The Affordable Care Act, Law of the Land – Still

From ChamberChoice

In the early morning hours of July 28, 2017 the Affordable Care Act withstood another effort by the Republicans to repeal and replace it. Opposition to the “Skinny Bill” won during the most recent Senate action, and so, repeal and replace appears to come to a halt. The bill was referred to as “skinny” as it would have eliminated the individual mandate penalty and temporarily repealed the employer mandate penalty and medical device tax.

So, the question now becomes, what next? Below are some of the issues that our lawmakers will be taking into consideration:

• Take steps to ensure the stability of the individual insurance market; or
• Pursue strategies that will quicken the demise of the ACA (such as destabilizing the insurance market;
• Stop payment of the Cost Sharing Reduction (these are funds the government provides to insurers to help cover out-of-pocket expenses for low income individuals);
• Further advocate “State Innovation Waivers” which allows states to implement their own innovative ways to provide quality, comprehensive and affordable health while maintaining basic protections under the ACA; or
• Enforcement of both the individual and employer mandate penalties through a separate Executive Order overriding the Order issued on January 20th suspending ACA-implementation.

Although it appears that the Affordable Care Act is in a state of flux, for employers it could not be further from the truth. The ACA remains the “law of the land”, employers need to stay the course with their ACA compliance priorities until further notice. The employer mandate requires “applicable large employers” (ALEs) to offer minimum essential coverage that is minimum value and affordable to 95 percent of its full-time employees and their dependents. Failure to offer such coverage can result in penalties. The associated ACA reporting requirements are also still effective, ALEs who failed to provide Form1095-C to its full-time employees, or Form 1094-C to the IRS should discuss this issue with their legal counsel. The penalty for failing to issue a 1095-C is the same as failure to provide a W-2; $250 per failure in 2016 and $260 per failure in 2017. However, there is another jolt to this point, since the 1095-C is required to be provided to the employee and to the IRS, those penalty amounts would be doubled. An employer’s determination of being an ALE is based on having an average of 50 full-time/full-time equivalent employees in the preceding calendar year. 

As to what will happen in the future as to any repeal and replacement of the Affordable Care Act remains to be seen. However, unless and until official guidance to the contrary is provided, ongoing compliance with the law is required.

Health Insurance Summary Plan Descriptions: Fact or Fiction

From ChamberChoice

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for established retirement and health and welfare plans in private industry to provide protection for individuals in these plans. ERISA requires plans to disclose certain material, including reports, statements and documents to participants and beneficiaries. One of the most important documents participants must receive when becoming covered under a health plan subject to ERISA is a summary of the plan document, referred to as the Summary Plan Description (SPD).

The SPD is probably one of the most misunderstood ERISA required disclosure documents. This misunderstanding can put an employer subject to ERISA at risk to costly problems and potential penalties. This article addresses some of the misunderstandings that some employers maintain regarding the SPD.

The information provided by insurers is an SPD: Fact or Fiction?

Fiction: The Department of Labor considers the SPD as one of the most important documents required by ERISA. Its importance stems from its role as being the primary informational document provided to participants to inform them of their rights and obligations. The SPD describes how the plan works, what benefits the plan provides, how the plan is funded, and how the benefits are obtained. While the Certificate of Coverage, Benefit Booklet, or Summary of Benefit that an insurer provides may meet some of the required information in an SPD, such as covered or non-covered benefits, it does not include all of the required provisions that must be included in an SPD. Some of those provisions are information regarding the plan sponsor/plan administrator, participation and termination requirements and a participant’s ERISA rights. Therefore, if just providing these insurer’s documents an employer will not be compliant with meeting the SPD requirement.

The SPD must actually be distributed to plan participants: Fact or Fiction?

Fact: Many employers mistakenly believe that the SPD only must be made available upon request. However, every plan participant who is entitled to benefits under the employer’s plan subject to ERISA is entitled to receive an SPD. The SPD must be distributed in a manner reasonably calculated to ensure actual receipt by plan participants. Therefore, the most acceptable means of delivery would be hand delivery or first class mail. Second or third class mail is acceptable if return and forwarding postage are guaranteed. An employer should always maintain documentation of who received the SPD. Therefore, merely posting the document or leaving it in a location where it can be picked up is not enough.

