Chapter 10 - Benefits

Qualifying Events for FMLA Leave

-SomParental Leave - pg 278 -Applies to either parents -Also applies for foster care -Must be taken in a single increment -Must be taken within 12 months of the birth or adoption -If both parents work for the same organization, they are collectively limited to only 12 weeks of leave Serious health Condition Leave - Pg 279 -Covered employees are entitled to up to twelve weeks unpaid leave to care for themselves or family members in the event of a "serious health condition." -Under the Act, employees are entitled to take unpaid leave to care for a "spouse, son, daughter, or parent who has a serious health condition."30 A spouse is a husband or wife recognized as married under state law. This includes common law marriages in those states recognizing such forms of marriage.31 It does not include couples that are merely cohabitating. This means that domestic partners whose relationship is not legally recognized in their respective states are not entitled to FMLA leave. In order to be eligible for spousal leave, there must be a legally recognized relationship. -Sons and daughters include minor children (those under eighteen years of age) and children who have reached their majority (eighteen years or older) but are incapable of caring for themselves due to a physical or mental disability. Sons or daughters may be biological offspring, foster children, adopted children, stepchildren (if legally adopted), or a legal ward.32 As with spouses, there must be a legally recognized relationship. -An employee may request FMLA leave in order to care for a parent. However, that employee has no FMLA entitlement to care for in-laws. A serious health condition affecting either a father-in-law or mother-in-law would not be a qualifying event. For example, a covered employer must authorize a female employee to take up to twelve weeks of unpaid leave to care for her seriously ill mother, but the employer is not required under the FMLAto permit her a single minute of unpaid leave to take care of her seriously ill mother-in-law. Interestingly, as in parental leave situations, married couples are permitted only a total of twelve weeks leave between them to handle serious health conditions of family members when they work for the same employer.33 If the wife, for example, has already exhausted eight weeks leave during the current twelve-month period to care for her ailing father, her husband could only take a maximum of four weeks if his mother needed assistance. If the husband and wife work for separate employers, each is entitled to the full twelve-week unpaid leave. -One major difference between serious health condition leave and parental leave is that any FMLA leave used to care for ill family members can be taken intermittently.34 Where parental leave can be taken only in a single period of time, serious health condition leave can be taken incrementally—a few days now, a few days later. -The employer has the right to require the employee to provide documentation when requesting family leave. Employees seeking FMLA leave for the serious health condition of a family member may be required to verify the relationship of the family member.35 In addition, the employer may demand verification of the family member's serious health condition.36 -Regardless of the reason for the FMLA leave—parental leave or serious illness leave— the employee is guaranteed the right to return to his or her job or a comparable position at the leave's conclusion. In the opening scenario, Jerri Lynn likely would be able to return to her old job at the conclusion of her requested two months' leave. Employees with Serious Health Conditions - pg 280 -FMLA defines serious health conditions as "an illness, injury, impairment, or physical or mental condition that involves inpatient care in a hospital, hospice, or residential medical care facility; or continuing treatment by a health care provider."37 The critical point to make about serious health conditions is that they are not minor illnesses or injuries that last only a few days. Maladies like minor food poisoning,38 earaches, influenza, colds, or cosmetic treatments (e.g., for acne) do not qualify as serious health conditions.39 Instead, conditions requiring at a minimum an overnight stay in a hospital are more likely to rise to the level of a serious health condition. Other maladies or conditions that would meet this standard of severity would be broken bones, chronic illnesses (such as asthma and diabetes), surgery, medical conditions requiring prolonged episodic treatment (such as chemotherapy or radiation treatment for cancer), or any permanent long-term conditions that require monitoring (such as stroke or terminal illness). -A serious health condition is met when one or more of the following conditions is met: 1.A period of incapacity (i.e., inability to work, attend school, or perform other regular daily activities due to the serious health condition, treatment therefore, or recovery therefrom) of more than three consecutive calendar days, and any subsequent treatment or period of incapacity relating to the same condition. 2.Any period of incapacity due to pregnancy, or for prenatal care. 3.Any period of incapacity or treatment for such incapacity due to a chronic serious health condition. 4.A period of incapacity that is permanent or long-term due to a condition for which treatment may not be effective. Examples include Alzheimer's, a severe stroke, or the terminal stages of a disease. 5.Any period of absence to receive multiple treatments (including any period of recovery therefrom) by a health care provider or that would likely result in a period of incapacity of more than three consecutive calendar days in the absence of medical intervention or treatment, such as cancer (chemotherapy or radiation), severe arthritis (physical therapy), or kidney disease (dialysis) -Some federal courts have concluded that for an employee to prove he or she has a serious health condition and is entitled to FMLA leave, 2 facts must be established: 1. The employee must demonstrate that he or she was unable to work for at least three consecutive days. 2. The employee must show that he or she received subsequent treatment in which he or she was either seen at least twice by a health care provider or obtained a regimen of treatment under a health care provider.43

