Fitness Wearables: Are They Just a Shiny Penny in Employee Wellness?

Fitness wearables are hot right now—from trackers to watches to smart clothing from Ralph Lauren—it seems everyone wants to be part of the fitness wearables party. According to recent research, the wearables market keeps growing for both employers and consumers. 

Consider the facts:

• 1 in 10 Americans over the age of 18 owns a fitness tracker
• 46% of employers in a recent survey said they offer fitness trackers as part of their employee wellness programs
• By 2018, employers will integrate more than 13 million wearables into their employee wellness programs
• 41% of employers plan to spend more on technology in 2015—including wearable wellness technology
• More than 171 million wearable devices will be shipped in 2016, up from 14 million shipped in 2011

There are plenty of reasons consumers—including your employees—are embracing fitness wearables:

• Easy to use. Wearables make it fun and simple for employees to put their everyday routine to work toward their health and wellness goals.
• Saves time. Wearables can be a great fit for employees who have little time to track their health behaviors.
• Reinforces behavior change. Fitness wearables make it easy for employees to track changes in their health and monitor their progress.
• Fosters social connection. Wearables link participants to an online community of health—whether it is connecting with co-workers, friends or family.

While it’s clear that wearables have sparked an interest in employee health and wellness, do fitness trackers and wearables result in long-term behavior change for the individuals that wear them?

If you provide fitness trackers to your employees—or if you own a tracker yourself—you may know the excitement of wearing it the first day. Employees feel “cool,” tracking their steps and competing with their co-workers to keep them motivated. But when—and if—the fun factor wears off, some may lose interest.

Even the hottest fitness trackers fall victim to the “shiny penny syndrome,” where employees—and employers—are easily attracted to newest, latest and greatest tool only to lose interest when the next “shiny penny” comes along.

How long does interest in fitness wearables typically last? Just six months, according to a report from Endeavour Partners. The report states that after six months of use, one-third of consumers stop using their fitness wearable devices. And more than half of Americans who have owned a wearable activity tracker no longer use it.

When integrated into a corporate wellness strategy, wearables can make it easier for participants to track changes in their health and monitor their progress. And for some participants, wearable devices can serve as a critical spark to engage them in a journey towards better health.

However, research from the Journal of the American Medical Association shows that wearables alone cannot induce sustainable behavior change, but are best used as tools to support behavior change and to help people feel connected.

Creating an environment to make healthy choices easy for employees is equally important to improve employee health outcomes as the programs and services used to spark initial change.

Reminder: Medicare Part D Creditable Coverage Notice

Employers must provide a creditable or non-creditable coverage notice at least once a year to all Medicare eligible individuals who are covered under, or who apply for, the group’s prescription drug plan. This notice must be provided to both active employees and retirees who are eligible for Medicare Part D.

The Medicare Modernization Act mandates that all employers offering prescription drug coverage disclose to all Medicare eligible individuals with prescription drug coverage under the plan whether the coverage is “creditable”. This information is essential to the Medicare eligible’s decision whether to enroll in a Medicare Part D prescription drug plan.

Employers are required by the Centers for Medicare and Medicaid Services (CMS) to provide creditable coverage at least once a year and at the following times:

• Prior to the Medicare Part D Election Period beginning October 15th of each year
• Prior to the individual’s initial enrollment period
• Prior to the effective date of coverage for any Medicare-eligible individual that joins your plan
• Whenever prescription drug coverage ends or changes

This notice does not need to be a separate mailing and can be included with other plan information materials either printed or electronic. Employers are required to provide this notice and to provide CMS with your plan’s creditable or non-creditable coverage status annually via online form within 60 days of the beginning of each plan year.

Please contact our office for assistance in determining if your prescription drug plan is considered creditable or non-creditable coverage or if you need a copy of the model notice for employees.

