Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

On Wednesday, the Senate passed by a 62 to 36 margin the Tax Extender Act of 2009 (H.R. 4213), legislation that would extend until Dec. 31, 2010 the 65% premium COBRA subsidies and emergency unemployment insurance benefits, both programs that are set to expire in the coming weeks. The bill also extends several other tax credit initiatives, and includes pension funding relief measures. On Tuesday, the Senate voted 66-34 to limit debate on this bill, which was introduced by Sen. Max Baucus (D-MT) as an amendment (S. Amdt. 3336) in the nature of a substitute to the tax extender bill the House of Representatives passed in December.

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On Tuesday, the Senate voted to end debate on a $150 billion bill that would extend premium COBRA subsidies and emergency unemployment insurance benefits through December 31, 2010, as well as continue certain programs aimed at providing pension-funding relief. Sen. Max Baucus (D-MT) introduced the American Workers, State and Business Relief Act of 2010 (pdf) as an amendment (S. Amt. 3336) in the nature of a substitute to the Tax Extender Act of 2009 (H.R. 4213).  The tax extender bill has been serving as the vehicle to provide extensions to these and other expiring tax credit programs. The premium COBRA subsidy and emergency unemployment benefits were recently given one-month extensions through the Temporary Extension Act of 2010, signed into law on March 2.

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On Tuesday, President Obama signed the Temporary Extension Act of 2010 (H.R. 4691), a bill that will extend the 65 percent premium COBRA subsidy through March 31, 2010, and unemployment assistance benefits through April 5, 2010. The Senate passed this bill by a vote of 78-19 after Sen. Jim Bunning (R-KY) – who objected to how the measure would be funded – abandoned his efforts to block it. The House of Representatives approved this emergency spending measure by voice vote last Thursday.  Both benefits had expired on February 28.

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On Tuesday, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) will publish in the Federal Register a final (pdf) and a proposed rule (pdf) providing for greater worker investment and retirement account protections. Both final and proposed rules were drafted in response to the Pension Protection Act of 2006 (PPA), which amended portions of the Employee Retirement Income Security Act (ERISA) dealing with investment advice and retirement plan transparency. The announcement of these rules was made at a White House forum hosted by Vice President Joe Biden on Friday. According to the DOL, these two new rules are “designed to enhance retirement security and transparency for the millions of workers covered by 401(k), pension and other retirement arrangements.”

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Senator Dick Durbin (D-IL) and Representative John Conyers (D-MI) have introduced legislation that would strengthen the ability of employees to recover wages and benefits and restrict the awarding of bonuses in the event of their employer’s bankruptcy. According to a press release, the Protecting Employees and Retirees in Business Bankruptcies Act (S. 3033, H.R. 4677) would, among other things, “ensure that back pay awarded through [the Worker Adjustment and Retraining Notification (WARN) Act] damages would be given priority in the bankruptcy claims process.” Specifically, as stated in the release, the bill would do the following:

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On Thursday evening, the House of Representatives approved by voice vote the Temporary Extension Act of 2010 (H.R. 4691), legislation that provides brief extensions of unemployment insurance benefits and premium health insurance subsidies under the Consolidated Omnibus Budget Reconciliation Act (COBRA), among other programs. This stopgap measure would extend the 65 percent premium COBRA subsidy through March 31, 2010, and unemployment assistance benefits through April 5, 2010. Both measures are set to expire on February 28.

It is unclear how the Senate will act upon the expiring benefit programs. The Senate has thus far been unable to pass a short-term extension by unanimous consent, and Sen. Majority Leader Harry Reid (D-NV) is expected to introduce legislation that would extend these measures even longer.

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In tomorrow’s edition of the Federal Register, the Employee Benefits Security Administration (EBSA) will publish a final rule (pdf) that outlines procedures relating to the assessment of civil penalties against sponsors of multiemployer pension plans for certain violations of section 305 of the Employee Retirement Income Security Act (ERISA). The Pension Protection Act of 2006 (PPA) added section 305 to ERISA, which sets forth additional rules for multiemployer defined benefit pension plans that are in endangered or critical status. The PPA gave the Secretary of Labor authority to assess civil penalties not exceeding $1,100 per day against any plan sponsor of a multiemployer plan that fails to follow these additional rules and procedures. According to the EBSA, the final rule sets forth how the maximum penalty amounts are computed, identifies the circumstances under which a penalty may be assessed, outlines certain procedural rules for the Department of Labor (DOL) and filing by a plan sponsor, and provides a plan sponsor with a means to contest an assessment by the DOL.

The rule takes effect on March 29, 2010.

Photo credit:  MBPHOTO, INC.
 

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The Internal Revenue Service (IRS) will begin mailing questionnaires to 401(k) plan sponsors to gather information about compliance with applicable tax rules. The questionnaire will focus on 401(k) plan operations, including eligibility, employee deferral rates, compensation definitions and nondiscrimination testing. The IRS is expected to mail several thousand questionnaires to 401(k) plan sponsors around the country to help make certain it reaches a representative sample.

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A draft of the 362-page Senate jobs bill (pdf) has been circulating among members of Congress this week. Although still a work in progress, the draft bill includes provisions providing for, among other things, unemployment benefits and COBRA health insurance premium extensions, tax incentives to promote hiring, spending programs on transportation initiatives, pension funding relief, and a tax proposal designed to raise revenue from foreign-held assets and trusts.

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On Tuesday, the Employee Benefits Security Administration (EBSA), Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) will publish in the Federal Register interim final rules (pdf) under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (“the Act” or “MHPAEA”). These interim final regulations replace prior regulations, and make conforming changes to reflect modifications the MHPAEA made to the original Mental Health Parity Act (MHPA) of 1996 definitions and provisions regarding parity in aggregate lifetime and annual dollar limits, and incorporate new parity standards. The interim final regulations are effective as of April 5, 2010, and generally apply to group health plans and group health insurance issuers for plan years beginning on or after July 1, 2010.

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A reported deal has been reached between the White House and union leaders regarding the proposed 40 percent excise tax on high cost (“Cadillac”) healthcare plans for inclusion in the final healthcare overhaul bill. This tax – first appearing in the Senate version of the legislation – is favored by President Obama, but has been heavily criticized by both House Democrats and organized labor.

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Rep. Joe Sestak (D-Pa.) has introduced a bill (H.R. 4421) that would extend the waiver of required minimum distribution rules for certain retirement plans and accounts through 2010. On December 23, 2008, former President Bush signed into law the Worker, Retiree and Employer Recovery Act of 2008 which, among other things, waived the minimum distribution requirement for 2009 from most employer-sponsored plans. H.R. 4421 would amend sections 401 and 402 of the Internal Revenue Code to extend this waiver an additional year.

This bill has been referred to the House committee on Ways and Means.

Photo credit: Kirby Hamilton

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The DOL’s Employee Benefits Security Administration (EBSA) has created model notices that employers can use to notify current and former health plan participants and beneficiaries of the COBRA premium reduction provided by the American Recovery and Reinvestment Act (ARRA), and extended by the 2010 Department of Defense Appropriations Act (2010 DOD Act). In general, the 2010 DOD Act extends the COBRA premium reduction eligibility period for two months until February 28, 2010, and increases the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). The EBSA’s Fact Sheet explains who is now eligible for the premium reduction, the new period of coverage, and notice requirements plan administrators must provide in light of the extension. The agency has also issued a set of frequently asked questions (FAQs) on the new COBRA premium reduction extension provisions that explain the revised notice obligations. The three model notices – Updated General Notice, Premium Assistance Extension Notice, and the Updated Alternative Notice – are specifically designed for different categories of qualified beneficiaries, and contain information that helps satisfy the notice requirements of both ARRA and the 2010 DOD Act.

Photo credit:  MBPHOTO

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The IRS has issued new guidance (Notice 2010-6) that provides valuable assistance in dealing with nonqualified deferred compensation plans under Section 409A of the Internal Revenue Code (the “Code”). Prior to this guidance, there was no means to correct an incorrectly drafted nonqualified deferred compensation plan (as the documentary compliance “transition period” ended December 31, 2008). This was in contrast to certain “operational errors” for which corrective guidance had been issued by IRS in Notice 2008-113.

