AFFORDABLE CARE ACT EMPLOYER MANDATE DELAYED FOR MEDIUM SIZED EMPLOYERS

September 19, 2014

By Parker Himes

The Treasury Department on Monday announced that employers with 50-99 full-time employees will be given until 2016 to offer insurance to full-time employees before risking a federal penalty. The 2016 deadline is two years longer than the original deadline under the Affordable Care Act.  Under the Act, a full-time employee is anyone who works 30 or more hours per week.

Also announced on Monday is another type of grace period for employers with 100 or more full-time employees. Originally, employers were required to offer coverage to 95% of full-time employees by 2015.  Under the new rules, however, employers with 100 or more full-time employees can avoid the federal penalty for failing to offer coverage by offering insurance to just 70% of full-time employees by 2015 and 95% of full-time employees by 2016.  Importantly, however, employers are still subject to a $3,000 penalty for each employee in the 30% not offered health insurance who buys coverage on a state health-care exchange and qualifies for subsidized premiums.

Administration officials also said Monday that they will issue a separate set of rules in the next few weeks related to how employers must report their employees’ insurance status to the government.   The Firm will be monitoring the law’s progress and will keep you up to date on any significant developments.

If you have any questions related to this issue or any other aspect of the Affordable Care Act, we encourage you to contact an attorney at the Firm for clarification.

Finally, please join us for a presentation on the Affordable Care Act at the Firm’s 34th  Annual School Law Seminar on Saturday, March 1 at McDonald’s Hamburger University in Oak Brook.  As always, board members, district and building level administrators may register for no cost on the Firm’s website (http://edlawyer.com/law-seminar-registration). We look forward to seeing you there.

TRS Pension Cap – Start Date for Contracts

By John E. Fester

TRS has recently cast doubt on whether an employment contract starting on May 31, 2014 will be considered “effective on or before June 1, 2014” for purposes of pension cap grandfathering.  Because May 31 is a Saturday, and TRS generally does not recognize weekends as days on which service credit can be earned, it could be argued that the contract is not truly effective until Monday, June 2 (the first day of creditable service), which is after the June 1 deadline.  In order to protect against this argument, employees seeking to have a multi-year contract in place for purposes of pension cap grandfathering should make sure the effective date of the contract (i.e. the first day of creditable service under the contract) is earlier than May 31, 2014.  If you have any questions regarding this matter, please contact your attorney at Scariano, Himes and Petrarca.

 

FULL-TIME EMPLOYEE UNDER THE AFFORDABLE CARE ACT

 July 9, 2013

By Parker Himes

A full-time employee under the Affordable Care Act is defined as an employee working 30 hours or more, not 35 hours as stated in a previous article.  While the 30 hour standard has not changed, over the next year and a half the Obama Administration will explore ways to make the law more palatable to employers, which could include modifying the definition of full-time employee to include only those employees working 35 hours or more.  In fact, Senator Susan Collins (R-ME) and Senator Joe Donnelly (D-IN) recently proposed bipartisan legislation, titled the “Forty Hours is Full Time Act of 2013” (S. 1188), that would change the definition of full-time employee to 40 hours under the Act.  We will monitor the progress of this bill.

During this time, further guidance will be forthcoming concerning the definition of “employee” under the Act. The Administration anticipates that the guidance on this issue, and many others, will help clarify employers’ responsibilities and help employers implement the infrastructure necessary to comply with the law.  It is important to note that any number of changes could occur between now and January 2015.  The Firm will be monitoring the law’s progress and will keep you abreast of any developments.

If you have any questions about this issue or any other related to the Affordable Care Act, we encourage you to contact an attorney at the Firm for clarification.

OBAMA ADMINISTRATION DELAYS EMPLOYER MANDATE UNDER AFFORDABLE CARE ACT

July 8, 2013

By Parker Himes

Last week, the Obama administration delayed the effective date of the Affordable Care Act’s employer mandate, which requires companies with 50 or more employees to offer health insurance to workers or pay a penalty.  The delay pushes the inception of the employer mandate back to January 2015.  At that time, employers will be required to provide health insurance  to  employees  working  35  hours  or  more.    Administration officials  reason  that  the  delay  will  allow  a reassessment of the reporting burdens and will give employers more time to arrange compliance with the law.

Conversely, the individual mandate will not be delayed.   Health care exchanges are slated to be up and running by October 1, selling coverage that takes effect January 1, 2014.  The Administration notes that many of the employees who will not receive coverage through employers until 2015 will be able to obtain coverage from these health care exchanges.

