Not according to James Kwak, a law professor at the University of Connecticut, who writes The Baseline Scenario blog.

The problem, says Kwak, isn’t simply employees’ inability to adequately sock away enough money for retirement,which study after study would lead employers and employees to believe.

The major underlying issue is the “deeply flawed ‘system’ of employment-based retirement plans that shifts risk onto individuals and brings out the worse of everyone’s behavioral irrationalities,” he said.

Essentially, Kwak’s argument is that the majority of defined-contribution plans (401ks, 403bs, etc.) consist of expensive, actively managed mutual funds that either:

• logically cannot beat the market on an expected, risk-adjusted basis, or
• overwhelmingly fail to beat the market on a risk-adjusted basis.

As a result, these plans could be in violation of ERISA.

 ’Violates the existing fiduciary duty’

Granted, the DC retirement plan model is far from perfect, as many retirement-ready participants found out when the market crashed in 2008. But isn’t it a stretch to say that a high percentage of employers are breaking the law with the retirement plans they’re offering employees?

Not really, says Kwak, because offering costly, under-performing investments, “violates the existing fiduciary duty of employer and plan trustees to invest participants’ money prudently.”

And there have been a few high-profile cases where employees have successfully argued that their employers — as plan sponsors — didn’t do enough to negotiate lower fees, and therefore, violated their fiduciary duties and ERISA.

Still, the idea that most plan sponsors are technically in violation of their fiduciary duties is a pretty extreme notion.

DOL partly to blame

Another interesting point Kwak made: The DOL is partly to blame because of its lack of clear guidance on the role of a fiduciary and its duties.

And he even offers a recommendation to the feds — as well as a prediction for what would happen for 401k participants if that recommendation is followed: “the Department of Labor should clarify its guidelines under ERISA (which could be done without Congressional action) to make it clear that actively managed funds create potential liability for plan fiduciaries.”

Should this happen, Kwak says: “The likely result is that most plans would shift to index funds in order to avoid liability, investor costs would fall by about 80 percent, and, in aggregate, investors would do slightly better than before even on a gross (before fees) basis.”

The post Most firms’ 401ks are potentially illegal, says legal expert appeared first on HR Benefits Alert.

Exchange notices, SBC changes

The most recent guidance came from the DOL and offered some highly anticipated info on the notices that businesses are required to distribute to employees on the availability of health insurance exchanges.

If you remember, employers were initially scheduled to distribute these notices back in March, but the feds pushed back that compliance deadline because they decided it was “impracticable” for firms to hand out the notices since many of the state exchanges haven’t been set up – and they don’t become operational until Jan. 1, 2014 (although open enrollment is scheduled to begin this October).

Now the DOL says employers must provide this notice to all current employees by October 1, 2013 — and new employees hired after that date must receive the notice at the time of their hire. Then, starting in 2014, new hires must receive the notice within 14 days of their start date.

In addition to guidance, the agency issued two model notices that employers can use to satisfy the Obamacare exchange notice requirement.

The first model notice the DOL released is meant for firms that offer health insurance to some or all of their workers. The second notice is for businesses that don’t offer a health plan.

Also, the DOL released a revised COBRA Model Election Notice, which includes info about the health insurance exchanges, as well as a redline document that shows the changes to the initial COBRA notice.

Prior to its guidance on the exchange notices, the DOL released an FAQ that included info on changes to the Summary of Benefits and Coverage (SBCs) documents employers are required to distribute, as well as model SBCs firms can use to comply with this Obamacare provision.

HRA, HSA contributions

In addition to the DOL’s exchange notice guidance, the IRS issued a proposed final rule to clarify a number of Obamacare provisions.

One major area of clarification: How employer contributions toward health reimbursement arrangements (HRAs) and health savings accounts (HSAs) should be counted when it comes to determining a plan’s minimum value.

When it comes to HSAs, employers’ contributions should be used when calculating a plan’s minimum value or “metal” level.

Employers’ contributions to a HRA can also be factored into the minimum-value equation as long as those contributions aren’t used to pay premiums.

Also, as the feds clarified previously, HRAs must be integrated with an employer-sponsored health plan to comply with the Obamacare rules on lifetime and annual limits.

Minimum value, affordability & wellness

The IRS guidance also clarified how employer-sponsored wellness program incentives will factor in to determining whether a health plan meets the minimum value and affordability standards under Obamacare.

