DOL proposes $35K overtime threshold

Recently, the Department of Labor proposed an increase in the salary threshold for overtime eligibility. The current overtime threshold is set at $23, 660. Continue reading this blog post to learn more about this proposed change.

The Labor Department proposed to increase the salary threshold for overtime eligibility to $35,308 a year, the agency announced late Thursday.

If finalized, the rule’s threshold — up from the current $23,660 — would expand overtime eligibility to more than a million additional U.S. workers, far fewer than an Obama administration rule that was struck down by a federal judge in 2017.

Unless exempt, employees covered by the Fair Labor Standards Act must receive at least time and one-half their regular pay rate for all hours worked over 40 in a workweek.

The proposal doesn’t establish automatic, periodic increases of the salary threshold as the Obama proposal had. Instead, the department is asking the public to weigh in on whether and how the Labor Department might update overtime requirements every four years.

The department’s long-awaited proposal comes after months of speculation from employers and will likely be a target of legal challenges from business groups concerned about rising administrative challenges of the rule. The majority of business groups were critical of Obama’s overtime rule, citing the burdens it placed particularly on small businesses that would be forced to roll out new systems for tracking hours, recordkeeping and reporting.

Labor Secretary Alexander Acosta said in a statement that the new proposal would “bring common sense, consistency, and higher wages to working Americans.”

Under the Obama administration, the Labor Department in 2016 doubled the salary threshold to roughly $47,000, extending mandatory overtime pay to nearly 4 million U.S. employees. But the following year, a federal judge in Texas ruled that the ceiling was set so high that it could sweep in some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states then sued, challenging the rule.

The Department said it is asking for public comment for periodic review to update the salary threshold.

SOURCE: Mayer, K. (7 March 2019) "DOL proposes $35K overtime threshold" (Web Blog Post). Retrieved from

2019: A Look Forward

A number of significant changes to group health plans have been made since the Affordable Care Act (ACA) was enacted in 2010. Many of these changes became effective in 2014 and 2015 but certain changes to a few ACA requirements take effect in 2019.

 Changes for 2019 

  1. Cost-sharing Limits – Non-grandfathered plans are subject to limitations on cost sharing for essential health benefits (EHB). The annual limits on cost sharing for EHB are $7,900 for self-only coverage and $15,800 for family coverage, effective January 1, 2019.
    • Health plans with more than one service provider can divide maximums between EBH as long as the combined amount does not exceed the out-of-pocket maximum limit for the year.
    • Beginning in 2016, each individual – regardless of the coverage the individual is enrolled – is subject to the self-only annual limit on cost sharing.
    • The ACA’s annual cost-sharing limits are higher than high deductible health plans (HDHPs) out-of-pocket maximums. For plans to qualify as an HDHP, the plan must comply with HDHP’s lower out-of-pocket maximums. The HDHP out-of-pocket maximum for 2019 is $6,750 for self-only coverage and $13,500 for family coverage.
  2. Coverage Affordability Percentages – If an employee’s required contribution does not exceed 9.5 percent of their household income for the taxable year (adjusted each year), then the coverage is considered affordable. The adjusted percentage for 2019 is 9.86 percent.
  3. Reporting of Coverage – Returns for health plan coverage offered or provided in 2018 are due in early 2019. For 2018, returns must be filed by February 28, 2019, or April 1, 2019 (if electronically filed). Individual statements must be provided by January 31, 2019.
    • ALEs are required to report information to the IRS and their eligible employees regarding their employer-sponsored health coverage. This requirement is found in Section 6056. Reporting entities will generally file Forms 1094-B and 1095-B under this section.
    • Every health insurance issuer, self-insured health plan sponsor, government agency that provides government-sponsored health insurance, and any other entity that provides MEC is required to finalize an annual return with the IRS, reporting information for each individual who is enrolled. This requirement is found in Section 6055. Reporting entities will generally file Forms 1094-C and 1095-C under this section.
    • ALEs that provide self-funded plans must comply with both reporting requirements. Reporting entities will file using a combined reporting method on Forms 1094-C and 1095-C.
    • Forms Used for Reporting – Reporting entities must file the following with the IRS:
      1. A separate statement for each individual enrolled
      2. A transmittal form for all returns filed for a given calendar year.
    • Electronic Reporting – Any reporting entity that is required to file 250 or more returns in either section must file electronically on the ACA Information Returns (AIR) Program. Reporting entities that file less than 250 returns can file in paper form or electronically on the ACA Information Returns (AIR) Program.
    • Penalties – Entities that fail to comply with the reporting requirements are subject to general reporting penalties for failure to file correct information returns and failure to furnish correct payee statements. Penalty amounts for failure to comply with the reporting requirements in 2019 are listed below:
Penalty Type Per Violation Annual Maximum Annual Maximum for Employers with up to $5 million in Gross Receipts
General $270 $3,275,500 $1,091,500
Corrected within 30 days $50 $545,500 $191,000
Corrected after 30 days but before August 1 $100 $1,637,500 $545,500
Intentional Disregard $540* None N/A

**Intentional disregard penalties are equal to the greater of either the listed penalty amount or 10 percent of the aggregate amount of the items required to be reported correctly.

