Bernstein Shur Monthly


Bernstein Shur Monthly

Smaller Employer? The Cures Act & Things To Know For HRA’s

By: Steve Gerlach

For example, in order to establish a QSEHRA, an employer must not be an “applicable large employer” under the ACA’s play-or-pay rules. This means that the employer must have fewer than 50 full-time employees, including full-time equivalents. Moreover, if the employer sponsors a QSEHRA, it is forbidden from sponsoring any plan that constitutes “minimum essential coverage” (or MEC) under the ACA’s definition of that term.

Starting in 1961, employers were permitted to sponsor free-standing health reimbursement arrangements (“HRAs”); that is, the HRA was not required to be integrated with a traditional health plan.  Then came the ACA.  Readers may recall that under a series of notices issued in 2013 through 2015, the IRS ruled that to comply with the ACA, HRAs must be integrated with the employer’s traditional health plan.  Failure to integrate the HRA could result in extremely high penalties assessed on the employer.  Right at the end of 2016, Congress partially reversed the IRS by passing (and President Obama signed) the 21st Century Cures Act (the “Cures Act”).  Contained in that act is a provision allowing certain small employers to offer their employees an HRA that need not be “integrated” with a group health plan. Employees may then use their employer’s pretax contributions to such an HRA to pay premiums under individual health insurance policies.

In addition, the QSEHRA itself must meet several requirements:

  • Only Employer contributions are permitted—employees may not contribute.
  • Essentially all employees must be covered. The limited exceptions apply to new hires (those with fewer than 90 days of service), part-time and seasonal employees, members of collective bargaining units, employees under age 25, and nonresident aliens.
  • The employer’s contribution on behalf of each employee must be uniform, subject only to adjustments for an employee’s age and the number (and ages) of any covered dependents.
  • For 2017, the contributions are capped at $4,950 if only employees are covered, or $10,000 if the QSEHRA also covers dependents.
  • The Employer must annually provide a written notice to each covered employee that explains the QSEHRA rules. This notice must be provided at least 90 days before the start of the calendar year for which a QSEHRA contribution will be made (or, if later, when an employee first becomes eligible under the arrangement). For calendar year 2017, this notification deadline is extended to 90 days after the law was enacted (which was Dec. 13, 2016). The statute imposes a penalty of $50 per employee (capped at $2,500 per year) for failing to provide this notice.
  • The amount contributed to an employee’s QSEHRA must also be reported on the employee’s Form W-2. Employees are also subject to several rules regarding their participation in the QSEHRA:
  • The QSEHRA, itself, does not constitute MEC, and so does not prevent individual mandate penalties.
  • If the Employee does not obtain MEC by purchasing an individual insurance policy, the Employee’s QSEHRA funds will be taxable.
  • A QSEHRA participant may still qualify for a tax subsidy to purchase coverage through an exchange. However, the amount contributed to the QSEHRA will offset any tax subsidy the employee would otherwise receive. So in effect, the Employer will be shouldering a cost that would otherwise be borne by the taxpayers.
  • COBRA rules do not apply to QSEHRAs.

Given the complicated restrictions applicable to QSEHRAs, as well as the potential adverse consequences of noncompliance — for both employers and their employees — any employer seeking to establish a QSEHRA should seek professional advice before proceeding.  At a bare minimum, the Employer should have a written plan document outlining the various requirements.   Required under ERISA and the Tax Code, such documents will help facilitate the Employer’s—and employees’—compliance with the new law.

Steve Gerlach is a shareholder at Bernstein Shur Counselors at Law. He specializes in employee benefits, executive compensation and ESOPs.


The New Political Administration And Construction: Something New Or Groundhog Day?

By: Mike Bosse

Regardless of your politics, we have a newly elected President and a new Congress. President Trump has finished his first 100 days of office, and the Republicans have majorities in both the Senate and the House, and the next federal elections will not occur in November of 2018.  Although no one can predict for sure, the opening first couple of months of the new presidency and Congress has signaled positive vibes for the future of the construction industry. Here are just a few examples from the new presidential and congressional administrations, with some predictions about what we are likely to see in the coming months and years.

First, in the opening days of his presidency, President Trump signed an Executive Order to advance the construction of the Keystone XL and Dakota Access pipelines, two projects that had been blocked by the Obama administration in 2015 because of environmental concerns. Then, in late March, the State Department granted the construction permit to Transcanada.  The pipeline, intended to run from Canada to Nebraska, will connect to already existing lines that run to U.S. refineries on the Gulf Coast. Because the pipeline crosses over from Canada, it needs approval from the Executive Branch and that has now occurred. Trump also is considering requiring that materials for the pipelines come from the United States, similar to the Buy American provisions that came along with funding during the Great Recession.

President Trump has also signaled a plan to invest $1 trillion in the infrastructure of the United States, although the financing for the infrastructure rebuild is not yet clear. President Trump has clearly made the modernization of our infrastructure a priority, something that many of us discussed throughout the last presidential administration. One thing that Trump has hinted at is that he wants to link up private investors and perhaps put private companies in charge of some of the transportation projects instead of the federal government. This could potentially open up a multitude of new public-private partnerships in the coming years, including in New England where they have been scarce. There is a document circulating in the industry with a priority list of 50 projects around the country including the MBTA Green Line Extension in Boston listed as the 28th project, the I-93 rebuild in New Hampshire listed as the 30th, and another 48 projects around the country. President Trump’s focus on the infrastructure also has led to new congressional attempts at funding a rebuild of our infrastructure, and time will tell if there is enough support to actually make an updated infrastructure a real priority.