Mandatory Florida Posting Change

The State of Florida has updated its Discrimination poster to include pregnancy as a protected class. The state’s Civil Rights Act was amended earlier this year to prohibit discrimination on the basis of pregnancy. This amended law took effect July 1st and you are required to post this revised notice. Be sure to check your postings to make sure you have the updated notice posted. Please contact out office if you need a copy of the updated notice.

EEOC Report 1 Due by September 30th

If you employed more than 100 people in the preceding calendar year, you are required to complete and submit your EEOC Report 1 (Survey) by September 30th. You should have received a reminder letter via mail from the EEOC in August also with the link to file the report online.

Please contact our office for information about the EEOC Report 1 or for the link to the EEOC’s web based filing system.

The EEOC Goes Electronic: FAQs on the EEOC’s New Electronic Pilot Program

Courtesy of Fisher & Phillips LLP

The Equal Employment Opportunity Commission (EEOC) recently rolled out a pilot program to electronically notify employers of new charges filed against them. Instead of mailing the Notice of Charge of Discrimination form through conventional means, the EEOC is rolling out a new system that will notify an employer of a pending charge and allow an employer to respond to the charge through an online portal.

This new system is catching a lot of employers by surprise, and has resulted in many questions. Fisher & Phillips has developed a list of Frequently Asked Questions to aid employers in understanding this new pilot program.

What is this new system?
The EEOC is piloting a new electronic system involving an online portal called ACT Digital. If a new Charge of Discrimination is filed against you, the EEOC will email you notice of the new Charge and invite you to download a copy through the portal. 

Phase I of the project only allows employers a channel of communication with the EEOC about the Charge. Charging Parties are not yet allowed electronic access. In this first phase, upon consenting to certain terms and conditions, you are able to:

• view and download the Charge;
• review an invitation to mediate and respond accordingly;
• submit a Position Statement to the EEOC; and
• provide or verify company contact information, including the designation of a legal representative.

The EEOC has indicated that employers will also be able to use ACT Digital to communicate with the EEOC regarding extensions, inquiries, and other Charge-related issues. It seems this option may already be operational in some EEOC offices.

Where is the EEOC implementing ACT Digital?
The EEOC is rolling out ACT Digital in waves. The first wave began in early May 2015 and included EEOC offices in San Francisco and Charlotte. Earlier this summer, the EEOC released the program in a second wave of offices, which included Denver, Detroit, Indianapolis, and Phoenix. The EEOC’s goal is to implement ACT Digital in all of its 53 offices by October 2015.

How will we first receive notice?
The EEOC will send an email containing a Charge notification to an employer’s representative. The EEOC might obtain this email address from the Charging Party, or may obtain it from past email communications with those businesses already in the EEOC’s system.

Note that this could result in a manager or supervisor receiving notice of a Charge outside his or her own department or area. We are still checking to see if the EEOC will allow employers to proactively designate an email address where all notices to the company should be sent.

Must employers use this system?
This is the most common question we’ve received so far. The short answer is no – for now. Employers are currently not required to use ACT Digital during the pilot period of implementation. Note that if you do respond to the initial email, you may be creating an obligation to use the system going forward, thereby limiting your position with regard to how the Charge is handled.

However, the EEOC is transitioning to an entirely electronic format and, as a practical matter, all employers will likely be required to use this electronic system in the future.

What if the notification email is blocked by a firewall or spam folder?
The EEOC’s notification procedure includes some “fail-safes” to ensure you do not miss notifications of pending Charges. For example, the EEOC may send a hard copy of the Charge if the online portal is not accessed by the employer within approximately 10 days after the notice email is sent.

Can the Charge be viewed by the public?
No, with one exception. Each Charge has a unique portal access that you will use for the life of the case. Therefore, only people with access through the unique portal address will be able to access ACT Digital to view the Charge and your Position Statement. At this time, even the Charging Party does not have access to the online portal.

The one exception – which has always been the case – is that the public may request Charge files under the Freedom of Information Act (FOIA). The EEOC has stated that it will continue to follow its current protocols and federal regulations in responding to FOIA requests (which typically do not allow for access to the Charge while the matter is pending).