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The Employee Benefits Security Administration (EBSA) has issued a final rule, (pdf) to be published in tomorrow’s edition of the Federal Register, that establishes a safe harbor period during which funds received or withheld from employee paychecks as contributions to certain benefit plans will not be considered “plan assets” for ERISA or IRS purposes. An employer is required to deposit these funds into the benefit plans on the earliest date on which the contributions can reasonably be segregated from the employer’s general assets. According to the EBSA, many employers and their advisers are uncertain as to how soon they must forward employee contributions to the benefit plans in order to avoid the requirements associated with holding plan assets. To this end, the final rule creates a safe harbor to “provide a higher degree of compliance certainty with respect to when an employer has made timely deposits of participant contributions to employee benefit plans with fewer than 100 participants.” Under this rule, employers with pension or welfare benefit plans with fewer than 100 participants will be considered to have made a timely deposit to the plan if the participant contributions are deposited within 7 business days. The contributions will be considered deposited when placed in an account of the plan regardless of whether the amounts have been allocated to specific participants or participant investments.

Photo credit: Kameleon007
 

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Staff members of the three House committees (Ways and Means, Education and Labor, and Energy and Commerce) involved in crafting the healthcare overhaul bill have put together an 11-page document (pdf) highlighting the similarities and differences between the House and Senate bills. The Senate’s Patient Protection and Affordable Care Act (H.R. 3590) and the House of Representative’s Affordable Health Care for America Act (H.R. 3962) contain some crucial differences that are currently being ironed out in informal talks as opposed to formal conference committee. Resolving the differences this way avoids any anticipated procedural delays in the Senate.

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The American Benefits Council (“the Council”), an advocacy organization for voluntary private employer-sponsored benefit programs, has released a document outlining its recommendations to Congress for crafting the final healthcare bill. Lawmakers are in the process of merging the provisions of the Senate’s Patient Protection and Affordable Care Act (H.R. 3590) and the House of Representative’s Affordable Health Care for America Act (H.R. 3962) to create a unified bill. The bills contain many crucial differences, especially with respect to the provisions regulating employer-sponsored coverage and responsibilities. The Council’s recommendations document – Priority Employer Issues for Consideration of House and Senate Health Care Reform Legislation (pdf) – sets forth a number of suggestions related to health coverage and tax issues that would be affected by both versions of healthcare overhaul legislation.

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The Department of Labor’s Employee Benefits Security Administration (EBSA) has released a fact sheet explaining how the Defense Department’s 2010 appropriations bill (“2010 DOD Act”) extends the Consolidated Omnibus Budget Reconciliation Act (COBRA) premium reduction provided by the American Recovery and Reinvestment Act (“ARRA” or “Economic Stimulus”). In general, the 2010 DOD Act extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).  Among other things, the fact sheet outlines who is now eligible for the premium reduction, the new period of coverage, and notice requirements plan administrators must provide in light of the extension. The fact sheet explains that plan administrators are now required to provide notice about the changes made to the COBRA premium reduction provisions to individuals who have already been provided a COBRA election notice, unless the election notice included the updated premium reduction information. These notices must be given to assistance eligible individuals by February 17, 2010. Individuals who have been terminated on or after October 31, 2009 and will lose health coverage must be provided this notice “within the normal timeframes for providing continuation coverage notices.” Those who had reached the end of the reduced premium period before the legislation extended it to15 months must be provided this notice within 60 days of the last day they were eligible to receive COBRA premium assistance under the old rules.

Photo credit:  Andriy Solovyov

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On December 21, 2009, the President signed a Law that amends the COBRA Subsidy provision of the American Recovery and Reinvestment Act (ARRA). The Law extends the time that certain former employees may receive and may qualify for subsidized COBRA continuation coverage.

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On Saturday, the Senate approved by a vote of 88 to 10 the final version of the FY 2010 Defense Appropriations Bill (H.R. 3326). Embedded in this $636 billion spending measure is the contentious amendment submitted by Sen. Al Franken (D-Minn.) that restricts federal contractors and subcontractors working on large defense projects funded by the appropriations bill from requiring their employees and independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate first agreed to include a limit on arbitration in the appropriations bill in October. The House passed the amended spending bill last Wednesday.

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The Internal Revenue Service (IRS) has granted a one-year extension for amending certain defined benefit and contribution plans that are subject to minimum funding requirements to comply with the additional funding mandates provided by the Pension Protection Act of 2006 (PPA 06) and modified by the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). The deadline will be extended to the last day of the first plan year beginning on or after January 1, 2010. According to the IRS Notice 2009-97 (pdf), to be published in the December 28 Internal Revenue Bulletin, this extension applies to the deadline for amending the following:

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The House of Representatives voted 217 - 212 to approve the Jobs for Main Street Act of 2010 (pdf), legislation that, among other things, would extend COBRA health continuation coverage and unemployment insurance benefits. The bill would divert $75 billion from the Troubled Asset Relief Program (TARP) to fund infrastructure programs, job stabilization efforts, and emergency relief measures.

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The House of Representatives approved a defense spending bill by a vote of 395 to 34 that extends jobless benefits as well as prevents most defense contractors and subcontractors from forcing their employees or independent contractors to sign, as a condition of employment, agreements to arbitrate certain employment-related claims. The Senate approved this provision – introduced by Sen. Al Franken (D-Minn.) as an amendment to the Fiscal Year 2010 Department of Defense Appropriations Act (pdf) (H.R. 3326) – in October.

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The DOL’s Employee Benefits Security Administration (EBSA) has posted on its website new guidance regarding the COBRA health insurance premium subsidy granted by the American Recovery and Reinvestment Act of 2009 (“ARRA” or “Economic Stimulus”). Under ARRA’s COBRA provisions, the government provides certain qualifying unemployed workers with a 65 percent subsidy of their health insurance premiums for up to nine months. Those individuals who first became eligible to receive this subsidy will begin to lose their coverage starting this month.

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The Congressional Budget Office (CBO) yesterday released a report: An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act (pdf) that focuses on the impact the Senate healthcare bill would have on health insurance premiums. Specifically, the analysis examined the average effects of the Patient Protection and Affordable Care Act (H.R. 3590), as proposed by Senator Reid (D-Nev.), on premiums in 2016 for coverage purchased individually, coverage purchased by small employers, and coverage provided by large employers.

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On Monday, the Pension Benefit Guaranty Corporation (PBGC) issued a proposed rule that would, among other things, conform the agency’s reportable events regulation under the Employee Retirement Income Security Act (ERISA) and other PBGC regulations to the changes made by the Pension Protection Act of 2006 (PPA 2006). According to the PBGC’s overview of the proposed rule published in the Federal Register, the new regulations would do the following:

• amend the PBGC’s reportable events regulation to make the advance reporting threshold test consistent with the PPA 2006 funding rules and PBGC’s new variable rate premium rules;
• eliminate most automatic waivers and filing extensions currently available under the reportable events regulation;

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Last week, Rep. Lloyd Doggett (D-Tex.) introduced a bill that aims to close tax loopholes that enable companies to provide highly compensated employees with generous retirement benefits at the expense of lower- and middle-income workers. The Retirement Fairness Act of 2009 (H.R. 4126) adds two sections to the Internal Revenue Code (IRC) to modify the rules relating to the nondiscrimination requirements in qualified pension plans and to include part-time employees in determining the minimum coverage requirements for these plans. The net effect of these changes would be to limit the use of Qualified Supplemental Executive Retirement Plans (Q-SERPs), which permit certain highly paid executives from paying themselves additional retirement benefits funded through their workers’ pension plans.

This bill has been referred to the House Committee on Ways and Means.

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As anticipated, the Department of Labor’s the Employee Benefits Security Administration (EBSA) has withdrawn its final rule (pdf) published on January 21, 2009 regarding the provision of investment advice to participants and beneficiaries in individual account plans such as 401(k)s and beneficiaries of individual retirement accounts (IRAs) and related plans. Last week, the EBSA issued a final rule extending the applicability and effective dates of the investment advice rule, which would have taken effect on November 18.

