In this report:
Federal Legislative Update
HR 3962 – Affordable Health Care for America Act
HR 3930 – COBRA Continuation Protection Act of 2009
HR 3991 – Emergency Influenza Containment Act
HR 1409 / S 560 – Employee Free Choice Act
HR 2892 – E-Verify Extension
HR 3567 – Respect for Marriage Act
HR 2647 – FMLA Expansion
Genetic Information Nondiscrimination Act (GINA)
Oregon Supreme Court: Workers’ Comp Claim for Gastric Bypass Surgery
Washington Court of Appeals: Time-loss Benefits after Firing
Washington Court of Appeals: Medical Marijuana Law
In Other News…
New Excise Tax for Violations of COBRA, HIPAA
OSHA to Issue H1N1 Standards for Health Care Settings
EEOC Letter: Health Risk Assessment cannot be prerequisite to Health Reimbursement
President Announces Initiatives for Retirement Savings
DHS Rescinds Controversial No-Match Rule
Immigration Agents Will Target Employers
Washington Company Officials Plead Guilty to False I-9s
Injured Workers’ Right to Sue in Oregon and Washington
Referendum, Washington’s Domestic Partner Law, Passes
Upcoming Dates and Deadlines
Federal Legislative Update
HR 3962 – Affordable Health Care for America Act
Summary: HR 3962 represents the first time since the approval of Medicare and Medicaid in
1965 that a chamber of Congress has passed a comprehensive health reform bill. See the attached
summary of provisions of HR 3962 and the two pending Senate bills.
Status: Passed by the House November 7, 2009, 220-215, with 39 Democrats voting against the
measure and only one GOP lawmaker voting in favor. Attention now shifts to the Senate.
Democratic Senate leaders have been working to combine features of two reform bills, S 1679
approved by the Senate Health, Education, Labor and Pensions Committee in July 2009 and S
1796 approved by the Senate Finance Committee in October 2009.
Outlook: Senate leaders have stated that they hope to introduce a merged bill by mid-November
2009, but a finalized version might not pass the Senate before the end of 2009. Supporters of the
measure need 60 votes to overcome a threatened filibuster from Republicans. Given that not all
Democrats will support the measure, Democratic leaders will need to convince at least a few
Republicans to vote for a health care bill.
Professional Pointer: Most of the debate to come will involve the public plan option, including
two issues: 1) whether it will be an opt-out provision for states (similar to HIPAA high-risk opt-
out pools), and 2) at what level the public option is triggered. Any public option is tied to
For employers, there are some specific issues that are pretty certain at this time:
· Health care reform will pass, and will be effective January 1, 2013, as all the bills use 2013 as
the beginning date.
· Individuals will be required to purchase health insurance and employers will be required to
offer health insurance to employees or pay a fee, as all of the bills include an individual mandate
and an employer mandate.
· There will be a "cadillac tax" on health plans but at a higher limit than in the Finance
Committee bill. It will be dangerous for many Senators to agree to an additional tax on "wealthy
Americans" to pay for part of health reform. To help fund the process and keep the cost down
will require an additional tax; however, the thresholds by which the tax is paid will be raised
(and will need to be offset by savings elsewhere).
· Employers will likely pay some level of a fee that will be equal in dollars to the subsidy related
to their employees, either as a direct dollar amount or as a per-employee fee; and the
methodology to calculate such fee will be neutral to employers.
· Employers will be mandated to provide some coverage to part-time employees or pay a fee to
opt-out of coverage.
· Self-insured plans will be required to have certain benefit levels based on actuarial benchmarks
to be determined in the bill.
As the final bill is reconciled and its provisions are known, employers should proceed cautiously
with any medical plan overhauls, including the use of health reimbursement accounts, health
savings accounts, and other cost-shifting programs to employees. However, employers should be
aware that the health care reform bill will likely contain some form of phase-in or grandfathering
for current health plans; employers making changes due to cost or competitive reasons should do
so in the 2010 plan year if possible and not wait until after the bill's passage.
HR 3930 – COBRA Continuation Protection Act of 2009
Summary: Extends the COBRA subsidy period from 9 months to 15 months, makes workers
involuntarily terminated between January 1, 2010 and June 30, 2010 eligible for the subsidy, and
extends the COBRA period from 18 months to 24 months for Assistance Eligible Individuals
(AEI). The bill sunsets subsidies and extended COBRA periods on December 31, 2010,
providing a limited window to take advantage of these added benefits.
The American Recovery and Reinvestment Act of 2009 (ARRA) already requires an employer to
subsidize the COBRA premium for an AEI – an employee whose qualifying event under
COBRA is a result of involuntary termination from employment between September 1, 2008 and
December 31, 2009, who is eligible for COBRA coverage and timely elects such coverage. The
employer pays 65% of the COBRA premium, and the AEI pays 35%. The employer may receive
a Federal tax credit to recoup the 65% premium payment.
