IRS Releases 2009 Inflation-Adjusted Benefits Figures

The IRS has released the 2009 inflation-adjusted figures for popular employer-provided fringe benefits, including adoption assistance and long-term care premiums.

Employer-provided adoption assistance. For 2009, employers that have adoption assistance programs can exclude $12,150 from employees' incomes. This amount is phased out for high earners. In 2009, the excludable amount begins to be phased out for employees who have modified adjusted gross incomes exceeding $182,180. The benefit is completely phased out for employees who have modified adjusted gross incomes of $222,180 or more.

Transportation fringe benefits. Employers may pay or reimburse employees a limited amount for their commuting expenses. For 2009, the monthly exclusion for qualified employer-provided parking is $230; the transit pass/commuter vehicle exclusion is $120. Mass transit benefits may be provided through debit cards, smart cards, etc., if transit systems can accept those cards. Reminder: These fringes may be offered on a pre-tax basis, but can't be part of a cafeteria plan. Bicycle fringes are $20 a month.

Long-term care premiums. For tax and benefits purposes, employer-provided long-term care is treated like health benefits, with one big exception. While employers' payment of employees' health premiums is completely tax-free to employees, the amount employers can pay tax-free on long-term care insurance contracts is limited, based on employees' age. Reminder: These benefits can't be part of a cafeteria plan.

• For employees who are 40 years old or younger, employers can pay up to $320.
  
  
• For employees who are between 40 and 50 years old, employers can pay up to $600.
  
  
• For employees who are between 50 and 60 years old, employers can pay up to $1,190.
  
  
• For employees who are between 60 and 70 years old, employers can pay up to $3,180.
  
  
• For employees who are older than 70, employers can pay up to $3,980.

Click here to read all of the IRS's 2009 inflation-adjusted figures.

 DOL Releases Final FMLA Regs

Relying on 15 years' worth of experience, and hoping to wrap up numerous court cases and voluminous comments solicited over several years from stakeholders, the Department of Labor (DOL) has released final regulations governing the Family and Medical Leave Act (FMLA). The final regs will become effective on January 16, 2009. Here are the major highlights.

Military Provisions 

The final regs reflect changes to the FMLA made by the National Defense Authorization Act (NDAA). The NDAA created two new categories of FMLA leave — qualifying exigency leave and military caregiver leave.

Qualifying exigency leave. This leave is non-routine, and applies to employees whose spouses, children, or parents are members of the military Reserve or National Guard, or are retired members of the Regular Armed Forces and retired Reserve, and who are called to active duty. Employees are entitled to the regular 12 weeks of FMLA leave, including intermittent leave. Employers may request a copy of the deployment orders, and may verify the orders with the military. A new optional form, Form WH-384, Certification of Qualifying Exigency for Military Family Leave, has been created so employees can certify their need for leave. Qualifying exigencies are defined to include the following:

short-term deployment;

• military events and related activities;
  
  
• childcare and school activities;
  
  
• financial and legal arrangements;
  
  
• counseling;
  
  
• rest and recuperation;
  
  
• post-deployment activities; and
  
  
• additional activities.

Military caregiver leave. Employees who are the spouse, parent, or next of kin of a covered service member are entitled to 26 weeks of leave in one 12-month period if a covered service member sustains a serious injury or illness in the line of battle. The 26 weeks apply per service member, per injury. The single 12-month period begins on the first day employees take caregiver leave and ends 12 months after that date, regardless of the method employers use to calculate other FMLA leave. Employees are entitled to a combined total of 26 weeks of caregiver leave and other FMLA leave in one 12-month period.

Because employees can request FMLA leave to care for a seriously ill family member, it's conceivable that employees' FMLA leave could qualify as both FMLA leave for a serious health condition and military caregiver leave. In these cases, employers must designate the leave as military caregiver leave. Employers may retroactively designate military caregiver leave under the same circumstances that they can retroactively designate other FMLA leave.

The regs prioritize the definition of next of kin to mean the nearest blood relative, other than the service member's spouse, parent, or children, in the following order: blood relatives who are granted legal custody of the service member, siblings, grandparents, aunts and uncles, and first cousins. Service members may designate their next of kin. Since the next of kin must be a blood relative, it can never be a domestic partner. Employers may request documentation of the familial relationship. The regs suggest that employees may provide simple statements of this relationship.

