Government Affairs Committee Meeting September 10Th & 11Th

Government Affairs Committee Meeting September 10th & 11th, 2013 Washington, D.C.

AGENDA

Tuesday Sept. 10

Location: Hall of States Building Room 231, 444 North Capitol St. NW, Washington, DC

11:00 a.m. – 11:30 a.m. Gather / Welcome

11:30 a.m. – 12:30 p.m. Lunch with Political Speaker

12:30 p.m. – 1:45 p.m. Employment / Labor Update (NLRB, Persuader, DOMA) Kara Maciel, Epstein Becker Green Healthcare Update (Employer Delay, Reporting Requirements) Adam Solander, Epstein Becker Green

1:45 p.m. – 2:00 p.m. Break

2:00 p.m. – 2:40 p.m. Patent Trolls Matthew Tanielian, Franklin Square Group

2:40 p.m. – 3:00 p.m. Issue Roundup (Interchange, SNAP, Menu Labeling, Etc.)

3:00 p.m. – 3:45 p.m. GMO Briefing Louis Finkel, EVP Grocery Manufactures Association (GMA)

3:45 p.m. – 4:30 p.m. Committee Policy Discussion on GMOs

5:00 p.m. – 6:30 p.m. NGA Capitol Hill Reception Featuring 2nd Annual Congressional Best Bagger Contest Location: Rayburn House Office Building B-318 45 Independence Ave SW, Washington, DC

Wednesday Sept. 11

7:30a.m. – 7:50 a.m. Breakfast Location: NGA’s Offices 1005 North Glebe Road Arlington, VA (near Holiday Inn Hotel Ballston)

7:50 a.m. – 8:45 a.m. Capitol Hill Meetings Preparation / Briefing Primary Hill Meeting Topic: Healthcare

9:45 a.m. – 11:30 a.m. Capitol Hill Lobbying Meetings (NGA is coordinating meetings and teams) (approximately)

Government Affairs Committee Roster

Mr. Darrell Bourne Mr. Michael Erlandson Ragland Bros. Retail Co. SUPERVALU INC. – Corporate Headquarters Huntsville, AL Eden Prairie, MN [email protected] [email protected]

Mr. Chris Brown Mr. Nate Filler Wray’s Food and Drug Ohio Grocers Association Yakima, WA Columbus, OH [email protected] [email protected]

Mr. RF Buche Mr. Mike Gallagher GF Buche Company dba Buche Foods Spartan Stores, Inc. Sioux Falls, SD Grand Rapids, MI [email protected] [email protected]

Mr. Brian Burnam Mr. Larry Gayer Keith’s Foods, Inc. Country Fresh Inc. dba Country Fresh Market Bloomfield, IA Shell Knob, MO [email protected] [email protected]

Mr. Spencer Coates Mr. Ron Graff, JR Houchens Industries, Inc. Columbiana Foods, Inc. Giant Eagle Bowling Green, KY Youngstown, OH [email protected] [email protected]

Mr. Jason Cooper, Chair Mr. Tim Henderson Brookshire Grocery Company Henderson’s IGA, Inc. Prairie Village Tyler, TX Valentine, NE [email protected] [email protected]

Mr. Doug Cunningham Mr. Kevin Herglotz Affiliated Foods Midwest Unified Grocers Norfolk, NE Livermore, CA [email protected] [email protected]

Ms. Linda Doherty Mr. Jimmy Holland New Jersey Food Council Associated Wholesale Grocers Trenton, NJ Kansas City , KS [email protected] [email protected]

Mr. Kevin Doris Mr. Gerry Kettler Gerland Corporation Niemann Foods, Inc. Houston, TX Quincy, IL [email protected] [email protected] Mr. Bob King Mr. Paul Rowton Associated Food stores, Inc. GES, Inc. dba Food Giant Salt Lake City, UT Marianna, AR [email protected] [email protected]

Mr. Manard Lagasse Mr. Brandon Scholz Associated Grocers, Inc Wisconsin Grocers Association Baton Rouge, LA Madison, WI [email protected] [email protected]

Mr. Tom Litzler Mr. Dan Shaul Remke’s Markets, Inc. Missouri Grocers Association Erlanger, KY Springfield, MO [email protected] [email protected]