Status: Introduced into the House of Representatives on October 26, 2009 and referred to two
Outlook: The Obama Administration has indicated support of extended benefits, but there is
uncertainty whether the extension will pass the House and then the Senate.
Professional pointer: If the COBRA subsidy period is not extended, employers must begin to
prepare for the end of the subsidy period as to new AEIs. One major issue not referenced in the
legislation is the eligibility of employees for the subsidy who are involuntarily terminated as of
December 2009 but do not lose coverage under the health plan until the "last day of the month."
Do these individuals lose coverage as of December 31, 2009 (an AEI) or lose coverage as of
January 1, 2010 (not an AEI)?
If the ARRA subsidy was not an issue, almost all employers, as part of common COBRA
practice, would answer that the last day of coverage is December 31, 2009, and the first day the
employee loses coverage is January 1, 2010. A health claim submitted as incurred at 11:59 PM
on December 31, 2009 would be covered, and a health claim submitted as incurred at 12:01 AM
on January 1, 2010 would not be covered. The relevant COBRA statute states that a health plan
may provide an optional extension of coverage (until the end of the month) and that the COBRA
period will commence as of the date of the loss of coverage. The date of the loss of coverage
would, thus, appear to be January 1, 2010.
However, the IRS ARRA information includes an example stating that if an employee is
involuntarily terminated on November 15, 2009, and the employer does not use the optional
extension of coverage (until the end of the month), the COBRA period is November 15, 2009
plus 18 months to May 15, 2010. If the employer does use the optional extension of coverage,
then the COBRA period, and thus the date of loss of coverage, is November 30, 2009 (last day of
month) to May 31, 2010. If an employee were to be involuntarily terminated on December 31,
2009 as the legislation states, being eligible for the subsidy, there is no situation where the
employee would be actually eligible for the subsidy because the employee would have coverage
through midnight as of the day of his or her termination.
Hopefully, the IRS will address this situation. If not, employers must make a determination
whether to offer the subsidy and risk the eligibility of tax credit or not offer the subsidy and risk
the penalties under ARRA. Each situation will likely be a facts and circumstances decision.
Employers need to be mindful about reductions in force and other involuntary terminations that
may occur in December and communication to such employees regarding subsidy eligibility in
COBRA election forms and severance agreements.
HR 3991 – Emergency Influenza Containment Act
Summary: Would provide five paid sick days to workers with contagious diseases who are told
by their employers to stay home. The bill is a response to the outbreak of the H1N1 flu virus and
would apply to businesses with 15 or more employees. Workers who follow their employer’s
direction to stay home because of contagious illness cannot be fired, disciplined or retaliated
against for staying home. The bill would not require employers to offer paid leave to their
workers, but a worker who was advised or required to stay home because s/he was ill would be
entitled to up to five days of paid leave. The measure would take effect 15 days after being
signed and would expire after two years.
The CDCP estimates that a sick employee reporting to work could infect at least 10% of the
people with whom s/he has contact. Data from the US Bureau of Labor Statistics shows 39% of
all private-sector workers -- nearly 40 million US workers – did not have paid sick days, and
many of them were employed by restaurants, hotels and school cafeterias.
Status: Introduced in the House November 5, 2009. The Education and Labor Committee will
hold a hearing on the legislation on November 16, 2009.
Outlook: In support of government efforts to quell the flu outbreak, the legislation could gain
traction and might be approved by the House of Representatives soon.
HR 1409 / S 560 – Employee Free Choice Act
Summary: Possible modifications in the final version of the Employee Free Choice Act:
Organizing – An employer’s right to call for a private ballot election may be retained, but the
legislation may include a “quick” election requirement: after a union files a petition, an election
would have to be held within a short period, perhaps as few as five to ten days. AFL-CIO
President John Sweeney has said he would accept a fast election campaign instead of card check
because it would meet his goal of minimizing management interference during organizing
Arbitration – While the mandatory arbitration provision might be dropped, a compromise may
include a “final best offer” form of arbitration, where an arbitrator would choose the entirety of
either the union or employer’s final contract proposal.
Union Access – The legislation is likely to include enhanced union access to the workplace,
potentially requiring employers to allow union representatives to appear at employer-
sponsored meetings on unionization, to meet with individual employees and to have access to
the employer’s e-mail systems and other communications tools.
Increased Penalties on Employers – The penalty structure from the original version of EFCA may
not change under a compromise version, including treble damages against employers for unfair
Status: Introduced in both the Senate and the House March 10. Has 227 co-sponsors.
Outlook: Has been the subject of intense Senate negotiations this year: The bill lacks support to
avoid a filibuster. Recent comments by key legislators indicate that a compromise that will meet
organized labor’s objectives may be close.
HR 2892 – E-Verify Extension (included in FY 2010 DHS Appropriations Act)
Summary: Extends E-Verify, the federal government’s electronic employment verification
system, for three years. It had been scheduled to expire on October 31, 2009. The provision
includes $137 million to operate and improve the system. A provision that would have made E-
Verify permanent was removed from the final bill. The Obama administration is enforcing an
executive order that requires contractors to use the electronic verification system. Federal
contracts must require companies conducting business with the federal government to enroll in
E-Verify. The program will be voluntary for all other businesses.
