October 2, 2013

ERISA-Fifth Circuit Rules That Plan Administrator's Denial Of Claim For Death Benefits Must Be Upheld

In Porter v. Lowe's Companies, No. 12-60683 (5th Cir. 2013), plaintiff Josh Porter ("Porter") brought suit against defendant Lowe's Companies ("Lowe's"), to challenge the Plan Administrator's denial of a claim for death benefits under an ERISA Plan. The covered employee had died in an automobile accident on her way to respond to a night alarm at work. The district court granted relief from the Plan Administrator's denial of Porter's claim, and awarded the death benefits to Porter, concluding that the Plan Administrator had abused its discretion.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") found that the Plan Administrator was entitled to a review of its decision to deny the claim by a court using the arbitrary and capricious standard, since the ERISA plan granted it the discretion to interpret the plan's meaning and to determine benefit eligibility. Since the Plan Administrator did not insure the plan, there was no conflict of interest. The Plan Administrator's interpretation of the plan, in a manner which denied the claim for the death benefits, was not unreasonable. As such, the Court ruled that the Plan Administrator did not abuse its discretion, so its claim denial must be upheld. Accordingly, the Court reversed the district court's decision, and rendered judgment in favor of Lowe's.

October 1, 2013

Employment-Fifth Circuit Rules That Plaintiff Can Establish An ADA Claim For Failure to Accommodate, Even Though There Is No Nexus Between Denied Accommodation And Job Functions

In Feist v. State of Louisiana, No. 12-31065 (5th Cir. 2013), the plaintiff, Pauline G. Feist ("Feist"), a former assistant attorney general for the Louisiana Department of Justice ("LDOJ"), claims, among other things, that LDOJ discriminated against her in violation of the Americans with Disabilities Act ("ADA") by declining to provide a free on-site parking space to accommodate her disability (osteoarthritis of the knee). The district court granted summary judgment against Feist's discrimination claim, holding that she failed to explain how the denial of on-site parking limited her ability to perform the "essential functions" of her job. Feist filed timely appeal, arguing that the ADA does not require a link between a requested accommodation and an essential job function.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") said that the sole question on appeal is whether the district court applied the correct legal standard in determining whether Feist's proposed accommodation was reasonable, and thefore an ADA violation occurred when the employer did not honor it. The Court ruled that-to show reasonableness- Feist need not show a nexus between a requested accommodation-the on-site parking-and her ability to handle essential job functions. Accordingly, the Court vacated the district court's summary judgment, and remanded the case back to the district court for further proceedings

September 30, 2013

Employee Benefits-IRS Provides Guidance For Making Claims For FICA And Income Tax Refunds Following Windsor

In Notice 2013-61, the Internal Revenue Service (the "IRS") provides guidance for employers and employees to make claims for refund or adjustments of overpayments of Federal Insurance Contributions Act ("FICA") taxes and Federal income tax withholding, with respect to certain benefits provided and remuneration paid to same-sex spouses, following the Supreme Court's decision in United States v. Windsor and the holdings of Rev. Rul. 2013-17. Notice 2013-61 is here.

September 27, 2013

Employee Benefits-IRS Provides Guidance On Automatic Contribution Increases

In Retirement News For Employers, August 20, 2013, the IRS provides guidance on automatic contributions increases. Here is what the IRS said:

Your plan can automatically increase salary deferral contributions for participants if it has or adopts an automatic contribution arrangement ("auto enrollment") feature. An automatic contribution increase feature can:
-- periodically increase the amount employees contribute from their wages to the plan, and
--help employees save more for their retirement.

With an automatic contribution arrangement, you can automatically enroll employees in the plan when they meet the plan's eligibility requirements and then deduct salary deferrals from their wages. Employees may, however, elect to contribute at a different rate (including zero).

Timing and amount of automatic contribution increases

You have flexibility over when employees' contributions will automatically increase and by how much, depending on your plan's type of automatic contribution arrangement.
A basic automatic contribution arrangement has the most flexibility because you may structure the contribution increases to occur at any time, in any amount and based on any definition of compensation. However, your plan must state:
 when increases will occur;
 the amount of the increase (may have a cap, for example, a maximum contribution rate of 15%); and
 the definition of compensation the plan will use for the increase.
An eligible automatic contribution arrangement ("EACA") gives you about the same flexibility as a basic automatic contribution arrangement, but:
 you must inform employees of the timing and amount of automatic contribution increases in an annual notice; and
 any contribution increase must meet the uniformity requirement (the increase is the same for all employees, for example, 1%).