Arnold Tolles identified 8 broad groups or classes of early welfare programs

1.Recreational plans included athletic teams, glee clubs, and drama clubs. Many employers provided facilities such as clubhouses, recreation rooms, gymnasiums, bowling alleys, and game rooms to bring employees relief from boredom, provide relaxation, and generate group spirit. 2.Health and safety plans provided employer-paid physical examinations, first aid, guards on machines, safety instructions, and medical advice and treatment in cases of accidents and sickness on the job. 3.Education and information plans included services such as company-sponsored educational programs, company-financed scholarship funds, the provision of technical libraries for employees, and the sponsorship of a variety of seminars. 4.Economic security plans are now one of the most costly types of welfare benefits. These provisions included thrift clubs, credit unions, stock purchase plans, paid vacations, paid sick leave plans, and group life, accident, and health insurance plans. 5.Convenience plans for employees included a wide variety of effects, the most elemental of which were adequate toilets and washrooms. Other examples included locker rooms, lunchrooms, and lunch wagons. 6.Personal and family problems plans consisted of emergency financial assistance to the employee, vocational guidance, and advice on problems of health and family finances. 7.Community interests programs included such activities as paying for time not worked while the employee is voting, serving on a jury, appearing as a witness, or conducting union duties. If the employer's facilities were located in isolated areas, they often provided housing for employees and their families. 8.Employee representation plans, endorsed by some larger companies, provided collective representation of employees as an alternative to labor unions. These plans were initially called "work councils" during the 1920s and were later known as "shop committees." Today they are known as employee empowerment programs, quality circles, or employee participation programs (see Table 10.1).

Fiduciary

A fiduciary is a person who is placed in a position of trust and confidence to exercise a standard of care in the administration or management of an activity.81 ERISA generally identifies a fiduciary as anyone who exercises discretionary authority or control over a pension plan's management or assets, including anyone who provides investment advice to the plan.82 Fiduciaries who do not follow the principles of conduct outlined in the Act may be held responsible for restoring losses to the plan resulting from their actions.83 ERISA also gives the pension plan's participants the right to sue for benefits and breaches of fiduciary duty.

Successor employer

An employer who replaces another employer. If one company was acquired by another company, the acquiring company is the successor employer. If Company X (employing thirty-five employees) acquires Company Y (employing sixty employees), Company X, as the successor employer, has also acquired Company Y's FMLA obligations. If as a result of the acquisition the total employee threshold of fifty or more is met, the successor employer (Company X) is now required to follow the FMLA.

Unemployment Compensation - Employee Eligibility

As a rule, certain classes of employees are not entitled to coverage under state unemployment compensation laws. In all states, railroad workers are not entitled to draw unemployment compensation because railroad workers and their families are covered under separate social insurance legislation, the Railroad Retirement Act of 1935,8 and not the Social Security Act. Additionally, all states exclude persons who are self-employed from unemployment compensation. Persons who are employed by their immediate family members (parent, spouse, or child) cannot draw unemployment benefits.9 Full-time students and the spouses of full-time students who provide employment services for schools, colleges, and universities are not provided unemployment insurance coverage.10 Finally, persons who are currently drawing pensions, retirement pay, or other annuities are disqualified automatically from collecting unemployment compensation.11 Although all of these classes of individuals are universally denied unemployment benefits, states, individually, have excluded other classes of employees Reasons for Ineligibility for Unemployment Compensation •Failure to seek suitable employment •Involuntary termination for misconduct •Unemployment resulting from labor strike •Voluntary termination without good cause •Failure to meet the State requirements for wages earned or time worked