Status: Signed into law by President Obama on October 28, 2009.
Outlook: Lawmakers and business groups continue to debate the best way to create and maintain
an efficient and accurate nationwide verification system. Critics of E-Verify claim that the
system has several security flaws and can be inaccurate and unreliable. It lacks the capacity to
verify the employment eligibility of the millions of workers hired every year by US companies.
E-Verify can be undermined by identify theft and false documents. When this occurs, employers
and HR professionals can be subject to unfair penalties for mistakes.
HR 3308 would require all US employers to use E-Verify.
HR 2028, the New Employee Verification Act, would replace E-Verify with a paperless and
more reliable, fraud-proof verification system. A coalition of employer groups called the HR
Initiative for a Legal Workforce, of which SHRM is a member, supports HR 2028.
HR 3567 – Respect for Marriage Act
Summary: Would repeal the federal Defense of Marriage Act (DOMA). Requires that all
marriages that are valid under state laws are also valid and recognized under federal law. States
that have not legalized same-sex marriage would not be required to recognize same-sex
marriages performed elsewhere, but same-sex marriage performed in a state where same-sex
marriage has been legalized would be recognized for purposes of federal law.
DOMA was enacted in 1996 and provides that for all purposes of federal law, such as ERISA
and the federal tax code, the word “marriage” means “only a legal union between one man and
one woman as husband and wife” and the word “spouse” refers “only to a person of the opposite
sex who is a husband or wife.” DOMA also provides that no state is required to recognize a
same-sex relationship considered a legal marriage in another state.
Oregon and Washington currently do not perform or recognize same-sex marriages.
The bill would make significant changes to the federally mandated benefits available to
employees and their same-sex spouses. For example:
· Employers with pension or 401(k) plans would be required to recognize same-sex spouses for
purposes of determining the surviving spouse annuities or other death benefits under these
· The federal income tax treatment of health coverage for an employee’s same-sex spouse would
change such that employees would no longer have to be taxed on the income imputed for the
employer’s contribution to the same-sex spouse’s coverage.
· Employers would be required to permit employees to take family/medical leave to care for the
illness of a same-sex spouse.
Status: Introduced in the House September 15. Referred to the Subcommittee on the
Constitution, Civil Rights, and Civil Liberties October 19.
HR 2647 – FMLA Expansion (included in FY 2010 National
Defense Authorization Act)
Summary: Expands last year’s exigency and caregiver leave provisions for military families
under FMLA. In January 2008, Congress amended the FMLA to provide:
· Exigency leave - up to 12 weeks of leave for urgent needs related to a reservist family
member’s (spouse, son, daughter, or parent) call to active service.
· Caregiver leave - up to 26 weeks of unpaid leave to an employee to care for a family member
(spouse, son, daughter, parent, or next of kin) who is injured while serving on active military
· expands the exigency leave benefits to include family members of active duty service members.
· expands the caregiver leave provision to include veterans who are undergoing medical
treatment, recuperation or therapy for serious injury or illness that occurred any time during the
five years preceding the date of treatment.
Status: Signed into law October 28.Effective upon enactment.
Professional Pointer for Oregon employers: The Oregon Military Family Leave Act
("OMFLA") went effect in June 2009. OMFLA provides protected leave to the spouse or
domestic partner of a member of the federal Armed Forces, the National Guard or the federal
military reserve forces who has been called to (or notified of an impending call or order to)
active duty, or who is on leave from active duty during a period of military conflict. OMFLA
applies to employers with 25 or more employees. Now is a good time to review all Family and
Medical Leave policies to ensure compliance with the federal expansion of Qualifying Exigency
and Caregiver leave as well as OMFLA.
The Genetic Information Nondiscrimination Act (GINA)
The employment provisions (Title II) of GINA take effect on November 21, 2009. GINA
prohibits employers of 15 or more employees from requesting, requiring or purchasing any
genetic information from applicants or employees, with a few very limited exceptions.
Employers who think that ‘genetic information’ means the results of a genetic test administered
to an applicant or employee are partially correct, but the law is broader in its sweeping
protections. ‘Genetic information’ is defined to include an individual’s genetic tests, requests for
and receipt of genetic services, and family medical history. An employee’s genetic information
includes any manifestation of a disease or disorder in the employee’s family members. ‘Family
members’ include dependents plus all relatives to the fourth degree without regard to whether
they are related by blood, marriage or adoption.
