Supreme Court votes to allow citation of unpublished opinions.  The US Supreme Court voted Wednesday, April 12 to allow unpublished opinions to be cited in federal court. The High Court has adopted an amendment to the Federal Rules of Appellate Procedure, which would require federal courts to allow the citation of opinions designated as unpublished (Rule 32.1). The new rule also requires a party who cites an unpublished disposition that is not available in a publicly accessible electronic database to file a copy of the disposition. Rule 32.1 has been transmitted to Congress and will take effect on December 1, 2006 unless Congress enacts legislation to reject, modify or defer the amendments. The new rule applies only to decisions issued on or after January 1, 2007.

Source: Administrative Office of the US Courts

EEOC issues semiannual regulatory agendas.  The US Equal Employment Opportunity Commission (EEOC) has published its semiannual regulatory agenda, which list all the regulations that are scheduled for review or development during the next twelve month, or that have been finalized since the publication of the last agenda. The EEOC's last semiannual regulatory agenda was published in the Federal Register on October 31, 2005 (70 FR 209).

The EEOC has identified the following items in its semi-annual regulatory agenda:

Proposed rule stage: (1) Disparate Impact and Reasonable Factors Other Than Age (RIN No 3046-AA76): In Smith v City of Jackson, 86 EPD ¶41,882, 125 S. Ct. 1536 (2005), the US Supreme Court affirmed that disparate impact is a cognizable theory of discrimination under the Age Discrimination in Employment Act of 1967 (ADEA) but indicated that “reasonable factors other than age,'' not ”business necessity,'' is the appropriate model for an employers' defense against an impact claim. Accordingly, the EEOC intends to revise its regulation on disparate impact, currently codified at 29 CFR Section 1625.7(d). The EEOC intends to have a notice of proposed rulemaking by September 2006. (2) Coverage under the Age Discrimination in Employment Act (RIN No 3046-AA78): In General Dynamics Land Systems v Cline 84 EPD ¶41,592, 540 US 581 (2004), the US Supreme Court held that the ADEA only prohibits age-based discrimination against relatively older individuals. It rejected the Commission's position that the ADEA also prohibits age-based discrimination against relatively younger individuals who are age 40 or over. The Commission is therefore revising relevant portions of its regulations to conform to the holding in Cline. The EEOC intends to have a notice of proposed rulemaking by July 2006. The EEOC contact on these matters is: Dianna B. Johnston, Assistant Legal Counsel, Office of Legal Counsel, Equal Employment Opportunity Commission, 1801 L Street NW, Washington, DC 20507. Phone: 202 663-4638. TDD Phone: 202 663-7026. Fax: 202 663-4639. Email: dianna.johnston@eeoc.gov.

Final Rule Stage: (1) Posting Requirements under the Notification and Federal Employee Antidiscrimination and Retaliation Act (RIN No: 3046-AA74): Title III of the Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 requires each Federal agency to post on its website certain statistical information about equal employment opportunity complaints that it receives and processes under 29 CFR part 1614 (see CCH EMPLOYMENT PRACTICES GUIDE ¶4115.101 et seq.). The Act authorizes the EEOC to issue regulations defining certain terms and prescribing the time, form and manner of the posting. (2) Repositioning of Commission Field Offices (RIN No: 3046-AA80): This rule revises the Commission's regulations to reflect new position and organizational titles consistent with the field repositioning approved in 2005. The rule does not change the procedures in the regulations. The EEOC contact on these matters is: Thomas J. Schlageter, Assistant Legal Counsel, Equal Employment Opportunity Commission, 1801 L Street, NW, Washington, DC 20507. Phone: (202) 663-4668. TDD Phone: (202) 663-7026. Fax: (202) 663-4639. Email: Thomas.schlageter@eeoc.gov.

Long-term actions: (1) Coordination Of Retiree Health Benefits With Medicare And State Benefits (RIN: 3046-AA72): In a move strongly supported by organized labor, workers and employers, the EEOC in April 2004, voted to move forward with a regulation to reverse a federal court decision which held that employers may not "coordinate" health benefits for retirees who turn age 65 and take into account the additional benefits they receive from Medicare (Erie County Retirees Association v County of Erie (220 F.3d 193 2000)). Before the regulation took final effect, a federal district court judge on March 31, 2005, permanently enjoined the EEOC from issuing the rule (AARP v EEOC, EDPa, No 05-CV-509), concluding that the EEOC's rule was contrary to Congressional intent and the plain language of the ADEA. However, based on an intervening US Supreme Court decision (Cable and Telecomms Ass'n v Brand X Internet Servs (125 S. Ct. 2688)), the district court reversed its position on the EEOC's rule (AARP v EEOC, EDPa, 86 EPD ¶42,079). (2) Federal Sector Equal Employment Opportunity Complaint Processing (RIN No 3046-AA73): This is a long term action of the EEOC in the final rule stage. The EEOC contact as to Coordination Of Retiree Health Benefits With Medicare And State Benefits is Dianna B. Johnston. As to Federal Sector Equal Employment Opportunity Complaint Processing, the agency contact is Thomas J. Schlageter.

