Chaz

Employee involuntarily terminates March 1. Company pays 100% of coverage for first three months of COBRA period (which runs concurrently with this three month period). How long is the employee entitled to receive the COBRA subsidy, for six months or for the full nine?

There is guidance that the AEI pays 35% of the 102% total COBRA cost.

My thoughts EXACTLY.

Well, the reason I ask is that a large, well-known COBRA administrator is apparently NOT including the 35% amount for its clients (at least the last I heard). I agree that it makes sense to include the 35% amount from an administrative POV, but I was wondering if there is any legal requirement to do so as well.

Do the various notices going out to COBRA subsidy-eligible individuals have to specify the amount that the individuals have to pay for their coverage (i.e., do they have to give the 35% amount) or can they state the 102% and require the individuals to make the calculation themselves?

Note that employers generally cannot provide direct cash reimbursements to employees for transit passes unless the "Readily Available" test is passed (or failed, depending on your perspective). If transit vouchers are readily available, many employers don't offer transit passes because of the administrative headaches involved.

I think it will be interesting to see how much deference the Feds give to employer discretion as to what is an involuntary termination. For example, if an employer can make a policy that "if you are absent and don't notify the employer within N days, you are deemed to have voluntarily terminated," can the employer make a determination that, for instance, "if you come into work late N days" or "if you don't successfully produce N widgets, you are deemed to have voluntarily terminated." Ridiculous examples, I know, but what will be the standard?

4. Employee is terminated when employee doesn't/can't return from short-term disability.

I agree. The person would have to had lost coverage due to an involuntary termination of employment that occurred on or after September 1, 2008 (and by December 31, 2009) to be eligible for the subsidy.

Well, at least A&B agree with me! It doesn't make much sense, though, when it comes to the subsidy cut off rules, which provide that becoming eligible for other health coverage cuts off the subsidy, except for becoming eligible for standalone dental, vision, etc. coverage. If I am receiving the subsidy for dental coverage and then become eligible for a standalone dental plan, does that mean I can keep getting the subsidy? I don't think this is what Congress intended.

Is coverage under dental and vision plans eligible for the new COBRA subsidy? One would think not and many commentators have said that only major medical plans are covered, but my reading of the statute indicates that there is no exclusion for other health plans other than FSAs offered under a cafeteria plan). Including dental and vision plans (and other ERISA health plans for that matter) in the subsidy doesn't really make a whole lot of sense based on the subsidy cutoff provisions, etc., but I can't see any way around not including them. Has anyone given this any thought?

Governmental entities are generally exempt from ERISA but not from the nondiscrimination rules in the Internal Revenue Code.

If the Plan document provides for after-tax election changes, I don't think the Code will prevent them.

As part of a severance arrangement, can an employer make HSA contributions for and in 2010 and 2011 to a former employee who terminates employment in 2009? If so, are there any unique issues that the employer should be aware of (other than whether the employee remains otherwise HSA-eligible)?

Does anyone have any thoughts on this? Does anyone in the benefitslink community assist public company clients in drafting the executive compensation disclosure of their proxy statements??

In preparing the Section 402(k) compensation of non-employee directors, is it necessary to include disclosure of directors who departed in the previous fiscal year? How about directors who departed after the end of the fiscal year but before the date of the proxy statement? The reg and instructions don't seem to address this.

I wouldn't draft a plan document without having counsel review it.

An example in the proposed cafeteria plan regs seems to indicate that only employees who participated in the FSA for the plan year in which the forfeiture occurred can benefit from a reduced salary reduction (i.e., lower premium) in the next plan year. More than likely, some of the participants in the medical plan in 2009 will be different than the participants in the FSA in 2008. Is that a problem?

Taking into account both the proposed cafeteria plan regulations and ERISA, can an employer use health FSA forfeitures for one plan year to offset medical plan premium increases in the next plan year?

That's a good point. I don't have the numbers but I would imagine that the employee's share plus the surcharge will still be less than the total cost of coverage. I should have clarified that Medicare coverage is excluded from the surcharge policy. Enforcing it is a totally different issue. The employer will be using a number of methods to do so, the most effective one is loss of coverage and termination of employment if a misrepresentation is discovered. Obviously, there will not be 100% compliance. Does anyone else have any thoughts on this? I am trying to get a sense on what the trend is out there.

Does anyone have any experience with requiring an employee to pay a surcharge if the employee's spouse is eligible for coverage under another plan (and waives that coverage and enrolls under the employee's plan)? Is the surcharge deducted on a pre-tax or post-tax basis? (I think it can be done either way but I am looking to see what common plan designs are.) Thanks.

. . . nicely clarified.

J Simmons gave the fast answer. Basically, HIPAA prohibits using a health factor as a basis for discrimination with respect to either eligibility or premium contributions. There is an exception to the rule for certain qualified wellness programs, the most significant requirements being that (i) the penalty for smokers (or the reward for nonsmokers) must be limited and (ii) there must be an opportunity for a smoker to satisfy an alternative standard (e.g.., the smoker will be entitled to the non-smoker rates if he or she completes (successfully or unsuccessfully) a smoking cessation program). These two requirements often make these programs lose their desirability because of the lack of effectiveness in changing the targeted behavior. The ADA is slightly out of my area of expertise, but it generally prohibits denying employees an opportunity to receive benefits due to a disability. Interestingly, although I have not checked recently, awhile ago, there was some dispute as to whether nicotine addiction is an actual "disability" under the ADA, which is why I raised the issue of "possible" ADA issues in my original reply. I should have mentioned that a number of states have "lifestyle" laws, which may put a crimp in these types of programs as well.

. . . and you have to comply with the six-month hold-out requirement for "specified employees."

There are HIPAA and possible ADA issues that make this inadvisable.