"Baby UI" paid leave program repealed. The Department of Labor issued a final rule removing the Birth and Adoption Unemployment Compensation (BAA-UC) regulations. The regulations, which were sometimes called "Baby UI," permitted an experimental opportunity for states to provide, in the form of unemployment compensation, partial wage replacement for parents taking approved leave or otherwise leaving employment while caring for their newborns or newly-adopted children. The final rule repealing the BAA-UC regulations, which takes effect November 10, 2003, appeared in the October 9, 2003, Federal Register (68 FR 58,539-58, 549).

A drastic decline in many states' unemployment fund balances since the BAA-UC regulations were issued in 2000 was cited by the Labor Department, which emphasized the need for states to preserve the integrity of their unemployment funds for providing temporary income support to the involuntarily unemployed. No state has elected to participate in the BAA-UC experiment, and, therefore, terminating the experiment will not result in any state withdrawing benefits it previously granted. Each state remains free to create a paid family leave-type program using state moneys from sources other than the state's unemployment taxes deposited into its unemployment fund. Last year, California enacted a paid family leave law that is funded through an increase in employees' contributions to the state's temporary disability insurance program. 

FMLA for reservists' families. Family members of more than 166,000 National Guard and Reserve personnel could be eligible for Family and Medical Leave Act benefits under an amendment to the Iraq supplemental spending bill (S. 1689) approved by the Senate on October 17. Under the Senate-approved amendment, a family member's call to active duty would be added to the list of current FMLA-covered events, such as the birth or adoption of a child or the need to care for oneself or a family member because of a serious medical condition.

Golden parachute payment regs corrected. The Internal Revenue Service on October 14, 2003, issued corrections to regulations relating to golden parachute payments under section 280G of the Internal Revenue Code. The corrections, which appeared at 68 Federal Register 59114, primarily address date provisions. They are effective August 4, 2003, the date that the final regulations were published. 

HIPAA code sets. October 16, 2003, was the deadline for covered entities to comply with the Health Insurance Portability and Accountability Act 's electronic transaction and code sets provisions. After that date, covered entities, including health plans, may not conduct non-compliant transactions. In response to concern over the health care industry's state of readiness, the Centers for Medicare and Medicaid Services (CMS) issued contingency planning guidelines for HIPAA's EDI rules. The guidelines indicate that CMS will not impose penalties on covered entities that deploy contingencies in order to ensure the smooth flow of payments if they have made reasonable and diligent efforts to become compliant and, in the case of health plans, to facilitate the compliance of their trading partners. 

Senate approves TRICARE Plan. The Senate unanimously approved a plan to provide National Guard and Reserve members access to the military health program, TRICARE. The amendment, by Senate Democratic Leader Thomas A. Daschle of South Dakota, and Sen. Lindsey Graham, R-S.C., is part of the 2004 Emergency Supplemental Appropriations for Iraq and Afghanistan Security and Reconstruction Act (S. 1689). Under the amendment, Guard Members and Reservists and their families would be provided access to the TRICARE system for a modest premium, said Daschle and Graham in a joint statement. Currently, Guard Members and Reservists can get TRICARE only during active duty. In the House, Rep Michael Turner, R-Ohio, introduced similar TRICARE legislation (H.R.2176) to provide limited TRICARE program eligibility for members of the Ready Reserve of the Armed Forces and to provide financial support for continuation of health insurance for mobilized members of reserve components of the Armed Forces. 

John Goheen, spokesman for the National Guard Association said the legislation is necessary because reservists need to be physically fit and up to date with their doctor visits in case they are called to duty, yet one in five lack health care coverage. Graham said during a floor speech that 30% of the Guards and Reservists called to active duty were unable to be deployed because of health care problems. 

Pre-tax deduction for health insurance. The House Government Reform Committee approved a bill on September 25 that would let federal civilian and military retirees and active duty military employees pay for their health care premiums on a pretax basis. It awaits action by the Ways and Means and Armed Services Committees before going to the House floor for a vote. The bill, HR 1231, could save retirees between $400 and $600 a year, suggested Government Reform Committee Chairman Tom Davis, R-Va. Government Reform shares jurisdiction over the bill with the Armed Services and Ways and Means Committees, which also must act on the bill before it goes to the House floor. There are no immediate plans for a markup, said a Ways and Means aide. The committee is focused on passing a prescription drug benefit for Medicare, a comprehensive energy bill and international tax reform, the aide explained. An untitled Senate version, S. 623, is currently in the Senate Finance Committee. 

