On May 24, 2021, the IRS released the 2021 drafts of Forms 1094-C and 1095-C. Earlier in the month, the IRS released the 2021 drafts of Forms 1094-B and 1095-B. These forms are informational reporting forms that insurers and self-insured employers will use to satisfy their obligations under IRC Section 6055 and that large employer plan sponsors and health plans will use to satisfy their obligations under IRC Section 6056. These forms, once finalized, will be filed in early 2022 relating to 2021 information. All forms appear to be unchanged from their 2020 versions. (Note that 2021 draft instructions for these forms have not yet been released.)

The ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires insurers and small self-insured employers to report on Forms 1094-B and 1095-B that they provided minimum essential coverage to covered individuals during the year. Section 6056 requires applicable large employers (under the employer mandate) to report on Forms 1094-C and 1095-C that they provided affordable and minimum value coverage to full-time employees.

As a reminder, the forms must be filed with the IRS by February 28, 2022, if filing by paper, and March 31, 2022, if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by January 31, 2022. The penalties for failure to file and report are $280 per failure. This means that an employer who fails both to file a completed form with the IRS and to distribute a form to an employee/individual would be at risk for a $560 penalty. Keep in mind that the IRS allows reporting entities not to distribute the Form 1095-B if certain conditions are met.

Employers should become familiar with these forms in preparation for filing information returns for the 2021 calendar year. However, these forms are only draft versions, and they should not be filed with the IRS or relied upon for filing. We will keep you updated of any developments, including release of the finalized forms and instructions.

Draft Form 1094-B »
Draft Form 1095-B »
Draft Form 1094-C »
Draft Form 1095-C »

Source: NFP BenefitsPartners

On June 4, 2021, the DOL, HHS and the Treasury (the agencies) issued two FAQs concerning the maximum out-of-pocket limit for plan years beginning January 1, 2022. In previous years, the limit was adjusted annually based upon the premium adjustment percentage described under the ACA. The method used in 2020 and 2021 relied upon estimates of private health insurance premiums for the private health insurance market (excluding Medigap and the medical portion of property and casualty insurance) as a measure of premium growth. Using this method, the maximum out-of-pocket limits for plan years beginning in 2021 are $8,550 for self-only coverage and $17,100 for other than self-only coverage. These limits were covered in an article in the May 27, 2020, edition of Compliance Corner.

However, continued use of this calculation would result in more rapid increases in consumer costs than would have occurred had HHS retained the method used to calculate the premium adjustment percentage prior to the 2020 plan year. Accordingly, the agencies adopted a method that utilizes estimates of employer-sponsored insurance premiums as a measure of premium growth. By applying this method, the maximum out-of-pocket limits for plan years beginning in 2022 will be $8,700 for self-only coverage and $17,400 for other than self-only coverage.

FAQs About Affordable Care Act Implementation Part 46 »

Source: NFP BenefitsPartners

On May 6, 2021, the US Court of Appeals for the Ninth Circuit (appellate court) affirmed a lower court’s ruling in Howard Jarvis Taxpayers Ass’n v. Cal. Secure Choice Ret. Sav. Program, 2021 WL 1805758 (9th Cir. 2021) that the CalSavers Retirement Savings Program is not preempted by ERISA. Specifically, the appellate court does not consider the program to be an ERISA plan, nor does it place additional requirements on an employer. Under the program, only employers who have chosen not to adopt an ERISA plan would be required to participate.

Beginning June 30, 2020, California employers with more than 100 employees must offer employees a qualified retirement plan (such as a 401(k)) or participate in the state-run retirement savings program known as CalSavers. The requirement applies to employers with 51 to 100 employees on June 30, 2021, and to employers with five or more employees on June 30, 2022. For these purposes, employer size is based on the number of California-based employees reported on the Employment Development Department quarterly report.

Before the applicable deadline, employers must sponsor a qualified retirement plan or register with CalSavers. Under CalSavers, an employer must automatically enroll eligible employees in the retirement program with a contribution of at least 3% of earnings. New employees must be enrolled within 30 days of employment. Employees may choose to opt out of the program.

If an employer fails to comply for up to 90 days, a penalty of $250 per employee could be assessed against the employer. If noncompliance continues, the per-employee penalty could increase to $500.

Employers with five or more employees in California should continue compliance efforts in either maintaining an employer sponsored retirement plan or registering with CalSavers, based on size and applicable effective date.