Expected Changes

  1. Health FSA Contributions – Effective January 1, 2018, health FSA salary contributions were limited to $2,650. The IRS usually announces limit adjustments at the end of each year. This limit does not apply to employer contributions or limit contributions under other employer-provided coverage.
  2. Employer Shared Responsibility Regulations – The dollar amount for calculating Employer Shared Responsibility 2 penalties is adjusted for each calendar year. Applicable large employers (ALEs) must offer affordable, minimum value (MV) healthcare coverage to full-time employees and dependent children or pay a penalty. If one or more full-time employees of an ALE receive a subsidy for purchasing healthcare coverage through an Exchange, the ALE is subject to penalties.
    • Applicable Large Employer Status – ALEs are employers who employ 50 or more full-time employees on business days during the prior calendar year.
    • Offering Coverage to Full-time Employees – ALEs must determine which employees are full-time. A full-time employee is defined as an employee who worked, on average, at least 30 hours per week or 130 hours in a calendar month. There are two methods for determining full-time employee status:
      1. Monthly Measurement Method – Full-time employees are identified based on a month-to-month analysis of the hours they worked.
      2. Look-Back Measurement Method – This method is based on whether employees are ongoing or new, and whether they work full time or variable, seasonal or part-time. This method involves three different periods:
        • Measurement period – for county hours of service
        • Administration period – for enrollment and disenrollment of eligible and ineligible employees
        • Stability period – when coverage is provided based on an employee’s average hours worked.
      3. Applicable Penalties – ALEs are liable for penalties if one or more full-time employees receive subsidies for purchasing healthcare coverage through an Exchange. One of two penalties may apply depending on the circumstances:
        • 4980H(a) penalty – Penalty for not offering coverage to all full-time employees and their dependents. This penalty does not apply if the ALE intends to cover all eligible employees. ALEs must offer at least 95 percent of their eligible employees’ health care coverage. Monthly penalties are determined by this equation:
          1. ALE’s number of full-time employees (minus 30) X 1/12 of $2,000 (as adjusted), for any applicable month
          2. The $2,000amount is adjusted for the calendar year after 2014:
          3. $2,080 – 2015; $2,160 – 2016; $2,260 – 2017; $2,320 – 2018
        • 4980H(b) penalty – penalty for offering coverage – ALEs are subject to penalties even if they offer coverage to eligible employees if one or more full-time employees obtain subsidies through an Exchange because:
          1. The ALE didn’t offer all eligible employees coverage
          2. The coverage offered is unaffordable or does not provide minimum value.
          3. Monthly penalties are determined by this equation: 1/12 of $3,000 (as adjusted) for any applicable month
            1. $3,120 – 2015; $3,240 – 2016; $3,390 – 2017; $3,480 – 2018

Contact one of our advisors for assistance or if you have any questions about compliance in the New Year.

SOURCES:, www.,,

DOL reverses course on ‘80/20’ limitations for tipped employees

On November 8, the Department of Labor (DOL) released four new opinion letters, providing insight into their views on compliance with federal labor laws. Read this blog post to learn more.

Last week, the DOL issued four new opinion letters providing both employers and employees further insight into the agency’s views regarding compliance with federal labor laws.

While the letters touch on a variety of issues, perhaps the most notable change involves the DOL’s about-face regarding the amount of “non-tipped” work an employee can perform while still receiving a lower “tip-credit” wage.

Essentially, this new guidance does away with the previous “80/20” rule regarding tipped employees. Under the 80/20 rule, businesses were barred from paying employees traditionally engaged in tip-based work, like servers and bartenders, a lower minimum wage and taking a tip credit for the other portion of the employee’s wage up to applicable state and federal minimum wage requirements when those employees’ side work, like napkin folding or making coffee, accounted for more than 20% of the employee’s time.

In recent years, there has been an explosion of litigation across the country over the 80/20 rule, questioning whether the tipped employee’s “side work” amounted to more than 20% of the employee’s duties and time. Likewise, in many of those same suits, plaintiffs would challenge individual tasks associated with their side work, attempting to claim that those tasks were not so closely related to their tipped duties, but rather rose to the level of a completely different or “dual job,” meaning that the employer should not be permitted to take the tip credit for hours worked performing those tasks.

