Thursday, January 7, 2016

Employment Lawyers Quiz a Benefits Lawyer

One of our New Year’s resolutions here at the Navigator is to get better at understanding employee benefits issues.  We run across them all the time, as do HR professionals and in-house counsel.  We know we don’t have the expertise to deal with the complex stuff; the best we can do is spot the issues and get help from an experienced and knowledgeable benefits lawyer. 

We’re lucky to know someone like that. Jewelie Grape gives practical, easy-to-follow advice on all aspects of benefits law.  We thought we’d start off 2016 by asking Jewelie some basic questions and sharing her answers with you.

Q: What HR issues worry benefits lawyers the most?

A: Right now, the Affordable Care Act is first on the list of worries for a lot of benefits lawyers. The ACA requires employer reporting that is new and complicated.   Many large employers must provide a Form 1095-C to each full-time employee by March 31, and send Form 1094-C and 1095-C to the IRS by May 31 or June 30. (The IRS graciously gave employers another extension late last month – until then these were due January 31 and March 31.) The required forms can be complicated and time consuming to complete. They require month-by-month health plan information for each full-time employee and dependent. Incorrect or incomplete returns can subject employers to penalties.  If an employer is subject to these ACA requirements and hasn’t focused on reporting obligations, the time to get started is NOW.

Q: What benefits-related issues get employers in the most trouble?

I don’t think there’s one specific issue that gets employers in the most trouble, although executive compensation might qualify. Mostly, employers get in trouble because they assume they know and understand complicated IRS rules and regulations related to employee benefits, and therefore don’t seek the advice of benefits professionals when designing and administering their benefit plans.  Consulting with a benefits lawyer or other competent benefits professional before a problem arises is not a sign of weakness and not a waste of money.  In my experience, it makes good business sense.

Q: What are some good general resources for HR professionals and in-house counsel who want to learn more about employee benefits?

A: Let me take you to lunch or coffee!  Just kidding… kind of.

The Society for Human Resource Management has a good website, and the IRS and Department of Labor websites also contain helpful information.  Many law firms with employee benefit groups publish newsletters or alerts that cover benefits-related court decisions, legislative activity, and regulatory guidance. You can sign up to receive these newsletters or alerts on many firms’ websites.

Q: Executive compensation seems complicated.  What’s the deal?  

Executive compensation can be really complicated. You can make experienced HR professionals and employment lawyers break out in a cold sweat by just mentioning 409A, which is the section of the Internal Revenue Code that controls nonqualified deferred compensation plans and sometimes interferes with severance arrangements. The IRS and other federal agencies have complex, technical regulations that govern compensation and deferred compensation for some highly-paid employees.  Issues often don’t arise until the executive is eligible to begin receiving payment or a corporate change in control occurs.  At that point, compensation and deferred compensation arrangements that are non-compliant can cause significant problems that are very expensive to correct. If your executive compensation arrangements and executive severance agreements have not been reviewed for compliance with 409A and other regulatory requirements, you’re asking for trouble.

Q: Rumor has it that you might start a blog covering employee benefits issues. True?

A: Could be.  If I do, I’ll be sure to invite you Navigators to be guest columnists.

We are grateful to Jewelie for her willingness to answer our questions, today and always. If she does start a blog, we’ll be sure to let you know and provide a link.