Your plan's EACA may allow employees to request a withdrawal of any automatically contributed amount within 90 days of when automatic contributions were first withheld from their wages.

A qualified automatic contribution arrangement ("QACA") has similar notice and uniformity requirements as an EACA, but in addition:
 contribution increases must meet a minimum schedule of automatic contribution default percentages (starting at 3% and increasing by 1% each year until the default percentage is 6%);
 the default percentage cannot be more than 10%; and
 you must make a minimum level of employer contributions each year.

By meeting all QACA requirements, your plan is exempted from the annual actual deferral percentage and actual contribution percentage nondiscrimination testing requirements. Your plan can include an EACA as well as the QACA so that employees can request a withdrawal of any automatically contributed amount within 90 days of when automatic contributions were first withheld from their wages.

Sample amendments

Notice 2009-65 contains two sample amendments you can review and discuss with your benefits advisor to add:
1. a basic automatic contribution arrangement with automatic contribution increases to your 401(k) plan, or
2. an eligible automatic contribution arrangement with automatic increases to your 401(k) plan.

September 26, 2013

Employee Benefits-IRS Provides Guidance On How Self-Employed Individuals Should Calculate Their Own Retirement Plan Contributions and Deductions

In Retirement News For Employers, August 20, 2013, the IRS provides guidance on how self-employed individuals should calculate their own retirement plan contributions and deductions. Here is what the IRS said:

If you are self-employed (a sole proprietor, or a working partner in a partnership or limited liability company), you calculate your self-employment ("SE") tax using the amount of your net earnings from self-employment and following the instructions on Schedule SE, Self-Employment Tax. However, you must make adjustments to your net earnings from self-employment to arrive at your plan compensation, which is the amount you use to determine the plan contribution/deduction for yourself.

Plan compensation

To calculate your plan compensation, you reduce your net earnings from self-employment by:
-- the deductible portion of your SE tax from your Form 1040 return, page 1 (Schedule SE, IRC Sections 401(c)(2) and 164(f)); and
-- the amount of your own (not your employees') retirement plan contribution from your Form 1040 return, page 1, on the line for self-employed SEP, SIMPLE, and qualified plans (IRC Section 401(c)(2)).

You use your plan compensation to calculate the amount of your own contribution/deduction. Note that your plan compensation and the amount of your own plan contribution/deduction depend on each other - to compute one, you need the other (this is a circular calculation). One way to do this is to use a reduced plan contribution rate. You can use the Table and Worksheets for the Self-Employed (Publication 560) to find the reduced plan contribution rate to calculate the plan contribution and deduction for yourself.

Example

Joe, a Schedule C sole proprietor, will have $100,000 net profit on his 2013 Schedule C (after deducting all Schedule C expenses, including a 10% retirement plan contribution made for his common-law employees but not his own contribution). Joe must pay $14,130 in SE taxes. To compute his plan compensation, Joe must subtract from his net profit of $100,000:
-- the IRC Section 164(f) deduction, which in this case is ½ of his SE tax ($14,130 x ½);
and
-- the amount of contribution for himself to the plan.

To determine the amount of his plan contribution, Joe must use the reduced plan contribution rate (considering the plan contribution rate of 10%) of 9.0909% from the rate table in Pub. 560.

Alternatively, Joe can compute his reduced plan contribution rate by:
1. Taking the plan contribution rate 10%
2 .Dividing the plan contribution rate by 100% + plan contribution rate 10%/110%
3. To get the reduced plan contribution rate 9.0909%.

Joe can now compute his own contribution/deduction amount as follows:
1 .$100,000 Schedule C net profit
2. - $7,065 1/2 SE tax deduction ($14,130 x ½)
3. = $92,935 Net profit reduced by ½ SE tax
4. x 9.0909% Joe's reduced plan contribution rate
5. = $8,449 Joe's allowed contribution and deduction

There is simple way to quickly verify the accuracy of Joe's contribution/deduction amount:
1. $100,000 Joe's Schedule C net profit
2. - $7,065 ½ SE tax deduction
3. - $8,449 Joe's contribution/deduction for himself
4. = $84,486 Amount subject to plan's full rate
5. x 10% Plan's full rate
6 = $8,449 Joe's contribution/deduction for himself
If lines 3 and 6 above match, the contribution/deduction calculation is correct.