An employer can also deliver the SPD electronically, as long as certain DOL electronic delivery requirements are satisfied. Electronic delivery of documents can be by email or by attachment to email, use of a company website for posting of documents, and provision of documents on magnetic disk, CD-ROM, or DVD. The key issue remains, even with electronic delivery, the plan administrator must ensure actual receipt of the document. Some ways to ensure electronic receipt of an SPD would be to use return-receipt or notice of undelivered or unread email features, or conducting periodic reviews to confirm receipt. Other steps that must be taken by a plan administrator when delivering an SPD electronically are: notice must be provided to each participant at the time the document is provided of the significance of the document; and, the participant must be advised a paper copy will be furnished upon request.

My insurer, broker or Third Party Administrator is responsible for an SPD: Fact or Fiction?

Fiction: Under ERISA, the plan administrator is responsible for the SPD and any other disclosure requirements. This is true even where another party prepares or distributes the SPD and where that other party has contractually obligated itself to perform such services. Generally the DOL defaults to the plan sponsor, who is the employer, as the plan administrator. Thus, it stands to reason that the employer, and not the insurer, broker or TPA will be responsible for furnishing SPDs and will be liable for failure to furnish adequate SPDs.

There are consequences for failing to provide an SPD: Fact or Fiction?

Fact: There are no specific penalties in the statute or regulations for failure to prepare or furnish a required SPD. However, under the general enforcement provisions of ERISA, a participant may bring a suit against the plan administrator to enforce the requirement. Likewise, as part of a DOL investigation, the investigator is likely to require the plan sponsor to immediately produce and distribute any required but missing SPDs that are currently applicable. Furthermore, if a participant requests in writing to be provided an SPD, and the plan sponsor fails to provide it within 30 days, the plan sponsor may be charged $110 per day.

Finally, the greatest risk to a plan sponsor in failing to distribute SPDs arises when a participant makes a claim for a benefit based on a faulty or nonexistent SPD. This type of dispute can be extremely costly due to exposure for unanticipated benefits in connection with such claims, and court costs in defending such disputes.

Conclusion

ERISA has been the law of the land since 1974. Although amended several times in the last 40 plus years, it remains the main employee benefit law. Two key requirements for an employer/plan sponsor are the reporting and disclosure requirements. The main disclosure requirement is providing a Summary Plan Description to plan participants describing their rights and obligations. Failure to comply with this ERISA disclosure requirement can result in costly consequences. Thus, prompt production and distribution of SPDs is an often overlooked but crucial aspect of ERISA compliance. Contact your JRG Advisors representative for assistance with an SPD.

FLSA Overtime Rule Revisited Again

From ChamberChoice

In December 2016, employers faced one of the most dramatic changes in the Fair Labor Standards Act (FLSA) in over 42 years. As a brief background, the FLSA establishes the federal minimum wage for all hours worked (currently $7.25 an hour), and overtime premium pay at one and one-half times an employee’s regular pay rate for worked hours exceeding 40 in one work week. The FLSA also exempts from overtime payments “any employee employed in a bona fide executive, administrative, or professional capacity”, generally referred to as the white collar exemption. Two of the three criteria for an employee to meet the white collar exemption is that the employee must be paid on a salary basis, and the salary must meet a minimum specified salary amount. The latter is known as the salary level test. The salary level test has been set at $455 weekly or $23,660 annualized, for some time.

In 2016, the Department of Labor under the Obama Administration increased the salary level test, more than doubling it, to $47,476 per year. This new salary threshold would have drastically expanded the number of employees eligible for overtime pay. Although scheduled to be effective December 1, 2016, causing a panic attack with employers, it was blocked from enforcement, when a nationwide preliminary injunction was issued by a federal court in Texas (which is in the Fifth Circuit). The preliminary injunction was appealed and is still pending today.

However, what the Trump Administration’s Department of Labor has decided to do is ask the Court not to address the validity of the 2016 rule and salary level test. This will give the DOL an opportunity to revisit the issue through new rulemaking. This request is in line with President Trump’s charge for federal agencies to review regulations with a focus on lowering regulatory burden.