Mr. Nolan Lockwood Mr. Christy Spoa Walla Walla’s Harvest Foods Ellwood City Save-A-Lot Walla Walla, WA Ellwood City, PA [email protected] [email protected]

Mr. Barry Loy Mr. Michael Needler, JR Supermarket Operations, Inc. – The Markets Fresh Encounter, Inc. Natchez, MS Findlay, OH [email protected] [email protected]

Ms. Lorelei Mottese, Vice-Chair NGA Government Affairs Staff: Wakefern Food Corporation Edison, NJ Greg Ferrara [email protected] Vice President, Public Affairs (703) 516- 8811 Mr. Jim Nilsson [email protected] Geissler’s Supermarkets, Inc. dba Geissler’s Tom Wenning East Windsor, CT Executive Vice President & General Counsel [email protected] (703) 516- 8805 [email protected] Mr. Ron Rehkopf Rehkopf Enterprises, Inc. Kailee Tkacz Texarkana, TX Manager, Government Affairs [email protected] (703) 516- 8832 [email protected] Mr. Jim Ried Olean Wholesale Grocery Cooperative, Inc. Hannah Loy Olean, NY Coordinator, Public Affairs (703) 516- 8815 [email protected] [email protected]

Trying To Avoid ACA Mandate? ERISA 510 May Catch You - Law360 Page 1 of 3

Law360, New York (August 22, 2013, 12:03 PM ET) -- The employer mandate provision of the Affordable Care Act requires that applicable large employers — those with 50 or more full-time equivalent employees — provide health insurance to their full-time employees or pay a tax penalty. Significantly, the ACA defines a full-time employee as anyone who works on average 30 hours or more each week. Especially in industries that employ high numbers of part-time employees, this definitional change has the potential to greatly expand the number of employees eligible for employer-sponsored coverage.

In response to this change, employers are analyzing their workforces to determine how best to comply with the ACA mandates, while also reducing the potential financial impact from having to provide coverage or pay a penalty for all such full-time employees. A common response from employers has been to employ certain “workforce management” techniques to reduce some or all employee hours to below 30 hour per week in order to reduce the number of full-time employees for whom they are responsible under the mandate.

While this type of workforce management seems a rational response that would be permitted by the ACA, employers may well be stepping out of the frying pan and into the fire, due to certain provisions of the Employee Retirement Income Security Act of 1974, as amended.

Potential Liability Under Section 510 of ERISA for ACA Workforce Modifications

Plaintiffs attorneys and other commentators are warning that employers who modify their employees’ hours of work to prevent their qualification as a full-time employee may be running afoul of Section 510. In general, ERISA Section 510 was enacted in order to prevent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights. Specifically, Section 510 provides the following:

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.

In the context of the employer mandate, plaintiffs are likely to argue that an employer’s workforce management efforts interfered with an employee’s right to health coverage. The most likely ERISA 510 claim would seem to involve an employee who averaged 30 hours a week previously. http://www.law360.com/articles/464969/print?section=employment 8/27/2013 Trying To Avoid ACA Mandate? ERISA 510 May Catch You - Law360 Page 2 of 3

If such an employee’s hours were capped below 30 hours a week, arguments could be made that such a change was made with the intent to deny that individual a right to which he or she would have been entitled. While this scenario seems to be the most likely Section 510 claim, arguments could be made that an employer’s workforce management practices could violate Section 510, regardless of the number of hours the employee worked previously.

In general, ERISA 510 claims are evaluated by the courts using a three-step process. The first step is that the plaintiff employee must establish a prima facie case by showing that the employee had the opportunity to attain rights under the plan, was qualified for the position at issue and was subjected to adverse action giving rise to an inference of discrimination.

The second step requires employers to defend against these claims by articulating a legitimate, nondiscriminatory reason for the action taken. Should the employer articulate a legitimate reason for the action, the burden falls to the employee to establish that the employer was motivated by the specific intent to avoid providing the benefit.