Completed actions: Privacy Act Regulations (RIN No 3046-AA79): On December 12, 2005, the EEOC published a notice of proposed rulemaking intending to amend 29 CFR 1611.11. This section contains a schedule of fees utilized by the EEOC for purposes of assessing costs to individuals who seek access to records under the Privacy Act (5 USC 552a). The revision amends 29 CFR 1611.11 to conform the fees charged under the Privacy Act to the fees charged under the FOIA. See 29 CFR 1610.15, as amended by 70 FR 57510 (2005). In effect, the fees for duplication, attestation and certification of records under the Privacy Act are being made consistent with the fees charged for those services under the FOIA. Comments from the Public were due on or before January 11, 2006, but none were received. Therefore, the EEOC is adopting the proposed revisions, without change, as its final rule. The agency contact on this matter is Thomas Schlageter.

EEOC issues new Compliance Manual Section, FAQ Sheet on race and color discrimination.  On April 19, 2006, the EEOC issued a new Compliance Manual section updating guidance on how Title VII prohibits discrimination in employment on the bases of race and color. The EEOC also issued a companion FAQ sheet. These resources, available on the EEOC’s website at http://www.eeoc.gov/types/race.html, are designed to assist in identifying and responding to instances of discrimination, and to help prevent discrimination in the first place.

"This comprehensive guidance will assist employers, employees and EEOC staff in understanding how Title VII applies to a wide range of contemporary discrimination issues," said EEOC Chair Cari M. Dominguez. Vice Chair Naomi C. Earp said, "Although employment opportunities for people of color have improved dramatically over the years since 1964, EEOC's job, and that of our many partners, will not be completed until all of our nation's workplaces are free of unlawful discrimination." Echoing that theme, Commissioner Stuart J. Ishimaru observed, "We can only become one nation if we are able to bridge the racial divide, and today the EEOC takes another step toward that end. Issuing this chapter reaffirms the EEOC's commitment to the vigorous enforcement of Title VII's prohibitions against race and color discrimination in the workplace."

The new materials cover issues related to evaluating allegations of discrimination; providing equal access to jobs through the recruitment, hiring and promotion processes; and addressing harassment and retaliation. In addition to the Commission's website at http://www.eeoc.gov/policy/docs/race-color.html, the new Compliance Manual section is also available through the EEOC's Publications Distribution Center at: (800) 669-3362 voice or (800) 800-3302 (TTY).

Labor/Wage Hour     Top of Page

OFCCP regulations listed in DOL's Semiannual Regulatory Agenda.  On April 24, 2006, the United States Department of Labor (DOL) published its semiannual regulatory agenda, which included Office of Federal Contract Compliance Programs (OFCCP) and veterans items that are scheduled for review or development during the next twelve months or that have been finalized since the publication of the last agenda. The DOL's last seminannual regulatory agenda was published in the Federal Register on October 31, 2005 (70 FR 64896).

Final rule stage. Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors for Special Disabled Veterans and Veterans of the Vietnam Era (RIN: 1215-AB46) – The OFCCP proposes to create a new regulation implementing the Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA) 38 USC 4212, to conform to the Jobs for Veterans Act (JVA). JVA amended VEVRAA in four ways. First, JVA raised contract coverage from $25,000 to $100,000. Second, JVA granted VEVRAA protection to a new group of veterans: those who, while serving on active duty in the Armed Forces, participated in a United States military operation for which an Armed Forces Service Medal was awarded pursuant to Executive Order 12985. Third, JVA changed the definition of "recently separated veteran" to include "any veteran during the three-year period beginning on the date of such veteran's discharge or release from active duty." Fourth, JVA changed "Special Disabled Veterans" to "Disabled Veterans," expanding the coverage to conform to 38 USC section 4211(3). This proposal will also increase the AAP threshold from $50,000 to $100,000 and will make other changes to the regulations. The VEVRAA final rule implementing the Veterans Employment Opportunities Act of 1998 and Veterans Benefits Health Care Improvement Act of 2000 at 41 CFR 60-250 is RIN 1215-AB24. A final action on this regulation is expected in November 2006.

Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors; Equal Opportunity Survey (RIN: 1215-AB53) – On November 13, 2000, the OFCCP published a final rule which established an Equal Opportunity (EO) Survey. The EO Survey requires that nonconstruction contractor establishments designated by OFCCP prepare and file an Equal Opportunity (EO) Survey. The EO Survey contains information about personnel activities, compensation and tenure data and specific information about the contractor's affirmative action programs. This Notice of Proposed Rulemaking will address concerns regarding the effectiveness of the EO Survey. The OFFCP expects to take final action on this item on August 2006.

Completed actions. Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors for Special Disabled Veterans and Veterans of the Vietnam Era (RIN: 1215-AB24) – Effective January 3, 2006, the OFCCP revised the current regulations implementing the nondiscrimination and affirmative action provisions of the VEVRAA, which requires government contractors and subcontractors to take affirmative action to employ and advance in employment qualified special disabled veterans and veterans of the Vietnam era. The OFCCP made three general types of revisions to the VEVRAA regulations. First, it generally conformed the VEVRAA regulations to the Veterans Employment Opportunities Act of 1998 and the Veterans Benefits and Health Care Improvement Act of 2000. Secondly, it removed references to the Letters of Commitment (LOC) because the violations formerly incorporated into the LOC are now summarized in the Compliance Evaluation Closure Letter. Third, it removed language about the effective date of the rule published in 1998 because the language was obsolete and the regulations no longer contained an "effective date" paragraph. The DOL had determined that this rulemaking need not be published as a proposed rule, as generally required by the Administrative Procedures Act, 5 USC 553, because the revisions in the rule were either nondiscretionary ministerial actions that merely incorporated, without change, statutory amendments into the preexisting regulations or were rules of agency procedures or practice.

