October 2009 Archives

October 29, 2009

Employment-EEOC Revises Its "EEO is the Law" Poster

The EEOC has revised its "Equal Employment Opportunity is the Law" poster. This new version reflects current federal employment discrimination law (including the Americans with Disabilities Act Amendments Act of 2008). It was revised to add information about the Genetic Information Nondiscrimination Act of 2008, which is effective November 21, 2009. The revised poster also includes updates from the Department of Labor.The new poster is available in English, Arabic, Chinese and Spanish.

The law requires an employer to post in the workplace a notice describing the Federal laws prohibiting job discrimination-so the notice the employer is currently using must now be replaced or supplemented. The EEOC's new poster (or a supplement to the current poster) may be found here.

October 22, 2009

Employment-Letter From EEOC Says That Health Risk Assessment Violates The ADA

In a letter dated August 10, 2009, the Equal Employment Opportunity Commission (the "EEOC") dealt with the issue of whether the Americans with Disabilities Act (the "ADA") allows an employer to require its employees to complete a health risk assessment, in order to receive reimbursement from an employer-funded health reimbursement arrangement (an "HRA"). This health risk assessment asks the employee to answer more than one hundred questions in the following categories: family health history, self care, personal health, women's health, older adult health, and various health choices. Specific disability-questions in this health risk assessment include how often the employee feels depressed, whether the employee has ever been told that he or she has certain conditions, such as asthma, cancer, heart disease, or diabetes, and how many different prescription medications the employee currently takes or how much alcohol the employee drinks.

In dealing with this issue, the EEOC noted that the ADA strictly limits when an employer may obtain medical information from employees. Once employment has begun, an employer generally may make disability-related inquiries and require medical examinations:
--if they are job-related and consistent with business necessity (i.e., the employer has a reasonable belief, based on objective evidence, that an employee's ability to perform essential job functions will be impaired by a medical condition or an employee will pose a direct threat due to a medical condition);
--when they follow up on a request for reasonable accommodation, or where the examination or other monitoring is conducted under specific circumstances (e.g., such as where periodic medical examinations are required of employees in positions affecting public safety); or
--as part of a voluntary wellness program (with voluntary meaning that employees are neither required to participate nor penalized for non-participation).

The EEOC said that requiring employees to complete a health risk assessment which includes many disability-related inquiries, such as those included in the health risk assessment at issue, as a prerequisite to obtaining reimbursement from the HRA does not appear to be job-related and consistent with business necessity. Since all employees are required to complete the health risk assessment to receive such reimbursements, there is no indication that the employer has any concern that a particular employee will be unable to do his or her job or will pose a direct threat because of a medical condition. Also, it appears that the employer is not obtaining medical information in response to a request for reasonable accommodation or because it is monitoring employees in positions affecting public safety. Finally, even if the health risk assessment could be considered part of a wellness program, it is not voluntary, because it penalizes any employee who does not complete the questionnaire by making him or her ineligible to receive reimbursement from the HRA. The EEOC concluded that the ADA prohibits this employer from requiring the employees to complete the health risk assessment under these circumstances.

In a footnote, the EEOC pointed out that, as of November 21, 2009, the Genetic Information Nondiscrimination Act ("GINA") will prohibit employers from obtaining any genetic information (which includes family medical history) from job applicants or employees, except under certain very limited circumstances. Therefore, it will generally be unlawful for an employer to ask an applicant or employee any questions about the health of a family member, for example, whether a relative has or ever had certain medical conditions, such as cancer, diabetes, or heart disease. Thus, the employer in this case will likely violate GINA, if it continues to ask questions about an employee's family medical history after GINA becomes effective.

