Clarity Needed on ‘Minimum Value' Of Collectively Bargained Plans, Counsel Says

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Florence Olsen  

Employers face uncertainty about how some of the provisions of the 2010 law overhauling the nation's health care system affect collective bargaining agreements, now that the Supreme Court has upheld the law, practitioners told BNA June 28.

Companies that have not given the law's employer penalty provisions the attention they deserve will be seeking answers to how those provisions, especially those requiring employers to meet the law's “minimum value” standard, might affect collectively bargained agreements, said Darrell S. Gay, a labor and employment attorney and partner at Arent Fox in New York.

The law's provision requiring that employers with 50 or more full-time workers, or an equivalent number of part-time workers, pay a penalty if their employee health benefits fail a minimum value test creates a new duty for employers, Gay said. “It's a duty the employer has to address, one way or another, that [it] never had to address before,” he said.

Minimum Value.

One question is whether an employer could negotiate a future contract under which the employer and workers split the cost of health benefits 50/50, for example, Gay said. Under PPACA, a plan could fail the law's minimum value test if the employer is not subsidizing at least 60 percent of the overall value of the plan's health benefits (116 PBD, 6/18/12; 39 BPR 1174, 6/19/12).

“There's a host of questions and analysis that has to be conducted to help employers of all sizes” in analyzing their employee health benefits, Gay said. Some employers may be liable for penalties under PPACA “because of the level of contributions being made by employees against the actual wages they are making,” he said.

Another collective bargaining challenge for employers will be in complying with PPACA's automatic enrollment provisions, said Greta E. Cowart, a partner at Haynes & Boone in Dallas.

PPACA amended the Fair Labor Standards Act by mandating automatic enrollment in health benefits for all new full-time employees, but it did so without defining what constitutes a full-time employee under the FLSA or providing an exemption from automatic enrollment for employees whose employment is subject to a collective bargaining agreement, Cowart said.

PPACA's automatic enrollment provision “places the employer with a collectively bargained workforce potentially choosing between violating its collective bargaining agreement by implementing the automatic enrollment and incurring an expensive grievance defense,” Cowart said.

By Florence Olsen  

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