COVID-19 Guidance for Employee Benefit Plans

DOL issued new COVID-19 Guidance for Employee Benefit Plans. The guidance includes a few helpful documents:

• Extension of Certain Timeframes for Employee Benefit Plans, Participants, andBeneficiaries Affected by the COVID-19 Outbreak;
• EBSA Disaster Relief Notice 2020-01; and
• Frequently Asked Questions.

Unfortunately, benefits plans issues are always complicated. Take, for example, this question that both employers and employees have been struggling with:

Q1: If my place of employment temporarily closes because of the COVID-19 outbreak, am I still covered by my employer's group health plan?

What's the answer?

As long as the employer exists, continues to sponsor a health plan, and employs you, and you continue to meet your employer's eligibility requirements, you would generally remain covered under your existing health plan, even if the employer's physical location closes

This just raises more questions. Are employees who are laid off during the quarantine still "employed?" What if they're on UC? What are the eligibility requirements? And on, and on. This guidance is a good start though.

Obamacare's three "affordability" safe harbors

The Affordable Care Act (aka "Obamacare") is complicated, but generally it requires large employers to provide "affordable" health insurance to their employees (or else pay huge fines).

So, what does "affordable" mean? Per the IRS's Q&A sheet, "If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee."

Okay... but if I'm an employer, how in the heck am I gonna know my employees' "household incomes"? You probably won't.

Ummm, do you see the problem here? Yes, but fear not! The IRS has identified three safe harbors:

(1) the Form W-2 wages safe harbor,
(2) the rate of pay safe harbor, and
(3) the federal poverty line safe harbor.

In other words, you just make sure the employee contribution is below 9.5% of: their own W-2 income; the employee's "rate of pay at the beginning of the coverage period, with adjustments permitted, for an hourly employee, if the rate of pay is decreased (but not if the rate of pay is increased)" (multiply the rate by 130-hours); or the federal poverty line.

I guess it's nice to have these safe harbors, but they seem to necessarily require capping the employee contribution at a lower rate than would otherwise be allowed. You can read the regulations here.

Can employers cut employees' hours to avoid Obamacare's employer mandate?

The Obamacare (aka Affordable Care Act) "employer mandate" generally requires large employers to provide full-time employees (30+ hours per week) with affordable health insurance. Can employers cut their employees' hours below that 30 threshold to avoid their obligations under Obamacare?

This sounds like an easy question. Employers have a right to set their employees' schedules and hours, and the employees have no vested, accrued, forward-looking right to health insurance. So, the answer must be "Yes!" of course the employer can cut their hours... right?

Not so fast. In Marin v. Dave & Buster's the Southern District of New York addressed this issue with a surprising (to me) outcome. The employee claimed that her hours were cut so that D&B could avoid the Obamacare employer mandate. She relied on ERISA Section 510, which provides:

Not official use.

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act. 29 U.S.C. § 1140.

The Court provided very little analysis, but concluded:

The critical element is intent of the employer -- proving that the employer specifically intended to interfere with benefits . . . see also Berube v. Great Atl. & Pac. Tea Co., 348 F. App'x 684, 687 (2d Cir. 2009) ("To succeed on a Section 510 claim, a plaintiff must demonstrate the employer specifically intended to interfere with benefits.") . . . .  "Discharging an employee for the purpose of depriving him of continued participation in a company-provided group health plan is a violation of section 510" . . . . Plaintiff has sufficiently and plausibly alleged this element of intent . . . . 

Accordingly, accepting as I must that these factual allegations will be proved, the complaint states a plausible and legally sufficient claim for relief, including, at this stage, Plaintiff's claim for lost wages and salary incidental to the reinstatement of benefits.

(internal citations omitted). Frankly, I'm still skeptical. This is only one district court opinion so this issue is far from resolved; but employers seeking to utilize this strategy should be aware of the risk.

Obamacare "Cadillac Tax" Delayed

The recent federal budget bill includes a few more Obamacare (Affordable Care Act ("ACA")) delays. Most notably, the "Cadillac Tax" got pushed back another two years (until 2020). The Hartman Group has a nice little white paper on the subject, Federal Budget Bill to Delay ACA’s Cadillac Tax & Suspend Two Other Taxes (.doc file):

The ACA imposes a 40 percent excise tax on high-cost group health coverage, also known as the “Cadillac tax" . . . . Although originally intended to take effect in 2013, the Cadillac tax was immediately delayed until 2018 following the ACA’s enactment. The 2016 federal budget bill would further delay implementation of this tax for an additional two years, until 2020.

I believe we're technically still waiting on President Obama to sign it, but he is expected to do so.

