancy, approximately a week before her due date. Three days after she had given birth, and about 10 days after submitting the doctor's note, the employer discharged her because she had not worked for a full year, as required under the employer’s policy.

The OCRC found probable cause for pregnancy discrimination based on O.A.C. 4112-5-05(G)(2). (G)(2) makes it unlawful sex discrimination to discharge an employee "who is temporarily disabled due to pregnancy" and that discharge "is caused by an employment policy under which insufficient or no maternity leave is available."

The employer argued that these regulations went beyond what was provided for by existing interpretations of the federal Pregnancy Discrimination Act (PDA), and that the Ohio Supreme Court had directed Ohio courts to apply federal interpretations of the PDA. The employer also argued that its act was justified under subdivision (G)(5), which permits enforcement of "length of service" requirements under certain circumstances.

The Fifth District held that while Ohio courts were indeed to apply federal interpretations of Title VII where the language of the Ohio act is comparable, Title VII and the PDA were not preemptive ceilings, and the Ohio act was not necessary equivalent to the federal act, but only "similar to" it. Specifically, the court cited the U.S. Supreme Court's opinion in California Fed. Sav. & Loan Assn. v. Guerra (1987), 479 U.S. 272, which held that "Title VII does not preempt a state law that guarantees pregnant women a certain number of pregnancy disability leave days, because this is neither inconsistent with nor unlawful under Title VII." The court pointed out that that R.C. 4112.08 also requires that R.C. Chapter 4112 "shall be construed liberally for the accomplishment of its purpose." In the end, the court determined that O.A.C. 4112-5-05(G)(2) trumps (G)(5), and that maternity leave must be provided for a “reasonable period of time.”

This illustrates that under Ohio Law employers who fail to provide all pregnant employees a reasonable amount of maternity leave regardless of the employers leave policy do so at their own peril. The issue is what constitutes a “reasonable period of time” for pregnancy/maternity leave. The Ohio Civil Rights Commission has taken the position in its technical policy T-29 that a leave policy providing a minimum of at least 12 weeks of pregnancy/maternity leave for women affected by pregnancy, childbirth or a related medical leave, that is applied regardless of length of service, is presumed to be reasonable and sufficient. However, the reasonableness and sufficiency of a leave policy may be rebutted based on the past practices of the employer, the employer’s business necessity, the type of work involved and other relevant factors. Remember that in some instances due to medical necessity, a reasonable period of leave could require more than a 12 week leave period.

The Court’s opinion appears to lay the groundwork for the OCRC to use R.C. 4112.08 (which has no federal counterpart) as the basis for distinguishing R.C. Chapter 4112 from federal Title VII/ADA/ADEA law, and issue regulations that carry employers' obligations under R.C. Chapter 4112 far beyond anything required by federal law – all without any action by the General Assembly.

Thursday, March 12, 2009

IRS Releases Updated Form 941 For Employers To Report Cobra Premium Assistance Payments

By Richard A. Hanrahan

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“the Act”) into law. The Act makes significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), and allows certain assistance-eligible individuals of COBRA the right to receive a 65% subsidy on their premium payments.

In particular, assistance-eligible employees, involuntarily terminated between September 1, 2008 and December 31, 2009, must pay 35% of the COBRA premium, while employers must pay the remaining 65%. However, employers may recover the 65% subsidy provided to assistance-eligible individuals by completing the IRS updated Form 941 (Rev. January 2009), Employer’s Quarterly Federal Tax Return.

Employers must claim the COBRA premium payments on Line 12a of Form 941. The assistance payments on Line 12a may result in overpayment of taxes, in which employers can elect to offset their payroll tax deposits or claim the subsidy as a refund at the end of the quarter. Employers must also include the number of individuals provided COBRA premium assistance on Line 12b.

In addition to properly filing out the new Form 941, employers must maintain supporting documentation for the tax credit or refund, including:
  • Receipt of the employee’s 35% share of the premium, including dates and amounts;
  • For insured plans: a copy of invoice or a similar statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier;
  • For self-insured plans: proof of the premium amount and coverage provided to the assistance eligible individuals;
  • Declaration and date of the former employee’s involuntary termination (which must be between September 1, 2008 and December 31, 2009);
  • Proof of each assistance eligible individual’s eligibility and election for COBRA coverage at any time during the period from September 1, 2008 and December 31, 2009;
  • A record of all covered employees’ social security numbers, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one (1) or more individuals; and,
  • Other documents necessary to verify the correct amount of reimbursement
The filing date for the updated Form 941 will not be extended. Therefore, it is imperative that employers complete Form 941 on time and maintain the proper documentation. The IRS states it will send the new Form 941 to about 2 million employers sometime in mid-March. However, employers can retrieve the updated Form 941 at: http://www.irs.gov/pub/irs-pdf/f941.pdf.

The Department of Labor, Department of Health and Human Services, and the IRS share responsibility for implementing the COBRA requirements. For further details on Form 941, refer to the IRS link: http://www.irs.gov/instructions/i941/index.html.

(For more details on the changes to COBRA read our firm’s prior alert: “The COBRA Clutch: The Stimulus Bill Alters COBRA”).