Wellness programs that are neither ERISA plans nor group health plans under HIPAA (because
they provide only referral services and no medical care) must comply with Title II of GINA and
EEOC regulations. The law appears to build in an exception for the inadvertent request of a
family medical history provided in the context of a voluntary wellness program. But in
preliminary advisory letters, the EEOC is taking a hard line on the kind of program that it will
consider a "voluntary wellness program" under GINA. If the wellness program is not
"voluntary," any questions about family medical history will be illegal. One indicator may be if
the employee gains or loses an economic benefit by participating or refusing to participate, but
the EEOC has not provided clear guidance on that question. Prior HIPAA regulations would
have permitted such programs in many cases, particularly where the reward was based on
participation in the wellness program rather than its results, but under GINA such a program
would be impermissible.
Through a range of examples, the new regulations do offer employers options for redesigning
their wellness plans to avoid violating GINA:
· A wellness program that does not collect family medical history will be permissible under
GINA, even if it includes participation or results-based rewards (although employers will still
need to consider whether it satisfies HIPAA’s requirements).
· Collecting family medical history but not offering any reward would be allowed if the
information is not collected prior to or in connection with enrollment in the program.
· Another option is to request two distinct health risk assessments from employees after (and
unrelated to) enrollment in the health plan: one providing a reward for completing a health risk
assessment that does not elicit any family medical history or other genetic information, and
another purely voluntary health risk assessment that seeks information as to family medical
history and genetic testing, to which no reward is tied.
Practices that are permitted under the ADA may be unlawful under GINA. For example,
employers may require employees to submit to medical examinations after making a conditional
offer of employment, provided that they follow ADA’s limitations on these exams. But GINA
changes the kinds of questions that those medical examinations can ask. GINA will prohibit
employers from obtaining any genetic information (including a family medical history) from
post-offer applicants. The same will be true when an employer requires an employee to submit to
a fitness-for-duty examination.
Title I provisions (for group health plans and health insurers) of GINA will be effective for
plan years starting on and after December 7, 2009, based on new regulations issued by the
Internal Revenue Service (IRS), the Department of Labor (DOL) and the Department of Health
and Human Services (HHS). Title I provisions prohibit group health plans and insurers from
collecting genetic information for underwriting purposes and prior to or in connection with
enrollment. This includes changes to deductibles and other cost-sharing plus discounts, rebates,
in-kind payments and other methods of altering premiums as a reward (or punishment) for
completing a health risk assessment or participating in a wellness program. Offering reduced
premiums or other rewards for providing genetic information (in this case, the family medical
history that often is a routine part of health risk assessments) would be impermissible
The regulations include three exceptions:
• GINA will not prohibit a health care provider who is treating an individual from requesting
that the patient undergo genetic testing.
• The rules permit a plan to obtain genetic test results and use them to make claims payment
determinations when it is necessary to do so to determine whether the treatment provided to the
patient was medically advisable.
• Plans can request, but not require, genetic testing in certain very limited circumstances
involving research, so long as the results are not used for underwriting, and then only with
written notice to the individual that participation is voluntary and will not affect eligibility for
benefits, premiums or contributions.
The regulations will affect the application of HIPAA’s privacy rules to health information held
by group health plans and insurers by clarifying that health information includes genetic
Professional pointer: Employers that sponsor any group health or wellness plan should:
· Review their plan documents and administration for compliance with these new rules prior to
January 1, 2010, for calendar-year plans.
· Confirm with their administrators and insurers that they have not set rates impermissibly based
on genetic information and do not use genetic information for any underwriting purposes,
including application of any existing condition exclusion period.
· Avoid requesting or requiring any genetic testing or genetic information from their employees.
Particularly for employers that are offering wellness programs in connection with an upcoming
open enrollment season, special attention should be given to any health risk assessments or other
enrollment forms that collect genetic information, medical history or any other information that
might fall within GINA’s scope.
· Acquire the EEOC’s new version of it’s ‘EEO – It’s the Law’ poster which includes a
description of GINA's provisions.
· If using enrollment forms or health risk assessments that might be expected to elicit family
health histories, include language on the forms warning individuals not to reveal genetic
The Portland law firm of Barran Liebman is offering a breakfast seminar on December 1. Rick
Liebman and Paula Barran will discuss the impact that GINA will have for employers.
Oregon Supreme Court: Workers’ Comp Claim for Gastric
The Oregon Supreme Court has held that SAIF must pay for gastric bypass surgery Edward
Sprague underwent in 2000 when he weighed 350 pounds. Sprague injured his knee on the job in
1976, filed a Workers’ Compensation claim and sought treatment. In 1999, he re-injured his knee
and filed a new claim. He also successfully expanded his original claim to include a new
condition, consequential arthritis in the knee. In 2000, his knee had deteriorated and his doctor
recommended a knee replacement.
Sprague needed to lose weight to be eligible for the knee surgery and to relieve pressure on the
injured knee. His doctor recommended gastric bypass surgery, but SAIF refused to pay for it,
arguing that it was not covered because it was “directed at” Sprague’s obesity, which had existed
before the 1976 injury, rather than at the injury itself. The Supreme Court disagreed, concluding
that the gastric bypass surgery was “directed to” Sprague’s arthritic knee condition, which was
caused in major part by his compensable 1976 injury.