The withdrawn rule would have implemented a statutory prohibited transaction exemption under the Employee Retirement Income Security Act (ERISA) and parallel provisions in the Internal Revenue Code made by the Pension Protection Act (PPA), and provided an additional administrative class exemption. According to the EBSA, the agency received a number of comments that raised concerns about the potential for investment adviser self-dealing as a result of these provisions. Commenters claimed that the rule does not contain strong enough safeguards to protect the interests of plan participants and beneficiaries from potential conflicts of interest. The EBSA concluded that given these and other legal and policy concerns raised, the Department is justified in withdrawing its final rule, and intends to propose new regulations on the statutory prohibited transaction exemption under ERISA shortly.

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As promised, Sen. Chris Dodd (D-Conn.) and Rep. Rosa DeLauro (D-Conn.) have introduced in both chambers of Congress emergency legislation that would provide most employees with up to seven paid sick days to care for themselves or a family member with a contagious illness, including the H1N1 influenza virus. The Pandemic Protection for Workers, Families, and Businesses Act (S. 2790, H.R. 4092) would allow employees to use these sick days to tend to their own flu-like symptoms, obtain a medical diagnosis or preventive treatment, care for a sick child, or care for a child whose school or child care facility has been closed due to the spread of a contagious illness. Part-time employees would also be entitled to paid leave on a pro-rated basis. Employees would have the discretion to decide whether they need to take leave, although the Department of Labor (DOL) could issue a regulation requiring medical certification. In addition, the bill would make it unlawful for an employer to take an adverse action or otherwise discriminate against employees that avail themselves of these leave benefits. If enacted, the terms of this bill would take effect within 15 days, and sunset after two years. Employers that already provide up to seven days of annual paid sick leave would not be required to provide additional benefits.

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Both the Department of Labor’s Employee Benefits Security Administration (EBSA) and the Pension Benefit Guaranty Corporation (PBGC) have issued final rules published in today’s Federal Register that affect employer-provided pension plans. The EBSA’s final rule (pdf) delays until May 17, 2010 the effective and applicability dates of final rules under the Employee Retirement Income Security Act (ERISA) and parallel provisions in the Internal Revenue Code (IRC) dealing with the provision of investment advice to participants and beneficiaries in individual account plans such as 401(k)s and individual retirement accounts (IRAs). The rules, which were issued during the final days of the Bush administration, would have permitted advisers affiliated with mutual funds, brokerage firms and other companies that sell investments to provide investment advice to 401(k) and IRA participants. EBSA’s Assistant Secretary Phyllis C. Borzi has already announced that the agency plans to withdraw and rework this rule, which would have gone into effect on November 18. On January 20, 2009, Chief of Staff Rahm Emanuel directed agency heads to consider delaying any rule that had not yet taken effect to give the new administration a chance to review the law and policy involved.

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Last week Sens. Sherrod Brown (D-Ohio) and Robert Casey (D-Pa.) introduced the COBRA Subsidy Extension and Enhancement Act of 2009 (S. 2730), a bill that would enhance the COBRA continuation health coverage subsidy program created by the American Recovery and Reinvestment Act of 2009 (“ARRA” or “Economic Stimulus”). Under the current program, the government provides certain qualifying unemployed workers with a 65 percent subsidy of their health insurance premiums for up to nine months. Individuals who first became eligible to take advantage of this temporary COBRA assistance in March 2009 will lose their coverage beginning in December 2009. The COBRA Subsidy Extension and Enhancement Act would extend this deadline, as well as increase the amount of the subsidy and the number of individuals who would be able to take advantage of this program.

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During a November 10 Senate subcommittee hearing on the H1N1 influenza virus (“swine flu”) and paid sick leave, Senator Chris Dodd (D-Conn.) announced that he plans to introduce a bill that would entitle most employees to take up to 7 days of paid sick leave to deal with the H1N1 or seasonal flu. According to a press release, under the terms of this bill workers would be entitled to the paid leave for their own flu-like symptoms, medical diagnosis or preventive care, to care for a sick child, or to care for a child whose school or child care facility has been closed due to the spread of flu. The decision to take this leave would be left to the employee’s discretion, although the Department of Labor could issue regulations requiring medical certification. If signed into law, the provisions of this bill would take effect 15 days after enactment, and sunset after 2 years.

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This morning, President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548) into law.  Originally titled the Unemployment Compensation Extension Act of 2009, this Act will extend by 14 weeks unemployment benefits in all 50 states. Those states with high, sustained rates of unemployment – averaging at least 8.5 % over a three-month period – will receive up to 20 additional weeks of benefits.

The Senate approved this measure by a vote of 98-0 on November 4. Although the House had approved a less expansive version of this bill in September, it voted 403-12 to pass the Senate’s amended version on November 5. Despite Congress’s overwhelming approval of this legislation, final passage was delayed several weeks when a number of senators sought to include amendments that were unrelated to unemployment.  The amendments the Senate eventually agreed to incorporate in the final bill extend through April 30, 2010 the $8,000 first-time homebuyer tax credit, and allow businesses to apply their 2008 or 2009 operating losses to any five years prior to 2008, enabling them to receive tax refunds for those years. Those businesses that accepted funds through the Troubled Asset Relief Program (TARP) would be ineligible for this tax relief. In addition, the Act contains provisions updating the Unemployment Insurance Modernization provision in the American Recovery and Reinvestment Act to allow victims of sexual assault who have left their job to be eligible for benefits under the “compelling family reasons” clause. This measure is funded by extending the employer-paid Federal Unemployment Tax Act (FUTA) surtax until June 30, 2011.

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Rep. George Miller (D-Calif.), chairman of the House Education and Labor Committee, and Rep. Lynn Woolsey (D-Calif.), chair of the Workforce Protections Subcommittee, have introduced a bill that would provide up to five paid days of sick leave per year to employees who are told to miss work on account of a contagious illness. The stated purpose of the Emergency Influenza Containment Act (H.R. 3991) – which applies to employers with 15 or more employees – is to “ensure that American workers are able to follow, without financial harm, the recommendations of their employer and public health authorities to stay home when they have symptoms of a contagious disease that may put co-workers, customers, or the public at risk.” Under the terms of this legislation, which covers both full- and part-time workers, employees would be entitled to this paid leave only if they are sent home or advised to stay home by their employers. Employees who decide to stay home on their own claiming to be sick would not have access to this leave.

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Rep. Joe Sestak (D-Pa.) has introduced a bill that would extend by six months the maximum COBRA continuation coverage period for individuals who were involuntarily terminated between April 1, 2009 and December 31, 2009, and amend the American Reinvestment and Recovery Act of 2009 (ARRA or “Economic Stimulus”) by extending the eligibility and maximum assistance periods for the 65 percent COBRA premium assistance available under ARRA. According to a press release, the Extended COBRA Continuation Protection Act of 2009 (H.R. 3930) would extend COBRA benefits in three ways. First, the bill would extend from 9 to 15 months the total allowable time an unemployed worker can receive COBRA premium assistance. Second, the bill extends this assistance to individuals who are involuntarily terminated between January 1 and June 30, 2010. Third, it would extend eligibility for traditional COBRA coverage an additional 6 months, from 18 to 24 months, for individuals terminated at the beginning of the economic recession in 2008. No extended COBRA premium assistance or extended COBRA benefits would extend beyond December 31, 2010.

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The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) has issued new guidance in the form of 25 frequently asked questions (FAQs) to help plan administrators and service providers of group health and other welfare benefit plans comply with the expanded requirements for reporting service provider fees and other compensation on Schedule C of the 2009 Form 5500 Annual Return/Report of Employee Benefit Plan. The EBSA implemented these requirements – which are effective for plan years beginning on or after January 1, 2010 – as part of a final rule published on November 16, 2007.

According to an EBSA press release, issues covered by the FAQs include the reporting of gifts, entertainment and other non-monetary compensation; compensation to hedge fund investment managers; “look-through” investment funds; mutual fund redemption fees; and ERISA fee recapture accounts.

Earlier guidance on these reporting requirements was released in July 2008.

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The Senate on Tuesday voted 87-13 to proceed with consideration of the Unemployment Compensation Extension Act of 2009 (H.R. 3548), a bill that would, among other things, provide up to 14 additional weeks of unemployment benefits to individuals in all 50 states, and up to 20 additional weeks in states with rates of high, sustained unemployment. This legislation, which cleared the House of Representatives in September, has run into snags in the Senate. Democrats have accused Republicans of stalling passage by drafting amendments to the bill that have nothing to do with unemployment. Tuesday’s cloture vote effectively limits debate on the bill, and thus the consideration of the various amendments that have been proposed.

