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Northwest OH Legal Blog

Tuesday, February 25, 2014

Midsize Companies Get Transition Relief in Final Rules on ACA Employer Mandate

The Treasury Department issued final rules on the Affordable Care Act's employer mandate February 10, 2014 which granted significant new transition relief to employers with 50 to 99 full-time employees.

The final rules (T.D. 9655) under tax code Section 4980H (also known as the employer shared-responsibility provisions) provide that beginning January 1, 2015, the mandate will only apply to companies with more than 100 full-time employees. The rules will apply to midsize businesses beginning Jan. 1, 2016. The final rules are scheduled to be published in the Feb. 12 Federal Register.

To avoid a payment for failing to offer health coverage, employers will need to offer coverage to 70 percent of their full-time employees and/or full-time equivalents in 2015 and 95 percent in 2016 and beyond, Treasury said. During a February 10, 2014 conference call a senior Treasury official said the changes will provide significant relief to midsize businesses as they seek to comply with the health-care law.  According to Treasury Department estimates, midsize businesses are about 2 percent of the total number of employers in the U.S.

The final rules did not change the definition of full-time employee, maintaining the 30-hours-a-week threshold.

In July 2013, the Obama administration delayed for one year the January 1, 2014, effective date of proposed rules (REG-138006-12) under Section 4980H on mandatory reporting requirements for employers and health insurers, as well as related employer shared-responsibility penalties


Tuesday, February 18, 2014

Supreme Court Hears Challenge to Public Sector Unions

On January 12, the Supreme Court heard a case which could have major ramifications for Public Sector Unions.  The Case, Harris v. Quinn, involves home-care workers in Illinois that, because they receive funds from Medicaid to provide services to their patients or family members, were declared public workers.  As public workers, Service Employees International Union (SEIU) organized these workers into a union.  A vote was taken, and the majority of workers voted to have SEIU be their exclusive representative.  Eight bargaining unit members opposed to joining SEIU or helping to pay for the cost of representation filed suit.  At both the district and appeals court, the courts found in favor of SEIU and the State.  Petition was then made to the Supreme Court who agreed to hear the case.

Much like the private sector, when a public sector union is formed the union must represent all employees in the bargaining unit in contract negotiations, grievance hearings, and any other representational matters regardless of their union membership.  To offset the cost of representing non-union bargaining unit members, unions may charge a “fair share” fee that is the portion of union dues expended on representation that does not include the amount a union charges members to cover the union’s political or ideological activity.  Although, anti-union activist have attacked fair share fees before, the Supreme Court upheld the right of public sector unions to collect fair share fees in its 1977 decision Abood v. Detroit Board of Education. Subsequently, a whole body of case law has evolved affirming the right of public sector unions to collect fair share fees relying on Abood.  Now this right is being challenged again with a more conservative court to decide its outcome.

Although Harris v. Quinn was initially brought to question whether the health-care workers were, in fact, public sector workers, the case has since evolved into a ploy to overturn Abood on first amendment grounds.  Led by the conservative National Right to Work Legal Foundation, the plaintiffs have argued that the forced payment of fair share fees infringes on their right to speak and free association.

Although the Court has, in the past, reaffirmed the decision in Abood, two years ago Justice Alito wrote an opinion joined by the other four conservative justices that questioned whether the collection of fair share fees was constitutional.  During oral arguments for Harris, Alito once again questioned whether fair share fees forced public sector members to support public policy that they find objectionable.  Alito’s concerns were further echoed by Justice Kennedy.

With Alito, Kennedy, and presumably Thomas, appearing ready to strike down Abood, the outcome of the case could hinge on Chief Justice Roberts, who focused his questioning on the question of whether or not these workers are, in fact, public sector workers, and Justice Scalia who seemed doubtful that the public employee union activity was more about shaping public policy than about the traditional role of improving the working conditions of bargaining unit members.

It the Supreme Court would rule to overrule Abood, the effect could be widespread, turning all public sector employees in the nation into so called “right to work” employees.  This would exacerbate the free rider problem allowing bargaining unit members to enjoy all the rights and benefits of representation without having to share in any of the costs.  Although the case may be decided on narrower grounds (a path that Chief Justice Roberts seemed to favor) the potential exists for the Supreme Court to throw away almost 30 years of precedent and deal a major blow to unions representing public sector unions.  A decision on the case is expected in late May or June.  Allotta | Farley will be following this closely and will update you once a decision is handed down.


