Back to the Drawing Board for EEOC Wellness Program Rules

On August 22 the U.S. District Court in D.C. granted summary judgment to the AARP which challenged the EEOC’s rules governing employer wellness programs. The rules allow an employer to offer or impose on an employee financial incentives or financial penalties depending on participation in an employer wellness program. The Court chose not to vacate the EEOC’s rules for the time being, but instructed the EEOC to explain its rationale for setting a 30% maximum on the incentive or penalty, which would be applied to the employee‘s premium cost,  to determine whether disclosure of the employee’s personal medical information is voluntary, instead of determining that any employer wellness program requiring disclosure of personal medical information is involuntary and therefore unlawful. AARP v. U.S. EEOC, (D.D.C. Aug. 22, 2017).

Under ACA, health insurance plans may lawfully offer an incentive of up to 30% of the cost of coverage, in exchange for the employee’s participation in a health-contingent wellness program. These employer-sponsored wellness programs often involve the collection of personal medical information, which implicates substantive protections of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), both enforced by the EEOC.

Both the ADA and GINA permit employers to collect personal medical information as part of a wellness program if the employee provides the information voluntarily. In May 2016, the EEOC issued an ADA rule stating that imposing a penalty or offering an incentive capped at 30% of the cost of self-only coverage that requires disclosure of ADA-protected information, does not render participation in the wellness program involuntary. Similarly, the EEOC issued a GINA rule allowing employers to offer the same 30% incentives for disclosure of a spouse’s medical information in the course of wellness program participation.

In 2016 AARP sought a preliminary injunction prohibiting enforcement of the ADA and GINA rules which became effective January 1, 2017. The EEOC’s arguments in opposition to the injunction were:

  • The 30% incentive level is in harmony with the ACA incentive level.
  • The 30% incentive level is a reasonable interpretation of “voluntary” based on current insurance rates.
  • The EEOC relied on comments submitted by the American Heart Association endorsing the 30% incentive level.

The Court determined that the EEOC provided inadequate explanation for determining that a 30% penalty or incentive is an appropriate measure of voluntariness. The Court remanded the rules to the EEOC but without vacating them to avoid disrupting current wellness programs. The Court ordered the EEOC to report back to the Court by September 21, 2017.

If you have any questions or would like to discuss how this decision or the EEOC’s wellness program rules affect you or your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Labor Law Practice Group  at 973-535-7129 or pmcgovern@nullgenovaburns.com, Firm Counsel Gina M. Schneider, Esq. at 973-535-7134 or gmschneider@nullgenovaburns.com, or Firm Associate Ryann M. Aaron, Esq. at 973-387-7812 or raaron@nullgenovaburns.com.

Fate Uncertain for HHS’s Extension of ACA Discrimination Protections to Abortion & Gender Transition

In May 2016 HHS issued a final rule implementing the Affordable Care Act’s Section 1557 nondiscrimination provision, which applies to recipients of funding from HHS. The rule prohibits discrimination on the basis of gender identity and termination of pregnancy, as well as race, color, national origin, sex, age, and disability. The new rule has been interpreted to require covered entities to perform and provide insurance coverage for gender transitions and abortions, regardless of their contrary religious beliefs or medical judgment.

The HHS rule has been challenged in court at least twice. On December 31, 2016, the U.S. District Court in Wichita Falls, Texas enjoined nationally the portions of the rule prohibiting discrimination on the basis of gender identity and termination of pregnancy. Franciscan Alliance, Inc. v. Burwell, Civil Action No. 16-cv-00108. The Order was appealed by the ACLU and the River City Gender Alliance and the appeals remain pending.

The Trump Administration has not indicated whether it will challenge the Court’s injunction and enforce the rule. The current Administration position favoring repeal of ACA in its entirety is consistent with the policy changes already made by the Trump administration. On February 22 the Departments of Education and Justice withdrew agency guidance that mandated transgender student access to restrooms consistent with gender identity. In late March President Trump appointed Roger Severino to head HHS’s Office of Civil Rights (OCR) which is charged with enforcing the HHS rule. Although Severino’s appointment has been controversial, as yet there is no indication from the OCR as to its enforcement position under new HHS leadership.

In the only other reported case brought under the rule’s prohibition of discrimination based on gender identity, on December 6, 2016 the U.S. District Court in Oakland, California stayed further proceedings in a case challenging an employer’s denial of gender transition health coverage. Robinson v. Dignity Health, Civil Action No. 16-cv-3035. The stay was granted pending the outcome of Gloucester County School Bd. v. G.G., a case scheduled for hearing before the Supreme Court. However, on March 6 the Supreme Court remanded the case back to the Court of Appeals for further consideration in light of Justice’s and Education’s withdrawal of guidance on February 22.  The California court has continued the stay in the Robinson v. Dignity Health case based on the pending bankruptcy of the plaintiff and scheduled the next hearing for May 19.

The Supreme Court’s action suggests that courts across the country may be taking a “kick the can down the road” approach on the Section 1557 rule as the Trump Administration has promised to repeal and replace ACA, or alternatively that the Court prefers to review the case only when the Court is back to full strength. Currently, the HHS rule’s provisions relating to gender identity and termination of pregnancy remain enjoined nationally.