On July 25, the DOL 25 issued a Request for Information (RFI). An RFI is an opportunity for the public to provide data and information that may be used to revise a rule. The RFI seeks comments on a variety of topics under the FLSA, but basically focusing on the salary level test which has been on hold.

Some of the issues for which the RFI seeks comment are:

  • Whether the salary test should be updated based on inflation;
  • Whether there should be a multiple salary level test and whether differences in employer size or locality should matter;
  • What the impact of the 2016 rule was and did employers make changes in anticipation of the rule;
  • Were specific industries/positions impacted more than others;
  • Was the provision permitting 10% of the salary level test to be satisfied with bonuses appropriate; and
  • Should the salary levels be automatically updated?

Of course, the merit of these comments will be dependent on the Fifth Circuit’s decision on whether the salary test is permissible to begin with. A favorable determination will provide the Department with information to proceed on a new rulemaking. Employers should continue to watch this issue until finalized.

Natural Gas Forecasted to Equal or Exceed Coal as Electricity Source for Second Straight Year

The U.S. Energy Information Administration (EIA), in its recent short-term energy outlook report, predicts that in 2017, natural gas will either exceed or equal coal as a source of electricity generation for the second straight year. Last year was the first that natural gas-fired electricity generation exceeded coal-fired generation, with coal generating 30% of U.S. electricity and natural gas responsible for 34%. In 2017, through the first four months, coal has provided 30% of U.S. electricity while natural gas has provided 28%, and the EIA expects that by the end of the year, both coal and natural gas will have each generated about 31% of the electricity in the U.S.

The EIA also recently released statistics that showed Pennsylvania as ranking second in the nation in natural gas production for the fourth straight year. Natural gas is a big part of the PA economy, and locally, a new natural gas pipeline is scheduled to get underway later this year. It will have an estimated economic impact of $85.5 million for Columbia County alone, and $1.6 billion for all of the project’s regions. The Atlantic Sunrise pipeline will expand the Transco gas pipeline system with a new pipe approximately 185 miles long connecting the existing pipeline just north of Columbia County to southeast Pennsylvania, which will allow for more efficient transportation of Marcellus Shale natural gas and should enable even more to be exported. 

Williams is also encouraging all workers that come into the area to work on this project to patronize local businesses. More information about the opportunities for local businesses related to this pipeline project will be available at the Chamber’s next Learn at Lunch, sponsored by PPL Electric Utilities, this Tuesday, Aug. 8, at noon at Wesley United Methodist Church. Mike Atchie from Williams will talk about the different types of opportunities for local businesses to cater to the visiting workers and give an overall update on the project at this event. The cost to attend this event is $10 for lunch and those interested can register here.

PA Senate Passes $600 Million Tax Increase Package

From PA Chamber of Business & Industry

In a close 26-24 vote held July 27, the state Senate narrowly passed a revenue package that will significantly increase the cost of doing business in the Commonwealth.

House Bill 542, the Tax Code bill, contains $600 million in tax increases on Pennsylvania residents and job creators.  The Senate’s revenue proposal includes: a new tax on residential and commercial use of natural gas; an increase to residential and commercial electric bills; a higher tax on phone bills; as well as a severance tax on the natural gas industry.  In addition to these tax increases, the Senate’s plan calls for borrowing $1.3 billion against the state’s Tobacco Settlement Fund; $200 million in special fund transfers and $200 million from a yet-to-be enacted gaming expansion bill in order to balance the 2017-18 budget.

Prior to the vote on final passage, the PA Chamber sent a memo to the entire Senate, raising concerns with the impact the new and increased taxes will have on Pennsylvania’s economy and urging Senators to oppose the bill.  In a statement released following the vote, PA Chamber President Gene Barr said: “We’re disappointed that the Senate has voted in favor of a $600 million tax increase that will hurt Pennsylvania’s ability to compete and will increase job creators’ operating costs for electricity, natural gas and communications services. At a time when the state’s unemployment rate has consistently been above the national average, proposals like H.B. 542 – which will make Pennsylvania’s business climate more burdensome – will only further weaken the state’s economic growth.”

While the proposal is supported by the Wolf administration, its fate in the House is uncertain. The PA Chamber is encouraging businesses to urge the House of Representatives to oppose this bill.  Contact information is available on the Columbia Montour Chamber’s website.