The Cadillac Tax has created some difficulties at the bargaining table where employers attempt to negotiate health insurance with unions - it is yet another cost of insuring employees.

SCOTUS Kills Yard-Man

When you were growing up, did you ever have a teacher return an assignment and tell you everything you did wrong... but not give you the right answer? Instead, you were just supposed to try again and figure it out for yourself? That's pretty much what Justice Thomas just did to the 6th Circuit.

On Monday, the Supreme Court issued its opinion in M&G Polymers USA LLC v. Tackett. Sometimes, employers and unions enter into collective bargaining agreements (CBAs) that provide health care benefits for retirees. The CBA usually has a set lifespan (three years is common). The issue here is whether the retiree health care benefits continue only until the CBA dies, or until the retirees die. Put another, did the CBA create a vested right to a lifetime of health care benefits?

Justice Thomas,
official portrait public domain.

Of course, the parties could have just specified the answer in the CBA - but what fun would that be? The Sixth Circuit, through a series of cases (Yard-Man and its progeny) created a presumption in favor of the retiree benefits vesting (and therefore continuing indefinitely) if a CBA was silent on the issue. Cue Justice Thomas for a unanimous court:

As an initial matter, Yard-Man violates ordinary contract principles by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements. That rule has no basis in ordinary principles of contract law.

In other words, "You know that Yard-Man presumption you've been applying? STOP IT!" But the Court never actually gives us the answer (i.e. whether the benefits vested or not in this case).

Justice Thomas just tells the lower courts to apply "ordinary contract principles," and then reminds us of some of them. For example, "the traditional principle that courts should not construe ambiguous writings to create lifetime promises" and "the traditional principle that 'contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.'"

Justice Ginsburg (joined by the rest of the liberal bloc) wrote a concurring opinion, noting some other principles. Like, "[C]onstraints upon the employer after the expiration date of a collective-bargaining agreement . . . may arise [from] implied terms of the expired agreement." And, if the CBA is ambiguous, the Court "may turn to extrinsic evidence—for example, the parties’ bargaining history" to determine if the parties intended the health benefits to vest.

Now go back and try again, 6th Circuit, and remember what Justice Thomas told you.

Employer Mandate Extension Attacked as Unconstitutional

On Friday, the U.S. House of Representatives filed this Complaint, alleging that President Obama's unilateral delay and alteration of the Obamacare employer mandate was unconstitutional.

The Patient Protection and Affordable Care Act (aka "Obamacare") includes an "employer mandate." Large employers, defined as having at least 50 full-time employees (or 50 FTEs), must provide health insurance for their full-time employees or else pay a penalty. The mandate was supposed to begin on January 1, 2014.

However, the Obama administration decided to delay implementation of the mandate until 2015. Even in 2015, the administration will only enforce the mandate for employers with more than 100 employees who fail to cover at least 70% of their full-time employees. Further still, even in 2016, the administration will only enforce the mandate for employers who fail to cover 95% of their full-time employees.

The House's argument is pretty simple: The president can't re-write the law to change dates, and which employers are covered, and how many employees the employer needs to insure. That's a pretty clear legislative function.

President Obama (more specifically, the executive officers and departments named in the Complaint) has not filed an answer yet. Presumably he will argue some type of executive discretion to phase in the legislation and some discretion to target only the most egregious offenders in the law's early implementation.

Frankly, I don't know enough about this area of the law to assess how strong of an argument that will be. Also, there will be some question of whether the House has standing to even file such a lawsuit. I should note that part of the lawsuit challenges public funding of programs for which Congress has not allocated funds. It will definitely be interesting to see how this plays out.

This is not directly on point, but if you missed SNL's I'm just a bill/executive order skit then you should definitely check it out.

SCOTUS Arguments on Retiree Benefits in CBAs

I love it when current events perfectly align with my lesson plan for my employment law class at Penn State. Yesterday, we discussed health insurance and the reading assignment included this tidbit:

Unionized employees have had some success in arguing that retiree health benefits obtained through collective bargaining are not revocable, particularly in the absence of any clear contract language authorizing the employer to modify or terminate the benefits.

Employment Law for Human Resource Practice (4th Ed.) by David J. Walsh, p. 452. As luck would have it . . . this exact issue was before the Supreme Court on Monday!

The case is M&G Polymers USA, LLC v. Tackett, and you can read the transcript from the oral arguments here. The issue is whether retiree health benefits in a CBA vest immediately and continue indefinitely or if they are subject to change (most notably upon termination of the CBA).

Of course, the parties could specify that in the CBA - but life's never that easy. What happens if the CBA is silent on the subject? Do we look outside the CBA to discern the parties' intent? Will the Court impose a presumption one way or the other?