What followed was case after case of lawyers, courts and employers quibbling over minutes spent folding napkins, wiping counters, slicing lemons, and painstakingly calculating and arguing as to whether those tasks added up to 20% and whether those tasks were not closely related enough to be included in the 20% calculation.

In these kinds of cases, we’d see arguments over circumstances like the server that moonlights as a “maintenance man” versus the server that changed the lightbulb or helped sweep underneath the tables.

The ultimate result: confusion, chaos and, frankly, a treasure trove for plaintiff’s attorneys who had another arrow in their quiver in which to seek additional purported wages for clients from employers that would find it difficult, if not impossible, to account for all minutes and tasks employees were performing in busy restaurants.

Following the DOL’s opinion letter, the landscape will change. Recognizing that the existing guidance and case law had created “some confusion,” the DOL expressly stated that they “do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties...”

However, in attempting to provide additional clarity, the DOL may have instead opened up the proverbial Pandora ’s Box of uncertainty. In identifying the list of duties that the DOL would consider “core or supplemental,” the DOL refers to the Tasks section of the Details report in the Occupational Information Network (O*NET). It goes without saying that no document can provide an exhaustive list of tasks in today’s changing marketplace. While the DOL attempted to recognize the changing nature of today’s environment in a savings-type footnote, one does not have to look too far ahead to foreshadow the response from the plaintiff’s bar arguing over the related duties listed on O*NET.

While the DOL’s new position on the 80/20 rule will certainly come as a relief to many employers with tipped employees, employers should still be mindful in evaluating tipped employees’ job duties on a regular basis. Employees that are engaged in “dual jobs” are entitled to the full minimum wage, without the tip credit.

SOURCE: Kennedy, C. (15 November 2018) "DOL reverses course on ‘80/20’ limitations for tipped employees" (Web Blog Post). Retrieved from

This article originally appeared on the Foley & Lardner website. The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

IRS bumps up 401(k) contribution limit for 2019

Do you offer a retirement plan to your employees? The IRS recently raised the annual contribution cap for 401(k) and other retirement plans. Continue reading to find out what the new contribution caps are.

Participants in 401(k) and other defined contribution retirement accounts will see their annual contribution cap raised from $18,500 to $19,000 in 2019, according to the Internal Revenue Service.

The catch-up contribution limit on defined contribution plans remains unchanged at $6,000.

Savers with IRAs will see the annual contribution cap raised from $5,500 to $6,000 — the first time the cap on IRA deferrals has been raised since 2013. The annual catch-up contribution for savers age 50 and over will remain at $1,000.

Cost-of-Living Adjustment (COLA) increases will also be applied to the deduction phase-out scale for IRA owners who are also covered by a workplace retirement plan:

  • for single filers the scale will be $64,000 to $74,000, up $1,000
  • for joint filers where the spouse contributing to an IRA is also covered by a workplace plan, the phase-out slot increase to $103,000 to $123,000
  • for an IRA contributor whose spouse is covered by a plan, the income phase-out is $193,000 to $2003,000

Single contributors to Roth IRAs will see the income phase-out range increase to $122,000 to $137,000, up $2,000 from last year. For married couples filing jointly the range will increase to $193,000 to $203,000, up $4,000 from last year.

More low and moderate-income families may be able to claim the Saver’s Credit on their tax returns for contributions to retirement savings plans. The threshold increases $1,000 for married couples, to $64,000; $48,000 for head of households, up $750; and $32,000 for singles and single filers, up $500 from last year.

The deferred compensation limit in defined contribution plans for pre-tax and after-tax dollars will increase $1,000, to $56,000. And the maximum defined benefit annual pension will increase $5,000, to $225,000.

SOURCE: Thornton, N. (1 November 2018) "IRS bumps up 401(k) contribution limit for 2019" (Web Blog Post). Retrieved from

Five frequently overlooked mistakes in HIPAA compliance

HIPAA regulations can be confusing and often healthcare entities overlook certain HIPAA regulations. Read this blog post to learn about the 5 most frequent tripwires.

HIPAA was enacted in 1996. In the years since, most healthcare entities have adapted to the major requirements imposed by HIPAA, HITECH and the Privacy and Security Rules. Nevertheless, the thicket of regulations still leaves some traps for the unwary. Here are the most frequent tripwires.

First, the goal of HIPAA is integrity and availability of records along with confidentiality. For workflow or other reasons, hospitals or other covered entities are often reluctant to share patient records.

