*By Patrick J. Hoban
Recently, the Department of Labor (“DOL”) released guidance, available here,
that changes employee notification requirements under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Employees
covered under a group health plan are entitled to notices regarding
their rights under COBRA. The new notice requirements include
information regarding the Health Insurance Marketplace (“Exchanges”)
under the Patient Protection and Affordable Care Act
The DOL has provided an updated model continuation coverage “general notice,” available here, and updated model continuation coverage “election notice,” available here.
Covered employees and covered spouses/dependents are entitled to the
general notice upon the commencement of their employment and the
election notice within a short time period following a “qualifying
event” (e.g., termination of employment). The DOL considers use of the
model notices “to be good faith compliance with the . . . notice
content requirements of COBRA,” at least until the DOL finalizes its
rules with respect to the notices
The new general notice
language informs employees of their potential eligibility for coverage
through the Exchanges or under another group health plan (e.g., a
spouse’s plan) through a “special enrollment period” as opposed to COBRA
continuation coverage.
The new election notice language sets forth in bold print “You may be able to get coverage through the Health Insurance Marketplace that costs less than COBRA continuation coverage”
and provides three pages of information relating to the Exchanges. In
addition to describing options other than COBRA continuation coverage,
the election notice advises that “it can be difficult or impossible to
switch to another” option once a decision is made
Additionally, the Department of Health and Human Services (“HHS”) released a bulletin, available here,
announcing a “special enrollment period” lasting through July 1, 2014
for qualified individuals to drop their COBRA coverage and enroll in a
plan under an Exchange. This “special enrollment period” only applies
to the federal Exchange and the HHS bulletin encourages state-based
Exchanges to adopt similar enrollment periods.
Employers and plan administrators should take note of the
model notices and remain alert as the notices are subject to change and
may be modified as the DOL finalizes its rules. For the time being,
use of the model notices constitutes good faith compliance with COBRA’s
notice requirements.
*Patrick J. Hoban practices in all areas of labor and employment law. For more
information about COBRA notices or any other labor and employment needs,
please contact Patrick pjh@zrlaw.com) at 216.696.4441.
Showing posts with label COBRA. Show all posts
Showing posts with label COBRA. Show all posts
Wednesday, May 14, 2014
Wednesday, April 21, 2010
Feds Extend Unemployment Benefits and COBRA Subsidies for a Third Time
*By Patrick J. Hoban
On April 15, 2010, both houses of the U.S. Congress passed and the President signed H.R. 4851 which extends unemployment compensation benefits and ARRA COBRA subsidies. As enacted, H.R. 4851 – now Public Law 111-157 the “Continuing Extension Act of 2010” (the “CEA”) – extends unemployment benefits through June 2, 2010 and extends the eligibility period for ARRA COBRA subsidies for those who involuntarily lose employment and associated group health insurance coverage through May 31, 2010. This is the third extension of the COBRA subsidies since they were first established in the American Reinvestment and Recovery Act in February 2009. CEA also extends federal government funding of physician Medicare payments and the National Flood Insurance Program.
CEA includes a provision requiring employers to provide supplemental notice of ARRA COBRA entitlement for employees who involuntarily lost employment and employer-provided group health insurance coverage between the March 31, 2010 expiration date of the prior extension and the date the CEA went into effect on April 15. In short, employers must notify any employee eligible for the ARRA COBRA subsidy between April 1 and April 15 due to the passage of CEA of their eligibility for the subsidy if they have not already done so. The Employee Benefits Security Administration (“EBSA”), the federal government agency responsible for administering COBRA benefits, has updated information concerning the application and enforcement of the pending legislation. (www.dol.gov/ebsa).
*Patrick J. Hoban has extensive experience in all areas of labor and employment law, with a focus on private and public sector labor law. For more information about this pending legislation or other ARRA COBRA or COBRA issues, contact Pat at 216.696.4441 or pjh@zrlaw.com.
On April 15, 2010, both houses of the U.S. Congress passed and the President signed H.R. 4851 which extends unemployment compensation benefits and ARRA COBRA subsidies. As enacted, H.R. 4851 – now Public Law 111-157 the “Continuing Extension Act of 2010” (the “CEA”) – extends unemployment benefits through June 2, 2010 and extends the eligibility period for ARRA COBRA subsidies for those who involuntarily lose employment and associated group health insurance coverage through May 31, 2010. This is the third extension of the COBRA subsidies since they were first established in the American Reinvestment and Recovery Act in February 2009. CEA also extends federal government funding of physician Medicare payments and the National Flood Insurance Program.
CEA includes a provision requiring employers to provide supplemental notice of ARRA COBRA entitlement for employees who involuntarily lost employment and employer-provided group health insurance coverage between the March 31, 2010 expiration date of the prior extension and the date the CEA went into effect on April 15. In short, employers must notify any employee eligible for the ARRA COBRA subsidy between April 1 and April 15 due to the passage of CEA of their eligibility for the subsidy if they have not already done so. The Employee Benefits Security Administration (“EBSA”), the federal government agency responsible for administering COBRA benefits, has updated information concerning the application and enforcement of the pending legislation. (www.dol.gov/ebsa).
*Patrick J. Hoban has extensive experience in all areas of labor and employment law, with a focus on private and public sector labor law. For more information about this pending legislation or other ARRA COBRA or COBRA issues, contact Pat at 216.696.4441 or pjh@zrlaw.com.
Wednesday, March 10, 2010
President Obama Signs H.R. 4691 Extending Unemployment and ARRA COBRA Subsidy Benefits Through March 31, 2010
*By Patrick J. Hoban
On March 2, 2010, President Obama signed H.R. 4691 – the “Temporary Extension Act of 2010” (the “Act”) into law. The Bill, which became Public Law 111-144, provides short-term extensions of several authorities, including those related to: (1) unemployment compensation; (2) ARRA COBRA premium subsidies; (3) Medicare physician payments; (4) Medicare therapy caps; (5) surface transportation programs; (6) flood insurance programs; (7) retransmission of television broadcasts; (8) Federal poverty guidelines; and (9) Small Business Administration loan guarantees.
In addition to extending the ARRA COBRA premium subsidies to individuals who become eligible through March 31, 2010, the Act clarifies the eligibility of individuals who lose group health insurance coverage due to the reduction in hours of an employee. The Act specifies that the loss of group coverage due to a reduction in hours only triggers eligibility for COBRA continuation coverage but not the ARRA COBRA subsidy. However, an individual who loses group coverage due to a reduction in hours and is later involuntarily terminated is entitled to elect ARRA COBRA coverage at the time of his or her involuntary termination.
Importantly, per the “clarification” set forth in the Act and as confirmed by the Employee Benefits Security Administration (“EBSA”), the total period for COBRA continuation coverage eligibility (with or without the ARRA premium subsidy) initially extends for 18 months from the triggering event (i.e., loss of group coverage due to an hours reduction or termination of employment). Currently, the ARRA COBRA premium subsidy extends for 15 months from the date of involuntary termination. However, EBSA has confirmed that the ARRA COBRA premium subsidy does not extend the period of COBRA continuation entitlement. Thus, when a covered individual loses group coverage due to a reduction in hours, the clock starts ticking on his or her COBRA continuation eligibility. If that employee is later involuntarily terminated, he or she will be entitled to elect the ARRA COBRA premium subsidy but that election will not extend the period of COBRA continuation coverage to which he or she is entitled.