Defined Contribution Plans

Based on a prescribed amount invested periodically into an individual account for each employee. Such plans do not have to identify how much is to be placed into the account each year, but they must spell out the process by which it is done. These defined contribution plans are sometimes referred to as individual account plans. Defined contribution plans are exempt from the funding requirements and the plan termination insurance provisions of ERISA. As a consequence, more employers prefer defined benefit plans.

Progress of employee benefits

By the early 1970s, most employers and employees viewed employee benefits as an integral part of the total compensation program, and the majority of employees felt they were entitled to receive them as a part of their employment relationship. In the 1980s and continuing into the present, federal and state governments have actively increased their roles regulating existing employee benefit programs. Government has also legislated tax reforms in order to provide incentives for private employers to create additional benefits as well as improve existing benefit plans. Benefits administration and management of employee benefits programs have become much more complex due to the extensive tax implications.

COBRA

COBRA covers all employers engaged in interstate trade but exempts certain employers and specific plans. For one, employers with fewer than twenty employees are exempt from COBRA's provisions. In addition, government health plans or health plans administered by religious organizations are not covered by the Act.

Qualifying Events for Cobra

Certain conditions, referred to as qualifying events (see Figure 10.5), require continued coverage under COBRA if the employee, dependents, or divorced spouse elect to be covered within a sixty-day period from occurrence of the qualifying event. Qualifying events for COBRA eligibility would include a reduction in an employee's work hours to part-time status resulting in no coverage under the existing plan or termination of employment for any reason other than gross misconduct.52 If an employee loses his or her job because of an economic downturn, the employer must continue coverage, but if the employee is terminated because of documented insubordination, the employer does not have to provide continued coverage. There are also qualifying events that entitle the dependents of a covered employee to continued health benefit coverage. The spouse and minor children of an employee are entitled to continued coverage in the event of the employee's death.53 Additionally, these dependents are entitled to continued coverage in the event of a divorce or legal separation from the employee.54 Also, the dependent child of the employee may request continued health coverage if he or she has lost dependent child status under the employer's group health insurance plan (this typically occurs when the child marries or reaches age twenty-three). Employees who are protected under the Uniformed Services Employment and Reemployment Rights Act (USERRA) are entitled to a maximum of twenty-four months COBRA coverage.55

Employee Retirement Income Security Act of 1974 - ERISA

ERISA does not require employers to offer employee benefit plans; however, once an employer has established a plan, the Act protects the interests of participants and their beneficiaries. Because COBRA and HIPAA are merely amendments to ERISA's provisions governing health care benefits (ERISA's comprehensive nature includes a broad range of employee "welfare benefits"),76 the remaining discussion will focus only on the Act's pension plan requirements. ERISA establishes standards of conduct, responsibility, and obligations for fiduciaries of employee benefit plans. It provides for remedies, sanctions, and ready access to the federal courts as well. ERISA is a cumbersome and complicated statute that increases its inherent confusion by dividing enforcement responsibilities between three government agencies: the Pension and Welfare Benefits Administration of the Department of Labor, the Internal Revenue Service of the Department of the Treasury, and the Pension Benefit Guaranty Corporation. ERISA's most significant impact has been in four areas: 1. Vesting rights. Vesting is the process by which employees may earn a nonforfeitable right to retirement benefits provided by a plan. Retirement plans can use a participant vesting schedule of either two years, five years, or three to seven years. Vested employees who terminate employment may either have to wait until they reach the plan's early retirement age or normal retirement age before receiving any benefit payments, or they may be required to take a lump-sum payment if the accumulated vested benefits are $3,500 or less. 2. Termination insurance. ERISA established the Pension Benefits Guaranty Corporation (PBGC) to administer an insurance fund to which all covered employers with qualified retirement plans must contribute. When a plan terminates leaving unpaid obligations, the PBGC may recover from the employer the cost of paying benefits to vested participants. 3. Reporting and disclosure requirements. The Act requires periodic filing of detailed information with both the Department of Labor and the Internal Revenue Service as well as a detailed disclosure to plan participants. 4. Fiduciary standards. The Act establishes federal standards of conduct for fiduciaries involved in administering all covered benefit plans. Plan fiduciaries are the individuals who control and manage retirement benefit plans and their assets. The Act requires fiduciaries to act in a prudent manner and make decisions with the benefit of participants in mind. Fiduciaries are personally responsible for breaches of responsibilities. Plan participants are allowed to sue in federal courts to recover losses.