The ruling will also be of interest to all employers as more than half of the states have either adopted similar programs or have established Task Forces to research the issue. The cities of New York and Seattle have also adopted a similar government-run autoenrollment savings program.

The appellate court’s decision indicates that such plans may not be preempted by ERISA, clearing the way for states to impose these requirements.

Howard Jarvis Taxpayers Ass’n v. Cal. Secure Choice Ret. Sav. Program »
CalSavers, Employer Registration and Resources »

Source: NFP BenefitsPartners

On April 13, 2021, the CMS Office of Financial Management issued an alert clarifying who has the responsibility for reporting primary prescription drug coverage as the responsible reporting entity (RRE).

Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) contains mandatory reporting requirements for fully insured and self-insured group health plans. These reporting requirements are commonly known as the “Medicare Section 111 reporting requirements,” and are meant to assist CMS in determining coordination of benefit responsibilities between the group health plan and Medicare. RREs are responsible for the actual Section 111 reporting and are required to report whether active covered individuals are entitled to Medicare Part A, Part B, Part C and Part D coverage. Prior to January 1, 2020, reporting of prescription drug coverage (Part D) was optional, but is now required.

Generally, an RRE is the insurer for a fully insured plan, the third-party administrator for a self-insured plan and the plan administrator for a self-insured plan that self-administers. The alert explains that the entity considered the RRE for primary prescription drug coverage reporting is the entity that has the direct prescription drug relationship with the employer/plan sponsor. CMS provides specific examples to help reduce confusion, including:

**When the employer/plan sponsor contracts directly with the group health plan for hospital, medical and/or prescription drug coverage, the group health plan (and if applicable, its third-party administrator) is the RRE responsible for reporting prescription drug coverage. This is true even if the group health plan has carved out the processing and payment of the primary prescription drug claims to a pharmacy benefits manager (PBM), as the group health plan is still the entity with the direct relationship with the employer/plan sponsor for prescription drug coverage.
**When the employer/plan sponsor contracts with a group health plan for medical and hospital coverage only, and then independently contracts with another third-party PBM to administer prescription drug coverage, the PBM is the RRE responsible for reporting prescription drug coverage.

The above examples reinforce that the RRE is the entity which has the direct contract with the employer/plan sponsor for prescription drug coverage. While this alert does not introduce new guidance, it serves as a good reminder of the Medicare Section 111 reporting requirements for prescription drug coverage.

Reminder Regarding who is the Responsible Reporting Entity (RRE) When Reporting Primary Prescription Drug Coverage Information »

Source: NFP BenefitsPartners

On May 5, 2021, CMS released the Final Benefit and Payment Parameters for 2022, along with an accompanying fact sheet. The regulations are intended for health insurers and the marketplace but include important information that also affects large employers and self-insured group health plans. The effective date is July 6, 2021.

For 2022, the out-of-pocket maximum applicable to insured and self-insured plans is $8,700 for self-only coverage (up from $8,550) and $17,400 for family coverage (up from $17,100). This limit is distinct from the 2022 IRS out-of-pocket maximums applicable to HSA-compatible high deductible health plans (HDHPs), which are $7,050 for self-only coverage (up from $7,000) and $14,100 for family coverage (up from $14,000).

As previously reported in the 2021 Benefit and Payment Parameters Rule, effective with the 2022 MLR reporting year, insurers are to deduct prescription drug rebates and any other price concessions received by the insurer (or any entity providing pharmacy benefit management services to the insurer) from the incurred claim amount. The 2022 final rules clarify that prescription coupons, rebates and other concessions received directly by the insured are excluded for this purpose as they did not benefit the insurer.

HHS has long had a policy that provides a special enrollment period in the health insurance marketplace for an individual who loses a COBRA premium subsidy. The final rules codify this practice, which applies not only to the current ARPA COBRA subsidies but also to an employer-provided subsidy. The individual will have a 60-day period following the end of the subsidy to enroll in individual coverage both on and off the marketplace.

Interestingly, CMS did not finalize a proposed rule that would have required all health insurance exchanges to verify at least 75% of new enrollments coming through a special enrollment period. The reasoning provided was that it was believed to be overly burdensome on consumers and the state exchanges. Similarly, CMS stated that they will not take enforcement action against state exchanges that do not perform random certification of employer-sponsored coverage for individuals applying for individual coverage and a premium tax credit. This is required by the statute and regulations, but CMS will continue the nonenforcement policy through at least 2022.

Employers may find this annual guidance helpful in designing their plan benefit offerings.