The agency contact on these matters is: James C. Pierce, Acting Deputy Director, Division of Policy, Planning & Program Development, OFCCP, Department of Labor, Employment Standards Administration, 200 Constitution Avenue NW, Room N3422, FP Building, Washington, DC 20210. Phone: (202) 693-0102; TDD Phone: (202) 693-1337. Fax: 202 693-1304. Email: ofccp-public@dol.gov.

In addition, the DOL included the following veterans-related item in its semiannual regulatory agenda: Proposed rule stage. Jobs for Veterans Act of 2002: Contract Threshold and Eligibility Groups for Federal Contractor Program (RIN: 1293-AA12) – The Veterans' Employment and Training Service (VETS) is proposing to issue a notice of proposed rulemaking to implement changes required by the Jobs for Veterans Act (JVA) of 2002. This Act amended the Vietnam Veterans' Readjustment Assistance Act of 1974, as amended (VEVRAA), by revising the reporting threshold from $25,000 to $100,000. JVA also eliminated the collection categories of special disabled veterans and veterans of the Vietnam era and added the new collection categories of disabled veterans and armed forces expeditionary medal veterans. JVA continues the collection for the recently separated veterans category, but changed the definition for that category to include any veteran who served on active duty in the U.S. military ground, naval, or air service during the 3-year period beginning on the date of such veteran's discharge or release from active duty. Additionally, Federal contractors and subcontractors will be required to report the total number of all current employees in 9 job categories for each hiring location. This proposal will assist VETS in meeting the statutory requirement of annually collecting the VETS-100 Report.

The agency contact on this matter is: Robert Wilson, Chief, Investigations and Compliance Division, Department of Labor, Office of the Assistant Secretary for Veterans' Employment and Training, 200 Constitution Avenue NW, Room S-1312, Washington, DC 20210. Phone: 202 693-4719. Fax: 202 693-4755. Email: rmwilson@dol.gov. The DOL's seminannual regulatory agenda was published in the Federal Register on April 24, 2006 (71 FR 78).

Proposed FMLA regulatory revisions still on DOL's agenda.  Revisions to the Family and Medical Leave regulations are still on the Department of Labor's (DOL) regulatory agenda, but there is no hint on when we can expect to see them published in the Federal Register. The DOL's Semiannual Regulatory Agenda, published on April 24, 2006, again indicates that DOL intends to propose revisions to the FMLA regulations to address issues raised by the US Supreme Court's Ragsdale v Wolverine World Wide, Inc decision (145 LC ¶34,457). The DOL also intends to propose rules addressing issues raised by other judicial decisions. The agenda indicated that "regulatory alternatives will be developed for notice-and-comment rulemaking," but no timetable was specified.

Ragsdale. The Supreme Court's ruling invalidated regulatory provisions pertaining to the effects of an employer's failure to timely designate leave that is taken by an employee as being covered by the FMLA. The FMLA regulations require employers to designate if an employee's use of leave is counting against the employee's FMLA leave entitlement, and to notify the employee of that designation (Section 825.208). Section 825.700(a) provides that if an employee takes paid or unpaid leave and the employer does not designate the leave as FMLA leave, the leave taken does not count against the employee's 12 weeks of FMLA leave entitlement. On March 19, 2002, the U.S. Supreme Court said that §825.700(a) was invalid absent evidence that the employer's failure to designate the leave as FMLA leave interfered with the employee's exercise of FMLA rights.

Arbitrator, not court, decides validity of contract with arbitration clause.  Should a court or an arbitrator consider a claim that a contract containing an arbitration provision is void for illegality? In a 7-1 decision, the US Supreme Court has ruled that, regardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to an arbitrator. The Court's three arbitration agreement propositions established in prior decisions controlled the outcome of the case (Buckeye Check Cashing, Inc v Cardegna, USSCt, 152 LC ¶10,636).

The respondents had entered into deferred payment transactions with Buckeye in which they received cash in the amount of a personal check plus a finance charge. Each transaction was covered by an agreement that contained a provision requiring that any disputes on the validity, enforceability or scope of the arbitration provision or the entire agreement resolved by binding arbitration. However, when the respondents challenged the agreements on usurious interest grounds, they filed in state court action, arguing the agreement was criminal on its face. The trial court denied Buckeye's motion to compel arbitration, but a district court of appeal reversed, holding that the question of the contract's legality should go to an arbitrator. This ruling was reversed by the Florida Supreme Court that reasoned enforcing an arbitration agreement in a contract challenged as unlawful would violate state public policy and contract law.

Justice Scalia, writing for the Court, said this challenge to the whole contract was controlled by three propositions: As a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. This arbitration law applies in state and federal courts. Accordingly, because this challenge was to the agreement, not specifically to its arbitration provisions, those provisions were enforceable apart from the remainder of the contract. The challenge should therefore be considered by an arbitrator, not a court. The Court rejected the Florida Supreme Court's conclusion that enforceability of the arbitration agreement turned on Florida's public policy and contract law. Also, the Court said that the rule of severability applied in state as well as federal court and it did not matter whether the challenge would render the contract voidable or void.

