The political storm over the Obama administration’s rule on birth control tops a number of recent developments that affect employers and how they handle certain issues pertaining to the female portion of their workforce.

Following a backlash from religious groups, the Obama administration offered a compromise on its rule that will require employers’ plans to cover contraception services for women. According to a Business Insurance report, the government said nonprofit affiliates of religious organizations, such as universities and hospitals, will not be required to directly offer prescription birth control coverage. However, employees who wish to have access to those services will still be able to get them at no cost through their employer’s health insurer. The rule will apply to plan years starting on or after Aug. 1, 2013.

Before the contraception debate caught the big headlines, the government had been making some moves with a separate rule that stems from the Patient Protection and Affordable Care Act (PPACA). A regulation folded into that legislation requires employers with 50 or more workers to provide time and a private place for workers who are nursing mothers to express breast milk.

The rule hasn’t generated as much attention as other provisions of PPACA, but employers should take note of it, experts say. The Department of Labor has started to enforce the rule, investigating 23 companies and handing out 15 citations for violations in 2011, according to SmartHR Manager.

More than 64 percent of U.S. mothers with children under age 6 were in the workforce in 2010, according to the Bureau of Labor Statistics. The healthy percentage of working moms with young children suggests that this rule has a high likelihood of touching most employers now or at some point in the future.

While the new rule will impact policies for companies after their female workers become moms, some employers are seeking compliance help for conflicts that involve employees while they’re still pregnant.

Employers recently testified at a recent Equal Employment Opportunity Commission (EEOC) hearing and requested more guidance on how to comply with the Pregnancy Discrimination Act (PDA), according to a report inWorkforce. Deane Ilukowicz, vice president of HR for Hypertherm Inc. in Hanover, N.H., noted in written testimony that the complex web of PDA, the Family and Medical Leave Act, the Americans with Disabilities Act and other laws “can derail even companies who want to do the right thing.”

Ilukowicz suggested the commission rework its PDA fact sheet and provide more case study examples.

At the hearing, an EEOC spokesman reiterated the commission’s commitment to the enforcement of PDA, warning employers to avoid “stereotypes or presumptions about the competence and commitment” of workers who are pregnant.

Inevitably, however, a big chunk of the hand-wringing over a full-blown wellness program boils down to costs, experts say — specifically, the costs of starting and maintaining an initiative and the difficulty of measuring the financial benefits.

Recent research, however, suggests that wellness pays off for employers that are willing to stick with it. A report in the American Journal of Health Promotion finds that for every dollar spent on costs, employers can expect about $3 in overall medical savings within just two or three years.

“The study provides support for continued investment, but reminds employers that health management is a multi-year investment strategy,” Seth Serxner, the study’s lead author, told Health Behavior News Service.

Yet even those employers that currently support wellness programs have a hard time wrapping their minds around wellness ROI, a separate study suggests. More than three-fourths of employers who have initiatives in place remain in the dark about the ROI of their programs, according to aPLANSPONSOR report on a study by Fidelity Investments and the National Business Group on Health (NBGH).

Fortunately, employers can rely on a number of simple and low-cost ideas that can help them get over the ROI hump and create a program that improves workers’ lives, according to Tammie Brailsford, executive vice president and chief operating officer of MemorialCare Health System in California.

“Instead of building a fitness center, offer employees a pedometer, mealtime walking programs and sessions on achieving better health,” Brailsford said in SmartBusiness Orange County. “Costs can be minimal — from $50 to $500 or more per employee annually, plus incentives for health improvement.”

Those incentives can increase overall costs, but most employers remain committed to them, the Fidelity/NBGH study found. Seventy-three percent of companies with wellness programs used incentives in 2011, with an average value of $460. That compares with an average incentive value of $430 in 2010 and $260 in 2009.

But the real value of incentives shouldn’t be tied solely to cost, warns Renay Gontis of JRG Advisors. The incentive needs to be not only desirable but also in sync with the goals of the wellness program, she said.

