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ERISA for the NonprofitCEO

Theodore P. Stein

Thursday, October 24, 2013

Whiteford, Taylor & Preston, LLP

Simone Putnam, Raffa Managed HR

• Employee Retirement Income Security Act of 1974, 29 U.S.C. §1001, et seq.

• Protecting Interests of Plan Participants and Beneficiaries

• Broad preemption of any state law that “relates” to employee benefit plan

• Federal court jurisdiction to enforce ERISA violations, plus attorney’s fees to prevailing parties

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Health Insurance Portability and Accountability Act (HIPAA) of 1996

Genetic Information Nondiscrimination Act of 2008 (GINA)

Patient Protection and Affordable Care Act of 2010 (PPACA or ACA or Obamacare)

• Plan, fund or program• Established by an employer, employee

organization, or both• To provide welfare or pension benefits• For employee participants or their

beneficiariesERISA, §3(1), (2)(A), 29 U.S.C. §1002(1), (2)

(A)

• Pension Plans– Exceptions:• Bonus programs• Group IRAs• Salary reduction plans under §403(B)• Top Hat Plans• Excess Benefit Plans• Code Section 457 and 409A Plans• Governmental Plans

Welfare Plans◦ Exceptions:

Wage payments for medical and other reasons Maintenance of recreation, dining, or first aid

facilities Holiday gifts Remembrance funds Voluntary group insurance program Scholarship programs

Plan Administrator◦ Person specifically designated in plan document◦ If no so designated, plan sponsor is administrator◦ Must provide plan documents upon request

Plan Sponsor Plan Fiduciary Plan Participant and Beneficiary

No formal writing, notice or reporting required

Employer’s intent is not relevant Employer cannot opt out by non-compliance Employer does not need to be involved in

administration

• Plan must be established and maintained in writing [29 U.S. C. §1102(a)(1)]

• Writing may consist of multiple documents• Must authorize person and establish

procedure to amend plan• Must provide procedure for establishing

funding policy• Must specify how payments are made to

and by plan

• Form 5500– Annual report filed by plan administrator– Exceptions:• Insured or unfunded welfare plan with fewer than 100 participants• Certain group insurance arrangements• Top Hat Plans

– Penalties:• $25 for each day report is unfiled (up to $15,000)• Secretary of Labor can assess civil penalty of up to $1,100 per day• Delinquent Filer Voluntary Compliance Program

• Summary Plan Description (SPD)• Summary Annual Report (SAR)• Summary of Material Modification (SMM)• Summary of Benefits and Coverage (SBC)

Written summary for each employee benefit plan covered by ERISA

Must be written in manner understood by average plan participant

Must be furnished to participants within 90 days of becoming a participant (or to beneficiary within 90 days of first receipt of benefits)

Updated SPD must be provided every 5 years if amendments (or 10 years if no changes)

Summary Annual Report (SAR) must be provided to participants and beneficiaries

Exemption for small insured or unfunded welfare and top hat plans

Deadline is 9 months after plan year close Participant, beneficiary, fiduciary or DOL

can bring suit to enforce Criminal and civil penalties for violations

SMM must be distributed when material modification of plan terms occurs

Recipients: Participants and beneficiaries receiving benefits

Must be calculated to be understood by average plan participant

Must be provided no later than 210 days after plan year ends

Group health plans and health insurers must provide 4-page summary of benefits/coverage

Must be provided at application/enrollment Notice of material modifications must be

given 60 days prior to effective date Must use standard definitions and terms as

developed by Department of Labor

Under prior law, no requirement to provide health care benefits

ACA requires large employers (inc. nonprofits) to provide affordable and minimum health care to full-time employees or pay penalties

Imposes requirements on small employers Allows whistleblower claims under ACA

procedures

50 or more full-time employees (including equivalents)

Full-time = 30 or more hours per week or 130 hours per month

Affiliated companies are combined Special rules for seasonal and salaried

employees who don’t keep track of their time

Employer Mandate – Postponed to 1-1-15 Plan must be “affordable”

◦ May not cost more than 9.5% of household income

Must provide “minimum value”◦ Must pay out 60% or more of benefit costs

incurred by plan Employer Shared Responsibility Payments

If no coverage is provided by employer◦ $2,000 penalty multiplied by all full-time

employees (excluding first 30) if one employee receives a federal subsidy via health marketplace

◦ Ex: Employer has 130 employees; annual penalty is $200,000

If coverage is “unaffordable”◦ $3,000 multiplied by number of full-time

employees receiving federal subsidies

Employers, including small employers, required to send notice of health insurance marketplace by October 1, 2013

For new employees, notice must be sent within 14 days of hire

Must advise employees of marketplace and employer’s health benefits plan if any

Model notices posted on DOL website

Whistleblower Protections and Claim Procedure◦ No employer may discharge or discriminate

against employee: Who receives an ACA credit or subsidy or Who reports an ACA violation to the employer or

government agency or testifies in proceeding◦ Employee has 180 days after adverse action to

file complaint with OSHA

OSHA will investigate and can order interim reinstatement for “reasonable cause”

OSHA must provide findings and either party may object and request hearing

OSHA must issue final order within 120 days If no decision issued in 210 days of

complaint filing, complainant may sue in U.S. District Court and ask for jury trial

Complainants need to show adverse action was “contributing factor”

Burden shifts to employer to show by clear and convincing evidence that same action would have resulted absent protected activity

ERISA §510 also bars interference with employee benefits

Rehire, back pay & attorneys’ fees available

Investigation starts with letter or phone call EBSA is assigned to enforce ERISA DOL/EBSA can issue subpoenas, compel

witnesses to testify under oath “Voluntary compliance” Remedies: Fines, civil lawsuits, criminal

penalities

Windsor: Section 3 of DOMA defining “spouse” and “marriage” to exclude same sex is unconstitutional

DOL TR 2013-04 (09-18-2013)◦ Under ERISA, “state of celebration” rule governs

Effects◦ Health plan premium for same sex spouse is not

taxable◦ Marriage “penalty” now applies

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Thank you!

QUESTIONS?

Theodore P. Stein, EsquireWhiteford, Taylor & Preston, LLP

(301) 804-3617tstein@wtplaw.com