DOL announces new leadership at Bureau of International Labor Affairs.  US Secretary of Labor Elaine L. Chao announced today a new leadership team at the DOL’s Bureau of International Labor Affairs (ILAB). James Carter starts this week as deputy undersecretary of labor for international labor affairs and ILAB Chief of Staff Rob Owen has been promoted to associate deputy undersecretary for international labor affairs.

"Jim Carter will be a great addition to ILAB," said Secretary of Labor Elaine L. Chao. "He and Rob Owen, formerly chief of staff in ILAB, and the new associate deputy undersecretary for international labor affairs, will do a great job for ILAB." Carter most recently served as deputy assistant secretary for economic policy at the U.S. Department of Treasury. Carter previously served as associate director at the White House National Economic Council and has served in several positions on Capitol Hill and at the Office of Management and Budget. He holds a Master of Public Administration degree from George Mason University and a Bachelor of Science degree in political science from Truman State University.

Prior to being named ILAB's chief of staff, Owen served as deputy counselor in the Department of Labor's Office of the Secretary. Owen had previously served in the legislative branch, as counsel to the U.S. Senate's Committee on Governmental Affairs. He holds a law degree and a Bachelor of Arts degree in economics from the University of Nebraska.

The ILAB is responsible for developing departmental policy and programs relating to international labor activities and coordinating departmental international activities involving other US Government agencies, intergovernmental organizations and nongovernmental organizations including the International Labor Organization. ILAB also administers the North American Agreement on Labor Cooperation, the labor side agreement to NAFTA, and the other labor chapters included in US free trade agreements.

DOL’s new public window on performance.  The DOL is now participating in ExpectMore.gov, a government-wide effort to encourage greater accountability for results and for how taxpayers' money is spent. Launched with the release of the President's 2007 budget, www.ExpectMore.gov is a new website that provides candid assessments of federal programs in jargon-free language, according to the agency. "The President's Management Agenda compelled federal agencies to take a clear and honest look at how we function administratively. The Department of Labor once again stepped up by being the first to earn the highest ranking in all five government-wide categories of the President's Management Agenda," said Secretary of Labor Elaine L. Chao. "ExpectMore.gov provides greater transparency of the department's performance in effective administration of taxpayer-funded programs." ExpectMore.gov allows the general public to review the performance of 28 DOL programs and almost 800 other federal programs accounting for 80 percent of the federal budget. The remaining 20 percent will be included within a year. For every program assessed, visitors can find a rating of performance, strengths and weaknesses and the program's improvement plan. ExpectMore.gov also links to detailed program assessments and the program's own site.

Active year for OLMS; web based compliance tools featured.  The DOL’s Office of Labor-Management Standards (OLMS) has published its annual report summarizing the work of the office in safeguarding union assets and ensuring union democracy through enforcement of the Labor-Management Reporting and Disclosure Act (LMRDA). The OLMS processed 325 criminal cases under the LMRDA which resulted in 114 indictments and 97 criminal convictions of crimes such as embezzlement of union funds, mail fraud, false statements on reports and false union records. It also conducted 612 compliance audits, including an additional 7 audits of international unions in fiscal year 2005.

OLMS attempts to avoid problems by offering union members and officials financial reporting and recordkeeping compliance assistance. This year, under a special enforcement initiative to get unions and employees to file LM-30, the Labor Organization and Employee Report form, the OLMS offered a grace period for new filers who voluntarily submitted an initial report without being directed to do so; these individuals would not be asked to file reports covering the same transactions for previous years, absent extraordinary circumstances. The OLMS continued to provide training and assistance in the use of electronic software and the reporting requirements of the revised electronic Form LM-2, which is the yearly financial form filed by the largest unions.

Compliance assistance goals achieved by the agency in 2005 include the creation and updating of internet based tools for compliance assistance events, new regulatory initiatives, court actions, Executive order 13201 matters, and user feedback. The agency also began posting user guides and electronic versions of LM-3 and LM-4 for filing via the internet as well as posting electronic tools for LM-30 reporting. The agency also launched a new and improved Internet Public Disclosure Room and answered 150 public e-mails per month. A final electronic accomplishment was a new web page instituted this year to aide small unions in complying with the LMRDA.

The agency has published a number of Notices of Proposed Rulemaking in fiscal year 2005. It sought public comment on a revised LM-30 form which is used to disclose potential financial conflicts of interest between union officials and their obligations to members. The 40 year old form had remained the same since its inception 1963. The OLMS also solicited public comment on the nature and scope of the fiduciary duties under Section 501 of the Act; a Request for Information was issued this past year to aide in issuing guidelines regarding the fiduciary obligations of union officers, agents, shop stewards and representatives. A final rule is currently being prepared regarding a union's duty to inform its membership of democratic rights within federal sector unions. Finally, OLMS is currently evaluating 24 comments solicited via a Request for Information to determine the parameters of local, intermediate, national and international organizations under Title IV of the LMRDA since these different labor organizations have different election intervals and election methods under the Act.

DOL’s Wage Hour Division to participate in Department of Justice Hurricane Katrina fraud task force.  The DOL has announced its participation in the US Department of Justice Hurricane Katrina Fraud Task Force. Participation by the DOL’s Wage and Hour Division will enable better coordination and prosecution of violations of wage and hour laws. "Employers and federal contractors and subcontractors must understand that this department is serious about pursuing the non-payment and under-payment of wages," said Victoria A. Lipnic, Assistant Secretary for Employment Standards. "We cannot allow those who contribute their labor to the hurricane recovery effort to be exploited."