Although the Act only extended the ARRA COBRA premium subsidy to eligible individuals through March 31, 2010, there are currently two bills pending in the U.S. Congress that would extend the premium subsidies through June 30, 2010. Employers should expect Congress to take further action on COBRA within the month.
*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.
On March 2, 2010, President Obama signed H.R. 4691 – the “Temporary Extension Act of 2010” (the “Act”) into law. The Bill, which became Public Law 111-144, provides short-term extensions of several authorities, including those related to: (1) unemployment compensation; (2) ARRA COBRA premium subsidies; (3) Medicare physician payments; (4) Medicare therapy caps; (5) surface transportation programs; (6) flood insurance programs; (7) retransmission of television broadcasts; (8) Federal poverty guidelines; and (9) Small Business Administration loan guarantees.
In addition to extending the ARRA COBRA premium subsidies to individuals who become eligible through March 31, 2010, the Act clarifies the eligibility of individuals who lose group health insurance coverage due to the reduction in hours of an employee. The Act specifies that the loss of group coverage due to a reduction in hours only triggers eligibility for COBRA continuation coverage but not the ARRA COBRA subsidy. However, an individual who loses group coverage due to a reduction in hours and is later involuntarily terminated is entitled to elect ARRA COBRA coverage at the time of his or her involuntary termination.
Importantly, per the “clarification” set forth in the Act and as confirmed by the Employee Benefits Security Administration (“EBSA”), the total period for COBRA continuation coverage eligibility (with or without the ARRA premium subsidy) initially extends for 18 months from the triggering event (i.e., loss of group coverage due to an hours reduction or termination of employment). Currently, the ARRA COBRA premium subsidy extends for 15 months from the date of involuntary termination. However, EBSA has confirmed that the ARRA COBRA premium subsidy does not extend the period of COBRA continuation entitlement. Thus, when a covered individual loses group coverage due to a reduction in hours, the clock starts ticking on his or her COBRA continuation eligibility. If that employee is later involuntarily terminated, he or she will be entitled to elect the ARRA COBRA premium subsidy but that election will not extend the period of COBRA continuation coverage to which he or she is entitled.
Although the Act only extended the ARRA COBRA premium subsidy to eligible individuals through March 31, 2010, there are currently two bills pending in the U.S. Congress that would extend the premium subsidies through June 30, 2010. Employers should expect Congress to take further action on COBRA within the month.
*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.
Thursday, March 4, 2010
U.S. Senate Passes Extension of ARRA COBRA Subsidy and Unemployment Benefits Through March 31, 2010
*By Patrick J. Hoban
On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009, which extended unemployment insurance benefits by 14 weeks in all states and 20 weeks in states experiencing higher average rates of unemployment (8.5% over a three-month period).
Then, on December 19, 2009, President Obama signed into law the 2010 Defense Department Appropriations Act (“DDAA”). The DDAA extended COBRA subsidies created by the American Reinvestment and Recovery Act (“ARRA”) and extended the COBRA subsidy eligibility period from December 31, 2009 to February 28, 2010 for individuals who involuntarily lost their employment and group health insurance coverage after September 1, 2008. DDAA also expanded the period of the COBRA subsidy from 9 to 15 months and required administrators of covered group health insurance plans to provide notice of extended COBRA benefits.
On March 2, 2010, the U.S. Senate passed H.R. 4691 which extends the ARRA COBRA subsidy through March 31, 2010. The U.S. House passed the bill on February 25, 2010 by unanimous voice vote but its passage in the Senate was delayed by questions over how the Congress would pay its $10 Billion cost. With the withdrawal of a procedural challenge by Kentucky Senator Jim Bunning in exchange for an agreement to vote on a separate measure to fund the bill, the Senate passed the H.R. 4691 without amendment by a vote of 78 to 19. Once signed by the President, the bill will become law.
In addition to extending the ARRA COBRA subsidy through March 31, 2010, H.R. 4691 clarifies entitlement to the subsidy for employees who become eligible for COBRA due to a loss of group health coverage resulting from a reduction in hours of work. Group plan sponsors must notify employees whose reduction in work hours entitles them to COBRA benefits and they will have 60 days to elect COBRA coverage. The bill further provides that employees eligible due to a reduction in hours who are later involuntarily terminated are entitled to a second notice of COBRA eligibility and 60-day election period. Notably, H.R. 4691 states that such an employee’s 15-month period of ARRA COBRA subsidy entitlement runs from the commencement of the initial eligibility created by the reduction in hours. Specific H.R. 4691 compliance assistance for employers will be forthcoming from the Employee Benefits Security Administration after it becomes law and will be available at http://www.dol.gov/ebsa/COBRA.html.
H.R. 4691 also extends unemployment benefits by an additional 13 weeks in states experiencing higher average rates of unemployment, – the fourth such extension since the beginning of the recession in December 2007 – continues funding to employ approximately 2,000 Department of Transportation employees, and delays a scheduled 21% reduction in Federal Government Medicare payments to physicians.
Although the current ARRA COBRA subsidy extension will expire on April 1, 2010, Z&R has previously that there are currently two separate bills before Congress - S2730 and H.R. 2847 - which would extend the subsidy through June 30, 2010.
*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.
On November 6, 2009, President Obama signed into law the Worker, Homeownership, and Business Assistance Act of 2009, which extended unemployment insurance benefits by 14 weeks in all states and 20 weeks in states experiencing higher average rates of unemployment (8.5% over a three-month period).
Then, on December 19, 2009, President Obama signed into law the 2010 Defense Department Appropriations Act (“DDAA”). The DDAA extended COBRA subsidies created by the American Reinvestment and Recovery Act (“ARRA”) and extended the COBRA subsidy eligibility period from December 31, 2009 to February 28, 2010 for individuals who involuntarily lost their employment and group health insurance coverage after September 1, 2008. DDAA also expanded the period of the COBRA subsidy from 9 to 15 months and required administrators of covered group health insurance plans to provide notice of extended COBRA benefits.
On March 2, 2010, the U.S. Senate passed H.R. 4691 which extends the ARRA COBRA subsidy through March 31, 2010. The U.S. House passed the bill on February 25, 2010 by unanimous voice vote but its passage in the Senate was delayed by questions over how the Congress would pay its $10 Billion cost. With the withdrawal of a procedural challenge by Kentucky Senator Jim Bunning in exchange for an agreement to vote on a separate measure to fund the bill, the Senate passed the H.R. 4691 without amendment by a vote of 78 to 19. Once signed by the President, the bill will become law.
