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b. Termination or reduction in hours of employment (other than by reason of
misconduct)
5. The election period generally refers to
6. Continuation coverage (use PP 3.29)
a. Beneficiaries are responsible for paying the insurance premiums
VII. Health Insurance Portability and Accountability Act of 1996 (HIPPA) (use PP 3.30)
A. Overview
1. An amendment to ERISA, Title I (Part 7: Group Health Plan Portability, Access, and
Requirements)
2. Contains 4 main provisions
a. The first provision guarantees that employees and their dependents who leave their
employer’s group health plan
i. Will have ready access to coverage under a subsequent employer’s health plan
ii. Regardless of their health or claims experience
b. The second provision sets limits on the length of time that health plans and health
insurance issuers
i. May impose preexisting conditions, and
ii. Identify conditions to which no preexisting condition may apply
c. The third provision counts periods of continuous coverage under another form of
comprehensive health coverage toward a preexisting condition limit
d. The fourth provision protects the transfer, disclosure, and use of health care
information
B. Availability and Portability (use PP 3.31)
2. Health plans may not create rules that would limit
a. Eligibility for initial enrollment
C. Limits to Preexisting Condition Rule (use PP 3.32)
1. Prior to HIPAA, group insurance plans excluded coverage of preexisting conditions
for up to 12 months
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© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
advice, diagnosis, care, or treatment was received during a designated period
preceding the beginning of disability or health insurance coverage
3. This law states that a preexisting condition exclusion can be imposed on a health
condition only if medical advice, diagnosis, care, or treatment was recommended or
D. Renewability
1. Group health insurance issuers are NOT required to renew coverage under certain
conditions, including
a. Nonpayment of contributions
E. Health Care Privacy
1. Effective 2003, covered health care entities must receive a patient’s consent for use
and disclosure of health records
2. Covered health care entities include
a. Health plans
4. Prior to obtaining written consent, the use of health information requires full
disclosure of how and for what purpose it will be used
VIII. Pension Protection Act of 2006 (use PP 3.33)
A. Overview
1. Designed to protect employees’ company-sponsored retirement plans in two ways:
a. For defined benefits plans, this law should strengthen the financial condition of
the PBGC by requiring that private sector companies that under-fund their plans
B. Defined Benefit Plans
1. Increase in underfunded plans poses a great risk to the financial solvency of the
PBGC.
3. Raises the amount that employers can contribute to pension funding with tax
advantages, creating an additional incentive to adequately fund pension plans.
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C. Defined Contribution Plans
1. Many individuals do not participate in defined contribution plans because they don’t
2. The act enables companies to automatically enroll their employees in defined
3. The act requires that companies give multiple investment options to employees to
select how much risk they are willing to bear.
IX. Patient Protection and Affordable Care Act of 2010 (use PP 3.34)
A. Overview
2. PPACA was amended by the passage of the Health Care and Education
Reconciliation Act of 2010
4. The goal of health care reform is to reduce the number of uninsured U.S. residents by
32 million in 2016
5. The Health Care and Education Reconciliation Act adds requirements:
a. Multitude of revisions to PPACA such as limiting the penalty to companies that
X. Federal Equal Employment Opportunity Laws
A. Overview
1. Several federal equal employment opportunity laws prohibit illegal discrimination
2. The Equal Employment Opportunity Commission (EEOC)
a. Oversees enforcement of these laws
b. Employees can file claims with the EEOC if they have reason to believe they have
been discrimination against on the basis of
i. Race
ii. Color
iii. Gender
c. Provides a number of services to employers, including
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B. Laws include (use PP 3.35)
2. Title VII of the Civil Rights Act of 1964
4. Pregnancy Discrimination Act of 1978
6. Civil Rights Act of 1991
XI. Equal Pay Act of 1963 (use PP 3.36)
A. Overview
a. Is an amendment to the minimum wage provision of the FLSA
b. Enacted to remedy a serious problem of employment discrimination in private
B. Relevance to employee benefits practices
a. Based on the principle that men and women should receive equal pay for
performing equal work, except where the pay is based on
i. Seniority
ii. Merit
b. Pay includes income (wages/salary) and benefits
c. Employers must provide equal employee benefits to male and female employees
who perform equal work and their beneficiaries, regardless of cost differences
XII. Title VII of the Civil Rights Act of 1964 (use PP 3.37)
A. Overview
1. Enacted to prohibit illegal discrimination against protected class individuals in
employment
2. Grew out of broader social unrest among underrepresented minorities
B. Coverage
1. Protects workers in
a. All private sector employers
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manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
e. Labor organizations
f. Joint labor management committees controlling apprenticeship and training
2. The equal employment opportunity Commission enforces Title VII
C. Relevance to Employee Benefits Practices
1. It makes it unlawful for employers to
a. Fail or refuse to hire or to discharge any individual, or otherwise to discriminate
against any individual with respect to his compensation including employee
benefits
b. To limit, segregate or classify employees or applicants for employment that might
adversely affect the employee’s status as an employee
XIII. Age Discrimination in Employment Act of 1967 (ADEA) (use PP 3.38)
A. Overview
1. Enacted to prohibit illegal discrimination in employment on the basis of age
2. Made it UNLAWFUL to
a. Fail or refuse to hire or to discharge anyone with respect to the employee’s
compensation
i. Terms
B. Coverage
1. Applies to
a. All private sector employers with 20 or more employees
2. The Equal Employment Opportunity Commission enforces the ADEA
C. Relevance to Employee Benefits Practices
1. ADEA sets limits on the development and implementation of early retirement
practices
2. Early retirement practices