October 20, 2009

Employment-Second Circuit Rules That The Plaintiff Has Made Out A Prima Facie Case Of Age Discrimination (But His ERISA Claim Fails)

In Berube v. Great Atlantic & Pacific Tea Company, Inc., No. 08-1229-cv (2nd Cir. 2009), the plaintiff, Paul Berube, had worked for the defendant, Great Atlantic & Pacific Tea Company, Inc. (A&P), as a liquor store manager. In 2003, A&P changed its invoicing procedures. The plaintiff initially failed to comply with the new procedures and was eventually transferred to a different store. After an audit at the new store revealed that the plaintiff was still using the old inventory method, A&P verbally ordered him to use the new method. The plaintiff complied with this request. However, A&P suspended the plaintiff approximately two weeks after making the request and terminated his employment shortly thereafter. The plaintiff brought this suit against A&P, on the grounds that his termination violated both the Age Discrimination in Employment Act (the "ADEA") and ERISA. The district court granted summary judgment against the plaintiff on both the ADEA and ERISA claim. The plaintiff appealed.

As to the plaintiff's ADEA claim, the Second Circuit faced the question of whether the plaintiff had established a prima facie case of an ADEA violation. In answering this question, the Court said that, to establish this case, the plaintiff must show that: (1) at the relevant time, the plaintiff was a member of the protected class; (2) the plaintiff was qualified for the job; (3) the plaintiff suffered an adverse employment action; and (4) the adverse employment action occurred under circumstances giving rise to an inference of discrimination. In this case, the plaintiff had established elements (1), (2) and (3). As to element (4), the Court found that the plaintiff had offered sufficient evidence to make out a prima facie claim of discriminatory intent by demonstrating that younger, similarly-situated employees received progressive discipline-as opposed to immediate termination-for transgressions of comparable seriousness while he did not. Thus, the Court ruled that the plaintiff had established element (4), and therefore had made out a prima facie case of age discrimination. The Court reversed the district court's summary judgment on the plaintiff's ADEA claim, and remanded the case back to the district court for further proceedings on that claim.

The Second Circuit upheld the district court's grant of summary judgment on plaintiff's ERISA claim. It noted that Section 510 of ERISA makes it unlawful for any person to discharge or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan. To succeed on a Section 510 claim, a plaintiff must demonstrate that the employer specifically intended to interfere with benefits. Moreover, to defeat summary judgment a plaintiff must adduce some evidence from which a reasonable jury could conclude that an employer intended to reduce benefits under ERISA. The Court found that the plaintiff failed to do so here, merely speculating that the cost of his skin cancer treatments was the cause of his termination. It ruled that no reasonable jury could conclude, based on the record in this case, that A&P intended to deprive Berube of his medical benefits. x

October 19, 2009

Employee Benefits-Social Security Announces That There Will Not Be Any Cost-of-Living Increase to Social Security Benefits Or Taxable Wage Base for 2010

According to a press release, Social Security has said that monthly social security and supplemental social security income (SSI) benefits will not increase for 2010. This happens because there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2009.

Also, the social security taxable wage base remains at $106,800 for 2010. A table showing the taxable wage base and other Social Security information is here.

October 19, 2009

Employee Benefits-IRS Announces Pension Plan Limits for 2010

In IR-2009-94 (Oct. 15, 2009), the IRS announced the cost of living adjustments for the dollar limits imposed by the Internal Revenue Code on retirement plans for 2010. Most of these limits did not change from 2009. Thus, the following dollar limits will apply for 2010, each of which is the same amount as for 2009:

--the limit under Section 402(g)(1) on the exclusion for elective deferrals which are described in Section 402(g)(3), and which are made under 401(k) and other plans, will be $16,500;

--the limit under Section 414(v)(2)(B)(i) for catch-up contributions to a plan, other than a SIMPLE 401(k) plan described in Section 401(k)(11) or a SIMPLE IRA described in Section 408(p), for individuals aged 50 or older will be $5,500;

--the limit under Section 414(v)(2)(B)(ii) for catch-up contributions to a SIMPLE 401(k) plan described in Section 401(k)(11) or a SIMPLE IRA described in Section 408(p), for individuals aged 50 or older will be $2,500;

--the limit on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) will be $195,000;

--the limit on annual additions under a defined contribution plan under Section 415(c)(1)(A) will be $49,000;

-- the annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) will be $245,000;

--the limit under Section 416(i)(1)(A)(i) concerning the definition of a key employee in a top-heavy plan will be $160,000; and

--the limit used in the definition of highly compensated employee under Section 414(q)(1)(B) (applied in the preceding year-here 2009) will be $110,000.

