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Ohio Bureau of Workers' Compensation Planning a Move to Prospective Payment

Posted on Fri, Oct 25, 2013 @ 04:54 PM

David J. Schmittby David J. Schmitt

Ohio employers currently pay their workers’ compensation premiums “retrospectively.” This means that when employers write a check for their workers’ compensation premium, they are paying for the previous six months of coverage, or in “arrears.” For example, private employers paid in February 2013 for the July 1, 2012 to December 31, 2012 coverage period.

Prospective billing is an industry standard and builds upon ongoing efforts by BWC to modernize its operation. Under prospective billing, BWC would, like most insurance companies, collect employer premiums for the upcoming policy period. In other words, employers will make upfront payments to BWC for their workers’ compensation coverage.

Potential Benefits of Prospective Payment:

The BWC believes that a switch to a prospective billing system could provide the following benefits to Ohio employers:

  1. Opportunities for more flexible payment options (e.g., monthly, quarterly, yearly) with possible discounts for those who pay a year in advance for example.
  2. Ability to better anticipate budgetary impacts of workers’ compensation coverage, especially for public-taxing districts.
  3. Better opportunities for BWC to provide quotes online or via phone.
  4. Fewer costs from employers who either don’t pay premiums timely or have workers injured without coverage being mutualized among employers in good standing.
  5. Moving to prospective payment also increases BWC’s ability to detect employer non-compliance and fraud.

Transition

The legislature has given BWC the authority to pursue prospective billing, meaning the switch could occur as early as late 2014. Prior to switching, BWC plans to ask its Board of Directors to authorize a credit for all employers equal to the full amount of six months’ premium. This would allow employers to make their first prospective payment without worrying about also having to pay their last retrospective payment. This would equate to an estimated $900 million savings to businesses. In addition, this switch would result in rate reductions of 2 percent for private employers and 4 percent for public employers.

Cors & Bassett will continue to monitor this BWC initiative and inform employers when to expect these savings to occur

Tags: Bureau of Workers' Compensation

Product Liability Alert: California Imposes New Regulations Regarding Chemical Composition of Consumer Products

Posted on Tue, Oct 08, 2013 @ 07:38 PM

David J. Schmittby David J. Schmitt

Companies that manufacture or retail products in California should be aware of this new California statute and associated regulations.

On October 1, 2013, the Safer Consumer Products Act took effect in California, imposing new requirements on product manufacturers, importers and even retailers and assemblers of products, regarding the components of certain consumer products. The regulations are codified in Title 22, Division 4.5, Chapter 55 of the California Code of Regulations and will be administered by the Department of Toxic Substances Control ("DTSC").

The stated purpose of the Act is to require responsible entities "to seek safer alternatives to harmful chemical ingredients in widely used products." The DTSC's first responsibility under the Act is to identify candidate chemicals, or chemicals that have been identified as harmful by California, federal and international agencies. Within 180 days, the DTSC must create a list of priority products, consisting of no more than five products to which the Act's regulations will apply. This priority products list will be updated at least once every three years. A "priority product" need not be narrowly-defined, but may be as general as a "laundry product," encompassing a variety of consumer products. The DTSC will publish its lists of priority products and candidate chemicals on its website.

When a priority product contains a candidate chemical, the chemical is deemed a chemical of concern ("CoC"). A responsible entity ("entity") – one whose consumer product contains a CoC – must notify the DTSC within 60 days to identify itself and provide a list of brands containing the subject CoC. An entity thereafter faces three alternatives: (1) stop California distribution of the consumer product; (2) remove the CoC from the product; or (3) conduct an alternative analysis to demonstrate whether there is a feasible, less harmful replacement chemical.

The Act provides for DTSC supervision over the entity's choice. The entity must, for example, notify the DTSC if it opts to stop distribution in California, if it removes the CoC from its product or if it replaces the CoC with another chemical. If the entity retains the CoC in the product, the entity must submit a preliminary analysis to the DTSC detailing the reasons for which the CoC must remain in the product in lieu of alternative chemicals.

This preliminary analysis is supplemented by a final alternative analysis, after which the DTSC determines the appropriate action. The DTSC may decide to require the entity to inform consumers that the product contains the chemical or to restrict the sale of the product. The DTSC may even prohibit distribution and sale of a product even if no alternative chemical exists.