A previous HR Benefits Alert report covers what the feds said in detail, and offers a few examples of how this guidance is likely to impact employers’ wellness plans moving forward.

The post Breaking down the barrage of new Obamacare guidance & forms appeared first on HR Benefits Alert.

Just weeks ago, a Davenport, IA, jury awarded 32 intellectually disabled men $240 million in damages for the way they were abused by their employer, Hill Country Farms (d.b.a., Henry’s Turkey Service), a turkey processing outfit.

Award slashed

But in what must have come as a big blow to the workers, the EEOC just acknowledged in a post-trial brief the award — which was being touted as the largest in the agency’s history — must be slashed significantly to $1.6 million due to a federal cap on damages for a company with less than 101 employees.

That means instead of each worker being slated to receive $7.5 million, which the EEOC said was an “appropriate and meaningful measure of the actual harms suffered by these victims of discrimination,” they’ll only recover $50,000 each, plus interest.

Add those figures to a wage discrimination judgment levied against Henry’s Turkey Service last fall, and the damages awarded to each man will total $2.9 million.

Suffered injustices

The EEOC filed suit, under the ADA, against Henry’s Turkey Service after it came to light that the company was abusing the men, who were tasked with eviscerating turkeys.

The suit claims the workers’ disability made the men particularly vulnerable to abuse because they were unaware of the extent to which their rights were being denied and violated.

Some of the things the workers had to endure, according to the EEOC’s suit:

• hitting and kicking by co-workers
• name-calling — “retard,” “stupid” and “dumb a**”
• being restrained or confined to rooms (with at least one reported case of handcuffing)
• denials of bathroom breaks
• being housed in “deplorable and sub-standard living conditions”
• having to carry heavy weights as “punishment,” and
• being denied medical care.

The EEOC said the treatment had gone on for 20 years, but the lawsuit only covered the period between 2007 and 2009.

It was even reported that company supervisors and the workers’ supposed caretakers often dismissed the employees complaints of injuries and pain.

Denied proper wages

As if all of that wasn’t bad enough, last September Henry’s Turkey Service was found guilty of another violation of the ADA after it was discovered the company paid the disabled workers substandard wages.

A federal judge awarded $1.3 million in back wages to the workers — between $28,000 and $45,000 per individual — because they should’ve been paid an amount equal to what other non-disabled workers were paid for doing the same work, which was between $11 and $12 per hour. But instead, they only received $65 per month.

Cite: EEOC v. Hill Country Farms

The post EEOC hits biz with huge discrimination suit for unconscionable acts appeared first on HR Benefits Alert.

Rhonda Jones worked for Fabricut, a distributor of decorative fabrics, as a temporary worker. As her temp assignment was coming to an end, Jones applied for a permanent position.

Fabricut offered her permanent employment. But as part of the offer, Jones had to visit a medical examiner, Knox Laboratory, which was contracted to screen Fabricut applicants.

Knox Laboratory required Jones to fill out a questionnaire asking her about the existence of heart disease, hypertension, cancer, tuberculosis, diabetes, arthritis and mental disorders in her family. Jones then underwent an extensive medical examination.

The laboratory determined from the pre-employment screening that Jones had carpal tunnel syndrome.

And although her personal physician gave her a clean bill of health following the Knox screening, Fabricut rescinded its job offer anyway.

Violation of GINA

The EEOC filed suit, claiming Fabricut violated GINA.

The law, which was enacted in 2008 and took effect in 2009, prohibits employers from requesting, requiring or purchasing employees’ (and perspective employees’) genetic health information — a.k.a., family medical history. GINA also makes it illegal to discriminate against employees or applicants because of their family medical history.

Fabricut — perhaps seeing the error of its ways — agreed to settle the lawsuit by paying $50,000 in relief to Jones, as well as post an anti-discrimination notice for its employees, disseminate anti-discrimination policies to its employees and provide anti-discrimination training to employees with hiring responsibilities.

The EEOC also alleged Fabricut violated the ADA, which prohibits employers from discriminating against individuals with disabilities — or individuals regarded as having disabilities.

Two takeaways for employers

Although Fabricut’s case seems like a pretty cut-and-dried illustration of discrimination under GINA, it provides two valuable reminders for employers:

• Review third-party providers’ procedures and forms that apply to your workers or applicants, because your company will be liable for a violation by that party if it stems from a contract or policy your company created, and
• Revisit GINA’s anti-discrimination laws with supervisors and managers in charge of screening applicants — so they know what types of questions are off limits.

