Recently, Employee Benefit News published an article by Craig J. Davidson, CEBS on how reducing employee hours may create an ERISA problem for employers. Essentially his argument states that employers will be reducing employees hours to to avoid setting up a benefit plan, which interferes with the right of the employee to participate in the plan and therefor this is a violation of ERISA Section 510.
The portion of ERISA which he is basing his thesis 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 … ”
Here’s the problem with this argument – there has to be a plan in place which the employee would otherwise have a right to participate in.
The fact is, employers will be reducing hours to avoid a penalty assessed by the government. There is no obligation for the employer to setup a plan so ERISA does not apply to an employer who does not offer a benefit plan and is seeking to legally avoid the penalties of the ACA.
The ACA does not require employers to setup a health plan, it simply penalizes them for not doing so.
Reducing employee hours to reduce or eliminate government penalties does not infringe on an employee’s right to participate in a plan because there is no plan.
At the very least, this interpretation of ERISA is a stretch. A stretch that will make a lot of money for attorneys at the very least.
This does not mean that there won’t be an attempt to enforce this interpretation of ERISA but if you or your client does not offer a plan, applying ERISA will be a hard argument for the government to make.