In addition to members of the Reserve and National Guard, this leave applies to employees whose family members are part of the regular military. Leave may be taken if the service member is undergoing medical treatment, recuperation, or therapy; is otherwise in outpatient status; or is on the temporary disability retired list. Employers may request that employees certify the need for this leave. Employees may self-certify the need for leave on new optional Form WH-385, Certification for Serious Injury or Illness of Covered Servicemember.

Revisions To The FMLA Regs 

While the bulk of the FMLA regs remains intact, the final regs clarify key areas that have presented difficulties for employers and employees.

Breaks in service. Under the final regs, employers need not count breaks in service of seven years or longer toward the FMLA requirement that employees work for 12 months prior to becoming eligible for leave. There are two exceptions. Breaks in employment due to a military call up must be counted, as must breaks that are included in any written agreement, including union contracts. Since the FMLA requires employers to keep records for three years, employees have the burden of proving their employment in years four through seven.

Serious health condition. The regs retain the six definitions of a serious health condition, but make three key clarifications.

• A serious health condition lasting more than three full consecutive calendar days, involving two visits to a health care provider. The two visits must occur within 30 days, with the first visit occurring within seven days of the first day of incapacity. The 30-day period begins with the first day of illness. Health care providers, and not employees, must determine whether a second visit is warranted.
  
  
• Serious health conditions lasting more than three full consecutive calendar days, involving a visit to a health care provider, plus a course of continuing treatment. The regs require that employees visit the health care provider within seven days of the onset of the condition.
  
  
• Chronic health conditions. The regs define "periodic visits" to a health care provider as at least two visits per year.

Holidays. The regs clarify that if employees take leave in increments of less than a week, and a holiday falls within that partial week, the hours they don't work on the holiday can't be counted against FMLA leave. On the other hand, if employees take a full week of FMLA leave, the holiday hours not worked can be counted against their FMLA leave.

Counting incremental leave. The regs still require employers to allow intermittent or reduced-schedule leave in the shortest period of time they use to account for other types of leave, provided it's one hour or less. The regs eliminate references to payroll or record-keeping systems, however, with the result that employers must account for intermittent or reduced-schedule leave using an increment no greater than the shortest period of time that they use to account for other forms of leave (provided it's not greater than one hour). Employers, therefore, may use smaller increments (e.g., 30 minutes, if 30 minutes is used to account for vacation leave) to account for FMLA leave.

Physical impossibility. Some employees on intermittent or reduced-schedule leave may find that it's physically impossible for them to join (or leave) their work shifts in mid-shift. The regs allow the entire period of absence to count toward FMLA leave. This exception is intended to be applied narrowly, however, and can't be used to prevent employees from working late or leaving early under normal circumstances. Employees, therefore, may end up taking more leave than is necessary, but their entire leave is protected FMLA leave.

Failure to work overtime. The regs clarify that overtime hours not worked due to FMLA leave can be counted against employees' FMLA entitlement, if they would normally be required to work overtime.

Substitution of paid leave. Employees can substitute paid leave, or employers may require that paid leave be substituted for FMLA leave. The regs clarify that employers may apply their normal leave policies to the substitution of all types of paid leave for unpaid FMLA leave. Employees, therefore, can't use leave that hasn't yet accrued, or can't take time off to care for a family member if paid sick leave can be taken to care only for themselves. Employers must make employees aware of any additional requirements for the use of paid leave, and inform them that they remain eligible for unpaid leave.

Awards and raises. Employees on FMLA leave may be disqualified from perfect attendance awards, safety awards, or other payments that are based on attaining a specific goal, unless the award is paid to employees on an equivalent non-FMLA leave. Employees who substitute paid leave for FMLA leave (e.g., employees substitute vacation leave) remain eligible for awards, if other employees who take vacations remain eligible. Bonuses that aren't based on the achievement of a goal, holiday bonuses for example, can't be denied to employees who are out on FMLA leave. Pay increases that are based on seniority, length of service, or performance need not be granted to employees on FMLA leave unless they're granted to employees on an equivalent leave status for a reason that doesn't qualify as FMLA leave.

Waiving FMLA rights. The regs specify that employees may not waive their FMLA rights on a prospective basis, but employers and employees may settle past FMLA claims themselves.