If you have any questions or would like to discuss how the Section 1557 rule affects you or your business, please contact Patrick W. McGovern, Esq. at 973-535-7129 or pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq. at 973-535-7134 or gmschneider@nullgenovaburns.com or Ryann M. Aaron, Esq. at 973-387-7812 or raaron@nullgenovaburns.com.

Key 2017 Legal Changes that Employers and Federal Contractors Must Know About

Ready or not, 2017 is upon us and with it come many regulatory changes and important deadlines for employers and individuals. Make sure your New Year’s resolutions include compliance with the following changes and deadlines pertinent to employers and federal contractors.

Affordable Care Act

Employer Reporting. In November, the IRS extended the deadline for employers to meet their ACA reporting requirements. Employers required to furnish employees with Forms 1095 now have until March 2, 2017 to do so. The deadline to submit the Forms to the IRS remains February 28, 2017 for paper returns or March 31, 2017 for electronically-filed returns.

Marketplace Insurance. The deadline for individuals to obtain marketplace insurance coverage beginning January 1, 2017 expired on December 15, 2016. Individuals who want to enroll in marketplace insurance coverage for the balance of 2017 must do so by January 31, 2017. After the January 31 deadline, individuals may enroll in marketplace coverage only if they qualify for a Special Enrollment Period.

Required Contribution Percentages. For tax years and plan years beginning on and after January 1, 2017, the IRS increased to 9.69% of employee household income the maximum cost of coverage the employer can charge the employee for purposes of the employer mandate penalty. The IRS also increased to 8.16% of the employee’s household income the maximum cost of coverage the employer can charge the employee for purposes of determining whether the employee is eligible for an affordability exemption from the individual mandate.

IRS 2017 Contribution Limits for Retirement Plans and IRAs

The following are the IRS contribution limits for 2017:

  • 401(k) and 403(b) employee contribution limit: $18,000.
  • 401(k) and 403(b) catch-up contribution limit: $6,000.
  • IRA employee contribution limit: $5,500.
  • IRA employee catch-up contribution limit: $1,000.
  • 401(a)(17) compensation limit: $270,000.

Benefit Plan Changes

In May, the HHS Office of Civil Rights issued final rules implementing Section 1557 of ACA. Health programs must comply with these nondiscrimination rules effective January 1, 2017. Additionally, in May, the EEOC issued rules implementing Title I of the ADA and Title II of GINA as they relate to employer wellness programs. Employers must conform their wellness programs with these rules effective January 1, 2017. Plan sponsors that made material modifications to their benefit plans in the past plan year must provide participants with a Summary of Material Modifications within 210 days after the end of the plan year of the modification. For plan years ending on December 31, 2016, the SMM must be provided by July 30, 2017.

New York Minimum Wage and Overtime Salary Exemption Increase

Effective December 31, 2016, the N.Y. minimum wage and salary threshold exemption for time-and-a-half overtime pay increase based on the employer’s size and region as follows:

Minimum Wage Increase

  • New York City: Large Employer (11 or more employees): $11.00 per hour.
  • New York City: Small Employer (10 or fewer employees): $10.50 per hour.
  • Nassau, Suffolk and Westchester Counties: $10.00 per hour.
  • Remainder of New York: $9.70 per hour.

Overtime Salary Exemption Increase

  • New York City: Large Employer (11 or more employees): $825.00 per week.
  • New York City: Small Employer (10 or fewer employees): $787.50 per week.
  • Nassau, Suffolk and Westchester Counties: $750.00 per week.
  • Remainder of New York: $727.50 per week.

New Jersey Minimum Wage Increase

Effective January 1, 2017, the New Jersey minimum wage increases to $8.44 per hour.

EEO-1 Report

During 2017, no federal contractor or subcontractor is required to file an EEO-1 Report with the EEOC or DOL Office of Federal Contract Compliance Programs. The next filing date is March 31, 2018. For the March 31, 2018 filing and all future filings, EEOC and DOL will not accept paper filings. All filings must be done online. Finally, the snapshot pay period for the EEO-1 Report due on March 31, 2018 will be from October 1 to December 31, 2017 instead of July 1 to September 30.

Pay Transparency

Beginning January 1, 2017, pursuant to E.O. 13673 and the DOL Final Rule, a federal contractor or subcontractor must furnish a wage statement to each individual performing work under the federal contract if the individual is subject to the wage requirements of the FLSA, the Davis Bacon Act or the Service Contract Act. The wage statement must be provided each pay period and must include 1) the number of straight time hours worked; 2) the number of overtime hours worked; 3) the rate of pay; 4) gross pay; and 5) itemized additions to or deductions from gross pay. The federal contractor or subcontractor must inform an overtime-exempt individual in writing of the exempt status. For individuals treated as independent contractors, the federal contractor or subcontractor must provide a written notice that the individual is classified as an independent contractor.

Paid Sick Leave

Beginning January 1, 2017, pursuant to E.O. 13706 and the DOL Final Rule, a federal contractor or subcontractor must provide an employee with at least 56 hours per year of paid sick leave or permit an employee to accrue not less than one hour of paid sick leave for every 30 hours worked under a covered federal contract.

If you have any questions or would like to discuss how these changes and dates affect you or your business, please contact Patrick W. McGovern, Esq. at 973-535-7129 or pmcgovern@nullgenovaburns.com, or Nicole L. Leitner, Esq. at 973-387-7897 or nleitner@nullgenovaburns.com.