Contribution or deduction mistakes

You should amend your Form 1040 tax return and Schedule C if you:
-- deducted your own plan contribution on Schedule C instead of on Form 1040, page 1,
or
-- made and deducted more than the allowable plan contribution for yourself.

If you contributed more for yourself than your plan terms allowed, you should also correct this plan qualification failure by using the IRS correction programs.

September 25, 2013

Employment-Fifth Circuit Rules That Employer Must Use Fluctuating Workweek Method Of Calculating Overtime Wages

In Ransom v. M. Patel Enterprises, Inc., No. 12-50534 (5th Cir. 2013), after a jury found Abigail F. Ransom and fifteen other executive managers (the "plaintiffs") of Party City, a retail chain, to be misclassified by their employer as exempt from the Fair Labor Standards Act ("FLSA"), the plaintiffs became eligible for an award of overtime wages. Because the plaintiffs were paid a weekly salary, the trial court had to compute their hourly rate of pay in order to award overtime damages. Disregarding the so-called "fluctuating workweek" ("FWW") method of determining overtime damages - a method established by precedent and relevant federal regulations as applicable in this case - the district court, presided over by a magistrate judge, instead determined overtime damages by using the magistrate judge's unorthodox preferred methodology. The defendant appeals the calculation method.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") ruled that the FWW method, as explained in 29 C.F.R. § 778.114(a), must be used to calculate the overtime wages due, since the employees in this case understood that they were to be paid a fixed salary for the total number of hours they worked each week, even though the number of those hours may fluctuate from week to week. As such, the Court reversed the district court's decision, and remanded the case back to the district court to make a recalculation using the correct method.

September 24, 2013

ERISA-Fifth Circuit Rules That Insurer Was Not Arbitrary or Capricious In Denying Claim For LTD Benefits

In Truitt v. Unum Life Insurance Company of America, No. 12-50142 (5th Cir. 2013), the plaintiff, Terri Truitt ("Truitt"), claimed that her lower-back, leg, and foot pain prevented her from working as an attorney. The defendant, Unum Life Insurance Company of America ("Unum"), awarded Truitt long-term disability benefits. Years later, a former companion of Truitt provided Unum with emails indicating that, while claiming to be disabled, Truitt engaged in activities, such as traveling abroad, that were inconsistent with her asserted disability. Based, in part, on these emails, Unum denied Truitt's claims prospectively, and sought more than $1 million in reimbursements for benefits paid. The district court found that there was substantial evidence to support Unum's denial of benefits. Nonetheless, the district court held, among other things, that the denial was procedurally unreasonable, and therefore an abuse of discretion, because Unum did not fulfill its duty to "consider the source" of the emails. Unum appeals.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") said that, in evaluating whether a plan administrator wrongfully has denied benefits under ERISA, this court never has imposed a duty to investigate the source of evidence. Instead, the burden is on the claimant to discredit evidence relied only the plan administrator. Accordingly, the Court ruled that Unum did not act arbitrarily and capriciously in denying claims prospectively. It reversed the district court's decision, and rendered judgment for Unum. The Court further remanded the case back to the district court on Unum's claim of $1 million in reimbursements for amounts previously paid.

September 23, 2013

ERISA-DOL Offers Its Own Guidance On Treatment Of Same-Sex Spouses After Windsor

As a follow up to the IRS guidance on this topic (see my blogs of September 4th and 6th), the Department of Labor (the "DOL") has issued Technical Release No. 2013-04, which provides guidance for employee benefit plans on the definition of "Spouse" and "Marriage" under ERISA and the Supreme Court's Decision in United States v. Windsor. Here are the highlights of what the DOL said:

Introduction. On June 26, 2013, the Supreme Court of the United States ruled, in United States v. Windsor, that section 3 of the Defense of Marriage Act ("DOMA") is unconstitutional. Section 3 provides that, in any Federal statute, the term "marriage" means a legal union between one man and one woman as husband and wife, and that "spouse" refers only to a person of the opposite sex who is a husband or a wife.

Guidance. In general, where the Secretary of Labor has authority to issue regulations, rulings, opinions, and exemptions in title I of ERISA and the Internal Revenue Code, as well as in the Department's regulations at chapter XXV of Title 29 of the Code of Federal Regulations, the term "spouse" will be read to refer to any individuals who are lawfully married under any state law, including individuals married to a person of the same sex who were legally married in a state that recognizes such marriages, but who are domiciled in a state that does not recognize such marriages. Similarly, the term "marriage" will be read to include a same-sex marriage that is legally recognized as a marriage under any state law.

