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Check out our weekly blog posts and see the latest news and discussions happening in the HR world of business.

Obamacare: Understanding how the new health care plan impacts ERISA

No matter which side of the political spectrum you fall on, we can all agree that Obamacare is one complicated piece of legislation! In particular, many companies are being tripped up by a section of the Employee Retirement Income Security Act (ERISA).

As a quick reminder, Section 510 of ERISA prohibits businesses from taking action against employees for exercising their rights under a benefit plan. It also prohibits employers from attempting to interfere with employees’ ability to obtain a benefit they’d otherwise become entitled to. Businesses found in violation of these regulations can include reinstatement, restitution and back pay.

Now, what does all of this have to do with the healthcare reform bill? Well, it seems that some of the “workforce realignment initiatives” companies are adopting in an attempt to avoid Obamacare requirements or penalties could violate the portion of ERISA that pertains to interfering with an employees’ access to benefits. For example, a company that attempts to reduce the work hours of employees to avoid counting them as full-time equivalents (FTEs) under Obamacare or who lays off older staff as they have higher medical costs could be found in violation of ERISA and subject to penalties

HR Morning News notes that “right now it’s unclear how this Section 510 of ERISA and Obamacare will mesh, especially in a court room, but it’s something employers need to be thinking about.” They note that in general, “federal laws allow businesses to organize their operations as they see fit to mitigate tax obligations and penalties. Therefore, it’s reasonable to believe that realigning your workforce by reducing hours or full-time equivalent staff to avoid Affordable Care Act (ACA) liabilities would be permissible under this umbrella.” However, they warn that if “employers frame businesses decisions in a way that makes it seem like their intent is to interfere with employees’ benefits that they expose themselves to trouble.”

Therefore, it seems that company will be able to make changes to avoid tax liabilities, but not to deny employee benefits. In order to avoid running into trouble, attorneys and experts in employment law Craig Martin and Nary Kim of Jenner & Block recently recommended in CFO Magazine that employers be sure that:

– All levels of management be coached to consistently communicate only the business need behind any organizational changes being implemented.

– Internal, external and public communications should mirror each other in that they only explain the business need to make organizational changes.

– Sensitive internal communications should be created in a way that triggers attorney-client privilege protections.

Avoid sweeping changes to workforce hours – which will surely raise red flags – and instead consider only capping hours for new employees, for example.

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