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Employee Benefits Blog

Insights on Employee Benefits and Executive Compensation

SEC No-Action Letter Permits Non-ERISA Retirement Plans to Issue Participant Fee Disclosures Without Violating Securities Laws

Posted in Retirement Plans

The U.S. Securities and Exchange Commission (SEC) issued a no-action letter on February 18, 2015, that extends relief from SEC Rule 482 to sponsors of certain retirement plans exempt from ERISA. The relief permits sponsors of non-ERISA plans to follow final U.S. Department of Labor regulations for participant-level fee disclosures, provided the sponsor complies with several conditions set forth by the SEC.

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C-Suite – Changing Tack on the Sea of Data Breach?

Posted in Employment, Privacy and Data Security

The country awoke to what seems to be a common occurrence now: another corporation struck by a massive data breach.  This time it was Anthem, the country’s second largest health insurer, in a breach initially estimated to involve eighty million individuals.  Both individuals’ and employees’ personal information is at issue, in a breach instigated by hackers.

Early reports, however, indicated that this breach might be subtly different than those faced by other corporations in recent years.  The difference isn’t in the breach itself, but in the immediate, transparent and proactive actions that the C-Suite took.

Unlike many breaches in recent history, this attack was discovered internally through corporate investigative and management processes already in place.  Further, the C-Suite took an immediate, proactive and transparent stance: just as the investigative process was launching in earnest within the corporation, the C-Suite took steps to fully advise its customers, its regulators and the public at-large, of the breach.

Anthem’s chief executive officer, Joseph Swedish, sent a personal, detailed e-mail to all customers. An identical message appeared in a widely broadcast press statement.  Swedish outlined the magnitude of the breach, and that the Federal Bureau of Investigation and other investigative and regulatory bodies had already been advised and were working in earnest to stem the breach and its fallout.  He advised that each customer or employee with data at risk was being personally and individually notified.  In a humanizing touch, he admitted that the breach involved his own personal data.

What some data privacy and information security advocates noted was different: The proactive internal measures that discovered the breach before outsiders did; the early decision to cooperate with authorities and press, and the involvement of the corporate C-Suite in notifying the individuals at risk and the public at-large.

The rapid and detailed disclosure could indicate a changing attitude among the American corporate leadership.  Regulators have encouraged transparency and cooperation among Corporate America, the public and regulators as part of an effort to stem the tide of cyber-attacks.  As some regulators and information security experts reason, the criminals are cooperating, so we should as well – we are all in this together.

Will the proactive, transparent and cooperative stance make a difference in the aftermath of such a breach?  Only time will tell but we will be certain to watch with interest.

DOL Extends FMLA Spousal Leave Rights to Same-Sex Spouses in All States

Posted in Employment

On February 23, 2015, the U.S. Department of Labor (DOL) Wage and Hour Division published its final rule regarding the definition of “spouse” under the Family and Medical Leave Act (FMLA).  Specifically, the rule recognizes all lawful same-sex spouses for purposes of FMLA leave, regardless of the couple’s state of residence.  This final rule takes effect on March 27, 2015.

The FMLA permits eligible employees to take unpaid leave to care for a spouse with a serious health condition.  Under the final rule, the DOL adopts the “state of celebration” rule in determining who is considered a spouse for these purposes.  Accordingly, an eligible employee who has married a same-sex spouse in any state is permitted to take advantage of spousal FMLA leave, regardless of whether the couple resides in a state where same-sex marriage is recognized.  The DOL previously adopted a “state of residence” rule for purposes of the FMLA, meaning an employee could take advantage of FMLA leave to care for a same-sex spouse only if the couple resided in a state where same-sex marriage is recognized.  The “state of celebration” rule is consistent with the approaches adopted by the DOL and the Internal Revenue Service for purposes of other laws governing employee benefits.

Employers must review and revise their FMLA leave policies in light of this new definition to ensure spousal FMLA leave is extended to same-sex couples residing in all states beginning March 27, 2015.

UK Employment Alert: Flexibility Clauses: Worth the Paper They’re Written On?

Posted in Employee Benefits, Employment

A recent decision by the Employment Appeal Tribunal (Norman & Others v National Audit Office [2014] UKEAT 0276/14/1512) has emphasised the need for employers to ensure that “flexibility clauses” are drafted unambiguously and have contractual effect if they are to be effective.

Read the full article.

Sharp Questions Dominate Supreme Court Oral Arguments Regarding the Challenge to the Availability of ACA Premium Tax Credits

Posted in Benefit Controversies, Health and Welfare Plans

On March 4, 2015, the Supreme Court of the United States heard oral arguments in King v. Burwell, the highest profile challenge to the Affordable Care Act (ACA) since the Supreme Court’s 2012 decision to uphold the law.  The oral arguments featured sharp questioning of both sides.  A decision is anticipated in June to determine whether the high court will maintain the status quo with respect to the availability of premium tax credits to lower-income exchange customers in all states.

Read the full article.