Employment Law     Top of Page

Senate approves genetic nondiscrimination bill. The Senate unanimously passed a bill that would prohibit employers and insurance companies from discriminating against people based on their genetic makeup. The Senate passed the Genetic Information Nondiscrimination Act of 2003 (S.1053) by a 95-0 vote on October 14, 2003. On that same day, the Bush administration issued a statement expressing its support for the measure. If enacted, employers would be barred from using genetic information to make employment decisions, including decisions on hiring, firing, job assignments and promotions. Employers could collect genetic information from employees or their family members only in limited cases, such as to monitor the effects of toxins in the workplace. Insurers could not collect a person's genetic information prior to enrolling the person in an insurance plan or use genetic information to deny coverage or set premiums. Genetic discrimination legislation has been introduced in the past three Congresses. The bill now goes to the House. But action there could be delayed until next year since Congress is working to clear fiscal 2004 spending bills and other priority legislation before breaking for the year. 

Employee selection guidelines delayed, again. The Office of Management and Budget (OMB) has, for the eighth time since the end of 2001, approved a three-month extension of the Uniform Guidelines on Employee Selection Procedures (UGESP). In 2001, the OMB directed the Equal Employment Opportunity Commission (EEOC) to define the term "applicant," as it relates to the UGESP, especially as to its meaning in the context of electronic resumes and the use of the Internet. The EEOC is the lead agency on this issue, and is currently working with the OFCCP and other federal agencies on a new guidance. The latest OMB extension gives the agencies until the end of December 2003 to complete that task. 

HELP Committee passes job-training, unionization bills. The Senate Health, Education, Labor and Pensions (HELP) Committee on October 2 approved a bill that would require states to allow public safety employees to unionize (S. 606) and another to reauthorize the Workforce Investment Act (S. 1627). While most states extend to firefighters and police officers the right to collectively bargain, others do not. Bipartisan backers of the Workforce Investment Act reauthorization bill say it would make job-training services more efficient by streamlining performance, reporting and eligibility requirements. 

Union transparency. The Labor Department announced final rules to strengthen the financial integrity and transparency of labor unions by improving the annual financial disclosure forms filed by unions as required by the Labor-Management Reporting and Disclosure Act (LMRDA). Due to changes made in the final rule in response to public comments, only the largest unions — those with $250,000 or more in annual receipts — will be required to itemize certain receipts and disbursements of $5,000 or more on their Form LM-2 annual report. The new rules will be effective for annual financial reports for fiscal years beginning on or after January 1, 2004, although no union will have to actually file a report under the new disclosure rule until March 2005. 

And on Capital Hill, the House Education and the Workforce Subcommittee on Employer-Employee Relations approved three bills that would strengthen enforcement of union-reporting rules and give union members information about how their dues are spent. The Union Members' Right to Know Act (H.R. 992) would require unions to notify members about their rights, including information on union dues, member disciplinary procedures, and the election and removal of union officials. Unions would be required to notify new members of their rights within 90 days of joining a union. The Labor-Management Accountability Act (H.R. 993) would allow the Secretary of Labor to assess civil penalties on unions and employers that fail to file disclosure reports or that file them late. The Union Member Information Enforcement Act (H.R. 994) would authorize the labor secretary to investigate complaints from union members who claim their unions are not complying with disclosure requirements. 

Religious exemption for federal contractors. The Department of Labor's Office of Federal Contract Compliance Programs on September 30, 2003 published at 68 Federal Register 56392-56393 an amendment to the regulations implementing Executive Order 11246 to incorporate the exemption for religious entities prescribed by Executive Order 13279 (EO 13279). Executive Order 13279 exempts religious organizations that are government contractors from Executive Order 11246's bar on religious discrimination in hiring. The final rule took effect October 30, 2003.

EO Survey continues. The Office of Management and Budget (OMB) approved the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP)'s request for a two-year extension of the OMB's approval of the Equal Opportunity Survey (EO Survey) in its current form. A source at the Department of Labor confirmed to CCH that, on September 15, 2003, the OMB approved the agency's request to send approximately 10,000 EO Surveys per year in 2004 and 2005. 

Employment verification pilot. The House rejected a bill to extend and expand a pilot project for employers to verify that potential employees are U.S. citizens. The pilot project allows employers in six states–California, Florida, Illinois, Nebraska, New York and Texas–to access immigration and Social Security records to verify the citizenship of potential employees. Lawmakers expressed concerns about privacy during the debate on the bill (H.R. 2359). Congress created the system in 1996, but it is set to expire this November. The bill would have extended the program for an additional five years and made it available to employers nationwide.