Light duty. Employees who voluntarily work light-duty assignments don't forfeit FMLA rights. Further, the regs state that employees who work light-duty assignments aren't taking FMLA leave, and they retain job restoration right when the light-duty assignment ends. An employee's right to job restoration expires at the end of the 12-month leave year.

Employer notice requirements. The regs extend the time for employers to provide notices to five business days, from two business days. Notices may be posted electronically, provided employees and job applicants have access to computers. Three optional forms have been created — WH-1420, Employee Rights and Responsibilities Notice; Form WH-381, Notice of Eligibility and Rights and Responsibilities; and Form WH-382, Designation Notice.

Employers must provide employees with a general notice about the FMLA (via a poster, and either an employee handbook or upon hire), an eligibility notice, and a rights and responsibilities notice. If employees aren't eligible for FMLA leave, the notice need only state one reason why they're not eligible. Rights and responsibilities notices must be provided to employees with eligibility notices. A list of employees' essential job responsibilities must be provided to employees with designation notices, if employers will require that fitness-for-duty certifications address employees' ability to perform the essential functions of their jobs. Employers may retroactively designate leave as FMLA leave, provided employees receive their notices and suffer no harm or injury.

Employee notices. The regs require that, absent unusual circumstances, employees needing FMLA leave must follow their employers' usual and customary call-in procedures for reporting absences. FMLA leave may be delayed or denied for those who don't.

Employees must still give at least 30 days' notice if leave is foreseeable, and if they can't, they must give as much notice as practicable. It should be practicable for employees to provide notice either the same day or the next business day. The provision that seemed to give employees two full business days to call-in is specifically abandoned.

Employees still don't have to mention that they need FMLA leave, but they must explain their need for leave in a way that puts employers on notice that FMLA leave is at issue. For example, calling in sick would not suffice to put the employer on notice that FMLA leave may be warranted. Employees who have already taken FMLA leave must mention their need for additional FMLA leave.

Medical certifications. Two new optional forms have been created — Form WH-380E, Certification of Health Care Provider for Employee's Serious Health Condition, and Form WH-380F, Certification of Health Care Provider for Family Member's Serious Health Condition.

Employers should request medical certification when employees provide notice of their need for FMLA leave, or within five business days thereafter. Employers' representatives allowed to contact health care providers are limited to another health care provider, an HR professional, a leave administrator, or a manager, but can't be the employee's direct supervisor. If employers consider a medical certificate to be incomplete, they must specify in writing what information is lacking, and give employees seven calendar days to cure the deficiency.

Employers may request a new medical certification each leave year for medical conditions that last longer than one year. The final regs also clarify that employers may request recertification of an ongoing health condition every six months in conjunction with an FMLA absence.

Fitness-for-duty certification. The final regs make two changes to the fitness-for-duty certification process. First, employers may require that the certification specifically address employees' ability to perform the essential functions of their jobs. Employers that require fitness-for-duty certifications to address employees' ability to perform the essential functions of their jobs must provide a list of employees' essential job responsibilities to them with the designation notice. Second, where a reasonable safety concern exists, employers may require a fitness-for-duty certification before employees return to work, when employees take intermittent leave.

For more details on the FMLA regs, read AHI's Free Report: Get Ready For The New FMLA Rules. The report can be downloaded from our homepage at www.legalworkplace.com/new-fmla-rules-free-report.aspx.

Click here for the text of the regulations, including the new forms. (Warning: This is an extremely large document).

 College Students To Maintain Group Health Benefits Through Serious Illnesses    

Under newly enacted federal legislation, group health plans that provide dependent coverage will not be able to kick off dependent college students whose severe illnesses or injuries require them to take medically-necessary leaves of absence from school or limit them to part-time student status. The new law, called Michelle's Law, will become effective with the first plan year commencing after October 9, 2009 — January 1, 2010 for calendar-year plans.

Medically Necessary Leaves Of Absence 

Michelle's Law applies to insured and self-insured plans. However, it doesn't mandate that group health plans provide dependent health insurance. Further, more protective state laws (i.e., state laws that generally require coverage until dependents turn 22 years old or older for other reasons) continue to remain in effect. Finally, employers with fewer than two participants are exempt from this requirement.

The law amends ERISA to require that employer-provided health plans continue to cover full-time college students who are on medically necessary leaves of absence. Coverage must continue for the earlier of up to one year after the first day of the leave of absence, or the date on which dependent coverage would otherwise terminate under the terms of the plan.