Many in the industry also are predicting that the direction of OSHA will change from a focus on enforcement to a higher volume of compliance assistance and cooperative programs. I have previously written about the Silica Rule, and my colleagues have written about the Injury and Illness Recordkeeping Rule, both of which are regulations that could be rolled back under the Trump administration. The Silica Rule’s deadline already has been pushed back to September 23, 2017.  President Trump has also been vocal about rolling back regulations, and OSHA would be a likely candidate in the construction industry.

The likely change at OSHA is part of a background signal of less regulation in general at both the state and federal level. The president has already had some victories of keeping companies and workers in the United States instead of having them move to another country.  Additionally, although Obama’s signature health care hasn’t been rolled back yet, the issue of health care certainly has been at the center stage for the first couple of months in 2017.

There is also a serious ongoing discussion in Washington about litigation reform. Efforts in the past have been made to increase transparency in asbestos cases, including the use of claim funds by plaintiffs’ lawyers. Class action abuses are often the subject of possible reform, and could supplement the United States Supreme Court that has generally has made class actions harder to prosecute in the last decade.  Finally, speaking of the Supreme Court, Justice Neil Gorsuch because Supreme Court Justice Gorsuch when his nomination passed and he was sworn in on April 10, 2017.  President Trump may have the opportunity over the next four years to nominate one or possibly more judges to the highest court.

Finally, there is the controversial discussion over building the “wall” along the nation’s southern border with Mexico.  This is a politically charged discussion obviously, but if something like it happened under this administration, the sheer amount of labor that would be required would be massive and would need to be sustained over a long period of time.  Some reports estimate that the wall would be 1,000 to 2,000 miles in length, have a budget of up to $15 million, and create over 25,000 jobs.  Builders submitted bids to the Department of Homeland Security on April 4, 2017, for wall prototypes that will be built in San Diego.

Aside from how anyone voted, the election is over, and it is clear that construction and infrastructure development has taken a center stage in the first months of the Trump and Congressional administrations. Will any of it actually happen? Only time will tell. It might end up being Groundhog Day again. But new administrations tend to benefit some industries over others, and we will continue to monitor developments as they occur and report about the positive and negative impacts on the construction industry in the coming months and years.


A Jury Awarded A Verdict Of $454 Million Against Kimberly-Clark Based On Fraud Claims Asserted By Purchasers Of The Company’s Products

By: Kevin Decker

A jury awarded a verdict of $454 million against Kimberly-Clark based on fraud claims asserted by purchasers of the company’s products. In the case, a California federal jury was asked to examine claims that Kimberly-Clark and its spinoff Halyard Health Inc. misled customers by claiming that their MicroCool surgical gowns were impermeable, providing protection against diseases like Ebola and HIV. The plaintiffs, who had purchased the gowns, provided evidence during the trial that the defendant companies knew that the surgical gowns were defective and had failed tests. The jury’s award consisted of approximately $4 million in compensatory damages and $450 million in punitive damages, even in the absence of evidence of any injuries caused by the defects. Kimberly-Clark has stated that it would challenge the verdict on appeal, describing the damages award as excessive.

Read more about this development here:


A 7-Step Cyber-Health Checkup For Your Business

By: Dan Mitchell

Cyber security is top of mind in most businesses these days, as it should be.  As lawyers practicing in the data privacy and cyber security areas throughout ME and New England, we thought it would be helpful to provide the following list of seven steps to consider as you assess the cyber health of your organization:

  1. Educate Yourself. We already have too much we need to know, but cyber security has become too important not to invest some time in learning basic concepts. Fortunately, there are many readily accessible sources of information.
  2. Have an Incident Response Plan. The worst time to think about how to respond to a data breach is after it already has occurred. The early hours after a breach is discovered are critical, and every organization should have an up-to-date incident response plan that will enable it to respond quickly and effectively in a crisis environment.
  3. Consider Hiring a Chief Privacy Officer. Many companies are hiring a Chief Privacy Officer (“CPO”) or Chief Information Officer (“CIO”). This individual, usually an executive of the company, should be charged with primary responsibility for developing and implementing policies designed to protect employee and customer data from unauthorized access, as well as spearheading efforts to address breaches.
  4. Test Yourself. You should test your cyber security regularly in order to find its potential weaknesses. At a minimum, conduct at least an annual assessment of the key components of your system and the knowledge of your team regarding best practices
  5. Train and Re-train Your Team. A close cousin to item number four, you must develop and perform internal training at every level of your organization, with regular reinforcement. Even security-minded employees can fall prey to attacks in surprising ways.
  6. Consider Cyber Insurance. Yes, you probably need cyber insurance at this point. Your company’s current policies, including its general liability coverage, are unlikely to protect you in the event of a cyber incident.  Fortunately, the cyber insurance market is expanding.
  7. Always Stay One Step Ahead. IT professionals will tell that you that cyber security is a war fought in the trenches. Cyber criminals are constantly trying to figure out new ways to enrich themselves at your expense.  Good cyber security has become part of your business, like it or not, so accept it and get out front.