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Benefits Law Advisor

EEOC Challenges the Design of Another Employer’s Wellness Program under the ADA

Little more than a month ago, we reported to you about the U.S. Equal Employment Opportunity Commission’s (EEOC’s) first lawsuit against a Wisconsin employer concerning its wellness program. On October 1, the EEOC announced a second lawsuit against another Wisconsin employer. EEOC v. Flambeau, Inc. (W.D.WI, filed October 1, 2014). Based on the report, the agency’s concerns about the program are similar to those in the first case – when employees are made to face “dire consequences” for not participating in certain aspects of an employer’s wellness program that constitute a medical inquiry, the EEOC believes the program violates the Americans with Disabilities Act’s (ADA) prohibitions against certain medical inquiries. In short, the EEOC considers such inquires to be involuntary.

In this case, the wellness program featured biometric testing and a “health risk assessment” – common features in many programs. However, according to the EEOC, if employees did not submit to the testing or complete the assessment, they would face “cancellation of medical insurance, unspecified “disciplinary action” for failing to attend the scheduled testing, and a requirement to pay the full premium in order to stay covered”. More specifics on the program and the case are described in our Disability, Leave & Health Management Blog.

The regional attorney for the EEOC’s Chicago district, John Hendrickson, acknowledges that “employers certainly may have voluntary wellness programs – there’s no dispute about that – and many see such programs as a positive development.” But, he warns, they have to be voluntary. In addition to EEOC concerns about voluntariness, employers need to consider how the Affordable Care Act may apply, if at all, to the wellness program they want to implement. Some of these issues are summarized in our discussion about the EEOC’s first lawsuit which can be accessed at the first link above.


Have You Obtained a HPID?

Written by Tyler Philippi

The Department of Health and Human Services (“HHS”) recently released guidance on the application process to obtain a Health Plan Identifier (“HPID”). A HPID is an all-numeric 10-digit identification number that many HIPAA-covered health plans are required to adopt by November 5, 2014. Think of a HPID like an EIN for health plans. HPIDs will be used in all HIPAA standard transactions, such as the payment of health care claims, claim status checks, health plan eligibility confirmations, and premium payments.

The HPID requirement is another product of the Affordable Care Act and seeks to reduce administrative costs by promoting electronic transactions between medical providers and health plans. To acquire HPIDs for their health plans, plan sponsors will have to register with the Centers for Medicare and Medicaid Services’ (“CMS”) Health Plan and Other Entity Enumeration System (“HPOES”) available through the CMS Enterprise Portal.

It is fair to say that prior to this new guidance the instructions for the application process were not exactly easy to follow. This new two-page document, however, navigates users through the HPID application process step-by-step. In essence, employers will register their organization, identify approved users in the web portal and their roles, and designate an “Authorizing Official User” to act on behalf of the organization in approving/submitting applications.

HPIDs are not required for every health plan, only Controlling Health Plans (“CHP”). A CHP is a health plan that either controls its own business activities or is not controlled by an entity that is not a health plan and exercises sufficient control over any Subhealth Plans (“SHP”). A SHP is simply a health plan whose business activities are controlled by a CHP and obtaining a HPID for SHPs is optional.

Making the HPID optional for SHPs recognizes that employers can structure their health plans in a variety of different ways. For instance, a welfare benefit plan that has three medical benefit arrangements is only required to obtain a single HPID for the welfare benefit plan. The employer could, however, assign separate HPIDs to each medical arrangement if it would simplify claims administration, or any other reason. For most entities, coordination with the third-party claims administrator will determine whether obtaining a SHP has any benefit.

HPIDs will be required to be used in HIPAA standard transactions beginning November 7, 2016. It is the obligation of the HIPAA covered entity to use an HPID in the electronic HIPAA transactions and ensure that business associates of the entity are also using a HPID.

U.S. Supreme Court’s Rejection of Moench Presumption: Fifth Third Bancorp. vs. Dudenhoeffer

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Written by Meredith Fergus


Fifth Third Bancorp (the “Company”) is a public company which maintained a 401(k) plan containing an employee stock ownership plan (“ESOP”) component. The Company matched employee contributions by contributing employer stock to the ESOP, which invested its funds primarily in Company stock.  When the Company’s stock value fell, former employees and ESOP participants filed a lawsuit against the Company and several of its officers who were alleged to be fiduciaries of the ESOP.  The District Court dismissed the case on the premise that the ESOP fiduciaries were entitled to a “presumption of prudence” in continuing to offer the Company stock as an investment option.  The Sixth Circuit reversed this decision, concluding that although ESOP fiduciaries are entitled to a “presumption of prudence” that does not apply to other ERISA fiduciaries, the presumption is an evidentiary one and therefore does not apply at the pleading stage.