“The last thing an employer wants to do is to offer counterproductive incentives such as membership in a cake-of-the-month club or a gift certificate to an all-you-can-eat dinner,” Gontis told SmartBusiness Pittsburgh. “A few positive incentive examples include fitness club memberships, new walking/running shoes, massages and paid time off.”

Most recently, the Department of Labor (DOL) issued a new proposed rule that would extend leave for family caregivers of U.S. veterans up to five years after the veterans leave the military, according to a DOL press release. Presently, the law only covers family members of service personnel who are currently serving.

The proposed rule also would make FMLA more accessible to airline flight crews by altering the eligibility requirements and changing how flight crews’ hours are calculated when determining FMLA leave.

This proposal adds yet another wrinkle to FMLA compliance. According to Steve Peltin of Foster Pepper PLLC, leaves of absence often are the most complicated – and frustrating – aspects of HR administration.

FMLA provides workers with up to 12 workweeks of unpaid leave within a 12-month period. However, who is eligible — and when — depends on a myriad of factors, including employer size, how long the employee has worked for the company and where employees put in their time, Peltin noted in a recent online posting.

Military service can make compliance even more tricky. The law contains seven “qualifying military exigencies” that affect the FMLA calculation for military personnel, all of which depend on a variety of situations and military obligations, according to Peltin. Then, of course, there is leave for caregivers of servicemembers, which the proposed rule would expand.

On top of all that, other laws – specifically the Americans with Disabilities Act (ADA) – often overlap and affect leave policies. Peter Susser, writing for SmartHR Manager, notes that terminations that follow FMLA leave can run against ADA.

Susser provides this scenario: “An employee is granted FMLA leave to treat a serious health condition that poses long-term restrictions and limitations; 12 weeks pass; the employee fails to return to work; company terminates employee under a ‘no-fault’ absence policy.” Because the employer provided 12 weeks, there’s no problem, right?

Don’t count on it, Susser writes. The employer could be violating ADA if the worker’s “serious health condition” is considered a disability. If both laws apply, the company might have to grant more leave as a reasonable accommodation or face serious consequences if it terminates the employee.

When grappling with FLMA and ADA questions, documentation is the best policy, according to Susser. “HR managers should document every telephone conversation, email exchange or letter sent to employees while they are on leave,” he writes, adding that any terminations should be executed carefully, keeping in mind the intertwined nature of FMLA and ADA.

But unlike the famous, fair-weather rodent, employers can’t hide in their offices for six weeks until spring (or a healthier workforce) rolls in. Employers must implement solid cost-control strategies if they want to keep their health care plans viable and valuable, experts say.

The challenges for employers are evident. Total premiums for family health coverage jumped 50 percent from 2003 to 2010, according to Commonwealth Fund research reported byThe New York Times. While health care headlines often expose the big offenders such as obesity, chronic conditions and smoking, other lesser-known trends are having a hidden but significant impact on health care costs.

Health Screenings
Prevention and early detection of medical problems can stave off high costs in the long run, but many Americans aren’t doing enough, according to a new Centers for Disease Control and Prevention (CDC) report. Screening rates for a number of cancers remain below the government’s target levels, especially among some minority groups, according to the CDC analysis reported by WebMD. About 59 percent of men and women had colonoscopies or other colorectal cancer screens in 2010 – well below the CDC’s target of 70 percent. About 75 percent of women received mammograms, while about 80 percent had Pap tests to screen for cervical cancer. Targets for those screenings were 81 percent and 93 percent, respectively.

Induced Births
The practice of induced births to fit around a patient’s (or doctor’s) schedule has become a moneymaker for hospitals but a drain for insurers and employers, according to an Employee Benefit News report. Recent studies suggest that these early, scheduled births can lead to avoidable complications for both mother and baby, which can drive up costs.