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It appears that hope for easy passage of an amended unemployment insurance benefits extension bill introduced earlier this month has faded. The Unemployment Compensation Extension Act of 2009 (H.R. 3548), which would extend UI benefits in all 50 states, has run into opposition from Senate Republicans who have either introduced or plan to introduce a number of amendments in an alleged attempt to stall the legislative process.

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On Thursday, the Senate voted 68 to 29 to approve the conference report (pdf) to the National Defense Authorization Act for Fiscal Year 2010 (H.R. 2647), which contains provisions expanding Family and Medical Leave Act (FMLA) military family leave entitlements that were enacted as part of the Fiscal Year 2008 National Defense Authorization Act. These FMLA amendments allow eligible employees to take up to 12 weeks of job-protected leave in a 12-month period for any “qualifying exigency” arising out of the active duty or call to active duty status of a spouse, son, daughter or parent. In addition, eligible employees are permitted to take up to 26 weeks of job-protected leave in a “single 12-month period” to care for a covered servicemember with a serious injury or illness. The 2010 National Defense Authorization bill would allow family of active duty members in regular service to take advantage of exigency leave provided for by these FMLA amendments, as well as extend military caregiver leave to veterans. Current Department of Labor (DOL) regulations limit access to exigency leave to family of Reserve and National Guard members only, and do not permit family members to take leave to care for servicemembers once they have left the military, even though certain injuries and illnesses (such as traumatic brain injury and post traumatic stress disorder) may not manifest themselves until months or years after the injury occurs.

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Last Thursday, Rep. Nathan Deal (R-GA) introduced two healthcare-related bills applicable to employers. The Improved Employee Access to Health Insurance Act of 2009 (H.R. 3821) would prevent states from enacting any law that prevents an employer from instituting an auto-enrollment process for employee health insurance coverage, so long as the participant or beneficiary has the option to decline coverage.

The second bill introduced by Rep. Deal (H.R. 3822) would allow employers that do not offer health benefits to provide tax-free defined contributions and administrative assistance to employees who opt to buy health insurance coverage on their own. The offer of assistance and tax-free contributions would not be considered a group health plan for Employee Retirement Income Security Act (ERISA) or the Public Health Service Act purposes.

The Improved Employee Access to Health Insurance Act has been referred to the House Committee on Education and Labor. H.R. 3822 has also been referred to this committee, as well as to the House Committees on Energy and Commerce and Ways and Means.
 

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Sen. Claire McCaskill (D-MO) has introduced legislation that would expand whistleblower protections to non-federal employees who disclose information about the misuse of federal funds. The Non-Federal Employee Whistleblower Protection Act of 2009 (S. 1745) would shield employees of companies that receive funding from any government agency (in the form of either grants or contracts) from retaliation for making protected disclosures involving waste or fraud. The bill also expands the scope of covered actions, outlines the burden of proof in whistleblower cases, and prevents employers from forcing employees to waive their whistleblower rights.

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Senators Harry Reid (D-Nev.), Max Baucus (D-Mont.), Jack Reed (D-R.I.) and Jeanne Shaheen (D-N.H.) have introduced a new bill, the Emergency Unemployment Compensation Extension Act of 2009 (S.A. 2668 to H.R. 3548), that would extend unemployment insurance benefits for individuals in all 50 states. Under the terms of this legislation, unemployed workers would receive up to 14 weeks of additional benefits. Those in states with unemployment rates above 8.5 % would be entitled to an additional 6 weeks of benefits. The measure would be funded by extending through June 30, 2011, the Federal Unemployment Tax assessed on employers.

According to a press release issued from Sen. Reid’s office, the bill would also update the Unemployment Insurance Modernization provision in the American Recovery and Reinvestment Act ( “ARRA” or the “Economic Stimulus Package”) to allow victims of sexual assault who have left their job to be eligible for benefits under the “compelling family reasons” clause. Additionally, the legislation specifies that railroad workers facing expiring unemployment benefits would be eligible for additional weeks.

This measure is intended as a substitute for the Unemployment Compensation Extension Act of 2009 (H.R. 3548), which would have extended unemployment benefits for 13 weeks only in states with high persistent unemployment (8.5% on a rolling three-month average). The original bill passed the House of Representatives last month, but stalled in the Senate when lawmakers from states with unemployment rates that did not exceed the requisite threshold cried foul. Sen. Shaheen – who led the chorus of disenchantment by writing a letter to the Senate urging that benefits be extended in all 50 states – co-authored the new bill.

Given the current state of the economy and mounting unemployment rates, this measure is expected to receive widespread support in both houses of Congress.

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In an informal opinion letter released October 6, 2009, the Equal Employment Opportunity Commission (EEOC) determined that requiring employees to complete a health risk assessment as a precondition to receiving payment from an employer-funded health reimbursement arrangement can violate the Americans with Disabilities Act (ADA) in certain circumstances.

The letter, written by EEOC Assistant Legal Counsel Peggy Mastroianni, was in response to an employer that asked whether requiring employees to answer more than 100 questions in several categories, including “Personal Health,” “Health Choices-Alcohol and Tobacco,” “Health Changes,” and “Family Health History,” as a prerequisite to receiving health expense reimbursement under an employer-funded health reimbursement plan would violate the ADA. Mastroianni explained that the ADA permits employers to make disability-related inquiries and obtain medical information from employees in certain circumstances, such as if the inquiry is job-related and consistent with business necessity, is part of a follow-up to a request for a reasonable accommodation, or is part of a voluntary wellness program. A program is considered “voluntary” if the employees are neither required to participate nor penalized for non participation.

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The Department of Labor (DOL), Internal Revenue Service (IRS), and the Centers for Medicare and Medicaid (CMS) have published in the Federal Register interim final rules (pdf) governing Sections 101 through 103 of Title I of the Genetic Information Nondiscrimination Act of 2008 (GINA). Title I of GINA amended the Employee Retirement Income Security Act of 1974 (ERISA), the Public Health Service Act (PHS Act), the Internal Revenue Code of 1986 (Code), and the Social Security Act (SSA) to prohibit discrimination in health coverage based on genetic information. Sections 101-103 contain provisions banning discrimination based on genetic information in health insurance coverage and group health plans. The EEOC has not yet issued final rules interpreting Title II of GINA, which prohibits discrimination in employment based on genetic information, and limits the acquisition and disclosure by employers and other entities of such information.

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A bill that would temporarily provide an additional 13 weeks of unemployment insurance benefits to states with high and sustained unemployment has lost momentum in the Senate. The Unemployment Compensation Extension Act of 2009 (H.R. 3548) sailed through the House of Representatives on September 22 by a vote of 331 to 83.  Obstacles to this measure arose in the Senate, however, where some lawmakers have expressed concern that this bill would be unfair to those states that have not exceeded 8.5% unemployment (for a rolling three-month average), as required by the bill to qualify for additional benefits.

Leading the criticism is Sen. Jeanne Shaheen (D-NH), who argued that the UI benefits extension should apply to all 50 states. In a statement and letter to the Senate signed by 14 fellow Democratic Senators and two Independents, Shaheen said that “unemployed workers face equally severe challenges no matter what state they live in, and they should be given the support they need.”

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The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) (P.L. 110-343) (pdf) and Michelle’s Law (P.L. 110-381) (pdf), two laws that impact employer-sponsored group health plans, will take effect for plan years beginning on or after October 3, 2009 and October 9, 2009, respectively.  Calendar year plans have until January 1, 2010 to comply with both laws. 

The MHPAEA requires private group health benefit plans that provide mental health and/or substance use disorder benefits to offer them on a basis equivalent to the medical and surgical benefits provided.  In order to ensure coverage parity, the act imposes several plan design requirements upon group health benefit plans that offer mental health and/or substance use disorder benefits. The bill exempts certain small group health benefit plans and those that would incur a particular level of increased costs for all benefits due to compliance with the parity rule. These exemptions are specific and narrow.