As I told my class yesterday, if the Court imposes a strong presumption (regardless of whether it's a presumption that the benefits vest and continue, or do not survive the termination of the CBA), that should solve the problem moving forward. The parties will simply know what the "default" is and if they want something else, they can bargain for it and include express language overriding the presumption in the CBA.

We'll have to wait and see what SCOTUS does with this one . . . .

Obamacare Opinions Galore!

Wow, busy day for Obamacare yesterday. The big story is that a circuit split developed in the span of a few hours.

The gist of the issue is that the Obamacare statute (aka "Affordable Care Act") authorizes the government to subsidize health insurance for individuals who purchase a plan from an exchange "established by the State under section 1311." However, only 14 states (and D.C.) have established their own exchanges. In the remaining states (including Pennsylvania), the federal government has established an exchange under section 1321. The federal government has been subsidizing purchases off of the federal exchanges as well . . . but with no express statutory authority.

The D.C. Circuit yesterday, in a split opinion, stuck to the literal reading of the statute in Halbig v. Burwell. The Court remanded to the trial court to vacate the IRS rule allowing the subsidies for purchases from the federal exchanges. Meanwhile, the Fourth Circuit reached the opposite conclusion in King v. Burwell. The Fourth Circuit emphasized the context of the statute and deferred to the IRS's interpretation, upholding the subsidies to federal exchanges.

Is this issue headed to another SCOTUS Obamacare showdown? We'll see. The parties may opt to seek an en banc rehearing in either court, which could remove the circuit split (one factor the Supreme Court looks to when deciding whether to accept a case).

In yet another opinion on a different issue, a district court tossed Senator Johnson's lawsuit re: congressional health plans.

Unrelated sidenote: I want to emphasize the importance of typography. Look at the D.C. Circuit opinion and then look at the Fourth Circuit opinion. Do you see any differences in how the two documents looks? D.C.'s is beautiful - SCOTUS-esque. The Fourth Circuit's? Not so much.

Breaking: SCOTUS Affords Religious Exemption to Obamacare Contraceptive Mandate for Certain Employers

Well, it has been a big day at SCOTUS. Now, we have the opinions in Hobby Lobby and Conestoga Wood. The introductory paragraph from Justice Alito's majority opinion:

We must decide in these cases whether the Religious Freedom Restoration Act of 1993 (RFRA), 107 Stat. 1488, 42 U. S. C. §2000bb et seq., permits the United States Department of Health and Human Services (HHS) to demand that three closely held corporations provide health-insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies’ owners. We hold that the regulations that impose this obligation violate RFRA, which prohibits the Federal Government from taking any action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest.

I'll need some time to digest the full opinion - but that's the gist of it.

SCOTUS Grants Cert. in Retiree Benefits / Collective Bargaining Case

On Monday, the Supreme Court granted certiorari in M&G Polymers U.S.A. v. Tackett. You can view the order here and the SCOTUSblog case page here. SCOTUS limited its grant to only the first question presented in the petition for certiorari:

1. Whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.

As you can see, Third Circuit (my home circuit) precedent is on the line here.

Lawffice Links - Hobby Lobby SCOTUS Oral Arguments

Last week, the Supreme Court heard oral arguments in Sebelius v. Hobby Lobby (aka the Obamacare Contraceptive Mandate Case). I baked some Lawffice Links for the occasion:

• First, check out the SCOTUSblog page for Sebelius v. Hobby Lobby, and a friendly reminder that there is a companion case straight out of my home state of Pennsylvania, Conestoga Wood Specialties Corp. v. Sebelius.
• You can check out the transcript from oral arguments here. And, the audio is now available here. 
• SCOTUSblog's argument recap.
• The Wall Street Journal live-blogs the craziness. 
• Did I mention that a woman hand-knitted a uterus for Hobby Lobby?

I suspect this will be one of the last SCOTUS opinions of the year, sometime in late June.

Litigation Twitter Accounts? Hobby Lobby Says "Yes"

Yesterday, I came across the Twitter account for @HobbyLobbyCase (as I type this, Google Blogger politely nudges me that it is also a Google Plus account +Hobby Lobby Case ). I guess I shouldn't be surprised, but I find this fascinating.

As my readers may recall from past entries, the Supreme Court will hear a challenge to the Obamacare contraception mandate from Hobby Lobby, a closely held corporation. The case will test the religious freedoms of such corporations against the mandates of the ACA. Oral arguments are today.

The case's Twitter account appears to be managed by Hobby Lobby itself. What kinds of things do they post? Well, this infographic is a good example:


I'm guessing we'll see a lot of websites, twitter accounts, and facebook pages for some big cases that generate a lot of public interest. Is it right for all cases? Probably not. It's an interesting concept though.