 The Moench Presumption

In the Third Circuit case, Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), the court stated that “keeping in mind the purpose behind ERISA and the nature of ESOP’s themselves . . . An ESOP fiduciary who invests the assets in employer stock is entitled to a presumption that it acted consistently with ERISA . . . However, the plaintiff may overcome that presumption by establishing the fiduciary abused its discretion.”  This “presumption of prudence,” also known as the “Moench Presumption,” has been widely accepted by the courts: U.S. Courts of Appeal for the Second Circuit in In re Citigroup ERISA Litigation, 662 F.3d 128 (2d. Cir. 2011), and the Ninth Circuit in Quan v. Computer Sci. Corp., 623 F.3d 870 (9th Cir. 2010).

 The Supreme Court’s Ruling

There is no presumption of prudence to protect ESOP fiduciaries.  Plaintiffs must instead demonstrate that the plan fiduciary acted imprudently by plausibly alleging that:

  1. where a stock is publicly traded, there were special circumstances requiring a plan fiduciary to have recognized on the basis of publicly available information that the market was overvaluing or undervaluing the stock, or
  2. based on inside information, the fiduciaries should have taken an alternative action that the plan fiduciary could have taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

ESOP fiduciaries are put into a difficult position in which they may be sued for imprudence by continuing to invest in company stock, or they may be sued for not following plan documents if they stop investing in company stock, and they can no longer use the Moench Presumption which has often caused lawsuits brought against them to be dismissed in the pleadings stage. 

 Effect on Publicly Traded Companies

This decision may cause more lawsuits to be initiated; however, this would likely primarily affect publicly held companies.  For example, the disclosure of inside information to participants is not relevant to privately held companies which usually fund their plans through company contributions, and there are no investment choices for the participants.  In addition, if a fiduciary of a privately held company chose not to buy ESOP shares because he knows that the company’s most recent valuation is no longer valid due to changes in business conditions and/or the valuation was based on improper information given to the appraiser, he would be violating ERISA, and such disclosure issues are not applicable to privately held companies because there is no market for the shares.

Employers – Review Your Controlled Group to Assure ACA and Retirement Plan Compliance


Beginning in 2015, certain employers that fail to offer affordable health insurance that provides minimum value to their full-time employees and their dependents may incur substantial Employer Shared Responsibility penalties under the Affordable Care Act (“ACA”).  We previously wrote about the importance of properly classifying workers as employees or independent contractors to assure ACA compliance.  In this post, we discuss another significant aspect of ACA and retirement plan compliance – knowing the employer’s controlled group.

Shared Responsibility and Controlled Groups

Pursuant to special transitional relief, employers that have fewer than 100 full-time and full-time equivalent employees (“FTEs”) in 2014 and meet certain additional criteria will not be subject to the Shared Responsibility penalties in 2015.  Starting in 2016, the Shared Responsibility rules will apply to employers with 50 or more FTEs.  When counting an employer’s FTEs to determine whether the Shared Responsibility provisions apply, the Internal Revenue Code (the “Code”) requires the employer to include not only its own employees, but also the employees of each member of the employer’s “controlled group”.  An employer that fails to count the FTEs of its controlled group members may erroneously determine that it is exempt from the Shared Responsibility penalties, creating significant compliance issues.

Retirement Plans and Controlled Groups

An employer that sponsors a qualified retirement plan, such as a Code Section 401(k) plan, also needs to be fully aware of its controlled group structure.  For retirement plan sponsors, controlled group status affects many aspects of plan administration and compliance, including (but not limited to) eligibility, compensation limits, service crediting, nondiscrimination testing, minimum participation requirements, and filing requirements.  In a worst-case scenario, the failure to account for an employer’s controlled group in the operation of a retirement plan could result in plan disqualification.

What is a Controlled Group?

