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Legal Updates in ERISA,
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ERISA & Employee Benefits 

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Employment, Labor & Human Resources

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November 2011

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The Wagner Law Group਍ഀ Newsletter

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Table of Contents

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I. TAX-QUALIFIED PLANS

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2012 Cost-of-Living Adjustments

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DOL Issues Interim Guidance on Electronic Delivery of਍ഀ Disclosures for Participant-Directed Plans

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PBGC Provides Premium-Related Relief to Plan Sponsors

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New IRS Program Allows Employers to Voluntarily਍ഀ Reclassify Workers as Employees and Receive Partial Tax Relief

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II. WELFARE BENEFIT PLANS

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Supreme Court to Review Constitutionality of PPACA

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Agencies Issue Proposed Regulations on PPACA's Uniform਍ഀ Summary of Benefits Coverage

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New Rules on Women's Preventive Care

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PPACA's Internal Claims and Appeals and External਍ഀ Review Rules Amended

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HHS Issues Proposed Regulations on PPACA Exchanges'਍ഀ Eligibility and Employer Standards

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HHS Issues Guidance Exempting HRAs from PPACA's Annual਍ഀ Maximum Benefit Rule

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Court Rules Actual Receipt of COBRA Election Notice਍ഀ Not Required

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Enrollment in Medicare Part A Required to Maintain਍ഀ Eligibility for Social Security Benefits

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III. HUMAN RESOURCES & EMPLOYMENT MATTERS

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Best Practices Related to Workplace Harassment

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First Circuit Finds Employer Liable for USERRA਍ഀ Violations

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NLRB Extends Implementation Date For Notice-Posting਍ഀ Rule

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The Wagner਍ഀ Law Group News

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Super Lawyers magazine has named Marcia Wagner, Russ Gaudreau and John Keegan as Massachusetts Super Lawyers. They were chosen by਍ഀ their peers and through independent research. Ari Sonneberg received the Rising Star nod as one of Massachusetts'਍ഀ top up-and-coming attorneys. Stephen Newman and David Gabor were named as a New York Super Lawyers.

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Upcoming਍ഀ Events

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Broadridge Financial Soluntions,਍ഀ Inc. 2011 Annual Regional Meeting Series in Boston: Marcia ਍ഀ Wagner will be speaking on practical solutions to recently issued਍ഀ regulatory changes. November਍ഀ 30, 2011

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Palm Beach Bar Association: Eugene F. Pollingue,਍ഀ Jr. will be speaking on the impact of Civil Law on਍ഀ estate planning in the U.S. January਍ഀ 25, 2012 

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Recent Seminars 

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Below are links to seminar material that The Wagner Law਍ഀ Group recently presented.

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"Important਍ഀ Pension Changes from D.C. - What Do You Need to Know?" Marcia Wagner, John Hancock Mixer Meeting 2011,਍ഀ November 15, 2011 (Memphis, TN) 

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"Plan Fees and਍ഀ Fiduciary Responsibilities - Preparing for the New Rules," Marcia Wagner, 1st Global National Conference 2011,਍ഀ November 14, 2011 (Salt Lake City, UT)

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"Tax਍ഀ Implications of Liquidation of Partnerships and Family Limited਍ഀ Partnerships," Eugene F. Pollingue,਍ഀ Jr., Boston Bar Association Seminar, November 10, 2011 (Boston,਍ഀ MA) 

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"Prospecting the਍ഀ 403(b) Market for Companion DB Business," Marcia Wagner, CFDD 2011 Advisor Conference,਍ഀ October 18, 2011 (Chicago, IL)

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"Techniques to਍ഀ Help Advisors Consult to the Fastest Growing DC Plan Market," Marcia Wagner, CFDD 2011 Advisor Conference,਍ഀ October 18, 2011 (Chicago, IL)

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"Basics of਍ഀ ERISA," Marcia Wagner,਍ഀ 2011 NSCP National Meeting, October 17, 2011 (Baltimore, MD)

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"Important਍ഀ Pension Changes from D.C. - What Do You Need to Know?" Marcia Wagner, John Hancock Mixer਍ഀ Meetings, October 12 & October 13, 2011 (San Mateo, CA and਍ഀ Walnut Creek, CA)

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"Guidance on਍ഀ Deferred Compensation: IRC 409A and IRC 457," Marcia Wagner, Toscan & Ardito CPA, October਍ഀ 11, 2011 (North Andover, MA)

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"Important਍ഀ Pension Changes from D.C. - What Do You Need to Know?" Marcia Wagner, John Hancock 2011 Retirement Plan਍ഀ Networking Mixer, September 22, 2011 (West Conshohocken, PA and਍ഀ Prussia, PA)

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Articles਍ഀ Published

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Below are links to recently published articles written਍ഀ by The Wagner Law Group.
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"Asserting the਍ഀ Attorney-Client Privilege in ERISA Cases," Marcia Wagner, Law਍ഀ Firm Partnership & Benefits Report, October 2011

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"Investing with਍ഀ Confidence," Marcia Wagner, Planadviser, September਍ഀ - October 2011

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Webinars and਍ഀ Podcasts

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Below are recently conducted webinars by The Wagner Law਍ഀ Group.

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"Navigating the਍ഀ New Realities of 401(k) Participant Education," Marcia Wagner, Legg Mason Webinar, October 20, 2011

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Quoted਍ഀ Articles

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Below are links to recently published articles quoting਍ഀ The Wagner Law Group

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"Workers Come਍ഀ Out Winners Even After 401(k) Lawsuits Are Losers," Marcia Wagner,਍ഀ The Wall Street Journal, October 25, 2011

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"Labor਍ഀ Department Issues Rule on 401(k) Advice," Marcia Wagner,਍ഀ Bloomberg, October 24, 2011

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"Government:਍ഀ 401(k) Fee Disclosures May Be Electronic," (opens new window) Marcia Wagner, The Associated Press,਍ഀ September 13, 2011 

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Services We਍ഀ Provide Our Clients

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I. ERISA &਍ഀ EMPLOYEE BENEFITS 

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  • Administrative਍ഀ Representation
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  • Employment਍ഀ Taxes
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  • ERISA਍ഀ Title I
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  • Income਍ഀ and Pension Excise Taxes
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  • Non-Qualified਍ഀ Plans and Executive Compensation
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  • Other਍ഀ Plan Issues
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  • Plan਍ഀ Administration
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  • Plan਍ഀ Compliance
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  • Plan਍ഀ Testing
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  • Retirement਍ഀ Plans
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  • Welfare਍ഀ Benefit Plans
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II. ESTATE਍ഀ PLANNING & ADMINISTRATION

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  • Asset਍ഀ Preservation and Protection
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  • Estate਍ഀ Planning Instruments
  • ਍ഀ
  • Personal਍ഀ and Family Planning
  • ਍ഀ
  • Taxes
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III. EMPLOYMENT,਍ഀ LABOR & HUMAN RESOURCES

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  • Establishment and਍ഀ Implementation of Policies and Procedures
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  • Handling਍ഀ and Resolution of Disputes
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  • Management਍ഀ of Employees 
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The Wagner਍ഀ Law Group Description

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The Wagner Law Group, A Professional Corporation, is a਍ഀ nationally recognized ERISA & employee benefits, estate਍ഀ planning, employment, labor & human਍ഀ resources practice. 

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Established in 1996, The Wagner Law Group has 19਍ഀ attorneys engaged exclusively in employee benefits, estate planning਍ഀ and employment law. Six of our attorneys are AV rated by਍ഀ Martindale-Hubbell as having very high to preeminent legal abilities਍ഀ and ethical standards. The firm is among the largest ERISA boutiques਍ഀ in the country. Our practice is national in scope, with clients in਍ഀ more than 40 states and several foreign countries.

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Contact Info

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The਍ഀ Wagner Law Group

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Massachusetts਍ഀ Office 

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Tel:਍ഀ (617) 357-5200 

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Fax:਍ഀ (617) 357-5250 

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99਍ഀ Summer Street 

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13th਍ഀ Floor

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Boston,਍ഀ MA 02110

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਍ഀ Florida਍ഀ Office 

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Tel:਍ഀ (561) 293-3590
਍ഀ Fax: (561) 293-3591
਍ഀ 7121 Fairway Drive
਍ഀ Suite 203
਍ഀ Palm Beach Gardens, FL 33418

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New਍ഀ York Office

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Tel:਍ഀ (716) 650-5987

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Fax: (716)਍ഀ 633-0301

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333਍ഀ International Drive

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Suite਍ഀ B-4

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Williamsville,਍ഀ NY 14221

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www.wagnerlawgroup.com  

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This Newsletter is protected by copyright. Material਍ഀ appearing herein may be reproduced with appropriate credit.

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Pursuant to Internal Revenue Service Circular 230, we਍ഀ hereby inform you that any advice set forth herein with respect to US਍ഀ federal tax issues is not intended or written by The Wagner Law Group਍ഀ to be used and cannot be used, by you or any taxpayer, for the਍ഀ purpose of avoiding penalties that may be imposed on you or any other਍ഀ person under the Internal Revenue Code.