Strategies for Avoiding Section 510 Liability

The critical issue in ERISA 510 cases is often whether the employer acted with a specific intent to interfere with an employee’s rights to benefits under a plan. Thus, employers should take steps to avoid providing plaintiffs' attorneys with a “smoking gun,” should they decide to engage in workforce management and lower employee hours.

Perhaps most significantly, employers should avoid making public statements on employment or health benefits strategy. In a Section 510 lawsuit, statements made by the employer will almost certainly be used to demonstrate a specific intent by the employer that these modifications were made to avoid providing individuals with benefits.

In addition to controlling external communication, employers should be cognizant that their internal communications may also be used against them in a Section 510 lawsuit. As a result, employers should take steps to ensure that internal communications around workforce management are discussed only in the context of a larger business needs and, if possible, protected under attorney-client privilege.

Employers should also centralize their communications around benefits issues so that the organization has a single, consistent voice. Creating a centralized communication plan includes training all levels of management on the unified message about workforce management to avoid the release of any conflicting statements to the media.

When making modifications to workforce hours, an employer should ensure that the modifications are done in a manner that will cause the least amount of potential liability. As discussed above, employers who reduce all of their current full-time employees' hours to below 30 hours per week likely face the highest potential risk under Section 510 because it may be difficult to defend that these changes were made for any reason except to avoid the employer mandate.

In recognition of this fact, some employers have protected themselves by “grandfathering” current employees working over 30 hours and switching to a new part-time strategy moving forward that limits the hours of newly hired part-time employees.

Finally, employers should look to minimize Section 510 risk on an ongoing basis by minimizing the need to engage in workforce management. Central to this undertaking is that employers should review and revise all employee handbook provisions and job http://www.law360.com/articles/464969/print?section=employment 8/27/2013 Trying To Avoid ACA Mandate? ERISA 510 May Catch You - Law360 Page 3 of 3

descriptions to ensure that they accurately reflect each employee’s work status as full-time or part-time as defined by the ACA.

Potential Penalties

ERISA Section 502 provides employees with equitable relief, which may entitle the employee to payment of the value of the health care benefits the employee would have received as a full-time employee. In addition, Section 502 damages could also include plan reformations or other monetary relief.

Further, the various ACA penalty provisions could be triggered if it is ruled that the plan failed to meet the ACA requirements. Finally, the ACA whistleblower damages provisions could also be triggered.

Conclusion

The merit of Section 510 claims, in the employer mandate context, is a subject that will be decided ultimately by the courts. However, given the potential for damages, we can expect a number of these suits to be brought in the coming years.

Thus, it is recommended that employers seek legal advice to develop strategies that protect their current workforce management decisions and allow them to effectively and economically staff their businesses on an ongoing basis, including minimizing risk under Section 510 of ERISA.

--By Adam C. Solander and Elizabeth B. Bradley, Epstein Becker Green PC

Adam Solander is an associate in the health care and life sciences practice in the Washington, D.C., office of Epstein Becker Green. Elizabeth Bradley is an associate in the firm's labor and employment practice and is also based in Washington, D.C.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

http://www.law360.com/articles/464969/print?section=employment 8/27/2013 Daily Labor Report®

NUMBER 132 JULY 10, 2013

HEALTH CARE

The Affordable Care Act provides unique compliance obligations for employers in certain industries, especially those with large numbers of part-time and seasonal workers, and companies that may comprise multiple smaller employers, Epstein Becker Green’s Kara M. Ma- ciel and Adam C. Solander say in this BNA Insights article. Some of the provisions of the impending shared-responsibility rules will have a greater impact on high-turnover industries because of their size and employee mix, the authors sug- gest. They outline the four major steps required under the shared-responsibility rules and explain some of the nuances in terms of managing costs, as well as both monetary and non- monetary risks to consider.