For purposes of this guidance, the term "state" means any state of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, the Northern Mariana Islands, any other territory or possession of the United States, and any foreign jurisdiction having the legal authority to sanction marriages.

The terms "spouse" and "marriage," however, do not include individuals in a formal relationship recognized by a state that is not denominated a marriage under state law, such as a domestic partnership or a civil union, regardless of whether the individuals who are in these relationships have the same rights and responsibilities as those individuals who are married under state law. The foregoing sentence applies to individuals who are in these relationships with an individual of the opposite sex or same sex.

September 20, 2013

ERISA-Third Circuit Rules That Fidelity Did Not Violate ERISA By Charging A Fee For Reviewing Domestic Relations Orders

In Danza v. Fidelity Management Trust Company, No. 12-3497 (3rd Cir. 2013), the plaintiff, Nicholas Danza ("Danza"), had brought suit on behalf of himself and other similarly situated beneficiaries of employee benefit plans against the defendants, Fidelity Management Trust Company and Fidelity Investments Institutional Operations Company (collectively, "Fidelity"), alleging that they violated various provisions of ERISA by charging plan participants an excessive service fee for reviewing Domestic Relations Orders ("DROs"). The district court had granted Fidelity's motion to dismiss, and Danza appeals.

In this case, Danza was a participant in a 401(k) retirement plan (the "Plan") sponsored by his employer. The employer and Fidelity entered into a Trust Agreement under which Fidelity agreed to provide recordkeeping and administrative services for the Plan, which included the review of DROs for compliance with ERISA and the members' plan. The fees for this review ranged from $300 for a review of a DRO generated on Fidelity's website to $1,800 when plans not on Fidelity's website are involved. When a DRO naming Danza was reviewed by Fidelity, Danza was charged $1,200. This suit ensued.

In analyzing the case, the Third Circuit Court of Appeals (the "Court") noted that Danza asserts that Fidelity violated ERISA by entering into an agreement to charge allegedly excessive fees and for collecting such fees. Thus, the Court said, to determine if Plaintiff properly alleges violations of ERISA, Fidelity's conduct must be examined at two points: when it was negotiating for the fees and when it was collecting the fees.

The potential ERISA violation at the negotiating stage was a breach of fiduciary duty-namely a duty of loyalty to participants- under section 404(a) of ERISA. But at this stage, Fidelity was not a fiduciary of the plan, and thus could not commit a fiduciary breach. The potential ERISA violation as the collection stage is the same-breach of duty of loyalty to participants-but Fidelity did not set the fees it was charging and was merely collecting fees negotiated for at the earlier stage. Thus, Fidelity could not commit a fiduciary breach at this stage either. As such, the Court concluded that Danza's claim under section 404(a) of ERISA fails. Similarly, the Court concluded that Danza's other claims of ERISA violations-such as breach of fiduciary duty by a co-fiduciary under section 405(a) of ERISA, involvement in prohibited transactions in violation of section 406 of ERISA, also fail. As a result, the Court affirmed the district court's motion to dismiss.

September 19, 2013

Employment-Eighth Circuit Holds That Walking Time, Between The Changing Room and The Time Clock, Is Not Compensable Time Under The FLSA

In Adair v. ConAgra Foods, Inc., No. 12-3565 (8th Cir. 2013), the plaintiffs sued their employer, ConAgra Foods, Inc. ("ConAgra"), alleging that ConAgra violated the Fair Labor Standards Act (the "FLSA") by, among other things, failing to compensate them for time spent walking between changing stations where they don and doff their uniforms and the time clock where they punch in and out for the day. The district court denied ConAgra's motion for summary judgment on this walking time, and granted the parties' joint motion to certify the issue for interlocutory appeal. The Eighth Circuit Court of Appeals (the "Court") granted permission to appeal.

In analyzing the case, the Court noted that, under the FLSA and its regulations, an employee's workday, on which compensable time is based, begins and ends with a "principal activity". The Court further noted the plaintiffs' contention that, even though their time spent changing clothes is not compensable-since its not a custom or practice treated as compensable time under the collective bargaining agreement (see section 203(o) of the FLSA)- it is still a "principal activity" that begins and ends the workday under the FLSA. It follows, they say, that the time walking to and from the clock is part of the workday and workweek that must be compensated.