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This Newsletter is provided for information purposes by਍ഀ The Wagner Law Group to clients and others who may be interested in਍ഀ the subject matter, and may not be relied upon as specific legal਍ഀ advice.  This material is not to be construed as legal advice or਍ഀ legal opinions on specific facts. Under the Rules of the Supreme਍ഀ Judicial Court of Massachusetts, this material may be considered਍ഀ advertising.

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Current਍ഀ and back issues of this Newsletter are available on our website at:

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www.wagnerlawgroup.com.

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਍ഀ

Marcia Wagner

਍ഀ

This newsletter is intended to provide you with an਍ഀ overview of recent developments in the law regarding਍ഀ tax-qualified plans, welfare benefit plans and human resources and਍ഀ employment matters.

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As always, if you have any questions or comments,਍ഀ please call us at (617) 357-5200 or e-mail a member of our team

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Best Regards, 

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View my profile on LinkedIn

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Marcia Wagner 

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I.   TAX-QUALIFIED PLANS

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2012਍ഀ Cost-of-Living Adjustments

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2012

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2011

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Maximum਍ഀ annual payout from a defined benefit plan at or after age 62਍ഀ (plan year ending in stated calendar year) (Section 415(b)(1)(A))

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$200,000*

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$195,000*

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Maximum਍ഀ annual contribution to an individual's defined contribution਍ഀ account (plan year ending in stated calendar year) (Section਍ഀ 415(c)(1)(A))

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$50,000**

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$49,000**

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Maximum਍ഀ Section 401(k), 403(b) and 457(b) elective deferrals (Section਍ഀ 402(g))

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$17,000***

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$16,500***

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Catch-up contribution limit਍ഀ for individuals age 50 and older (Section 313(v)(2)(B)(i))

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$5,500***

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$5,500***

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Maximum਍ഀ amount of annual compensation that can be taken into account for਍ഀ determining benefits or contributions under a qualified plan਍ഀ (plan year beginning in stated calendar year) (Sections਍ഀ 401(a)(17), 404(l) and 408(k))

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$250,000

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$245,000

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Test਍ഀ to identify highly compensated employees, based on compensation਍ഀ in preceding year (plan year beginning in stated year determines਍ഀ "highly compensated" status for next plan਍ഀ year) (Section 414(q)(1)(B))

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$115,000

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$110,000

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Wage਍ഀ Base For Social Security Tax

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$110,100

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$106,800

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Wage਍ഀ Base For Medicare

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No Limit

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No Limit

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Amount਍ഀ of compensation to be a "key" employee in a top-heavy਍ഀ plan (Section 416(i)(1)(A)(i))

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$165,000

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$160,000

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Maximum਍ഀ Social Security Benefit
਍ഀ at Social Security Normal
਍ഀ Retirement Age

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$2,513/month

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$2,366/month

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Earnings਍ഀ Test - Early Retirement
਍ഀ (age 62) (Amounts that Can Be Earned before Benefits Are Cut)

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$14,640/year

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$14,160/year

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*There are਍ഀ late-retirement adjustments for benefits starting after age਍ഀ 65. 

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**"Catch-up" contributions do not count਍ഀ against this limit.   

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***These limitations apply to individuals on a tax਍ഀ year basis (generally, calendar year). 

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Back to Top

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DOL Issues Interim Guidance਍ഀ on Electronic Delivery of Disclosures

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for਍ഀ Participant-Directed Plans

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The U.S. Department of Labor ("DOL")਍ഀ recently issued Technical Release 2011-03 ("TR 2011-03")਍ഀ regarding the use of electronic media to satisfy the new participant਍ഀ disclosure requirements under DOL Regulation §2550.404a-5. Although਍ഀ temporary, TR 2011-03 provides plan administrators with interim਍ഀ guidance on acceptable methods for electronically distributing the਍ഀ first round of participant disclosures, which are required as early਍ഀ as May 31, 2012. Plan administrators who satisfy all of the਍ഀ conditions of TR 2011-03 will not be subject to DOL enforcement਍ഀ actions should conflicting guidance be subsequently਍ഀ issued.  

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Background

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On October 20, 2010, the DOL issued Reg. §2550.404a-5਍ഀ (the "Regulation"), which requires plan administrators to਍ഀ make significant new disclosures to participants in਍ഀ participant-directed individual account plans. The Regulation਍ഀ permits certain disclosures, such as plan fees and expenses, to be਍ഀ made in retirement plan benefit statements, while requiring other਍ഀ disclosures, such as investment information, to be made separately.਍ഀ However, the Regulation does not specify whether any of the਍ഀ disclosures can be made electronically.

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਍ഀ

In consideration of the rapidly approaching compliance਍ഀ date of May 31, 2012, the DOL issued TR 2011-03 to provide plan਍ഀ administrators with temporary guidance on using electronic media to਍ഀ furnish the required disclosures. The interim guidance provides two਍ഀ methods for electronically distributing the required disclosures to਍ഀ participants, one of which applies to disclosures that may be਍ഀ included in retirement plan benefit statements, and the other of਍ഀ which applies to disclosures that must be provided separately.

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Disclosures Included਍ഀ in Retirement Benefit Statements

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Under TR 2011-03, participant disclosures that may be਍ഀ included in retirement plan benefit statements can be distributed਍ഀ electronically in the same manner as retirement plan benefit਍ഀ statements. The DOL previously explained the requirements for਍ഀ electronically distributing retirement plan benefit statements in਍ഀ Field Assistance Bulletin 2006-03, and that guidance is reaffirmed਍ഀ in TR 2011-03. In particular, TR 2011-03 provides that retirement਍ഀ plan benefit statements, and the disclosures permitted to be਍ഀ included in those statements, may be furnished in accordance਍ഀ with:  

਍ഀ
    ਍ഀ
  • the਍ഀ existing DOL safe harbor regulations for electronic delivery;
  • ਍ഀ
  • the਍ഀ Internal Revenue Service ("IRS") regulations਍ഀ governing electronic delivery; or
  • ਍ഀ
  • the਍ഀ procedure described in Field Assistance Bulletin 2006-03. 
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਍ഀ

DOL Safe Harbor for Electronic Delivery

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਍ഀ

The DOL's electronic disclosure safe harbor਍ഀ regulations apply to participants who have access to the employer's਍ഀ electronic information system (e.g.,਍ഀ the employer's intranet or e-mail system) as part of their਍ഀ day-to-day job. Under the DOL's safe harbor, participants that fall਍ഀ within this category are not required to consent to receiving਍ഀ disclosures electronically. However, such participants must receive਍ഀ an affirmative communication from the plan administrator explaining਍ഀ the significance of the electronic disclosure and informing them of਍ഀ the right to receive a paper copy of the disclosure, free of਍ഀ charge.

਍ഀ

 

਍ഀ

The DOL safe harbor also applies to participants who਍ഀ do not have access to the employer's electronic information system਍ഀ as part of their day-to-day job but consent to receiving the਍ഀ disclosures electronically. However, in order for the safe harbor਍ഀ to apply to these participants, the following conditions must be਍ഀ met: 

਍ഀ
    ਍ഀ
  • the਍ഀ participant must affirmatively consent to receiving the਍ഀ disclosures through electronic media;
  • ਍ഀ
  • the਍ഀ participant's consent must be provided electronically, in a਍ഀ manner that reasonably demonstrates their ability to access਍ഀ disclosures in electronic form; and
  • ਍ഀ
  • if਍ഀ a change in the hardware or software required to access and਍ഀ retain electronic disclosures creates a material risk that਍ഀ participants will be unable to access electronic disclosures,਍ഀ participants must receive notice of the revised hardware or਍ഀ software requirements and again consent to receive disclosures਍ഀ through electronic media. 
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਍ഀ

IRS Regulations Governing Electronic Delivery

਍ഀ

 

਍ഀ

The IRS regulations require that electronic਍ഀ disclosures be distributed in a manner that provides participants਍ഀ with reasonable access and that the electronically-provided਍ഀ information must be no less understandable than the paper version.਍ഀ Participants must affirmatively consent to receiving the਍ഀ disclosures electronically, unless they are effectively able to access਍ഀ the medium used to provide the disclosure. In addition,਍ഀ participants must be:

਍ഀ

 

਍ഀ
    ਍ഀ
  • notified਍ഀ of the significance of the disclosures being provided਍ഀ electronically;
  • ਍ഀ
  • provided਍ഀ with instructions to access the disclosure, including any਍ഀ hardware or software requirements; and
  • ਍ഀ
  • informed਍ഀ of the right to receive the disclosure in paper form, free of਍ഀ charge. 
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਍ഀ

Field Assistance Bulletin 2006-03

਍ഀ

 

਍ഀ

Under Field Assistance Bulletin 2006-03 ("FAB਍ഀ 2006-03"), if a plan provides participants with continuous਍ഀ access to benefit statement information through a secure website,਍ഀ the DOL will view the provision of such access as good faith਍ഀ compliance with the requirement to furnish retirement plan benefit਍ഀ statements, provided that:  

਍ഀ
    ਍ഀ
  • participants਍ഀ are furnished with a notice explaining the availability of the਍ഀ required retirement plan benefit statement information and how਍ഀ such information can be accessed;
  • ਍ഀ
  • the਍ഀ notice informs participants of their right to request and obtain਍ഀ a paper copy of the retirement plan benefit statement, free of਍ഀ charge; and
  • ਍ഀ
  • the਍ഀ notice is written in a manner calculated to be understood by਍ഀ the average plan participant and furnished both in advance of਍ഀ the date that a plan is required to furnish the first਍ഀ retirement plan benefit statement and annually਍ഀ thereafter.  
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਍ഀ

Disclosures Not Included਍ഀ in Retirement Plan Benefit Statements

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਍ഀ

According to TR 2011-03, plan administrators may not਍ഀ rely on FAB 2006-03 to furnish disclosures that are required to be਍ഀ made separately from the retirement plan benefit statement.਍ഀ Instead, plan administrators must furnish these disclosures਍ഀ electronically in accordance with either the DOL safe harbor (as਍ഀ described above) or the temporary guidance provided in TR 2011-03.

