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.

IRS Proposes Restrictions on Employer Opt-Out Payments for ACA Coverage Waivers

In early July the IRS issued proposed regulations addressing the effect that employer payments to employees who waive employer-sponsored health coverage, known as Opt-Out Payments, have on determining whether an ACA-covered employer must pay an ACA penalty known as the Affordability Penalty. Generally, the proposed regulation will apply to Opt-Out Payments adopted after December 16, 2015, but there will be a phase-in period for Opt-Out Payments in labor agreements.

By way of background, ACA-covered employers are subject to a monthly Affordability Penalty for each full-time employee who (1) is required to pay more than 9.66% (indexed for 2016) of the employee’s household income to purchase self-only coverage under the employer’s health plan (“employee premium payment”) and (2) instead purchases individual coverage through an ACA exchange. In determining the amount of the employee premium payment and whether the affordability standard is satisfied, the proposed regulations would allow the employer to exclude the value of any Opt-Out Payment from the employee premium payment, but only where receipt of the Opt-Out Payment is conditioned on the employee’s (1) declining employer-sponsored coverage and (2) providing reasonable evidence that the employee and all other individuals for whom the employee expects to claim a personal exemption deduction have minimum essential coverage (other than coverage in the individual market, whether or not obtained through an ACA exchange).  This example illustrates when the value of an Opt-Out Payment would be excluded in calculating the employee premium payment: Employer offers its employees coverage under a plan that requires Employee to contribute $3,000 for self-only coverage. Employer also makes available to Employee a payment of $500 if Employee (1) declines to enroll in the plan and (2) provides reasonable evidence that Employee and all other members of B’s expected tax family are or will be enrolled in minimum essential coverage through another source (other than coverage in the individual market, whether or not obtained through the Marketplace). The Opt-Out Payment provided by Employer is a conditional Opt-Out Payment as defined under the regulations, and, therefore, Employee’s required contribution for self-only coverage under the plan is $3,000 since the $500 Opt-Out Payment is disregarded.

On the other hand, the value of an unconditional Opt-Out Payment (i.e., Opt-Out Payments conditioned only on waiving coverage) must be included in the calculation of the employee premium payment in determining affordability.  Therefore, any unconditional Opt-Out Payment will increase the employee premium payment, and make it less likely that the premium payment will come below the 9.66% household income percentage limit. Under the same facts as in the example above, except that eligibility for the Opt-Out Payment is unconditional, the $500 Opt-Out Payment increases the employee premium payment from $3,000 to $3,500, regardless of whether the employee accepts or declines the employer’s offer of coverage.

The proposed regulations are subject to public comment and our firm will continue to monitor and report on any developments. In the meantime, we recommend that ACA-covered employers review their current and planned Opt-Out Payment arrangements to determine how these payments will be treated under the proposed regulations and what adjustments must be made to avoid ACA penalties.  If you have any questions or for more information regarding the impact of the proposed regulations or ACA requirements generally on your organization, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com or Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com in the Firm’s Employee Benefits Practice Group.

Supreme Court Rejects Challenge to Affordable Care Act’s Tax Credit Provisions

On June 25, the U.S. Supreme Court, in a 6-3 decision, finally resolved a central issue under the Affordable Care Act (“ACA”) as to whether Congress’ failure to provide expressly for Federal subsidies to States that did not create their own health care Exchanges but opted for the Federal tax credits should prohibit payments of Federal tax credits to individuals who purchase their coverage from the Federal Healthcare Exchange.

The Court held that despite the inartful drafting and ambiguities in the legislation, the Court would enforce what it viewed to be Congress’ intent in the legislation to have State and Federal Healthcare Exchanges work the same in every State, regardless of whether the State has its own Exchange or depends on the Federal Exchange. The Court reasoned that its job was to read the words of the statute “in their context and with a view to their place in the overall statutory scheme” and concluded that the ACA “indicates that State and Federal exchanges should be the same,” and therefore, tax credits must be available on both State and Federal Exchanges.

In sum, the Court ruled that ACA tax credits are available under the State and the Federal Exchanges “to avoid the type of calamitous result that Congress plainly meant to avoid.”

For questions related to this development or ACA generally, please contact Patrick W. McGovern, Esq., Director of the Employee Benefits Practice Group and Partner in the Labor Law Group, at pmcgovern@nullgenovaburns.com, or Gina M. Schneider, Esq., a member of the Employee Benefits Practice Group and Counsel in the Labor Law Group, at gmschneider@nullgenovaburns.com.

Court Denies EEOC’s Requested Preliminary Injunction to Block Wellness Plan Biometric Testing

On November 3 U.S. District Court Judge Ann Montgomery gave Honeywell International a victory in Round One of the EEOC’s legal challenge to Honeywell’s wellness program, by refusing to grant the EEOC preliminary restraints barring Honeywell from imposing monetary penalties on employees who refuse to submit to biometric screening. Judge Montgomery reasoned that she was not prepared to decide whether the EEOC would prevail on the merits, and it would be easier to require Honeywell to reimburse employees for monetary penalties they suffer as opposed to blocking the penalties for now and assessing the penalties later if the wellness program is determined to be lawful. So for now, Honeywell’s biometric screening may continue.

If you have any questions about whether your company’s wellness program is compliant with the Affordable Care Act, HIPAA, the ADA or GINA, please contact Patrick W. McGovern, Esq., in our Employee Benefits Group at 973-535-7129, pmcgovern@nullgenovaburns.com.

