On Dec. 21, 2010, the Department of Labor (DOL) issued a Request for Information (RFI) seeking public comments regarding the recent amendments to the Fair Labor Standards Act (FLSA) relating to the Patient Protection and Affordable Care Act's (PPACA) so-called "nursing mothers" amendment.

Under the amendment, which became effective on March 23, 2010, employers must provide unpaid "reasonable break time for an employee to express breast milk for her nursing child for one year after the child's birth each time such employee has need to express milk." The law also requires employers to provide "a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk." The law does not apply to employees who qualify as exempt under the FLSA; however, employers may be obligated to provide such breaks under state law. Further, employers with fewer than 50 employees are exempt from compliance with the statute, but only if compliance would impose an "undue hardship" causing the employer "significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business."

Importantly, the RFI contains the DOL's preliminary interpretations of the new amendments to the FLSA. For example, the DOL encourages employers to provide break time for all nursing mothers, including those who are exempt under the FLSA, and cautions that the small employer "undue hardship" exception will be very limited in application. In addition, the RFI lists a set of factors in determining whether the time needed for a nursing mother to express milk is "reasonable," including the distance to the designated space and the need to first visit another location to retrieve a breast pump, which may require a longer (but still "reasonable") break period. Interpretations are also offered with respect to whether a designated space will suffice for purposes of compliance. Finally, the DOL encourages nursing mothers to give employers advance notice of their intent to take breaks at work to express milk, and encourages employers to provide flexible scheduling for those employees who choose to make up for any unpaid break time.

The RFI also seeks public input on or before Feb. 22, 2011, on key issues raised by the new legislation, including:

1. the compensability of break time for lactating mothers;
2. factors in determining reasonableness of break times;
3. what constitutes an adequate space to express breast milk;
4. the undue hardship exemption for small employers;
5. the notice requirements from the mother to the employer to facilitate an employer's ability to provide appropriate space for expressing milk; and
6. the requirement's relationship to the Family and Medical Leave Act.

The DOL does not plan to issue regulations implementing the amendment at this time as it believes that regulations may not be the most useful or effective means for providing initial guidance due to the wide variety of workplace environments and workforces. However, if the DOL's experience enforcing the break-time requirement and the public comments suggest that regulations are ultimately necessary, the DOL will then initiate rulemaking.

Click here to view the RFI.

On Jan. 7, 2011, President Obama signed into law H.R. 6523. The new law allows adult children whose parents participate in the TRICARE health care program, available to members of the military and their dependents, to retain coverage up to age 26. The dependent coverage extension is a key part of PPACA, but had not been previously applied to TRICARE participants. The TRICARE dependent coverage extension is retroactive to Jan. 1, 2011.

Click here to view H.R. 6523.

Click here to learn more.

On Dec. 30, 2010, the Department of Health and Human Services' (HHS) Early Retiree Reinsurance Program (ERRP) added new and updated Common Questions to its website. The following sections were revised with important information for plan sponsors:

• Application: Updated information on application approval
• Costs and Reimbursement: New information on submitting reimbursement requests and important information related to costs
• Early Retirees: Information regarding member IDs and early retiree eligibility
• Price Concessions and Cost Adjustments
• Miscellaneous: New questions related to ERRP funding and information on creating new employment-based plans

In addition, the ERRP website has a new look, including a new "Recent Changes" that provides the most recent updates.

Click here to learn more.

The American Payroll Association (APA) released a summary of state tax treatment relating to the dependent child mandate of PPACA. Generally, PPACA and the related guidance amended the Internal Revenue Code (IRC) to extend the general exclusion from gross income for employer-provided health insurance and reimbursements under an employer-provided accident or health plan to any employee's dependent who has not attained age 27 as of the end of the taxable year. However, PPACA did not address or affect state taxation of such employer-provided coverage. The APA summary provides a list of states that automatically adopt changes to the IRC, states that do not conform to the IRC, and states that are considering modifying their state tax codes in consideration of the dependent child mandate.

Click here to learn more.

