The Bay Area Commuter Benefits Program, SB 1339, was enacted in 2012 to allow two local Bay Area agencies—the Metropolitan Transportation Commission and the Bay Area Air Quality Management District—to jointly adopt a commuter benefit ordinance requiring employers to offer commuter benefits to covered employees. These agencies have now adopted a Commuter Benefit rule requiring larger Bay Area employers to offer specified commuter benefits to covered employees by September 30, 2014 as a means of encouraging carpooling and use of public transporation.
The new Rule applies to employers with an average of 50 or more full-time (30 hours of work per week) employees performing work within the following nine Bay Area counties: Alameda, Contra Costa, San Mateo, Marin, Napa, San Francisco, Santa Clara, southern Sonoma County, and southwestern Solano County. For purposes of determining whether an employer has an average of at least 50 employees, the look back period is the most recent three month period.
The Rule requires covered employers to provide the commuter benefits described below to employees who perform an average of at least 20 hours of work per week (the average looks back to the previous calendar month) within the counties listed above, excluding a seasonal or temporary employee (an employee who works 120 days or less within the calendar year).
Required Commuter Benefits
By September 30, 2014, covered employers must offer at least one of the following commuter benefit options to covered employees:
- Pre-tax option: A program, consistent with section 132(f) of the Internal Revenue Code, allowing covered employees to elect to exclude from taxable wages costs incurred for transit (bus, rail or ferry) passes or vanpool (a vehicle with a carrying capacity of at least six adults, not including the driver) charges, up to $130 per month;
- Employer-paid benefit: A program whereby the employer pays employees a subsidy of up to $75 to cover the cost of commuting via transit or by vanpool; or
- Employer-provided transit: transportation provided by the employer to covered employees at no cost or low-cost via bus, shuttle, or vanpool.
In lieu of these options, an employer may offer an alternative benefit that provides at least the same reduction in single-occupancy vehicle trips as the three options identified above. Any alternative benefit must be submitted to and approved, in writing, by the Bay Area Air Quality Management District.
Covered employers are required to designate a Commuter Benefits Coordinator who is responsible for implementing the employer’s commuter benefit program and for complying with the Rule. Covered employers must also register online with the Bay Area Air Quality Management District and provide specified information before September 30 and annually thereafter. Covered employers must also provide notice of the Rule and the employer’s commuter benefits to covered employees. Finally, the Rule imposes a recordkeeping requirement of 3 years for records establishing compliance with the Rule.
For more information and for registration obligation details, click here.
Many employers are about to embark on the annual open enrollment period where they modify their health benefits (or at least consider doing so) and undergo the process of enrolling employees for the 2012 calendar year. Certain provisions of Obamacare (officially known as the Patient Protection and Affordable Care Act or "PPACA" for short), have already taken effect. Others will come into play over the next 26 months. This blog does not allow for a comprehensive review of the PPACA. However, we wanted to provide some resources that are accessible, without cost, to help guide our readers as they approach open enrollment and as we get closer to 2014 when all the Act's provisions are scheduled to be in place.
The PPACA has provisions that allow states to set up exchanges to make it easier for individuals and small businesses to compare plans and buy health insurance on the private market. California was one of the first states to begin working on this. This website provides good information on the California Health Benefit Exchange.
There have been many challenges to the PPACA in the courts. If these are successful, the PPACA may not move forward as intended. Only time will tell whether these challenges will derail the PPACA completely, partially or not at all. Six writs of certiorari are currently before the United States Supreme Court and the mandates of Obamacare are under attack based on constitutional grounds. This website provides a good summary of the status of the various lawsuits challenging the PPACA.
On this website, the Henry J. Kaiser Family Foundation provides a good summary of the key provisions of the PPACA and a helpful Implementation Timeline.
This is the United States Department of Labor's website on the PPACA. It contains comprehensive information on the Act, including but not limited to access to the proposed DOL regulations related to the Act.
This website provides information on implementation of the PPACA in California.
We hope this information is helpful to you.