Similarly, the unique portals will close after a period of time. We do not know for sure, but it is believed the portals will be deactivated 90 to 100 days after the EEOC closes the file. Because the portals expire, you should download and retain all necessary files and documents related to the Charge if they use the electronic system.

Will state human affairs commissions use ACT Digital?
At this time, the EEOC has not indicated whether state human affairs commissions will be utilizing the ACT Digital system.

What will Phase II look like?
The EEOC has released very little information about Phase II and any speculation as to what is in the pipeline is just that – speculation. With that caveat, there are a few likely next moves.

We expect the EEOC will open the portal to Charging Parties so they may file and monitor their Charges online. It is unknown, however, whether the portals will be kept separate or combined. In the future, the EEOC may also maintain a database of the employer’s prior Charges, as opposed to deactivating the portal.

What should we do immediately?
Because you could receive notice of a new Charge tomorrow, you should instruct all of your supervisors and managers today to immediately contact the HR department or in-house counsel if they get an email from the EEOC. Just as in the past you instructed them to forward on any hard copy EEOC Charge received in the mail, the same rule should apply for electronic notices.

You should take it one step further in this digital age: counsel your managers not only to forward on EEOC emails to proper company channels without responding, but also to refrain from downloading the Charge or even clicking anywhere on the email.

Phase I of the ACT Digital rollout should not drastically affect how you respond to EEOC Charges. In fact, it might make communication with the EEOC easier. As additional phases are rolled out, however, this could change. Stay tuned for more updates.

Do you want to learn more?

Fisher & Phillips LLP is hosting a free, 20-minute webinar on this subject on Thursday, September 10, 2015, at 12:00pm EST. You can register for “EEOC Goes Electronic: FAQs On EEOC’s New Electronic Pilot Program” by visiting their website (www.laborlawyers.com) and looking under the “Events” tab.

Bill Increases Penalties for IRS Reporting Failures including ACA

In July 2015, President Obama signed into law the Trade Preferences Extension Act of 2015. Included in the bill was an important provision that affects welfare and retirement benefit plans. The Act sizably increases filing penalties for information return and statement failures under the Internal Revenue Code, effective for filings after December 31,2015. Employers now face significantly larger penalties for failing to correctly file and furnish the ACA forms 1094 and 1095 (shared responsibility reporting requirements) as well as Forms W-2 and 1099-R. 

Background

Sections 6721 and 6722 of the IRC impose penalties associated with failures to file- or to file correct- information returns and statements. Section 6721 applies to the returns required to be filed with the IRS, and Section 6722 applies to statements required to be provided generally to employees.These penalty provisions apply to the ACA shared responsibility reporting Forms 1094-B, 1094-C, 1095-B, and 1095-C (Sections 6055 & 6056) failures as well as other information returns and statement failures, like those on Forms W-2 and 1099.

For ACA:

• Section 6055 reporting supports IRS enforcement of the individual mandate
  
• Section 6056 reporting supports IRS enforcement of the employer mandate and low-income subsidies for coverage purchased in the public marketplace.

The Sections 6055 & 6056 reporting requirements are effective for medical coverage provided on or after January 1, 2015, with the first information returns to be filed with the IRS by February 29, 2016 (or March 31,2016 if filing electronically) and provided to individuals by February 1, 2016. 

Increase in Penalties

The Trade Preferences Extension Act of 2015 (Act) contains several tax provisions in addition to the trade measures that were the focus of the bill. Provided as a revenue offset provision, the law significantly increases the penalty amounts under Sections 6721 and 6722. A failure includes failing to file or furnish information returns or statements by the due date, failing to provide all required information, as well as failing to provide correct information. 

The law increases the penalty for:

• General failures- from $100 to $250 per return and increases the annual cap on penalties from $1.5 million to $3 million. 
  