In addition to extending the ARRA COBRA subsidy through March 31, 2010, H.R. 4691 clarifies entitlement to the subsidy for employees who become eligible for COBRA due to a loss of group health coverage resulting from a reduction in hours of work. Group plan sponsors must notify employees whose reduction in work hours entitles them to COBRA benefits and they will have 60 days to elect COBRA coverage. The bill further provides that employees eligible due to a reduction in hours who are later involuntarily terminated are entitled to a second notice of COBRA eligibility and 60-day election period. Notably, H.R. 4691 states that such an employee’s 15-month period of ARRA COBRA subsidy entitlement runs from the commencement of the initial eligibility created by the reduction in hours. Specific H.R. 4691 compliance assistance for employers will be forthcoming from the Employee Benefits Security Administration after it becomes law and will be available at http://www.dol.gov/ebsa/COBRA.html.
H.R. 4691 also extends unemployment benefits by an additional 13 weeks in states experiencing higher average rates of unemployment, – the fourth such extension since the beginning of the recession in December 2007 – continues funding to employ approximately 2,000 Department of Transportation employees, and delays a scheduled 21% reduction in Federal Government Medicare payments to physicians.
Although the current ARRA COBRA subsidy extension will expire on April 1, 2010, Z&R has previously that there are currently two separate bills before Congress - S2730 and H.R. 2847 - which would extend the subsidy through June 30, 2010.
*Patrick J. Hoban, practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban at pjh@zrlaw.com or 216.696.4441.
Wednesday, December 30, 2009
U.S. Congress About To Pass Extension of ARRA COBRA Subsidy
*By Patrick J. Hoban
On December 19, 2010, the U.S. Senate accepted amendments to H.R. 3326 – the 2010 Defense Department Appropriations Act – which contains provisions extending the COBRA subsidies created by the American Reinvestment and Recovery Act (“ARRA”) in February 2009. If approved by the full House and Senate, the bill will do the following:
*Patrick J. Hoban practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this pending legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban (pjh@zrlaw.com) at 216.696.4441.
On December 19, 2010, the U.S. Senate accepted amendments to H.R. 3326 – the 2010 Defense Department Appropriations Act – which contains provisions extending the COBRA subsidies created by the American Reinvestment and Recovery Act (“ARRA”) in February 2009. If approved by the full House and Senate, the bill will do the following:
- Extend the expiration of the COBRA subsidy eligibility period from December 31, 2009, to February 28, 2010 for individuals who involuntarily lost their employment and group health insurance coverage after September 1, 2008.
- Expand the period of COBRA subsidy from 9 to 15 months;
- Afford individuals whose 9 months of ARRA COBRA subsidy has run out an opportunity to elect an additional 6 months of subsidized COBRA coverage; and
- Require the administrators of covered group health insurance plans to provide additional notice of the extended ARRA COBRA benefits within 60 days of the enactment of the legislation.
*Patrick J. Hoban practices in all areas of labor and employment law, with a focus on private and public sector labor law. If you have any questions about this pending legislation or other ARRA COBRA or COBRA issues, contact Pat Hoban (pjh@zrlaw.com) at 216.696.4441.
Saturday, August 8, 2009
Amendments to New York Insurance Law Extends “Mini-COBRA” Eligibility Period and Benefits for Dependent Children
*By Patrick J. Hoban
New York Governor David Patterson signed two bills into law that require commercial health insurers issuing group health policies under state law to offer up to 36 months of healthcare continuation coverage for eligible employees and extend dependent coverage to covered employee’s children up to the age of 29 respectively.
The amendment to Section 3221 of the New York State insurance law requires insurers to offer policies that extend continuation coverage for eligible employees from 18 to 36 months. As part of the State’s “Mini-COBRA” law, the requirement applies to all employer policyholders regardless of the size of their workforce. The amendment did not change other statutory provisions regarding eligibility, election, and events that terminate continuation coverage. While the change applies to any policies or contracts issued, renewed, modified, or amended after July 1, 2009, the New York State Department of Insurance expects that the new benefit will apply to most policies on its next annual renewal date.
The amendment to Section 3216 requires insurers to offer coverage to the unmarried “dependent” children of covered employees up to the age of 29, without regard to the child’s degree of financial dependence. Children are eligible for this coverage if they are not eligible for employer-provided insurance in their own right, they live, work, or reside in New York or the service area of the insurer, and they are not covered by Medicare. Employers are not required to pay for any of the cost of this coverage. Employees and qualifying dependent children may elect prospective coverage under the new law for up to twelve months after enactment of the law if a dependent child’s coverage was terminated before age 29 under the terms of a prior group policy. Coverage is terminated when a dependent child no longer meets the eligibility requirements, fails to pay premiums, of the group policy is terminated and not replaced with another group policy. The law takes effect on September 1, 2009, and will apply to contracts issued, renewed, modified, altered or amended on or after that date.
If you insure employees under New York State law and have any questions about how these changes will affect your business, please contact Pat Hoban (pjh@zrlaw.com) 216.696.4441.
*Patrick J. Hoban practices in all areas of labor and employment law, with a focus on private and public sector labor law. Contact him at 614.224.4411 or pjh@zrlaw.com.
New York Governor David Patterson signed two bills into law that require commercial health insurers issuing group health policies under state law to offer up to 36 months of healthcare continuation coverage for eligible employees and extend dependent coverage to covered employee’s children up to the age of 29 respectively.
The amendment to Section 3221 of the New York State insurance law requires insurers to offer policies that extend continuation coverage for eligible employees from 18 to 36 months. As part of the State’s “Mini-COBRA” law, the requirement applies to all employer policyholders regardless of the size of their workforce. The amendment did not change other statutory provisions regarding eligibility, election, and events that terminate continuation coverage. While the change applies to any policies or contracts issued, renewed, modified, or amended after July 1, 2009, the New York State Department of Insurance expects that the new benefit will apply to most policies on its next annual renewal date.
The amendment to Section 3216 requires insurers to offer coverage to the unmarried “dependent” children of covered employees up to the age of 29, without regard to the child’s degree of financial dependence. Children are eligible for this coverage if they are not eligible for employer-provided insurance in their own right, they live, work, or reside in New York or the service area of the insurer, and they are not covered by Medicare. Employers are not required to pay for any of the cost of this coverage. Employees and qualifying dependent children may elect prospective coverage under the new law for up to twelve months after enactment of the law if a dependent child’s coverage was terminated before age 29 under the terms of a prior group policy. Coverage is terminated when a dependent child no longer meets the eligibility requirements, fails to pay premiums, of the group policy is terminated and not replaced with another group policy. The law takes effect on September 1, 2009, and will apply to contracts issued, renewed, modified, altered or amended on or after that date.
If you insure employees under New York State law and have any questions about how these changes will affect your business, please contact Pat Hoban (pjh@zrlaw.com) 216.696.4441.
*Patrick J. Hoban practices in all areas of labor and employment law, with a focus on private and public sector labor law. Contact him at 614.224.4411 or pjh@zrlaw.com.
Saturday, April 18, 2009
IRS Issues New Guidance on COBRA
By Rick A. Hanrahan
The IRS recently issued further guidance on the enhanced COBRA benefits contained in the American Recovery and Reinvestment Act of 2009. IRS Notice 2009-27 provides a summary of the enhanced COBRA benefits and detailed Questions and Answers addressing a variety of issues, including the definition of involuntary termination, calculation of the premium subsidy, eligibility, duration of premium subsidy, and the election period.
