Benefits Monthly Minute
The May Monthly Minute covers new fertility benefit guidance, summer intern coverage considerations and a slim (but significant) win for Trader Joe’s in its ongoing 401(k) plan class action.
New Federal Fertility Coverage Guidance
Earlier this month, the U.S. Departments of Labor, Health and Human Services, and Treasury released a proposed rule creating a new category of limited excepted benefits for fertility coverage. This new category of excepted benefits would require that:
- Substantially all benefits are for diagnosis, mitigation, or treatment of infertility or related reproductive health conditions.
- Benefits are capped at a combined lifetime maximum of up to $120,000 for the participant and their beneficiaries (indexed for inflation).
- Employers provide a notice that clearly describes the coverage and meets certain other criteria.
Allowing employers to offer fertility benefits as a limited excepted benefit, rather than only through major medical coverage, means that employees could access fertility benefits without having to enroll in the employer’s major medical plan (similar to standalone vision and dental). It also would permit employers to tailor benefits to include diagnosis, mitigation, and treatment of infertility, including potentially IVF and non-IVF services, without managing compliance with ACA market reforms or special enrollment rights.
KMK Comment: Although the proposed rule includes a 60 day comment period, this is a noncontroversial proposal that will come as welcomed news for employers and employees alike. If elected as a benefit, it can serve as a useful employee retention tool that employers can tailor to suit their particular workforce and financial goals. As with other group health plans that are excepted benefits, fertility coverage benefits would constitute health plans so interested employers will want to coordinate with legal advisors to ensure accurate plan documentation and ERISA compliance.
‘Tis the Season for Summer Interns
As the academic year comes to a close, many businesses look forward to hiring full-time (paid) summer interns. Whether or not these new hires are regarded as a core part of the workforce, it’s important to evaluate their employment through an ACA compliance lens.
Under ACA regulations, the term “seasonal employee” generally means an employee who is hired into a position for which the customary annual employment (considering the nature of the position) is six months or less. The typical example is a ski instructor in winter or a lifeguard in summer. But, what if an employer hires summer interns to work for approximately 10 weeks between June 1 and August 21, and the precise employment period is determined by the intern’s particular academic calendar? These interns may very well meet the definition of “seasonal employees” under the ACA rules, and, if so, they may be excluded from health coverage under an ACA initial measurement period. This is because, like new variable-hour employees, new seasonal employees may be subject to an initial measurement period even though they work full-time hours for the season.
KMK Comment: It’s important for employers not to assume their student interns may be excluded from coverage as seasonal without careful planning, whether through application of an initial measurement period or via appropriate plan design. If coverage is not offered to otherwise-eligible interns, employers may face increased exposure to employer mandate penalties. The KMK Employee Benefits Group is available to assist employers with ACA and related health plan compliance questions.
Trader Joe’s Scores Forfeiture Win in 401(k) Class Action
One of the latest wins for employers comes in the form of an announcement -- made in court -- ruling that Trader Joe’s use of 401(k) plan forfeitures to offset its own employer contributions does not violate ERISA. In so doing, the Massachusetts judge ruled that defendants were entitled to a favorable judgment on this discrete issue, and disagreed with class action plaintiff’s contention that forfeited funds should be used to lower participants’ administrative costs. Despite this favorable decision for the grocer, the judge also ruled that the parties’ ongoing dispute over plan fees and investments was permitted to continue.
KMK Comment: Notwithstanding the absence of a written decision on the forfeiture issue, the bottom line result supports employers’ use of plan forfeitures to offset employer contributions, as long as the written plan document so provides. Employers should carefully review plan documents with legal counsel to ensure that the documentation clearly sets forth how forfeitures may be applied.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
