March 2009 Archives

March 31, 2009

Employment Law Could Become More Complex With Paid Family and Medical Leave Act

According to a press release, on March 25, 2009, Representative Pete Stark (D-CA) and others introduced to Congress the Family Leave Insurance Act of 2009 (H.R. 1723)(the "Act"). This Act will:

  • Provide an employee with 12 weeks of paid leave, over a 12-month period, to care for a new child, provide for an ill family member, treat his or her own illness, care for a wounded veteran, or deal with the deployment of a family member;
  • Provide these benefits through a new trust fund that is financed equally by employers and employees, who will each contribute 0.2% of the employee's pay (for the average worker, less than $7 a month);
  • Progressively tier the benefits so that a low wage employee (earning less than $30,000) will receive full or near full salary replacement, middle income employees ($30,000- $60,000) receive 55% wage replacement, and higher earners (over $60,000) receive 40-45%, with the benefit capped at approximately $800 per week;
  • Administer the program through the Department of Labor, which will contract with states to administer the program (similar to how the Unemployment Insurance program is run); and
  • Allow states and businesses with materially equivalent or better benefits to opt-out of the program.

The press release states that the Act "builds on the success" of the Family and Medical Leave Act of 1993 (often called the "FMLA"). The FMLA provides 12 weeks of unpaid leave to an employee who needs to take time off generally for one of the reasons referred to in the first bullet above.  However, employers have found the FMLA very difficult to administer, due to the complexity of the statute and the underlying regulations, and in particular the Department of Labor's overhaul and revision of those regulations, effective as of January 16, 2009. In considering whether to enact the proposed  Family Leave Insurance Act, it is hoped that Congress will take into account the complexity of and difficulty in administering the proposed Act along with the existing FMLA.

March 27, 2009

New IRS Tax Withholding Tables Need To Be Used by April 1!

IRS Notice 1036 and IRS Publication 15-T, issued in February and March of this year, contain new income tax withholding tables which reflect the changes to the tax law made by the American Recovery and Reinvestment Act of 2009, including the Making Work Pay credit. In that Notice and Publication, the IRS indicated that employers should begin using these new tables as soon as possible, but in any event by April 1.

The new tables will result in reduced amounts of income tax withholding. On page 73 of Publication 15-T, the IRS indicated that an employee is not required to submit a new Form W-4 in connection with the use of the new tables. However, if an employee does not want to have his or her  withholding reduced (because, e.g., the employee has more than one job, or the employee is married and the combined incomes will place the employee in a higher tax bracket), the employee should consider filing a new Form W-4. To avoid the withholding reduction, the employee may claim fewer withholding allowances on line 5 or request additional amounts to be withheld on line 6 of the form.

March 25, 2009

New Rules Allowing Special Enrollment in Group Health Plans Become Effective April 1!

The Children's Health Insurance Program Reauthorization Act of 2009 (the "Act") amends the Internal Revenue Code, ERISA and the Public Health Service Act to expand the provisions pertaining to special enrollment rights in group health plans. Under the Act, a group health plan must allow an employee or an employee's dependent, if otherwise eligible for coverage, to enroll in the plan if one of the following events occur: (1) the employee or dependent has been covered under Medicaid or a state's Child Health Insurance Program (a "CHIP") , and that coverage terminates due to loss of eligibility or (2) the employee or dependent becomes eligible for Medicaid or CHIP assistance for participation in the plan. To enroll, the employee must request coverage within 60 days after the coverage termination date in the case of (1) or the eligibility determination date in the case of (2). The new special enrollment rights are available on and after April 1, 2009. Note that the 60-day election period for the new special enrollment rights differs from 30-day election period that applies to the pre-Act special enrollment rights (i.e., enrollment available upon loss of certain other health care coverage or upon becoming a dependent due to marriage, birth, adoption or placement for adoption).

To implement the new special enrollment rights, a group health plan sponsor should take the following action:

--notify the employees about the new special enrollment rights as soon as possible (and preferably prior to April 1);

--amend or revise the plan, its summary plan description and any notice and other relevant employee communications to provide for or describe the new special enrollment rights (and to coordinate the plan's rules with the applicable CHIP); and

--consider amending any cafeteria plan, through which coverage under the group health plan may be elected, to provide for the new special enrollment rights.