However, the Court said the FLSA contemplates that a "principal activity" is one which the employee is employed to perform. In this case, the plaintiffs are not employed to perform their changing of clothes. Thus, changing clothes is not a principal activity which can start the workday. It follows, the Court continued, that time spent walking between the clothes-changing stations and the time clock is not part of the workday and workweek for which the employer is liable to pay compensation under the FLSA.

September 18, 2013

ERISA-Ninth Circuit Overturns The Trustees' Interpretation of Plan Language, Which Equated Unskilled Jobs With The Job Of Skilled Mechanic

In Tapley v. Locals 302 and 612 of the International Union of Operating Engineers Employers Construction Industry Retirement Plan, No. 11-35220 (9th Cir. 2013), the plaintiffs were appealing a judgment of the district court, upholding the interpretation of plan language by the Trustees of their pension plan. The Trustees determined that the plaintiffs' respective post-retirement jobs as a traffic flagger and snow plow operator fell into the same "job classification" as their former union jobs as skilled mechanics. On that basis, each plaintiff was precluded from working his job if he wanted to collect retirement benefits. The plaintiffs brought suit against the Trustees under ERISA, alleging that the Trustees' interpretation of the plan language was an abuse of discretion. The district court affirmed the Trustees' interpretation.

In analyzing the case, the Ninth Circuit Court of Appeals (the "Court") said that the Trustees' interpretation of the plan is entitled to a deferential review, since the plan gives them broad power to determine eligibility for benefits. However, the Court continued, by construing the plan language to preclude the plaintiffs from retiring to unskilled jobs entailing roadside work, the Trustees effectively re-write the plan to sweep within its ambit an overly broad range of skills. Common sense strongly suggests that a position flagging traffic or plowing snow is not in the same "job classification" as a skilled mechanic repairing heavy equipment utilizing specialized skills acquired over a long career. These two positions have little in common beyond basic skills widely acquired through everyday experiences. The record before us, the Court said, fails to identify a single instance when the Trustees found any overlapping skills or duties that were "material" or "significant," much less essential to the work performed.

The Court said further, that it is not for this Court to proffer a reasonable interpretation of plan language, but instead to identify and reject any interpretation that is arbitrary, misfocused and contrary to the intent of those responsible for its terms. We must do so here. We are unable to see how any sensible application of a skills and duties test to the established facts can support the Trustees' conclusion. The Court concluded by saying that, for the foregoing reasons, the Court reverses the district court' decision (and overturns the Trustees' interpretation of the plan), and returns the matter to the Trustees for reevaluation of the merits in a manner consistent with the Court's opinion.

September 17, 2013

Employee Benefits-IRS Provides Guidance On The Application Of The ACA To Health FSAs

In Notice 2013-54, the Internal Revenue Service (the "IRS") provides guidance, in the form of Q and As, on the application of the Affordable Care Act (the "ACA") to, among other things, certain health flexible spending arrangements ("health FSAs"). Here are some highlights:

--The requirements of the ACA do not apply to a group health plan in relation to its provision of benefits that are excepted benefits. Health FSAs are group health plans but will be considered to provide only excepted benefits-and not be subject to the ACA requirements- if (1) the employer also makes available group health plan coverage that is not limited to excepted benefits and (2) the health FSA is structured so that the maximum benefit payable to any participant cannot exceed two times the participant's salary reduction election for the health FSA for the year (or, if greater, cannot exceed $500 plus the amount of the participant's salary reduction election).

--If an employer provides a health FSA that does not qualify as excepted benefits, the health FSA generally is subject to the ACA requirements, and will be treated as failing to meet the ACA preventive services requirements (but not as failing the annual dollar limitation prohibition, so long as the health FSA is offered under a Code § 125 cafeteria plan).

The rules in the Notice generally apply for plan years beginning on and after January 1, 2014, but taxpayers may apply the guidance provided in the Notice for all prior periods.

September 16, 2013

Employee Benefits-IRS Provides Guidance On The Application Of The ACA To HRAs, Health FSAs, And Certain other Employer Healthcare Arrangements

In Notice 2013-54, the Internal Revenue Service (the "IRS") provides guidance, in the form of Q and As, on the application of the Affordable Care Act (the "ACA") to: (1) health reimbursement arrangements ("HRAs"), including HRAs integrated with a group health plan, (2) group health plans under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy and (3) certain health flexible spending arrangements ("Health FSAs").