Controlled groups are described in Code Sections 414(b) and (c) and applicable regulations, and may include two or more corporations or unincorporated trades or businesses.  Controlled groups can take one of three forms:

  1. a “parent-subsidiary” group, in which at least 80% of each entity (except the common parent) is owned by another entity, and the common parent entity owns at least 80% of at least one entity in the group;
  2. a “brother-sister” group, in which the same five or fewer individuals, trusts or estates collectively own both a “controlling interest” (at least 80%) and have “effective control” (more than 50%, but counting only ownership that is identical for each entity) of two or more entities; and
  3. a “combined” group, consisting of a parent-subsidiary group and a brother-sister group, where one parent entity is both the common parent of the parent-subsidiary group and a member of the brother-sister group.

Even where a controlled group does not exist, an “affiliated service group” may exist under Code Section 414(m).  Affiliated service group rules are complex and generally apply to two or more entities connected by the provision of management or other services.  These rules may cause entities that are not members of the same controlled group to nevertheless be combined for many health and retirement plan purposes.

Both controlled and affiliated service group rules are further complicated by intricate constructive ownership rules, which can deem an individual to be the owner of an interest not directly held by such individual (for example, individuals may be deemed to own stock held by their family members).

Changes in ownership and service arrangements between employers may create and break controlled and affiliated service groups, so employers should carefully consider the effect of planned corporate changes on their benefit plan administration.

What to Do Next

There is still time for employers to determine their controlled and affiliated group structure to ensure ACA and retirement plan compliance.  Employers should work with their benefits or other tax attorneys when performing complex controlled and affiliated service group analyses.  If you have any questions about this or any other aspect of ACA and retirement plan compliance, please contact a member of the Jackson Lewis Employee Benefits practice or the Jackson Lewis attorney with whom you regularly work.

Look Beyond the ACA Wellness Regulations When Designing Your Program, EEOC Sues Employer Over Its Program

The EEOC could sue my company over the wellness program that is part of our medical plan?

Yes, that agency recently sued an employer in Wisconsin claiming the penalty the employer imposed for nonparticpation in its program was too significant, causing the medical inquiries under the program to be involuntary for purposes of the Americans with Disabilities Act (ADA). EEOC v. Orion Energy Systems, E.D. WI, filed August 20, 2014). Our Disability, Leave & Health Management Blog looks more closely at the EEOC’s theories for liability. It is also important to remember the Affordable Care Act (ACA) rules for wellness programs.

Many employers are in the process of reviewing their medical plans in preparation for the upcoming open enrollment season for 2015. The focus is largely on ACA compliance, in particular the employer shared responsibility penalties. But, as wellness programs have increasingly become a feature of medical plans, employers need to also be reviewing the ACA wellness program regulations, as well as the other laws that may affect their wellness program design and administration, such as the ADA.

Features of the wellness program challenged by the EEOC. According to the EEOC’s complaint, the employer paid 100% of the health insurance premiums for employees who participated in its “voluntary” wellness program. If the employee chose not to participate, the employee paid 100% of the premiums. The program had two components: (i) employees completed a Health Risk Assessment (HRA), which seems to have included having blood work done, and (ii) a “fitness” component involved completing a medical history questionnaire and then using the employer’s range of motion machines. The complaint also alleges that there was a $50 “penalty” for not participating in the fitness component of the wellness program.

ACA Issues. Enforcement of the ACA regulations is outside the EEOC’s jurisdiction, but it is important to remember some key provisions of the ACA regulations that became effective this year for wellness programs:

  • The new regulations raise the maximum permissible reward offered in connection with a health-contingent wellness program to 30 percent. This amount is raised to 50 percent for programs that seek to reduce tobacco use.
  • Health contingent programs can come in two forms: “outcome based” and “activity-only.”
  • Outcome-based wellness programs, in general, reward employees for meeting certain goals, such as lowering their body mass index or cholesterol, or quitting smoking. A reasonable alternative standard must be provided for all individuals who do not meet the outcome-based standard, to ensure that the program is reasonably designed to improve health and is not a subterfuge for underwriting or reducing benefits based on health status.
  • Activity-only wellness programs require individuals to perform or complete an activity related to a health factor in order to obtain a reward, although a particular outcome is not required. Activity-only programs require that a reasonable alternative standard for obtaining the reward be provided to individuals for whom it would be unreasonably difficult due to a medical condition or medically inadvisable to meet the existing standard.
  • Program descriptions must describe the availability of the reasonable alternatives available.