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In order to rely on the temporary guidance, plan਍ഀ administrators must satisfy the following six (6) conditions:

਍ഀ
    ਍ഀ
  • Voluntary਍ഀ Provision of E-mail Address. Participants਍ഀ entitled to receive the disclosures must voluntarily provide਍ഀ the plan administrator with an e-mail address for the purpose਍ഀ of receiving disclosures required by the Regulation. The਍ഀ participant must provide the e-mail address in response to a਍ഀ request accompanied by an initial notice (described below).
  • ਍ഀ
  • Initial਍ഀ Notice.਍ഀ The initial notice must be clear and conspicuous, provided਍ഀ contemporaneously and in the same medium as the request for਍ഀ the e-mail address, and:
  • ਍ഀ
      ਍ഀ
    • explain਍ഀ that providing an e-mail address for the receipt of required਍ഀ disclosures is entirely voluntary, and that as a result of਍ഀ providing the e-mail address, the required disclosures will਍ഀ be made electronically;
    • ਍ഀ
    • provide਍ഀ a brief description of the information that will be disclosed਍ഀ electronically and how it can be accessed;
    • ਍ഀ
    • inform਍ഀ participants of their right to request and obtain, free of਍ഀ charge, a paper copy of the disclosures being provided਍ഀ electronically and explain how to exercise that right;
    • ਍ഀ
    • inform਍ഀ participants of their right, at any time, to opt out from਍ഀ receiving the disclosures electronically and explain how to਍ഀ exercise that right; and
    • ਍ഀ
    • explain਍ഀ the procedure for updating e-mail addresses.
    • ਍ഀ
    ਍ഀ
  • Annual਍ഀ Notice. Beginning਍ഀ the year following the year in which the participant਍ഀ voluntarily provided an e-mail address, and annually਍ഀ thereafter, the plan administrator must provide an annual਍ഀ notice to each such participant. The annual notice must਍ഀ contain the same general information as provided in the਍ഀ initial notice and be provided on paper, unless there is਍ഀ evidence that the participant has interacted electronically਍ഀ with the plan since the prior annual notice was provided.
  • ਍ഀ
  • Delivery. The plan਍ഀ administrator must take appropriate and necessary measures਍ഀ reasonably calculated to ensure that the electronic delivery਍ഀ system results in actual receipt of transmitted information (e.g.,਍ഀ using return receipt or notice of undeliverable electronic਍ഀ mail features or conducting periodic reviews to confirm਍ഀ receipt of transmitted information).
  • ਍ഀ
  • Confidentiality. The plan਍ഀ administrator must take appropriate and necessary measures਍ഀ reasonably calculated to ensure that the electronic delivery਍ഀ system protects the confidentiality of personal information.
  • ਍ഀ
  • Calculated਍ഀ to be Understood.਍ഀ Notices furnished to participants must be written in a manner਍ഀ calculated to be understood by the average plan਍ഀ participant.   
  • ਍ഀ
਍ഀ

Additionally, TR 2011-03 provides a special transition਍ഀ rule for participants whose e-mail addresses are already on file਍ഀ with plan administrators. The transition rule eliminates the਍ഀ requirement that plan administrators request these participants'਍ഀ e-mail addresses. However, the transition rule requires plan਍ഀ administrators to furnish these participants with a notice that, in਍ഀ general, contains the same information required to be provided in਍ഀ the initial notice. Plan administrators must provide this notice to਍ഀ applicable participants no earlier than ninety (90) days nor later਍ഀ than thirty (30) days before the date the initial disclosures਍ഀ required under the Regulation will be provided.

਍ഀ

 

਍ഀ

The transition rule notice must be furnished on paper,਍ഀ unless there is evidence that the participant interacted with the਍ഀ plan electronically during the preceding twelve (12) months, in਍ഀ which case such notice may be provided electronically. Additionally,਍ഀ the transition rule does not apply if the employer, plan sponsor or਍ഀ plan administrator assigned an e-mail address to a participant,਍ഀ unless there is evidence that the participant used the e-mail਍ഀ address for plan purposes during the preceding twelve (12)਍ഀ months. 

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Conclusion

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਍ഀ

The DOL is still reviewing its electronic disclosure਍ഀ rules, and has not indicated when further definitive guidance on਍ഀ the matter will be released. Nonetheless, plan administrators that਍ഀ comply with the requirements in TR 2011-03 will not be subject to਍ഀ DOL enforcement actions in the event that conflicting guidance is਍ഀ subsequently issued.

਍ഀ

 

਍ഀ

Plan administrators should consider whether to begin਍ഀ requesting participants' e-mail addresses in accordance with TR਍ഀ 2011-03. Additionally, plan administrators may wish to consult with਍ഀ their service providers to determine whether, and to what extent,਍ഀ providing the required disclosures electronically will result in a਍ഀ reduction of plan expenses. 

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PBGC਍ഀ Provides Premium-Related Relief to Plan Sponsors 

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਍ഀ

The Pension Benefit Guaranty Corporation਍ഀ ("PBGC") recently released guidance that provides defined਍ഀ benefit plans with relief from certain penalties related to the਍ഀ late payment of premiums and the failure to properly elect the਍ഀ method used to calculate the variable rate premium਍ഀ ("VRP"). According to the PBGC, the relief is part of an਍ഀ ongoing effort to ease regulatory burdens on its customers and in਍ഀ response to the President's Executive Order mandating federal਍ഀ agencies to both improve regulations and the process used to review਍ഀ them.    

਍ഀ

 

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Relief from Penalties Related਍ഀ to Late Payment of Premiums

਍ഀ

 

਍ഀ

In general, when a defined benefit plan sponsor fails਍ഀ to timely remit its annual PBGC premium payment, the PBGC assesses਍ഀ penalties and interest. The PBGC may waive late payment penalties,਍ഀ but not interest, upon a showing of reasonable cause and in other਍ഀ circumstances outlined in the premium payment regulations.

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਍ഀ

Under the new guidance that applies to plan years਍ഀ beginning after 2010, the PBGC will automatically waive premium਍ഀ payment penalties that are assessed solely because a premium਍ഀ payment was late by no more than seven (7) days. This relief only਍ഀ applies to late payment penalties related to flat-rate and variable਍ഀ rate premiums; it does not apply to late payment interest charges,਍ഀ penalties for failure to timely file required premium information,਍ഀ or penalties for late payment of termination premiums. 

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Relief from Penalties Related਍ഀ to Alternative Methods Elections

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਍ഀ

For plan years beginning after 2007, PBGC regulations਍ഀ allow a plan to elect to use the alternative premium funding target਍ഀ ("APFT") method to calculate its VRP. To make this਍ഀ election, a plan must check Box 5 on the "PBGC Comprehensive਍ഀ Premium Filing" (the "Filing") for the first year to਍ഀ which the election applies. In the absence of such an election, the਍ഀ plan must calculate its VRP using the standard premium funding਍ഀ target ("SPFT") method.

਍ഀ

 

਍ഀ

For the 2008 and 2009 plan years, approximately five਍ഀ (5) percent of plans that used the APFT method to calculate their਍ഀ VRP failed to check Box 5 on the Filing. To provide relief to these਍ഀ plans, the PBGC issued Technical Update 10-2 ("TU 10-2").਍ഀ Under TU 10-2, a plan that intended to elect to use the APFT method਍ഀ but neglected to check Box 5 on the Filing was deemed to have made਍ഀ a valid election to use the APFT if certain conditions were਍ഀ met. 

਍ഀ

 

਍ഀ

Premium Penalty Relief for 2008 and 2009 Plan Years

਍ഀ

 

਍ഀ

Plans that did not qualify for relief under TU 10-2਍ഀ and plans that were denied requests for reconsideration (or such਍ഀ requests were not submitted) were required to amend the applicable਍ഀ Filing and recalculate the VRP using the SPFT method. In some਍ഀ cases, recalculation of the VRP resulted in additional premiums਍ഀ being due. Because these additional premiums were paid after the਍ഀ due date, late payment penalties were assessed.

਍ഀ

 

਍ഀ

According to the guidance, for the 2008 and 2009 plan਍ഀ years, the PBGC will waive premium penalties that resulted from the਍ഀ recalculation of the VRP. PBGC will also waive late premium਍ഀ penalties where plans used the SPFT method but inadvertently਍ഀ checked Box 5 on the Filing and were required to recalculate the਍ഀ VRP using the APFT method.