For employers, the delay could reduce pressure to develop the data collection and infrastructure necessary to track full- time employees based on the law’s complex rules.  The Administration points out that a majority of the large companies covered by the mandate (including most school districts) already provide their employees with health insurance that complies with the employer mandate.  James A. Klein, president of the American Benefits Council, touts the delay as providing “vital breathing room to implement the law in a more thoughtful and administratable way…Major employers have led the way in providing coverage to their workers and are expending great resources to ensure compliance with the new law.” Todd Leeuwenburgh, Health Reform’s Employer Mandate Delayed: Obama Recognizes Employer Concerns, Thompson’s HR Compliance Expert, July 3, 2013.

Yet, the delay does not apply to employer compliance with the law’s other insurance mandates. These mandates include:

1) coverage for dependent children up to age 26; 2) no exclusions for pre-existing conditions; 3) no annual or lifetime limits on payments; and 4) coverage with no cost-sharing for preventative services; among others.

The Obama administration has promised to provide more clarity to employers regarding the mandate over the next year and a half.  For now, however, employers can take advantage of the breathing room afforded by this delay to form their strategy for compliance with the law.

If you find yourself dealing with issues related to the employer mandate, we urge you to contact an attorney at the Firm so we can help to find a favorable resolution.

Changes Affecting Healthcare Flexible Spending Accounts Begin January 1, 2013

December 5, 2012

By: Adam Dauksas

Beginning January 1, 2013, a new pre-tax, salary-deferral limit for healthcare flexible spending accounts (“FSAs”) will take effect.  As part of the federal Patient Protection and Affordable Care Act (commonly referred to as “ObamaCare”), FSAs will soon have annual limits of $2,500 per year, with that figure then rising each year thereafter based on the rate of inflation.

This is an important change in the law because, up until now, there has not been an official cap on how much employees could contribute to FSAs; IRS rules merely dictated that employers had to come up with their own maximum contribution amounts. Typically, employers have set this figure somewhere between $2,000-$5,000.

This new $2,500 limit, however, applies to the plan year, not the calendar year.  For instance, if your plan year is tied to the fiscal year and thus your next plan year does not begin until July 1, 2013, then that is when the $2,500 limit takes effect.  In addition, if your current plan provides for a grace period (which can be up to two months and fifteen days), unused salary FSA deferrals that are carried over into that grace period do not count against the $2,500 limit applicable to your next plan year.

Yet despite this new limit, FSAs – for now, at least – will still be subject to the IRS’ “use-or-lose” rule, meaning that any unused money left in the account at the end of the plan year is forfeited by the employee (Note: The “use-or-lose” rule may well be amended in the future.  On June 25, 2012, the IRS stated, in its Notice 2012-40, that “[g]iven the $2,500 limit, the Treasury Department and the IRS are considering whether the use-or-lose rule for health FSAs should be modified to provide a different form of administrative relief.”).

In light of these changes, you should review your plan documents as soon as possible for compliance with the new $2,500 limit.  If you need to amend your plan or have any other questions regarding FSAs, please do not hesitate to contact Scariano, Himes and Petrarca, Chtd.

ILLINOIS ’ CIVIL UNIONS LAW

HOW WILL THIS NEW LEGISLATION AFFECT YOUR DISTRICT?

February 3, 2011

By: James Petrungaro and Adam Dauksas

This week, Governor Quinn signed into law the Illinois Religious Freedom Protection and Civil Union Act, which will soon provide for legal recognition of civil unions in Illinois.  Under the law, which takes effect June 1, 2011, any person entering into a civil union will have “the same legal obligations, responsibilities, protections, and benefits as are afforded or recognized by the law of Illinois to spouses.”  Significantly, the new law will recognize both homosexual and heterosexual civil unions.

Because this is only a State law, however, civil unions granted in Illinois will remain unrecognized by the federal government.  Accordingly, the new legislation will have no impact on federal employment laws, such as the Family and Medical Leave Act (“FMLA”) and the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Similarly, a party to a civil union will be ineligible to receive a survivor’s Social Security benefit.

Nevertheless, the new law will have a significant impact on school districts.  For instance, Section 24-6 of the School Code provides that districts must grant to their full-time employees at least 10 days of sick leave at full pay each school year to care for, among other things, “a serious illness or death in the immediate family or household.” Under the Illinois Religious Freedom Protection and Civil Union Act, the term “immediate family” now encompasses a civil union partner.