To some extent, this case reflects a problem built into the Workers’ Comp system. Employers
often have had to pay for an intervening medical issue before treating the Workers’ Comp issue.
For example, if an employee who needed surgery had out-of-control diabetes, the carrier would
decide whether it would pay for treating the diabetes. But judges have never mandated treating
the diabetes. This has always been a carrier decision.
Employers have been required to pay for employees’ weight loss programs before the employees
undergo surgery, but with weight loss surgery as a preliminary step to other treatment, the
employer would be liable for paying for treatment for any complications that resulted from the
surgery. Further, if the employee should die as a result of the surgery, the carrier would be liable
for death benefits also. The rulings place a much larger burden on employers because they
increase the scope of what employers are liable for.
Professional pointer: Employers should go back to the basics of hiring practices:
· Look at the essential functions of the job and ask whether the applicant can safely perform
· If you see an obesity problem in your workplace, initiate a wellness program to keep it from
winding up in workers’ comp.
· With the rise in the number of people who are overweight, expect more claims like this one.
Further, the reasoning of the case may be applied to expand workers’ coverage to other
treatments not obviously related to workplace injuries, such as smoking cessation. These rulings
set a precedent for how we manage underlying medical conditions that have nothing to do with
the injury at all.
Washington Court of Appeals: Employer Must Continue
Time-Loss Benefits Despite Firing Employee
When an injured employee was ready to return to a light-duty job but could not, because the
employer had fired him for a violation of its safety rules, he still remained eligible for wage
replacement benefits, the Washington Court of Appeals held, because the employer had not
previously contested its liability.
Timothy Walker had been a Redi-Mix concrete truck driver for about a month when he took a
turn too fast and rolled his truck. His employer, Glacier Northwest Inc., fired him several weeks
later in accordance with company policy. Meanwhile, Walker received medical and time-loss
compensation benefits for injuries suffered in the accident in accordance with state Department
of Labor and Industries procedures.
When Walker was released for light-duty work, Glacier refused to offer a position because it had
fired him. The company then sought permission to stop paying compensation benefits.
The Department of Labor and Industries ordered the payments to continue under Wash. Rev.
Code 51-32-.090(4), which states that an employer may stop paying benefits to an injured worker
after the employee is offered work that he or she can physically perform. Glacier did not offer
Walker work because it had fired him.
On appeal, the trial court ruled in favor of the employer. That decision was reversed by the
appeals court. When an employee cannot perform light-duty work with the original employer,
the employer may attempt to force the employee to find modified work elsewhere by requesting
rehabilitation services from the Department of Labor and Industries, the appeals court noted, but
Glacier did not do that.
More importantly, the employer did not contest its liability for benefits when Walker was unable
to perform any work and had been fired for cause. Only after Walker was able to perform
modified work did Glacier assert his misconduct as a reason to terminate benefits.
Washington Court of Appeals: Medical Marijuana Law
The Washington Court of Appeals has held that there was no implied cause of action arising
from the Washington State Medical Use of Marijuana Act (MUMA) against an employer who
refused to hire a prospective employee who failed a pre-employment drug test allegedly due to
her medical use of marijuana.
“Jane Roe” sought and obtained authorization under MUMA to use medical marijuana to treat
her migraine headaches. In 2006, she applied for a position as a customer service consultant with
the employer, an outsourcing company that provided telemarketing support to its customers. The
employer required all individuals to whom it had extended a conditional offer of employment to
undergo a pre-employment drug test and to obtain a negative result. In October 2006, Roe
received a conditional offer of employment, and the employer informed Roe of its drug-testing
requirement. Roe then told the employer of her at-home medical use of marijuana. Roe
underwent a drug test and tested positive for marijuana. The employer rescinded its conditional
offer of employment because of the positive test result. Roe sued the employer for violations of
the MUMA and for wrongful termination based on public policy.
The MUMA permits physicians to prescribe marijuana for medical use for terminal and
debilitating illnesses and exempts from criminal prosecution those authorized users of medical
marijuana and their prescribing physicians. Roe argued that the MUMA created an implied cause
of action against employers by medical marijuana users. She contended that because the MUMA
prohibited medical marijuana users from being “penalized in any manner, or denied any right or
privilege,” employers could not take adverse actions against such individuals based on their
marijuana use. The Court of Appeals rejected this argument.
Professional Pointer: This case confirms that the MUMA provides authorized medical
marijuana users “only a defense to criminal prosecution” and does not create any new
substantive employment rights. This decision should provide some comfort to Washington’s
employers who conduct drug testing in the workplace – they will not be subject to liability for
common law claims under the MUMA.
In Other News…
New Excise Tax Reporting for Violations of COBRA,
HIPAA Takes Effect in 2010
Since the date of enactment of COBRA, HIPAA portability requirements and other federal
mandates applicable to group health plans, the Internal Revenue Code has provided that
employers are liable for excise taxes for failure to comply with such provisions. However, there
had never been a method for self-reporting the excise tax, and the Internal Revenue Service
(IRS) had not historically imposed these excise taxes as part of an audit.