The student's doctor must certify to the plan that the leave is medically necessary because the student is suffering from a severe illness or injury. If the group health plan changes while the student is on a medically necessary leave of absence, and the new plan covers dependents, the new plan will be subject to these provisions in the same manner as the old plan.

All the usual ERISA notification duties apply. Therefore, plan sponsors must update their plan documents and employee notices.

 Final Regs Implement Newborns' And Mothers' Health Protection Act 

Under the 1996 Newborns' and Mothers' Health Protection Act, group health plans must allow 48 hours of hospitalization to a mother who delivers her baby vaginally, and 96 hours if the delivery is by cesarean section. Final regulations clarify the law. For group health plans, the final regs are effective for plan years beginning January 1, 2009.

Group Plans Covered

The law and regs apply to all ERISA-covered plans, insured and self-insured plans alike. Insured plans may be excluded from coverage if one of these conditions is met.

• A state law requires health insurance for at least a 48-hour or 96-hour hospital stay in connection with childbirth.
  
  
• A state law requires health insurance to provide for maternity and pediatric care that comports with guidelines established by the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, or another established professional medical association.
  
  
• A state law requires that decisions regarding the appropriate length of stay be left to the attending health care provider in consultation with the mother.

ERISA preempts state laws for self-insured plans, which must comply with this law and the final regs.

What To Expect When An Employee Is Expecting

The regs clarify that the 48-hour or 96-hour clock starts ticking with the delivery, rather than when the mother is admitted to the hospital or the onset of labor. In cases of multiple births, the clock starts with the last baby's birth. If a baby is born outside a hospital, say, at a birthing center, the clock starts when the mother or baby is admitted to the hospital for a birth-related medical condition. The mandatory coverage periods aren't violated if health care providers and mothers agree on earlier discharge times.

The regs seek to prohibit plans from interfering with decisions made by health care providers and mothers. Plans can't penalize providers who stick to the time periods, or require providers to get authorization for 48-hour or 96-hour hospital stays. In addition, since the provision of benefits can greatly influence providers' and patients' decisions, the regs prohibit plans from wielding influence through the use of monetary incentives or disincentives.

• Plans can't reduce providers' compensation or provide monetary or other incentives that would induce them to violate the law.
  
  
• Plans can't provide incentives to mothers to cut short their hospital stays (e.g., by waiving the co-payment if a mother agrees to be discharged within 24 hours of giving birth).
  
  
• Plans can't restrict benefits for any portion of a 48-hour or 96-hour hospital stay in a manner that's less favorable than the benefits provided for any preceding portion of the stay (e.g., by paying for the first 48 hours of a hospital stay related to a cesarean section, but requiring pre-certification for the remaining two 24-hour periods).

Plans remain free to negotiate the level and type of compensation with providers. Plans can require pre-certification when a stay exceeds the mandatory time periods. Plans can continue to impose cost-sharing mechanisms on mothers, and can use monetary incentives (e.g., lower co-insurance) to steer mothers and babies to certain hospitals, provided the incentives are the same for all hours of the mandatory time periods.

ERISA-covered plans must comply with ERISA's notice provisions, including summary plan description (SPD) disclosure requirements. Notice may be provided to employees electronically, provided plans comply with ERISA's electronic disclosure rules. This notification requirement, however, shouldn't be onerous. Since 2000, plans have been required to include a description of this law or its state equivalent in their SPDs.

Click here to read the final regulations.

 Ask The Experts 

Q. In the process of changing payroll providers, two employees fell through the cracks. A new hire filled out all the paperwork to have 401(k) pre-tax deductions made from her pay, but received her full salary, instead. Another employee was already having pre-tax deductions made, but pre-tax deductions weren't made from a bonus. We caught both problems six months into the year. How can we fix this?

A. In both cases, the problem is one of missed pre-tax deferral opportunities, and can be rectified by making qualified non-elective contributions on employees' behalf. The corrective contribution is 50% of the missed deferral, adjusted for earnings. Say the new hire elected to have 10% deducted on a pre-tax basis and she earns $20,000. The qualified non-elective contribution is $1,000 (50% x $2,000 missed deferral opportunity). If the employee's bonus is $2,000, and he elected to have 5% deducted on a pre-tax basis, the qualified non-elective contribution is $50 (50% x $100 missed deferral opportunity).