For more information about these rules, including a free 90-minute webinar, go to our wellness program resource center.

Affordable Care Act Employer Penalties – Another Reason to Make Sure Workers are Properly Classified as Employees or Independent Contractors

Written By Monique Warren

Beginning next year, an applicable large employer that does not offer affordable minimum value group health coverage to its fulltime employees (and their children up to age 26) will be vulnerable to employer shared responsibility penalties under Internal Revenue Code §4980H.  Whether an employer is an “applicable large employer” depends on its number of fulltime (and fulltime equivalent) employees in 2014.  The amount of penalties to which an applicable large employer is vulnerable also depends substantially on the number of fulltime employees it has and how many of those employees obtain subsidized Exchange coverage.  Thus, an employer cannot begin to consider its penalty vulnerability, much less strategize on how to avoid or minimize that penalty vulnerability, without knowing how many employees it has and who they are.

That an employer should know how many employees it has, and who they are, may seem obvious.  But what’s not so obvious, in many cases, is whether a worker is properly identified as an employee.  Many employers have workers who perform services under individual or third party contract arrangements (written or otherwise).  Employers frequently refer to these workers as contract workers, temporaries, independent contractors, consultants, contingent workers, and the like.  They may or may not be on the employer’s payroll.  They may or may not receive a Form W-2 from the employer.  They may or may not be offered coverage under the employer’s benefit plans.  And they may or may not be employees.

A serious problem arises when the Internal Revenue Service (“IRS”) disagrees with the employer’s classification of a worker as an independent contractor rather than an employee.  An employee, for employer shared responsibility penalty purposes (as for other purposes considered by the IRS), means a “common law employee” of the employer as explained under Treasury Regulation § 31.3401(c)-1(b).  A common law employment relationship exists “when the person [entity] for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished.”  Whether a common law employment relationship exists obviously turns on a subjective “facts and circumstances” test and the IRS gets to decide whether the relationship passes or fails that test.  The IRS considers whether the employer has behavioral and financial control as well as the nature of the relationship.   Important among the facts and circumstances the IRS considers is whether the employer has the right to hire and fire the worker.  The IRS also considers things like whether the employer gives the worker the tools, equipment and place to work, among other facts and circumstances.  The IRS does not consider as relevant how the employer refers to the worker (e.g., independent contractor, consultant, etc.).  For employers that have misclassified workers as independent contractors who should have been treated as employees, the IRS’ Voluntary Worker Classification Settlement Program remains open, enabling those employers to reclassify workers as employees who’ve been misclassified as independent contractors in prior years for a fraction of the cost (in penalties) that otherwise could be incurred.

An individual paid by a staffing firm, but working under the direction and control of another entity is the common law employee of the entity for whom the individual performs the work.  Thus, using a staffing firm to hire workers will not reduce the number of employees an employer has.  However, for purposes of avoiding employer shared responsibility penalties, the employer will be treated as offering affordable minimum value coverage to those workers if the staffing firm offers such coverage to the workers and the employer pays a higher fee for those workers who enroll in coverage than for those who don’t.

For an employer that has not already done so, it is imperative that the employer make sure it has properly identified all of its common law employees as employees (using the IRS’ Voluntary Classification Settlement Program, if appropriate).  And, an applicable large employer that uses a staffing firm should determine whether the staffing firm will offer affordable minimum value group health coverage to fulltime employees and charge the employer a higher fee for those who enroll.



Employer Action Item – Health Care Reform

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Under the Patient Protection and Affordable Care Act, beginning in 2015, certain large employers who do not offer affordable health insurance that provides minimum value to their full-time employees may be subject to significant penalties. Please refer to our article titled “Health Care Reform: Employers Should Prepare Now for 2015 to Avoid Penalties” for information about these penalties and what employers should be thinking about now.



Written by Stephanie Zorn

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On June 27, 2014, the IRS released Information Letter 2014-0012, which contains guidance for employees who have had the value of same-sex spousal coverage under employer health plans — which until recently was required to be included in gross income — reported on their Forms W-2.


Historically, the employer cost of opposite-sex spousal coverage under employer-provided health plans was tax free, see Treas. Reg. section 1.106-1, while the employer cost of same-sex spousal coverage resulted in taxable income to the employee.  Further, the employee cost of opposite-sex spousal coverage could be paid for on a pre-tax basis through a cafeteria plan, see I.R.C. section 125, while same-sex spousal coverage could only be paid for with after-tax dollars.