The new civil union law also grants to licensed partners the same property inheritance rights that have long been enjoyed by married couples in Illinois.  Accordingly, a partner in a civil union will soon be able to receive state pension benefits when his or her partner, who had worked for the government, dies.

In addition, the law may impact discrimination rights. The Illinois Human Rights Act makes it a civil rights violation for a board of education to “refuse to hire, to segregate, or to act with respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure or terms, privileges or conditions of employment” on the basis of an individual’s “marital status.”  Although there is currently no case law equating civil unions to one’s “marital status,” we expect civil union partners to claim protected status under the Illinois Human Rights Act. One way in which this could affect school districts is through the grant of insurance benefits to dependents. If civil union partners are protected by the Human Rights Act, a spouse cannot be offered dependent care to the exclusion of a civil union partner.  Yet, even if the employee’s civil union partner receives insurance benefits from the school district, the value of any insurance benefits received by an employee’s partner would be treated as income and taxed by the federal government.

To ensure compliance with the new law, boards of education and appropriate administrators should review and modify their existing board policies, handbooks and insurance policies to adequately reflect the law’s changes.  If you have any questions regarding the implementation of the Illinois Religious Freedom Protection and Civil Union Act or would like us to audit your policies and procedures to ensure compliance, please do not hesitate to contact Scariano, Himes and Petrarca.

Family Medical Leave Act Interpretation – In Loco Parentis Clarification

July 15, 2010

By Trisha Olson

On June 22, 2010, the U.S. Department of Labor (“DOL”) issued an interpretation of the Family and Medical Leave Act (“FMLA”) to clarify when an employee who does not have a biological or legal relationship with a child may take FMLA leave for the birth, adoption or placement of a child or to care for a child with a serious health condition.  Generally, the FMLA provides 12 workweeks of job protected, unpaid leave during any 12- month period, for eligible employees to care for a son or daughter with a serious health condition, for the birth and care of a newborn, for the adoption of a child, or placement of a child from foster care in the employee’s home within the first 12 months following birth or placement.

The recent DOL interpretation clarifies the definition of “son or daughter” as used in the FMLA.  The current definition includes a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is either under age 18, or age 18 or older and is incapable of self-care because of a mental or physical disability.  The term in loco parentis generally refers to an individual who puts him or herself in the position of a parent by assuming certain day-to-day or financial obligations of a child.  The DOL interpretation clarifies that employees who have no biological or legal relationship with a child may stand in loco parentis to a child.   For example, where an employee provides day-to-day care for his or her unmarried partner’s child, but does not financially support the child, the employee could be considered to stand in loco parentis to the child and therefore be entitled to FMLA leave to care for the child if the child has a serious health condition.  Likewise, a domestic/same-sex partner who is not the biological or adoptive parent of a child may stand in loco parentis to the child and would be entitled to leave to bond with the child following placement, or to care for the child if the child had a serious health condition.

The DOL interpretation states that a person is not required to provide both financial support and day-to-day care of a child in order to stand in loco parentis to the child.  For instance, an employee who provides significant financial support for a grandchild, but who does not provide day-to-day care, may stand in loco parentis.

Further, the fact that a child has a biological or legal parent in the home does not prevent another person from standing in loco parentis for purposes of taking FMLA leave.  In fact, the interpretation provides that when a child’s biological parents take subsequent spouses, all four parents (biological and step-parents/partners) could be entitled to FMLA leave for the child.

Significantly, other FMLA provisions are unaffected by this interpretation.  For example, the new interpretation does not require employers to provide FMLA leave to employees seeking time to care for their unmarried or domestic/same-sex partners.   However, because the DOL interpretation regarding in loco parentis is applicable immediately, employers should promptly review their FMLA policies, procedures and practices to ensure that they are consistent with the DOL interpretation.

Employers who have questions about an employee’s relationship to a child for FMLA purposes may require the employee to provide reasonable documentation or a statement of the family relationship.  The DOL interpretation states that “a simple statement asserting that the requisite family relationship exists” is all that is required to establish an employee’s relationship.

In all cases, whether an employee stands in loco parentis to a child will depend on the particular facts. Accordingly, if you have questions regarding whether an employee is entitled to FMLA leave, please contact us.

Retiree Health Insurance Plans

Financial Help from the Federal Government and a Recent Court Decision

 April 29, 2010

In conjunction with the TRS “early” retirement option that permits teachers to retire between ages 55 and 60 without reducing their retirement annuity, many school districts offer a companion retiree health insurance program to encourage veteran teachers to retire as many as 10 years before age 65, when the employee becomes eligible for Medicare. These collectively bargained retiree health insurance plans offer subsidized or sometimes 100% health insurance coverage during the gap between retirement and eligibility for Medicare. While retirees are sometimes required to secure insurance through TRIP or a private insurance plan, many school districts have allowed retirees to continue participation in the school district’s group health plan.