Cite: EEOC v. Fabricut, Inc.

The post Employer commits $50K GINA mistake: How to avoid the same fate appeared first on HR Benefits Alert.

Express Oil Change, an automotive maintenance and repair chain, had a self-funded healthcare plan for its employees. And to shield itself from exceptionally large insurance claims, it purchased stop-loss coverage from Blue Cross.

The stop-loss policy provided claims coverage for member medical claims that exceeded $75,000. It also imposed a lifetime $1 million maximum on benefits on plan participants

But — and here’s the catch for Express — the maximum only applied to certain services, like out-of-network claims. Meanwhile, Express was under the impression its stop-loss policy capped all benefits under its self-funded plan at $1 million.

Wrong!

Major medical problems for newborn

Express found out the hard way that the cap didn’t apply to a lot of the benefits one of its plan members was receiving — like those in-network and those spanning multiple years.

An Express employee gave birth to premature twins, and one of them had serious medical problems. Over the next few years the employee’s child quickly amassed $2.8 million in in-network claims, and Express found itself on the hook for $1.8 million in claims above and beyond its stop-loss coverage.

Express then sued the insurance agents that turned it on to the Blue Cross plan — and Blue Cross itself — trying to get them to pay for its costly gap in coverage.

Express claimed either the agents or Blue Cross should’ve made the gap in coverage more clear.

The lesson from the case: Read the fine print.

The court shot down all of Express’ claims, except for one: its breach of fiduciary duty claim against the agents. That claim was allowed to move forward, but hasn’t been decided yet.

Express argued the agents were hired specifically to help it transition from a fully-insured plan to a self-funded plan, design the self-funded plan and obtain stop-loss coverage that eliminated any uninsured risk for the company. That, Express claimed, put the agents in the position of fiduciaries — not just agents.

And by not throwing out that claim, the court has granted Express the opportunity to prove the agents were fiduciaries and breached their duties as such.

Obamacare eliminates lifetime maximums

The vast majority of the Affordable Care Act kicks in starting Jan. 1, 2014, and its implementation will eliminate the ability for health plans to set lifetime maximum benefit limits, which makes the lesson from this case hit home all that much more.

Since plans will be unable to cap benefits, it will become more important for self-funded employers worried about catastrophic claims to obtain adequate amounts of stop-loss coverage.

Those employers will want to make sure they know:

• at what point stop-loss coverage will run out — making them liable for claims above and beyond that limit, and
• whether their stop-loss policy will cover claims that span multiple years.

Cite: Express Oil Change, LLC, v. ANB Insurance Services, Inc.

The post Nightmare scenario: Self-funding oversight costs employer $1.8M appeared first on HR Benefits Alert.

Companies have been hoping that their wellness program incentives will help their health plans meet affordability and minimal value requirements under Obamacare. So chances are they won’t like the guidance the IRS just issued.

Recently, the IRS — one of the three agencies responsible for issuing compliance deadlines and guidance for the Affordable Care Act — released a flurry of Obamacare guidance.

A major chunk of that guidance was dedicated to clearing up some confusion surrounding wellness programs and their role in determining minimum value and affordable coverage.

As you know, Obamacare requires employers with 50 or more full-time equivalent employees (FTEs) to offer affordable coverage that meets the feds’ minimum value and affordability standards to all FTEs starting January 1, 2014 or pay a penalty.

Health care is deemed affordable if an employee’s contribution toward self-only coverage doesn’t exceed 9.5% of his or her household income.

The minimum — or “actuarial” — value is the percentage (on average) of the total cost of care a plan will cover.

For example: If a plan has an actuarial value of 60% (the minimum percentage of coverage a plan can cover to not be penalized under the law), an individual under that plan would be responsible for 40% of the cost of his or her care.

The minimum value “metal levels” under Obamacare are as follows:

• bronze plans will cover 60% of care costs
• silver plans will cover 70%
• gold plans will cover 80%, and
• platinum plans will cover 90%.

A one-year exception

The IRS’ new guidance says for a limited period of time — from May 3, 2013 through January 1, 2015 — employers can assume that all of their employees will earn any discounts and incentives offered through their wellness program when calculating their plan’s “value” and “affordability.”

Example: If a wellness plan offers employees who volunteer to take a health risk assessment $200 off of their premiums or deductible, the plan’s minimum value metal level and affordability can be calculated as if all employees will earn that $200 incentive.