 In United States v. Windsor, 570 U.S. ___, 133 S. Ct. 2675 (2013), the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (“DOMA”) — which had prohibited the recognition of same-sex couples as spouses for federal tax law purposes — unconstitutional.  Thereafter, the IRS issued guidance providing that same-sex spouses who were lawfully married under the law of any state — regardless of where those same-sex spouses resided — would be treated the same as opposite-sex spouses for federal tax purposes.  See Revenue Ruling 2013-17.  Subsequent IRS guidance clarified the tax treatment of the employer cost and the employee cost of same-sex spousal coverage:  the former would not result in taxable income to the employee and the later could be paid on a pre-tax basis through a cafeteria plan.  See Notice 2014-1.



Information Letter 2014-0012 outlines two possible correction methods for an employee who has had the value of same-sex spousal health coverage reflected on a Form W-2.   

Option One:  The employee can ask the employer for a corrected Form W-2 — that does not include the value of any excludable spousal health coverage in taxable wages — and use the corrected Form W-2 when filing the employee’s tax return. 

Option Two:  If the employer does not issue a corrected Form W-2, the employee can complete Form 4852 (Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.) pursuant to the instructions contained the Information Letter and file it with a completed Form 1040 and the uncorrected Form W-2. 

The Information Letter also advises employees that they may be entitled to a refund of federal employment taxes (social security and Medicare) paid on the value of excludable spousal health coverage and provides two possible refund methods:  an employer-sought refund and an employee-sought refund via Form 843 (Claim for Refund and Request for Abatement).     


Key Take Away:  Significantly, Information Letter 2014-0012 does not require employers to issue corrected Form W-2s or seek a refund of federal employment taxes.  Accordingly, considerations of payroll department workload and employee relations can determine whether issuance of a corrected Form W-2 or the seeking of a refund is appropriate.  Payroll departments who have not already done so should ensure their Form W-2 reporting and federal employment tax withholding aligns with Windsor and subsequent IRS guidance.        



Dueling Decisions in the 4th and D.C. Circuit Courts of Appeals Spell More ACA Uncertainty for Employers

written by Joy M. Napier-Joyce


Just as employers are gearing up to prepare for compliance with the Shared Responsibility rules under the ACA, a pair of decisions from two federal appeals courts has thrown a curve ball into what was already a complicated assessment of risk for employers and raised new questions.

The U.S. Court of Appeals for the District of Columbia Circuit ruled yesterday in a 2-1 decision (Halbig vs. Burwell) that the plain language of the ACA does not authorize the federal government to provide subsidies to help individuals pay for health coverage through a federally run health exchange or marketplace (“Marketplace”).  Hours later, the U.S. Court of Appeals for the 4th Circuit (King vs. Burwell) reached the opposite conclusion with a unanimous ruling, finding that the text of the law is ambiguous as to whether subsidies are available for coverage through a federally run Marketplace, and requiring the court to give deference to the Administration’s position (established through IRS regulations) that subsidies are available for coverage obtained through both state and federal Marketplaces.  14 states and the District of Columbia run their own Marketplace where subsidies are clearly authorized.  Marketplaces in the other 36 states are run by the federal government.  Under the D.C. Circuit’s interpretation, subsidies would be unavailable for Marketplace coverage in these 36 states.  To date, 4.7 million individuals have enrolled in federally run Marketplaces and qualified for subsidies.

The most immediate impact of an outcome that recognizes that only state run Marketplaces can offer subsidized coverage is that far fewer individuals will have access to “affordable” health coverage and the Marketplaces may be less effective in expanding coverage.  While yesterday’s decisions, and most of the press surrounding the decisions, focus on an individual’s entitlement to subsidized Marketplace coverage, there are very important implications for the calculation of employer penalties under the “Shared Responsibility” or “Pay or Play” provisions of the Act.

By way of background, the ACA provides that applicable large employers, defined to be those with at least 50 full-time and/or full-time equivalent employees, may be subject to a penalty for either (1) the failure to offer minimum essential coverage to substantially all of its full-time employees and their dependents; or (2) the failure to offer affordable, minimum value coverage.  A penalty is only triggered, however, if a full-time employee obtains subsidized coverage through a Marketplace.  Generally speaking, an individual must have a limited household income and not be offered affordable, minimum essential coverage through their employer in order to be eligible for a subsidy.