The Internal Revenue Service (IRS) released the 2010 version of Form 8889, "Health Savings Accounts (HSAs)," and related instructions. HSA holders (and beneficiaries of deceased HSA holders) must report their HSA activity to the IRS by attaching Form 8889 to their Form 1040. Generally, reportable items include contributions and distributions. The form may also be used to calculate HSA deductions and any income and additional excise taxes relating to ineligible contributions and distributions.

Click here to view Form 8889.

Click here to view Form 8889 Instructions.

On Jan. 6, 2010, the DOL's Employee Benefits Security Administration (EBSA) released the 2010 Form M-1, "Report for Multiple Employer Welfare Arrangements (MEWAs) and Certain Entities Claiming Exception (ECEs)." The 2010 Form M-1 is largely unchanged from 2009, except for a few updates to certain compliance questions. Plan administrators may use EBSA's online filing system to expedite processing of the form.

Click here to view the news release.

Click here to view the 2010 Form M-1.

The DOL updated its "Troubleshooter's Guide to filing the ERISA Annual Report." The guide addresses potential filing errors and how to avoid them and the new all-electronic filing process (including e-signature options). The guide also contains a line-by-line guide for completing the Form 5500 and the various related schedules. Common reporting errors are included within the guide as well as several checklists that are applicable based on plan size or plan type.

Click here to view the Form 5500 Troubleshooter's Guide.

On Jan. 3, 2011, the IRS issued Bulletin No. 2011-1, which includes eight revenue procedures that contain the 2011 updates for certain letter rulings, determination letters and other IRS guidance. Of specific interest for employee benefit plans is Rev. Proc. 2011-3, which describes several areas in which IRS counsel offices will not issue letter rulings or determination letters. These "no ruling" areas include:

• whether a self-insured medical reimbursement plan satisfies the nondiscrimination requirements of Code Section 105(h) for a plan year;
• whether amounts used to provide various benefits are includible in participants' gross income and considered "wages" for withholding and employment tax purposes when the benefits are offered through a cafeteria plan; and
• whether an action is "gross misconduct" within the meaning of the COBRA provision regarding termination of employment.

Other revenue procedures contained in the bulletin include the type of advice the various IRS counsel offices will provide, the areas in which the IRS will issue determination letters or letter rulings, as well as any changes in user fees.

Click here to view Bulletin No. 2011-1.

On Dec. 29, 2010, President Obama signed into law the Omnibus Trade Act of 2010 (H.R. 6517). The new law addresses the health coverage tax credit (HCTC), which provides an 80 percent tax credit to cover the health insurance premiums, such as COBRA, of certain eligible individuals and their dependents. H.R. 6517 extends the HCTC for six weeks, through Feb. 12, 2011. Thus, for workers who lose their jobs due to foreign competition and for older retirees in failed pension plans, the HCTC is available for eligible coverage purchased through Feb. 12, 2011. The HCTC should not be confused with the 65 percent COBRA premium subsidy provided under the American Recovery and Reinvestment Act, which was not extended by H.R. 6517.

Click here to view H.R. 6517.

Click here to view the IRS HCTC Press Release.

The IRS recently issued the 2010 versions of Publication 502 (Medical and Dental Expenses) and Publication 503 (Child and Dependent Care Expenses). Publication 502 describes what medical expenses are deductible by taxpayers on their 2010 federal income tax returns. The 2010 version includes a discussion of the COBRA premium assistance subsidy and an update to the HCTC and health insurance costs for self-employed persons. In addition, changes to the "controlled substances" entry have been made to clarify that controlled substances (such as marijuana) obtained in violation of federal law cannot be included as medical expenses, even if they are legal under state law.

Publication 503 describes the requirements that taxpayers must meet in order to claim the dependent care tax credit (DCTC) under IRC section 21 for child and dependent care expenses. The 2010 version includes an explanation of how to calculate the DCTC when the taxpayer has multiple qualifying individuals, but one of them has no dependent care expenses. The 2010 version also includes a new example illustrating how the DCTC applies where a taxpayer has two qualifying individuals with different dependent care expense amounts and is partially reimbursed under a dependent care assistance program.

Click here to view Publication 502.

