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Cutting Employee Hours due to Health Reform May Infringe Federal Law

In his May 29, 2013 Employee Benefit News article, Craig J. Davidson points out that cutting employee hours to under 30/week as a means to reduce eligibility for health insurance under health reform may infringe on Federal law.;

"...a potential problem exists with this strategy and it is found in the backwaters of ERISA Section 510 which refers back to ERISA Section 502. This could be fodder for attorneys depending on the motive of the employer in taking employees part time."

Davidson continues, "The poignant part of ERISA Section 510 states: "It shall be unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan ... "A plan participant in an ERISA plan (health plans are ERISA plans) has a legal right to participate in the plan without undo interference.

For sure, employers can - and do - cut employees' hours for reasons of legitimate business necessity. Sometimes a cut in hours relegates a benefit plan participant to ineligibility to participate in the plan under the terms of the plan's eligibility requirements.

Now, let us look at the single motive that some employers are considering to avoid offering health benefits under the terms of the ACA. This is key to a potential ERISA Section 510 claim against an employer.If the single motive for cutting employees hours is to avoid the purposes of the ACA, to me, that sounds like a subterfuge that interferes with a plan participant's rights to their health plan. That is one of the very prohibitions that ERISA Section 510 was written to prevent."

Read the complete article.

Posted by Cristie Travis at 3:10 PM

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