With the exception of certain specific carve outs, such as psychotherapy notes, this violates HIPAA. Patients are entitled to their records. Compliance programs must accommodate this legal reality

Second, HIPAA requires that disclosure of healthcare records be minimized to the extent necessary to accomplish the objective. In other words, a contractor or other entity with access to personal health information is only entitled to those data points necessary to perform their function e.g. names and addresses.

For practical purposes, a technical solution is not always available — a covered entity may have a single computer system, and cannot realistically reconfigure it for every purpose.

Also see: 

In such instances however, compliance may not be left by the wayside. It must be accomplished by alternative means such as administrative safeguards. For example, a covered entity and business associate may contractually agree to limit access, and combine this restriction with random audits to ensure compliance.

Third, the requirement of minimal disclosure also extends to individual employees and contractors. They are entitled only to those records they need to perform their job functions.
Of course, in the real world those functions continually evolve. Employees often switch roles, go on leave, rotate to different units or complete the tasks that entitled them to access in the first place.

Yet access is rarely calibrated to fluctuating business needs. Excessive access is a regulatory risk. Any compliance program needs to regularly reassess employee access. It must adjust PHI access rights to conform to current responsibilities.

Fourth, HITECH and the Security Rule require a security assessment and the institution of safeguards to protect against reasonably anticipated disclosure. They also require that all business associates be bound to adhere to the safeguards program.

The Business Associate Agreement needs to specifically incorporate this requirement. Technically, the failure to do so, even in the absence of a breach, is a violation. Yet many covered entities overlook this requirement.

If the business associate is unwilling to accommodate the requirement, the covered entity needs to evaluate the contractual arrangement, ensure that it meets the identified security criteria, and document the basis for this determination.

Finally, the healthcare sector is consolidating. The acquisition and consolidation of practices results in transition periods where the successor entity has multiple sets of PHI records under multiple compliance regimes.

The result is a program that is either incomplete, incompatible, or is otherwise deficient. This is a serious regulatory risk. While a seamless transition may not be possible, incorporating compliance into the succession plan at the earliest possible stage is the prudent approach.

None of these five steps require mastery of particularly arcane aspects of the HIPAA regulatory scheme. Yet covered entities and business associates regularly stumble on them. Each of these pitfalls is easily remedied. In compliance, as in medicine, an ounce of prevention is worth a pound of cure.

SOURCE: Gul, S (2 August 2018) "Five frequently overlooked mistakes in HIPAA compliance" (Web Blog Post). Retrieved from

DOL Proposes Rule to Expand Association Health Plans for Small Employers

What are the pros and cons of the proposed rule by the DOL allowing small business to purchase health insurance without some of the restraints imposed on smaller employers by the ACA and individual states? Let's take a look.

A proposed rule by the U.S. Department of Labor (DOL) would allow small businesses to band together and purchase health insurance without some of the regulatory requirements that the individual states and the Affordable Care Act (ACA) impose on smaller employers.

Advocates of the proposal say that it will make it easier for small businesses to afford better coverage for their employees. Critics contend that it's a way to get around the ACA requirement that plans cover essential health benefits.

The proposal, published in the Federal Register on Jan. 5, expands access to what the rule calls "small business health plans," which are more commonly known as association health plans.

The proposed rule attempts to achieve many of the objectives of the Small Business Health Fairness Act introduced in Congress last year, which also sought to allow small businesses to offer employees health coverage through association health plans.

The rule modifies the definition of "employer" under the Employee Retirement Income Security Act (ERISA) regarding entities—such as associations—that could sponsor group health coverage. An association can be formed for the sole purpose of offering the health plan.

A broader interpretation of ERISA could potentially allow employers anywhere in the country that can pass a "commonality of interest" test to join together to offer health care coverage to their employees. For instance, an association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:

  • In the same trade, industry or profession throughout the United States.
  • In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.

Sole proprietors also could join small business health plans to provide coverage for themselves as well as their spouses and children.

"Many small employers struggle to offer insurance because it is currently too expensive and cumbersome," the DOL said in a press release. "Up to 11 million Americans working for small businesses/sole proprietors and their families lack employer-sponsored insurance. … These employees—and their families—would have an additional alternative through Small Business Health Plans (Association Health Plans)."

"With the passage of the tax bill, which includes a reduction of the individual mandate penalty, it's very likely that many people will drop their health care coverage in the individual marketplace," said Chatrane Birbal, the Society for Human Resource Management's senior advisor for government relations. Association health plans "could provide an option for small employers to offer competitive and affordable health benefits to their employees, thereby increasing the number of Americans who receive coverage through their employer," she noted.

For most midsize-to-large employers and their employees, however, the proposed rule will likely result in no change in health coverage, Birbal said.