• Intentional failures- from $250 to $500 per return with no annual cap on penalties

Other penalty increase also apply, including those associated with timely filing a corrected return. Penalties could also provide a one-two punch under the ACA for employers and other responsible entities. For example, under Sec 6056, applicable large employers (ALE) must file information returns to the IRS (the 1094-B and 1094-C) as well as furnish statements to employees (the 1095-B and 1095-C). So incorrect information shared on those forms could result in a double penalty- one associated with the information return to the IRS and the other associated with individual statements to employees. 

Final regulations on the ACA reporting requirements provide short-term relief from these penalties. For reports files in 2016 (for 2015 calendar year info), the IRS will not impose penalties on ALE members that can show they made a “good-faith effort” to comply with the information reporting requirements. Specifically, relief is provided for incorrect or incomplete info reported on the return or statement, including Social Security numbers, but not for failing to file timely.

Case Study: Company Hit with Largest I-9 Penalties to Date

Failure to thoroughly complete I-9 paperwork has left an event-planning company with a fine of $605,250 (the largest amount ever ordered) serving as a reminder that employers need to be taking I-9 compliance very seriously.

On July 8, 2015, the Office of the Chief Administrative Hearing Officer (OCAHO), which has jurisdiction to review civil penalties for I-9 violations, ordered Hartmann Studios to pay the fine for more than 800 I-9 paperwork violations.

Immigration and Customs Enforcement (ICE) audited the company in March 2011.

The bulk of the violations charged against Hartmann were due to a repeated failure to sign section 2 of the I-9 form. Employers are required to complete and sign section 2 within three business days of a hire, attesting under penalty of perjury that the appropriate verification and employment authorization documents have been reviewed.

ICE found 797 I-9s where section 2 was incomplete. About half of these incomplete forms related to individuals from the International Alliance of Theatrical Stage Employees Union Local 16A, who worked for Hartmann on a project-by-project basis during the term of a collective bargaining agreement. Even though the union workers worked on a project-by-project basis, they were not terminated upon completion of a project and remained “on-call.” The union created a “three-in-one” form that combined a portion of a W-4 form, parts of sections 1 and 2 of an I-9 form, and a withholding authorization for union dues. No separate I-9 form was completed for these workers nor did Hartmann sign section 2 of the union form.

Hartmann could have been charged with the more-substantive offense of having failed to prepare any I-9 form at all for the 399 union members, because the union’s form is not compliant, but OCAHO declined to do so.

Hartmann told OCAHO it believed that the union form was sufficient to confirm that the workers had proper employment authorization, and that nothing further needed to be done to confirm their eligibility for employment. The company also said that it did not know signing section 2 of the form was a legal requirement. 

In addition to failing to sign section 2, Hartmann was also cited for:

• Failure to fill out any I-9 form at all for four individuals.
• Failure to locate the I-9 forms for eight individuals at the time of the     inspection.
• Failure to ensure that three workers checked a box in section 1 indicating immigration status.
• Failure to ensure that two workers signed section 1.
• Failure to ensure that two workers entered their alien numbers on the form.
• Missing List A, B and C documents.

This case demonstrates the need for employers to conduct routine self-audits of their I-9 inventories to ensure that the forms have been properly completed and retained and are ready for inspection.

Employers should also ensure that acceptable proof of audits and training is kept so that it may be used as evidence of good faith in court proceedings.

U.S. Department of Labor Proposes to Restrict Scope of FLSA ‘White-Collar’ Overtime Exemptions

After more than 15 months of waiting, the U.S. Department of Labor has issued a Notice of Proposed Rulemaking (“NPRM”) announcing the Department’s intention to shrink dramatically the pool of employees who qualify for exempt status under the Fair Labor Standards Act.

The 295-page NPRM, released June 30, contains a few specific changes to existing DOL regulations: more than doubling the salary threshold for the executive, administrative, and professional exemptions from $455 a week currently to $921 a week (with a plan to increase that number to $970 a week in the final version of the regulation), as well as raising the pay thresholds for certain other exemptions, and building in room for future annual increases. More ominously, the Department invites comment on a host of other issues. This opens the door to many further significant revisions to the regulations in a Final Rule after the Department reviews the public’s comments to the NPRM.