This information can be found at: http://www.irs.gov/pub/irs-drop/n-09-27.pdf
The IRS recently issued further guidance on the enhanced COBRA benefits contained in the American Recovery and Reinvestment Act of 2009. IRS Notice 2009-27 provides a summary of the enhanced COBRA benefits and detailed Questions and Answers addressing a variety of issues, including the definition of involuntary termination, calculation of the premium subsidy, eligibility, duration of premium subsidy, and the election period.
This information can be found at: http://www.irs.gov/pub/irs-drop/n-09-27.pdf
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.
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.
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:
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”).
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 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”).
Wednesday, February 25, 2009
The COBRA Clutch: The Stimulus Bill Alters COBRA
By Rick A. Hanrahan
On Tuesday February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“the Act”, i.e. the new stimulus bill) into law. The Act, which is budgeted at $789 billion, is designed to provide an economic stimulus to the ailing economy. The Act also includes the most significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) since its inception, and will require immediate action by employers and COBRA administrators. The following are some of the major changes to COBRA:
Eligibility
Effective Date
Notice Requirements
Failure by Employer to Provide Proper Notice to Eligible Employees
Payroll Tax Offsets
Appeals Procedure
The Act’s COBRA provisions are comprehensive and will require additional COBRA administration. While there will be pressure to comply with the Act’s requirements, employers should be careful that they do not inadvertently restrict or overstate the number or assistance-eligible individuals.
On Tuesday February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“the Act”, i.e. the new stimulus bill) into law. The Act, which is budgeted at $789 billion, is designed to provide an economic stimulus to the ailing economy. The Act also includes the most significant changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) since its inception, and will require immediate action by employers and COBRA administrators. The following are some of the major changes to COBRA:
Generally
- The Act provides a subsidy of 65% of the COBRA continuation
premiums for eligible individuals for a maximum for 9 months, so that
an eligible individual will only have to pay 35% of the COBRA premium in
order to get coverage (as opposed to the current maximum 102% of cost)
- Employers are responsible for paying the 65% subsidized
portion of COBRA continuation payments, but will be reimbursed by
deducting the amount expended from payroll taxes that they submit to the
IRS the next pay period, or if necessary, directly reimbursed for
amounts expended
- The premium assistance period will be shorter than 9 months in certain circumstances, including if an individual becomes eligible for coverage under a major group health plan (such individual is required to notify the employer of eligibility for such other coverage, and will be subject to a penalty of 110% of the subsidy amount for failing to do so)
Eligibility
- An individual is eligible for the new COBRA premium subsidy
if he or she is involuntarily terminated from employment from September
1, 2008 through December 31, 2009 and is eligible to elect COBRA during
that time
- Individuals who elected COBRA due to an involuntary
termination on or after September 1, 2008 but prior to the date of the
Act’s enactment (March 1, 2009 for most plans) are eligible to receive
the subsidy on a prospective basis beginning on the date of enactment
- Individuals who were eligible to elect COBRA due to an
involuntary termination between September 1, 2008 and the Act’s
enactment (March 1, 2009 for most plans) but did not elect
COBRA must be given the opportunity to elect COBRA on a prospective
basis, with the maximum coverage period measured from the earliest date
that COBRA coverage could have been elected (Employers will have to
provide proper notice to such individuals, as described below)
- An eligible individual’s family members are also eligible for the premium subsidy under COBRA
- Individuals with modified adjusted gross income that exceeds $250,000 (for joint filers) or $125,000 (for all other filers) will not be eligible for the full premium subsidy. The premium subsidy will phase out for those individuals with an adjusted gross income of $145,000/$290,000. However, employers and insurers can treat all COBRA beneficiaries who have coverage due to involuntary termination during the applicable time period as eligible for the subsidy and receive reimbursement for the 65% of the premiums for coverage provided.
Effective Date
- COBRA’s provisions of the Act become generally effective
February 17, 2009 – the date President Obama signed the law into effect
- The 65% subsidy is effective for the first “period of
coverage” for assistance-eligible individuals beginning on or after
February 17, 2009 – which, for employers who bill COBRA premiums on a
monthly basis, will occur on and after March 1, 2009
- Since it will likely be impractical to reflect the new subsidy on bills for March 2009 COBRA coverage, the Act provides a two-billing cycle grace period to credit or refund overpaid COBRA premiums
Notice Requirements
- For individuals who became entitled to elect COBRA before
the date of enactment, the employer must provide additional notification
by April 18, 2009.
- Employers must modify COBRA election notices or provide
separate, supplemental notices to all individuals who become entitled to
elect COBRA continuation coverage from September 1, 2008 through
December 31, 2009 (After that date, the notices and tracking will have
to be changed again to comply with the previous rules)
- Such notices must describe:
- The availability of the 65% subsidy
- The ability to elect coverage even if an individual refused coverage prior to the Act
- How to elect the subsidy and, if applicable, the right to change coverage options
- Certain other information
- The notice can be incorporated into the regular COBRA election-rights package or provided through a separate notice that is sent along with the regular COBRA election-rights package
Failure by Employer to Provide Proper Notice to Eligible Employees
- Failure to send timely COBRA election notices to all
eligible individuals that complies with the new requirements could
subject the employer or plan to a penalty of up to $110 per day under
ERISA § 502(c)(1).
- Failure to comply with the new election notice requirements could also result in adverse tax consequences under § 4980B(b) of the Internal Revenue Code (i.e., excise taxes of $100 per day per notice for each day that the plan administrator fails to comply with COBRA ($200 if more than one qualified beneficiary in the same family is affected)), up to specified maximum amounts
Payroll Tax Offsets
- Employers will have to abide by a fairly comprehensive reporting scheme in order to claim the 65% subsidy, including, but not limited to:
- Attest to the involuntary termination of each assistance-eligible individual
- Report payroll taxes offset for the current period
- Report the taxpayers identification number (TIN) of each assistance-eligible individual
- Report the amount of subsidy received
- Report whether the subsidy covered one or more qualified beneficiaries
Appeals Procedure
- The Act provides that if an individual requests that the
group health plan treat the individual as eligible for the COBRA subsidy
and such request is denied, the individual may appeal the decision to
the Department of Labor (“DOL”), or to the Department of Health and
Human Services (“HHS”) pursuant to the Public Health Service Act. DOL
or HHS must rule on the appeal within 15 business days.
- If an appeal is denied by DOL or HHS, the individual could file suit under ERISA § 502(a)(3) for treatment as a subsidy-eligible individual
The Act’s COBRA provisions are comprehensive and will require additional COBRA administration. While there will be pressure to comply with the Act’s requirements, employers should be careful that they do not inadvertently restrict or overstate the number or assistance-eligible individuals.