Family and Medical Leave

Family and medical leave is provided under the Family and Medical Leave Act of 1993 (FMLA). Effective as of August 5, 1993, the FMLA requires that eligible employees receive up to twelve weeks of unpaid leave for the birth of a child, adoption of a child, care of an immediate family member (spouse, child, or parent) suffering from a "serious health condition," or recovery from a personal "serious health condition."14 In determining an employee's entitlement to FMLA's mandatory leave, two questions must be addressed: •Is the employer a covered entity (required to comply with the provisions of the Act)? •Has the employee in question met the FMLA's eligibility requirement?

Retirement Plans Not Covered by ERISA

Federal, state, or local government employee plans are not covered by ERISA. Certain church or church association plans are also exempted. Retirement plans that are maintained under state workers' compensation, unemployment compensation, or disability insurance laws are further excluded from coverage under the Act. Multinational corporations are not required to comply with ERISA for the retirement plans that they have created for foreign nationals at overseas sites. However, the pension plans of U.S. citizens working for these companies in overseas locations are protected.

Termination - To receive unemployment compensation, the terminated employee must meet 3 conditions

First, the employee must have been involuntarily terminated. Thus, if the employee voluntarily terminates employment (resigns), he or she may be ineligible to draw unemployment benefits, depending on the state regulations.12 If the employee has been discharged for either misconduct (i.e., violating a work rule, insubordination, theft, etc.) or failure to meet minimum performance standards, he or she is disqualified from unemployment compensation eligibility. Second, the terminated employee must be able and willing to work. This means the terminated employee is entitled to unemployment compensation as long as he or she is unemployed and has not refused suitable work. Unemployment claimants are required to make regular visits to the state unemployment commission for the purpose of locating another job. If the claimant fails to actively seek new employment (i.e., does not check with the employment commission regularly) or refuses to accept a comparable position through the employment commission, unemployment benefits may be terminated. Third, in order to be eligible for unemployment compensation, the terminated employee must have met the state's minimum income and contribution levels. Before a claimant can draw the state's unemployment benefits, he or she must have first earned a certain base wage amount and worked for a minimum period of time (usually at least three months in the previous year prior to the unemployment claim).

Health Insurance Portability and Accountability Act of 1996

HIPAA places certain restrictions on the rights of employers and insurers to deny or limit coverage for preexisting conditions. HIPAA also amended COBRA to extend maximum coverage to twenty-nine months for any former employee or beneficiary with qualifying disabilities and amended COBRA's definition of "qualified beneficiary" to include any child born to or placed for adoption with the former employee during the covered period.63 The regulation under HIPAA allow employees who change jobs or lose jobs to maintain health coverage by requiring later employers to admit them into the group health plan. HIPAA also imposes requirements on the application of preexisting condition exclusions in group health plans. As defined in HIPAA, a preexisting condition exclusion comprises any limitation or exclusion of benefits because the condition was present before the first day of coverage.64 The preexisting condition must be disclosed through diagnosis or medical records before the first day of coverage. Group health plans may impose a preexisting condition exclusion only if it is related to a physical or mental condition for which diagnosis was made and care or treatment was recommended or received during a six-month period ending on the enrollment date.65 The exclusions must be limited to a twelve-month period after the enrollment date or a nineteen-month period in the case of a late enrollment. The period of preexisting condition exclusion must be reduced by the length of any periods of creditable coverage under other group health plans, Medicare, or other similar types of coverage as of the enrollment date. Preexisting condition exclusions do not apply to pregnancy. In certain circumstances, preexisting condition exclusions may not apply to newborns or adopted children.

