Government Clarifies Benefit Laws

Wednesday, November 04, 2009

Each year, the American Bar Association’s Joint Committee on Employee Benefits (ABA JCEB) meets with the primary federal agencies that administer laws related to group health plans. The 2009 meetings offer insights to benefits and insurance professionals.

The ABA JCEB published comments from four agencies:

•                      The IRS

•                      The Department of Labor (DOL)

•                      The Department of Health and Human Services (HHS)

•                      The Equal Employment Opportunity Commission (EEOC)

These responses are unofficial and nonbinding, but give us guidance into how these agencies would rule in similar circumstances. When an agency declined to respond, it is an indicator of an important gray area that may see official regulations in the near future.

IRS

The IRS addressed two issues related to the COBRA subsidy under the American Recovery and Reinvestment Act (ARRA). First, the IRS provided an important clarification about subsidy eligibility. If an employee is eligible to be added as a dependent under a spouse's health plan at all times before an involuntary termination, he or she is NOT entitled to the COBRA premium subsidy. However, if the employee does not become a dependent under the spouse’s plan, he or she can still elect COBRA coverage, but not subsidized COBRA coverage. Second, if an assistance eligible individual waives the COBRA premium subsidy for MAGI considerations and then receives an employer subsidy equal to or greater than the COBRA subsidy (e.g., through a severance plan), the employer-provided subsidy is NOT considered taxable income.

The IRS repeated that the fair market value of health coverage must be imputed as income for non-dependents (e.g., domestic partners) who are covered under a health plan. The IRS declined to explain how to calculate the fair market value and refused to confirm that an employee with family coverage already could simply view the addition of the non-dependent as having a fair market value of zero.

DOL

The DOL stated that any time a new federal law results in a Summary Plan Description (SPD) becoming "incorrect, incomplete or obsolete," the ERISA plan must issue either a new SPD or a Summary of Material Modifications.

HHS

HHS provided an enforcement update. Only about 1,200 of the 43,000 privacy complaints handled by its Office for Civil Rights (OCR) since April 2003 involved group health plans. Common complaints were misdirected communications, failure to update systems, failure to abide by a request for confidential communications, inadequate separation between the plan and the employer, sharing information with unauthorized persons and loss of unencrypted media (e.g., laptops).

EEOC

EEOC also provided an enforcement report:  1,418 benefit-related charges in 2008, a 26% increase since 2007. Overall, EEOC charges are up 18%. Most complaints involve age discrimination.

Regarding health plan exclusions, EEOC continues to analyze differences in benefits by first determining whether a disability-based distinction is being made. That occurs if all or substantially all of the affected individuals are disabled. Then, EEOC would see if the provision is a subterfuge to evade the purposes of the ADA.

Health Risk Assessments (HRAs) have received a lot of attention since the issuance of several sets of regulations related to genetic information in 2009. EEOC reiterated that it has not taken a position as to what level of inducement would make an HRA inquiry involuntary. It referenced a March 2009 EEOC informal discussion letter, which stated (among other things) that an employer's practice of requiring employees to participate in an HRA in order to obtain coverage under the employer's health plan was not voluntary. EEOC also pointed out that the Genetic Information Nondiscrimination Act curtails the collection of family medical history in HRAs because this is considered genetic information.