2022 Benefit and Payment Parameters Final Rule »
2022 Benefit and Payment Parameters Fact Sheet »

Source: NFP BenefitsPartners

On April 6, 2021, the United States Court of Appeals for the Eleventh Circuit (the appellate court) ruled in Ramji vs. Hospital Housekeeping Systems that an employer cannot choose between workers’ compensation laws and federal FMLA obligations.

The plaintiff in the case was an employee of Hospital Housekeeping who injured her knee while at work. Once the employee notified the employer of her injury, the employer gave her time off and light-duty work while she recuperated but did not inform her of her rights under FMLA and did not place her on FMLA leave. She was paid in accordance with workers’ compensation regulations while she was on leave. When she returned to work, the employer tested her to see if she could perform the essential functions of her job. When she failed the test, she was fired.

The employee sued the employer, alleging that the employer violated FMLA when she was placed on leave to recuperate for a short time and then subsequently fired. The employer argued that it treated the injury as a workers’ compensation claim and had complied with workers’ compensation regulations. The employer also asserted that it did not believe that the employee qualified for FMLA because she received clearance from her doctor after taking a few days off and returned to work. In addition, the employer stated that the employee needed to inform it of her need for FMLA leave and did not do so.

The trial court agreed with the employer. However, the appellate court ruled that the employer did not comply with its obligations under FMLA even if it complied with workers’ compensation regulations. FMLA provides eligible employees with 12 weeks of unpaid leave with job protection upon return from that leave. The appellate court determined that the nature of the employee’s injury and the fact that she requested leave to deal with it provided the employer with enough information to determine that she qualified for FMLA. The employer was then obligated to inform her of her rights and responsibilities under FMLA as well as her eligibility for FMLA leave. The employer could not choose between providing the employee with FMLA or with workers’ compensation benefits (in fact, FMLA provides that it runs concurrently with workers’ compensation) and cannot require an employee to accept light duty work in lieu of FMLA leave. The court determined that doing these things interfered with the employee’s right to FMLA.

The appellate court ruling does not resolve the case; rather, it resolved a Motion for Summary Judgement filed by the employer, which would have ended the litigation based upon a determination that the employer wins on the law. If the court had ruled in favor of the employer, the litigation would likely have ended there. However, this ruling allows the plaintiff to resume her litigation in the trial court. It is possible that the trial court and subsequent appeals may change the outcome of the case. However, this case is an instructive reminder to employers about their obligations under FMLA to inform employees of their rights and responsibilities under the law and that doing so is not optional.

Ramji vs. Hospital Housekeeping Systems »

Source: NFP BenefitsPartners

On April 2, 2021, the DOL, HHS and the Treasury (collectively, “the Departments”) jointly released FAQs regarding recent amendments to the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). The guidance is intended to assist group health plan sponsors in understanding the new MHPAEA obligations imposed by the Consolidated Appropriations Act of 2021 (CAA).

As background, the MHPAEA generally provides that financial requirements and treatment limitations imposed on a plan’s mental health or substance use disorder (MH/SUD) benefits cannot be more restrictive than those applicable to medical/surgical benefits in a classification. Furthermore, separate treatment limitations cannot be imposed only on MH/SUD benefits. These MHPAEA provisions apply to both quantitative treatment limitations, such as the number of doctor visits, and non-quantitative treatment limitations (NQTLs), such as preauthorization requirements, step protocols or experimental treatment limitations.

The CAA, which was enacted on December 27, 2020, requires group health plans and issuers to perform and document their comparative analyses of the design and application of any NQTLs imposed upon MH/SUD benefits. Effective February 10, 2021, plans must be prepared to provide the analyses to the Departments (or applicable state authorities or participants) upon request.

Accordingly, the FAQs explain that for an analysis to be treated as sufficient under the CAA, it must contain a detailed, written, and reasoned explanation regarding the bases for the plan’s conclusion that the NQTLs comply with the MHPAEA. FAQ #3 specifies that such analyses should include, but not necessarily be limited to:

1. A clear description of the specific NQTLs, plan terms and policies at issue
2. Identification of the specific MH/SUD and medical/surgical benefits to which the NQTLs apply within each benefit classification
3. Identification of any factors, evidentiary standards or sources, or strategies or processes considered in the design or application of the NQTLs
4. Precise definitions and supporting sources for any factors, standards, strategies or processes defined in a quantitative manner
5. An explanation as to whether any factors were given more weight than others and the reason(s) for doing so, or whether there was any variation in the application of a guideline or standard used by the plan between MH/SUD and medical/surgical benefits
6. If the application of the NQTL turns on specific benefit administration decisions, an identification of the nature of the decisions, the decision maker(s), the timing of the decisions and the qualifications of the decision maker(s)
7. If the plan’s analyses relied upon any experts, an assessment of each expert’s qualifications and the extent to which the plan relied upon each expert’s evaluations in setting recommendations regarding both MH/SUD and medical/surgical benefits
8. A reasoned discussion of the plan’s findings and conclusions as to the comparability of the processes, strategies, evidentiary standards, factors and sources within each affected classification, and their relative stringency, both as applied and as written
9. The date of the analyses and the name, title and position of the person(s) who performed or participated in the comparative analyses

Employers are encouraged to refer to the MHPAEA Self-Compliance Tool, which is accessible on the DOL website, for guidance related to these NQTL requirements and the necessary analyses process. In particular, the Self-Compliance Tool outlines four steps that plans should take to assess their compliance with MHPAEA for NQTLs. The FAQs indicate that plans that have followed the guidance in the Self-Compliance Tool should be well prepared to satisfy a comparative analyses request.

Plans should also be prepared to provide applicable supporting documentation, such as claims processing policies and procedures, referenced studies or internal testing results.

In the near term, the DOL expects to focus on the following NQTLs in its enforcement efforts:

1. Prior authorization requirements for in-network and out-of-network inpatient services
2. Concurrent review for in-network and out-of-network inpatient and outpatient services
3. Standards for provider admission to participate in a network, including reimbursement rates
4. Out-of-network reimbursement rates (plan methods for determining usual, customary and reasonable charges)

However, the guidance makes clear that a review, once initiated, may not necessarily be limited to these particular NQTLs. Additionally, a comparative analysis may be requested if the Departments become aware of potential MHPAEA NQTL violations or complaints.

If a plan’s submission of a comparative analysis results in a determination that the plan is not in compliance with the MHPAEA, the plan would be required to submit additional comparative analyses that demonstrate compliance within 45 days. If the Departments make a final determination that the plan is still not in compliance following the 45-day corrective action period, all enrollees would need to be notified within seven days. In addition, the compliance findings would be shared with the state where the group health plan is located.

The FAQs also confirm that the comparative analyses and other applicable information should be made available to ERISA plan participants, beneficiaries and enrollees upon request. Additionally, in the event of a claim appeal, a participant’s right to documents and information would include the MHPAEA analyses and related materials, if relevant to the adverse benefit determination.

Employers that sponsor plans offering MH/SUD benefits should be aware of the enhanced MHPAEA compliance obligations imposed by the CAA and this related guidance. These employers should ensure that NQTL comparative analysis is performed and documented for each NQTL under their plans and be prepared to provide the required comparative analyses upon request. Consultation with carriers and/or TPAs will likely be necessary to verify and coordinate the necessary data to complete the analyses. Employers should refer to the DOL MHPAEA Self-Compliance Tool and consult with counsel for further guidance.

FAQS About Mental Health and Substance Use Disorder Parity Implementation and the Consolidated Appropriations Act, 2021 Part 45 »

Source: NFP BenefitsPartners

On April 7, 2021, the DOL issued guidance regarding the COBRA subsidy provisions under the American Rescue Plan Act of 2021 (ARPA). As a reminder, the ARPA allows certain individuals to elect COBRA coverage and have that COBRA coverage 100% subsidized by the federal government from April 1, 2021, to September 30, 2021. An individual must have experienced a reduction of hours or termination of their employment (other than by reason of such employee’s gross misconduct) in order to apply this subsidy. These individuals are referred to as Assistance Eligible Individuals or AEIs. A person who voluntarily terminates their employment is not eligible for this subsidy. The DOL’s guidance includes a series of FAQs, model notices and related information.

FAQs

The DOL provides 22 FAQs that regarding implementation of the COBRA requirements under ARPA. The topics addressed by the FAQs are as follows:

*FAQs 1 – 6: general information
*FAQs 7 – 9: premiums
*FAQs 10 – 12: notices
*FAQs 13 – 21: individual questions for employees and their families
*FAQ 22 (mis-numbered Q21): additional information

Several of the questions provide clarification of ARPA. According to FAQ number 2, premium subsidy provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules. They also apply to plans sponsored by state or local governments subject to the continuation provisions under the Public Health Service Act. Premium subsidies are also available for group health insurance required under state mini-COBRA laws.