Determining Unpaid Leave (total weeks)

If an employer already offers employees paid leave (i.e., vacation, sick leave, personal leave), the unpaid leave mandated by the FMLA may run concurrently with the paid leave, provided the employer has identified such leave as being taken for a FMLA reason. For example, assume an employer provides employees with two weeks' paid sick leave as a benefit. Now assume an employee requests the full twelve weeks' under the FMLA for a medical emergency. The employee cannot demand two weeks' paid leave in addition to the twelve weeks unpaid leave (a total of fourteen weeks). The FMLA authorizes the employer to require the employee to substitute any of the accrued paid vacation leave, personal leave, or family leave.48 Using the previous example, the employer may include the two weeks' paid sick leave as part of the FMLA required leave, for a total of twelve weeks (two paid and ten unpaid weeks). In our opening scenario, Jerri Lynn could draw her paid vacation to run concurrently with her FMLA leave. If she had one month's leave accrued, this would guarantee her a stream of income for the first of the two months' FMLA leave requested. However, during the second month, Jerri Lynn would have no income from her employer.

Unemployment Benefits

If an individual is laid off by a covered employer, that individual is entitled to receive unemployment compensation for up to twenty-six weeks. Keep in mind that during this twenty-six-week period, the claimant must be actively seeking suitable employment. The amount of unemployment compensation the individual may draw per week is established by the individual state. In all states, this amount is based on a percentage of the employee's average weekly pay (usually 50 percent) and a maximum ceiling, whichever amount is smaller.

Independent Contractors and Employee Benefits

Independent contractors, as their name implies, are independent individuals who contract with employers to perform specific duties and jobs for a set rate of compensation. Independent contractors are not employees and therefore are not entitled to benefits available to employees of a specific employer. Not only are independent contractors not eligible for the employer's voluntary benefits, the employer does not have to provide them with the mandatory benefits (i.e., unemployment compensation, workers' compensation, social security, overtime, etc.). In fact, independent contractors are completely responsible for their own benefits and are even required to withhold their own federal income taxes and FICA taxes (both the employer's and employee's portions).95 An employer is not required to provide voluntary benefits (i.e., paid holidays, paid vacations, stock options, etc.), but once the employer decides to offer a specific benefit, it must be offered to all eligible employees. The employer cannot arbitrarily declare some individuals to be employees and others to be independent contractors. If an individual is classified as an independent contractor, it must be demonstrated that he or she truly is one.