Large Group Treatment for Small Employers

The ACA requires that nongrandfathered insured health plans offered in the individual and small group markets provide a core package of health care services, known as essential health benefits. Large employer group plans and self-funded plans are not required to comply with the essential benefit requirements.

Last October, President Donald Trump signed an executive order directing the DOL and other agencies to issue regulations that would allow more employers to band together and purchase health care plans, including across state lines. The DOL's proposed rule would do this by allowing employers that currently can only purchase group coverage in their state's small group market to join together to purchase insurance in the less-regulated large group market. The 50 states most often limit the large group market to employers with 50 or more employees, while a handful of states limit this market to employers with 100 or more employees.

By joining together, employers could not only avoid those regulatory restrictions that pertain only to the small group market, but also could reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options, the DOL said.

The rule would maintain current employee protections by:

  • Preserving nondiscrimination provisions under the Health Insurance Portability and Accountability Act (HIPAA) and the ACA. with regard to association health plans.
  • Clarify that an association health plan cannot restrict coverage of an individual based on any health factor.

"Small Business Health Plans (Association Health Plans) cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors," the DOL said. The Employee Benefits Security Administration "will closely monitor these plans to protect consumers."

The DOL will accept comments on the proposed rule during a 60-day period ending on March 6. "There are likely to be a number of changes to the proposed regs before they become final, and there really are a number of issues related to the proposal which need to be answered," said Robert Toth, principal at Toth Law and Toth Consulting in Fort Wayne, Ind.

Differing Reactions

Insurance sold nationwide through associations of small employers "would have to comply with far fewer standards" than current small group market plans, according to a statement by the Commonwealth Fund, a nonprofit foundation that supports expanding health care coverage to low-income and uninsured Americans. "Federal administrative changes that allow some health plans to bypass state and federal rules but not others create an uneven playing field, destabilize insurance markets, and put consumers at risk."

"Allowing the expansion of association health plans could mean the proliferation of coverage that does not provide the essential benefits people with diabetes need to effectively manage their disease and to prevent devastating and costly complications," said a statement from the American Diabetes Association.

The proposal, however, is supported by the National Retail Federation. "Main Street retailers need more affordable health care options and a level playing field with larger companies that are better positioned to negotiate for lower insurance costs," said David French, senior vice president for government relations at the federation, in a statement.

"These changes could be attractive to small employers with relatively healthy employees and who would not need the full range of benefits offered by the ACA's exchange plans" for the small group market, said Beth Halpern, health law partner at Hogan Lovells in Washington, D.C.

Like Trump's executive order, the proposed regulation seeks "to liberalize the rules to build large insurance pools of small employers," said Perry Braun, executive director at Benefit Advisors Network (BAN), a Cleveland-based consortium of health and welfare benefit brokers. "Spreading the risk across large numbers of participants in an insurance pool is thought to bring insurance premium stability," he said, adding, "It will be interesting to see [which brokers] enter the market to aggregate small businesses" into the new plans.



Miller S. (8 January 2018). "DOL Proposes Rule to Expand Association Health Plans for Small Employers" [ web blog post]. Retrieved from address

Fiduciary Rollout: DOL to Extend a Hand

Original post

WASHINGTON -- As the dust begins to settle after the Department of Labor issued its hotly contested fiduciary regulation, one of the key officials who led the rulemaking initiative says that he anticipates issuing clarifying guidance on an ongoing basis as industry feedback trickles back on how the rules are working in practice.

“This is a major undertaking and that we need to be mindful of what impact it's having as people are implementing it,” said Timothy Hauser, a deputy assistant secretary at the Labor Department, on Tuesday at a policy forum hosted by the Investment Company Institute. “We need to have the courage to make changes and to be responsive as problems emerge. And I can assure you we have every intent of doing so."

The ICI is a trade group that has been sharply critical of the rulemaking process.

Rule opponents have argued that many firms would be more likely to abandon middle-income clients planning for retirement, rather than submit to the contractual provisions relating to best-interest advice. But Hauser noted that the department made changes as it redrafted the final rule, in a bid to make the provisions less burdensome.


Hauser took pains to explain that that process is still ongoing, insisting that he will entertain further tweaks to the rule and will publish clarifying guidance, likely in a question-and-answer format on a "rolling basis."

"We did our level best, really, to try to find the legitimate concerns and objections people had to what we were doing and try to be responsive," Hauser said. "We'll continue to do that as we move forward."

At the same time, Hauser offered a strong defense of the rule and the underlying rationale for the department's effort to crack down on conflicted advice in the retirement sector.