਍ഀ

 

਍ഀ

Plans that are eligible for this relief will be਍ഀ notified by the PBGC. Eligible plans that have already paid the਍ഀ late premium penalty will receive a credit in the amount of the਍ഀ late premium penalty, which can be used to offset future premiums.਍ഀ Eligible plans that have not yet amended their 2008 or 2009 Filings਍ഀ and paid the additional premium due will only receive a waiver of਍ഀ the late premium penalty if the applicable Filing is amended and਍ഀ the additional premium is paid within thirty (30) days of the date਍ഀ the plan receives notification from the PBGC.  

਍ഀ

 

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Relief for Plan Years Beginning After 2009

਍ഀ

 

਍ഀ

For plan years beginning after 2009, the guidance਍ഀ provides relief similar to TU 10-2. Relief is available to plans਍ഀ that: 1) used the APFT method but did not validly elect to do so by਍ഀ checking Box 5 of the Filing, or 2) used the SPFT method but਍ഀ erroneously elected the APFT method by checking Box 5 on the਍ഀ Filing. In either case, the PBGC will determine the VRP based਍ഀ solely on the information reported on line 7d(1) in Part III of the਍ഀ Filing. (Line 7d(1) of the Filing asks plans to identify whether਍ഀ the APFT or SPFT method was used to calculate the VRP.)

਍ഀ

 

਍ഀ

In addition, the guidance provides limited relief to਍ഀ plans whose election to use the APFT method was invalid solely਍ഀ because the Filing was submitted late. This relief is available਍ഀ only if the late Filing is not an amendment of a timely Filing in਍ഀ which the plan elected the SPFT method to determine the VRP and the਍ഀ late Filing is submitted by the earlier of ninety (90) days after਍ഀ the due date or thirty (30) days after PBGC provides notice that਍ഀ the Filing is late.  

਍ഀ

 

਍ഀ

The PBGC will contact plans entitled to this relief to਍ഀ explain the options and actions required to obtain the relief, if਍ഀ any (e.g.,਍ഀ whether the inconsistent Filing must be amended). Plans that do not਍ഀ qualify for relief under the guidance can seek reconsideration਍ഀ based on the facts and circumstances. 

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New IRS਍ഀ Program Allows Employers to Voluntarily Reclassify Workers as਍ഀ Employees and Receive Partial Tax Relief

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The IRS recently released Announcement 2011-64, which਍ഀ provides guidance concerning a new Voluntary Classification਍ഀ Settlement Program ("VCSP") that affords partial relief਍ഀ from federal employment taxes for eligible employers who agree to਍ഀ prospectively recharacterize misclassified workers as employees.

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The VCSP applies to employers who are currently਍ഀ treating their workers (or a group of workers) as independent਍ഀ contractors or other nonemployees and want to prospectively਍ഀ classify the workers as employees.

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To participate in the VCSP, employers must meet਍ഀ certain eligibility requirements, apply to participate in the VCSP,਍ഀ and enter into a closing agreement with the IRS.

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Eligibility Requirements

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To be eligible to participate in the VCSP, an਍ഀ employer:

਍ഀ
    ਍ഀ
  • must਍ഀ have consistently treated the workers as nonemployees;
  • ਍ഀ
  • must਍ഀ have filed all required Forms 1099 for the workers for the਍ഀ three (3) previous years;
  • ਍ഀ
  • must਍ഀ not be under a current IRS audit; and
  • ਍ഀ
  • must਍ഀ not currently be under audit concerning the classification of਍ഀ workers by the DOL or by a state government agency.
  • ਍ഀ
਍ഀ

Employers who were previously under audit by the IRS਍ഀ or DOL concerning the classification of the workers will only be਍ഀ eligible to participate in the VCSP if the employer has compiled਍ഀ with the results of that audit.

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Application Process

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਍ഀ

Eligible employers that wish to participate in the਍ഀ VCSP must submit new IRS Form 8952, "Application for Voluntary਍ഀ Classification Settlement Program," which must be signed by਍ഀ the appropriate representative of the employer. If applicable, the਍ഀ employer should also submit a completed IRS Form 2848, "Power਍ഀ of Attorney," that identifies its authorized representative.਍ഀ Once the IRS reviews the application and verifies that the employer਍ഀ is eligible to participate in the VCSP, it will contact the਍ഀ employer or its authorized representative to complete the process.

਍ഀ

 

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Closing Agreement

਍ഀ

 

਍ഀ

Employers whose applications are accepted will enter਍ഀ into a closing agreement with the IRS. In exchange for entering਍ഀ into the closing agreement with the IRS, the employer:

਍ഀ
    ਍ഀ
  • will਍ഀ only have to pay ten (10) percent of the employment tax਍ഀ liability that may have been due on compensation paid to the਍ഀ workers for the most recent tax year (as determined under the਍ഀ reduced rates of Section 3509 of the Internal Revenue Code਍ഀ (the "Code"));
  • ਍ഀ
  • will਍ഀ not be liable for any interest and penalties on the employment਍ഀ tax liability;
  • ਍ഀ
  • will਍ഀ not be subject to an employment tax audit with respect to਍ഀ worker classification for the workers during prior years; and
  • ਍ഀ
  • will਍ഀ agree to extend the statute of limitations on assessments of਍ഀ employment taxes for three (3) years for the first,਍ഀ second, and third calendar years beginning after the date on਍ഀ which the employer has agreed under the VCSP closing agreement਍ഀ to begin treating workers as employees.
  • ਍ഀ
਍ഀ

Any amount due under the closing agreement is payable਍ഀ simultaneously when the employer enters into the closing agreement਍ഀ with the IRS.

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Conclusion

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਍ഀ

Employers should be aware that participation in the਍ഀ VCSP does not limit the right of other federal and state agencies਍ഀ to bring enforcement actions against the employer for the਍ഀ misclassifications. In fact, an employer's voluntary reclassification਍ഀ of workers under the VCSP could be construed by other government਍ഀ agencies as an admission of prior misclassification. This could਍ഀ have substantial affects on, for example, employee benefit matters.਍ഀ It is unclear whether an employer's participation in the VCSP will਍ഀ create an increased risk of audit by other government agencies.

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As a best practice, employers should examine the job਍ഀ responsibilities of their workers to determine whether such workers਍ഀ have been properly classified as independent contractors or਍ഀ employees. Employers that discover worker misclassifications must਍ഀ then assess whether the benefits of participating in the VCSP਍ഀ outweigh the possible risks. 

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II.  ਍ഀ WELFARE BENEFIT PLANS

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Supreme਍ഀ Court to Review Constitutionality of PPACA 

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
਍ഀ

The Supreme Court recently਍ഀ announced that it will hear arguments on several aspects of the਍ഀ Patient Protection and Affordable Care Act ("PPACA"),਍ഀ including the constitutionality of the individual mandate, which਍ഀ requires most individuals to obtain health insurance or pay a਍ഀ penalty. It is expected that the Court will hear oral arguments on਍ഀ the matter in March 2012 and issue its decision in next June.

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In particular, the Court granted certiorari to hear਍ഀ appeals from State਍ഀ of Florida v. U.S. Dep't of Health & Human Services,਍ഀ in which the Eleventh Circuit Court of Appeals ruled that PPACA's਍ഀ individual mandate exceeds Congress's power to regulate interstate਍ഀ commerce. Although the Eleventh Circuit declared the individual਍ഀ mandate unconstitutional, it also concluded that this provision was਍ഀ severable from the rest of PPACA, saying that no other part of the਍ഀ legislation should be struck down.

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The central issue that the Supreme Court will decide਍ഀ is whether the PPACA's individual mandate exceeds Congress's਍ഀ authority to regulate commerce amongst the states. The Court has਍ഀ acknowledged that if it finds the individual mandate to be਍ഀ unconstitutional, it will also decide which, if any, of PPACA's਍ഀ other numerous provisions must be invalidated. In doing so, the਍ഀ Court will be required to determine whether Congress intended some਍ഀ or all of the provisions to be effective even without the਍ഀ individual mandate.

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The Court also agreed to review the constitutionality਍ഀ of a PPACA provision that essentially requires states to vastly਍ഀ expand Medicaid spending. Opponents of this provision contend that਍ഀ Congress overstepped its constitutional authority by expanding the਍ഀ Medicaid eligibility and coverage thresholds, which states are਍ഀ obligated to adopt in order to continue to receive federal Medicaid਍ഀ funds.

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However, the Court must first consider whether the Tax਍ഀ Anti-Injunction Act of 1867 (the "Act") prevents any਍ഀ current challenge to the individual mandate. In particular, the Act਍ഀ bars litigation aimed at restraining the assessment or collection਍ഀ of any tax before such tax is actually paid. If the Court concludes਍ഀ the individual mandate penalties are taxes that are subject to the਍ഀ Act, the earliest date that the individual mandate challenges could਍ഀ proceed would be April 2015, when penalties would first be due਍ഀ under PPACA for failure to comply with the mandate in 2014.