In September 2005, the US Justice Department created the Hurricane Katrina Fraud Task Force, designed to deter, investigate and prosecute disaster-related federal crimes such as charity fraud, identity theft, procurement fraud and insurance fraud. The Hurricane Katrina Fraud Task Force--chaired by Assistant Attorney General Alice S. Fisher of the Criminal Division--includes members from the FBI, the Federal Trade Commission, the Postal Inspection Service, and the Executive Office for United States Attorneys, among others.

Participation in the Katrina Fraud Task Force will allow the Wage and Hour Division to enhance the enforcement work it has already been doing in the Gulf. Currently, an internal Wage and Hour Division task force is investigating alleged violations of the laws it enforces, including government contract labor standards on federal contracts in the Gulf Coast region. Many individuals working in the Gulf Coast region are recent immigrants with limited knowledge of the protections afforded them under US law. Through enforcement actions and outreach efforts in the region, the Wage and Hour Division is taking aggressive steps to ensure employees know their rights and employers meet their obligations under federal wage and hour laws.

The Wage and Hour Division enforces some of the nation's most comprehensive labor laws, including the Fair Labor Standards Act and the government contract labor standards. For more information about these federal laws, call the Department of Labor's toll free help line at 1-866-4USWAGE (1-866-487-9243). Information is also available on the Internet at www.wagehour.dol.gov.

Benefits Top of Page

CMS issues updated guidance on creditable prescription drug coverage notice. The Centers for Medicare & Medicaid Services (CMS) has issued updated guidance on the notice of creditable prescription drug coverage (Disclosure Notice), which entities that currently provide prescription drug coverage to Medicare beneficiaries must provide pursuant to Medicare Part D regulations. This updated guidance, which is effective on May 15, 2006, supersedes previous guidance issued in May 2005.

In conjunction with the guidance, CMS has issued model/sample language that entities can (but are not required to) use when disclosing creditable coverage status to beneficiaries. CMS issued initial Model Disclosure Notices in May 2005 to be used for the period of November 15, 2006 through May 15, 2006. CMS indicates that entities should continue to use those initial Model Disclosure Notices until May 14, 2006. Entities can use the new Model Disclosure Notices on or after May 15, 2006 for annual disclosure, new plan enrollees (those with Part D Initial Enrollment Periods on or after May 15, 2006), upon request by the beneficiary, and in future plan years. CMS also has added a Model Personalized Beneficiary Disclosure Notice, which an entity can provide to the beneficiary upon request or in lieu of the other model notices.

Source: http://www.cms.hhs.gov/creditablecoverage, General Creditable Coverage Guidance.

Retirement planning resource for Hispanic Americans.  The US Department of Labor has released "Su Dinero Y Futuro Economico: Una Guia Para Ahorrar," a resource to help Hispanic Americans plan, save and invest for a secure retirement. The publication, which can be found at http://www.dol.gov/ebsa/pdf/savingsfitnesssp.pdf, is the Spanish-language version of the department's popular Savings Fitness: A Guide to Your Money and Your Future.

The publication highlights the importance of saving for retirement and emphasizes the benefits of developing savings habits at a young age. The booklet provides important information on how to start saving, how retirement plans work, ways to develop a savings plan that incorporates realistic retirement goals, and simplified principles on investing. "Hispanic-Americans are one of the fastest growing segments of the workforce. Su Dinero Y Futuro Economico will help them save for their retirement," said Ann L. Combs, assistant secretary of labor for employee benefits security.

This financial planning tool uses an easy-to-follow approach to setting financial goals and including retirement planning as a priority. A resource section provides other sources of information on retirement, savings and investment issues, including a link to FirstGov en Espanol, which provides information on government services including benefits and financial assistance, consumer protection and employment.

CMS provides guidance on COBRA coverage in the retiree drug subsidy program.  CMS’s Retiree Drug Subsidy Center (RDS Center) has announced additional information about individuals receiving COBRA coverage and whether they may be considered a qualifying covered retiree (QCR) for purposes of the retiree drug subsidy. The RDS Center indicates the answer depends on whether the individual is considered to be receiving coverage by reason of current employment status as determined under the Medicare Secondary Payer (MSP) regulations.

Background. The RDS Center notes that in general, a QCR is a Part D eligible individual who is enrolled in the sponsor's plan and who is not enrolled in Part D. In addition, under COBRA, certain former employees, retirees, spouses, former spouses, and dependent children generally have the right to temporary continuation of health coverage when coverage would be lost due to certain specific events.

Question and answer. The question the RDS Center addresses in the announcement is as follows: An employer provides retiree drug coverage as well as coverage to actively employed workers and their family members. The employer has applied for the retiree drug subsidy. Can the employer treat individuals receiving COBRA coverage as QCRs?