With the publication of final regulations on excise tax reporting, effective January 1, 2010,
employers that sponsor group health plans now will be required to report and pay excise taxes for
failing to satisfy certain federal group health plan mandates, unless timely corrected. In addition,
excise tax reporting is required if comparable employer contribution rules are not satisfied for
health savings accounts (HSAs) and Archer medical savings accounts (MSAs). Failure to file the
excise tax return and pay the excise tax on or before the required due date will result in penalties
and related interest unless the failure to timely file or pay is due to reasonable cause and not to
An excise tax is imposed on employers for failure to comply with the requirements of:
· HIPAA portability, access and renewability
· HIPAA nondiscrimination based on health status
· Genetic Information Nondiscrimination Act (GINA)
· Mental Health Parity and Addiction Equity Act of 2008
· Newborns’ and Mothers’ Health Protection Act (minimum hospital stays for newborns and
· Michelle’s Law (coverage of dependent students on leaves of absence)
· HSA comparable employer contribution rules
· Archer MSA comparable employer contribution rules.
The excise tax varies depending on which law the employer or plan has violated. For failures
relating to COBRA and group health plan requirements, generally the excise tax is $100 per
individual to whom the failure relates per day for each day of noncompliance. For failures
relating to the Archer MSA and HSA comparable employer contribution requirements, generally
the excise tax is 35% of the amount contributed by the employer to the Archer MSAs or the
HSAs of all employees within the calendar year.
There are exceptions to the tax for failures relating to COBRA and group plan requirements,
where the failure to comply is not discovered when exercising reasonable diligence, or where the
failure is due to reasonable cause, not willful neglect, and is timely corrected.
For failures relating to the Archer MSA and HSA comparable employer contribution
requirements, the excise tax may be waived in situations where the excise tax imposed is
excessive relative to the failure involved.
OSHA to Issue H1N1 Inspection Standards for Health Care Settings
A compliance directive on H1N1 flu inspection standards for health care employers is coming
soon, OSHA announced October 14, 2009. The directive reportedly will closely follow the new
CDC guidance published October 14. It aims to ensure uniform inspection procedures for high
and very high risk occupational exposures, such as in health care.
OSHA inspectors will ensure that health care employers implement a hierarchy of controls,
including source control, engineering and administrative measures, and encourage vaccination
and other work practices recommended by the CDC. The CDC’s Interim Guidance on Infection
Control Measures for 2009 H1N1 Influenza Settings lists personal protective equipment as the
lowest level of control, behind eliminating potential flu exposures, engineering controls and
Where OSHA inspectors determine that a facility has not violated any requirements but that
additional measures could enhance the protection of employees, OSHA may provide the
employer with a Hazard Alert Letter outlining measures to further protect workers.
EEOC Letter: Health Risk Assessment Cannot Be
Prerequisite to Health Reimbursement
In an informal discussion letter posted to the EEOC website on October 6, 2009, the EEOC
stated that the Americans with Disabilities Act (ADA) does not permit an employer to require its
employees to complete a health risk assessment (HRA) to receive money from an employer-
funded health reimbursement arrangement.
The letter responded to an inquiry about the legality of an employer’s HRA. The HRA asked
employees more than a hundred questions about topics including family health history, self care,
personal health, women’s health, older adult health, nutrition, physical activity, alcohol and
tobacco use, safety and health changes.
Title I of the ADA strictly limits when an employer may obtain medical information from
applicants and employees. An employer may ask disability-related questions and require medical
examinations of its employees only when the inquiries or examinations are job-related and
consistent with business necessity. This standard may be met when an employer reasonably
believes based on objective evidence that an employee’s ability to perform essential job
functions will be impaired by a medical condition or an employee will pose a direct threat due to
a medical condition.
Disability-related inquiries and medical examinations also are allowed when they follow up on
reasonable accommodation requests or when monitoring is conducted under specific
circumstances, or as part of a voluntary wellness program.
An HRA would violate the ADA if it included such disability-related inquiries as how often
employees feel depressed, whether they have been told that they have certain conditions (e.g.,
asthma, cancer, heart disease or diabetes), how many prescription medications they take or how
much alcohol they drink as a prerequisite to obtaining reimbursement for health expenses. Such
questions are not job-related and consistent with business necessity.
When all employees must complete an HRA as a prerequisite for eligibility for a health
insurance program, the employer has not demonstrated a concern that a particular employee will
be unable to perform his or her job or will pose a direct threat because of a medical condition.
When an HRA is part of a wellness program, it is not voluntary if it penalizes any employee who
does not complete the questionnaire by making him or her ineligible to receive reimbursement
for health expenses.
The letter noted that the ADA would permit questions about whether an employee sees a
personal doctor for routine care or has a health care directive, how many servings of vegetables
or fruit an employee eats, whether he or she takes a vitamin supplement or eats breakfast and
how much an employee exercises.