਍ഀ

 

਍ഀ

For plan sponsors and administrators, the Court's਍ഀ announcement means that the day-to-day implementation of PPACA will਍ഀ continue in an environment of uncertainty for the next several਍ഀ months. However, there is now hope that the Court will soon issue a਍ഀ definitive decision on the constitutionality of the individual਍ഀ mandate and PPACA.

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Agencies਍ഀ Issue Proposed Regulations on PPACA's Uniform Summary of Benefits਍ഀ Coverage

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IRS and the Departments of Labor਍ഀ ("DOL") and Health and Human Services ("HHS")਍ഀ recently issued proposed regulations that identify the standards਍ഀ for the uniform explanation of coverage requirement under PPACA.

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The proposed regulations require both insured and਍ഀ self-funded group health plans (including grandfathered plans) to਍ഀ provide a uniform explanation of benefits and coverage਍ഀ ("Summary of Benefits and Coverage" or "SBC")਍ഀ to plan participants and beneficiaries, and other individuals਍ഀ eligible to enroll in the plan. Insurers who provide coverage to਍ഀ group health plans are also required to provide SBCs to these਍ഀ individuals as well as to the plan itself. However, individuals਍ഀ need only receive one (1) SBC from either the insurer or group਍ഀ health plan.

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SBCs must contain standardized information in a਍ഀ uniform format to help individuals understand the key features of a਍ഀ plan and make more informed decisions when selecting coverages. The਍ഀ proposed regulations provide a draft template for the SBC along਍ഀ with model language to be used in completing the template.਍ഀ Specifically, SBCs must provide the following information:

਍ഀ
    ਍ഀ
  • Uniform਍ഀ definitions (i.e., a "Uniform Glossary") of਍ഀ standard insurance and medical terms;
  • ਍ഀ
  • A਍ഀ description of the coverage, including cost-sharing, for each਍ഀ category of benefits (to be identified in forthcoming਍ഀ guidance);
  • ਍ഀ
  • A਍ഀ description of the plan's exceptions, reductions, and਍ഀ limitations of coverage;
  • ਍ഀ
  • The਍ഀ plan's cost-sharing provisions, including deductibles,਍ഀ coinsurance, and copayments;
  • ਍ഀ
  • The਍ഀ plan's renewability and continuation of coverage provisions;
  • ਍ഀ
  • Coverage਍ഀ examples that illustrate what proportion of health care਍ഀ expenses the plan would cover under three (3) common benefit਍ഀ scenarios - pregnancy, breast cancer treatment, and diabetes਍ഀ management;
  • ਍ഀ
  • A਍ഀ statement about whether the plan provides "minimum਍ഀ essential coverage" as defined under PPACA, and,਍ഀ beginning January 1, 2014, whether the plan's share of the਍ഀ total allowed benefit costs meets PPACA's requirements;
  • ਍ഀ
  • A਍ഀ statement that the SBC is only a summary and that the plan਍ഀ document or policy should be consulted to determine governing਍ഀ provisions;
  • ਍ഀ
  • Contact਍ഀ information for questions and for obtaining a copy of the plan਍ഀ or policy;
  • ਍ഀ
  • The਍ഀ Internet address or similar contact information for obtaining਍ഀ a list of network providers if the plan maintains more than਍ഀ one (1) network of providers;
  • ਍ഀ
  • The਍ഀ Internet address or similar contact information for obtaining਍ഀ information on prescription drug coverage if the plan uses a਍ഀ prescription drug formulary;
  • ਍ഀ
  • The਍ഀ Internet address for obtaining the Uniform Glossary; and
  • ਍ഀ
  • Information਍ഀ on premiums for insured coverage or on the cost of coverage਍ഀ for self-funded coverage. 
  • ਍ഀ
਍ഀ

When distributing written enrollment materials or when਍ഀ covered individuals renew coverages, plans must also provide SBCs਍ഀ for all coverages for which an individual is eligible to enroll. If਍ഀ a plan does not distribute written enrollment materials, SBCs must਍ഀ be provided no later than the first day the individual is eligible਍ഀ to enroll. For plans that automatically renew coverages, SBCs must਍ഀ be provided no later than thirty (30) days before the first day਍ഀ of the new plan year.

਍ഀ

 

਍ഀ

Individuals enrolling pursuant to a HIPAA special਍ഀ enrollment must receive the SBC within seven (7) days after਍ഀ the request for enrollment. If a covered individual requests an਍ഀ SBC, plans must provide it as soon as practicable, but no later਍ഀ than seven (7) days after receiving the request.

਍ഀ

 

਍ഀ

Other SBC requirements:

਍ഀ
    ਍ഀ
  • Group਍ഀ health plans must provide SBCs free of charge.
  • ਍ഀ
  • For਍ഀ self-insured group health plans, the plan administrator is਍ഀ solely responsible for providing the SBC. For insured group਍ഀ health plans, the obligation to provide the SBC lies with both਍ഀ the plan administrator and insurer, but only one (1) SBC਍ഀ needs to be sent.
  • ਍ഀ
  • Group਍ഀ health plans may distribute SBCs electronically if the਍ഀ delivery satisfies the proposed regulations' electronic਍ഀ disclosure requirements.
  • ਍ഀ
  • Beneficiaries਍ഀ need not receive separate SBCs if they reside at the same਍ഀ address as the plan participant.
  • ਍ഀ
  • When਍ഀ there are material modifications (including plan improvements)਍ഀ that would impact the information in the most recently਍ഀ distributed SBC, a notice or new SBC explaining the਍ഀ modifications must be distributed at least sixty (60) days਍ഀ before their effective date.
  • ਍ഀ
  • SBCs਍ഀ must be provided in a "culturally and linguistically਍ഀ appropriate manner." If at least ten (10) percent of਍ഀ the population in a county are literate only in a particular਍ഀ non-English language (as determined by the U.S. Census਍ഀ Bureau), then each SBC sent to a recipient with an address in਍ഀ that county must contain a statement in that non-English਍ഀ language informing the recipient of the availability of਍ഀ language services provided by the plan.
  • ਍ഀ
਍ഀ

Final regulations are supposed to be effective March਍ഀ 23, 2012. Nevertheless, the proposed regulations request comments਍ഀ on the feasibility of this effective date, so it appears that the਍ഀ effective date is subject to change. 

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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New Rules਍ഀ on Women's Preventive Care

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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Under PPACA, group health plans that do not have਍ഀ grandfather protection must cover certain preventive care services਍ഀ with no cost sharing, such as co-pays or deductibles. Preventive਍ഀ care services include well child and well baby care, mammograms,਍ഀ immunizations and other services recommended by the U.S. Preventive਍ഀ Services Task Force, the Advisory Committee on Immunization਍ഀ Practices of the Centers for Disease Control and Prevention, and਍ഀ the Health Resources Services Administration.

਍ഀ

 

਍ഀ

HHS has recently issued additional guidelines on਍ഀ preventive medical services that are specifically addressed to਍ഀ women and which supplement the existing preventive services that਍ഀ non-grandfathered plans must cover without any cost sharing.

਍ഀ

 

਍ഀ

Under the new HHS guidelines, women's preventive਍ഀ services will also include:  

਍ഀ
    ਍ഀ
  • annual਍ഀ "well-woman" visits;
  • ਍ഀ
  • screening਍ഀ for gestational diabetes in pregnant women between਍ഀ twenty-four (24) and twenty-eight (28) weeks of਍ഀ pregnancy and the first pre-natal visit for high risk women;
  • ਍ഀ
  • Human਍ഀ Papillomavirus testing for women thirty (30) years and਍ഀ older no more frequently than every three (3) years;
  • ਍ഀ
  • sexually-transmitted਍ഀ infection counseling;
  • ਍ഀ
  • annual਍ഀ Human Immunodeficiency Virus ("HIV") screening and਍ഀ counseling;
  • ਍ഀ
  • annual਍ഀ screening and counseling for interpersonal and domestic਍ഀ violence;
  • ਍ഀ
  • breastfeeding਍ഀ support, supplies, and counseling in conjunction with each਍ഀ birth; and
  • ਍ഀ
  • FDA-approved਍ഀ contraception methods (which can include sterilization and the਍ഀ morning after pill) and contraceptive counseling. Currently,਍ഀ HHS regulations state that the "recommendations do not਍ഀ include abortifacient drugs" (i.e., drugs਍ഀ that induce abortion). 
  • ਍ഀ
਍ഀ

However, the contraceptive coverage requirement can਍ഀ infringe upon the religious freedom of certain organizations that਍ഀ offer health plans. Accordingly, HHS has issued an amendment to the਍ഀ preventive care regulation that gives "religious਍ഀ employers" the option of not covering contraception services.਍ഀ For purposes of the exemption, a religious employer is: 1) a਍ഀ non-profit organization, 2) has the inculcation of religious values਍ഀ as its purpose, 3) primarily employs persons who share its਍ഀ religious beliefs, and 4) primarily serves persons who share its਍ഀ religious beliefs.

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These rules are effective for plan years beginning on਍ഀ or after August 1, 2012. 