This is the one exception the IRS added to the guidance.

Tobacco vs. non-tobacco incentives

After Jan. 1, 2015, wellness incentives will be divided into two main categories:

• incentives that aim to reduce or prevent tobacco usage, and
• those that don’t.

From then on, how a company’s health plan affordability and minimum value is determined will depend on what category its wellness incentives fall into.

When it comes to wellness program incentives specific to tobacco usage, health plans should assume all employees will earn the program’s incentives when it comes to determining the plan’s affordability and minimum value.

Example: If a company’s wellness program offers a premium discount to non-smokers, the company can use the discounted premium when calculating the affordability and minimum value of its health plan.

And if a plan penalizes smokers — with higher premiums or cost-sharing — the plan can calculate affordability and minimum value using the figures all non-smokers would pay.

On the other hand, when it comes to determining affordability and minimum value for health plans with all other wellness incentives not geared toward smoking prevention, plans should assume that all employees will fail to satisfy the wellness program’s requirements to earn incentives.

Therefore, all non-smoking-based incentives/penalties offered through an employer’s wellness plan won’t factor into the affordability and minimum-value calculations after Jan. 1, 2015.

Hopes crushed

Bottom line: Employers’ hopes about the majority of their wellness program incentives helping their health plans meet minimum-value and affordability requirements have effectively been crushed by the feds.

Many experts in the benefits community aren’t happy with the distinction the feds made between wellness programs and feel the moves adds more confusion to complying with Obamacare’s many regs.

As Paul Dennett, senior vice president, health policy, at the American Benefits Council, put it, “It’s not clear why the proposed rules would have one rule that applies to completing a wellness program that addresses tobacco use, and an entirely different rule for any other kind of wellness program. It seems as though the rules should be consistent and this will add one more wrinkle to what will already be a real challenge to communicate to employees.”

Another potential drawback: The move could also make smokers feel even more singled out.

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An entertaining and informative infographic that’s perfect for Mother’s Day. The infographic (below) was created by the Reed Group, a firm that specializes in helping organizations reduce the cost, compliance risk and complexity of employee absences. It offers a number of hypothetical situations on:

• Small businesses’ FMLA obligations
• FMLA for children’s recreational activities
• Dependent coverage under the Affordable Care Act, and
• FMLA caregiver leave for routine procedures.

Happy Mother’s Day to all of the moms who read HR and Benefits Alert.

Via: The Reed Group

The post Would TV moms qualify for FMLA? (Mother’s Day graphic) appeared first on HR Benefits Alert.

The U.S. Court of Appeals for the District of Columbia Circuit just ruled to strike down a proposed rule from the National Labor Relations Board (NLRB) requiring most private sector employers to post a notice informing employees of their right to join a union and bargain collectively for wages, benefits and hours.

Since first bursting on the scene in 2010, the NLRB poster rule has faced major opposition from several business groups, most notably the National Association of Manufacturers, that have asserted the rule exceeded the board’s power.

Lawsuit filed

The National Association of Manufacturers filed suit against the NLRB in an attempt to get the rule struck down. But in March of 2012, a district judge allowed the rule to stand, although the judge did strip the NLRB’s of its ability to punish employers who didn’t comply.

“An employer’s mere failure to supply information” doesn’t rise to the level of a labor law violation, the judge said.

Undeterred by the somewhat pro-employer ruling, the National Association of Manufacturers appealed. And in April of 2012, the Court of Appeals for the District of Columbia Circuit ordered an injunction, delaying enforcement of the NLRB poster rule until the appeal could be heard.

After hearing the appeal, the D.C. circuit court, which is the same court that ruled President Obama’s recess appointments to the NLRB were unconstitutional, struck down the poster rule entirely.

Employers can express, withhold statements

The court looked at Supreme Court rulings on the First Amendment to help it reach its conclusion. In the end, it said employers have just as much right to not disseminate views as they do to express their own views, and it would be illegal to punish an employer for expressing a statement — or, as is the case here, for failing to post a statement under the NLRB’s orders.

The National Association of Manufacturers said the ruling is a key victory in the fight against the NLRB’s aggressive agenda.

The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), on the other hand, was not happy with the ruling, stating the court’s decision suggests hundreds of other notice requirements should also be struck down.

The NLRB can still force further proceedings on the rule, but hasn’t yet acknowledged it’ll do so.

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