Background

On March 13, 2014, President Obama directed the Secretary of Labor to modernize and streamline the existing overtime regulations for exempt executive, administrative, and professional employees. He said the compensation paid to these employees has not kept pace with America’s economy since the Department last revised regulations in 2004. The President noted that the minimum annual salary level for these exempt classifications under the 2004 regulations is $23,660, which is below the poverty line for a family of four.

Since the President issued his memo, the Department has held meetings with a variety of stakeholders, including employers, workers, trade associations, and other advocates. The Department has raised questions about how the current regulations work and how they can be improved. The discussions have focused on the compensation levels for the exempt classifications as well as the duties required to qualify for exempt status.

The NPRM

The NPRM expressed the Department’s intention to increase the salary threshold for the white-collar exemptions from $455 a week (or $23,660 a year) to $921 a week ($47,892 a year), which the Department expects to revise to $970 a week ($50,440 a year in 2016) when it issues its Final Rule. Under this single change to the regulations, it is estimated that 4.6 million currently exempt employees would lose their exemption right away, with another 500,000 to 1 million currently exempt employees losing exempt status over the next 10 years as a result of the automatic increases to the salary threshold.

The NPRM acknowledges that roughly 25% of all employees currently exempt and subject to the salary basis requirement will be rendered non-exempt under the proposed regs. The Department recognizes that employers are likely to reduce the working hours of currently exempt employees reclassified as a result of these regulations, and that the reduction in hours will probably lead to lower overall pay for these employees.

Related changes in the regs include increasing the annual compensation threshold for exempt highly compensated employees from the present level of $100,000 to a proposed $122,148, as well as raising the exemption threshold for the motion picture producing industry from the present $695 a week to a proposed $1,404 a week for employees compensated on a day-rate basis.

Perhaps not surprisingly, given the likely impact of the proposal, almost all of the NPRM is devoted to economic analysis and justification for the steep increase in the salary thresholds. Nevertheless, the NPRM touches on some other topics as well. The Department states that it is considering, and invites comment on, a wide range of topics, including:

• Whether to allow nondiscretionary bonuses to satisfy some portion of the required salary level (the Department suggests up to 10%), including the appropriate frequency of such bonuses (the Department suggests not less than monthly);
• Whether to allow commissions to satisfy some portion of the required salary level;
• Whether to modify the current duties tests for exempt status, including the “primary duty” standard, by such means as:
• Adopting the California model requiring that exempt employees spend more than half of their working time on exempt tasks;
• Placing quantitative limits on the amount of time exempt employees may spend on non-exempt duties; or
• Modifying or eliminating the concept of concurrent duties whereby exempt employees can maintain exempt status when performing exempt and non-exempt activity simultaneously; and
• The best way to determine annual updates to the salary levels in the regulations.

What Comes Next?

The proposed regulations are subject to a 30-day public comment period. Now is the time for any employer or trade association dissatisfied with the proposed regulatory text, or concerned about changes the Department is weighing for inclusion in a Final Rule, to submit comments. The Department has put the regulated public on notice: it is considering sweeping changes to the regulations not described specifically in the proposed regulatory text, such as altering the duties tests for exempt status. Employers may not have another opportunity to comment on the content of a Final Rule.

Following the public comment period, the Department will issue a Final Rule that may add, change, delete, or affirm the regulatory text of the proposal. The Office of Management and Budget will review the Final Rule before publication. This process is likely to take at least six to eight months. A Final Rule is not expected before 2016.

Same Sex Marriage Rights Extended Nationwide

The Supreme Court left one of its most high-profile decisions for the end of its term, holding today by a 5-4 vote that the Constitution requires states to recognize same-sex marriage. As a result, state bans against same-sex marriage are no longer permissible and all states are required to recognize same-sex marriages that take place in other states. Employers should update their FMLA policies and benefit plans to provide the same coverage for same-sex married couples as for other married couples. Obergefell v. Hodges.