In its answer, the RDS Center states that for purposes of the retiree drug subsidy, an individual cannot be counted as a QCR if he or she is considered to be receiving coverage by reason of current employment status as determined under the MSP regulations. While COBRA coverage is based on the employment status of the employee at the time of the COBRA qualifying event, for purposes of MSP and the retiree drug subsidy, whether an employee, or spouse or dependent of an employee, will be considered to be receiving coverage by reason of current employment status will depend on whether the employee continues to have current employment status after the COBRA qualifying event. Thus, any former employee who chose COBRA coverage can be counted as a QCR if he or she is eligible for Part D and not enrolled in a Part D plan. Any spouse or dependent who is eligible for Part D and not enrolled in a Part D plan, and is receiving COBRA coverage can be counted as a QCR if the coverage is based on the employment of an individual who is no longer in current employment status, according to the RDS Center. If the COBRA coverage derives from an employee who is still in current employment status, a plan sponsor may not count the individual as a QCR. As with all QCRs, whether the COBRA recipient meets the definition of a QCR is subject to audit by CMS.

Account for additional premium amount. The RDS Center also notes that for any COBRA recipient that can be counted as a QCR, the plan's actuary must account for the additional premium amount that COBRA recipients pay for prescription drug coverage in the retiree drug subsidy actuarial equivalence "net test." For example, if the COBRA beneficiaries are separated out as an individual benefit option under the sponsor's plan, assuming the option meets the gross test, it must be combined with another option in order to pass the net test because it will likely fail the net test on an individual basis.

Source: http://rds.cms.hhs.gov/news/announcements/qualifying.htm.

Payroll Top of Page

IRS posts draft of agricultural employer federal tax liability form. The Internal Revenue Service (IRS) has posted a draft of Form 943-A (Rev. June 2006), Agricultural Employer's Record of Federal Tax Liability, in the Topics for Tax Professionals section, http://www.irs.gov/taxpros/topic/index.html, under Draft Tax Forms. The draft was posted on April 4, 2006. Advance proof copies of IRS tax forms are subject to change and Office of Management and Budget approval before they are officially released. Comments on the draft form can be submitted to the IRS via its website and must include the word "DRAFT" in the response. In order for the IRS to properly consider all comments, they should be sent within 30 days from the date the draft was posted. Comments can be made anonymously, or can include the taxpayer's name and e-mail address or phone number. Due to the high volume of comments received, the IRS will not be able to respond to all comments; however, all comments will be considered.

IRS beefs up enforcement to counter employment tax evasion. Sixty-six billion dollars of the estimated $345 billion tax gap is attributable to uncollected employment taxes, a senior IRS official told the Second Annual American Payroll Association's 2006 Capital Summit in Washington, D.C. IRS Acting Chief, Employment Tax, Dan Lauer said that new compliance initiatives will help to close that gap. The IRS has hired more agents for this purpose and is focusing on particular areas of employment tax evasion, such as the underground economy.

More audits. " We don't get it all," Lauer acknowledged, discussing unreported and uncollected employment taxes, but emphasized that the IRS is adding resources to ferret out noncompliance. The stakes are huge because payroll-related deposits account for roughly 70% of all IRS tax collections or $1.7 trillion. This year, the IRS is making a special push to identify employers who pay their workers in cash to get around their employment tax obligations. The agency is also focusing on unreported tip income. Other enforcement targets include identifying employers that misclassify their workers as independent contractors and return preparer and promoter fraud. The IRS hired about 50 new employees in 2005 to work on employment tax enforcement. "This is a significant boost to employment tax compliance. More agents mean more audits," Lauer said.

Lock-in letters. Last year, the IRS relaxed the Form W-4, Employee's Withholding Allowance Certificate, submission rules for employers. Under temporary regulations employers no longer have to submit withholding certificates unless instructed to do so by the IRS. If the IRS determines that an individual's withholding is inadequate, based on the employee's Form W-2, Wage and Tax Statement, it will issue a " lock-in" letter to the employer specifying the status and the maximum number of withholding allowances permitted for the employee. Employees falsely claiming complete exemption from withholding is the most common problem, according to William Warner, IRS Senior Tax Analyst, Wage/Investment Compliance.

While the IRS also sends a copy of the letter to the employee, Warner told employers to give a copy to employees. If an individual is no longer on the job, the employer should alert the IRS by sending a letter on company letterhead by mail or fax to the IRS office in Lowell, Massachusetts. Warner reminded employers to include their employer identification numbers (EIN) in the correspondence. Warner encouraged employers to remind employees that there is a $500 penalty for filing a false Form W-4. The penalty is assessed personally on the employee.

IRS considers issues for final regs on supplemental wage withholding. Marie Cashman of the IRS Office of Chief Counsel indicated at the Second Annual American Payroll Association's 2006 Capital Summit in Washington, DC, on March 23 that the IRS and Treasury are working on several issues before they issue final regulations on supplemental wage withholding. In the American Jobs Creation Act of 2004 (P.L. 108-357), Congress imposed a new system of mandatory withholding on supplemental wage payments. For supplemental wages over $1 million, employers must withhold at a flat rate of 35%. For amounts of $1 million or less, the employer must withhold at a flat rate of 25%. The IRS issued proposed regulations regarding such withholding in early 2005 and expects to issue final regulations by June 30, 2006, Cashman said. She indicated that regulations are not imminent.

Transitional relief being considered. Under current law, employers have the option to withhold at the 25% rate or to lump supplemental wages with regular wages to determine the withholding rate. Scott Mezistrano of the American Payroll Association commented that payroll agents and payroll software developers will need time to develop systems to comply with the new rules. Cashman said the IRS understands that new systems take time and noted that some commentators asked for a 2007 effective date for the regulations. Cashman said the government is considering transition relief and the extent to which it may be necessary. There may be limits, however, since the new law's statutory effective date is January 1, 2005.