President Announces Initiatives for Retirement Savings
In his September 5, 2009, weekly radio address, President Obama announced a set of initiatives
by the US Treasury Department and IRS intended to make it easier for employed Americans to
save for retirement. The new federal steps, which do not require congressional action, include
guidance and simplified procedures to:
· Enable workers to convert their unused vacation or other leave into additional retirement
· Expand opportunities for automatic enrollment in 401(k) and other retirement plans. Automatic
enrollment boosts participation in 401(k) retirement plans from about 70% to more than 90%,
and is particularly effective in increasing participation of low-income and minority workers. But
while nearly half of larger companies with 401(k) plans have adopted automatic enrollment,
fewer medium-sized and small businesses have done so.
· Allow Americans to save their income tax refunds in US Savings Bonds. Taxpayers can already
instruct the IRS to deposit their refunds directly to an IRA or other savings vehicle. Now
taxpayers will have another savings option – the ability to use their refunds to purchase US
Savings Bonds by checking a box on their tax return, without having to open an account at
Treasury or take any other action, and even if the taxpayer doesn't have a bank account. The
savings bonds would be mailed to the taxpayer.
· Provide easy-to-understand language to explain tax-favored retirement savings options to
workers and small employers. Employees changing jobs and receiving payments from a
retirement plan face several choices, including a tax-free rollover to another retirement account.
These and other "life event" choices are not always well understood.
These initiatives are distinct from the administration's earlier proposal that employers who do not
currently offer a retirement plan be required to enroll their employees in direct-deposit individual
retirement accounts (IRAs), and to automatically defer a portion of their salaries into these
accounts. No legislation on that proposal has moved so far.
In tandem with the president's radio address, the White House released a fact sheet and the
Treasury Department and IRS issued a summary of new revenue rulings and notices related to
the new initiatives. And the IRS has launched an online Retirement Plans Navigator that
explains, in plain English, the different retirement plan options available to small employers.
DHS Rescinds Controversial No-Match Rule
The Department of Homeland Security (DHS) has issued a final rule, effective October 7, 2009,
rescinding a set of regulations and procedures for employers that receive employee “no-match”
letters from the Social Security Administration (SSA). It follows an announcement made by
DHS Secretary Janet Napolitano in August that the Obama administration had decided to drop
the controversial rule.
The no-match rule was promulgated in August 2007 during the administration of President Bush
in an attempt to strengthen enforcement of US immigration laws. The regulation provided
guidelines and described the legal obligations of employers that receive “no-match” letters from
the SSA. The SSA issues no-match letters if an employee’s name does not correspond correctly
to a valid Social Security Number. The rule stated that a no-match letter could be sufficient to
notify an employer that an employee might not be eligible to work in the United States. An
employer who failed to act on a no-match letter would be considered to have ‘constructive
knowledge’ that a worker was not eligible.
The rule faced a challenge in federal court from a coalition of labor unions and business groups,
including the AFL-CIO and the US Chamber of Commerce. The lawsuit claimed that DHS
overstepped its authority in issuing the regulation and did not follow proper procedures. A
federal district court judge in Northern California agreed with the plaintiffs’ arguments and
issued a preliminary injunction blocking the no-match rule from taking effect. In 2008, the DHS
responded to the judge’s request to amend the regulation and conduct an audit of the rule’s
economic effect on small businesses.
The case was still pending and implementation of the final rule in effect had been put on hold
until Napolitano’s announcement. The DHS issued a proposed rule to rescind the regulation in
August 2009 and asked for comments from the public. Comments by SHRM and the American
Council on International Personnel (ACIP) were among 22 received. The SHRM/ACIP comment
stated that rescinding the rule would take away guidance for employers on how to respond to
SSA notices and to comply with DHS employee verification requirements. They suggested that
DHS provide a safe harbor for employers who make good faith efforts to resolve discrepancies.
In the final notice, DHS officials acknowledged that while “additional guidance would be
valuable to employers,” there were no grounds to suggest that “if no-match rules are rescinded
employers will have no guidance.” The notice stated that DHS has always provided guidance on
how employers should comply with the employment verification requirements of federal
The Senate responded in July 2009 by adding a provision to the DHS appropriations bill (S
1298) that would block DHS from rescinding the rule. However, the House-passed version of the
bill (HR 2892) does not include a similar provision. The differences between the two bills must
be reconciled by a conference committee.
Immigration Agents Will Target Employers
Under new enforcement guidelines issued April 30, 2009, ICE investigators will concentrate on
building cases against businesses suspected of hiring undocumented immigrants before they raid
workplaces and round up any illegal workers. This is a shift from recent tactics that resulted in
high-profile worksite raids where thousands of suspected undocumented immigrants were
arrested. Of the more than 6,000 arrests made related to worksite enforcement in 2008, only 135
were of business owners or managers.
ICE will continue to arrest and process for removal any undocumented workers identified during
worksite investigations. But a key change will be the focus on criminal prosecution of
employers, including supervisors and managers, who hire illegal workers knowingly.