For Employers With High Turnover and Large Numbers of Seasonal Workers, the ACA Creates Unique Compliance Issues

1 BY KARA M. MACIEL AND ADAM C. SOLANDER he Affordable Care Act provides unique compliance obligations for employers in certain indus- T tries, such as the retail, lodging, restaurant, and Kara M. Maciel is a Member of the Firm in grocery sectors, many of which employ large numbers Epstein Becker Green’s labor and employ- of part-time and seasonal employees, and may comment, litigation, and health care and life sci- prise multiple smaller employers. ences practices, and co-chair of the firm’s Of paramount concern for these employers, as for all wage and hour subpractice group. She repre- employers, is the impending application of the shared sents employers in lawsuits arising under fed- responsibility rules. The guidance to date has been very eral and state law, including discrimination much a mixed bag for these high-turnover industries. and disability claims, and wage and hour, Some of the shared responsibility provisions will have a leave, and trade secret issues. Adam C. Solan- greater impact on these industries because of their size der is an Associate in the firm’s health care and employee mix, while others provide useful interpre- and life sciences practice. He represents tations that will lessen some of the negative impacts of health care clients with respect to health regu- these rules. latory compliance issues and health care reform and advises employers on issues con- cerning ERISA preemption, obligations of plan fiduciaries, prohibited transactions, and 1 Pub. L. No. 111-148, 124 Stat. 119 (2010), amended by denial of benefits. Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029.

This article will briefly examine the four major steps during a calendar year, if the employees in excess of 50 required under the shared responsibility rules in the during that period were seasonal employees. Employers context of these industries. These include: (1) determin- may use a reasonable, good faith interpretation of the ing whether the business is subject to the shared re- term seasonal worker until the IRS issues further guid- sponsibility rules; (2) identifying the number of full- ance. time employees a particular employer may have; (3) ex- This provision is significant for many high-turnover amining the way the shared responsibility rules relate industries as it allows the businesses to meet their to high-turnover industries; and (4) identifying strate- needs by hiring temporary workers without being sub- gies for compliance. ject to the shared responsibility provisions on those grounds. Overview Applicable Large Employers and Controlled As background, the employer shared responsibility Group Status rules provide that ‘‘applicable large employers’’ with 50 or more full-time employees (including full-time equiva- A hallmark of many of these high-turnover industries lent employees) will be subject to a tax penalty if any is that they are comprised of a strong independent sec- full-time employee receives a premium tax credit or tor. In general, independent businesses are made up of cost-sharing reduction to purchase health coverage either one facility or a small number of facilities that through a health insurance exchange. may be owned by one person or a family. For purposes Generally, an employee is eligible for a cost-sharing of determining whether an employer has at least 50 full- subsidy if: (1) an employer does not offer the majority time employees, companies that have common owner- of its full-time employees (and their dependents) the ship or are otherwise related (such as family-owned en- opportunity to enroll in coverage; or (2) an employer of- terprises) will be combined using a test codified at Sec- fers its full-time employees the opportunity to enroll in tion 414 of the Internal Revenue Code. coverage, but the coverage is ‘‘unaffordable’’ or does In the context of the ACA, these rules will affect these not provide ‘‘minimum value.’’ high-turnover industries, especially the independent Conceptually, the shared responsibility rules are not sector. While these rules are certainly not new, in many difficult to understand. However, as with all things cases, the shared responsibility rules are the catalyst for ACA, the devil is in the details and the details are what these businesses to offer coverage for the first time, and complicate shared responsibility compliance for high- the rules represent yet another complication. turnover industries. Entities that may be affected by these rules should examine their ownership structures to determine Applicable Large Employers and the Seasonal whether their businesses will be treated as a single entity under Section 414. The concern with treating these Employee Exception businesses (many of which may be only tangentially related) as a single entity is that it jeopardizes many of the Industries that experience seasonal increases in the efficiencies independent businesses are able to create. demand for their goods or services, in many cases, re- For example, parents may not be able to split different spond to this temporary spike in demand by hiring tem- segments of the family business to offer their various porary employees with no intention of extending the heirs, while retaining some ownership stake, without employment relationship beyond the time of increased such businesses being aggregated and forced to provide demand. For example, it is not uncommon for small em- costly benefits or pay a tax penalty. ployers to hire college students over the summer to deal Governance issues are also likely to arise as some of with a stockpile of odd jobs that accrue over the course these business owners may not agree with their family of a year. To the extent those businesses are small busi- members on whether to ‘‘pay or to play’’ (meaning nesses, the regulations provide an exception whereby cover workers or pay the fine for not doing so). If the such workers would not be counted for purposes of de- pay contingent represents more than 5 percent of the termining whether the business is an ‘‘applicable large workforce, it could force the hand of the entire con- employer’’ subject to the shared responsibility provi- trolled group. By withholding an offer of health cover- sions. age, this group could trigger the penalty across the en- In general, employers are considered ‘‘applicable tire full-time workforce even if the remainder of the large employers’’ and, therefore, subject to the shared business offered coverage. responsibility provisions if they engage 50 or more ‘‘full-time’’ employees or a combination of ‘‘full-time’’ and part-time employees that equals 50 ‘‘full-time’’ The Full-Time Employee and High-Turnover equivalent employees during the prior calendar year. Industries However, there is a seasonal employee exception, which applies when an employer’s workforce exceeds Perhaps the most significant change the ACA will 50 full-time employees for no more than 120 days or make for employers who rely on a large seasonal or four calendar months (which need not be consecutive) part-time workforce comes from the new requirement