Thursday, February 13, 2014

United States Supreme Court Unanimously Upholds Disability Plan’s Limitations Period on Court Actions by Participants Who Have Been Denied Benefits

The United States Supreme Court has given a ringing endorsement to plan-imposed time limits on court actions by participants who have been denied benefits by an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).  On December 16, 2013, the Supreme Court, in Heimeshoff v. Hartford Life & Accident Insurance Co. et al., unanimously held that contractual limitations provisions in an ERISA-governed employee benefit plan are enforceable unless the time limits imposed by such provisions are unreasonably short or, in the alternative, a controlling statute preempts them.

Under the facts in Heimeshoff, Julie Heimeshoff, in 2005, reported chronic pain and fatigue that interfered with her duties as a senior public relations manager for Wal-Mart Stores, Inc. (“Wal-Mart”).  After she was diagnosed with lupus and fibromyalgia, Heimeshoff stopped working, and she filed a claim for long-term disability benefits with Hartford Life & Accident Insurance Co. (“Hartford”), the administrator of Wal-Mart’s Group Long Term Disability Plan (“Plan”).  Hartford denied Heimeshoff’s claim on the ground that she had failed to provide satisfactory proof of loss.

In 2006, another physician evaluated Heimeshoff and determined that she was disabled. That evaluation and other evidence were submitted to Hartford, but Harford again denied her claim after a Harford-retained physician concluded that Heimeshoff was able to perform the activities required by her sedentary position at Wal-Mart.  In 2007, Heimeshoff requested and was granted an extension of the Plan’s appeal deadline, but later that year Hartford issued a final denial of her claim.  In 2010, within three years after Hartford’s final denial of her claim, but more than three years after proof of loss was due, Heimeshoff sued in district court, seeking review of her denied claim under ERISA Section 502(a)(1)(B).

Hartford and Wal-Mart moved to dismiss, arguing that Heimeshoff’s complaint was barred by the Plan’s time limit on court actions by participants following an adverse benefit determination.  Pursuant to this Plan-imposed limit, any litigation challenging an adverse benefit determination was required to be filed within three years after the time that “proof of loss” was required to be submitted to the plan’s administrator in connection with a participant’s claim for benefits.  The federal district court for the District of Connecticut granted the motion to dismiss, and the United States Court of Appeals for the Second Circuit affirmed on appeal.

The Supreme Court upheld the rulings of both lower courts, holding that unless there is a controlling statute to the contrary, “…a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”  Noting that ERISA is silent as to the appropriate statute of limitations for benefit claims under ERISA Section 502(a)(1)(B), Justice Clarence Thomas, writing for the Court, reasoned that parties are free to agree to contractual provisions that are different from the general statute of limitations that would otherwise be applicable to such claims.  This freedom of contract includes both the length of the limitations period and the date on which the limitations period begins to run.  Further, the principle of enforcing written plan terms “is especially appropriate when enforcing an ERISA plan” because of the “particular importance of enforcing plan terms as written” in actions under ERISA Section 502(a)(1)(B).

The Supreme Court concluded that an ERISA plan’s limitations provision is to be given effect unless— 

  • the period is unreasonably short or
  • a “controlling statute” prevents the limitations period from taking effect.

In this case, the Plan’s three-year limitations provision was not unreasonable because Heimeshoff was left with almost one year to file suit after the Plan’s administrative review process had concluded.

The Supreme Court also rejected Heimeshoff’s argument that ERISA is a “controlling statute” that is contrary to the Plan’s limitations provision.  According to the Court, it was “highly dubious” that the Plan’s limitations provision would undermine ERISA’s remedial scheme that requires an internal review process for all disability benefit claims filed by participants.  The Court added that there is also no risk of endangering judicial review by allowing a plan to set a limitations period that begins to run before the plan’s internal review is complete.  In the Court’s view, a three-year limitations period is quite common, and courts may apply traditional doctrines such as waiver or estoppel to prevent a plan administrator from invoking a limitations provision as a defense when the administrator’s conduct causes a participant to miss a deadline for judicial review.

Now that the Supreme Court has authoritatively spoken on the legitimacy of plan-imposed time limits on the filing of court actions by participants who have been denied benefits by an ERISA-governed employee benefit plan, plan sponsors that wish to reduce the uncertainty surrounding statutes of limitations applicable to ERISA-based benefit claims would be well advised to review their plan documents to make sure that their plan documents provide a reasonable time limit for filing lawsuits in such cases.