Michelle’s Law similarly imposes certain coverage requirements on group health benefit plans. In essence, this law extends the health plan benefits coverage to a dependent child who is over the age of 18 and enrolled in college and would otherwise lose coverage in the event a medically necessary leave of absence would cause the child to lose full-time student status.

For more information on these laws, see Littler’s ASAPs: Equal Mental Health and Substance Use Benefits Realized by Russell D. Chapman and Andrea Jackson; and Michelle's Law Extends Group Health Benefit Plan Eligibility for Dependent Students on a Medically Necessary Leave of Absence by Steven J. Friedman and Andrea Jackson.

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The House of Representatives approved by a vote of 331 to 83 the Unemployment Compensation Extension Act of 2009 (H.R. 3548), a bill that would extend unemployment benefits for 13 weeks in states with high persistent unemployment (8.5% on a rolling three-month average). To pay for this measure, the bill extends for one year a federal unemployment tax (FUTA surtax) that is set to expire at the end of 2009, and has been in place for more than 30 years. This tax requires businesses to pay an annual tax of $14 per worker. The bill would also require that current reporting on newly hired employees include the date work begins to reduce overpayment of UI benefits. In July, Rep. Jim McDermott (D-Wash.), who introduced this legislation, introduced a more comprehensive unemployment insurance bill (H.R. 3404) that included the 13-week benefits extension. The shorter bill was introduced on September 10 as an emergency measure to address continuing high unemployment due to the economic downturn.

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Rep. Lynn Woolsey (D-CA) and Sen. Chris Dodd (D-CT) have introduced a bill in both chambers of Congress that would enhance family and medical leave benefits for family members of veterans. The Supporting Military Families Act of 2009 (H.R. 3403, S. 1543) would amend the Family and Medical Leave Act’s (FMLA) military family provisions that were enacted as part of the Fiscal Year 2008 National Defense Authorization Act that entitle family or primary caregivers of military members to take up to 26 weeks of unpaid leave to care for the wounded service member. The new bill would extend the time in which the family member could take such leave, and expand the scope of those who would be covered by these medical exigency leave provisions.

According to a press release issued by Rep. Woolsey’s office, this bill would:

• Extend the twenty-six weeks of leave to family members of veterans for up to five years after a veteran leaves service, if he or she develops a service-related injury or illness that was incurred, or, in the case of an existing injury, was aggravated while on active duty.
• Extend exigency leave to covered active duty members in regular military service. Current Department of Labor (DOL) regulations limit access to exigency leave to Reserve and National Guard members only.
• Extend exigency leave eligibility to those service members deployed to a foreign country. The current law limits availability of exigency leave to those deployed “in support of a contingency operation.”

The House version of this bill has been referred to House Committee on House Administration. The Senate companion bill has been referred to the Senate Committee on Health, Education, Labor and Pensions.

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Senator Roland Burris (D-IL) has introduced a bill that would extend temporarily the 18-month period of healthcare continuation coverage required by the Consolidated Omnibus Budget Reconciliation Act (COBRA). The COBRA Coverage Extension Act of 2009 (S. 1488) would provide up to 24 months of continuation coverage under group health plans required under COBRA, the law that amended the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and the Public Health Service Act to provide continuation of group health coverage for certain qualifying former employees, retirees, spouses, former spouses and dependent children. Specifically, S. 1488 would entitle any individual who is eligible for and has elected continuation coverage under COBRA as of the date of this bill’s enactment, and whose coverage would end before 12 calendar months had elapsed from the date of enactment due to an 18-month continuation limitation, to continue coverage until a full 12 months had passed after the date of enactment, or 24 months after the date of the qualifying COBRA event, whichever is earlier. This bill has been referred to the Senate Committee on Health, Education, Labor, and Pensions.

This bill joins another recent measure aimed at extending COBRA continuation coverage. The House’s much-publicized healthcare bill, America's Affordable Health Choices Act of 2009 (H.R. 3200), includes an amendment that would extend COBRA coverage until the individual becomes covered under another employer’s group health plan or under a health insurance exchange plan, the latter of which would be created under the bill itself. The extension would not apply to certain medical flexible spending arrangements. Offered by Rep. Susan Davis (D-CA), this amendment was approved by voice vote by the House Committee on Education and Labor on July 17. Given the development of the health insurance exchange system would not be established until the year 2013 at the earliest, it is conceivable that if this bill were to pass, COBRA continuation coverage could be extended for years. This healthcare bill has been approved by both the House Committees on Education and Labor, and Ways and Means.

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Rep. Lynn Woolsey (D-CA) has introduced the Balancing Act of 2009 (H.R. 3047), a bill aimed at working families that combines a number of provisions from previously-introduced family and medical leave legislation. In addition to addressing issues such as childcare and medical need assistance, this bill would, among other things, amend the Family and Medical Leave Act (FMLA) to provide for paid time off to care for a new baby or sick family member, provide paid sick leave, and allow employees to take time off to attend their children’s school or extracurricular activities, attend to the needs of elderly family members, receive routine medical care, as well as address issues related to domestic violence or sexual assault. The bill also includes a business child care incentive grant program in addition to a section promoting teleworking.

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Last week Senator Ron Wyden (D-Ore.) introduced the Military Family Leave Act of 2009 (S. 1441), a bill that would grant military family members temporary annual leave for the member's deployment. Specifically, the legislation would allow the spouse, child or parent of a member of the uniformed services to take up to two weeks of annual leave from his or her job if the service member receives notice of an impending call or order to active duty in support of a contingency operation, or is deployed in connection with a contingency operation. This leave could be taken intermittently or on a reduced leave schedule. The employee would be entitled to two workweeks of leave for each military family member called to active duty. The employee could elect – but the employer could not insist upon – the substitution of accrued paid time off for the leave provided for under this legislation. An employer may require, however, that certification to support the family member’s military situation be provided in a timely manner.

This bill also prevents an employer from terminating or otherwise discriminating against an employee who takes such military family leave, and compels the reinstatement of the employee to his or her position (or an equivalent one) without loss of benefits upon returning to work.

This bill, which adds a new chapter to Part III of title 38 of the U.S. Code, has been referred to the Senate Committee on Health, Education, Labor and Pensions.

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Rep. Paul Hodes (D-NH) this week introduced the Small Business Health Care Affordability Act of 2009 (H.R. 3115), a bill that would provide small businesses and their employees with tax credits for health insurance coverage. According to the terms of this legislation, employers with 50 or fewer employees would be entitled to a an annual tax credit of up to $1,000 per employee for providing individual health insurance coverage, and up to $2,250 annually for providing family coverage. The plan would also provide healthcare premium assistance for small business employees and their dependents.

This legislation has been referred to the House Committee on Ways and Means. If enacted, the provisions of this bill would apply to taxable years beginning after December 31, 2009.

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By a vote of 29 to 17, the House Committee on Education and Labor on June 24 approved a bill that would mandate certain 401(k) fee disclosure requirements, and require that investment advice provided to employees regarding employer-sponsored retirement plans be independent and free of any conflict of interest. The 401(k) Fair Disclosure and Pension Security Act of 2009 (H.R. 2989) combines provisions of two other bills that were approved by the House Education and Labor’s Subcommittee on Health, Employment, Pensions and Labor on June 17 by votes of 13 to 8 along party lines. Those two bills are the 401(k) Fair Disclosure for Retirement Security Act (H.R. 1984) sponsored by Rep. George Miller (D-CA) and the Conflicted Advice Prohibition Act (H.R. 1988) sponsored by Rep. Robert Andrews (D-NJ).

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Senator Russ Feingold (D-Wisc.) has reintroduced the Promoting Health Care Purchasing Cooperatives Act (S. 1165), a bill that would authorize the Secretary of Health and Human Services (HHS) to award grants to certain groups of employers to develop health care purchasing cooperatives. The legislation includes a grant application process for both self-insured and small businesses.

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During a press conference held this morning, Rep. Alan Grayson (D-Fla.) – whose district includes popular tourist spots in Orlando – introduced the Paid Vacation Act of 2009, a bill that would mandate paid vacation leave for most employees.  According to a press release, the measure would require employers with 100 or more employees to provide a week of paid vacation. After three years, businesses with a minimum of 50 employees would have to meet the same requirement, while those with 100 or more employees would be required to provide employees with two weeks of paid vacation leave. To be entitled to take such paid leave, employees would have to work for at least one year. Part-time employees would need to work a minimum of 25 hours per week and 1,250 hours per year to be eligible.