This week, California Governor Jerry Brown signed into law SB 299, legislation requiring California employers to continue group health coverage to employees on pregnancy disability leave for up to four months. California employers with five or more employees have long been required to comply with California's law permitting employees disabled by pregnancy to take a leave of absence of up to four months for the disabling condition. This leave is in addition to traditional "maternity leave," which separately provides the employee up to 12 weeks of leave for baby bonding (if the employer has 50 or more employees and is covered under FMLA/CFRA). Prior to passage of SB 299, employees on pregnancy disability leave were entitled to the same benefits provided by an employer to employees on other types of disability leaves. With respect to continuation of group health benefits, many employers limit the continuation of such coverage to 12 weeks, as this is the required time period for continuation of coverage under the FMLA/CFRA for family and medical leaves of absence. With the passage of SB 299, effective January 1, 2012, California employers must extend the continuation period to four months for pregnancy disability leaves.
As specified in the legislation, group health benefits must be continued on the same terms and conditions as if the employee continued actively reporting to work. Therefore, if the employer pays the entire premium for employee coverage, it must continue to do so for up to four months of pregnancy disability leave. If the employee normally pays a portion of the premium, the employee may be required to continue making such contributions (either for self or for dependent coverage) during the leave. Additionally, if the employee fails to return from pregnancy disability leave, the employer may recoup from the employee the premiums the employer paid to continue the employee's coverage during the leave, unless the reason the employee did not return is because of a continuing disability or because the employee took a separate protected leave (e.g. maternity leave) under the FMLA/CFRA.
California employers should review their policies and procedures relating to pregnancy disability leaves to ensure compliance with this new law.
Employers who offer paid sabbaticals to their long-term employees probably should not be sued, but apparently they are not immune. In Paton v. Advanced Micro Devices, Inc., the plaintiff resigned his employment with AMD and then brought a class action against AMD alleging that the company failed to pay out earned but unused sabbatical pay. According to the plaintiff, the sabbatical pay was just another form of accrued vacation that was required to be paid out on termination of employment.The trial court threw out the claim, finding that AMD's sabbatical program was not the equivalent of vested vacation and that sabbatical pay did not have to be paid out on termination of employment. The plaintiff appealed.
On appeal, the court held that there was insufficient evidence before the court to find that AMD's time off program was a true sabbatical program and not vacation. The court discussed the differences between vacation and sabbaticals, explaining that vacation is not conditioned upon anything other than the employee's rendering of service and vacation does not impose conditions on how the employee uses the time away from work. Sabbaticals, on the other hand, tend to be purpose-driven and aimed at providing the employee with incentive for professional growth and continued employment. However, the court recognized that many private companies are providing sabbatical leaves that provide for an extended amount of time off (longer than any typical vacation) but are not necessarily tied to any special learning opportunity. The court indicated that this type of sabbatical program is harder to distinguish from a vacation program. Nonetheless the court laid out several factors to be considered in assessing whether a leave program is a sabbatical: (1) the leave must be granted infrequently, e.g. every seven years; (2) the leave time is longer than a typical vacation; (3) the leave must be granted in addition to regular vacation that is comparable to that offeredcomparable employees in the regular market; and (4) the leave program should specify that the employee is expected to return to work for the employer after the sabbatical is over.
Analyzing the specific sabbatical program before it, the court held that there was insufficient evidence to support a finding that the leave qualified as a sabbatical as a matter of law. AMD's policy originally provided for an 8-week sabbatical leave after seven years of employment, but was later changed to provide for a 4-week sabbatical after five years of service. The policy provided for continued accrual of vacation during the sabbatical leave and for return to work upon conclusion of the leave. The policy's express purpose was to encourage continued employment by providing time away for revitalization and enrichment. The court found that the length of the sabbatical leave and frequency upon which it could be taken were areas that reasonable minds could differ as to whether the leave was qualitatively different than traditional vacation leave. Furthermore, the court did not have evidence as to AMD's motivation in adopting the policy or how AMD's vacation policy compared to that of competitors. As such, the court remanded the case to the trial court.
Employers with sabbatical programs should carefully review these programs to ensure that they are adeqately distinguished from traditional vacation to avoid costly claims for unpaid "vacation" pay on termination of employment.
Some pundits are calling CIGNA Corp. v. Amara, et al., decided May 16, 2011 by the United States Supreme Court,a very important case changing the landscape of employee benefits litigation. It has been described as eliminating the requirement that employees prove detrimental reliance on miscommunications about benefit plan terms in order to obtain relief. We read the case differently.