"The basic idea, first and foremost, is that we want advice to be in the customer's interest rather than in the interest of the adviser," he said. "The basis for this project — the reason we undertook this in the first place — was our belief that there was a significant problem in this marketplace."

The department's solution: update its rules under the 1974 Employee Retirement Income Security Act to extend fiduciary obligations to financial professionals working with retirement savers and plans, a threshold that is generally met when an adviser makes an investment recommendation and in turn receives compensation, Hauser said.

Hauser acknowledged that the ERISA statute has a "strong default position against conflicts of interest," but pointed out that the new rule explicitly permits conflicts such as commissions and proprietary products, provided that advisers offer up-front disclosures and aver in a binding contract that they will act in their clients' best interests.

That so-called best interest contract exemption has been one of the chief complaints of industry critics. But Hauser was quick to remind his audience that the rule will have minimal impact on advisers who offer advice that is free of conflicts.

"[T]there's nothing in the natural order of things that requires people to receive conflicted compensation streams as a condition of giving advice," he said. "However, we also don't outlaw conflicted compensation streams. The firm can continue to get commissions, it can get 12b-1 fees, it can get revenue sharing, it can get the variety of third-party payments."

Hauser continued: "But there's a quid pro quo for that. There's a basic deal that you need to strike with your customer, by and large, if you want to do that, and the deal is simple. You have to make a commitment to the customer that you're going to act in their best interest, and it needs to be enforceable."


Hauser also said the DoL is not looking at the rule as a vehicle for a punitive enforcement policy. Instead, he said that the department is hoping to serve as a resource for affected firms and to work with them in a collaborative spirit as they implement the new rules.

"Our primary efforts are not going to be about finding people to sue, it's going to be about helping people to comply," he said. "Any problems you're wrestling with, issues you're trying to deal with, operational issues you're confronting — we'd love to hear from you, we'd love to be able to give advice. I would much rather get advice out early rather than have you build entire systems only to have us say, 'Nah, we don't think that complies.' I think it's in all our interest to make this work."

Federal Employment Law Update – December 2014

Originally posted December 03, 2014 on

IRS Releases Guidance on Hardship Exemptions from ACA Individual Shared Responsibility Payment and Minimum Essential Coverage

On November 21, 2014, the IRS released final regulations relating to the requirement to maintain minimum essential coverage enacted by the Patient Protection and Affordable Care Act (ACA). Notice 2014-76, released concurrently with the regulations, provides a comprehensive list of all hardship exemptions that may be claimed on a federal income tax return without obtaining a hardship exemption certification.

The final regulations provide individual taxpayers with guidance under I.R.C. § 5000A on the requirement to maintain minimum essential coverage and rules governing certain types of exemptions from that requirement. The regulations address three general areas:

  • Employee contributions to a cafeteria plan.
  • Health reimbursement arrangements.
  • Wellness program incentives.

The final regulations also remove the references to specific hardship circumstances and, instead, provide that a taxpayer may claim a hardship exemption on a federal income tax return without obtaining an exemption certification for any month that includes a day on which the taxpayer satisfies the requirements of a hardship for which the Department of Health and Human Services (HHS), the Treasury Department, and the IRS issue published guidance.

Read Notice 2014-76

Read the Final Regulations

OMB Approves VETS-4212 Reporting Form

On November 19, 2014, the Office of Management and Budget (OMB) approved the new VETS-4212 form for federal contractors and subcontractors to report on their employment of veterans protected under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA). Under the revised form, set for implementation in 2015, contractors will report the specified information for protected veterans in the aggregate rather than for each of the categories of veterans protected under the statute.

VEVRAA, located at 38 U.S.C. § 4212(d), requires covered federal contractors to report annually to the Secretary of Labor on their employees and new hires who belong to the specific categories of veterans protected under the statute. Under the most recent amendments to the statute, those categories are:

  • Disabled veterans.
  • Other protected veterans.
  • Armed Forces service medal veterans.
  • Recently separated veterans.

View Form VETS-4212

Immigration – New Department of Labor Fact Sheets

On November 20, 2014, President Obama announced a series of Immigration Accountability executive actions to help fix the nation’s broken immigration system. Using his authority, the President directed agencies across the federal government to implement specific elements of these executive actions.

The Department of Labor has issued the following fact sheets to explain the department’s role in support of the executive actions:

Officials Extend Deadline for Submitting Reinsurance Contribution Form

On November 14, 2014, federal officials responded to requests for an extension of the deadline for contributing entities to submit their 2014 enrollment counts in connection with Transitional Reinsurance Program contributions. The deadline has now been extended until 11:59 p.m. on December 5, 2014. The January 15, 2015 and November 15, 2015 payment deadlines remain unchanged.