Defining supplemental wages. The rules will look to current authority to determine what supplemental wages are. They can include bonuses, overtime pay, back pay, tips, commissions, expense allowances, noncash fringe benefits and stock options. This is not an exclusive list. Cashman said that if an employee does not have regular wages, amounts that would normally be treated as supplemental wages are instead treated as regular wages. Cashman also noted that layering new regulations on the existing regulations can be complex. The government is not doing separate regulations for payments under $1 million versus payments over $1 million.

Employer liability. Marianna Dyson of Miller & Chevalier said there could be secondary liability if the employer does not withhold at the required rate. She asked whether the withholding is mandatory or whether the IRS would abate this liability if the employee paid the taxes due. Cashman said that the government is discussing concerns about employer knowledge. An employer has to track every dollar of compensation so that it knows when to "turn on" the 35% withholding rate. Dyson asked whether existing payroll systems can monitor executive compensation for the $1 million threshold. Mezistrano said this could be done, but it would be more complicated than current procedures. Cashman said that withholding would be based on amounts paid and would not reflect the employee's personal circumstances. For example, if a supplemental wage payment is paid to the spouse as alimony, the employer still must withhold at the appropriate rate for payments to the employee. She said there is precedent for this approach. Dyson asked whether the government would apply the 35% rate to fringe benefits that subsequently become taxable. Cashman said she would recommend applying the 35% rate.

IRS issues requirements for submitting Forms W-2c and W-3c. Requirements regarding the preparation and submission of substitute forms for Form W-2c, Corrected Wage and Tax Statement, and Form W-3c, Transmittal of Corrected Wage and Tax Statements, have been issued by the IRS. The IRS has also noted that the revenue procedure will be reproduced as the next revision of IRS Publication 1223, General Rules and Specifications for Substitute Forms W-2c and W-3c. The publication will be reproduced in EMPLOYMENTTAXFORMS and the CCHPAYROLLMANAGEMENTGUIDE on CD Rom/Internet in future releases. Along with exhibits and instructions on how to obtain the forms, the revenue procedure provides guidance for filing the forms electronically with the Social Security Administration (SSA), requirements for filing substitute paper copies of Red-Ink Forms W-2c (Copy A) and W-3c with the SSA, requirements for filing laser-printed substitute Forms W-2c (Copy A) and W-3c with the SSA, requirements for furnishing substitute privately-printed Forms W-2c (Copies B, C, and 2) and W-3c to employees, instructions for employers regarding retention of information and copies and guidance regarding approval of the forms from the Office of Management and Budget (OMB). (Rev Proc 2006-19, IRB 2006-13, March 27, 2006)

Pension Law Top of Page

DOL issues final regs, class exemption on termination of abandoned plans.   The US Department of Labor has announced the publication of final rules and a class exemption that allow financial institutions to take responsibility for abandoned 401(k) plans and distribute the plans' assets to covered workers and their families. The DOL estimates that 1,650 401(k) plans, covering 33,000 workers, are abandoned by their sponsors each year.

"Today's rules will help workers gain access to their retirement benefits by empowering financial institutions that hold the assets of abandoned plans," said Assistant Secretary of Labor Ann L. Combs. "Based on public reaction to the proposed rules, we are very encouraged by the willingness of the financial and plan service provider community to work together to address the abandoned plan problem for the thousands of workers whose benefits are unavailable to them." The DOL currently deals with abandoned plans on a case-by-case basis, often with the involvement of the courts. The final rules provide standards for determining when a plan is abandoned and establishes a process for winding up the affairs of the plan and distributing benefits to workers. The final rules should eliminate the need for costlier court approvals and allow workers to gain access to their benefits sooner. The recommendations of the department's Employee Retirement Income Security Act Advisory Council contributed to this important initiative.

PBGC announces online database of appeals board decisions.  To increase the public's access to and understanding of its operations, the Pension Benefit Guaranty Corporation (PBGC) has added to its public website an inventory of decisions rendered by the agency's Appeals Board since October 1, 2002. This full-text, searchable database currently includes about 140 decisions, redacted for public viewing.Through this new utility, workers, retirees and pension practitioners can retrieve and print decisions that are significant or relevant to a large number of participants in terminated pension plans administered by the PBGC. Link to public database of PBGC Appeals Board decisions appear at: http://www.pbgc.gov/practitioners/law-regulations-informal-guidance/content/page15626.html

House approves Rep. Miller's cash balance conversion measure.  The House of Representatives has approved a Democratic measure to help protect the pension benefits of older workers when their employers switch from traditional pension plans to so-called 'cash balance' plans. "This vote sends a clear message that when employers make promises to their workers, they should keep them," said Representative George Miller (D-CA), the senior Democrat on the House Education and Workforce Committee, who offered the measure. "Pensions are not a gift from employers. Workers earn their pensions, and they should not see their retirement nest eggs devastated at the whims of their employers."

House and Senate negotiators are in the process of working out their differences on legislation to change the nation's laws governing private pensions. Miller's motion would instruct the House negotiators to agree to Senate provisions that would protect the pension benefits of older workers when their companies switch to cash balance plans. Cash balance conversions have often led to deep benefit cuts for older workers. The key reason for these benefit cuts is that the formula for calculating benefits in a traditional pension is often more generous than the formula for calculating benefits in a cash balance plan.