Lactation and Breast-Feeding Are “Pregnancy Related Conditions” Protected Under Title VII

In EEOC v. Houston Funding II, Ltd., the Fifth Circuit issued a landmark decision finding that terminating a female employee because she is lactating or expressing milk is unlawful sex discrimination under Title VII of the Civil Rights Act of 1964 (as amended by the Pregnancy Discrimination Act of 1978) (PDA).  The Court also found that lactation is a medical condition related to pregnancy.

Donnica Venters (“Venters”) took a leave of absence to give birth, and subsequently asked her supervisor whether she could use a breast pump at work.  Instead of responding to her inquiry, Venters was told that she was being discharged for job abandonment.  The EEOC filed suit claiming that Houston Funding discriminated against Venters based on her sex, including her pregnancy, childbirth, or related medical conditions (citing the language from the PDA).  The Fifth Circuit agreed that terminating Venters simply because she is lactating or expressing breast milk constitutes sex discrimination, and that an adverse action “motivated by these factors clearly imposes upon women a burden that male employees need not – – indeed, could not – suffer.”

The Fifth Circuit held that lactation is a physiological condition distinct to women who have undergone pregnancy and childbirth, and that men, as a matter of biological fact, cannot lactate. As such, the Court held that lactation is included in the term “pregnancy related conditions” and protected by Title VII and the PDA.  Female employees, who are lactating and/or breast-feeding, may now bring claims under Title VII and the PDA.  Employers should also be aware that the Affordable Care Act already amended the Fair Labor Standards Act (FLSA) to require an employer provide “reasonable time for an employee to express milk for her nursing child for 1 year after the child’s birth each time such employee has need to express the milk.”  Employers must take their obligation to provide time and space to express breast milk seriously and must also take caution when considering taking adverse action against such employees.  The EEOC has made pregnancy- related limitations one of its six national priorities to address in the context of equal employment law, so employers should critically analyze any request or inquiry from employees regarding pregnancy or post-pregnancy accommodations to avoid unnecessary negative liability.

For more information on the implications of the EEOC v. Houston Funding II, Ltd. decision and other sex and pregnancy policies and regulations in the workplace, please contact Dena B. Calo, Esq, dcalo@nullgenovaburns.com, Director of the Human Resources Practice Group and Partner in the Employment Law & Litigation Group, or Jane Khodarkovsky, Esq., Associate in the Employment Law & Litigation Group, at jkhodarkovsky@nullgenovaburns.com.

ACA’s Employer Penalties Delayed To 2015 But Remaining 2014 Requirements Unchanged

On July 2, 2013 the U.S. Treasury Department announced that enforcement of the Affordable Care Act’s (“ACA”) employer penalties will be delayed until 2015. Under ACA businesses with at least 50 full-time employees plus full-time equivalents that do not offer affordable health coverage to at least 95% of their full-time employees and dependents are subject to monetary penalties.

The Treasury Department stated that the one year delay “will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.”  The Treasury Department will provide guidance regarding reporting requirements for insurers, self-insuring employers, and other parties that provide health coverage later this summer.

The Treasury Department’s announcement affects no other ACA provisions.  The state and federal health care exchanges are still scheduled to become operational on October 1, 2013.  Likewise, the effective date for health insurance purchased on the exchanges remains January 1, 2014.

If you have any questions or for more information about ACA and its impact on your organization or your employees’ benefit plans, please contact Patrick W. McGovern, Esq.pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com, or Phillip M. Rofsky, Esq., profsky@nullgenovaburns.com, in the Firm’s Employee Benefits Practice Group.

Affordable Care Act Update: IRS Issues Proposed Rule-Making Clarifying Employer Coverage Requirements

The IRS recently proposed new rules regarding the shared responsibility provisions of the Affordable Care Act (ACA) and a set of questions and answers to clarify coverage requirements.  Effective January 1, 2014 an employer with 50 or more full-time employees or full-time equivalent employees will be required to offer at least 95% of its full-time employees and their dependents minimum essential health benefit coverage, or in the alternative pay a penalty if any full-time employee receives a federal subsidy to purchase insurance through a health exchange.  A covered employer will pay a penalty when the coverage it offers is not affordable and the new rules clarify that coverage is affordable generally only when the cost of coverage is no more than 9.5% of the employee’s household income. Because of the practical difficulty of determining an employee’s household income, the employer’s safe harbor will be providing coverage that costs no more than 9.5% of the employee’s wages paid by the employer as reported in Box 1 of Form W-2. 

Additionally, the proposed rules clarify that a covered employer must offer coverage to an employee’s children under the age of 26 but need not offer affordable coverage to dependents, or any coverage at all to the employee’s spouse unless the spouse is also an employee of the employer.  The new rules create a strong incentive for a covered employer to direct money into health insurance coverage for its employees rather than their dependents. 

Covered employers may rely on the new rules for guidance until a final rule or other materials are issued. If you have any questions or for more information about ACA and its impact on your organization or your employees’ benefit plans, please contact Patrick W. McGovern, Esq.pmcgovern@nullgenovaburns.com, Gina M. Schneider, Esq., gmschneider@nullgenovaburns.com, or Phillip M. Rofsky, Esq., profsky@nullgenovaburns.com, in the Firm’s Employee Benefits Practice Group.