Leah Binder, CEO of The Leapfrog Group, told EBN that plan design can go a long way in discouraging would-be mothers from moving up their delivery date for the sake of convenience. If the plan participant has to put up a larger out-of-pocket contribution for such births, she might be less likely to elect that procedure, Binder said.

Wellness Solutions
In addition to plan design and a push for preventive medical services, employers can control costs by supporting a robust wellness program that gets to the root of many health care problems, a new report by the Principal Financial Group suggests. The study found that 41 percent of employees enrolled in employer-sponsored wellness initiatives said the programs made them happier and more productive, according to a report on the research by Business Insider. About 35 percent of respondents said they took fewer sick days, and 52 percent reported increased energy.

One of the hottest compliance topics to emerge from health care reform — the new summary of benefits and coverage (SBC) requirements — received some much-desired guidance and a new deadline, according to a report by SmartHR Manager.

The Department of Health and Human Services (HHS), the Department of Labor (DOL),  the Treasury Department and the IRS posted a final rule that clarifies that the SBC information can be incorporated into the summary plan description (SPD) as long as that information is correct and prominently displayed at the beginning of the SPD.

The final rule also pushed back the effective date. Originally, plans that started on or after March 23, 2012, were to be subject to these rules. That date has been moved to Sept. 23 of this year.

The Patient Protection and Affordable Care Act (PPACA) requires employers to provide workers with an easy-to-understand summary of benefits and coverage, a glossary of commonly used health care terms and general explanations of how the plan would handle certain medical conditions.

Other recent benefits-related decisions include:

Final GINA Rules
The Equal Employment Opportunity Commission (EEOC) has issued a final rule that defines record-retention requirements under the Genetic Information Nondiscrimination Act (GINA).  This rule establishes the same requirements that apply under Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act, according to a report by Workforce magazine.

The EEOC noted that the rule does not call for the creation of new documents or demand any additional reporting requirements. Employers must maintain all relevant records until any GINA charge is resolved, the EEOC added.

Final 401(k) Fee Disclosure Rules
The DOL finalized rules regarding fee disclosures for 401(k) plans, according to a PLANSPONSOR report. The final rules call for service providers to give plan fiduciaries information about any direct or indirect compensation or fees received by the service provider to maintain and manage the plans.

The rules also require providers to communicate any possible conflicts of interest. The DOL announced that any entities not in compliance by July 1 would be subject to penalties under the Internal Revenue Code.

On the same day that they released final regulations on the Summary of Benefits and Coverage (see our recent Compliance Alert on SBCs), the Departments of Labor, Health and Human Services, and Treasury (the Departments) also issued a joint set of frequently asked questions (FAQs) addressing various topics under the Affordable Care Act (ACA). IRS Notice 2012-17 (which was issued in substantially identical form by the other two Departments) provides guidance on automatic enrollment, employer shared responsibility, and waiting periods, as well as suggestions regarding various approaches the Departments are considering proposing in future regulations.

Automatic Enrollment
The ACA provision on automatic enrollment requires certain large employers (those with more than 200 full-time employees) to automatically enroll new full-time employees in one of the employer’s health benefit plans (subject to any legally permissible waiting period), and to continue the enrollment of current employees in a health benefit plan.  It further requires notice and an opt-out opportunity for employees who have been automatically enrolled.

Compliance Deadlines

As enacted, this SBC requirement was to apply as of March 23, 2012.  This recent guidance allows compliance to be deferred until the first open enrollment period beginning on or after September 23, 2012.  For participants who are not a part of the open enrollment process (such as new hires or special enrollees), the compliance deadline is the first day of the first plan year beginning on or after September 23, 2012.

To comply with this requirement, an SBC must be included in any application materials provided as a part of the open enrollment process.  If there are no such materials, the deadline for providing an SBC is the first day on which a participant is eligible to enroll.  Plans have additional time to provide an SBC to any special enrollee.  The deadline in that case is 90 days after the participant’s enrollment date (i.e., the same as the deadline for providing a summary plan description).