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7-10-13 COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC. DLR ISSN 0418-2693 3 that employers classify employees who work, on average, as few as 30 hours per week as ‘‘full-time.’’ Of particular note, an employee’s hours of service include In general, the ‘‘look-back stability safe harbor each hour for which the employee is paid for perfor- mance of services, or entitled to payment even when no method’’ works well for high-turnover industries. work is performed (for example, because of vacation, illness, or leave of absence). Because of the transient nature of employee Before passage of the ACA, few employers would have considered such 30-hour employees ‘‘full-time’’ or populations in these sectors, many employees who eligible for health benefits. Further exacerbating the ef- would have been considered full-time do not stay fect of the new ‘‘full-time’’ definition was that under the ACA itself, it appeared as though employers would be with the company long enough to qualify for required to determine whether an employee was ‘‘full- time’’ on a month-to-month basis and potentially enroll beneﬁts. Thus, only employees who are truly and disenroll employees in health coverage accord- ingly. This, of course, would have been an administra- full-time, and committed to the company, will tive nightmare for employers and engendered great ill will from employees whose status was periodically qualify for health beneﬁts. flipped from covered to uncovered. In response to this problem, previous guidance proposed, and the proposed shared responsibility regula- First, if the period of time for which no hours of ser- tions adopted, a ‘‘look-back stability safe harbor vice are credited is at least 26 consecutive weeks, an method’’ for determining whether employees worked employer may treat an employee, for purposes of deter- the requisite average of 30 hours per week to be consid- mining full-time status, as a newly hired employee. For ered full-time. Generally, under this approach, employ- periods of less than 26 weeks, the employer may also ers are allowed to select a period of time between three choose to apply a rule of parity. Under this rule, an em- months and one year to use as a ‘‘measurement pe- ployee may be treated as having terminated employ- riod.’’ ment and having been rehired as a new employee if the If an employee provided 30 hours of service per week period with no hours of service is at least four weeks during the ‘‘measurement period,’’ then the employer and is longer than the employee’s period of employ- must treat the employee as a full-time employee for a ment immediately preceding that period with no cred- corresponding ‘‘stability period’’ regardless of the num- ited hours of service. ber of hours of service the individual works over that If an employee is treated as a new hire, the employer time period. Generally, an employer must use the same must use the look-back period that is applicable to all look-back period for all employees but may use differ- new hires. However, if the employee is treated as a con- ent periods for certain categories of employees. tinuing employee, the measurement and stability period that would have applied to the employee, had the per- In general, the ‘‘look-back stability safe harbor son not experienced the period of no credited hours, method’’ works well for high-turnover industries. Be- would resume upon resumption of service. cause of the transient nature of employee populations In these high-turnover industries, it is common for in these sectors, many employees who would have been employees to come in and out of employment with a considered full-time do not stay with the company long particular employer. Therefore, it is important that em- enough to qualify for benefits. Thus, only employees ployers in these industries take the steps to terminate who are truly full-time, and committed to the company, employment when an employee leaves to minimize the will qualify for health benefits. possibility that a returning employee, who is unlikely to However, one complicating factor for many high- be full-time moving forward, may qualify for benefits. turnover industries is the ‘‘break-in-service’’ rules. In general, these rules are designed to prevent employers Applicability of Shared Responsibility from terminating and later rehiring employees in order Provisions to High-Turnover Workforces to avoid providing them benefits. Consequently, the proposed rule identifies two methods for accounting for An ‘‘applicable large employer’’ may be subject to a the hours of rehired or resuming service employees un- shared responsibility tax penalty in one of two ways: (1) der the shared responsibility provisions. the applicable large employer fails to offer at least 95