A table from the IRS, which shows the dollar limits for pension plans from 2003 through 2010, is here.

October 16, 2009

Employee Benefits-IRS Reminds Us That It Has Issued Final Regulations on Funding and Benefit Restrictions for Single Employer Defined Benefit Plans

In employee plans news, Special Edition, October 2009, the IRS reminds us that it recently issued final regulations under Sections 430 and 436 of the Internal Revenue Code (the "Code"). These regulations provide guidance on:
--determining the value of plan assets and benefit liabilities for purposes of computing the funding requirements for single employer defined benefit pension plans;
--using certain funding balances maintained for single employer defined benefit pension plans; and
-- applying benefit restrictions to certain underfunded defined benefit pension plans.

The IRS points out that many plans will have certified their adjusted funding target attainment percentage ("AFTAP") by October 1, 2009, and in certain cases may be subject to benefit restrictions. Plans subject to certain benefit restrictions are, under Section 101(j) of ERISA, required to notify participants and beneficiaries within 30 days after these restrictions are imposed.

The IRS also said that it has received questions as to how Section 101(j) of ERISA would apply to participants and beneficiaries who are not directly or indirectly affected by the funding-based limitations. In particular, the IRS has heard that, when a plan can pay only half lump sums under Section 436(d)(3) of the Code, notice should not have to be given to participants or beneficiaries in pay status, because they could not elect a lump sum distribution even if the plan were not subject to the half lump sum limitation. The IRS recognizes that not having to provide notice to participants and beneficiaries to whom the limitation could have no application would reduce costs, administrative burdens and participant confusion. Accordingly, the IRS agrees that Section 101(j) of ERISA does not require notice of a benefit restriction affecting the availability of lump sums to participants and beneficiaries in pay status who -- without regard to any Section 436 limitation -- can no longer elect a lump sum payment. The IRS expects to set forth this conclusion in upcoming guidance on Section 101(j) of ERISA.

October 14, 2009

ERISA-Second Circuit Rules That Oral Promises Cannot Vary The Terms Of A Pension Plan

In Ladouceur v. Credit Lyonnais, No. 07-4040-cv (2nd Cir. 2009), the plaintiffs brought a case under ERISA, on the grounds of breach of fiduciary duty, claiming that the employer must operate its pension plan in the manner it represented to the plaintiffs. The district court found no evidence of this representation in writing, and granted summary judgment against the plaintiffs.

In June of 2000, the plaintiffs met with Credit Lyonnais's Human Resources Director to discuss the impact of an upcoming merger between their current employer (a Credit Lyonnais subsidiary) and Credit Lyonnais on their salaries and pension benefits. The plaintiffs alleged that, at this meeting and at later times, Credit Lyonnais orally agreed to calculate the funding requirements for the plaintiffs' pension benefits from the date the plaintiffs began to work for the current employer (as early as 1987), rather than the date they would begin to work for Credit Lyonnais after the merger (in 2001). No written documents confirm this agreement. The plaintiffs became employed by Credit Lyonnais during 2001 as a result of the merger, but left this employment later in the year. In 2002, Credit Lyonnais informed the plaintiffs that the funding requirements for their pension benefits would be calculated based on the date in 2001 that they started working for Credit Lyonnais. The plaintiffs filed this suit in 2004, on the grounds of breach of ERISA fiduciary duty, stemming from Credit Lyonnais's representation that the funding requirements would be calculated based on the date (again, as early as 1987) that they started work with their pre-merger employer.

The Court faced the question of whether an alleged oral promise that purports to change a pension plan, which is subject to ERISA, can support a claim for breach of fiduciary duty under ERISA. The Court said that such oral promises are unenforceable under ERISA and therefore cannot vary the terms of an ERISA plan or otherwise give rise to a claim of breach of fiduciary duty under ERISA. As such, the Court upheld the district court's summary judgment against the plaintiffs.