A commmon theme in many employee benefit cases is the existance of a wrong without a remedy. These cases often include circumstance where the plan document provides for a specific benefit, but the summary plan description or some other communication provided by the employer ("Employer Communication") provides for another. Does the employee get the richer benefit even though not provided for in the formal plan document? In most cases the employee gets the benefit promised in the plan document regardless of any contrarylanguage in any Employer Communication.
The typical facts involve an employee reading and relying on a description of a valuable benefit in an Employer Communication and, after relying on the promised benefit, the employee retires. Some cases even involve circumstances where the employee double checks the benefit described in the Employer Communication with an employee in Human Resources. In general, the federal courts have refused to rewrite the terms of a qualified retirement plan to give the richer benefit. The logic behind these decisions is that ERISA consistently encourages employers to communicate benefits to employees in terms the employees can understand and in so doing, perfection is not required. All benefit plans are voluntary and the Supreme Court has consistently held that plain english communication may become extinct if employers are required to insure the precision of all Employer Communications.
CIGNA Corp. v. Amara does not change this legal premise. In CIGNA, the employer sent summary plan descriptions to all employees. The summary documentdescribed a greaterbenefit than actually provided by the terms of the plan itself. The plaintiff sued for the benefit promised in the summary description. The District Court agreed and ordered CIGNA to pay the higher benefit. In a unanimous decision, the Supreme Court reversed and remanded.
Up front, the Supreme Court made it clear that employer communications such as summary plan descriptions cannot amend the actual terms of a qualified retirement plan. The Court stated that employer communications such as a summary plan description, "important as they are, provide communications with beneficiaries about the plan, buttheir statements do not themselves constitute the terms of the plan." In other words, no Employer Communication can operate to change the benefits promised in a qualified retirement plan.
The remainder of the decision is a lengthy discussion of other types of equitable remedies that might be available to the plaintiff under ERISA Section 502(a)(3). The Supreme Court speculates what a plaintiff might allege in this circumstance and how the District Court sitting in equity should keep an open mind on what remedies might be available. The Court concludes by saying that the District Court has not determined if an appropriate remedy may be imposed and should do so upon remand.
Be careful what you read into CIGNA v. Amara. If anything it re-affirms that while Employer Communications are important and best efforts should be made to produce a writing that is accurate, the benefit promised in the plan will be limited to the document as written. Accidental increases will not be enforced. We note that CIGNA is a retirement benefit case (health benefit plans will have different standards). The case does highlight the need to appropriately communicate benefits and to periodically self audit to determine that these communication documents are properly prepared and distributed.
Paid sick leave legislation has been proposed and defeated in recent legislative sessions in California. This legislation has been proposed again this year, and just passed the Assembly Judiciary Committee largely along party lines. The proposed legislation, whichwould require California employers to providepaid sick days to employees (otherthan those covered by collective bargaining agreements)is now before the Assembly Appropriations Committee. We summarized the proposed legislation here, and will continue to post developments on this blog.
January 24, 2011
Posted by Cal Labor Law in Employee Benefits
Asposted last week, the Internal Revenue Service has clarified the tax breaks provided to employees covering children under the age of 27 on their employers' health benefit plans. Unfortunately, the California Legislature failed to pass AB 1178 which would have provided the same federal tax breakunder California tax law. As a result, California employers must impute income for the value of coverage provided to adult dependents for state tax purposes and may not allow pre-tax contributions for state tax purposes.
The method of calculating the value of group health care coverage for income tax purposes has been somewhat vague under California law. A number of authorities have used the COBRA rate (minus the 2% administrative charge) charged to provide individual COBRA coverage for the non-dependent child. This will vary based on the plan's overall rate structure. For example, most employers have separate rates for the employee only, the employee and spouse and a separate rate for employee plus family. The employee plus family rate, however, is the same for a family of three as it is for a family of twelve. If an employee elects single coverage and then adds an adult dependent, the employee will receive additional compensation, for California income tax purposes, based on the premium over the single employee rate.
It will be difficult for California employers to determine the value of the taxable benefit under California law. Look for the insurance companies to provide assistance at the end of 2011 so that the employer can include the imputed income on the employee's W-2 in January of 2012.