An article at Roll Call notes that the response to this proposal has been somewhat lukewarm. Critics of the measure have emphasized that a blanket federally-mandated vacation policy will not work in all organizations, would impose additional burdens on businesses in an already weak economy, and could affect hiring decisions for some employers.  

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A bill that would require employers to provide paid sick leave to employees was reintroduced in the House of Representatives on Monday by Rep. Rosa DeLauro (D-Conn.), and co-sponsored by 101 others. The Healthy Families Act (H.R. 2460) would allow employees to earn one hour of paid sick time for every 30 hours worked up to a maximum of 56 hours (seven days) annually. Employees could take this leave to attend to their own or a family member’s illness, or use the paid time off for preventative care such as doctor’s appointments. In addition, the bill provides leave for employees who are the victims of domestic violence, stalking or sexual assault. Employers with 15 or more employees would be covered by this legislation.

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Last week the Small Business Health Options Program (SHOP Act) (H.R. 2360) was reintroduced by Rep. Ron Kind (D-WI). This bill has bipartisan support, with 25 co-sponsors. In essence, this legislation would amend the Public Health Service Act to create state or nationwide health insurance purchasing pools for small businesses and the self-employed. A small business for purposes of this bill would be one with fewer than 100 employees who work an average of at least 35 hours per week. Self-employed individuals covered by this act must earn at least $5,000 in net earnings or not less than $15,000 in gross earnings from self-employment in the preceding taxable year.

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The U.S. Supreme Court has held that an employer does not necessarily violate the Pregnancy Discrimination Act (PDA) when it pays pension benefits calculated in part under an accrual rule – applied prior to the PDA’s enactment – that gave less retirement credit for pregnancy than for medical leave generally. The Court in AT&T v. Hulteen (pdf) further held that the benefit calculation rule used by the employer in this case was part of a bona fide seniority system that insulated it from a Title VII challenge.

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A number of federal agencies including the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) are requesting information in advance of a future rulemaking on group health plans. Specifically, the EBSA’s Request for Information (RFI) seeks input on questions related to the mental health parity provisions made by the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The RFI was published in the April 28, 2009 edition of the Federal Register.

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Legislation providing employers with various incentives for promoting employee health may receive serious consideration now that Congress is contemplating major healthcare reform. A recent article published in The New York Times claims that proposals such as the Healthy Workforce Act (H.R. 1897, S. 803), which would provide employers with a tax credit for 50 percent of the costs incurred in implementing “effective and comprehensive” employee wellness programs, could be incorporated into broader healthcare reform. The article also claims Congress may loosen legal restrictions to enable employers to use monetary rewards or penalties to encourage healthy lifestyles.

While many employers currently offer some form of wellness plan or benefits, doing so must be done with care. As the NYT article emphasizes, employers need to be mindful of tax, labor, and insurance laws when implementing such incentive programs. Paid gym memberships, for example, may count as an employee’s taxable income. Moreover, employers must take care not to discriminate on the basis of an employee’s health status or medical history. Critics also argue that the carrot and stick approach to promoting employee wellness may constitute a form of lifestyle discrimination, and could amount to an invasion of privacy. The proposals floating around Congress seek to remove some of these legal landmines to make it easier for employers to establish wellness programs. Given that one of President Obama’s eight principles for health legislation is that it must “invest in prevention and wellness,” such proposals are likely to receive attention in the coming months.  For additional employment law issues associated with wellness initiatives, see Littler’s Report Employer Mandated Wellness Initiatives: The Continuum from Voluntary to Mandatory Plans.

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Legislation that would amend the Employee Retirement Income Security Act (ERISA) which would prohibit certain entities that have some relationship with a retirement plan involving a plan's investments from providing investment advice for participants and beneficiaries under individual account plans was introduced this week. The Conflicted Investment Advice Prohibition Act of 2009 (H.R. 1988) would add a paragraph to ERISA defining and outlining specific qualifications and requirements for an “independent investment advisor” with respect to an individual account plan. If this bill becomes law, it is possible that a huge number of existing relationships between plans and investment providers would need to be abrogated.

According to Rep. Robert Andrews (D-NJ) who introduced the bill, the purpose of this legislation is to “restore ERISA’s prohibition on self-interested investment advisers providing advice to employer-sponsored retirement accounts, thereby safeguarding the retirement savings of millions of hardworking Americans.”

This bill has been referred to the House Committee on Education and Labor.

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The Internal Revenue Service (IRS) has issued Notice 2009-27, which provides guidance on the COBRA premium subsidy that was created under the American Recovery and Reinvestment Act of 2009 (ARRA), or stimulus package. ARRA, among other things, includes a provision that authorizes a 65 percent federal subsidy for continuing health care coverage under COBRA for employees who qualify as “assistance eligible.”

The IRS guidance provides 27 pages of detailed questions and answers on issues including who qualifies as an assistance eligible individual, what constitutes an involuntary termination for purposes of the definition of an assistance eligible individual, how to calculate a premium reduction, and which types of coverage are suitable for premium reductions, among other topics.

For more information on the IRS guidance, see Littler’s ASAP: IRS Clarifies Key Provisions of the New COBRA Subsidy by: Nancy L. Ober.

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The Department of Labor (DOL) has posted on its website expanded employer guidance on the premium Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidies provided for by the American Recovery and Reinvestment Act of 2009 (ARRA), or stimulus plan. A significant portion of this Q & A guidance, FAQs For Employers About COBRA Premium Reduction Under ARRA, clarifies the new COBRA notice requirements under ARRA. ARRA requires employers and plan sponsors to notify certain current and former plan participants and their beneficiaries about the reduction in health premium costs. Earlier this month, the DOL posted on its website model notices that an employer can provide to current and former employees to comply with the ARRA notice provisions.

The expanded guidance provides a number of examples to help employers determine who should receive the full version of the general, abbreviated general and alternative notices, and who should receive the notice in connection with extended election periods. Other portions of the Q & A address more general topics concerning the COBRA subsidy, such as which plans are subject to the premium reduction provisions, and who is eligible to receive this benefit.

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A bill that would provide a tax credit to companies offering “effective and comprehensive wellness programs” was introduced in both the House and Senate yesterday. The Healthy Workforce Act (H.R. 1897, S. 803) would amend the Internal Revenue Code (IRC) to provide a credit for 50 percent of the costs employers would incur in implementing such wellness programs for their employees. The bill was introduced by Senators Tom Harkin (D-IA) and John Cornyn (R-TX) and Representatives Earl Blumenauer (D-OR) and Mary Bono Mack (R-CA). Similar legislation was introduced and debated in 2007 but died in committee.

According to information provided by Sen. Harkin, to be eligible for this credit, businesses would need to provide programs that include, among other elements, “health risk assessments, health awareness and behavior change programs, meaningful incentives for program participation and an employee committee that tailors programs to meet workforce needs.” While the current bill has not yet been published, it is likely the same if not substantially similar to the bill introduced in 2007. That bill capped the credit amount at $200 per employee for businesses with fewer than 200 employees, and $100 per employee for those with more than 200 employees.

The House bill has been referred to the House Committee on Ways and Means, and the Senate version to the Senate Committee on Finance.

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The following summarizes some federal agency happenings this week:

Phyllis Borzi is Tapped to Serve as Assistant Secretary of DOL’s EBSA

President Obama has nominated Phyllis C. Borzi to serve as the Assistant Secretary of Labor for the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA). The EBSA is the organization within the DOL whose mission it is to educate and assist the 150 million Americans covered by more than 679,000 private retirement plans, 2.5 million health plans, and similar numbers of other welfare benefit plans; as well as plan sponsors and members of the employee benefits community.

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A bill introduced last week would amend the Internal Revenue Code (IRC) to provide a tax credit for qualified donations of employee services. The Incentive to Serve Tax Act (H.R. 1644) would provide employers with a qualified employee service donation credit equal to 25 percent of the qualified wages paid to the employee performing the services.