Background
In 2013, the U.S. Supreme Court ruled that Section 3 of the Federal Defense of Marriage Act (DOMA), which essentially barred same-sex married couples from being recognized as “spouses” for purposes of federal laws, violated the Fifth Amendment (United States v. Windsor). On the heels of that case, same-sex couples sued their relevant state agencies in Ohio, Michigan, Kentucky, and Tennessee to challenge the constitutionality of those states’ same-sex marriage bans, as well as their refusal to recognize legal same-sex marriages that occurred in other jurisdictions.

For instance, the named plaintiff, James Obergefell, married a man named John Arthur in Maryland. Arthur died a few months later in Ohio where the couple lived, but Obergefell did not appear on his death certificate as his “spouse” because Ohio does not recognize same-sex marriage.  Similarly, Army Reserve Sergeant First Class Ijpe DeKoe married Thomas Kostura in New York, which permits same-sex marriage.  When Sgt. DeKoe returned from Afghanistan, the couple moved to Tennessee, but that state refused to recognize their marriage. 

The plaintiffs in each case argued that the states’ refusal to recognize their same-sex marriages violated the Equal Protection Clause and Due Process Clause of the Fourteenth Amendment. In all the cases, the trial court found in favor of the plaintiffs. The U.S. Court of Appeals for the Sixth Circuit reversed and held that states’ bans on same-sex marriage and refusal to recognize marriages performed in other states did not violate Fourteenth Amendment rights to equal protection and due process.

The Supreme Court accepted review of the controversy, focusing its analysis on whether the Constitution requires all states to recognize same-sex marriage, and whether it requires a state which refuses to recognize same-sex marriage to nevertheless recognize same-sex marriages entered into in other states where such unions are permitted. 

Same-Sex Marriage Is Guaranteed By The Constitution
In its ruling today, the Supreme Court sided with the plaintiffs and held that marriage is a fundamental right; as such, same-sex couples cannot be deprived of that right pursuant to the Due Process and Equal Protection Clauses of the Fourteenth Amendment. 

Practical Impact On Employers: FMLA Policies and Benefit Documents Must Be Updated  
Following Windsor, the Department of Labor issued a Final Rule revising FMLA’s definition of “spouse” to ensure that same-sex married couples receive FMLA rights and protections without regard to where they reside. Specifically, the DOL’s Final Rule adopts a “place of celebration” rule, meaning that when defining a spouse under the FMLA, it refers “to the other person with whom an individual entered into marriage as defined or recognized under state law for purposes of marriage in the State in which the marriage was entered into or, in the case of a marriage entered into outside of any State, if the marriage is valid in the place where entered into and could have been entered into in at least one State.” In other words, this broad interpretation was intended to ensure that FMLA coverage existed for same-sex couples even in states where same-sex marriage was banned.

The Final Rule had been temporarily enjoined in Texas, Arkansas, Louisiana, and Nebraska by a federal judge who ruled that the DOL did not have the authority to change the definition of “spouse,” and that the change “improperly preempts state law forbidding the recognition of same-sex marriages for the purpose of state-given benefits.” That litigation was on hold pending the outcome of this case. The Supreme Court’s decision in Obergefell paves the way for the Final Rule to go into effect, which means that employers should update their FMLA policies accordingly.

Additionally, employers should review their benefit offerings and consider the impact this decision has on employees who are in same-sex marriages. 

Ironically, the Obergefell decision does not change the fact that sexual orientation is still not a protected class under federal law for employment law purposes. Although many states and municipalities protect against discrimination on the basis of sexual orientation, the proposed amendment to Title VII of the Civil Rights Act of 1964 remains in limbo.

What the Supreme Court’s Decision on Affordable Care Act Subsidies Means for Employers

In a 6-3 decision handed down June 25th by the U.S. Supreme Court, the IRS was authorized to issue regulations extending health insurance subsidies to coverage purchased through health insurance exchanges run by the federal government or a state (King v. Burwell, No. 14-114 ).