Some of the more important matters covered in the Notice are the application of the ACA to group health plans and HRAs. Here are some highlights:

--A group health plan, including an HRA, used to purchase health coverage on
the individual market is not integrated with that individual market coverage for purposes of the ACA's annual dollar limit prohibition (and will thus be deemed to fail to meet that prohibition if it has any such limitation).

--An HRA that is integrated with a group health plan will comply with the ACA's preventive services requirements if that group health plan complies with those requirements.

--In contrast, a group health plan, including an HRA, used to purchase coverage on
the individual market cannot be integrated with that individual market coverage for purposes of meeting the ACA's preventive services requirements.

--An HRA will be treated as being integrated with a group health plan for purposes of the ACA's annual dollar limit prohibition and preventive services requirements if it meets the requirements under either of the following methods:

The Minimum Value Not Required Method-This method requires that (1) the employer offers a group health plan (other than the HRA) to the employee that does not consist solely of excepted benefits, (2) the employee receiving the HRA is actually enrolled in a group health plan (other than the HRA) that does not consist solely of excepted benefits, regardless of whether the employer sponsors the plan (non-HRA group coverage), (3) the HRA is available only to employees who are enrolled in non-HRA group coverage, regardless of whether the employer sponsors the non-HRA group coverage , (4) the HRA is limited to reimbursement of one or more of the following--co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as medical care that does not constitute essential health benefits and (5) under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

The Minimum Value Required Method-This method requires that (1) the employer offers a group health plan to the employee that provides minimum value (pursuant to Code § 36B(c)(2)(C)(ii)), (2) the employee receiving the HRA is actually enrolled in a group health plan that provides minimum value (pursuant to said Code §), regardless of whether the employer sponsors the plan (non-HRA MV group coverage), (3) the HRA is available only to employees who are actually enrolled in non-HRA MV group coverage, regardless of whether the employer sponsors the non-HRA MV group coverage and (4) same as condition (5) above.

-- Unused amounts that were credited to an HRA while the HRA was integrated with other group health plan coverage may be used to reimburse medical expenses in accordance with the terms of the HRA after an employee ceases to be covered by such other integrated group health plan coverage, without causing the HRA to fail to comply with the ACA rules.

--In general, when the minimum value required method is not used, an HRA integrated with a group health plan imposes an annual limit in violation of the ACA annual dollar limit prohibition if that group health plan does not cover a category of essential health benefits and the HRA is available to cover that category of essential health benefits and limits the coverage to the HRA's maximum benefit.

The rules in the Notice generally apply for plan years beginning on and after January 1, 2014, but taxpayers may apply the guidance provided in the Notice for all prior periods.

September 13, 2013

Employee Benefits-DOL Says There Is No Penalty For Employer's Failure To Provide Notice Of ACA Insurance Exchanges

In an FAQ, the Department of Labor ("DOL") said the following about the notice of coverage options:

An employer cannot be fined for failing to provide employees with notice about the Affordable Care Act's new Health Insurance Marketplace. If the employer is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

The notice should inform employees:

• about the Health Insurance Marketplace;
• that, depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
• that if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits.

The DOL has two model notices to help employers comply. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan or some or all employees. Employers may use one of these models, as applicable, or a modified version. More compliance assistance information is available in a Technical Release issued by the US Department of Labor.

September 13, 2013

Employee Benefits-DOL Says There Is No Penalty For Employer's Failure To Provide Notice Of ACA Insurance Exchanges

In an FAQ, the Department of Labor ("DOL") said the following about the notice of coverage options:

An employer cannot be fined for failing to provide employees with notice about the Affordable Care Act's new Health Insurance Marketplace. If the employer is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

The notice should inform employees:

• about the Health Insurance Marketplace;
• that, depending on their income and what coverage may be offered by the employer, they may be able to get lower cost private insurance in the Marketplace; and
• that if they buy insurance through the Marketplace, they may lose the employer contribution (if any) to their health benefits.

The DOL has two model notices to help employers comply. There is one model for employers who do not offer a health plan and another model for employers who offer a health plan or some or all employees. Employers may use one of these models, as applicable, or a modified version. More compliance assistance information is available in a Technical Release issued by the US Department of Labor.