Friday, April 14, 2006
EMPLOYMENT LAW QUARTERLY | Spring 2006, Volume VIII, Issue ii
Download PDF
The U.S. Department of Labor ("DOL") recently adopted final regulations implementing the Uniformed Services Employment and Reemployment Rights Act of 1994, or USERRA. USERRA protects the rights of persons who voluntarily or involuntarily leave employment positions to undertake military service. It applies to all U.S. public and private employers, regardless of size. USERRA's regulations provide guidance concerning both employer and employee rights and obligations under USERRA and became effective on January 18, 2006.
Since the regulations apply to all employers, employers should take the time to ensure full compliance. USERRA's regulations are divided into six subparts. Subpart A provides a general introduction, defining certain terms for purposes of USERRA. Subpart B describes prohibited employer conduct, including USERRA's anti-retaliation and anti-discrimination provisions, and defines the applicable legal framework for analyzing such claims. Subpart C states the procedural requirements for reemployment, including notice, coverage and time limits for service. Subpart D describes the manner in which employees accrue benefits they would otherwise be entitled to as an employee. Subpart E explains the reemployment rights of service members. Finally, Subpart F contains the compliance and assistance provisions.
Subpart A essentially restates the statutory definitions contained within USERRA, and also excludes federal employees from the ambit of the regulations. Subpart B prohibits employers from denying employment, re-employment, retention, promotion, or any benefit of employment to an individual on the basis of his or her membership or service in the uniformed services, and also prohibits retaliation against employees for exercise of USERRA rights. This subpart also describes the applicable burdens of proof for a USERRA claim.
In Subpart C, the regulations establish the general eligibility requirements for reemployment, then describe the applicable procedures for reinstatement of employees. Thus, an employee will be eligible for reemployment following uniformed service if: 1) the employer had advance notice of the employee's service; 2) the employee's cumulative service totals five years or less during his or her employment relationship with a particular employer; (3) the employee timely returns to work or applies for reemployment; and (4) the employee was not separated from service with a disqualifying discharge or under other than honorable conditions.
As stated in the regulations, USERRA protects any absence that service in the uniformed services necessitates. To invoke USERRA rights, an employee (or appropriate officer of the employee's uniformed service) must give his or her employer advance notice that the employee intends to leave his or her job to perform military service. USERRA does not establish a specific time period for notice nor does USERRA prescribe the manner in which an employee gives notice.
In general, an employee retains reemployment rights if his or her unformed service during the employment relationship totals no more than five years. At the end of his or her service period, the employee is required to either report to work or submit a timely application for reemployment to his or her pre-service employer, depending on the length of his or her service. There are only three circumstances in which an employer may be excused from its obligation to reemploy the employee: 1) where the employer's circumstances have changed so much that reinstatement of the employee is impossible or unreasonable; 2) where assisting the employee in becoming qualified for reemployment imposes an undue hardship on the employer; or 3) where the employee's position was for a brief, non-recurrent period with no reasonable expectation that the employment would continue indefinitely or for a significant period.
Subpart D reiterates that an employer must consider an employee who is on military leave as being on a leave of absence. Thus, the employee is entitled to all non-seniority rights and benefits that an employer generally provides to other employees with similar seniority, status, and pay that are on leave of absence, as well as all non-seniority rights and benefits that an employer provides to similarly-situated employees pursuant to company policy. The regulations also grant employees absent due to service obligations for more than 31 days COBRA-like continuation of health care benefits for up to 24 months.
Subpart E describes with particularity the reemployment rights of eligible employees. An employer must promptly, e.g. as soon as practicable, reemploy an eligible employee who returns from a period of service.Moreover, an employer must reemploy an employee in a position that reflects with reasonable certainty the pay, benefits, and seniority that he or she would have attained if not for the period of service. The employee also is entitled to the seniority rights and benefits that he or she would have been reasonably certain to attain if he or she had remained continuously employed.
USERRA also provides returning employees with protection from discharge. Thus, an employer cannot terminate a reemployed service member except for cause, for a period of time based on the length of service. USERRA defines "for cause" as reasons related to either the employee's conduct or other legitimate nondiscriminatory reasons.
As demonstrated above, employers will want to review their policies and procedures to reflect USERRA's new regulations.Such preventative policies will ensure compliance with USERRA, and avoid costly litigation.
April 27, 2006
Interplay: solving the FMLA-ADA-workers' comp leave of absence puzzle.
Even FMLA aficionados sometimes face confusion when other leave issues enter the mix. If an employee with a disability requests leave as a reasonable accommodation, what of the FMLA? What are an employee's rights and your obligations if an employee cannot return to work for an extended period of time due to a workplace injury? And what do you do with their health insurance in the meantime? It is imperative for employers to understand where the FMLA, ADA, and workers' compensation laws intersect in situations like these. This seminar will discuss that interplay and include a brief discussion of COBRA-related issues (and breakfast-related pastries). Look for more information about this important seminar in coming weeks. All brain · food · breakfast seminars:
Between 2000 and 2005, the number of workers' compensation claims filed in Ohio has dropped by approximately 10 percent (from 208,301 in 2000 to 178,015 in 2005). Clearly, employers have made significant inroads in workplace safety.
Unfortunately, the news is not all good for employers. Even as the number of filed claims has fallen, the cost of those claims has increased dramatically. Between 2000 and 2005, medical costs for workers' compensation claims jumped by almost $300 million. This increase represents a nearly 30 percent increase in medical costs over five years. Indeed, the Bureau of Workers' Compensation ("BWC") altered its system for setting reserves to account for medical costs in response to this increase.
What accounts for this sharp rise in medical costs? Unquestionably, the number one culprit is the BWC's exceedingly generous reimbursement rates. It is a well-known secret that the BWC's reimbursement rate for medical services is much higher than that of private health insurers and other government-funded insurance programs. The Columbus Dispatch recently reported that from 1998 through 2004, the Bureau paid $543.6 million more for the medical treatment of injured workers than the actual cost of providing those services.
Relying on the BWC offers little hope of staunching these hemorrhaging medical costs. Relief by way of reduction of reimbursement rates for medical services is not very encouraging. State-funded employers are at the BWC's mercy when it comes to establishing those generous reimbursement rates.
Although the BWC offers little hope for relief, there is one important first step available to employers in this battle to control medical claims costs. Employers can contract with medical facilities, such as an urgent care facility, for the initial post-injury treatment. While this contract only applies to non-emergency type injuries, such injuries comprise the vast majority of soft-tissue injuries, such as back or neck strains, which often develop into more serious, and more costly, ailments.
Getting that initial diagnosis and, equally important, return-to-work recommendation from a physician of the employer's choice is essential to controlling overall claims costs. Presenting documentation from the employer's doctor releasing the claimant to work (even on light duty) is of critical importance at a hearing in challenging the claimant's certification disabling the claimant from employment for an extended period of time.
Unquestionably, the most common mistake employers make is taking a "wait and see" attitude before deciding to fight a workers' compensation claim. Often, by the time the employer discovers the claim's impact on its workers' compensation premiums, the damage has already occurred. A medical report from the employer's doctor returning the claimant to work immediately after the injury is the best prescription for fighting a medically suspect claim. Armed with such a report, the employer can stave off frivolous claims and limit the effect such claims exert on workers' compensation premiums.
The Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101, et seq. , severely restricts the manner in which employers obtain and use medical information from employees. Despite these restrictions, employers may require current employees to undergo medical examinations when job-related and consistent with business necessity. As demonstrated in Ward v. Merck & Co., Inc. , an employer can legitimately require an employee who poses a threat to his co-workers to undergo a medical examination, if the employer properly documents the situation.
The employee in Ward performed his position without incident for approximately six years. In 2002, supervisors observed that the employee became socially withdrawn and his work performance began to decline. The next year, local police had to be called to Merck's worksite because the employee "backed himself up against the food tables" in the cafeteria and "was screaming at people, telling them not to eat any of the vegetables."
Following this incident, the employee returned to work but maintained a "catatonic" demeanor. Indeed, co-workers complained that this employee's behavior was frightening, and co-workers were uncomfortable working around the employee. As a result, the employer requested that this employee submit to a medical examination to determine if he was capable of performing his job duties. The employee refused to submit to an examination and was subsequently fired. The employee then filed a lawsuit alleging that his former employer violated the ADA by requiring him to submit to a medical examination.
The Court held that the employer's request that the employee undergo a medical examination did not violate the ADA. In doing so, the Court stated the general rule that medical examinations are permitted only to the extent that they are job-related and consistent with business necessity. Citing to EEOC regulations, the Court stated that an examination is acceptable if the employer "has a reasonable belief based on objective evidence, that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition."
Applied to the facts at hand, the Court held that the employee's behavior posed a direct threat to himself and a direct threat to other employees. Specifically, the Court cited anecdotal evidence gathered by the employer which indicated that co-workers were frightened to work with this employee and were concerned for their safety. Moreover, co-workers and management expressed concerns about the employee's own safety. In addition, a significant decline in work performance accompanied the changes in the employee's behavior. As a result, the employer's decision to require a medical examination of this employee did not violate the ADA.
As demonstrated by Ward, employers must plan and document prior to requesting an existing employee to take a medical examination. In such cases, the ADA places the burden on the employer to establish that the medical examination is job-related and consistent with business necessity. To satisfy this burden, the employer should collect evidence demonstrating that either the employee 1) cannot perform the functions of his job or 2) presents a direct threat to himself or coworkers. With respect to performance, employers must instruct supervisors to review employee performance accurately. In the event that an employee potentially presents a direct threat to himself/herself or other employees, employers must document the incidents which lead to this belief, and make an attempt to corroborate this belief.
By possessing comprehensive documentation, an employer will be in a better position to convince a court that its requested medical examination was job-related and consistent with business necessity. In this manner, employers satisfy their obligations under the ADA while ensuring a safe and productive work environment.
It is an unconfirmed theory, but it may be that many COBRA issues could be avoided if only one ingredient was added to the mix: clarity. If all the interested parties have the pertinent information, know their own obligations, and understand everyone else's obligations, how can they go wrong?
In Krippendorf v. Mitchell , the U.S. District Court for the Eastern District of Arkansas recently decided, quite simply, that the employer just got it wrong. The employee worked as a salesperson for the employer, an Arkansas company apparently subject to that state's "baby COBRA," or state version of the federal law that mandates continuation of health care coverage under certain circumstances. (This generally means that the employer is small enough to be exempt from COBRA). While this is not exactly a COBRA case, it is nonetheless instructive.
The employee received health insurance benefits under the employer's group health insurance policy. Under the plan, the employee paid a portion of the health insurance premium for himself and his family ($86.89), which the employer deducted from each of the employee's bimonthly paychecks. The employer paid the rest of the premium. The employee quit his job on Monday, April 18, 2005 without advance notice. His last paycheck covered half the month--April 1 through Friday, April 15, 2005--and as usual, the company deducted $86.89 for the employee's portion of the heath insurance premium. The company's benefits administrator gave the employee the forms required to continue his health insurance coverage--and that is apparently where everyone ceased being on the same page.
The employee returned the forms with a check for the first month's premium ($768.15) at the beginning of May. The company cashed the employee's check, but for some reason sent neither the employee's premium payment nor his continuation of coverage form to the insurance company. Instead, the company cancelled the employee's coverage retroactive to April 1, 2005. The employee, unaware that the company had cancelled his coverage, sent the company his second month's premium payment. The employee learned of the cancellation only when his wife sought medical treatment and was informed that her health insurance had lapsed.
The employer finally sent the employee's continuation of coverage form to the insurance company in early June 2005--but still did not pay his health insurance premium. The employee's attorney contacted the Company on June 13, 2005 to warn that he would file suit in federal court if the employee's health insurance benefits were not reinstated before June 16. The company actually did reinstate the employee's insurance on or about June 16, 2005, but did not notify the employee or his attorney of the reinstatement until June 27, 2005.
By this time, the employee, left in the dark about the status of his insurance, had filed suit in court alleging ERISA and state law claims. The employee alleged that the company breached its fiduciary obligation under ERISA to send the appropriate premiums to the insurance company each month. He sought the amount equal to the portion of the premium that the company should have paid for the time period of April 1 to 18, 2005, as well as attorneys' fees and costs.
The court found that, under the plan, the employee was supposed to receive the benefit of health insurance coverage for the time period of April 1 through April 15 at a cost of only $86.89 to himself, and that the company had actually deducted that amount from his last paycheck.
The court further found that when the company accepted the employee's first monthly premium check in early May 2005, it did not apply the money toward the employee's continuation coverage, which should have started after his employment ended on April 18, 2005. Instead, the employer applied the funds retroactive to April 1, a problem because:
At least in this case, the employer was out of the loop. To avoid a similar situation, make sure that the "COBRA person" at your company sticks to the cardinal rule: abide by the plan. Ensure that COBRA notices and other paperwork are forwarded expeditiously to the proper parties and that premium payments are applied accurately. Finally, keep the lines of communication open, especially if the company has made a mistake. The employer in this case had a chance to work things out before heading to court and blew it. In most cases, all employees really want is health insurance, not a battle in court.
*Helena Oroz practices in all areas of employment law and compliance issues.
- STAND AT ATTENTION: New USERRA Rights and Obligations
- Brain • Food • Breakfast • Law Series: Volume II
- COMPENSATION INOCULATION: Vaccinating Your Workers’ Compensation Premium Against Rising Health Care Costs
- CHECK YOURSELF: Gathering the Information Necessary to Require Employees to Submit to a Medical Examination
- COBRA ADMINISTRATION: Clarity = Bliss.
STAND AT ATTENTION: New USERRA Rights and Obligations
By Ryan L. LongThe U.S. Department of Labor ("DOL") recently adopted final regulations implementing the Uniformed Services Employment and Reemployment Rights Act of 1994, or USERRA. USERRA protects the rights of persons who voluntarily or involuntarily leave employment positions to undertake military service. It applies to all U.S. public and private employers, regardless of size. USERRA's regulations provide guidance concerning both employer and employee rights and obligations under USERRA and became effective on January 18, 2006.
