Benefits In Brief

In a recent decision, a Florida federal trial court waded into an area of the law that has generated substantial concern among employers wishing to implement wellness programs that include both a carrot and a stick. The result was surprisingly good news for those employers.

One of the most common questions we receive from employers sponsoring group health plans is, “Can we offer different health benefits to different employees?” Related questions include, “Can we make our hourly employees pay a greater percentage of the cost of the plan than our higher-paid salaried employees?” or “Can we limit health benefits solely to managers and executive level employees?” And for the last 20 years, the answer has been, “Yes, so long as your plan is fully-insured.”

On December 22, 2010, the Internal Revenue Service announced (in Notice 2011-1) that insured group health plans will not be required to comply with the nondiscrimination requirements under health care reform until some time after the IRS issues regulatory guidance on those requirements.

Prior to enactment of the Affordable Care Act, employee health benefits provided through an insurance contract (i.e., fully insured benefits) were not subject to any income-based nondiscrimination requirements under the Tax Code. Thus, an employer could provide more generous health insurance benefits to executives or other highly compensated individuals through the purchase of individual or group insurance policies. As a reesult of the Act, that will soon change.

Years — and in some cases decades — after the enactment of excise taxes on violations of Tax Code provisions relating to employer health plans, the IRS has finally issued guidance on how those taxes are to be reported and paid. Significantly, the burden is now on employers and plan administrators to self-report these taxes. Failure to do so on a timely basis could lead to substantial filing penalties.

On October 1st, three federal agencies issued a lengthy package of regulations under the Genetic Information Nondiscrimination Act of 2008 (“GINA”). Though it will take some time to digest this entire package, one point is abundantly clear: Health plan sponsors and their insurers should think twice –– if not three or four times –– before including questions concerning an individual’s family medical history in any health risk assessment (“HRA”).

On January 29^th, President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009.  The Ledbetter Act was a direct response to the U.S. Supreme Court’s 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., in which the Court held that Ms. Ledbetter’s Title VII claim against Goodyear was barred by the statute of limitations.  By redefining when a discriminatory act is deemed to occur, the Act will allow additional employment discrimination claims to proceed to trial.  The likely result will be more backpay awards, and also greater liability for compensation-based benefits.

On May 21, 2008, the President signed the Genetic Information Nondiscrimination Act of 2008 (“GINA”). The new law prohibits discrimination on the basis of genetic information in health insurance and employment. The provisions applicable to group health plans and health insurance issuers are effective for plan years beginning on or after May 21, 2009.

Employer wellness programs are often touted as part of the answer to rising health insurance costs. However, a recent federal district court decision suggests that employers must tread carefully when seeking to control health insurance costs by policing employees’ conduct outside of work.

After protracted litigation, the Third U.S. Circuit Court of Appeals has finally upheld regulations issued by the Equal Employment Opportunity Commission (“EEOC”) allowing employers to reduce, change, or even eliminate retiree health coverage when retirees become eligible for Medicare. Unless this decision is reversed by the U.S. Supreme Court (which seems unlikely), employers who coordinate, terminate, or charge different premiums for retiree health coverage upon a retiree’s Medicare eligibility should be able to retain such practices without fear of violating the Age Discrimination in Employment Act (“ADEA”).

Over five years after regulations were first proposed, the Departments of the Treasury, Labor, and Health and Human Services have finally issued final HIPAA nondiscrimination and wellness program regulations. While the final regulations clarify certain aspects of the 2001 interim and proposed regulations, other questions remain unanswered.

The short history of cash balance plans has been a tale of extremes. Once the darling of consultants, cash balance plans became something of a pariah after a wave of lawsuits cast doubt on their legality. The Pension Protection Act of 2006 (“PPA”) and a recent appellate court decision, however, may put cash balance plans back in the good graces of employers.