April 2010 Archives

April 30, 2010

Department of Labor Announces New Compliance Strategy

Earlier this week, the Department of Labor (DOL) announced its regulatory agenda for Spring 2010. As always, the plan includes a number of discrete areas where the DOL plans to draft or revise regulations (for example, to require coal mine operators to inspect areas where miners will be working). This time around, the agenda also includes a broad paradigm shift: The DOL wants to replace what it calls a "catch me if you can" model, in which violations are stemmed only if and when the DOL steps in, to a "plan/prevent/protect" model, in which employers take the lead in finding, fixing, and preventing workplace problems.

What will this mean in practice? It's not entirely clear, as the DOL hasn't yet issued any proposed regulations or concrete details of how the plan will shape up. However, The New York Times reported today that the new approach will require employers to draft compliance plans explaining how they will make sure they aren't violating workplace safety and wage and hour laws. Employers will also be required to document key decisions -- for example, why the employer has determined that an employee is exempt from overtime or that a worker should be classified as an independent contractor rather than an employee -- and then provide that documentation to both the worker and the DOL. 


April 27, 2010

Health Care Reform for Employers and Employees

I put it off as long as I could, but I finally had to start doing some research on how the new health care reform bill, signed last month, will affect employers and employees. Many of the larger changes in the bill -- such as expanding Medicaid to cover more people, removing limits on coverage, creating health insurance exchanges where insurance can be purchased, and requiring people to either purchase insurance or pay a fine -- have been fairly well-publicized. There has been less coverage of how the law will affect employers and employees.

One set of changes determines the coverage and limits in health care plans. Although these changes will have to be made by the insurance companies themselves, employers will have to make sure the plan(s) they select meets the requirements -- and may have to pay a higher price for it. (Although existing group health plans can be "grandfathered," they still must incorporate some of these changes.) These changes include:

  • Adult children must be treated as eligible dependents until they reach the age of 26.
  • Health plans must not include lifetime or annual dollar limits on coverage.  
  • Exclusions for pre-existing conditions must be eliminated.
  • Out-of-pocket costs may not exceed a set maximum.

Another set of changes is specific to employment. For example:

  • Employers must report the cost of employer-sponsored coverage on each employee's W-2 form.
  • Small businesses (with up to 25 employees) will be eligible for a tax credit if they pay at least half of employees' health care premiums.
  • Group health plans may not discriminate in favor of highly compensated employees.
  • Employee deferral contributions to flexible spending accounts (FSAs) will be capped at $2,500, subject to inflation. Penalties for nonqualified distributions from these accounts will be increased, and deferred money may no longer be used to pay for over-the-counter drugs unless they are prescribed to the employee.
  • Employers must provide breast feeding breaks to nursing mothers during the year after the child is born, and must provide a private place (that isn't a bathroom) for this purpose.
  • Larger employers must automatically enroll employees in the company's group health plan; employees who don't want to participate must opt out.

Then there's that "play or pay" provision. The law doesn't require employers to offer health care coverage. However, it creates penalties for employers that don't provide coverage or that provide less generous benefits. Here's basically how it works:

  • Employers that have more than 50 employees and don't offer coverage must pay an annual fine of $2,000 per full-time employee (those working at least 30 hours a week). The first 30 employees are "free"; the fine begins with employee number 31.
  • Even employers that offer coverage may face a penalty if the employer doesn't pay for at least 60% of the actuarial value of the benefits the plan provides or the employee's cost for coverage is more than 9.5% of the employee's household income. In this situation, a full-time employee would be eligible to receive government-subsidized coverage -- and, if this happens, the employer would have to pay a penalty of $3,000 per full-time employee who receives the subsidy, up to a limit.
  • Employers must offer a voucher to employees who (1) earn less than 400% of the federal poverty line, (2) would have to pay more than 8% of their income for employer-provided coverage, and (3) choose to enroll in a plan from an exchange. The voucher requires the employer to pay what it would have paid to enroll the employee in its own plan.

Want to know more? Check out Nolo's article Health Care Reform: What Employers and Employees Need to Know.

April 20, 2010

COBRA Subsidy, Unemployment Benefits Extended to June

The battle over continued extensions of the COBRA subsidy and emergency unemployment benefits continues in Congress. Last week, Congress passed -- and the President signed -- another stopgap measure, continuing these programs through May 31 (COBRA) and June 2 (unemployment benefits). Still under consideration: a bill that would continue these benefits through the end of the year, as part of a larger budget package. Although both the House and Senate have passed a version of this budget bill, they are sufficiently different to require reconciliation and another vote before becoming law.

This time, Congress waited long enough to extend these benefits that some people faced a gap in coverage. The original programs expired on April 5, but the short-term extension passed on April 15. Those whose unemployment benefits ran out must now reapply to receive compensation retroactively for the time they missed.

The unemployment benefits extension helps only those who had not yet exhausted their regular and extended benefits. Currently, between regular state benefits, the extended benefits program (which provides an additional 13 to 20 weeks of benefits), and the four tiers of extended benefits available through the Emergency Unemployment Compensation (EUC) program, unemployed workers in some states can collect up to 99 weeks of benefits. (Because some of these benefits depend on the state's unemployment rate, fewer total weeks of benefits are available in some states.)

The extension Congress passed will help workers who have not yet used up all of these benefits, by continuing the existence of these programs. However, workers who have already exhausted all available benefits through these programs won't be helped by the extension. For these very long-term unemployed, the only hope is the Congress will add a fifth tier to the emergency benefits program, making benefits available beyond the current 99-week maximum.