If the D.C. Circuit’s interpretation survives an en banc appeal and/or likely review by the United States Supreme Court, the result would be that subsidies would only be available in the states that run their own Marketplace.  Applicable large employers operating in states with federally run Marketplaces could offer noncompliant health coverage, or no coverage, to employees in those states and not be subject to penalties under the employer Shared Responsibility requirements.  This would change the potential penalty exposure for employers dramatically.

Until the conflict is resolved, current IRS regulations provide that subsidies will be available in all Marketplaces, regardless of whether they are run by a state or the federal government.  For employers with 100 or more full-time or full-time equivalent employees, January 1, 2015 is the first day from which employer penalties could possibly be assessed (transition relief under the final regulations is discussed in our prior post).  Employers should therefore proceed with their compliance strategies on the basis that subsidies will be available for coverage in all Marketplaces.

As with many of the requirements under the ACA, employers will have to stay alert for further guidance and developments.

Getting Ready for 2015: How Government Contractors, Health Care Reform, and the Family Medical Leave Act Intersect

Written by Jewell Lim Esposito


It’s summer now, mid-year 2014. Open enrollment for the 2015 health plan year is just around the corner. . .

We want to make sure that all employers are ready. We want to ensure, as well, that government contractors specifically understand the intersection of the Service Contract Act (SCA) with other federal laws.

To be spared penalties for 2015 under the Affordable Care Act (ACA), employers who have 100 or more full-time employees and equivalents (FTEs) should ensure they have identified all their over 30-hour employees and be prepared to offer essential health benefits.

Employers with 50-99 FTEs must confirm they are under 100 and claim the 2015 exemption by certification to the IRS.

In our experience, our client government contractors who perform work covered by the SCA might be confusing how they satisfy their health and welfare fringe benefit obligations (the $3.81 per hour, for ease of reference), in coordination with health care requirements under the ACA, no matter how many FTEs that government contractor might have. Here are just two examples; we find that we are confronting more and more problematic situations, as government contractors are examining their existing practices now and tweaking their health plans, in anticipation of open enrollment this coming Fall 2014, for the 2015 plan year.

Example 1.

For example, the government contractor GovK has 800 FTEs, 400 of whom are covered by SCA. As has been the practice in years past, in 2015 GovK wants to carve out SCA employees from its company health plan and thinks that simply paying the $3.81 cash to them to allow them to buy their own health insurance (but not offering the same health plan that GovK offers to its non-SCA employees, many of whom are highly compensated), is enough to satisfy ACA. While guidance is still forthcoming related to the ACA, GovK – under these facts — cannot provide health care only to those who are highly compensated (this is a test that the health plan must pass). Moreover, under ACA and tax rules, GovK must benefit generally 70 percent or more of all employees (another test).

Example 2.

In another example, GovK agrees to pay the employee share of the health care premium for both its SCA (so the $3.81 is accounted for through the provision of a benefit) and non-SCA workers. At its most basic, this practice is non-discriminatory under tax and health care rules, because everyone gets the same benefit of the company paying the employee share. However, when an SCA (non-exempt or exempt) employee goes out on unpaid leave, GovK stops providing the $3.81 benefit (the SCA employee isn’t working, so GovK isn’t offering the bona fide benefit). . . and GovK stops forwarding the employee share of the health care premium to the insurance carrier. In fact, GovK tries to collect the health premium from the SCA employee.

Yet, when a non-SCA (non-exempt or exempt) employee person goes on leave, GovK continues to pay the employee share of the health care premium; GovK won’t collect from the non-SCA employee. While we would have to examine the facts, it is likely that this practice will favor the more highly compensated employees (and therefore is discriminatory from a tax/health plan sense), who tend to be the non-SCA employees.

Further, without going into more, GovK’s unwillingness to pay the SCA employee’s health premium while that employee is out under Federal Medical Leave Act (FMLA) creates compliance issues under that federal law.

Department of Labor Has Started Investigations of Health Plans.

As we see with the brief examples above, compliance with one federal law does not guarantee compliance with (or insulation from) other federal laws.

To underscore the importance of compliance, we note that just last month a DOL investigator has started to evaluate the interplay of these federal laws. We urge government contractor clients to understand that, when dealing with the $3.81 fringe and designing a health plan, they should be mindful of what impacts their operations.