I've been following Hobby Lobby (and the various contraceptive mandate cases) for awhile now. So, I'll keep you posted as this thing unfolds.

Do you have any other examples of a party using social media in connection with strategic litigation? Drop a comment!

Another Obamacare Employer Mandate Delay

I suppose this warrants another blog entry. Although, let's be honest . . . at this point it would be more surprising if the administration actually started enforcing the law as written. In any event, another day, another Obamacare delay.

As the linked LA Times article explains, the employer mandate will now be phased in until 2016:

Under the latest regulations, only employers with more than 100 full-time workers will have to pay fines next year and only if they do not cover at least 70% of those workers. 

In 2016, when the full mandate takes effect, employers with more than 50 full-time employees will have to provide insurance to at least 95% of their employees.

I don't think I need to tell you, but stay tuned! Who knows what changes will pop up next.

Lawffice Links - Pending Obamacare Challenges

Oh c'mon, you didn't think NFIB v. Sebelius (opinion here) would be the end of the Obamacare legal challenges did you? Here, digest some Lawffice Links to keep you up to speed:

• The big news from last week was that SCOTUS granted certiorari in two of the "contraception mandate" cases: Sebelius v. Hobby Lobby Stores, Inc. and from the 3d Cir., Conestoga Wood Specialties Corp. v. Sebelius (SCOTUSblog case sites). The cases will generally address the religious rights of closely held corporations versus the ACA's contraception mandate.
• To help you understand the issues in the contraception mandate cases, Eugene Volokh has promised heavy blogging on the subject. He appears to be using the tag "Hobby Lobby" so this link should take you to his posts.
• SCOTUS denied cert in a case seeking review of the employer mandate (and a few other issues).
• WSJ has Obamacare's Next Legal Challenge, a challenge to the IRS's tax penalties in states that did not create their own exchanges (HT: Josh Blackman).
• Still not enough Obamacare litigation? Don't forget to check out the Long-Shot Legal Challenges to Health Care Law in the USA Today.

Phew! That should keep you busy for awhile. 

Obamacare Individual Mandate Extension

This should hardly come as a surprise given the . . . shall we call it, "less than optimal" . . . rollout of the Affordable Care Act (aka "Obamacare") website. The Associate Press reports:

With website woes ongoing, the Obama administration Monday granted a six-week extension until March 31 for Americans to sign up for coverage next year and avoid new tax penalties under the president's health care overhaul law.

The extension applies to 2014 only.

A little known Lawffice Space secret: Before I became an attorney I was an information technology consultant in the DC area for about eight years, working primarily on federal contracts. I assure you that federal contractors are perfectly capable of creating databases, designing websites, capturing data, integrating multiple systems, and collaborating with multiple contractors to bring the pieces together - especially with the hundreds of millions of dollars supposedly available here. It's disappointing, and frankly baffling, how and why something as important as healthcare.gov could go so terribly wrong.

Contractors are blaming the federal government for last-minute changes and a lack of full system testing. It sounds like they just pushed something into production before it was ready; probably because of the *ahem* firm (until the Obama administration arbitrarily changes them) deadlines. In any event, the technology will surely get fixed. Meanwhile, the policy debate will rage on.

In Review: Unprecedented - The Constitutional Challenge to Obamacare

It's not everyday that a friend and law school classmate publishes a book that overlaps with my profession. In fact, I don't think it has ever happened before. So, I guess you could call it . . . wait for it . . . Unprecedented! <- See what I did there. My Mason Law classmate, Josh Blackman, published Unprecedented: The Constitutional Challenge to Obamacare.

Unprecedented tells the tale of the 2012 blockbuster Supreme Court case, NFIB v. Sebelius (aka the constitutional challenge to the Patient Protection and Affordable Care Act or "Obamacare"). Prof. Blackman takes us from the casual conversations that spawned the strategy for the litigation, to the scramble of state attorneys general to initiate the litigation, to the lower court decisions, and ultimately to the Supreme Court case itself.

Prof. Blackman does a particularly good job of explaining the context of the litigation, and the history of health care reform leading up to the ACA. Readers will learn about the Reagan-era (yes, Reagan) legislation that made the individual mandate a necessary component of the ACA, the early conservative (yes, conservative) mandate proposals, and the similar flips and flops from prominent liberal proponents of the ACA (including a trip down not-so-distant memory lane of Obama's opposition to "Hillarycare's" mandate).