October 13, 2009

Employment-More Lessons From Erdman

A few weeks ago, I blogged about the Third Circuit's decision in Erdman v.Nationwide Insurance Company, 07-3796 (3rd Cir. 2009) (see my blog of September 25). This case has two other aspects worth noting.

First, the Court faced the question of whether the plaintiff had stated a claim that her termination violated the Americans With Disabilities Act (the "ADA"), since the employer denied her leave to care for her disabled daughter. In answering this question, the Court noted that the ADA's "association provision" prohibits excluding or otherwise denying equal jobs or benefits to an employee, because of the known disability of an individual with whom the employee is known to have a relationship or association. Also, under the ADA, an employer's refusal to provide a reasonable accommodation, such as a leave of absence, to a disabled employee may violate the ADA. However, the Court ruled that the ADA's association provision does not obligate an employer to provide a leave to or otherwise accommodate the schedule of an employee with a disabled relative. Thus, the plaintiff has not stated an ADA claim. The Court noted that, if the employer had fired the plaintiff because she had a disabled daughter, the plaintiff would have an ADA claim. However, the Court concluded that the plaintiff had not been fired for that reason.

The Court also faced the question of whether the plaintiff had accumulated sufficient hours-1250 hours are needed- to qualify for leave under the Family and Medical Leave Act (the "FMLA"). This question stemmed from the problem that the plaintiff had not accumulated enough hours, unless the hours which the plaintiff earned by working at home are taken into account. Citing the FMLA regulations and a Second Circuit case (29 C.F.R. § 785.11 and 12; Holzapfel v. Town of Newburgh, 145 F.3d 516, 524 (2d Cir. 1998)), the Court said that, for purposes of determining the number of an employee's hours for FMLA purposes, all work that the employer knows or has reason to believe is being performed is taken into account. Hours worked off-site or beyond an employee's regular schedule count if the employer knows or has reason to believe that an employee is continuing to work the extra hours. The employer need not have actual knowledge of such off-site work; constructive knowledge will suffice. The Court ruled that, in this case, the plaintiff had introduced enough evidence of the employer's constructive knowledge of the plaintiff's work at home to avoid summary judgment against her for not having enough hours for FMLA leave.

October 8, 2009

Employment-Seventh Circuit Rules That Plaintiff Has Made Out An ADA Claim Of Failure To Accommodate

In Ekstrand v. School District of Somerset, No. 09-1853, the plaintiff, Renae Ekstrand, sued her former employer, the Somerset School District, in part on the grounds that her employer had failed to accommodate her seasonal affective disorder, in violation of the Americans with Disabilities Act (the "ADA"). The District Court had granted summary judgment to the employer on this claim, and the plaintiff appealed the decision.

The plaintiff had taught successfully at Somerset Elementary School from 2000 to 2005. For the 2005-2006 school year, the school assigned her to a classroom lacking exterior windows. The plaintiff told the principal that she had seasonal affective disorder, a form of depression, and would have difficulty functioning in a room without the natural light coming through a window. There were two alternate rooms available that had windows, but the school refused to transfer the plaintiff to one of those rooms despite her repeated requests. On October 17, 2005, the plaintiff sought medical attention for her condition. Her doctors placed her on medication and advised her to take a leave of absence for the remainder of the semester, about three months. The plaintiff took the leave and never returned to the school. She filed this suit in February 28, 2008.

In analyzing the plaintiff's claim, the Court said that, to survive the school district's request for summary judgment, the plaintiff had to present evidence that, if believed by a trier of fact, would show that: (1) she was a qualified individual with a disability, (2) the school district was aware of her disability and (3) the school district failed to reasonably accommodate that disability. The Court found that the plaintiff had presented, from her doctors and others, the evidence required to establish elements (1) and (2).

