Federal Employment Law Update – September 2016

Federal

HHS Issues Final Rule Increasing Civil Monetary Penalties for Inflation

On September 6, 2016, the Department of Health and Human Services (HHS) issued a final rule that adjusts the agency’s maximum civil monetary penalty amounts for inflation. The rule, which implements the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, adjusts the penalties to reflect inflation and “maintain their deterrent effect.”

Some of the penalty adjustments that could be applicable to employers are as follows:

  • Penalty for each pre-February 18, 2009, violation of a HIPAA administrative simplification provision: $150 (up from $100), up to a calendar year maximum of $37,561 (up from $25,000);
  • Penalty for each February 18, 2009, or later violation of a HIPAA administrative simplification provision, in which it is established that the covered entity or business associate did not know and by exercising reasonable diligence would not have known that the covered entity or business associate violated such a provision: $110 minimum to $55,010 maximum (up from $100 and $50,000, respectively), up to a calendar year maximum of $1,650,300 (up from $1,500,000);
  • Penalty for each February 18, 2009, or later violation of a HIPAA administrative simplification provision, in which it is established that the violation was due to reasonable cause and not to willful neglect: $1,110 minimum to $55,010 maximum (up from $1,000 and $50,000, respectively), up to a calendar year maximum of $1,650,300 (up from $1,500,000);
  • Penalty for each February 18, 2009, or later violation of a HIPAA administrative simplification provision, in which it is established that the violation was due to willful neglect and was corrected during the 30-day period beginning on the first date the covered entity or business associate knew, or, by exercising reasonable diligence, would have known that the violation occurred: $11,002 minimum to $55,010 maximum (up from $10,000 and $50,000, respectively), up to a calendar year maximum of $1,650,300 (up from $1,500,000);
  • Penalty for each February 18, 2009, or later violation of a HIPAA administrative simplification provision, in which it is established that the violation was due to willful neglect and was not corrected during the 30-day period beginning on the first date the covered entity or business associate knew, or, by exercising reasonable diligence, would have known that the violation occurred: $55,010 minimum to $1,650,300 maximum (up from $50,000 and $1,500,000, respectively), up to a calendar year maximum of $1,650,300 (up from $1,500,000);
  • Penalty for the failure to provide the Summary of Benefits and Coverage: $1,087 (up from $1,000); and
  • Penalty for violations of the regulations related to the medical loss ratio reporting and rebating: $109 (up from $100).

The final rule went into effect on September 6, 2016.

Read the Final Rule

IRS Issues Final Regulations Defining Terms Related to Marital Status

On September 2, 2016, the IRS released final regulations that reflect the holdings of Obergefell v. Hodges, Windsor v. U.S., and Rev. Rul. 2013-17. The regulations define terms in the Internal Revenue Code describing the marital status of taxpayers for federal tax purposes. The final regulations provide that the terms “spouse,” “husband,” and “wife” mean an individual lawfully married to another individual, and the term “husband and wife” means two individuals lawfully married to each other.

In addition, the final regulations provide that a marriage of two individuals will be recognized for federal tax purposes if that marriage would be recognized by the state, possession, or territory of the United States in which the marriage was entered into. Note that this reflects a change from the proposed regulations, which referred to any state, possession, or territory of the United States, rather than that in which the marriage was solemnized. The change avoids situations in which a couple would have to analyze the laws of all states, possessions, and territories to determine if any of those laws would fail to recognize their divorce, or would denominate an alternative legal arrangement (such as civil union) as a marriage.

The regulations clarify that the term “marriage” does not include registered domestic partnerships, civil unions, or other similar relationships recognized under state law that are not denominated as a marriage under that state’s law, and the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals who have entered into such a relationship.

The final regulations provide that two individuals entering into a relationship denominated as marriage under the laws of a foreign jurisdiction are married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States. This rule allows couples who are married outside the United States to determine marital status for federal tax purposes, regardless of where they are domiciled and regardless of whether they ever reside in the United States.

The final regulations apply as of September 2, 2016. Revenue Ruling 2013-17 is obsolete as of that date. However, taxpayers may rely on guidance related to the application of that ruling to employee benefit plans and the benefits provided under such plans, to the extent they are not modified, superseded, obsoleted, or clarified by subsequent guidance.

Read the Final Regulations