Read the Announcement

Agencies Release FAQs about Affordable Care Act Implementation (Part XXII)

On November 6, 2014, the Internal Revenue Service (IRS), Department of Health and Human Services, and the Treasury released FAQs about Affordable Care Act Implementation (Part XXII) in an ongoing series of informal guidance regarding the Affordable Care Act (health care reform). This easy-to-read FAQ emphasizes prior technical guidance that prohibits employers from paying or reimbursing individual health policy premiums.

Employers are prohibited from making or offering any form of payment for individual policy premiums, whether through pretax reimbursements, premium reimbursement arrangements (HRAs), after-tax reimbursements, or cash compensation. Further, employers are prohibited from offering incentives to high-claims-risk employees to drop or forego coverage under the employer’s group health plan.

Read the FAQs



CMS delays enforcement of health plan identifiers in HIPAA transactions

Originally posted by Alden Bianchi on EBN on November 6, 2014.

In a surprise move, the Centers for Medicare & Medicaid Services (CMS) announced an indefinite delay in enforcement of regulations pertaining to “health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions” that would have otherwise required self-funded employer group health plans (among other “covered entities”) to take action as early as November 5, 2014.

The CMS statement reads as follows:

Statement of Enforcement Discretion regarding 45 CFR 162 Subpart E – Standard Unique Health Identifier for Health Plans

Effective Oct. 31, 2014, the CMS Office of E-Health Standards and Services (OESS), the division of the Department of Health & Human Services that is responsible for enforcement of compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) standard transactions, code sets, unique identifiers and operating rules, announces a delay, until further notice, in enforcement of 45 CFR 162, Subpart E, the regulations pertaining to health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions adopted in the HPID final rule (CMS-0040-F). This enforcement delay applies to all HIPAA covered entities, including health care providers, health plans, and healthcare clearinghouses.

On Sept. 23, 2014, the National Committee on Vital and Health Statistics (NCVHS), an advisory body to HHS, recommended that HHS rectify in rulemaking that all covered entities (health plans, health care providers and clearinghouses, and their business associates) not use the HPID in the HIPAA transactions. This enforcement discretion will allow HHS to review the NCVHS’s recommendation and consider any appropriate next steps.

The CMS statement followed, but was not anticipated by, a recent series of FAQs that provided some important and welcome clarifications on how employer-sponsored group health plans might comply with the HPID requirements.


Congress enacted the HIPAA administrative simplification provisions to improve the efficiency and effectiveness of the health care system. These provisions required HHS to adopt national standards for electronic health care transactions and code sets, unique health identifiers, and security. As originally enacted, HIPAA directed HHS to establish standards for assigning unique health identifiers for each individual, employer, health plan, and health care provider. The Affordable Care Act modified and expanded these requirements to include an HPID. On Sept. 5, 2012, HHS published final regulations adopting HPID enumeration standards for health plans (“enumeration” is the process of getting an HPID).

For the purposes of HPID enumeration, health plans are divided into controlling health plans (CHPs) and sub-health plans (SHPs). Large CHPs (i.e., those with more than $5 million in annual claims) would have been required to obtain HPIDs by Nov. 5, 2014. Small controlling health plans had an additional year, until November 5, 2015.

The Issue(s)

While we have no idea what led the NCVHS to recommend to CMS that it abruptly suspend the HPID rules, we can make an educated guess—two guesses, actually.

What is it that is being regulated here?

The HIPAA administrative simplification rules apply to “covered entities.” i.e., health care providers, health plans, and health care data clearing houses. Confusingly, the term health plan includes both group health insurance sponsored and sold by state-licensed insurance carriers and employer-sponsored group health plans. Once HHS began issuing regulations, it became apparent that this law was directed principally at health care providers and health insurance issuers or carriers. Employer-sponsored group health plans were an afterthought. The problem for this latter group of covered entities is determining what, exactly, is being regulated. The regulatory scheme treats an employer’s group health plan as a legally distinct entity, separate and apart from the employer/plan sponsor. This approach is, of course, at odds with the experience of most human resource managers, employees and others, who view a company’s group health plan as a product or service that is “outsourced” to a vendor. In the case of an insured plan, the vendor is the carrier; in the case of a self-funded plan, the vendor is a third-party administrator.