Covered Plans

These SBC rules apply to both insured and self-funded plans.  The plan administrator (typically, the sponsoring employer) is responsible for providing the SBC.  In the case of an insured plan, however, the insurer is equally responsible.  Moreover, if an insurer provides a timely and accurate SBC, the plan administrator is not required to do so.

This is another health care reform requirement to which even “grandfathered” plans are subject.  The same is true for even stand-alone health reimbursement arrangements, as well as “mini-med” plans that have received a waiver from the prohibition on annual benefit limitations.

Certain employer plans are exempt from this SBC requirement, however.  These include HIPAA “excepted benefits,” such as stand-alone dental and vision plans and most flexible spending arrangements.  Health savings accounts are also exempt.  The agencies note, however, that even exempt FSAs or HSAs may need to be referenced in an SBC for a comprehensive medical plan, as a way of explaining that plan’s deductibles and other co-payment features.

Recent Changes

Although the final regulations track most of the August 2011 proposals, certain changes should make it somewhat easier to comply with this SBC requirement.  These include the following:

• An SBC need not disclose information concerning premiums.
• An SBC may be combined with other plan materials, such as a summary plan description, so long as the SBC is prominently displayed.  In the case of an SPD, the agencies suggest that the SBC immediately follow the SPD’s table of contents.
• Although the agencies continue to emphasize the importance of using the published template when preparing an SBC, they now acknowledge that certain modifications are permissible.  These might be needed to describe discounts available through provider networks, benefits that vary with the type of facility, multi-tier drug formularies, or incentives for participation in wellness programs.
• The proposed regulations described three examples to be included in the “Coverage Facts” portion of each SBC:  maternity care, management of type 2 diabetes, and treatment of breast cancer.  Responding to concerns raised by various commenters, the breast cancer example has now been removed.  However, the agencies have specifically reserved the right to require up to six different examples, so future guidance may require examples of more acute medical conditions.
• The version of the SBC template issued in August of 2011 was drafted by a task force organized by the National Association of Insurance Commissioners.  Perhaps for that reason, it spoke in terms of a “policy” or “insurer.”  Recognizing that these terms are not appropriate for self-funded plans, the revised template substitutes “coverage” and “plan” for these two terms.
• The final regulations make it somewhat easier to distribute an SBC via electronic means, rather than on paper.  The rules have not changed for participants and beneficiaries who are currently enrolled in the plan (for whom electronic delivery is permissible only in accordance with the DOL’s stringent requirements), but somewhat more liberal rules now apply to individuals who are merely eligible to enroll.  Assuming an SBC is in a “readily accessible format,” it may be posted on the Internet.  The plan or its insurer would then notify the eligible individual (either on paper or via e-mail) that the document is available online, providing both the Internet address and a statement that the SBC will be provided in paper form upon request.

The penalty for failing to comply with this SBC requirement is $1,000 for each participant and beneficiary who fails to receive a timely and accurate SBC.  Plan administrators should therefore take immediate steps to prepare appropriate SBCs (one for each benefit option), well in advance of the upcoming open enrollment season.  Administrators of insured plans will want to coordinate with their insurers, but self-funded plans should familiarize themselves with both the final regulations and numerous pieces of related guidance. 

Kenneth A. Mason, Partner
Spencer Fane Britt & Browne LLP

In an attempt to arm plan fiduciaries with additional information about the increasingly complex services provided by retirement plan vendors (such as record keepers, third-party administrators, and brokers) and the fees charged for those services, the Section 408(b)(2) regulations impose specific disclosure requirements on those providers.  Under ERISA, fiduciaries must ensure that these arrangements are reasonable, and that only reasonable compensation is paid for them.  As we reported in our May 2011 article, the information that will be provided under these rules is intended to help fiduciaries fulfill that responsibility.