January 21, 2011
Posted by Cal Labor Law in Employee Benefits
With the new year, the cat dragged in the first wave of health care reform. The Patient Protection and Affordable Care Act ("PPACA")impacts most employers as of January 1, 2011 (the actual effective date is plan years commencing after September 23, 2010). One of the first big issues employers will face is coverage of adult children under the age of 27. Under federal tax laws, health care coverage provided to employees and their "dependents" is not taxable. One of the PPACA changes mandates that all non-grandfathered health plans provide health care coverage to any "child" of an employee who is under the age of 27. Under Notice 2010-38 published by the IRS on May 17, 2010, an employee is not taxed on premiums paid for a "child" who has not attained the age of 27 by December 31 of any calendar year. This extends to any child regardless of that child's status as a dependent under Code §152 (regardless of whether the child is in school, lives with the employee or receives no support from the employee). "Child" includes an individual who is a son, daughter, stepson, stepdaughter of the employee whether adopted or naturally born. Court placed foster children are also included. The exclusion from taxation was also extended to cafeteria plans, flexible spending arrangements and health reimbursement arrangements.
In the last two days, Governor Schwarzenegger signed and vetoed several more pieces of employment legislation, including signing legislation that exempts certain categories of unionized employees from California's meal period laws. AB 569, which will take effect January 1, 2011, exempts construction employees, security officers in the security services industry, commercial truck drivers, and employees of electrical and gas corporations and local publicly owned electric utilities from California's meal period requirements if the employees are covered by a valid collective bargaining agreement containing meal period provisions. This is an important new law that will greatly benefit employers in these industries, many of whom have been affected by the wave of meal period litigation in California in recent years and whose operations are impaired by efforts to strictly comply with California's meal period laws on threat of additional litigation.
AB 569 contains more specific definitions of the occupations exempted from meal period requirements under this law. Employers who may benefit from this new law should review it carefully before changing policies or practices and must also understand that in order for it to apply, there must be a valid collective bargaining agreement in place containing its own meal period provisions. Although California's meal period rules are in need of much broader revamping to the benefit of all employers and employees, this new legislation is at least a start in the right direction.
In addition to signing AB 569 into law, Governor Schwarzenegger also signed SB 1304, which requires private employers with 15 or more employees to provide up to 30 days of paid leave per year to an employee for purposes of donating an organ, and up to 5 days of paid leave per year to an employee for puposes of donating bone marrow.
Finally, Governor Schwarzenegger signed AB 2364, which slightly broadens eligibility for unemployment compensation by providing that employees who leave their employ to protect his or her family from domestic violence abuse are eligible for benefits.
The Governor did not sign all proposed legislation increasing employee benefits, however. Notably, Governor Schwarzenegger vetoed AB 2340, which would have required employers to provide bereavement leave to employees.
The Governor also vetoed SB 1474, which would have increased union representation in the agricultural industry by allowing the Agricultural Labor Relations Board the ability to set aside electionsbased on employer misconductand to certify a labor organization as the exclusive bargaining agent based solely on signed authorization cards. In his veto message, the Governor stated that the bill's provisions represent a "serious departure from existing law" and "tip the scale in favor of the union by allowing the ALRB to consider any misconduct, which is not defined, by the employer when making the determination to set aside the election, but does not take into consideration the possibilty that the employer may have similar allegations of election misconduct by the labor organization."
The health care reform provisions become effective for health plans beginning after September 23, 2010 (renewal dates after October 1, 2010). As we have reported before, the new law is skeletal and we need a lot more guidance before we can know how we will all be impacted.
There are a number of changes that will create cost increases on all renewals (e.g., coverage of dependents up to age 26 regardless of student or marital status, no pre-existing conditions for minor dependents). These cost increases could be anywhere from 2% to 10% on top of any trend increases on the renewal of your non-grandfathered plans.
An under-discussed change is the implementation of a new non-discrimination rule for fully insured health benefit plans. In the past, fully insured health benefit plans could discriminate both in benefits and in what portion of the premium the employer paid. With the new rules, all non-grandfathered plans may not discriminate in benefits or in the amount of the employer subsidy. So, for example, non-grandfathered executive benefit plans (plans that cover deductibles, co-pays or out of pocket amounts not reimbursed by insurance) would be discriminatory and may subject the executive to additional income subject to taxation. Likewise, if an employer pays 100% of the health care premiums for management but only 75% of the health care premium for staff, management employees may have additional income subject to taxation.
We recommend that in setting budgets, you obtain renewal information as early as possible. Likewise, make sure that when setting employer and employee contributions and benefit levels, those decisions comply with the new discrimination rules.