Click here to view Publication 503.

The IRS has released the 2011 version of Form W-2 (Wage and Tax Statement) and related instructions. One notable change is the addition of new codes for Box 12 reporting, including a new code "DD" to be used for reporting the cost of employer-sponsored health coverage. As background, starting with the 2011 tax year, PPACA established a new requirement that employers report the aggregate cost of employer-sponsored health coverage. However, guidance released on Oct. 12, 2010 (IRS Notice 2010-69), made such reporting optional for 2011. The 2011 Form W-2 is basically unchanged from the draft version that was released with Notice 2010-69. The instructions do not describe the details of calculating the cost of coverage, and state that additional guidance is anticipated. The instructions also include a reminder that the amount reported with code DD is not taxable.

Click here to view the 2011 Version of Form W-2.

Click here to view the 2011 Version of Form W-2 instructions.

On Dec.30, 2010, the California Department of Insurance (CDI) issued Bulletin 10-3. The bulletin relates to the transaction of insurance in California in connection with other states and territories and provides a list of 28 states and territories that are considered "reciprocal states" under section 706.7 of the California Insurance Code. Generally, under section 706.7 a reciprocal state is a state that prohibits insurers domiciled therein from insuring California residents without holding a California insurance license. The bulletin also provides certain exceptions to the above general rule on reciprocal states.

Click here to view Bulletin 10-3.

On Jan. 6, 2011, pursuant to AB 2244, the CDI issued guidance regarding the prohibition of pre-existing condition provisions for group and individual health plans in California for children under the age of 19. The guidance addresses issues relating to pre-existing condition provisions in connection with grandfathered and non-grandfathered group plans, open and late enrollment periods, and surcharges.

Click here to learn more.

On Jan. 6, 2011, the CDI Commissioner, Dave Jones, issued a press release calling on Blue Shield of California to delay its implementation of a new round of substantial health insurance premium increases, which could see some insurance rates raised by up to 59 percent. Commissioner Jones also sent a letter to Blue Shield urging them to refrain from implementing its rate increase for at least 60 days. On the same day, HHS secretary, Kathleen Sebelius, also issued a statement on Blue Shield's proposed rate increase. The HHS statement emphasized that HHS supports Commissioner Jones, and that the rate increase is not a result of PPACA.

Click here to view the CDI Press Release.

Click here to view the HHS Statement.

Effective Jan. 1, 2011, SB 141 requires each carrier that provides group long-term disability (LTD) products to disclose to a policyholder whether the LTD policy contains an offset. For a group policy, SB 141 requires the policyholder (typically the employer) to provide the same disclosure to each individual covered under the policy.

The disclosure must include whether the offset functions to limit payments to an insured under the policy if the insured is receiving any Social Security disability benefits and any other benefits the insured may receive. The notice must also include what other categories of benefits the policy will offset, the percent of income the policy covers, the maximum dollar limit of the policy, and finally, an example of how the offset will operate. The disclosure must be made in a separate document and in not less than fourteen point font.

Click here to learn more.

On Jan. 5, 2011, the Nebraska Department of Insurance issued a notice that addresses the definition of employer-sponsored small group health insurance under PPACA. For purposes of the issuance of small group health insurance, the number of employees for a small group is 100. However, a state may opt to lower the number of employees to 50. Current Nebraska law defines small group health insurance as being between one and 50 employees and this will remain the same, with one exception; for purposes of the medical loss ratio (MLR) calculation, the department will allow companies to use one to 100 employees in determining the MLR.

Click here to learn more.

The New Jersey Department of Taxation recently issued Technical Bulletin 24-R (TB-24R) relating to New Jersey state taxation of employer-provided commuter transportation benefits. TB-24R provides that, generally, commuter transportation benefits that are taxable for federal income tax purposes are taxable for state tax purposes. However, if an employer provides commuter transportation benefits pursuant to a compensation reduction plan, the salary or wage amount set aside for the account is included in the employee's gross income for state tax purposes. TB-24R also provides additional information on parking and bicycling benefits in connection with New Jersey state taxation laws.

Click here to view TB-24R.