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XIV. Older Workers Benefit Protection Act (OWBPA)
A. Overview
2. When employers require employee contributions toward their benefits, under
particular circumstances, employers can require older employees to pay more for
B. Relevance to Employee Benefits Practices
1. Employers can reduce life insurance coverage of older workers if the costs are
2. Equal benefit or equal cost principle: When costs differ significantly, the employer
may reduce the benefit for older workers only to the point where it is paying just as
XV. Pregnancy Discrimination Act of 1978 (use PP 3.39)
A. Overview
2. Enacted because courts found that employment discrimination against pregnant
women did NOT violate the sex provision of Title VII
3. Example: In Nashville Gas Co. v. Satty, court held that excluding benefits for
pregnant women from the company’s disability plan did not violate Title VII – both
B. Coverage
1. Applies to same organizations as Title VII of the Civil Rights Act
2. The Equal Employment Opportunity Commission enforces this act
C. Relevance to Employee Benefits Practices
1. Employers must NOT treat pregnancy less favorably than other conditions covered
under employee benefit plans, including health insurance and disability insurance
2. EXAMPLE: An employer that allows temporarily disabled employees to take
3. Protects the rights of women who take leave for pregnancy-related reasons, including
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XVI. Americans with Disabilities Act of 1990 (ADA) (use PP 3.40)
A. Overview
1. The EEOC ruled that employers must offer benefits to disabled workers on the same
2. Employers may NOT fire or fail to hire disabled individuals because
3. Retirement plans cannot impose different requirements on employees with disabilities
5. ADA does not prohibit employers from offering less generous disability retirement
benefits to the disabled than to those without disabilities
6. ADA Amendments Act of 2008
7. Congress found that persons with many types of impairments (including epilepsy,
8. However, Congress thought that individuals with these and other impairments should
be covered
B. Coverage
2. EEOC enforces the ADA
C. Relevance to Employee Benefits Practices
2. An employee can claim that he/she is a qualified individual with a disability and
simultaneously apply for disability benefits.
3. EXAMPLE: Giles, machinist at GE, injured, had surgery, allowed to return to work
with a lifting restriction of 50 pounds, was terminated, received and exhausted long-
term disability benefits, asked GE to make reasonable accommodations so he could
XVII. Civil Rights Act of 1991 (use PP 3.41)
A. Overview
1. Enacted to overturn several Supreme Court rulings that limited employee rights
a. Supreme Court ruled that employees must prove that employment practices were
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i. A legally acceptable defense against charges of alleged discriminatory
B. Coverage
2. EEOC enforces this act
C. Relevance to Employee Benefits Practices
2. Employers increase the level of benefits based on seniority
3. This Act overturned the Supreme Court decision in Lorance v. AT&T Technologies
a. Which allowed employees to challenge the use of seniority systems only within
XVIII. Genetic Information Nondiscrimination Act of 2008 (use PP 3.42)
A. Overview
1. On May 21, 2008, Congress enacted the GINA to protect job applicants, current and
former employees, labor union members, and apprentices and trainees from
2. Title I of GINA applies to employer-sponsored group health plans.
3. Title II prohibits the use of genetic information by employers and others and limits
B. Coverage
1. GINA covers both private and public sectors
C. Relevance to Employee Benefits Practices
1. Recent developments in the field of genetics, human genome decoding, and genetic
2. As a result, individuals possess concerns about whether they may be at risk of losing
Chapter 03 – Regulating Employee Benefits
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Summary
NLRA, IRC, FLSA, ERISA, COBRA, HIPPA EEO laws, PPACA, ADEA, PDA, ADA, both
Discussion Questions
1. Describe the differences between pension plans and welfare plans.
Main Points
• ERISA distinguishes between pension benefits and non-pension benefits.
• Welfare practices under ERISA refer to non-pension benefits.
2. Some people argue that there is too much government intervention, while others say there is
not enough. Given the presentation of laws and regulations in this chapter, do you think there is
too little or too much government intervention? Explain your answer.
Chapter 03 – Regulating Employee Benefits
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3. Use your familiarity with employee-benefits practices to identify an area of practice that
would benefit from government regulation. Describe the rationale for your answer.
4. Explain the differences between COBRA and HIPAA.
Main Points
• COBRA is an amendment to ERISA, Title 1 (Part 6: Continuation Coverage and
Additional Standards for Group Health Plans).
5. What is the main gist of the Pension Protection Act of 2006, and why has it been necessary?
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Cases
Understanding Your Benefits
Continuing Healthcare Insurance
1. Should you plan to elect the COBRA coverage?
2. If you do want to elect COBRA coverage, what are some important considerations to
make sure your health insurance coverage is not interrupted?
Instructor Notes
When an employee terminates from a company for reasons other than gross misconduct, the
employee may continue their health insurance coverage for 18-36 months under COBRA. While
employees may appreciate the opportunity to continue coverage, they are often surprised at the
cost of doing so. The monthly premium the employee must pay to maintain their health insurance
Student Responses
1. Should you plan to elect the COBRA coverage?
2. If you do want to elect COBRA coverage, what are some important considerations to
make sure your health insurance coverage is not interrupted?
Chapter 03 – Regulating Employee Benefits
A Discriminatory Time-off Policy?
1. Do you think that women are underrepresented in Staffon’s workforce?
2. Do you think Staffon’s time-off policy is discriminatory?
Instructor Notes
Under Title VII of the Civil Rights Act, an employer may not classify employees in a way that
would deprive them of a benefit based on their membership in a protected class. In this case, the
Student Responses
1. Do you think that women are underrepresented in Staffon’s workforce?
2. Do you think Staffon’s time-off policy is discriminatory?