As the cost of health insurance has exponentially increased in the last few years, however, many districts have begun rethinking the wisdom behind this model. While retirees make up a small percentage of the insurance pool, their claims can represent a majority of the insurance plan’s costs. As a result, some school districts are looking to end the retiree health insurance program all together or modify the program by shifting increased financial responsibility to the retirees.

Help from the Feds

Recognizing that many employers can no longer afford to provide retiree health insurance plans, Congress recently enacted the Patient Protection and Affordable Care Act to preserve such plans and lessen the burden on employers. The legislation includes a temporary reinsurance program that will provide federal reimbursements to employer-funded early retiree health care plans for pre-Medicare retirees, between ages 55 and 64.

To be eligible for the program, employers must submit to the Secretary of Health and Human Services (“HHS”) a completed application, which is expected to be made available in June 2010. Although we have yet to see the application form, the legislation indicates that an applicant must demonstrate that its plan: (1) implements programs and procedures to generate cost-savings with respect to participants who have chronic and high-cost conditions; and (2) is able to provide documentation of the actual cost of the retiree medical claims. Both self-funded and insured plans are eligible. Once an employer’s application is approved by HHS, the employer must then submit a claim to HHS exhibiting the actual costs of the medical items or services received by each early retiree.

The reimbursement program is limited in scope and comes with some strings attached. Only costs incurred after June 23, 2010 are eligible for reimbursement and only 80% of the employer’s out of pocket cost will be reimbursed. Further, the reimbursed funds must be used to lower plan costs. This can include lowering premium costs for the employment-based plan or reducing the plan participants’ premium contributions, co-payments, deductibles, co-insurance or other out-of-pocket costs.

The program was appropriated $5 billion and will expire when that money runs out or January 1, 2014, whichever occurs first. At least one consulting firm has suggested that the current appropriation will last less than one year, so swift action is appropriate. Accordingly, we are advising our clients to monitor the release of the program’s application from HHS and apply for participation at the earliest possible moment.

A Test Case

The impact and success of the federal retiree insurance reimbursement program remains to be seen, and at least for now, is a temporary solution to skyrocketing retiree healthcare costs incurred by school districts. As a result, school districts may be considering modifications to their current programs. Until recently, Illinois law did not address whether the employer school district, in an attempt to cut retiree health insurance costs, could modify a contract- based retiree health insurance plan after the employment relationship had ended, (i.e., after the teacher retired) without breaching the contract that awarded the retirement benefit. In Haake v. Board of Education of Glenbard Township School District 87, a case handled by Scariano, Himes and Petrarca, the Illinois Appellate Court provided some guidance on the issue.

The teachers’ contract at issue in Haake included a benefit that stated retirees would continue to receive health insurance coverage at the same cost as when they retired, until they reached age 65. Under the contract, teachers electing individual insurance coverage paid nothing toward their premiums, and those electing family coverage paid 50% of the premium. Years after the contract expired, and pursuant to a new contract bargained with the teachers’ union, the board of education began charging retirees a small percentage of the plan’s premium costs for individual participants -- the same rate that active teachers were required to pay. The retirees filed suit arguing that the insurance benefit lasted beyond the expiration of the contract, thus making the board’s modification of the plan a breach of their agreement. The board of education argued that because the former contract had expired and had been replaced by a new agreement with the teachers’ union, the retirees could not avail themselves of the former contract.

The court held that even though the contract granting the benefit had expired, because the retiree insurance provision had specific language addressing the duration of the benefit (until age 65), the board of education and teachers’ union intended the benefit to outlast the contract’s expiration and could not be modified by the board to the detriment of the current retirees. The Haake decision is unfavorable for school districts seeking to reduce retiree health insurance costs, but does not serve as an absolute bar to modifying such plans. While instructive, the decision is limited factually to particular language of the contract at issue in that case. Other contracts that do not similarly establish an independent duration for the retiree benefit may be subject to modification without similar risk of breach of contract action.

Scariano, Himes and Petrarca stands ready to assist your district with restructuring its retiree health insurance plan and participating in the federal reimbursement program.