Payroll     Top of Page

2004 standard mileage rates increase. The 2004 optional standard mileage allowance rate for computing the deductible costs of operating a car for business purposes will increase from 36 cents per mile in 2003, to 37.5 cents per mile in 2004. The rate for medical or moving expense purposes will increase from 12 cents per mile to 14 cents per mile in 2004. The new rates apply to costs paid or incurred on or after January 1, 2004. The rate increases appear in IRS Rev. Proc. 2003-76, I.R.B. 2003-43, October 27, 2003.

House now opposes OT regs. The House reversed its stance on the Bush administration's controversial proposed overtime pay regulations. In July, the House narrowly defeated a Democratic amendment to the Labor Department funding bill that would have barred the department from moving forward with the regulations. That amendment failed by a 213-210 vote. But with a 221-203 vote on October 2, 2003, the House instructed its conferees, who will negotiate the final appropriations bill with their Senate counterparts, to adopt the Senate position on the issue. The Senate in September passed an amendment to its version of the bill to block the Labor Department from implementing most of the proposal. The position adopted by the Senate, and now the House, would allow the Labor Department to increase the salary threshold, but would bar proposed rules to redefine who would qualify for overtime protections. Despite the House vote, the fate of the regulations is not certain. The vote will make it more difficult for proponents of the regulations to save them, but conferees are not required to follow the instructions they receive from the House. Further complicating the issue, the administration has threatened to veto the legislation if it would overturn the proposed regulations. 

High earner's FICA taxes will barely increase. Highly-paid wage earners may scarcely notice the projected increase in the wage base on which Social Security taxes are due for 2004. The 2004 wage base of $87,900 is a mere $900 higher than the 2003 amount, and the maximum additional tax that might be collected on someone earning above the 2003 wage base is only $55.80. The tax increase will show up in the amount of FICA (Federal Insurance Contribution Act) tax deducted next year from the paychecks of those earning above the 2003 wage base. The wage base for 2004 is $300 less than the lowest estimated increase published in the 2003 Annual Report of the Board of Trustees of the Federal Old-Age, Survivors and Disability Insurance (OASDI) Trust Funds issued in March of this year. The 2004 wage base reflects national average wages for 2002, the variable upon which the 2004 wage base formula is based. The 2002 national average wage index of $33,252.09 is 1 percent higher than the 2001 national average wage index. 

The employee / employer Social Security tax rate remains at 7.65% for 2004, including 6.2% for the Federal Old-Age, Survivors and Disability (OASDI) portion and 1.45% for the hospital insurance portion (Medicare). For the self-employed, the rate continues to be 15.3%.

The amounts that Social Security beneficiaries can earn without having their retirement benefits reduced also will go up next year. Although the Senior Citizens' Freedom to Work Act of 2000 eliminated the annual earnings test as of January 2000 for workers between full retirement (age 65 and four months for workers attaining full retirement age in 2004, i.e., workers born in 1939, but age 65 for those born prior to 1938) and age 69, workers under full retirement age who are receiving benefits remain subject to the test and can earn up to $11,640 in 2004, or $970 per month, without having their benefits reduced. This is an inflation-adjusted increase of $120 over the 2003 annual limit. One dollar in benefits is withheld for every $2 in earnings above the limit.

2004 railroad retirement wage bases. The U.S. Railroad Retirement Board announced that the taxable earnings base for Tier I retirees will be $87,900 in 2004, up from $87,000 in 2003. The taxable earnings base for Tier II retirees will be $65,100 in 2004, up from $64,500 in 2003. The COLA for Tier I benefits is 2.1% and the COLA for Tier II benefits is 0.7% for 2004. A surcharge of 1.5% will be added to the basic Railroad UI Act tax rate for every established employer beginning January 1, 2004. New employers are not affected, however, as their rate will be the average rate for all employers from 2000 through 2002. 

Tax treaty tables. The IRS issued new supplemental tax treaty tables to replace the tables reproduced in IRS Pubs. 515 and 901. IRS Announcement 2003-62, IRB 2003-41, October 14, 2003, provides the rates for various types of income under several new tax conventions. The U.S. recently exchanged instruments of ratification for a new income tax treaty with the United Kingdom and new tax protocols for the tax treaties with Australia and Mexico.