Tuesday, February 11, 2014

Judge Rejects Lawsuit Aimed At Undermining Affordable Care Act And Upholds Premium Tax Credits Under Federal Insurance Exchanges

A legal challenge seeking to cripple The Affordable Care Act (ACA) suffered a major setback January 15, 2014 when as it was defeated in federal court. The case is Halbig v. Sebelius. The U.S. District Court for the District of Columbia granted summary judgment against the challengers, who argued that that the text of the ACA did not allow the law's premium tax credits to be offered on federal insurance exchanges and that they must only be available through state-based exchanges.

Judge Paul L. Friedman called that argument "unpersuasive," and said it ran counter to the central purpose of the Affordable Care Act. In a 39-page decision Judge Friedman wrote: “Plaintiffs' proposed construction in this case – that tax credits are available only for those purchasing insurance from state-run Exchanges – runs counter to this central purpose of the ACA: to provide affordable health care to virtually all Americans," He further said "Such an interpretation would violate the basic rule of statutory construction that a court must interpret a statute in light of its history and purpose."

The judge found that the federal exchanges -- which the Obama administration is constructing for 34 states that declined to build their own -- "would have no customers, and no purpose" if the challengers' logic were adopted.

The court further stated: "In other words, even where a state does not actually establish an Exchange, the federal government can create 'an Exchange established by the State under [42 U.S.C. § 18031]' on behalf of that state,"

The challenge was seen as a longshot from the outset given the fact that government agencies generally have broad discretion to interpret ambiguities in the law under Chevron v. Natural Resources Defense Council. The I.R.S. has ruled that federal exchanges may provide subsidies. Reviewing the ACA as a whole, the court found that law was unambiguous on this point. Another problem was the lack of evidence that congress sought to limit the premium tax credits in this manner.

Tim Jost, a professor of health law at Washington and Lee University who supports The ACA commented: "This argument made no sense from the beginning," "Congress clearly did not mean to exclude residents of two thirds of the states from premium tax credits. Judge Friedman had little trouble finding that the statute clearly authorizes premium tax credits to be granted through federal exchanges. He did not even have to defer to the agency’s interpretation of the statue. His reasoning is persuasive, and will be upheld by the appellate court."

The Plaintiffs say they will appeal.  Several other similar lawsuits have been filed in federal district courts in Indiana, Oklahoma and Virginia, which remain pending.


Tuesday, February 4, 2014

Early reporting of injury is important

Recently we had a client who suffered an injury at work but failed to report the incident to his employer. He then waited to see the doctor for several days and then did not seemingly make it clear to the doctor what had happened to him at work.  When the employer refused to accept the claim the matter went to hearing on whether to allow the claim.  The client then was subjected to the employers attorney insinuation that the problem did not occur at work because there was no contemporaneous accident report, a lapse between the incident and treatment and no mention of the relationship to work in the medical records.  Luckily we were able to get the necessary relationship statement from the doctor and convince the hearing officer of the clients truthfulness to get the claim allowed but it would have been so much easier for the client if he had reported the injury to his boss and made it clear to the doctor that the injury happened at work.  Then a hearing and the delays in treatment and compensation that go with it would not have been necessary.   


Tuesday, January 28, 2014

Internal Revenue Service Issues 2013 Cumulative List of Changes in Plan Qualification Requirements for Retirement Plans

On December 11, 2013, the Internal Revenue Service (“IRS”) issued IRS Notice 2013-84, which provides guidance that includes a 2013 cumulative list of changes in plan qualification requirements (“2013 Cumulative List”) to be used in conjunction with the determination letter program for individually designed retirement plans eligible for review in Cycle D.  Multiemployer pension plans governed by Section 414(f) of the Internal Revenue Code are among the plans eligible for review in Cycle D.

Pursuant to IRS Notice 2013-84, the IRS will start accepting determination letter applications for individually designed Cycle D plans beginning February 1, 2014. The 2013 Cumulative List informs plan sponsors of the issues that the IRS has specifically identified for review in determining whether a plan filing in Cycle D has been properly updated. The submission period for plans in Cycle D will end 12 months later, on January 31, 2015.

The 2013 Cumulative List reflects changes under a variety of laws, including the Moving Ahead for Progress in the 21st Century Act (MAP-21), the American Taxpayer Relief Act of 2012 and the Pension Protection Act.  The IRS said the notice does not extend any deadlines by which plans must be amended to comply with statutory, regulatory or guidance changes necessary for plans to maintain their tax-qualified status.