At present, unlike Proposition 65 enforcement, citizens are not entitled to bring a private right of action, on behalf of an individual or the general public. Rather, the DTSC is responsible for the Act's enforcement. Any entity that has violated a regulation will be listed on the DTSC's Failure to Comply List on its website. A violation may also result in the DTSC's imposition of a fine or criminal penalty as determined by the Health and Safety Code. A product may be exempt from compliance, however, where the CoC is below a certain threshold, as long as the CoC is a naturally-occurring contaminant of the product. A product may also be exempt if it is made up of more than 100 subparts, as long as the product is not a children's product or clothing.

Although the Act has been criticized by some for its weak enforcement and penalty measures, it is still significant for product manufacturers and other entities who manufacture, sell and distribute their consumer products in California. These entities should remain informed of the DTSC's priority products and candidate chemicals lists. If an entity's product contains a CoC, it is the entity's responsibility to ensure compliance with the Act's provisions.

Tags: Product Liability

UPDATE: DOMA—IRS & Department of Labor Issue Guidance

Posted on Wed, Oct 02, 2013 @ 10:21 AM

Jack B. HarrisonBy Jack B. Harrison

On June 26, 2013, the Supreme Court issued its long-awaited decision in Windsor v. United States, No. 12-307, a case challenging the section of the Defense of Marriage Act (DOMA) under which same-sex marriages validly entered into under applicable state law were not recognized for the purposes of federal laws.  The Court ruled, in a 5-4 decision, that this section of DOMA is unconstitutional.  The Supreme Court first determined that those defending the law, representatives of the United States Congress, actually had standing to defend the law, this giving the Supreme Court jurisdiction to hear the case.  The majority, with Justice Kennedy writing for the Court, held that the equal protection clause of the Fourteenth Amendment prohibited the federal government from refusing to recognize same-sex marriages that have been entered into validly under the law of a state.  A primary basis for this decision was that states have historically defined the parameters for those marriages they consider valid.  In this specific case, since New York had chosen to protect same-sex relationships by allowing same-sex couples to marry, it was a violation of equal protection for the federal government to make unequal a subset of state-sanctioned marriages.

On September 18, 2013, the Department of Labor (“DOL”) released Technical Release No. 2013-04 in order to provide guidance to employee benefit plans regarding the definition of "spouse" and "marriage" under ERISA in light of the Supreme Court's decision in Windsor.  The Internal Revenue Service (”IRS”) previously issued identical guidance to taxpayers in Revenue Ruling 2013-17.

The guidance issued by both the DOL and the IRS provides the following:

  1. "Spouse" refers to any individuals who are lawfully married under any state law, including individuals married to a person of the same sex.
  2. "Marriage" includes a same-sex marriage that is legally recognized as a marriage under any state law.
  3. Marriages between same-sex individuals that were validly entered into in a state whose laws authorize the marriage of two individuals of the same sex will be recognized even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.
  4. "Spouse" and "marriage" do not include individuals in a formal relationship recognized by a state that is not called a marriage under state law, such as domestic partnerships and civil unions.

Under the DOL analysis, the state of celebration rule, recognizing marriages that are valid in the state in which they were celebrated, regardless of the married couple’s state of domicile, provides for uniformity.  The DOL reasoned that the application of this rule provides a uniform rule of recognition that can be applied by employers, plan administrators, participants and beneficiaries.  According to the DOL, to adopt a rule based on the state of domicile, as opposed to the state of celebration, would create much confusion for employers who operate or have employees (or former employees) in more than one state or whose employees move to another state while entitled to benefits.  The net effect of the adoption of such a rule, according to the DOL would be a substantial burden on employers, both financial and administrative.

While the DOL release does not provide an effective date or indicate whether this new guidance will apply retroactively, the DOL does make it clear that it will offer further guidance dealing with specific benefit plan issues under ERISA.

Given these continuing developments in the aftermath of the Windsor decision, prudent employers and other plan sponsors should take the following steps, in consultation with their benefits counsel and plan administrators:

  • Send appropriate communications to employees about how the Windsor decision potentially impacts their benefits, describing what changes are being made to the benefit plans or policies in light of the decision;
  • Review benefit plans and employee policies to determine the impact of Windsor, if any, on their plans and policies;
  • Determine whether current plan eligibility rules, definitions and policies, specifically as related to the definition of spouse, need to be revised in light of Windsor and then revise applicable documents and forms, as necessary;
  • Where the employer provides domestic partner/civil union partner health benefits, consider whether those benefits should be continued or revised, given that same-sex spouses will be recognized as spouses for purposes of federal law, considering carefully applicable state law requirements and risks; and
  • Ensure that outside administrators, insurers and service providers are administering plans in a manner consistent with the employer's intent and the applicable legal requirements, including with respect to payroll and tax issues, in light of the decision in Windsor.

Tags: DOMA, Defense of Marriage Act