Per diem rates. For expenses paid after November 1, 2003, the federal per diem rate, which is the sum of the federal lodging rate and the federal meals and incidental expenses rate (M&IE), will increase to $207 (currently, $204) per day for high-cost areas and to $126 (currently, $125) per day for all other areas. The federal M&IE for purposes of the high-low substantiation method will increase to $46 (currently, $45) per day for high-cost areas and to $36 (currently, $35) per day for all other areas. The M&IE rates for employees or self-employed persons in the transportation industry will increase to $41 (currently, $40) per day for areas within the U. S. (CONUS) and to $46 (currently, $45) per day for areas outside the U. S. (OCONUS). There have also been changes to the list of localities considered high-cost. The changes were announced in Rev. Proc. 2003-80, IRB 2003-45, November 10, 2003.

Pension Law     Top of Page

2004 COLAs. The IRS announced the 2004 cost-of-living adjustments (COLAs) to dollar limitations on benefits and contributions, annual compensation limits, the threshold amount for determining excess distributions, compensation amounts for SEPs, and other dollar limitations applicable to retirement plans under Code Sec. 415 and other benefit-related sections. The 2004 dollar limitations announced by the IRS, compared with the 2003 figures, are as follows:

Senate moves to stop cash balance conversions. The Senate approved an amendment that would prohibit the Treasury Department from issuing new rules to clarify that a company’s conversion from a traditional pension plan to a cash balance plan is not age discrimination. The Senate adopted the amendment offered by Sen. Tom Harkin, D-Iowa, on October 23 as part of a bill (H.R. 2989) to fund the Treasury Department in fiscal 2004. The amendment to the bill is similar to one adopted by the House in September. The Bush administration has threatened to veto the bill based on an unrelated issue concerning government contracting.

The Senate also approved an amendment to the bill that would give federal civilian workers a 4.1 percent wage increase in fiscal 2004. The administration wants to implement a 2 percent raise for government employees.

Replacing the 30-year Treasury rate. On October 8, the House, by a vote of 397-2, passed the Pension Funding Equity Bill of 2003 (H.R. 3108), which would allow companies to use a four-year average of conservative corporate bond rates as chosen by the Treasury Secretary for calendar years 2004 and 2005. The two-year period was chosen because it will allow Congress enough time to study the issue before crafting a permanent replacement. A similar unnumbered bill, the Pension Stability Act, cleared the Senate Health Education Labor and Pensions Committee on October 29.

Electronic transactions. The Pension Benefit Guaranty Corporation on October 28 issued final regulations intended to remove regulatory impediments to electronic transactions. The regs, which address electronic methods of filings, issuances to third parties and recordkeeping, were published at 68 Federal Register 61344.





Safety     Top of Page

ILO drafts code on preventing workplace violence. The International Labour Organization (ILO) convened a meeting of experts to consider a new code of practice on violence and stress at work, and has just published a relevant handbook on how to prevent and respond to violence in the workplace. Discussion of the draft code by 36 experts representing governments, employers and workers was scheduled for the ILO in Geneva on 8-15 October. Codes of practice are not intended to replace national laws or regulations or accepted standards. They are primarily designed as a basis for prevention and protective measures, and are considered as ILO technical standards in occupational safety and health.






Social Security     Top of Page

Continuing disability reviews. The Social Security Administration is proposing to establish a new recordkeeping system that will more efficiently monitor the work activities of disability benefit beneficiaries. This system will allow the Administration to process continuing disability reviews more efficiently and replace what is now a manual, labor-intensive process. The proposed system, the eWork System, will become effective October 18, 2003, unless comments received warrant otherwise. The Social Security Administration monitors the work activity of its disability beneficiaries not only for the purpose of determining an individual's continuing eligibility for disability benefits, but also for the purpose of administering various SSA programs, such as the Ticket to Work program.

SSI Work Incentives Demo Project extended for additional year. The Social Security Administration (SSA) has announced that it is extending until October 1, 2004, the Supplemental Security Income (SSI) Work Incentives Demonstration Project. Under this project, the Administration has been testing the effectiveness of modifying certain provisions of the SSI program as an incentive to encourage SSI recipients with disabilities or blindness to work for the first time, return to work, or increase their work activity and earnings. The alternate rules had been set to expire on September 30, 2003, and will now expire on September 30, 2004. The extension applies to any disabled or blind SSI recipient or concurrent SSI / SSDI beneficiary currently enrolled as a participant in the State Partnership Initiative (SPI) program in California, New York, Vermont and Wisconsin.