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Legislation introduced by Rep. Thaddeus McCotter (R- MI) would amend the Internal Revenue Code to provide employers with a tax credit for hiring veterans. The Veterans’ Employment Transition Support Act of 2009 (VETS Act of 2009) (H.R. 1647) would grant a one-time tax credit to employers, and apply to the employment of any veteran certified as such by the designated local agency.

Employers would be granted credit in the amount of 40 percent of the employee’s first-year wages. A greater tax credit is available for the hiring of disabled veterans. The Act creates a sliding percentage tax benefit scale based on the degree of the employee’s disability. The amendments made by this Act would apply to veterans who begin work after the date of enactment.

This bill has been referred to the House Committees on Energy and Commerce, Education and Labor, and Ways and Means.

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The Department of Labor (DOL) has released on its website model Consolidated Omnibus Budget Reconciliation Act (COBRA) notices employers can provide to current and former employees as a means of complying with the notification mandates set forth in the American Recovery and Reinvestment Act of 2009 (ARRA), otherwise referred to as the stimulus package. ARRA, among other things, includes a provision that authorizes a 65 percent federal subsidy for continuing health care coverage under COBRA for employees who were involuntarily terminated between September 1, 2008 and December 31, 2009. Additionally, ARRA requires employers and plan sponsors to notify certain current and former plan participants and their beneficiaries about this reduction in health premium costs.

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Bills introduced in both chambers of Congress would amend the Employee Retirement Income Security Act (ERISA), the Public Health Service Act, and the Internal Revenue Code to prohibit preexisting condition exclusions in health plans. The Preexisting Condition Patient Protection Act of 2009 (H.R. 1558, S. 623) would preclude exclusions in group health plans as well as health insurance coverage in the group and individual markets.

The legislation also orders the Secretary of Health and Human Services (HHS) to provide Congress with a report within two years of the law’s enactment on the Act’s impact on health benefits coverage. Pursuant to this report, the HHS is authorized to request data from group health plans and health insurance issuers, including the number, nature, and dollar amount of claims made by enrollees, changes in the demographic composition of enrollees, and other information the Secretary deems appropriate.

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As previously discussed, the stimulus provisions regarding changes to the Consolidated Omnibus Budget Reconciliation Act (COBRA) are complex and confusing. Below, we address some common misconceptions about these provisions.

Misconception 1: The notices about the COBRA subsidy need to be distributed only to those employees who are involuntarily terminated.

Clarification: The COBRA subsidy provision requires that notices about the Federal COBRA subsidy are distributed to all employees who had or has a qualifying event from September 1, 2008 to December 31, 2009. Even if the employer believes that the employee will not qualify for the subsidy (e.g., the employee voluntarily terminated employment), that employee must receive the notice about the subsidy.

Example: Employee's hours are reduced and employee is reassigned, and employee resigns in response. Employee is entitled to the normal COBRA notice of rights and opportunity to elect continuation coverage, and in addition, the notice of the COBRA subsidy.

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During the White House Forum on Health Reform last week, President Obama expressed his desire for an overhaul of the nation’s health care system. But he would leave the details of this overhaul, however, up to the legislature. Therefore, it can be expected that a variety of health care reform bills will flood the docket in the coming months. While the majority of these bills will inevitably die in committee, aspects of these various proposals could be incorporated into a more comprehensive bill that would be expected to receive serious consideration. Democratic leaders have said that they hope to move comprehensive legislation to the House floor before the August recess.

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On February 26, President Obama unveiled his proposed $3 trillion budget. A detailed summary can be found on the White House website. (pdf)  As expected, the budget includes increased funding for various agencies tasked with oversight of employers.

Of interest to employers, highlights of this proposal include the following:

• Funding of $110 million to continue expansion of the E-Verify program.
• Projected DOL discretionary funding increases of $12.7 billion for 2009, and $13.3 billion for 2010.
• Increased funding for the Occupational Safety and Health Administration (OSHA), “enabling it to vigorously enforce workplace safety laws and whistleblower protections, and ensure the safety and health of American workers.”
• Increased enforcement resources of the Wage and Hour Division “to ensure that workers are paid the wages that are due them.”
• Increased funding for the Office of Federal Contract Compliance Programs.
• The establishment of automatic workplace pensions. Under this plan, a system of automatic workplace pensions would operate alongside Social Security.  Employees would be automatically enrolled in workplace pension plans.  Employers that do not currently offer a retirement plan would be required to enroll their employees in a direct-deposit IRA account that is compatible with exiting direct-deposit payroll systems. Employees would be given the ability to opt out of this program.
• The provision of $145 million to the Justice Department’s Civil Rights Division to strengthen civil rights enforcement against racial, ethnic, sexual preference, religious and gender discrimination.
   

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On February 24, the Internal Revenue Service (IRS) published in the Federal Register its final rule regarding automatic contributions to 401(k) plans and similar types of defined contribution plans. Such automatic enrollment features were established by the Pension Protection Act (Pub. L. No. 109-280), which amended the tax code to facilitate automatic enrollment for 401(k) plans, Section 403(b) tax-deferred annuity plans, Section 457(b) governmental plans, and similar arrangements. These regulations affect administrators of, employers maintaining, participants in, and beneficiaries of section 401(k) plans and other eligible plans that include an automatic contribution setup. Among other things, the regulations clarify minimum percentage requirements for qualified automatic contribution arrangements (QACA), expand uniformity requirements, and establish a notice timing requirement.

The final regulations relating to qualified automatic contribution arrangements apply to plan years beginning on or after January 1, 2008. The regulations relating to eligible automatic contribution arrangements apply for plan years beginning on or after January 1, 2010.

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Immigration-related bills are being introduced at a rapid pace. While many of these bills are destined to languish in committee, the sheer volume of immigration legislation introduced by both parties barely two months into the new Congress increases the chance that at least one bill will eventually receive real consideration. The latest bill – Electronic Employment Eligibility Verification and Illegal Immigration Control Act (H.R. 1096) – would amend the Immigration and Nationality Act to create an electronic employment eligibility verification system and a detailed employment verification process, expand the verification system to apply to previously hired individuals, and increase employer penalties for violations, among other things. If passed, this bill would amend the Immigration and Nationality Act to require E-Verify for all employers. The E-Verify system is currently voluntary, unless mandated by applicable state law.

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As economic conditions decline, scrutiny over executive compensation increases. On February 17, President Obama signed into law the massive stimulus package (Pub. L. No. 111-5) containing a number of provisions limiting executive compensation for entities receiving funds under the Troubled Asset Relief Program (TARP). A new bill introduced last week would augment these provisions by creating additional government oversight for companies receiving TARP assistance.

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The stimulus legislation signed into law as the American Recovery and Reinvestment Act of 2009 (ARRA) by President Obama contains sweeping revisions to the group health plan continuation coverage provisions contained in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The ARRA also impacts other areas of employment law. For an in-depth analysis of these changes, see Littler's ASAPs: Stimulus Package: An In-Depth Look at the New COBRA Subsidy in the ARRA by: Steven J. Friedman, Susan K. Hoffman, and J. René Toadvine, and Besides COBRA: What Does the Stimulus Package Have for Employers by: Ellen N. Sueda, GJ Stillson MacDonnell, Patricia A. Haim, and Chadwick M. Graham.

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The massive $787.2 billion economic recovery package signed into law as the American Recovery and Reinvestment Act of 2009 (ARRA) by President Obama on Tuesday will impact employers in several ways. Embedded in this stimulus package are provisions relating to COBRA, business tax credits, executive compensation, and H-1B visas, among others areas.

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The nation’s economic troubles have inspired a number of new employment-related bills. One immigration bill seeks to promote hiring Americans by limiting the incentives for illegal aliens to move to the United States to live and work, while another bill would facilitate the hiring of foreign workers under the H-2B guest worker program. A third bill would provide employers with a tax credit for hiring unemployed veterans.

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Lawmakers in the 111th Congress continue to introduce employment-related legislation. The following bills appeared on the docket within the past week:

Family and Medical Leave

A bill passed by the House on February 9 by voice vote would close a Family and Medical Leave Act (FMLA) loophole for airline pilots and flight attendants. The Airline Flight Crew Family and Medical Leave Act (H.R. 912) would change the hours of service requirement to enable more airline industry employees to take such leave.