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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PPACA's਍ഀ Internal Claims and Appeals and External Review Rules Amended

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
਍ഀ

IRS, DOL and HHS have once again amended the internal਍ഀ and external claims procedures for non-grandfathered plans under਍ഀ PPACA. The amendments were made after the receipt of numerous਍ഀ comments that the current regulations imposed unworkable਍ഀ requirements and provided inadequate timeframes for compliance.

਍ഀ

 

਍ഀ

The amendment makes numerous changes to the਍ഀ regulations, including the following: 

਍ഀ
    ਍ഀ
  • Review਍ഀ of Urgent Care Claims.਍ഀ The original regulations required pre-service, urgent care਍ഀ benefit determinations to be made within twenty-four (24)਍ഀ hours. The amendment modifies this rule by requiring urgent਍ഀ care benefit determinations to be made as soon as possible,਍ഀ but not later than seventy-two (72) hours, and obligates਍ഀ plans and insurers to defer to the attending health care਍ഀ provider's decision on whether a claim involves "urgent਍ഀ care." 
  • ਍ഀ
਍ഀ
    ਍ഀ
  • Provision਍ഀ of Diagnosis and Treatment Codes with Internal Claims਍ഀ Decisions.਍ഀ The regulations required diagnosis and treatment codes (along਍ഀ with a description of their meanings) to be automatically਍ഀ included with notices of adverse benefit determination. The਍ഀ amendment eliminates this rule and, instead, directs plans and਍ഀ insurers to notify individuals of their right to request such਍ഀ diagnosis and treatment codes.
    ਍ഀ   
  • ਍ഀ
  • "Strict਍ഀ Adherence" to Internal Appeal Rules. The regulations਍ഀ provided that a claimant may immediately move to external਍ഀ review (and not be required to exhaust the internal review਍ഀ process) if the plan or insurer failed in any way to follow਍ഀ all of the regulatory requirements for internal review. The਍ഀ amendment eliminates the immediate external review requirement਍ഀ if the failure is:
    ਍ഀ   
  • ਍ഀ
      ਍ഀ
    • De਍ഀ minimis;
    • ਍ഀ
    • Non-prejudicial;਍ഀ
    • ਍ഀ
    • Attributable਍ഀ to good cause or matters beyond the plan's control;
    • ਍ഀ
    • In਍ഀ the context of an ongoing good-faith exchange of information;਍ഀ and
    • ਍ഀ
    • Not਍ഀ reflective of a pattern or practice of non-compliance.
      ਍ഀ  
    • ਍ഀ
    ਍ഀ
  • Provision਍ഀ of Notices in a Culturally and Linguistically Appropriate਍ഀ Manner.਍ഀ Under the amendment, a "relevant" notice sent to any਍ഀ participant whose address is in a county where at least ten਍ഀ (10) percent of the population is literate only in the same਍ഀ non-English language must include a one-sentence statement, in਍ഀ the appropriate language, that informs individuals how to਍ഀ obtain language assistance services.
    ਍ഀ  
  • ਍ഀ
  • Scope਍ഀ of External Review Process. The regulations਍ഀ provided that any adverse benefit determination may be਍ഀ externally reviewed unless it relates to an individual's਍ഀ failure to meet the plan's eligibility requirements. The਍ഀ amendment modifies this rule by limiting the type of਍ഀ determinations eligible for external review to those involving਍ഀ medical judgment or a rescission in coverage. However, the਍ഀ amendment adds that a determination of whether an individual਍ഀ is entitled to participate in a "reasonable਍ഀ alternative" under a wellness program is also subject to਍ഀ external review. 
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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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HHS Issues਍ഀ Proposed Regulations on PPACA Exchanges' Eligibility and Employer਍ഀ Standards

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
਍ഀ

HHS has recently issued proposed਍ഀ regulations that set forth the eligibility standards for enrollment਍ഀ in a qualified health plan ("QHP") and "insurance਍ഀ affordability programs" (e.g.,਍ഀ Medicaid, Children's Health Insurance Program, and premium health਍ഀ insurance tax credits) through state-based Exchanges. The proposed਍ഀ regulations also provide the requirements that employers must਍ഀ satisfy to participate in Small Business Health Options Program਍ഀ ("SHOP") Exchanges.  

਍ഀ

 

਍ഀ

The Exchanges, which were created under PPACA, are਍ഀ intended to provide competitive marketplaces so individuals and਍ഀ small businesses can directly compare available private health਍ഀ insurance options on the basis of price and quality. The Exchanges਍ഀ will be state-based and are designed to enhance competition within਍ഀ the health insurance market, improve choice of affordable health਍ഀ insurance, and provide small businesses the same purchasing power਍ഀ as large businesses.  

਍ഀ

 

਍ഀ

Under the proposed regulations, Exchanges are to਍ഀ conduct eligibility determinations for individuals seeking਍ഀ enrollment in their programs. The processes outlined in the਍ഀ proposed regulations aim to make application and enrollment fast,਍ഀ simple, and seamless for individuals while minimizing burdens on states਍ഀ by allowing them to rely on electronic data sources to verify਍ഀ applicant information where possible. Exchanges must also determine਍ഀ an individual's eligibility for premium tax credits. Eligibility਍ഀ for the credits will be based on family income, which must be at਍ഀ least one hundred (100) percent but no more than four hundred਍ഀ (400) percent of the Federal Poverty Level. When an Exchange਍ഀ determines that an individual or family is eligible for premium tax਍ഀ credits, it will notify HHS, which in turn notifies IRS of਍ഀ eligibility. IRS will then make an advance payment directly to the਍ഀ Exchange for the QHP selected by the eligible individual or family.

਍ഀ

 

਍ഀ

The proposed regulations also provide guidance on the਍ഀ standards that employers must meet to be eligible to participate in਍ഀ SHOP Exchanges. SHOP Exchanges are intended to help small employers਍ഀ enroll their employees in qualified group health insurance plans.਍ഀ Only small employers with less than one hundred (100) employees are਍ഀ considered "qualified employers" who are eligible to਍ഀ participate in SHOP Exchanges. Nonetheless, once an employer is a਍ഀ "qualified employer," it may continue to participate in਍ഀ SHOP Exchanges even if it ceases to be a small employer because of਍ഀ an increase in the number of employees. According to the proposed਍ഀ regulations, qualified employers participating in SHOP Exchanges਍ഀ are required to: 

਍ഀ
    ਍ഀ
  • provide਍ഀ employees with information about the methods for selecting and਍ഀ enrolling in a QHP via the SHOP;
  • ਍ഀ
  • notify਍ഀ the SHOP about changes concerning an employee's eligibility to਍ഀ purchase coverage through the employer;
  • ਍ഀ
  • submit਍ഀ employer contributions to the SHOP; and
  • ਍ഀ
  • provide਍ഀ employees hired outside of the initial or annual open਍ഀ enrollment period with a specified period to seek coverage਍ഀ through the SHOP, beginning on the first day of਍ഀ employment. 
  • ਍ഀ
਍ഀ

Under PPACA, regular and SHOP Exchanges are to be਍ഀ operational in each state by January 1, 2014.

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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HHS Issues਍ഀ Guidance Exempting HRAs from

਍ഀ

PPACA's਍ഀ Annual Maximum Benefit Rule

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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HHS recently issued guidance that਍ഀ exempts health reimbursement arrangements ("HRAs") from਍ഀ PPACA's restriction on annual limits for coverage of essential਍ഀ health benefits. The new guidance builds on an earlier HHS rule਍ഀ that exempts HRAs integrated with group health plans that meet the਍ഀ annual limit requirements.

਍ഀ

 

਍ഀ

Under PPACA, health plans or insurers offering group਍ഀ or individual coverage generally cannot impose lifetime or annual਍ഀ dollar limits on "essential" health benefits. However, in਍ഀ a transitional rule, grandfathered plans can impose annual limits਍ഀ of $750,000 for plan years beginning before September 23, 2011;਍ഀ $1,250,000 for plan years after September 22, 2011; and $2,000,000਍ഀ for plan years after September 22, 2012 and before January 1, 2014.

਍ഀ

 

਍ഀ

HHS previously established a temporary procedure under਍ഀ which group health plans could obtain a one-year waiver from the਍ഀ minimum annual limit, if compliance would cause a significant਍ഀ decrease in access to benefits or a significant increase in਍ഀ premiums. A group health plan that receives such a waiver is਍ഀ required to retain certain records and provide annual notices which਍ഀ inform covered individuals that the plan provides an annual benefit਍ഀ that is less than the PPACA minimum.

਍ഀ

 

਍ഀ

HHS' new guidance provides that all HRAs that were in਍ഀ effect before September 23, 2010 are automatically exempted from਍ഀ the annual limits and will not be required to apply for an annual਍ഀ limit waiver. However, to remain exempt from the annual limit਍ഀ requirement, stand-alone HRAs must comply with the record retention਍ഀ and annual notice requirements.

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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Court਍ഀ Rules Actual Receipt of COBRA Election Notice Not Required

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
਍ഀ

In Hearst v. Progressive Foam Technologies,਍ഀ Inc., the Eighth Circuit Court of Appeals recently਍ഀ considered whether an employer must ensure that employees who਍ഀ experience a COBRA "Qualifying Event" must actually਍ഀ receive COBRA election notices. Generally speaking, employers that਍ഀ sponsor group health plans are required to provide notices that਍ഀ explain the COBRA election rights to eligible employees and their਍ഀ dependents who experience a Qualifying Event, within forty-four਍ഀ (44) days after the occurrence of the event.