Since the regulations apply to all employers, employers should take the time to ensure full compliance. USERRA's regulations are divided into six subparts. Subpart A provides a general introduction, defining certain terms for purposes of USERRA. Subpart B describes prohibited employer conduct, including USERRA's anti-retaliation and anti-discrimination provisions, and defines the applicable legal framework for analyzing such claims. Subpart C states the procedural requirements for reemployment, including notice, coverage and time limits for service. Subpart D describes the manner in which employees accrue benefits they would otherwise be entitled to as an employee. Subpart E explains the reemployment rights of service members. Finally, Subpart F contains the compliance and assistance provisions.
Subpart A essentially restates the statutory definitions contained within USERRA, and also excludes federal employees from the ambit of the regulations. Subpart B prohibits employers from denying employment, re-employment, retention, promotion, or any benefit of employment to an individual on the basis of his or her membership or service in the uniformed services, and also prohibits retaliation against employees for exercise of USERRA rights. This subpart also describes the applicable burdens of proof for a USERRA claim.
In Subpart C, the regulations establish the general eligibility requirements for reemployment, then describe the applicable procedures for reinstatement of employees. Thus, an employee will be eligible for reemployment following uniformed service if: 1) the employer had advance notice of the employee's service; 2) the employee's cumulative service totals five years or less during his or her employment relationship with a particular employer; (3) the employee timely returns to work or applies for reemployment; and (4) the employee was not separated from service with a disqualifying discharge or under other than honorable conditions.
As stated in the regulations, USERRA protects any absence that service in the uniformed services necessitates. To invoke USERRA rights, an employee (or appropriate officer of the employee's uniformed service) must give his or her employer advance notice that the employee intends to leave his or her job to perform military service. USERRA does not establish a specific time period for notice nor does USERRA prescribe the manner in which an employee gives notice.
In general, an employee retains reemployment rights if his or her unformed service during the employment relationship totals no more than five years. At the end of his or her service period, the employee is required to either report to work or submit a timely application for reemployment to his or her pre-service employer, depending on the length of his or her service. There are only three circumstances in which an employer may be excused from its obligation to reemploy the employee: 1) where the employer's circumstances have changed so much that reinstatement of the employee is impossible or unreasonable; 2) where assisting the employee in becoming qualified for reemployment imposes an undue hardship on the employer; or 3) where the employee's position was for a brief, non-recurrent period with no reasonable expectation that the employment would continue indefinitely or for a significant period.
Subpart D reiterates that an employer must consider an employee who is on military leave as being on a leave of absence. Thus, the employee is entitled to all non-seniority rights and benefits that an employer generally provides to other employees with similar seniority, status, and pay that are on leave of absence, as well as all non-seniority rights and benefits that an employer provides to similarly-situated employees pursuant to company policy. The regulations also grant employees absent due to service obligations for more than 31 days COBRA-like continuation of health care benefits for up to 24 months.
Subpart E describes with particularity the reemployment rights of eligible employees. An employer must promptly, e.g. as soon as practicable, reemploy an eligible employee who returns from a period of service.Moreover, an employer must reemploy an employee in a position that reflects with reasonable certainty the pay, benefits, and seniority that he or she would have attained if not for the period of service. The employee also is entitled to the seniority rights and benefits that he or she would have been reasonably certain to attain if he or she had remained continuously employed.
USERRA also provides returning employees with protection from discharge. Thus, an employer cannot terminate a reemployed service member except for cause, for a period of time based on the length of service. USERRA defines "for cause" as reasons related to either the employee's conduct or other legitimate nondiscriminatory reasons.
As demonstrated above, employers will want to review their policies and procedures to reflect USERRA's new regulations.Such preventative policies will ensure compliance with USERRA, and avoid costly litigation.
Brain • Food • Breakfast Law Series: Volume II
Please join us for breakfast refreshments at the third session of our 3-part seminar series, Volume II on April 27, 2006:April 27, 2006
Interplay: solving the FMLA-ADA-workers' comp leave of absence puzzle.
Even FMLA aficionados sometimes face confusion when other leave issues enter the mix. If an employee with a disability requests leave as a reasonable accommodation, what of the FMLA? What are an employee's rights and your obligations if an employee cannot return to work for an extended period of time due to a workplace injury? And what do you do with their health insurance in the meantime? It is imperative for employers to understand where the FMLA, ADA, and workers' compensation laws intersect in situations like these. This seminar will discuss that interplay and include a brief discussion of COBRA-related issues (and breakfast-related pastries). Look for more information about this important seminar in coming weeks. All brain · food · breakfast seminars:
- take place at our offices. Call (216) 696-4441 for directions or more information.
- begin with registration at 8:30 a.m. and conclude at 10:00 a.m.
- are strictly limited to 20 attendees. You may register in advance by calling (216) 696-4441 (please ask for Nicale) or sending an email to nee@zrlaw.com.
- cost $30.00 per attendee.
- include breakfast refreshments.
- are led by Zashin & Rich attorneys who practice only workplace law all day, every day.
- include time for your questions.
COMPENSATION INOCULATION: Vaccinating Your Workers’ Compensation Premium Against Rising Health Care Costs
By Steve P. DlottBetween 2000 and 2005, the number of workers' compensation claims filed in Ohio has dropped by approximately 10 percent (from 208,301 in 2000 to 178,015 in 2005). Clearly, employers have made significant inroads in workplace safety.
Unfortunately, the news is not all good for employers. Even as the number of filed claims has fallen, the cost of those claims has increased dramatically. Between 2000 and 2005, medical costs for workers' compensation claims jumped by almost $300 million. This increase represents a nearly 30 percent increase in medical costs over five years. Indeed, the Bureau of Workers' Compensation ("BWC") altered its system for setting reserves to account for medical costs in response to this increase.
What accounts for this sharp rise in medical costs? Unquestionably, the number one culprit is the BWC's exceedingly generous reimbursement rates. It is a well-known secret that the BWC's reimbursement rate for medical services is much higher than that of private health insurers and other government-funded insurance programs. The Columbus Dispatch recently reported that from 1998 through 2004, the Bureau paid $543.6 million more for the medical treatment of injured workers than the actual cost of providing those services.
Relying on the BWC offers little hope of staunching these hemorrhaging medical costs. Relief by way of reduction of reimbursement rates for medical services is not very encouraging. State-funded employers are at the BWC's mercy when it comes to establishing those generous reimbursement rates.
Although the BWC offers little hope for relief, there is one important first step available to employers in this battle to control medical claims costs. Employers can contract with medical facilities, such as an urgent care facility, for the initial post-injury treatment. While this contract only applies to non-emergency type injuries, such injuries comprise the vast majority of soft-tissue injuries, such as back or neck strains, which often develop into more serious, and more costly, ailments.
Getting that initial diagnosis and, equally important, return-to-work recommendation from a physician of the employer's choice is essential to controlling overall claims costs. Presenting documentation from the employer's doctor releasing the claimant to work (even on light duty) is of critical importance at a hearing in challenging the claimant's certification disabling the claimant from employment for an extended period of time.