The directive may mean that ICE investigators will use a variety of investigative tools to help
build their cases against employers. For example, information on violations of minimum wage
and overtime laws gathered by federal Wage and Hour Division investigators could help ICE
identify companies that potentially violated immigration law.
Under the new directive, verification of new hires’ work status and identification documents will
be more important than ever. And ICE’s new enforcement guidelines could renew interest in
developing an effective nationwide.
Washington Company Officials Plead Guilty to False I-9
Two corporate directors of Yamato Engine Specialists pleaded guilty August 20, 2009, to aiding
and abetting the use of a false statement on federal immigration employment forms. The two
admitted they knew employees at the family-owned Bellingham company submitted false names
and Social Security numbers on the I-9 forms used to verify workers’ right-to-work status. The
two directors will be sentenced to probation.
This is western Washington’s first successful prosecution of an employer for knowingly hiring
undocumented workers, US Attorney Jeffrey Sullivan said.
One director admitted that he knew of an employee who left Yamato after an ICE audit of its I-9
forms. The worker returned the following year and filled out a second I-9 with documents the
director admitted he knew were false. The other director admitted that she knew of another
employee who filled out an I-9 form in one name and five years later completed a second form in
another name under the new date.
The company is expected to pay a significant fine under the directors’ guilty agreement. 28
illegal aliens were found to be working for Yamato. All have been put on removal proceeding,
but allowed to remain in the country as potential witnesses pending the conclusion of the case.
Employers are not required to be document experts, but do attest on the I-9 form that the
documents provided by the worker appear to be genuine. ICE expects employers to use common
sense in making that determination.
Did You Know? Injured Workers May Have a Right to Sue in Oregon and Washington
Employers in Oregon and Washington face the possibility – under certain circumstances – of
injured workers bringing lawsuits outside of the Workers’ Compensation framework. Although a
key component of the Workers’ Comp system is the exclusivity of the remedy, which protects
employers from employees’ personal injury lawsuits, there are exceptions.
One exception is when an employer’s intentional acts result in injury to an employee. If a
manager assaults an employee or the employer knowingly violates safety standards, the
employee can bring a tort lawsuit for damages outside of the Workers’ Comp system. Oregon
and Washington both allow lawsuits contending intentional injury by the employer.
Referendum 71, Washington’s Domestic Partner Law, passes
Washington State’s “Everything but Marriage Act” (SB 5688) will go into effect after all. The
Act was passed by the Legislature and signed by Governor Gregoire earlier this year and was to
go into effect July 26. But a group called the Washington Values Alliance sponsored
Referendum 71 in an effort to overturn the law with a public vote. The referendum to allow SB
5688 to become law passed 51% to 49%.
The measure grants gay couples all the remaining state-provided benefits presently extended
only to married heterosexual couples. It expands the domestic partnership law passed in 2007
that granted gay couples hospital visitation rights, the ability to authorize autopsies and organ
donations, and inheritance rights when there is no will. Lawmakers expanded that law in 2008 to
give gay domestic partners standing under laws covering probate and trusts, community property
The new benefits under the current measure range from adoption and child support rights to
public employment benefits, although any benefits that cost the state money, such as pensions,
are delayed until 2014 because of the state's recession-fueled budget problems.
Upcoming Dates and Deadlines
DHS: Department of Homeland Security's rescission of "no-match" regulations was
11/21/09GINA: The employment provisions of GINA (Title II) take effect.
HIPAA: The Department of Health and Human Services' interim final rule reflecting
higher penalties for HIPAA rules violations goes into effect.
PPA: A qualified long-term-care rider may be added to an annuity or life insurance
contract such that the rider is fully funded through a partial cash surrender. Prior to the
1/1/10 PPA, this would have been a taxable event. But as of taxable years beginning after Dec.
31, 2009, the act allows for this transaction as long as the investment in the original
contract is large enough to support the transaction.
1/1/10 GINA: Title I of GINA takes effect for calendar-year plans.
1/1/10 Health insurance: Mental health parity provisions are effective for calendar-year plans.
IRS: Internal Revenue Service regulations will require employers that sponsor group
1/1/10 health plans to report and pay excise taxes for failing to satisfy certain federal group
health plan mandates.
HIPAA: The HIPAA privacy and security rules become applicable to business
associates on this date.
PPA: For collectively bargained plans, the rules on phased retirement pension
5/22/10 distributions apply after the first plan year that begins after the last of the agreements
terminates or, if earlier, this date.
EGTRRA: The Economic Growth and Tax Relief Reconciliation Act (EGTRRA)
12/31/10amendments to pension provisions of the Internal Revenue Code and ERISA do not
expire because the PPA eliminates EGTRRA's sunset provision.
Disclaimer: This report provides information only. It does not provide legal services or legal
advice. Although we try to make our information accurate and useful, you should consult an
attorney to verify, interpret and apply this information to your particular situation.