Pursuant to IRS Notice 2013-84, the general deadline for adopting interim or discretionary amendments appears separately in Section 5.05 of Revenue Procedure 2007-44, which was issued on June 14, 2007.  For tax qualification purposes, the IRS, in reviewing Cycle D plans, will generally not look for—

A. plan amendments related to guidance issued after October 1, 2013;

B. statutes enacted after October 1, 2013;

C. qualification requirements that will become effective in 2015 or later; or

D. statutory provisions that will become effective in 2014, for which there is no guidance listed in IRS Notice 2013-84.

To retain their tax-qualified status, however, plans must comply with all relevant tax-qualification requirements, including ones not included on the 2013 Cumulative List.


Thursday, January 23, 2014

The NLRB in 2013

After years of Senate confirmation battles and operating the National Labor Relations Board with less than its full complement of five board members, 2013 finally saw the Board fully staffed with the appointment of Chairman Mark Gaston Pearce and members Nancy J. Shiffer and Kent Y. Hirozawa.  With these appointments, decisions issued by the NLRB should no longer be challenged in the courts because of questionable quorums and recess appointments.  The senate also confirmed President Obama’s choice for NLRB General Council, Richard F. Griffin, Jr..  With the NLRB now “running on all cylinders,” as AFL-CIO President Richard Trumka put it, the board has begun to make strides in fulfilling the promise of the National Labor Relations Act.

Under the direction of Mr. Griffin, the NLRB recently filed several unfair labor practice charges against Wal-Mart for actions and statements they made about some of their employees who participated in Black Friday protests.  The Board also ruled in favor of the UFCW’s practice of giving gift cards to protestors, finding it was not, as Wal-Mart claimed, coercive behavior.

In addition to these developments, the Board has promised to give further guidance on so-called “micro-unions,” a development that allows individual departments to unionize even if the larger shop wishes to remain non-union.  These guidelines could help unions make inroads into more workplaces and further effectuate the purpose of the Act.

While 2013 ended on a positive note for the NLRB, with a fully staffed Board and strong leadership from its new General Counsel 2014 promises to offer even greater strides in returning workplace balance from the hands of corporate American back to the workers.


Friday, December 20, 2013

Internal Revenue Service Issues 2014 Cost-of-Living Adjustments for Retirement Plan Limits

On October 31, 2013, the Internal Revenue Service (“IRS”) announced cost-of-living adjustments to dollar limitations for items affecting tax-qualified retirement plans under the Internal Revenue Code (“Code”) in 2014.  The announcement includes the following highlights for 2014: 

  • The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500. 
  • The catch-up contribution limit for the above listed plans for employees aged 50 and over remains unchanged at $5,500.
  • The limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) is increased from $205,000 to $210,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2014 from $51,000 to 52,000.

The following table sets forth the Code limits applicable to 401(k) plans, profit sharing plans, and defined benefit plans for 2013, with a comparison to such limits for 2011 and 2012.

        
  

Limits under Applicable Code Section

  
  

2014

  
  

2013

  
  

2012

  

Annual Compensation - 401(a)(17)/404(l)

260,000

255,000

250,000

Elective Deferrals under 401(k) Plan - 402(g)(1)

17,500

17,500

17,000

Catch-Up Contributions under 401(k) Plan - 414(v)(2)(B)(i)

5,500

5,500

5,500

Annual Addition Limit for Defined Contribution Plans -   415(c)(1)(A)

52,000

51,000

50,000

Highly Compensated Employee Threshold - 414(q)(1)(B)

115,000

115,000

115,000

Annual Benefit Limit for Defined Benefit Plans - 415(b)(1)(A)

210,000

205,000

200,000

Key Employee Compensation Threshold - 416(i)(1)(A)(i)

170,000

165,000

165,000

Taxable Wage Base for Social Security Taxes

117,000

113,700

110,100

 


Tuesday, December 17, 2013

Workers Compensation and Third Party Actions

Some work related accidents can be caused by the negligence of a third party who can also be held responsible for the damages, both economic and non-economic, suffered by the worker.  Such worker can have both a workers compensation claim that is processed through the BWC and an independent claim against the party who caused the injury, usually processed through an insurance carrier.  Although the injured worker can recover under both claims there is a subrogation provision in the law which will require the injured worker to reimburse the BWC for a portion of the funds expended for the injured workers medical and disability benefits.  However it is beneficial for any worker injured by a third party to take advantage of all sources of potential benefits.    