Major Legislation Governing Employment Benefits

Legislation Provisions Revenue Acts of 1921, 1926, and 1928Exempts interest income on profit-sharing plans, bonus plans, and pension trusts from current taxation. Social Security Act of 1935, as amendedProvides for such benefits as retirement, disability payments, health payments, and survivor income. Labor-Management Relations Act of 1947Provides fundamental guidelines for the establishment and operation of pension plans administered jointly by an employer and a labor union in Section 302. Welfare and Pension Plans Disclosure Act of 1958Requires plan administrators for collectively bargained plans to provide annual financial reports of plans. Revenue Act of 1961Amends § 403(b) to defer taxes of annuity purchases to employees of public educational institutions. Welfare and Pension Plans Disclosure Act Amendments of 1962Shifts responsibility for protection of plan assets to the federal government. Self-Employed Individual Retirement Act of 1962 (Keogh Act)Allows self-employed individuals a limited deduction of earnings for their own pension contributions. Tax Reform Act of 1969Provides guidelines for implementation and application of employer and union jointly administered pension plans. Employee Retirement Income Security Act of 1974 (ERISA)Protects private pension plan benefits for participants and establishes the Pension Benefit Guaranty Corporation (PBGC). Revenue Act of 1978Introduces qualified deferred taxation compensation plans in Section 401 (k). Economic Recovery Tax Act of 1981 (ERTA)Extends IRA eligibility to employees covered by employer pension plans and authorizes qualified, voluntary employee contributions, increases contribution limits for IRA and Keogh Plans, and creates incentive stock options (ISO). Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Establishes alternative minimum tax provisions, restricts qualified retirement benefits for highly paid employees, restricts top-heavy plans, modifies Keogh plans and Social Security integration rules, and establishes requirements for group term life insurance. Deficit Reduction Act of 1984 (DEFRA)Imposes various restrictions on benefit plans in an effort to reduce a budget deficit and makes changes affecting 401 (k) plans. Retirement Equity Act of 1984 (REA)Amends ERISA pension plan provisions to expand employee benefit rights and protections regarding enrollment, vesting, breaks in service, and survivor provisions. Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)Requires employers to offer extended group health insurance coverage for up to 36 months to employees and dependents whose coverage would otherwise terminate due to qualifying events. Legislation Provisions Tax Reform Act of 1986Establishes major changes in several benefit plans for vesting schedules, Social Security integration, pension plan standards, and tax penalties as well as controlling discrimination in favor of highly paid employees. Age Discrimination in Employment Act amendment of 1986 (ADEA)Prohibits mandatory retirement based upon age for most employees. Omnibus Budget Reconciliation Act of 1986 (OBRA 1986)Requires that employers allow accrual and participation in established pension plans for employees who continue working beyond age 64 and for employees who are hired within 5 years of the plan's normal retirement age. Omnibus Budget Reconciliation Act of 1987 (OBRA 1987)Increases and extends the PBGC pension insurance premium provisions for participants employed beyond a pension plan's normal retirement age. Omnibus Budget Reconciliation Act of 1989 (OBRA 1989)Expands health care continuation under COBRA (1985) and includes some forms of deferred compensation in determining average compensation and Social Security taxable base. Omnibus Budget Reconciliation Act of 1990 (OBRA 1990)Increases the excise tax for pension asset reversions, the taxable base for Medicare payroll tax, and the PBGC premium rates. Older Workers Benefit Protection Act of 1990 (OWBPA)Amends the Age Discrimination in Employment Act (ADEA) to be applicable to employee benefit eligibility and participation. Omnibus Budget Reconciliation Act of 1993 (OBRA 1993)Reduces compensation limit for 401 (k) plans, increases amount of Social Security benefits subject to taxation from 50 percent to 85 percent for individuals earning more than $34,000 and married persons filing jointly earning above $44,000, and enacts a cap on deduction of executive compensation in excess of $1 million not linked to performance. Family and Medical Leave Act of 1993 (FMLA)Grants employees up to 12 weeks of unpaid leave for various family and employee reasons including an employee's own illness, serious health conditions of an employee's spouse, children, or parents, and to care for a newborn child or a child placed by adoption or foster care. Health Insurance Portability and Accountability Act of 1996 (HIPAA)Prohibits group health insurance plans from establishing eligibility rules based on health status, limits duration and extent of excluding preexisting conditions, requires group health insurance plans to track a person's coverage upon leaving the plan to allow that person to gain access to another plan with reduced or no preexisting conditions restrictions, requires special enrollment periods for persons losing other coverage under qualifying circumstances, extends COBRA provisions, and expands ERISA's disclosure requirements. Patient Protection and Affordable Care Act of 2010 (PPACA)Children are permitted to remain on parent's health insurance plans until age 26. Companies cannot charge higher premiums for pre-existing conditions. Employers are required to report the value of health care benefits on the employee's annual form W-2. Pre-tax employee contributions to flexible spending accounts are limited to $2,500. Beginning January 1, 2014, employer sponsored health insurance plans are limited to $2,000 annual deductibles for single individuals. Health Care and Education Reconciliation Act of 2010An amendment to the PPACA, imposes a $2,000 fine, for each full-time worker over the first 30 workers, on employers who employee 50 or more employees who do not offer health coverage.