DAILY LABOR REPORT ISSN 0418-2693 BNA 7-10-13 4 percent of its full-time employees (and their depen- than 60 percent.2 Health and Human Services has re- dents) the opportunity to enroll in coverage; or (2) an leased final regulations setting forth four methodolo- ‘‘applicable large employer’’ offers its full-time employ- gies employers may use to determine whether their ees the opportunity to enroll in coverage, but the cover- plan meets the ‘‘minimum value’’ threshold. Specifi- age is ‘‘unaffordable’’ or does not provide ‘‘minimum cally, plans may use the following methods: (1) the value.’’ Minimum Value Calculator, which is available on the Center for Consumer Information & Insurance Over- sight website under the ‘‘Plan Management’’ heading, Offer of Coverage/Dependent Coverage and allows plans to enter the features of their plan to determine whether they meet the ‘‘minimum value’’ re- The shared responsibility provisions impose liability quirements;3 (2) any safe harbor established by HHS on ‘‘applicable large employers’’ that fail to offer to at and the IRS; (3) certification by an actuary, but only if least 95 percent (or, if it would provide greater flexibil- the plan contains nonstandard features that are not ity to the employer, to five) of their full-time employees suitable for the Minimum Value Calculator or other safe the opportunity to enroll in coverage. One of the more harbor; or (4) any plan in the small group market that controversial aspects of the shared responsibility rules meets any of the ‘‘metal levels’’ of coverage based on is that they require applicable large employers to offer the Actuarial Value Calculator. coverage not only to full-time employees, but also to their dependents. The shared responsibility regulation Coverage is deemed ‘‘affordable’’ if the employee’s defines dependents as children up to age 26, but does required contribution for self-only coverage does not not include spouses. exceed 9.5 percent of the employee’s household income To give employers sufficient time to implement these for the taxable year. If an employer offers multiple cov- changes, the shared responsibility regulations provide a erage options, the affordability test applies to the em- transition relief period with respect to dependent cover- ployer’s lowest-cost option that also meets the ‘‘mini- age for 2014. Under this relief, any employer that takes mum value’’ requirement. steps in 2014 to fulfill its obligations to offer coverage Employers generally will not know their employees’ to dependents of full-time employees will not be liable household incomes and there are situations in which an for any tax payment under the law solely on account of employee’s income may actually be less than what a failing to offer coverage to dependents in plan year particular employer pays the employee. Therefore, the 2014. regulations allow employers to use one of three afford- The requirement to make an offer of coverage gener- ability safe harbors to determine whether an employer’s ally applies for high-turnover employers in the same coverage satisfies the 9.5 percent affordability test. way it does for other businesses. However, the work- The affordability safe harbors are the: (1) Form W-2 force composition of most high-turnover employers safe harbor, which allows plans to base affordability on complicates the offer of coverage and necessitates copi- the wages reported in Box 1 of an employee’s Form ous recordkeeping. This is because most high-turnover W-2; (2) the rate of pay safe harbor, under which an em- industries employ disproportionate numbers of low- to ployee’s monthly contribution amount is affordable if is moderate-income hourly employees. equal to or lower than 9.5 percent of the employee’s In general, these employees are unlikely to accept an hourly rate of pay multiplied by 130 hours per month; employer’s offer of coverage for several reasons. First, and (3) the federal poverty line safe harbor, under the cost for most employer-sponsored plans will far ex- which coverage offered to an employee is affordable if ceed the costs associated with the individual mandate the employee’s cost for self-only coverage under the penalties. Therefore, in many cases it will make eco- plan does not exceed 9.5 percent of the federal poverty nomic sense for such employees to forgo coverage. line for a single individual. Further, with the market reform changes, individuals In general, the calculators and safe harbors are help- can obtain primary care through nontraditional settings ful for demonstrating compliance with the ‘‘affordabil- and wait until they need health insurance before sign- ity’’ and ‘‘minimum value’’ requirements. However, ing up for coverage. To the extent an individual at- HHS has recently released a proposed regulation that tempts to receive a subsidy to purchase coverage could complicate an employer’s task of demonstrating through an exchange it is important that the employer compliance with these standards. has systems in place to document the offer of coverage Specifically, the regulation proposes that a plan’s so as not to trigger the shared responsibility penalties. share of costs for ‘‘minimum value’’ purposes is deter- The shared responsibility regulations do not currently mined without regard to reduced cost-sharing available require a specific manner of documenting the offer, as under a wellness program. Likewise, the ‘‘affordability’’ long as the offer comports with the general recordkeep- of an employer-sponsored plan is determined by assum- ing requirements in the code. ing that each employee fails to satisfy the requirements of a wellness program. Minimum Value and Affordability While wellness incentives may not generally be used to determine whether the ‘‘minimum value’’ and ‘‘af- Even if an employer offers its full-time employees the fordability’’ standards are satisfied, the proposed rule opportunity to enroll in coverage, it may still be subject provides an exception allowing plans to factor in the to a tax penalty if the offered coverage is either ‘‘unaf- cost-sharing features of tobacco cessation programs for fordable’’ or does not provide the requisite level of both ‘‘minimum value’’ and ‘‘affordability’’ purposes. ‘‘minimum value.’’ The ACA provides that an employer-sponsored plan 2 26 U.S.C. § 36B(c)(2)(C)(ii). meets the ‘‘minimum value’’ requirement if the percent- 3 http://cciio.cms.gov/resources/regulations/index.html/ age of total allowed costs of benefits provided is no less #pm.

