Compliance in the Age of the Biden Administration: Reducing Financial Risks and Penalties

72

By Bob Greene, Senior HR Industry Analyst, Ascentis

In late January, 2021, when President Joe Biden took office and the Senate changed control (albeit by the slimmest of margins), American business ushered in the first two-year period under unified Democratic party control since 2009-2010. Based on actions taken in the first six months of this Administration, those businesses would be excused for feeling a bit of “compliance whiplash.” Let’s examine two of the most impactful changes in employer regulations during that time and the actions companies should take to manage or minimize their impact. 

Healthcare Continuation Coverage Under COBRA

The American Rescue Plan Act (“ARPA”), signed by President Biden on March 11, 2021, included extensions of many CARES Act and other early pandemic-related legislation, including extensions and/or modifications to Paycheck Protection Program loans, the Employee Retention Tax Credit, and paid Emergency Sick and Family Leave.

Perhaps the most unprecedented changes to employee benefits under ARPA were to the health insurance continuation rights of certain employees under COBRA. Since its passage in 1986, COBRA has guaranteed employees who terminate employment, voluntarily or involuntarily (except for gross misconduct) or those who experience a reduction in hours such that they no longer qualify for coverage, up to 18 months of continued health insurance coverage. Employers have been allowed to charge those qualified beneficiaries up to 102% of the total cost of coverage for an active employee.

Under ARPA, and solely for the period April 1 through September 30, 2021, beneficiaries who qualify for coverage due to involuntary termination (but not voluntary quits) or reduction in hours will pay nothing. Employers may not charge the COBRA continuee any premium. They will be reimbursed by the federal government, as an employment tax credit, up to the total 102% cost of coverage they would otherwise collect from the continuee. There are many compliance requirements surrounding this provision, and full detail on them can be found at Ascentis’ blog on the subject, here (Part I) and here (Part II).

Human Capital Management Compliance Implications: While this new set of temporary COBRA provisions do not include any new penalty provisions aimed at employers specifically, it imposes multiple new requirements, including the need for two new types of notices to beneficiaries and the need to evaluate the unique opportunity for free COBRA coverage to individuals who have previously declined coverage, increasing the chance for traditional COBRA penalties to be assessed against employers. These include:

  • Violations of any COBRA provision can incur a penalty of $100 per day per affected individual. This is a non-tax-deductible excise tax.
  • Additionally, ERISA includes special notice penalties (COBRA notices included in this category) of $110 per day of the compliance failure. [ERISA § 502(c)(1)]
  • The IRS conducts examinations of COBRA compliance, and their taxes levied for COBRA non-compliance after these exams range from $2,500 minimum to a maximum of 10% of the premiums paid by the employer during the preceding tax year for all group health plans, or $500,000, whichever is less.
  • Finally, COBRA administrators can be held personally liable for these violations under certain circumstances.

Worker Health and Safety During the Pandemic

Section 2101 of the American Rescue Plan Act granted a supplemental appropriation to the US Department of Labor of $200 million to carry out worker protection activities. The funding expires on September 30, 2023. Of this amount, $100 million has been allocated to OSHA – the amount comes to over 17 percent of OSHA’s annual budget on a one-time basis.

With this allocation, OSHA will hire 82 new FTEs through September 30, 2021, and 408 new FTEs by September 30, 2023 (the end of fiscal 2023), a large portion of them Compliance Safety and Health Officers (CSHOs) and Whistleblower investigators. The impact on number and frequency of OSHA investigations is expected to be dramatic.

Following this, OSHA published a new Emergency Temporary Standard (ETS) in COVID-19 exposure management in the Federal Register on June 17, 2021, and it became effective on June 21, 2021. This ETS applies only to healthcare institutions. It should be noted that $5 million of OSHA’s special appropriation under ARPA was earmarked to be used in high-risk industries such as health care organizations, and poultry and meat processing plants, agricultural facilities, and correctional institutions.

OSHA’s health care ETS encompasses standards and recommendations on many different subjects. Regarding employee masking, the ETS is explicit: it exempts [only] “fully vaccinated workers from masking, distancing, and barrier requirements when in well-defined areas where there is no reasonable expectation that any person will be present with suspected or confirmed coronavirus.” Other subject matter areas with standards articulated in the OSHA health care ETS include daily employee screening, patient and non-employee screening, training, personal protective equipment with particular emphasis on respiratory protection, and vaccination programs, among others.

While the June OSHA health care ETS does not address the validity of employer policies mandating vaccines, employers already know, based on Equal Employment Opportunity Commission (EEOC) guidance already issued, that employer vaccine mandates ARE allowed, provided that the traditional vaccine mandate exemptions are made for those in need of an accommodation due to disabilities, sincere religious belief, and current pregnancy. An additional exception based on the fact that all current COVID vaccines being released on an emergency use authorization (“EUA”) basis was resolved on August 23, 2021, when the FDA granted final approval to the Pfizer COVID vaccine.

Indeed, the new OSHA health care industry ETS is accompanied by a convenient flowchart for health care employers to use to determine whether the order applies to them, and at multiple steps throughout the chart, a determining criterion is “Are all employees fully vaccinated?” At this writing, and as the delta variant has created a fourth set of infection, hospitalization and fatality spikes around the country, it is reasonable to expect OSHA to “turn up the volume” on employer vaccination programs.

Human Capital Management Compliance Implications: The sudden upturn in COVID infections and hospitalizations, fueled by the delta variant, and the relative stagnation of the vaccination rate signal that the pandemic will continue, as must employer responses to it.  Millions of dollars budgeted by OSHA on new worker safety inspectors, whistleblower investigators, and investigations themselves over the next 26 months are signs every employer should take seriously. Employers should:

  • Ensure that their COVID worker safety plan is up to date, in writing, and complies with both federal and state (and in some cases local municipal or county) laws,
  • Invest in training to ensure employees understand what they must and must not do while on worksites to keep themselves and each other safe,
  • Conduct daily screenings of unvaccinated workers by either temperature checks, questionnaires, or both,
  • Re-examine their approach to vaccination advocacy. Posting a central source of trustworthy information on an employer’s self-service home page or employee portal is a great start to counteract some of the misinformation so freely available on social media. Beyond that, both vaccine incentives (which have shown themselves to be VERY effective, depending on the audience) and vaccine mandates may have to be reconsidered as infections, hospitalizations and deaths are all rising due to the delta variant.
  • ALL of the preceding information should be committed to writing, with full records retention, and made available to OSHA inspectors should they begin an investigation of an employer’s workplace.

About the Author

Bob Greene currently serves as senior human resources industry analyst at Ascentis. During his 40 years in the human capital management industry, Bob has assisted organizations in a vendor/partner role, as a practitioner and as consultant, using the latest software and service solutions for human resources management, payroll and benefits system design as well as acquisition strategies. He also currently serves as co-managing editor of the International Association for Human Resource Information Management’s “Workforce Solutions Review.”

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.