In fact, in November 2005, the General Accountability Office issued a report that showed that half of all older workers (those 50 years old and older) lost benefits after their companies converted to a cash balance plan. Among those workers who lost benefits, the median benefit cut was $238 per month. In the 1990s, over 1,200 U.S. corporations – including IBM and AT&T – switched from traditional pension plans, in which workers receive a fixed monthly payment in their retirement, to cash balance plans. In general, cash balance plans pay a lump sum amount to workers at the time of their retirement or separation from service. They are often called "hybrid" plans because they include features of both traditional pensions and 401(k)s.

Since 1999, there has been a moratorium on Internal Revenue Service approval of cash balance conversions. The Senate - by an overwhelming vote of 97-2 - voted to include provisions in its pension legislation that would help protect the benefits of older workers in cash balance conversions. The Senate legislation protects workers in two ways:

• First, it protects all of the benefits already earned by workers in the traditional pension plan. In other words, workers may not lose any benefits they have already accrued through the old plan as a result of a conversion.
• Second, it requires companies to provide some type of protection for pension benefits that accrue after the conversion to a cash balance plan.

The AARP, AFL-CIO, National Committee to Preserve Social Security and Medicare, National Legislative Retirees Network, and Pension Rights Center all support these protections for older workers.

Lawmakers fail to reach accord on Pension Reform Bill.  House and Senate lawmakers failed to reach an agreement on a pension conference report (HR 2830). House Majority Leader John A. Boehner, R-Ohio, told reporters that the measure will have to wait until after the Easter recess, which lasted from April 7 through April 24, 2006.

Separately, House and Senate Republican leaders came close, but ultimately failed, to reach an agreement on a $70 billion tax reconciliation measure that they had hoped to schedule for an April 7 vote. House Ways and Means Committee Chairman William M. Thomas, R-Calif., and Senate Finance Committee Chairman Charles E. Grassley, R-Iowa., met throughout the day on April 6 to hammer out an agreement on a tax reconciliation conference report (HR 4297) that would include an extension of lower capital gains and dividend tax rates, as well as relief from the alternative minimum tax (AMT) for one year. The GOP leaders had given up on trying to win support from Democratic lawmakers and, instead, decided to remove some tax extender provisions from the legislation. They planned to pass those provisions, including research and development tax credits, small business expensing, and expanded IRAs, in a separate bill. Late on April 6, the plan fell apart, but none of the principal Republican lawmakers involved in the talks would comment on the reasons for the failure. Democrats were not involved in the negotiations.

Social Security Top of Page

W&M subcommittee considers proposals to safeguard SSNs.  Continuing its series of hearings on securing the privacy of Social Security numbers (SSNs), the House Ways and Means Social Security Subcommittee recently focused on identity theft and considered how businesses and the government might improve the confidentiality of SSNs.

Fraud-resistant cards proposed. Rep. David Dreier, R., Cal., is the sponsor of a bill--the Illegal Immigration Enforcement and Social Security Protection Act (H.R. 98)--that would require fraud-resistant Social Security cards and aid employers in verifying a worker's work-authorization status. The bill would require the SSA to issue cards containing digitized photos of the cardholders and security features designed to prevent tampering, counterfeiting or duplicating. Employers could use the information contained on the cards to verify a worker's eligibility through a Department of Homeland Security database. An immigration-enforcement bill (H.R. 4437) approved late last year by the House would direct the SSA to study Drier's proposal, the lawmaker stated at a March 30 subcommittee hearing. GAO discusses its recommendations

An official for the U.S. Government Accountability Office (GAO) outlined for the subcommittee a number of its recent recommendations to Congress to safeguard SSNs. Cynthia M. Fagnoni testified that different industries are subject to different federal oversight and may have little incentive to protect personal information. With regard to companies that outsource various services--such as data processing and customer service--Fagnoni suggested Congress could require industry-specific protections for sharing SSNs with contractors when such measures are not already in place. Alternately, Congress could take a broader approach that would restrict the use and display of SSNs to third-party contractors in general. (See, also, the story in Report Letter 586, dated February 27, 2006.)

The Privacy Act and other federal laws direct federal agencies to assure the security of SSNs. But these requirements might not be uniformly observed, Fagnoni stated. The GAO proposed that Congress convene a group of federal, state and local government officials to develop a uniform approach to safeguarding SSNs. As for private-sector entities that resell personal information, including SSNs, Fagnoni noted there are few limits on their ability to obtain, use and resell SSNs. While federal laws contain some restrictions, those restrictions can be interpreted broadly, and the reselling of personal information is likely to continue (John Scorza, CCH Washington News Bureau).

SSA announces collection of data on representative payees. The Social Security Administration has announced its intent to establish a new system of records, the "Representative Payee and Beneficiary Survey Data System," which will maintain data that will form the basis of a study to determine how payments made to representative payees under Title II or Title XVI of the Social Security Act are managed and used on behalf of the beneficiaries of those programs. The study is mandated by Section 107 the Social Security Protection Act of 2004 (PubLNo 108-203). The survey data in this proposed new system will be the basis for the mandated study and a subsequent report outlining the agency's findings and recommendations for change or further review of the SSA's representative payment policies. The proposed system of records is set to become effective on April 26, 2006.