The Court said that, to establish element (3), the plaintiff had to present evidence showing not only her attempt to engage in an interactive communication process with the school district to determine a reasonable accommodation, but also that the school district was responsible for any breakdown that occurred in that process. To be treated as having attempted to engage in such process, a disabled employee must make his or her employer aware of any nonobvious, medically necessary accommodations with corroborating evidence such as a doctor's note or at least orally relaying a statement from a doctor. Here, in the middle of November, the plaintiff told the school district that she was willing and able to return to work in a classroom with a natural light coming through a window. Then, on November 28, 2005, the plaintiff informed the school district through her psychologist that natural light was the key to her improvement. At that point, the school district was obligated to provide the plaintiff's specifically requested, medically necessary accommodation-that is, a room with a window- unless it would impose an undue hardship on the school district. The Court found that there would not have been any such undue hardship in meeting the plaintiff's request. There were two rooms available. Each of those rooms had a window, and could have made ready for the plaintiff's use at little cost . The Court concluded that the plaintiff had established element (3), as well as elements (1) and (2), and overturned the district court's summary judgment against the plaintiff on her ADA claim of failure to provide a reasonable accommodation.

October 7, 2009

Employee Benefits-DOL Says That IRA Distributions To A Trust, And Commissions Paid From The Trust, Are Not Prohibited Transactions

In Advisory Opinion 2009-02A, the Department of Labor (the "DOL") was faced with the question of whether an estate planning arrangement, set up to handle distributions from an IRA at death, would give rise to a prohibited transaction under Section 4975 of the Internal Revenue Code (the "Code").

Under the estate plan in question, a trust (the "Trust") was established by the grantor (the "Grantor"), with the Grantor as the current trustee, his son as the successor trustee (the "Successor Trustee") and his grandson as sole the beneficiary (the "Beneficiary"). The Grantor designated the Trust as the sole beneficiary of his IRA. The Trust would not receive any assets, other than those distributed to it from the IRA. Under the Trust, the Successor Trustee was required to determine the required minimum distribution for each calendar year from the IRA (under Code Sections 401(a)(9) and 408(a)(6)), and the Trustee, and then the Successor Trustee, could request a distribution from the IRA to the Trust in excess of the required minimum distribution. Under New York State law, the Trust could pay commissions, out of the IRA assets distributed to the Trust, to the Successor Trustee for serving as such. The amount of the commissions were based on the value of the assets held by the Trust.

The specific question addressed by the DOL was whether either a distribution from the IRA to the Trust, or a payment of commission by the Trust out of IRA assets distributed to it, would constitute a prohibited transaction under Section 4975 of the Code. The DOL noted that Section 4975(c)(1)(A) prohibits any direct or indirect sale or exchange, or leasing, of any property between an IRA and a disqualified person. Section 4975(c)(1)(D) prohibits any direct or indirect transfer to, or use by or for the benefit of, a disqualified person of the income or assets of an IRA. Section 4975(c)(1)(E) prohibits a fiduciary from dealing with the income or assets of an IRA in his or her own interest or for his or her own account. The DOL further noted that, for these purposes, the Grantor and Successor Trustee would each be a fiduciary and disqualified person of the IRA, and that the Trust would be a disqualified person of the IRA.

The DOL concluded that no distribution from the IRA to the Trust would be a prohibited transaction. This obtains because Section 4975(d)(9) of the Code provides that the receipt by a disqualified person-here the Trust- of any benefit to which such person may be entitled as a beneficiary of an IRA is not a prohibited transaction under Section 4975(c), so long as that the benefit is computed and paid on a basis which is consistent with the terms of the IRA as applied to all other beneficiaries, which is contemplated here. Furthermore, a decision made on behalf of the Trust to make an otherwise permissible benefit distribution from the IRA to the Trust, in accordance with the terms of the IRA, is not an act which is prohibited by Sections 4975(c)(1)(D) and (E) of the Code.

The DOL also concluded that the payment of the commissions from the Trust to the Successor Trustee would not result in a prohibited transaction. This is because a decision by an IRA owner-here the Grantor- to adopt an estate planning program that contemplates permissible IRA distributions being made into a separate non-IRA trust, which-as here- is designed to provide monetary or tax benefits to himself or his family members, is not an act described in, or prohibited by, Sections 4975(c)(1)(D) and (E) of the Code. Further, the Successor Trustee would not be acting as a fiduciary of the IRA in deciding whether and how much to distribute from the IRA into the Trust, so long as the IRA distributions are computed and paid on a basis which is permissible under the Code and consistent with the IRA's terms, which, again, is contemplated here. As such, those decisions, even though influencing the amount the Successor Trustee will receive as commissions from the Trust, would not be result in any prohibited transaction under Section 4975.