GREAT EXAMPLE

Looking at this chapter's opening scenario, is Jerri Lynn eligible for FMLA? First, with 162 employees, Frink & Rose is a covered employer. Obviously Jerri Lynn satisfies the first criterion for eligibility by working for a covered employer. She satisfies the second, working at a facility with 50 or more employees working within 75 miles, because over half of Frink & Rose's employees live within 30 minutes of the plant (obviously less than 75 miles). The third requirement of having worked at least 12 months is assumed to be satisfied because Jerri Lynn has been employed by Frink & Rose for over two-and-a-half years. Finally, the 1,250-hour requirement can be assumed to have been met because she is a full-time employee. A full-time employee is defined as one who works 35 hours per week or more (usually 40 or more). Even using the lower figure, Jerri Lynn would have accrued at least 1,750 hours during the previous 12-month period. Now that her eligibility for FMLA leave has been established, does Jerri Lynn have a qualifying event? Yes she does, as her husband, Kenny, has a serious health condition as defined in the Act. Because it was unforeseeable, Jerri Lynn does not have to give the thirty-day notice. So Bob was wrong about her having the time off and losing her job. However, Dave was also wrong when he told Jerri Lynn that the company had to pay her while she was on leave. FMLA only mandates up to twelve weeks of unpaid leave.

Mandatory vs Voluntary benefits

Mandatory are those mandated or required by law. Employers have no choice but to provide the benefits. Voluntary benefits are benefits that are not required by law. Thus, the employer may provide them, but not statute or regulation is violated if such benefits are not provided to employees. If some are not offered, this could be disastrous for employee recruitment.

FMLA - Eligibility for Employees

Pg 277 •Employee must work for a covered employer. •Employee must have worked for the employer for at least twelve months (can be nonconsecutive). •Employee must have worked in excess of 1,250 hours during the twelve-month period. •Employee must work at facility with 50 or more employees who live within 75 miles of the facility

Duration for Continued Coverage

Pg 284

Defined Benefit Plans

Plans in which the employer develops a program that identifies much much a retiring employee will receive each month for the remainder of his or her life. Such plans commonly utilize a benefit formula combining the years of employment with the employer, the employee's age, and the employee's ending salary to compute the amount of the individual's monthly retirement payment.

Waivers

Private agreements between the employer and the former employee, and the parties were free to decide the terms of the waiver. Pg 293

FMLA - Covered Employers

Private sector employers must comply with the FMLA when they employ fifty or more employees for at least twenty workweeks in the current or previous year, including joint employers and successor employers. The term joint employers refers to two or more employers who employ the same individual. Think of a situation in which the employee is paid by an employment service (i.e., Kelly or Manpower) and contracted to work for yet a second employer (i.e., Western Corporation or Lockheed Martin).15 Even though the employee receives his or her pay check and benefits from Manpower, if Lockheed Martin controls and supervises the employee's work activities, Lockheed Martin is a joint employer. If the leased employee brings the joint employer's workforce to the fifty-employee threshold, the joint employer is covered under the FMLA.16

Affordable Care Act

The Affordable Care Act imposes two different penalties depending on the health coverage of the employer. One penalty is imposed on large employers who offer no insurance coverage to their employees and another for large employers who offer insurance plans to employees which do not meet new government minimum standards. At the time of this book was in press, these minimum standards had yet to be determined. Pg 287

Consolidated Omnibus Reconciliation Act of 1985, as amended

The Consolidated Omnibus Reconciliation Act (COBRA) regulates group health insurance programs. Specifically, COBRA directs covered employers to offer continuation of group health care protection to participants and certain dependents for eighteen or thirty-six months, where coverage would otherwise cease upon termination of employment. COBRA further requires employers to continue health insurance coverage to separated employees due to voluntary or involuntary termination of employment at the group insurance rate plus a 2 percent administrative charge. Additionally, employers must provide the continued coverage when there is a reduction of work. Employers also are required to extend this coverage to the spouse of an employee in the event of the death of the employee or divorce.

Calculating the 12-Month Period under FMLA

The FMLA provides several options when establishing from which date the twelve-month eligibility period is calculated. Employers may select one of four options for determining this twelve-month period: 1. The calendar year. 2. Any fixed twelve-month "leave year" such as a fiscal year. 3. A year required by state law. 4. A year starting on the employee's "anniversary" date.49 The twelve-month period is measured forward from the date an employee's first FMLA leave begins, or a "rolling" twelve-month period is measured backward from the date the employee uses FMLA leave.