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A couple of recently-introduced bills would amend the Employee Retirement Income Security Act (ERISA). The Pension Security Act of 2009 (H.R. 712) would amend title I of ERISA to require that the annual report of a defined benefits pension plan disclose any hedge fund investments.

If enacted, the disclosures would need to be included in the annual reports for plan years beginning on or after the date of enactment. The Secretary of Labor – in consultation with the Securities and Exchange Commission – would be charged with issuing initial regulations within one year.

This bill has been referred to the Committee on Education and Labor.

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On February 4, 2009, President Obama signed into law the State Children’s Health Insurance Program (SCHIP). This expansion of children’s health insurance includes provisions amending the Employee Retirement Income Security Act (ERISA) by adding new clauses to the end of Section 701(f). In essence, group health plans and insurers are required to allow employees and their dependents who are eligible for coverage—but are not enrolled in the group plan—to enroll if they become ineligible for Medicaid or a state child health plan, or if they become eligible for financial assistance from Medicaid or a state child health plan. The employee or dependent must exercise this option within 60 days. This law also imposes new notice requirements regarding an employee’s options for financial assistance to pay for their employer-sponsored health coverage. Plan administrators must also be prepared to provide to the state, if requested, detailed information about the benefits available under the group health plan.

The Secretary of Labor and the Secretary of Health and Human Services will develop the initial model notices and provide them to employers no later than February 4, 2010. Each employer must give these initial annual notices to employees beginning with the first plan year that begins after the date on which the notices are first issued.
 

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Both the House and Senate versions of the 2009 Stimulus Bill include sweeping revisions to ERISA’s continuation of coverage provisions (commonly known as “COBRA”). While the exact form that these provisions may take in the final package is unknown, it is almost certain that some version of the current drafts will be included. The new provisions will impose additional burdens and hidden costs on employer-sponsors of group health plans.

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Pursuant to the January 20, 2009 memo by Chief of Staff Rahm Emanuel directing all federal agency heads to consider extending the effective dates of regulations that had been published in the Federal Register but had not yet taken effect, the Department of Labor’s Employee Benefits Security Administration (EBSA) has issued a notice. The notice proposes an extension of the effective and applicability dates of final regulations on investment advice provided to participants and beneficiaries of 401(k) plans and IRAs. The regulations, which apply to transactions occurring on or after March 23, 2009, would be extended 60 days until May 22, 2009.

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The U.S. House of Representatives will begin consideration this week of Senate amendments to the Children’s Health Insurance Program Reauthorization Act of 2009 (H.R. 2), which has already cleared both houses of Congress. This bill, which expands the State Children’s Health Insurance Program (SCHIP), contains provisions in both the House and Senate versions that would amend the Employee Income Retirement Security Act (ERISA).

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A few new labor and employment-related bills focusing on health care and wage requirements for highway construction projects were introduced this week.

Health Care

Bills extending COBRA coverage seem very popular this session. In addition to the recent House Stimulus Bill (H.R. 1)  and the Coverage Continuity Act of 2009 (S. 29) which included provisions extending such health care coverage, the COBRA Coverage Extension Act of 2009 (H.R. 694) introduced by Rep. Joe Sestak (D-PA) would temporarily extend the basic 18-month period of COBRA continuation coverage to 24 months. This bill was referred to the House Ways and Means Committee.

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Not even a full month into the year, the new Congress keeps flooding the docket with employment-related bills. Despite organized labor’s push to introduce union-friendly legislation early in President Obama’s term, and the many civil rights and work/family balance bills expected to be introduced, instead, the recent employment-related bills reflect the current financial crisis and rising unemployment. Providing health care and other assistance to the unemployed appears to have taken precedence over the drive for increased union membership and providing for enhanced employee rights and benefits, at least for now.

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A new bill introduced in the Senate would enable certain qualified individuals enrolled in COBRA to extend their health care coverage for an additional 12 months. The Coverage Continuity Act of 2009 (S. 29) provides that qualified beneficiaries whose COBRA eligibility ends between January 1, 2009 and December 31, 2009 can elect 12 additional months of coverage provided that they are continuously enrolled under COBRA. The purpose of this bill is to provide continued health care and tax credits for those who are unemployed.

In addition to the COBRA extension, this bill amends the Internal Revenue Code of 1986 to increase the tax credit for health insurance costs of eligible individuals and provides this tax relief to those covered under COBRA.
 

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On January 2, 2009, the Department of Labor (DOL) published a final regulation in the Federal Register that outlines the procedures for assessing civil penalties up to $1,000 per day against employee benefit administrators or sponsors who fail to disclose certain documents to participants, beneficiaries, employee representatives, and other employees as required by the Employee Retirement Income Security Act (ERISA), as amended by the Pension Protection Act of 2006 (PPA).

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As anticipated, President Bush signed two bills that had swiftly cleared Congress in the waning days of his administration. The Worker, Retiree and Employer Recovery Act of 2008 (Pub. L. No. 110-458) was designed to ease the effects of the financial crisis for seniors and businesses by, among other things, modifying pension funding and distribution requirements. For example, the Act waives the 2009 minimum distribution requirement for participants and beneficiaries of defined contribution employer-sponsored qualified retirement plans, and allows employers maintaining single-employer plans to spread the value of pension plan assets over a two-year period. Additionally, the legislation makes technical corrections to the Pension Protection Act of 2006.

Bush also signed a bill that makes technical corrections to the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act (Pub. L. No. 110-460). The legislation changes the effective date of provisions affecting collectively bargained health plans from January 1, 2009 to January 1, 2010. The initial start date was deemed a drafting error. The mental health parity law amends current requirements under ERISA, the Public Health Service Act and the Internal Revenue Code for parity in mental health benefits offered under a private group health benefit plan. For more information on the MHPA, see Littler’s ASAP: Equal Mental Health and Substance Use Benefits Realized by Russell D. Chapman and Andrea Jackson.

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The Joint Committee on Taxation has released the Technical Explanation of the Worker, Retiree, and Employer Recovery Act of 2008 (H.R. 7237).  This piece of legislation makes technical corrections to the Pension Protection Act of 2006 (PPA), and provides for additional amendments to the PPA, the Internal Revenue Code, the Employee Retirement Income Security Act of 1974 and the Age Discrimination in Employment Act.  Congress approved this pension relief measure on December 11.  The President is expected to sign this bill before the end of his term.

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On Dec. 11, the Senate approved a bipartisan bill that is designed to ease the financial crisis for certain employees and businesses by, among other things, modifying pension distribution requirements. The Worker, Retiree, and Employer Recovery Act of 2008 (H.R. 7327), introduced in and passed by the House of Representatives on December 10th, also makes technical corrections to the Pension Protection Act of 2006 (PPA).  The President is expected to sign the bill.

In essence, the bill would temporarily ease funding and distribution rules governing single and multi-employer pension plans and modify asset depreciation requirements, ostensibly to free up cash for payroll and other business expenses in light of the faltering economy. Some of the key bill provisions include:

• For single-employer pension plans:
  • Permits temporary adjustment to contribution, distribution, and projected earnings provisions of the PPA;
  • Gives these plans three years to phase in PPA pension funding target percentages.
• For multi-employer pension plans:
  • Permits a freeze of plan funding status to provide time for economic recovery before declaration of critical or endangered status;
  • Allows the election of a three-year extension of current amortization rules to help offset this year’s asset losses.
• For taxpayers:
  • Eliminates minimum distributions for 2009 to provide time for IRAs and other benefit accounts to recover asset losses.

Although it is generally unusual for Congress to introduce new legislation so close to the end of a session, the current financial catastrophe has changed the rules of the game. Business interests have been actively lobbying Congress in recent weeks to pass some type of pension relief measure. Although these may be welcome changes, they will have little impact on economic recovery, and merely delay recognition of the impact of the severe investment losses suffered by retirement plans, particularly for the millions of participants in 401(k) plans and IRAs who have seen substantial erosion in their expected retirement assets. Regardless, defined benefit plan sponsors are still required to fund their defined benefit plans and are liable for any shortfall on plan termination and the Pension Benefit Guaranty Corporation still must provide back-up termination insurance to these plans.
 

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