7-10-13 COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC. DLR ISSN 0418-2693 5

For plan years beginning before 2015, the proposed rule gives plans the ability to assume that all wellness program incentives, tobacco-related or otherwise, While carefully managing and restricting the would have been earned by an employee for the purposes of calculating ‘‘minimum value’’ and ‘‘affordabil- number of hours certain employees may work ity.’’ This transition relief only applies to wellness programs and incentives in effect as of May 3, 2013, and might make sense from an economic employees eligible for the wellness program as of May 3, 2013. standpoint . . . employers that engage in aggressive workforce management techniques may Employer Mandate Delayed Until 2015 well experience signiﬁcant levels of employee On July 2, 2013, in reaction to employers’ concerns about the many difficulties posed in efforts to comply dissatisfaction. with the Employer Mandate provisions of the ACA, the Obama administration delayed the implementation of the reporting and penalty provisions of the shared responsibility regulations until 2015. This delay could be As noted, the shared responsibility regulations autho- a precursor to other implementation delays as the ad- rize employers to use a look-back period of up to one ministration seeks to make the ACA’s implementation year. In light of the recent transition relief the shared successful, especially in light of intense scrutiny as to responsibility provisions become effective Jan. 1, 2015, implementation and an inability to amend the law in the look-back period for 2015 could have begun as early Congress. Employers and business groups have lobbied Jan. 1, 2014. In light of this, an employer wishing to en- the administration heavily in recent months, emphasiz- gage in such workforce management techniques must ing the cost and administrative burdens that compli- act now to ensure that employees it does not intend to ance with the shared responsibility regulations will provide benefits for do not have the requisite number of place on them. Significantly, employers have struggled hours to be considered ‘‘full-time.’’ to analyze the number of employees who work 30 hours It is important to note, however, that workforce man- or more per week and the costs associated with provid- agement techniques are not without legal risk to the ing such employees with affordable coverage. In addi- employer. There is a growing concern in the employer tion, new recordkeeping and reporting requirements, community that certain workforce management prac- for which little guidance has been released, left employ- tices could give rise to Employee Retirement Income ers with many unanswered questions and made it diffi- Security Act Section 510 claims. In general, Section 510 cult to institute efficient compliance systems. makes it unlawful to interfere with employee benefits Importantly, other aspects of the ACA remain in ef- and protects an employee’s right to present and future 4 fect despite the delay of the Employer Mandate. For ex- entitlements. Thus, any workforce realignment that re- ample, the Individual Mandate requirement stays in duces the number of hours an employee works could place requiring individuals to obtain coverage by Janu- give rise to arguments that the employer interfered with ary 1, 2014, or pay a $95 penalty. Benefit plan design is- an employee’s right to present or future benefits under sues remain important, including capping any waiting Section 510 of ERISA. period to 90 days to obtain coverage. Restructuring Employee Hours Considerations for Plans With Many Seasonal While carefully managing and restricting the number or Part-Time Workers of hours certain employees may work might make sense from an economic standpoint, employers also The new definition of ‘‘full-time’’ is likely to greatly should consider noneconomic consequences prior to increase the number of workers eligible for an employ- implementing such a structure. Namely, employers that er’s group health plan. In response, many employers, engage in aggressive workforce management tech- especially those with large numbers of seasonal and niques may well experience significant levels of em- part-time workers, will need to consider appropriate ployee dissatisfaction. This could have significant and workforce management techniques to control the in- unforeseen repercussions on the employer’s business creasing costs associated with their group health plans. and undermine the justifications for employer- sponsored benefits. To start, such employers should examine past em- Employers that aggressively manage their work- ployment statistics to determine the likely number of force’s hours are more likely to be targeted by union or- newly minted ‘‘full-time’’ employees and the additional ganizing efforts. In addition, employees who have be- costs associated with providing such individuals health come accustomed to a certain number of hours and re- coverage. If the additional costs are not sustainable, the sulting level of earnings are likely to become employer must evaluate its workforce against business dissatisfied should an employer reduce or ‘‘cap’’ the needs. The employer may need to modify its employees’ number of hours an employee may work. This discon- hours to achieve an affordable mix of ‘‘full time’’ em- tent will likely make them more receptive to union or- ployees, to whom benefits will be provided, and ‘‘part time’’ employees (with hours not exceeding 30 hours per week). 4 29 U.S.C. § 1140.