FAQ number 3 clarifies who is an AEI. In addition to those individuals who experienced a termination of employment (except for those who voluntarily terminated), an individual appears to be an AEI if they experience a reduction of hours, regardless of whether such a reduction is voluntary or involuntary. Examples of a “reduction of hours” include any temporary leaves of absence, an individual’s participation in a lawful labor strike and appears to include medical leave that does not result in the termination of the individual’s employment. If an individual is eligible through a spouse’s plan, then they are not an AEI. An individual is an AEI if they are on Medicaid or a marketplace/exchange plan. However, those who enroll in COBRA continuation with premium assistance will not be eligible for a premium tax credit on the exchange.

FAQ number 10 highlights an important caveat concerning eligibility for premium subsidies: individuals are not AEIs if their maximum COBRA continuation coverage period (if COBRA had been elected or not discontinued) would have ended before April 1, 2021. According to the FAQ, this generally means the COBRA subsidies will not apply to those individuals with applicable qualifying events before October 1, 2019.

The FAQs also clarify issues surrounding enrollment. Note that employers have until May 31, 2021, to provide notice to AEIs of their right to elect COBRA and receive subsidies under the ARPA. According to FAQ number 10, regular rules regarding COBRA notice distribution apply, including distribution by email. FAQ number 13 states that AEIs have 60 days from receipt of the notice to elect COBRA or they forfeit their right to elect COBRA subsidies. FAQ number 5 states that AEIs can choose to have prospective coverage from the date of election or, if they have a qualifying event on or before April 1, retroactive coverage to April 1. FAQ number 16 states that qualified beneficiaries who didn’t independently elect may do so now. Further, individuals who believe that they qualify for premium assistance need to complete and submit a form entitled Request for Treatment as an Assistance Eligible Individual, as well as an election form. And FAQ number 4 states that individuals may have a special enrollment period on the exchange after the subsidy ends.

The last major topic covered by the FAQs concerns enforcement of these requirements. According to both FAQ number 10 and FAQ number 12, employers who violate COBRA rules (including the requirement to offer a COBRA election and subsidies under the ARPA) could be subject to penalties equal to $100 per qualified beneficiary or $200 per family for every day that the employer violates COBRA rules. If individuals believe that they have not received an offer of COBRA due to them, then they are advised to contact the DOL.

FAQs »

Model Notices

The DOL also published four model notices: a “General Notice,” an “Alternative Notice,” a “Notice in Connection with Extended Election Periods” and a “Notice of Expiration of Period of Premium Assistance.”

The General Notice should be provided to all individuals who experience a qualifying event from April 1, 2021, through September 30, 2021. It includes information related to the premium assistance, and other rights and obligations under the ARPA, as well as all of the information required in an election notice. It also includes information on the health insurance marketplace, Medicaid and Medicare. The General Notice satisfies existing requirements for the content of a standard COBRA election notice as well as those required by the ARPA.

The Alternative Notice must be sent by issuers that offer group health insurance coverage subject to continuation coverage requirements imposed by state law that differ from those imposed by federal law (e.g., employers with fewer than 20 employees may be covered by certain state healthcare continuation laws). The Alternative Notice must be provided to all qualified beneficiaries, not just covered employees, who have experienced a qualifying event at any time from April 1, 2021, through September 30, 2021, regardless of the type of qualifying event. The Alternative Notice serves as a template that can be modified for each state’s requirements.

The Notice in Connection with Extended Election Periods must be distributed to AEIs (or any individual who would be an AEI if a COBRA continuation coverage election were in effect) who became entitled to elect COBRA continuation coverage before April 1, 2021. This notice covers the rights of AEIs to elect COBRA coverage as discussed above and provides them with the forms necessary to do so.

The Notice of Expiration of Period of Premium Assistance must be provided 15 – 45 days before the date of expiration of premium assistance and informs AEIs of the expiration and the date that the subsidies will expire. This notice must also provide information concerning eligibility for coverage without any premium assistance through either COBRA continuation coverage or coverage under a group health plan. This notice is not required if an AEI becomes eligible under a group health plan (excluding excepted benefits, a QSEHRA or a health FSA) or for Medicare. This notice may note that the individual and any covered dependents may be eligible for a special enrollment period to enroll in individual market health insurance coverage.