਍ഀ

 

਍ഀ

In Hearst,਍ഀ an employee was terminated after failing to return to work from a਍ഀ leave of absence. The employee later sued the employer, claiming਍ഀ that he never received the required COBRA election notice. The਍ഀ lower court dismissed the employee's claim because the employer਍ഀ provided a "mailing manifest" (i.e., log of daily਍ഀ mailings verified and date-stamped by U.S. Post Office) to show the਍ഀ employee's COBRA election notice was, in fact, mailed.

਍ഀ

 

਍ഀ

On appeal, the Eighth Circuit determined that the਍ഀ issue presented by Hearst਍ഀ was whether the employer sent the notice by means "reasonably਍ഀ calculated" to be received by the employee and not whether the਍ഀ employee actually received the notice. The Eighth Circuit affirmed਍ഀ the lower court's decision, agreeing that the employee's claim of਍ഀ not receiving the COBRA election notice was insufficient to਍ഀ overcome the employer's proof that the notice was mailed.

਍ഀ

 

਍ഀ

As a best practice, employers, or their COBRA਍ഀ administrators, should distribute COBRA election notices by using਍ഀ first-class mail, being sure to document such mailings with records਍ഀ that meet a court's evidentiary requirements. In general, courts਍ഀ accept business records and testimony from individuals with਍ഀ first-hand knowledge of the employer's compliance practices as਍ഀ sufficient evidence of mailing. 

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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Enrollment਍ഀ in Medicare Part A Required to Maintain Eligibility for Social਍ഀ Security Benefits

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
਍ഀ

A recent court decision could have਍ഀ significant consequences for older, active employees who wish to਍ഀ collect Social Security benefits while rejecting Medicare Part A਍ഀ benefits so that they can continue to make tax-advantaged਍ഀ contributions (or have their employer make contributions) to a਍ഀ Health Savings Account ("HSA").  

਍ഀ

 

਍ഀ

Individuals enrolled in Medicare Part A or B are਍ഀ ineligible to contribute to HSAs. However, individuals receiving਍ഀ Social Security benefits are automatically enrolled in Medicare਍ഀ Part A.

਍ഀ

 

਍ഀ

An obscure rule contained in the Social Security਍ഀ Administration's "Program Operations Manual System"਍ഀ provides that any individual who opts out of Medicare Part A਍ഀ automatically forfeits all past and future Social Security਍ഀ retirement benefits until Medicare Part A coverage is reinstated.਍ഀ Thus, an older employee who opts out of Medicare Part A in order to਍ഀ maintain eligibility for HSA contributions would also stop਍ഀ receiving Social Security benefits and would be obligated to repay਍ഀ any Social Security benefits already received.

਍ഀ

 

਍ഀ

In the recent court case Hall v. Sebelius, a group of਍ഀ plaintiffs asked a federal District Court judge to declare this਍ഀ rule unconstitutional. The plaintiffs argued that forcing਍ഀ participation in Medicare infringes on a citizen's right to make਍ഀ necessary choices about his or her health care and thereby violates਍ഀ the First, Fourth, Fifth, Ninth and Fourteenth Amendments to the਍ഀ Constitution. In addition, the plaintiffs asserted that applying਍ഀ for Social Security benefits and enrolling in Medicare are਍ഀ voluntary and that the application for each of these programs is਍ഀ not dependent on the application for the other.  

਍ഀ

 

਍ഀ

In dismissing the case, the federal judge stated that਍ഀ allowing retirees to disenroll from Medicare Part A without਍ഀ forfeiting Social Security retirement benefits would be contrary to਍ഀ Congressional intent, which was to provide mandatory਍ഀ benefits under Medicare Part A for those receiving Social Security਍ഀ retirement benefits. The judge further explained that the਍ഀ government is under no obligation to provide separate enrollment਍ഀ mechanisms for Social Security and Medicare.

਍ഀ

 

਍ഀ

To cure the inequity, the Health Care Choices for਍ഀ Seniors Act (the "Act") has been introduced in Congress.਍ഀ The Act, if implemented, would amend the Social Security Act by਍ഀ allowing Medicare eligible individuals to waive enrollment in਍ഀ Medicare Part A and automatically enroll in a "Medicare Alternative਍ഀ Voucher Program" (the "MAV Program"). Under the MAV਍ഀ Program, individuals would receive a voucher in lieu of Medicare਍ഀ Part A coverage that could be used as a contribution to an HSA or਍ഀ for the payment of premiums under a high deductible health plan. Individuals਍ഀ who enroll in the MAV Program would remain eligible to receive਍ഀ Social Security retirement benefits.

਍ഀ

 

਍ഀ

Until the Act becomes law, or the court decision is਍ഀ overturned, employees who are receiving Social Security benefits਍ഀ and who are thinking of opting out of Medicare Part A in order to਍ഀ remain eligible to make contributions to an HSA should reconsider.਍ഀ In most cases, the amount of Social Security retirement benefits਍ഀ that an individual would receive will eclipse the tax benefit਍ഀ realized by making tax-deductible contributions to an HSA or਍ഀ advantage of receiving tax exempt employer contributions.

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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III. HUMAN਍ഀ RESOURCES & EMPLOYMENT MATTERS

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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Best਍ഀ Practices Related to Workplace Harassment

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਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ ਍ഀ
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Changes in society have had a਍ഀ significant impact on what is considered permissible behavior in਍ഀ the workplace. Nevertheless, employers are legally obligated to਍ഀ maintain a workplace environment free from harassment. To meet this਍ഀ obligation, employers are advised to adopt polices that forbid਍ഀ harassment and communicate such policies to all employees through਍ഀ distribution of an employee manual and training. Employers must਍ഀ respond appropriately to complaints of harassment and take action਍ഀ when required. This article explains the practices employers should਍ഀ follow to avoid potential liability for harassment in the਍ഀ workplace.

਍ഀ

  

਍ഀ

Background

਍ഀ

  

਍ഀ

Most employees are considered "at will"਍ഀ employees and generally have no rights except those specifically਍ഀ created by statute. Federal laws have been enacted to protect਍ഀ employees from harassment in the workplace.

਍ഀ

  

਍ഀ

Harassment is defined as unwanted or unwelcomed਍ഀ offensive conduct that is severe or pervasive and motivated by one਍ഀ or more of the following categories: 1) gender, 2) race, 3)਍ഀ religion, 4) ethnicity, 5) national origin, 6) age, or 7)਍ഀ disability. 

਍ഀ

  

਍ഀ

It is unrealistic to expect employers to prevent਍ഀ harassment from ever occurring in the workplace. At the same time,਍ഀ public policy compels employers to protect employees from harassment.਍ഀ As a result, courts are challenged in determining when an employer਍ഀ is liable for harassment. Recent decisions by the United States਍ഀ Supreme Court and the appellate courts provide guidance on what is਍ഀ considered harassment and establish the expectations of employers਍ഀ and employees.

਍ഀ

  

਍ഀ

Generally, an employer is more likely to be held਍ഀ liable for the actions of its senior management. In situations਍ഀ where an employee harasses another employee of the same level, the਍ഀ employer will usually not be liable unless the employee complained਍ഀ to the employer and no action was taken.

਍ഀ

  

਍ഀ

In Faragher਍ഀ v. City of Boca Raton, the United States Supreme Court਍ഀ made it clear that employers could avoid liability for harassment਍ഀ by showing that: 1) the employer exercised reasonable care to਍ഀ prevent and promptly correct harassing behavior, and 2) the਍ഀ employee unreasonably failed to take advantage of any preventive or਍ഀ corrective opportunities provided by the employer or to otherwise਍ഀ act to avoid any harm. This is known as the Faragher਍ഀ defense.

਍ഀ

  

਍ഀ

To satisfy the Faragher਍ഀ standard, employers must: 1) adopt and implement company policies਍ഀ that prohibit harassment, 2) train employees on such policies, and਍ഀ 3) establish appropriate procedures for reporting and responding to਍ഀ incidents of harassment. Employers who fail to meet these criteria਍ഀ cannot avail themselves of the Faragher਍ഀ defense.

਍ഀ

 

਍ഀ

Company Policies and the਍ഀ Employee Manual

਍ഀ

  

਍ഀ

Employers need to establish formal policies governing਍ഀ conduct in the workplace. These policies should address the਍ഀ employer-employee relationship, clearly define the employer's਍ഀ policies, and explain to employees that the employer has a਍ഀ zero-tolerance policy regarding harassment.

਍ഀ

  

਍ഀ

The employee manual should set forth these policies਍ഀ and instruct employees on the procedures for reporting incidents of਍ഀ harassment. The manual should also explain that the employer will਍ഀ not retaliate against any employee for reporting incidents of਍ഀ harassment.