Thursday, December 12, 2013

IRS issues final rule implementing ACA fee on health insurers.

The Internal Revenue Service has released a final rule implementing a provision in the Affordable Care Act imposing billions of dollars in fees on health insurers. Health insurers are generally liable for annual fees based on premiums. The aggregate fee amount for all covered entities is $8 billion for 2014; $11.3 billion for 2015; $11.3 billion for 2016; $13.9 billion for 2017; and $14.3 billion for 2018, the rule said. The fee for subsequent years will be increased by the rate of premium growth.

The fee is to be levied on all fully insured health plans. Self-funded plans, including self-funded multi-employer plans are exempt. Most large employers fund the plans they offer their employees.

The final rule (T.D. 9643) was released Nov. 26, 2013 and published in the Nov. 29, 2013 in the Federal Register (78 Fed. Reg. 71,476, 11/29/13).The Joint Committee on Taxation has estimated that the fee would exceed $100 billion over the next 10 years. The proposed rule was issued in March and published in the March 4 Federal Register (42 PBD, 3/4/13; 40 BPR 523, 3/5/13).

The health insurance industry has strongly opposed the ACA provision. “Imposing a new sales tax on health insurance will add a financial burden on families and employers at a time when they can least afford it,” Karen Ignagni, president and chief executive officer of America's Health Insurance Plans (AHIP), said in a statement after the proposed rule was released.

AHIP said the estimated $100 billion in collections over the next decade from insurers will be larger than the ACA's taxes on drugs and medical devices combined.

AHIP says it supports proposed legislation that would repeal the fees, which was introduced in the House of Representatives.  In addition, the industry group said that it supports legislation introduced in the House of Representatives to delay the implementation of the health insurance tax for two years.

In a notice (Notice 2013-76) explaining the rule, the IRS said that, for each fee year, the IRS will make a preliminary fee calculation for each covered entity and will notify each covered entity of this calculation.


Tuesday, December 10, 2013

Informational Pickets by Public Sector Workers: Supreme Court says to SERB, “No strike, no notice.”

Recently, the Ohio Supreme Court ruled R.C. 4117.11(B)(8), requiring public sector union workers to give ten days advance notice to the employer prior to picketing, does not apply to informational picketing.  The case, Mahoning Education Association of Developmental Disabilities v. State Employees Relations Board, arose after the union representing the employees of the Mahoning County Board of Developmental Disabilities (MCBDD) peacefully picketed outside a MCBDD board meeting carrying signs urging MCBDD to reach a settlement with the Union over the terms of a new Collective Bargaining Agreement.  The union did not give any notice to the State Employment Relations Board (SERB) or MCBDD that it intended to picket the meeting, and the picket did not involve any work stoppages or strike activity.

In response to the picket, MCBDD filed an unfair labor practice with SERB alleging the union violated R.C. 4117.11(B)(8) when it failed to give notice to MCBDD of its intent to picket the board meeting.  4117.11(B)(8) states that it is an unfair labor practice to “engage in any picketing striking or other concerted refusal to work without giving written notice to the public employer and to the state employment relations board not less than ten days prior to the action.”  After a hearing, SERB determined that the Union had committed an unfair labor practice by failing to give notice of the picket.

The Union appealed SERB’s determination and eventually the case made its way to the Ohio Supreme Court.  There, the high court noted that there are two different types of picketing.  One type of picketing is the type of picketing that is associated with protests during a strike or work stoppage.  The other type is informational picketing,  This type of picketing involves activity  that expresses “ a grievance not associated with a strike or work stoppage.” The Court went on to determine that in enacting R.C. 4117, the legislature only meant for the notice requirement to apply to picketing associated with a work stoppage or strike and not informational picketing.  Accordingly, the Court determined that no unfair labor practice had occurred.

With no advance notice needed for informational pickets, this Union tool becomes a more useful and fluid way for public sector employees to engage and win support from the public.  Public Sector employees may use the removal of this restriction to their advantage during contentious negotiations and/or grievance settlements.


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With an office located in Toledo , OH Allotta Farley Co., L.P.A. serves clients throughout northwest OH with various legal matters. Areas of service include Allen County, Ashland County, Auglaize County, Crawford County, Defiance County, Erie County, Fulton County, Hancock County, Hardin County, Henry County, Huron County, Lucas County, Marion County, Mercer County, Morrow County, Ottawa County, Paulding County, Putnam County, Richland County, Sandusky County, Seneca County, Van Wert County, Williams County, Wood County, Wyandot County.

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