In addition to the specific requirements of each notice, the General Notice, the Alternative Notice and the Notice in Connection with Extended Election Periods must include the following information:

*A prominent description of the availability of premium assistance, including any conditions on the entitlement.
*A form to request treatment as an “Assistance Eligible Individual” (as discussed above).
*The name, address and telephone number of the plan administrator (and any other person with relevant information about the premium assistance).
*A description of the obligation of individuals paying reduced premiums who become eligible for other coverage to notify the plan and the penalty for failing to meet this obligation.
*A description of the opportunity to switch coverage options, if applicable.

The DOL also provided a PDF summarizing the COBRA premium assistance provisions of the ARPA, which includes the forms necessary to request treatment as an AEI.

Model Notices »
Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 »

Related Materials

In addition to the FAQs and model notices, the DOL also linked to a number of publications that provide information on COBRA, retirement and health benefits for dislocated workers and those experiencing job loss, and HHS guidance on the ARPA.

Employers should familiarize themselves with this guidance as they prepare to comply with the ARPA COBRA provisions. The Benefits Compliance team expects that the federal government will provide more guidance in the coming weeks. We will continue to analyze subsequent guidance and provide resources to explain the continued developments.

COBRA Premium Subsidy Webpage »

Source: NFP BenefitsPartners

In response to the COVID-19 public health emergency, the federal health insurance marketplace (Healthcare.gov) is accepting new enrollments in a special enrollment period (SEP) from February 15, 2021, through August 15, 2021. On March 23, 2021, CMS issued guidance on this opportunity in the form of frequently asked questions. (The extension was lengthened from the previously set extension to May 15, 2021.) This enrollment opportunity is open to anyone who is in a state that utilizes the federal marketplace and is otherwise eligible to purchase coverage. States that operate their own public marketplace may adopt a similar SEP, but they are not required to do so.

During this time, an individual is not required to have a recent loss of coverage or other triggering event (such as loss of employment-based coverage or marriage). It is considered an open enrollment period. The coverage will be effective on the first of the month after application submission and plan selection. If the individual has a special enrollment event that would permit retroactive coverage (birth, adoption, placement for foster care or pursuant to a court order), they must indicate such on the application.

If an individual is offered coverage through an employer that is considered affordable and meets the minimum value standard or if the individual is enrolled in employer coverage (regardless of affordability), the individual may still enroll in marketplace coverage, but they would not be eligible for a premium tax credit. As a reminder, employees can only drop employer coverage offered through a Section 125 cafeteria plan if they experience a qualifying event. The intended enrollment in marketplace coverage is an optional qualifying event permitting an employee to drop coverage mid-year, if the employer’s Section 125 Cafeteria Plan Document allows for such changes.

Although this guidance affects individuals who may enroll in the marketplace, employers should be mindful of this extension.

HHS News Release »
CMS SEP Guidance »

On February 22, 2021, the United States Court of Appeals for the Tenth Circuit (the appellate court) ruled in Carlile v. Reliance Standard Life, et.al that an employee was entitled to long-term disability benefits, even though he was on notice of his termination and on short-term disability when he requested them. The employer provided the employee with a 90-day notice of termination (“notice period”) and did not require him to work during that time. The employee came to work during the notice period, but he was diagnosed with cancer. He requested and received a short-term disability benefit during the notice period. When the short-term disability was set to expire, the employee requested a long-term disability benefit. The carrier that provided benefits on behalf of the employer denied this request, because he was no longer an active employee, since he was under a notice of termination and not working over 30 hours per week, and therefore no longer eligible for benefits under the terms of the plan.

The employee took the carrier to court, alleging that it denied his claim for long-term disability in violation of ERISA. The trial court found that the term “active” in the plan documents was ambiguous and ruled in favor of the employee. The carrier appealed, asserting that the plan’s definition of “full-time,” that someone must work at least 30 hours during a regular work week, was sufficient to determine whether someone is “active” for this purpose.

However, the appellate court agreed with the trial court, pointing out that in the absence of a specific definition in the plan, the term “active” could be interpreted broadly enough to include employees who worked any number of hours, if they worked. In addition, the employee worked during the notice period, was paid for that work, and was considered a full-time employee during that time. Since the term “active” was not so defined as to exclude employees who did not work 30 hours a week, the appellate court determined that it was ambiguous and ruled in favor of the employee.

Since the ruling came from a federal appeals court, it is possible that the matter will be appealed to the Supreme Court, so this may not be the final word on the matter. However, employers should be aware of the danger of ambiguous terms in their plan documents and should consider consulting with counsel or plan document drafters in order to determine whether important terms are clear and unambiguous.

Carlile v. Reliance Standard Life, et al »

Source: NFP BenefitsPartners