I thoroughly enjoyed Unprecedented from beginning to end. Prof. Blackman was present for a number of "behind the scenes" events, which provides a personal touch to a sometimes-sterile topic. Although I have greater familiarity with the law in this area than most, I still think it is accessible and understandable to laypeople (or attorneys who have only the vaguest understanding of it). The book strikes a nice balance of providing in-depth coverage while not getting bogged down in minutiae.

I don't think Blackman's ideology is any secret (I mean, he once had a John Galt license plate). That said, I think his commentary stayed pretty objective, although he did include some critical analysis of the law and the courts' decisions. I think people of all political stripes will enjoy Unprecedented and learn about health care reform along the way.

They're Heeeerrrreeee . . . Obamacare Exchanges Go Live

Just a quick reminder that the Affordable Care Act's Health Insurance Marketplace is open for business! I don't know what it says about me as a person that the first thing I did when I got up this morning was check out the new website to see what it looked like . . . . but that's what I did.

In any event, another reminder for employers: If you haven't already given your employees the required notice, today is the extended deadline.

The Obamacare Employer Mandate that's Still On

First post of the week on Thursday!? What's up with this dereliction of duty!? Sorry, it has been busy week.

I wanted to remind employers of an Obamacare mandate that as far as I know is still "on" - i.e. not delayed until next year like the employer insurance mandate. Under new provisions in the Fair Labor Standards Act, passed as part of the Affordable Care Act:

In accordance with regulations promulgated by the Secretary, an employer to which this chapter applies, shall provide to each employee at the time of hiring (or with respect to current employees, not later than March 1, 2013), written notice--

(1) informing the employee of the existence of an Exchange, including a description of the services provided by such Exchange, and the manner in which the employee may contact the Exchange to request assistance;

(2) if the employer plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code of 1986 and a cost sharing reduction under section 18071 of Title 42 if the employee purchases a qualified health plan through the Exchange; and

(3) if the employee purchases a qualified health plan through the Exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

29 U.S.C.A. § 218b. Of course, we all know silly things like laws are just recommendations with no actual binding effect, right? (sadly, I'm not sure if that's sarcasm or honest analysis).

The Department of Labor has announced that employers may ignore that March deadline, and announced a new deadline of October 1, 2013. For the Department's specific guidance, see Guidance on the Notice to Employees of Coverage Options under Fair Labor Standards Act §18B and Updated Model Election Notice under the Consolidated Omnibus Budget Reconciliation Act of 1985.

Fox Business has some more coverage, and suggests that employers face a $100/day fine for noncompliance.

Image: DOL Seal - Not official use.

Third Circuit Rejects Corporate Free Exercise Under the First Amendment

A Pennsylvania for-profit corporation sought an injunction, arguing that Obamacare regulations infringed upon its First Amendment right to the free exercise of religion (also raising an issue under the Religious Freedom Restoration Act (RFRA)). The regulations in question "require group health plans and health insurance issuers to provide coverage for contraceptives."

On Friday, the Third Circuit issued its opinion in Conestoga Wood Specialties Corp. v. Sec. of U.S. H.H.S., concluding: "[F]or-profit, secular corporations cannot engage in religious exercise." This creates a circuit split with the Tenth Circuit (a messy splintered en banc opinion remanding to the district court - but generally recognizing that corporations can exercise religion under the RFRA).

Will this circuit split lead to SCOTUS? We'll see. How would SCOTUS decide the issue? Well, we know the high court has already recognized that corporations have First Amendment rights in Citizens United. And we know that SCOTUS has recognized a ministerial exception under the ADA in Hosanna-Tabor (recognizing organizational free exercise rights under the First Amendment). So, I have to think the smart money is on SCOTUS recognizing a corporate First Amendment free exercise right (or at least a statutory right under the RFRA). We'll see though.

Image: Third Circuit seal used in commentary on Third Circuit decision. Not official use.

"Job Sharing" Around Obamacare's Employer Mandate

It goes without saying, but I'll say it anyways: Obamacare is complicated. But the general premise of the employer mandate is simple: Large employers must either provide healthcare to their full-time employees or pay a fine.

Under the Affordable Care Act (aka "Obamacare"), a full-time employee is generally defined as someone who works over 30 hours per week. Some employers have started cutting employees' hours to get below that magic threshhold.

CNN Money has an interesting article about employers who already took steps to exclude employees from the mandate:

Some Fatburger owners even began "job sharing" with other businesses, teaming up to share a higher number of employees all working fewer hours. Someone could work 25 hours at one Fatburger, 25 at another one with a different franchise owner, and still not be a full-time worker under Obamacare rules.

This allows employers to provide full-time hours for their employees, but still excludes them from the mandate. Of course, as the article points out, the mandate is on hold until 2015.