This means employers cannot avoid employer shared responsibility penalties under IRC section 4980H (“Code § 4980H”) with respect to an employee solely because the employee obtained subsidized exchange coverage in a state that has a health insurance exchange set up by the federal government instead of by the state. It also means that President Barack Obama’s 2010 health care reform law will not be unraveled by the Supreme Court’s decision in this case. The law’s requirements applicable to employers and group health plans continue to apply without change.

What Was the Case About?

IRC section 36B (“Code § 36B”), created by the Patient Protection and Affordable Care Act of 2010 (“ACA”), provides that an individual who buys health insurance “through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act” (emphasis added) generally is entitled to subsidies unless the individual’s income is too high. Thus, the words of the statute conditioned one’s right to an exchange subsidy on one’s purchase of ACA coverage in a state run exchange.

Since 2014, an individual who fails to maintain health insurance for any month generally is subject to a tax penalty unless the individual can show that no affordable coverage was available. The law defines affordability for this purpose in such a way that, without a subsidy, health insurance would be unaffordable for most people.

The plaintiffs in King, residents of one of the 34 states that did not establish a state run health insurance exchange argued that if subsidies were not available to them, no health insurance coverage would be affordable for them and they would not be required to pay a penalty for failing to maintain health insurance. The IRS, however, made subsidized federal exchange coverage available to them similar to coverage in a state run exchange.

It is ACA § 1311 that established the funding and other incentives for “the States” to each establish a state-run exchange through which residents of the state could buy health insurance. Section 1311 also provides that the Secretary of the Treasury will appropriate funds to “make available to each State” and that the “State shall use amounts awarded for activities (including planning activities) related to establishing an American Health Benefit Exchange.” Section 1311 describes an “American Health Benefit Exchange” as follows:

Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an “Exchange”) for the State that (A) facilitates the purchase of qualified health plans; (B) provides for the establishment of a Small Business Health Options Program and © meets [specific requirements enumerated].

An entirely separate section of the ACA provides for the establishment of a federally-run exchange for individuals to buy health insurance if they reside in a state that does not establish a 1311 exchange. That section – ACA § 1321 – withholds funding from a state that has failed to establish a 1311 exchange.

Notwithstanding the statutory language Congress used in the ACA (i.e., literally conditioning an individual’s eligibility subsidized exchange coverage on the purchase of health insurance through a state’s 1311 exchange), the Supreme Court determined that the language is ambiguous. Having found that the text is ambiguous, the Court stated that it must determine what Congress really meant by considering the language in context and with a view to the placement of the words in the overall statutory scheme.

When viewed in this context, the Court concluded that the plain language could not be what Congress actually meant, as such interpretation would destabilize the individual insurance market in those states with a federal exchange and likely create the “death spirals” the ACA was designed to avoid. The Court reasoned that Congress could not have intended to delegate to the IRS the authority to determine whether subsidies would be available only on state run exchanges because the issue is of such deep economic and political significance. The Court further noted that “had Congress wished to assign that question to an agency, it surely would have done so expressly” and “[i]t is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort.”

What Now?

Regardless of whether one agrees with the Supreme Court’s King decision, the decision prevents any practical purpose for further discussion about whether the IRS had authority to extend taxpayer subsidies to individuals who buy health insurance coverage on federal exchanges.

The ACA’s next major compliance requirements for employers: Employers with fifty or more fulltime and fulltime equivalent employees need to ensure that they are tracking hours of service and are otherwise prepared to meet the large employer reporting requirements for 2015 (due in early 2016) ). Employers of any size that sponsor self-funded group health plans need to ensure that they are prepared to meet the health plan reporting requirements for 2015 (also due in early 2016). All employers that sponsor group health plans also should be considering whether and to what extent the so-called Cadillac tax could apply beginning in 2018.