਍ഀ

  

਍ഀ

Employers must distribute the employee manual and਍ഀ ensure that each employee receives a copy. Many plaintiffs in harassment਍ഀ cases claim they were unaware of a policy or never saw the employee਍ഀ manual. Therefore, employers should have each employee sign and਍ഀ date a receipt acknowledging that the employee: 1) received a copy਍ഀ of the employee manual, 2) read the manual, 3) understood the਍ഀ manual, and 4) had ample opportunity to ask questions about the਍ഀ manual.

਍ഀ

  

਍ഀ

Finally, because employee manuals are often updated to਍ഀ reflect changes in the law, each version of the employee manual਍ഀ should state its effective date to prevent confusion over which਍ഀ employee manual an employee received.

਍ഀ

  

਍ഀ

Training

਍ഀ

 

਍ഀ

By providing training to employees, employers will਍ഀ reduce both potential exposure to litigation and the risk of਍ഀ significant legal expenses to defend a lawsuit. Training should਍ഀ begin with a review of the employee manual to ensure that all਍ഀ employees understand the rules and their responsibilities.਍ഀ Employers should ensure that all employees understand and agree to਍ഀ follow the same terms and conditions.

਍ഀ

 

਍ഀ

The next step in training is to deliver the employer's਍ഀ expectations of employees in terms of their work, attitude and਍ഀ interactions. Employees generally are more productive when they਍ഀ know what is expected of them and the consequences if they fail to਍ഀ meet such expectations.

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During training, an employer needs to make clear that਍ഀ it will not tolerate any form of inappropriate behavior. Employers਍ഀ should explain the rules governing employee conduct and the਍ഀ consequences for violating such rules, and emphasize that no਍ഀ employee, regardless of title, is exempt from these rules.

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Employers must be sure that employees understand the਍ഀ procedures for reporting incidents of harassment, including the਍ഀ person to whom incidents of harassment should be reported.

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Employers must provide supervisors with specialized਍ഀ training on how to appropriately respond to reports of harassment਍ഀ and recognize unlawful harassment. Supervisors must also be made਍ഀ aware of the relevant privacy laws and that any information learned਍ഀ in connection with a complaint must be kept confidential.਍ഀ Supervisors should also be cognizant that consistent enforcement of਍ഀ the employer's policies and procedures is required.

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Finally, employers should retain records of training਍ഀ that reflect the date, location, attendees, provider and copies of਍ഀ any training materials. These records should also confirm that the਍ഀ attendees were present for the entire program.

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Handling Complaints

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Employers must be sure they are properly prepared to਍ഀ investigate reports of harassment. The proper response to a਍ഀ harassment complaint will likely allow an employer to avoid costly਍ഀ litigation and workforce disruption. However, if a harassment਍ഀ complaint is mishandled, an employer could face litigation, legal਍ഀ fees, liability, bad publicity and workforce morale issues.

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A proper investigation is usually the product of sound਍ഀ preparation by a team that is ready to properly respond to਍ഀ harassment complaints. The team should meet promptly after receipt਍ഀ of a complaint to determine who to interview, what information is਍ഀ needed and whether an outside investigator should be retained.

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It is essential that employers maintain records of all਍ഀ such investigations. Employers should document each interview and਍ഀ have the interviewee review the record to confirm that it is਍ഀ accurate and that the interviewee had ample opportunity to express਍ഀ himself or herself. In addition, an interviewee should acknowledge,਍ഀ in writing, that he or she voluntarily provided the information਍ഀ absent any threat or duress. Finally, interview records should਍ഀ indicate the date, time and location of the interview and the਍ഀ persons present at such interview.  

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When conducting investigations, employers must be aware਍ഀ that employees have certain privacy rights. These rights must be਍ഀ balanced with the employer's obligation to maintain a workplace਍ഀ free from discrimination. As a best practice, employers should਍ഀ obtain written consent from employees prior to conducting interviews਍ഀ or investigations. 

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Employees are more likely to file lawsuits against਍ഀ employers claiming defamation and tortious interference with਍ഀ employment if they believe an investigation into their harassment਍ഀ claim was mishandled. Employers can mitigate this risk by਍ഀ developing appropriate policies, carefully conducting਍ഀ investigations, and keeping the information obtained via such਍ഀ investigations confidential.

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Conclusion

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The goal for any employer should be to maintain a਍ഀ workplace environment that is free from any form of harassment. By਍ഀ crafting, communicating, training and uniformly enforcing policies਍ഀ and procedures concerning workplace conduct, an employer can਍ഀ utilize a "best business practice" approach to reduce its਍ഀ exposure to claims of harassment.

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First਍ഀ Circuit Finds Employer Liable for USERRA Violations

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A recent decision by the First਍ഀ Circuit Court of Appeals illustrates how important it is for਍ഀ employers to understand and honor their obligations under the਍ഀ Uniformed Services Employment and Reemployment Rights Act of 1994਍ഀ ("USERRA"). In Fryer਍ഀ v. A.S.A.P. Fire & Safety Corp., Inc., the court਍ഀ held an employer liable for violating USERRA by failing to਍ഀ reinstate an employee to his pre-deployment position.

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Fryer, a member of the National Guard, returned home਍ഀ from a tour of duty in Iraq. Before his deployment to Iraq in 2007,਍ഀ Fryer had worked as a sales representative for A.S.A.P. Fire &਍ഀ Safety Corporation ("ASAP").   While serving in਍ഀ Iraq, Fryer informed ASAP that he would be returning home in 2008਍ഀ and requested that he be allowed to resume his employment at that਍ഀ time.

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When Fryer returned home, ASAP denied his request to਍ഀ return to work and informed him that his pre-service position had਍ഀ been filled. However, ASAP eventually offered Fryer a position as a਍ഀ sprinkler helper. Fryer grudgingly accepted the sprinkler helper਍ഀ position even though sprinkler helpers, unlike sales਍ഀ representatives, made no commissions and had no access to company਍ഀ vehicles or cell phones. Fryer repeatedly complained to ASAP about਍ഀ the violation of his USERRA rights until he was terminated in 2008਍ഀ for absenteeism. 

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Fryer proceeded to sue, alleging that ASAP: 1) failed਍ഀ to reemploy him in his pre-service position, 2) discriminated਍ഀ against him because of his military service, and 3) terminated him਍ഀ because of his military service. After hearing the case, the jury਍ഀ found that ASAP willfully violated USERRA and awarded Fryer਍ഀ considerable damages. Because the jury found ASAP's violation of਍ഀ USERRA was willful, the court, pursuant to USERRA, doubled Fryer's਍ഀ back pay damages. ASAP appealed the decision.

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On appeal, the First Circuit agreed with the jury's਍ഀ determination that ASAP was required to reinstate Fryer upon his਍ഀ return from Iraq. In particular, the First Circuit stated that਍ഀ "USERRA prohibits employers from denying members of the armed਍ഀ service re-employment on the basis of an employee's military਍ഀ service, and it grants members a right to reemployment following an਍ഀ absence necessitated by military service."

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The First Circuit then reviewed the jury's decision਍ഀ that ASAP willfully violated USERRA by terminating Fryer. ASAP਍ഀ asserted that it did not willfully violate USERRA because it had਍ഀ good reason (i.e., absenteeism) to terminate Fryer for਍ഀ cause. However, the court upheld the jury's willful finding and the਍ഀ lower court's doubling of Fryer's back pay award because the਍ഀ evidence indicated that ASAP's absenteeism excuse was merely a਍ഀ pretext.      

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To avoid exposure to costly litigation and liability,਍ഀ employers should be sure to review and meet their obligations under਍ഀ USERRA, as juries have a tendency towards punishing employers that਍ഀ disrespect returning military members. 

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NLRB਍ഀ Extends Implementation Date For Notice-Posting Rule

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The National Labor Relations Board਍ഀ ("NLRB") recently extended the implementation date of its਍ഀ notice-posting rule (the "Rule") from November 14, 2011਍ഀ to January 31, 2012. According to the NLRB, the extension of the਍ഀ Rule's implementation date is "to allow for enhanced education਍ഀ and outreach to employers, particularly those who operate small and਍ഀ medium sized businesses."

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The Rule requires private-sector employers who are਍ഀ subject to the NLRB's jurisdiction to post an 11 x 17 inch notice਍ഀ that apprises employees of their rights to: 1) form, join, or assist਍ഀ a union, 2) bargain collectively, 3) act together to improve wages਍ഀ and working conditions, or 4) refrain from engaging in such਍ഀ activities.  The notice also provides examples of unlawful਍ഀ employer and union conduct, and informs employees how to contact਍ഀ the NLRB with questions or complaints. Employers can obtain the਍ഀ notice from the NLRB's website at: www.nlrb.gov/poster.

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The NLRB's jurisdiction extends to most private-sector਍ഀ employers who have more than a "slight effect" on਍ഀ interstate commerce. Specifically, the NLRB's jurisdiction reaches਍ഀ retail employers who have a gross annual volume of business of $500,000਍ഀ or more and non-retail employers who buy or sell $50,000 or more of਍ഀ goods or services out of state annually. 

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The NLRB has created a Frequently Asked Questions਍ഀ ("FAQ") webpage that addresses questions regarding the਍ഀ Notice, which can be accessed at: https://www.nlrb.gov/faq/poster.   

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