The final regulations published on February 2 replace an interim final rule that was released on July 16, 2010.  In addition to delaying the effective date of the disclosure requirements, the final rule makes a number of minor changes in response to comments received on the interim final rule.  These include:

• An exclusion for certain Code § 403(b) annuity contracts and custodial accounts;
• Expansion of the information that service providers must disclose about “indirect” compensation they receive;
• Changes to the investment-related disclosures to conform to the requirements of the DOL’s participant-level disclosure rules; and
• A separate provision for disclosing changes to investment-related information, which must be updated at least annually.

The final regulations “strongly encourage” service providers to offer plan fiduciaries a “guide” or summary of their disclosures. The DOL included a sample guide as an appendix to the final rule. Debate about whether to require such a summary disclosure is rumored to have delayed the release of the final rules. For now, the summary is voluntary, but the DOL strongly hinted that it may make the summary mandatory in future regulations.

These regulations will be effective for contracts or arrangements (whether existing or new) between covered plans and covered service providers as of July 1, 2012. This delayed effective date (from April 1) also will push back the effective date for disclosures that plan administrators must send to participants. Initial annual participant-level disclosures must be furnished within 60 days after the effective date of the  service provider disclosures. For calendar year plans, this means that the initial disclosure of plan- and investment-related information must be furnished to participants no later than August 30, 2012 (rather than May 31), and the first quarterly statement must be furnished to participants no later than November 14, 2012 (rather than August 14).

Gregory L. Ash, Partner

Spencer Fane Britt & Browne LLP

This notification is brought to you by our Member Firm of United Benefit Advisors – a member-owned alliance of more than 140 premier independent benefit advisory firms and one of the nation’s five largest employee benefits advisory organizations – and Spencer Fane Britt & Browne LLP, with offices throughout the Midwest and more than a century of experience providing legal counsel. This publication is designed to provide accurate and authoritative information.  It is distributed with the understanding that the author, publisher and editors are not rendering legal or other professional advice or opinions on specific matters, and accordingly, assume no liability in connection with its use. The choice of a lawyer is an important decision and should not be made solely upon advertisement. Past results afford no guarantee of future results. Every case is different and must be judged on its own merits.

UBA also co-sponsors an informative webinar series designed to help employers anticipate emerging regulatory issues and stay abreast of the latest human resource trends and best practices. For more information, contact The LBL Group today.

Although 2012 is just getting started, many employers are already looking ahead to next year for a change in Form W-2 reporting.

Under the Patient Protection and Affordable Care Act (PPACA), companies are required to report the value of their employer-sponsored health care coverage on employees’ W-2s. This takes effect for most employers this year, meaning the values must be represented on the forms issued in 2013. Smaller employers — those with fewer than 250 W-2s to distribute, are exempt until at least 2014.

The IRS has issued a series of notices to help employers handle this new task. The guidance, according to Michael R. Durnwald of the law firm Katten Muchin Rosenman LLP, clarifies that:

• While the value of the plans must be reported, it does not affect the tax treatment of the health care coverage.
• Employers do not have to create a W-2 to satisfy this requirement for someone who normally would not receive a form (a retiree with health benefits, for instance).
• Employers can calculate the value in a number of ways, including using the COBRA premium.
• Flexible spending accounts, dental and vision plans should not be included in the value calculation.

The IRS added to that guidance shortly after the New Year’s holiday, according to a report by Business Insurance. The IRS further clarified that employers can include contributions to health reimbursement arrangements in the calculation, but are not required to do so.

Also, costs related to wellness initiatives, employee assistance programs and on-site clinics do not need to be included as long as the employer doesn’t charge premiums for them under COBRA.

Ultimately, however, the fate of this and other provisions of PPACA rests in the hands of the Supreme Court, which announced in December that it would start hearing oral arguments regarding the health care reform law in late March. A final ruling is expected in June, according to a Reuters report.