The idea that a group health plan may be treated as a separate legal entity is not new. The civil enforcement provisions of the Employee Retirement Income Security Act of 1974 (ERISA) permit an employee benefit plan (which includes most group health plans) to be sued in its own name. (ERISA § 502(d) is captioned, “Status of employee benefit plan as entity.”) The approach taken under HIPAA merely extends this concept. But what exactly is an employee benefit plan? In a case decided in 2000, the Supreme Court gave us an answer, saying:

“One is thus left to the common understanding of the word ‘plan’ as referring to a scheme decided upon in advance . . . Here the scheme comprises a set of rules that define the rights of a beneficiary and provide for their enforcement. Rules governing collection of premiums, definition of benefits, submission of claims, and resolution of disagreements over entitlement to services are the sorts of provisions that constitute a plan.” (Pegram v. Herdrich, 530 U.S. 211, 213 (2000).)

Thus, what HHS has done in the regulations implementing the various HIPAA administrative simplification provisions is to impose rules on a set of promises and an accompanying administrative scheme. (Is there any wonder that these rules have proved difficult to administer?) The ERISA regulatory regime neither recognizes nor easily accommodates controlling health plans (CHPs) and subhealth plans (SHPs). The FAQs referred to above attempted to address this problem by permitting plan sponsors to apply for one HPID for each ERISA plan even if a number of separate benefit plan components (e.g., medical, Rx, dental, and vision) are combined in a wrap plan. It left in place a larger, existential problem, however: It’s one thing to regulate a covered entity that is a large, integrated health care system; it’s quite another to regulate a set of promises. The delay in the HPID enumeration rules announced in the statement set out above appears to us to be a tacit admission of this fact.

Why not permit a TPA to handle the HPID application process?

One of the baffling features of the recently suspended HPID rules is CMS’ rigid insistence on having the employer, in its capacity as group health plan sponsor, file for its own HPID. It was only very recently that CMS relented and allowed the employer to delegate the task of applying for an HPID for a self-funded plan to its third party administrator. By cutting third party administrators out of the HPID enumeration process, the regulators invited confusion. The reticence on CMS’ part to permit assistance by third parties can be traced to another structural anomaly. While HIPAA views TPAs in a supporting role (i.e., business associates), in the real world of self-funded group health plan administration, TPAs function for the most part autonomously. (To be fair to CMS, complexity multiplies quickly when, as is often the case, a TPA is also a licensed carrier that is providing administrative-services-only, begging the question: Are transmissions being made as a carrier or third party administrator?)

HIPAA Compliance

That the HPID enumeration rules have been delayed does not mean that employers which sponsor self-funded plans have nothing to do. The HIPAA privacy rule imposes on covered entities a series of requirements that must be adhered to. These include the following:

Privacy Policies and Procedures: A covered entity must adopt written privacy policies and procedures that are consistent with the privacy rule.

Privacy Personnel: A covered entity must designate a privacy official responsible for developing and implementing its privacy policies and procedures, and a contact person or contact office responsible for receiving complaints and providing individuals with information on the covered entity’s privacy practices.

Workforce Training and Management: Workforce members include employees, volunteers, and trainees, and may also include other persons whose conduct is under the direct control of the covered entity (whether or not they are paid by the entity). A covered entity must train all workforce members on its privacy policies and procedures, as necessary and appropriate for them to carry out their functions. A covered entity must also have and apply appropriate sanctions against workforce members who violate its privacy policies and procedures or the Privacy Rule.

Mitigation: A covered entity must mitigate, to the extent practicable, any harmful effect it learns was caused by use or disclosure of protected health information by its workforce or its business associates in violation of its privacy policies and procedures or the Privacy Rule.

Data Safeguards: A covered entity must maintain reasonable and appropriate administrative, technical, and physical safeguards to prevent intentional or unintentional use or disclosure of protected health information in violation of the Privacy Rule and to limit its incidental use and disclosure pursuant to otherwise permitted or required use or disclosure.

Complaints: A covered entity must have procedures for individuals to complain about its compliance with its privacy policies and procedures and the Privacy Rule. The covered entity must explain those procedures in its privacy practices notice. Among other things, the covered entity must identify to whom individuals at the covered entity may submit complaints and advise that complaints also may be submitted to the Secretary of HHS.

Retaliation and Waiver: A covered entity may not retaliate against a person for exercising rights provided by the Privacy Rule, for assisting in an investigation by HHS or another appropriate authority, or for opposing an act or practice that the person believes in good faith violates the Privacy Rule. A covered entity may not require an individual to waive any right under the Privacy Rule as a condition for obtaining treatment, payment, and enrollment or benefits eligibility.

Documentation and Record Retention: A covered entity must maintain, until six years after the later of the date of their creation or last effective date, its privacy policies and procedures, its privacy practices notices, disposition of complaints, and other actions, activities, and designations that the Privacy Rule requires to be documented.

The HIPAA security rule requires covered entities to conduct a risk assessment, and to adopt policies and procedures governing two dozen or so security parameters.