Please Help Clarify Availability of Sick Leave for Childbirth

 January 13, 2010

Many of you will recall several years ago that Section 24-6 of the School Code was amended to clarify that sick leave could be used for birth, adoption, or placement for adoption.  The impetus for this change was a downstate school district that denied a teacher the use of paid sick leave in order to complete adoption of a child in a foreign country. Unfortunately, by including the term “birth” in the amendment, the legislature created some uncertainty in the sick leave statute.  In response to the amendment, the Illinois Education Association took the position that because there were no limits in the legislation, a school employee could use as much sick leave as he or she had accumulated whenever the teacher (or teacher’s spouse) gave birth, or became involved in the adoption process.

As this clearly was not the legislature’s intent, another amendment to Section 24-6 was passed last year, which should have  clarified  that  the  use  of  sick  leave  followingbirth  (without  a  doctor’s  note)  was  limited  to  the  six  weeks immediately following delivery.  However, the IEA has taken the position that the 30 sick days may be used anytime in the first year following childbirth.  Furthermore, because the IEA claims that the 30 sick days are not granted due to the postpartum condition of the mother or child, their position is that the days can be taken at any time for any reason (e.g. every Friday for 30 weeks).  The IEA’s position essentially converts sick days to unrestricted paid leave days, but only for teachers who give birth or father a child.

While we worked with Representative Sandra Pihos (R-Glen Ellyn) and LEND in an attempt to clarify that the 30 sick days available for use in connection with childbirth are intended to be for the six weeks following delivery, we were unable to gain additional legislative support at that time.  However, Representative Pihos has expressed interest in revisiting this issue to clearly identify when the 30 sick days would be available for use in connection with childbirth.

In order to assist Representative Pihos and LEND, we are asking you to provide us with information:

1.  Have any of your local unions advised you that they believe 30 days of paid sick leave are available in the case of childbirth beyond the six weeks following delivery?  If so, briefly describe the union’s position.

2.  Have any of your local unions threatened or filed grievances or litigation if you attempted to restrict paid sick leave (without a doctor’s note) to the first six weeks following delivery?  If so, what was your response?

3.  How many teachers during 2009-2010 have used the new 30 day allotment of sick leave in connection with childbirth?

Please send your responses to Lynn Himes,  ahimes@edlawyer.com or John Fester,  jfester@edlawyer.com.  Thank you for your assistance and we will keep you informed of any proposed changes to the School Code sick leave provisions.

COBRA SUBSIDY EXTENSION

December 31, 2009

By: Jessica M. Bargnes

The recently enacted Department of Defense Appropriations Act (DDAA) modifies certain provisions of the American Recovery and Reinvestment Act (ARRA) relating to the COBRA Subsidy.

The ARRA established the COBRA Subsidy which required eligible individuals to pay only 35 percent of their COBRA premiums.  The remaining 65 percent was reimbursed to the coverage provider through a tax credit. To be eligible, individuals must be involuntarily terminated from their employment and timely apply for the benefit. Those individuals who may be covered by Medicare or their spouse’s insurance are not eligible.

The DDAA amended the maximum duration of COBRA Subsidy assistance from nine months to 15 months. Further, the eligibility period was amended, changing the deadline of eligibility from December 31, 2009, to February 28, 2010.  The amendments to the COBRA Subsidy are retroactive to the effective date of the ARRA.

The  DDAA  doesnot  require  modification  of  the  notices  provided  byemployers  that  are required by ARRA, beyond modifying the eligibility dates.  Plan administrators must provide information about the premium reduction to all individuals who have COBRA qualifying events from September 1, 2008 through February 28, 2010.

Plan  administrators  must  alsoprovide  notice  about  the  changes  made  to  the  premium reduction provisions of ARRA by the DDAA to individuals who have already been provided a COBRA election notice.  Individuals who are eligible for the COBRA Subsidy must be provided this notice by February 17, 2010, and individuals who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal time frames for providing continuation coverage notices.

Because of the retroactivity of the law, the DDAA also requires that notice be provided to those individuals who are in a "transition period” within 60 days after the enactment of the DDAA.  A person in a “transition period” is one whose nine month COBRA subsidy expired prior to December 19, 2009.  These individuals are entitled to an additional 6 months of reduced premiums per the COBRA subsidy.

Those individuals who lost their subsidy and paid the full 100 percent premium in December 2009 will most likely be contacting their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the over payment.  The notice provided by the Plan Administrator regarding changes to the COBRA Subsidy should discuss this.  Employers should be prepared for an influx of inquiries into COBRA Subsidy related issues. Please do not hesitate to contact your attorney at Scariano, Himes and Petrarca, Chtd., with any questions that you may have regarding the COBRA amendments.