Unquestionably, the most common mistake employers make is taking a "wait and see" attitude before deciding to fight a workers' compensation claim. Often, by the time the employer discovers the claim's impact on its workers' compensation premiums, the damage has already occurred. A medical report from the employer's doctor returning the claimant to work immediately after the injury is the best prescription for fighting a medically suspect claim. Armed with such a report, the employer can stave off frivolous claims and limit the effect such claims exert on workers' compensation premiums.
CHECK YOURSELF: Gathering the Information Necessary to Require Employees to Submit to a Medical Examination
By Robert W. HartmanThe Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101, et seq. , severely restricts the manner in which employers obtain and use medical information from employees. Despite these restrictions, employers may require current employees to undergo medical examinations when job-related and consistent with business necessity. As demonstrated in Ward v. Merck & Co., Inc. , an employer can legitimately require an employee who poses a threat to his co-workers to undergo a medical examination, if the employer properly documents the situation.
The employee in Ward performed his position without incident for approximately six years. In 2002, supervisors observed that the employee became socially withdrawn and his work performance began to decline. The next year, local police had to be called to Merck's worksite because the employee "backed himself up against the food tables" in the cafeteria and "was screaming at people, telling them not to eat any of the vegetables."
Following this incident, the employee returned to work but maintained a "catatonic" demeanor. Indeed, co-workers complained that this employee's behavior was frightening, and co-workers were uncomfortable working around the employee. As a result, the employer requested that this employee submit to a medical examination to determine if he was capable of performing his job duties. The employee refused to submit to an examination and was subsequently fired. The employee then filed a lawsuit alleging that his former employer violated the ADA by requiring him to submit to a medical examination.
The Court held that the employer's request that the employee undergo a medical examination did not violate the ADA. In doing so, the Court stated the general rule that medical examinations are permitted only to the extent that they are job-related and consistent with business necessity. Citing to EEOC regulations, the Court stated that an examination is acceptable if the employer "has a reasonable belief based on objective evidence, that: (1) an employee's ability to perform essential job functions will be impaired by a medical condition; or (2) an employee will pose a direct threat due to a medical condition."
Applied to the facts at hand, the Court held that the employee's behavior posed a direct threat to himself and a direct threat to other employees. Specifically, the Court cited anecdotal evidence gathered by the employer which indicated that co-workers were frightened to work with this employee and were concerned for their safety. Moreover, co-workers and management expressed concerns about the employee's own safety. In addition, a significant decline in work performance accompanied the changes in the employee's behavior. As a result, the employer's decision to require a medical examination of this employee did not violate the ADA.
As demonstrated by Ward, employers must plan and document prior to requesting an existing employee to take a medical examination. In such cases, the ADA places the burden on the employer to establish that the medical examination is job-related and consistent with business necessity. To satisfy this burden, the employer should collect evidence demonstrating that either the employee 1) cannot perform the functions of his job or 2) presents a direct threat to himself or coworkers. With respect to performance, employers must instruct supervisors to review employee performance accurately. In the event that an employee potentially presents a direct threat to himself/herself or other employees, employers must document the incidents which lead to this belief, and make an attempt to corroborate this belief.
By possessing comprehensive documentation, an employer will be in a better position to convince a court that its requested medical examination was job-related and consistent with business necessity. In this manner, employers satisfy their obligations under the ADA while ensuring a safe and productive work environment.
COBRA ADMINISTRATION: Clarity = Bliss.
By Helena Oroz*It is an unconfirmed theory, but it may be that many COBRA issues could be avoided if only one ingredient was added to the mix: clarity. If all the interested parties have the pertinent information, know their own obligations, and understand everyone else's obligations, how can they go wrong?
In Krippendorf v. Mitchell , the U.S. District Court for the Eastern District of Arkansas recently decided, quite simply, that the employer just got it wrong. The employee worked as a salesperson for the employer, an Arkansas company apparently subject to that state's "baby COBRA," or state version of the federal law that mandates continuation of health care coverage under certain circumstances. (This generally means that the employer is small enough to be exempt from COBRA). While this is not exactly a COBRA case, it is nonetheless instructive.
The employee received health insurance benefits under the employer's group health insurance policy. Under the plan, the employee paid a portion of the health insurance premium for himself and his family ($86.89), which the employer deducted from each of the employee's bimonthly paychecks. The employer paid the rest of the premium. The employee quit his job on Monday, April 18, 2005 without advance notice. His last paycheck covered half the month--April 1 through Friday, April 15, 2005--and as usual, the company deducted $86.89 for the employee's portion of the heath insurance premium. The company's benefits administrator gave the employee the forms required to continue his health insurance coverage--and that is apparently where everyone ceased being on the same page.
The employee returned the forms with a check for the first month's premium ($768.15) at the beginning of May. The company cashed the employee's check, but for some reason sent neither the employee's premium payment nor his continuation of coverage form to the insurance company. Instead, the company cancelled the employee's coverage retroactive to April 1, 2005. The employee, unaware that the company had cancelled his coverage, sent the company his second month's premium payment. The employee learned of the cancellation only when his wife sought medical treatment and was informed that her health insurance had lapsed.
The employer finally sent the employee's continuation of coverage form to the insurance company in early June 2005--but still did not pay his health insurance premium. The employee's attorney contacted the Company on June 13, 2005 to warn that he would file suit in federal court if the employee's health insurance benefits were not reinstated before June 16. The company actually did reinstate the employee's insurance on or about June 16, 2005, but did not notify the employee or his attorney of the reinstatement until June 27, 2005.
By this time, the employee, left in the dark about the status of his insurance, had filed suit in court alleging ERISA and state law claims. The employee alleged that the company breached its fiduciary obligation under ERISA to send the appropriate premiums to the insurance company each month. He sought the amount equal to the portion of the premium that the company should have paid for the time period of April 1 to 18, 2005, as well as attorneys' fees and costs.
The court found that, under the plan, the employee was supposed to receive the benefit of health insurance coverage for the time period of April 1 through April 15 at a cost of only $86.89 to himself, and that the company had actually deducted that amount from his last paycheck.
The court further found that when the company accepted the employee's first monthly premium check in early May 2005, it did not apply the money toward the employee's continuation coverage, which should have started after his employment ended on April 18, 2005. Instead, the employer applied the funds retroactive to April 1, a problem because:
- the employee was still working on April 1. His last paycheck covered his last pay period (April 1 through April 15, 2005), and the employer had already withdrawn the regular $86.89 employee share from that paycheck to cover that period of time;
- the employer should already have paid its share of the employee's premium for this time period as well;
- and, essentially, because the employer did not prorate the employee's premium payment appropriately, the employee overpaid.
At least in this case, the employer was out of the loop. To avoid a similar situation, make sure that the "COBRA person" at your company sticks to the cardinal rule: abide by the plan. Ensure that COBRA notices and other paperwork are forwarded expeditiously to the proper parties and that premium payments are applied accurately. Finally, keep the lines of communication open, especially if the company has made a mistake. The employer in this case had a chance to work things out before heading to court and blew it. In most cases, all employees really want is health insurance, not a battle in court.
*Helena Oroz practices in all areas of employment law and compliance issues.
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