October 5, 2009

Employment-Government Issues Final Rules On GINA

According to a press release issued by the Department of Health and Human Services ("HHS"), dated October 1, 2009, HHS and the Departments of Labor and the Treasury have jointly issued interim final rules, which implement Title I of the Genetic Information Nondiscrimination Act of 2008 ("GINA"). The press release states that these rules will help ensure that genetic information is not used adversely in determining health care coverage and will encourage more individuals to participate in genetic testing, which can help better identify and prevent certain illnesses. Under GINA and these rules, group health plans and issuers in the group market cannot:

--increase premiums for the group based on the results of one enrollee's genetic information; or

-- deny enrollment, impose pre-existing condition exclusions, or do other forms of underwriting based on genetic information.

Further, under GINA and these rules, group health plans and health insurance issuers in both the group and individual markets cannot request, require or buy genetic information for underwriting purposes, or prior to and in connection with enrollment, and are generally prohibited from asking individuals or family members to undergo a genetic test.

October 5, 2009

Employment-DOL Provides Fact Sheet On GINA

The Department of Labor (the "DOL") has issued a Fact Sheet on the Genetic Information Nondiscrimination Act of 2008 ("GINA"). According to the Fact Sheet, GINA prohibits discrimination in group health plan coverage based on genetic information. It is effective for plan years beginning after May 21, 2009 (January 1, 2010 for calendar year plans). Regulations implementing the provisions of GINA were made public on October 1, 2009.

The Fact Sheet indicates that GINA:

--expands the genetic information protections included in the Health Insurance Portability and Accountability Act of 1996 ("HIPAA");

--provides that group health plans and health insurance issuers cannot base premiums for an employer or a group of similarly situated individuals on genetic information;

--prohibits plans and issuers from requesting or requiring an individual to undergo a genetic test; and

--generally prohibits a plan from collecting genetic information (including family medical history) prior to or in connection with enrollment, or for underwriting purposes.

October 1, 2009

Employee Benefits-IRS Clarifies That Periodic Payments From A Plan or IRA Should Not Stop, Despite Waiver of 2009 Required Minimum Distributions

Section 72(t) of the Internal Revenue Code (the "Code") imposes a 10-percent additional tax on early distributions from a qualified retirement plan (i.e., a plan described in Section 401(a) of the Code or a 403(b) plan) or an IRA. However, under an exception provided in Section 72(t)(2)(A)(iv), certain individuals receiving substantially equal periodic payments from a plan or IRA are not subject to the additional tax. The IRS has provided three methods for making a distribution in the form of substantially equal periodic payments and therefore meeting this exception. One method, the required minimum distribution method or "RMD method", uses rules similar to those under Section 401(a)(9) of the Code to determine the amount of the payments required each year. If a series of substantially equal periodic payments from a plan or IRA stops or is otherwise modified (other than by reason of death or disability) prior to age 59½ or 5 years after they start, all of the payments made are subject to a recapture tax under Section 72(t)(4).

Now consider Section 401(a)(9)(H) of the Code, which was added to the Code by the Worker, Retiree, and Employer Recovery Act of 2008 ("WRERA"), and which waives, for 2009, minimum required distributions under Section 401(a)(9). The question arises as to whether this waiver allows a recipient to forgo, for 2009, the periodic payments being made in a series from a plan or IRA under the RMD method, and still meet the exception to the additional tax in Section 72(t)(2)(A)(iv). The IRS says "No" in Notice 2009-82. Section 401(a)(9)(H) does not apply to such payments. Accordingly, if they are stopped in 2009 (other than because of death or disability) prior to age 59½ (or prior to 5 years from the date of the first payment), all of the payments made under the series are subject to the recapture tax under Section 72(t)(4).