Advanced Notification for FMLA Leave

The FMLA requires that employees give employers at least thirty days' notice when the reason for the leave is "foreseeable." However, the thirty-day requirement does not apply in situations when the serious health condition requiring the leave was sudden. Under such circumstances, the employee is merely required to provide employer notification as soon as possible. This exception makes the thirty-day notification requirement virtually pointless except in instances where scheduled medical treatments are known well in advance. Employees who have advance knowledge of a scheduled medical service or treatment must always provide timely notification. It is important that employers make employees aware of their responsibilities in this area and of the consequences of failing to provide proper notification when the date of the treatment was known.

Older Workers Benefit Protection Act of 1990

The Older Workers Benefit Protection Act (OWBPA) was enacted to protect older workers from discrimination in benefits based on age. The OWBPA requires employers to provide workers who are over forty years of age with benefits that are equal to those offered to younger employees unless it can be demonstrated that there is a greater cost for providing the benefits to older employees. Pg 292

Unemployment Compensation - Who are covered employees?

The Unemployment Tax Act defines an "employer" as any entity who paid wages of $1,500 or more in any quarter in the current or preceding calendar year and employed at least one individual on at least one day during twenty weeks in the current or previous year.7 This includes virtually all employers nationwide. However, various state laws have exempted specific categories of employers from unemployment eligibility. Because exemptions vary from state to state, readers are cautioned to consult the respective state unemployment commission for specific information on exempted employers.

The Uniformed Services Employment and Reemployment Rights Act

The Uniformed Services Employment and Reemployment Rights Act (USERRA)89 was enacted in 1994 for the express purpose of protecting the civilian jobs and employment benefits of veterans and members of reserve armed forces components (i.e., National Guard, U.S. Army Reserve, U.S. Air Force Reserve, etc.) when called to active duty. Returning veterans are entitled to be reemployed in their old civilian jobs, or a comparable job, upon release from active duty under honorable conditions. To be eligible for reemployment, the individuals cannot have been absent from their civilian jobs in excess of five years while in uniformed service,90 and they have informed the employer in writing before departure on active duty.91 The individuals must return to work in a timely manner upon release from active duty. In 2004 an amendment to USERRA called the Veterans' Benefits Improvement Act (VBIA) imposed a new requirement on employers to provide written notice to all individuals eligible under USERRA of their rights, benefits, and obligations under USERRA.92 Additionally, qualifying employees may elect to continue their employer-based health plan for up to twenty-four months while on active duty.93 USERRA also makes it unlawful for any employer to discriminate against any employee or applicants because the individual is a past or present member of the uniformed services, has applied for membership in the uniformed services, or is obligated to serve in the uniformed services

Unemployment Compensation - What is the incentive for employers to maintain a stable workforce?

The employer's contribution to the unemployment fund is based on the number of unemployment claims filed against it. Unemployment compensation is actually an unemployment insurance program. Like all insurance programs, the amount of premium an employer pays varies based upon the number of former employees who file unemployment claims.6 As automobile insurance premiums increase with the number of traffic accidents a policyholder has, so too do unemployment compensation premiums increase with the number of employees laid off by an employer. The connection is clear: employers with few layoffs pay low state unemployment taxes; those organizations that lay off many employees will pay higher taxes.

Joint Employer

The term joint employers refers to two or more employers who employ the same individual.

Vesting

Vesting means an individual has a nonforfeitable right to pension benefits. ERISA establishes the time frame in which an individual must be employed before becoming eligible to participate in a pension plan and accumulate benefits. The Act provides two methods for becoming vested. One method affords the employer the option of allowing employees to become 100 percent vested after five years of service. For the employee, it means that in the event he or she quits or is terminated before five full years of employment, the employee is not entitled to any pension benefit. The other option permits employers to offer employees partial vesting beginning at the conclusion of the employee's third year of employment and becoming fully vested by the conclusion of the seventh year (see Figure 10.7). Pg 290