SEC Proposes Disclosure Rule for Hedging Transactions by Directors, Officers and Employees

Posted in Executive Compensation

The U.S. Securities and Exchange Commission recently issued a proposed rule that would require public companies to disclose in annual proxy statements whether their employees and board members may hedge or otherwise offset any decrease in the market value of such companies’ equity securities. The proposed rule implements Section 955 of the Dodd-Frank Act and covers a broader range of transactions than typical hedging policies.

Read the full article.

German Employment Update – Obesity May Qualify as Severe Disability

Posted in Employment

European employers should exercise caution in the event of the dismissal of an obese employee.  The European Court of Justice (ECJ) determined that obesity may qualify as severe disability if it significantly restricts participation in working life (ECJ, judgment of December 18, 2014 in Case C-354/13).  This decision may be relevant not only for dismissals but also in hiring decisions. In order to avoid undue discrimination, an employment rejection letter should in no way whatsoever refer to the applicant’s weight.  The plaintiff in the present case was an obese nursery teacher who filed a suit against his employer, the Danish community Billund, because of his dismissal.  The employer argued that the dismissal was due to declining numbers of children being registered.  The nursery teacher argued that the reason for his dismissal, after 15 years of employment, was his obesity, which constituted undue discrimination due to disability.

The ECJ clarified that European Union law does not contain a general prohibition with respect to obesity discrimination in employment.  Nevertheless, obesity may qualify as severe disability if it significantly interferes with full and equal participation in working life.  This can happen in cases of a particularly serious obesity of long duration, which causes physical, intellectual and mental impairment.  According to this definition, the cause of the obesity is irrelevant.  Now, following the decision of the ECJ, the Danish trial court has to decide if the nursery teacher’s obesity significantly interferes with full and equal participation in working life.

The decision of the ECJ may have significant impact on German employment law.  Up until now, only conditions resulting from obesity (e.g., diabetes or chronic back pain) qualified as a severe disability.  Following the decision of the ECJ, obesity itself may qualify as severe disability.  It remains to be seen whether – and, if so, at which level –the ECJ will establish thresholds under which a dismissal or a rejection of an applicant is considered discriminatory due to obesity.  Until then, the decision of the ECJ gives rise to considerable legal uncertainty.

IRS Publishes Final Forms and Instructions on Information Reporting Under the Affordable Care Act

Posted in Health and Welfare Plans

The Internal Revenue Service (IRS) published final forms and instructions addressing information reporting requirements applicable to employers and insurers under Internal Revenue Code Sections 6055 and 6056. The reporting requirements are effective for tax years beginning in 2015, with the first report due in 2016 for 2015 coverage.

The Affordable Care Act (ACA) generally requires individuals (with limited exceptions) to maintain minimum essential coverage or pay an individual shared responsibility payment with their annual federal income tax return. The IRS will use the information reported by employers and insurers under the information reporting requirements of the ACA to determine individual compliance with the individual shared responsibility requirements and to determine individual eligibility for premium tax credits.

Reporting of Minimum Essential Coverage

Code Section 6055 imposes annual information reporting requirements on insurers, employers that self-insure group health plans and certain other providers of minimum essential health insurance coverage. These entities are required to file annual returns reporting information about the entity and specific information for each individual for whom minimum essential coverage is provided. Covered entities will report the required information to the IRS and to covered individuals on Form 1095-B (click here for instructions). Entities should use Form 1094-B to transmit Form 1095-B to the IRS.

Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans

Code Section 6056 imposes annual information reporting requirements on applicable large employers (generally defined as employers with 50 or more full-time employees) that are subject to the employer shared responsibility provisions of Code Section 4980H. These large employers are required to report to the IRS the health insurance or self-insured health care coverage the employer provides to its full-time employees. The return filed with the IRS will describe the health care coverage the employer provides to its full-time employees, including a list of full-time employees, the coverage offered to each full-time employee and the months to which the coverage applied. Entities will report the required information to the IRS on Form 1095-C (click here for instructions), and to each of their full-time employees. Entities should use Form 1094-C to transmit Form 1095-C to the IRS.

Next Steps

Employers sponsoring group health plans should prepare for compliance with the ACA’s information reporting requirements by reviewing their systems to ensure they are able to capture the necessary information to be reported to the IRS based on the above forms.

Supreme Court Rejects Sixth Circuit’s Yard-Man Inferences in M&G Polymers USA, LLC v. Tackett

Posted in Benefit Controversies, Health and Welfare Plans

M&G Polymers USA, LLC v. Tackett, a recent unanimous decision by the Supreme Court of the United States, is a game changer. By expressly repudiating the U.S. Court of Appeals for the Sixth Circuit’s 1983 Yard-Man decision and the many decisions following it, the Supreme Court rejected three decades of Sixth Circuit law inferring that retiree health benefits are vested for retirees’ lives, and provided new clarity in interpretation of retiree medical benefits under collective bargaining agreements.

Read the full article.