March 24, 2009

April 18 Deadline For New COBRA Notices Is Approaching!

Background: The American Economic Recovery and Reinvestment Act of 2009 (the "Act"), signed by President Obama on February 17, 2009 (the "Enactment Date"), contains relief for certain COBRA recipients. Under the Act, individuals who become eligible for COBRA coverage due to an involuntary termination of employment (other than for gross misconduct) occurring from September 1, 2008 through December 31, 2009 are eligible to pay a reduced premium for COBRA coverage for up to 9 months, starting March 1, 2009. Such individuals include the terminated employee and his or her spouse and dependents, and are referred to as "Assistance Eligible Individuals" or "AEIs". This premium reduction, which equals 65% of the amount otherwise required to be paid, is referred to as the "Subsidy".

To make the Subsidy available, any AEI whose COBRA entitlement is due to an involuntary termination which preceded the Enactment Date, and who on the Enactment Date is not receiving COBRA coverage (because he or she either failed to elect to receive the coverage or elected the coverage but later dropped it), must now be given another opportunity to elect to receive COBRA coverage and thus take advantage of the Subsidy. This opportunity is referred to as the "Second COBRA Election". The period for making the Second COBRA Election begins on the Enactment Date, and ends 60 days after the plan administrator notifies the AEI about the election. The plan administrator is required to furnish this notice by April 18, 2009. The Subsidy is automatically provided, as of March 1, to an AEI who is receiving COBRA coverage on the Enactment Date . The plan administrator is required to notify this AEI about the Subsidy by April 18.

The entitlement to the Subsidy ends at the earlier of (1) the time the AEI becomes eligible for Medicare or for coverage under another group health plan, or (2) at the end of the maximum COBRA coverage period, measured from the date of the termination of employment. The AEI is required to notify the plan administrator when he or she becomes so eligible. Under the Act, high income individuals (those earning at least $125,000/year, or $250,000/year for married individuals filing a joint tax return)are subject to tax recapture on any Subsidy they receive. Thus, an AEI may waive entitlement to the Subsidy.

Meeting the Act's requirements: To satisfy the Act's notice and Second COBRA Election requirements, the following steps should be taken:

Identify the individuals who became eligible for COBRA coverage due to a qualifying event (whether or not an involuntary termination) occurring on or after September 1, 2008 and prior to the Enactment Date. Divide these individuals into 2 groups: (1) those who are AEIs and are not receiving COBRA coverage as of the Enactment Date ("Group 1") and (2) all others ("Group 2").

The Second COBRA Election must be made available for, and a notice must be prepared and sent by April 18 to, each AEI in Group 1. The notice must include

  1. a discussion of the forms (if any) which must be completed to establish eligibility for the Subsidy;
  2. contact information for the plan administrator or other person maintaining relevant information pertaining to the Subsidy
  3. a description of the Subsidy, and all requirements and conditions pertaining to it , including the need to inform the plan administrator of eligibility for medicare or for coverage under another group health plan, the penalty for the failure to so inform and an AEI's right to waive the Subsidy.
  4. a description of the Second COBRA Election, including the period during which this election may be made; and
  5. a description of the period during which the COBRA coverage will be provided if the Second COBRA Election is made.

A notice must be prepared and sent by April 18 to each individual in Group 2. This notice must include the information in (a) to (c) above.

The Department of Labor has issued model notices which can be customized or otherwise used for these purposes.

March 23, 2009

Employee Benefit Plans and IRAs-Minimum Required Distributions Must Be Taken By April 1!

Reminder to any (former) employee or IRA owner, whose required distribution date in a qualified retirement plan, 403(b) plan, governmental 457(b) plan or traditional IRA is April 1, 2009- If you have not already done so, you must take the minimum required distribution for 2008 by that date. The suspension on minimum required distributions ("MRDs"), approved by Congress in the Worker, Retiree and Employer Recovery Act of 2008, applies only to those MRDs which must be made for 2009.

March 22, 2009

About The Author

The author of this blog is Stanley D. Baum. Stanley is an attorney in New York. He concentrates in ERISA, employee benefits, executive compensation and employment law. Stanley encourages the readers to submit comments and questions to him by using the contact form on the right side of the blog.