DAILY LABOR REPORT ISSN 0418-2693 BNA 7-10-13 6 ganizing appeals or lead to more workforce turnover tors exist that do not aggressively distinguish between with the costs associated with such turnover. ‘‘part-time’’ and ‘‘full-time’’ employees as such employ- Even employees who are provided with health care ers will likely be more attractive to employees. coverage are likely to be influenced by their dissatisfied Finally, businesses that engage in aggressive work- colleagues should aggressive workforce management force management could suffer harm to their commu- techniques be employed. Disgruntled employees could nity standing. Potential customers could view the com- cause an overall decrease in workplace morale and pro- pany as lacking in corporate social responsibility and ductivity. As a result, in situations of such diminished unsympathetic to employees. In such cases, the reputa- morale, it will be difficult for employers to recruit and tional harm could outweigh the benefit of workforce retain key employees. This is especially true if competi- management efforts.

7-10-13 COPYRIGHT ஽ 2013 BY THE BUREAU OF NATIONAL AFFAIRS, INC. DLR ISSN 0418-2693 Employer Mandate Delayed—Employers Get Welcome Relief from Penalties Until 2015, but Many Questions Remain

July 3, 2013

By Frank C. Morris, Jr.; Kara M. Maciel; Elizabeth B. Bradley; and Adam C. Solander

In reaction to employers’ concerns about the many difficulties posed in efforts to comply with the Employer Mandate provisions of the Affordable Care Act (“ACA”), the Obama administration (“Administration”) announced late yesterday that it is delaying the implementation of the penalty provisions and other aspects of the shared responsibility regulations until 2015. While the delay may have been to accommodate stakeholder requests, the delay also may have accommodated the Administration in connection with its readiness to implement the Employer Mandate. This delay could be a precursor to other implementation delays as the Administration seeks to make the ACA’s implementation successful, especially in light of intense scrutiny as to implementation and an inability to amend the law in Congress.

Employers and business groups have lobbied the Administration heavily in recent months, emphasizing the cost and administrative burdens that compliance with the shared responsibility regulations will place on them. Many union leaders who supported passage of the ACA have also raised a variety of concerns with its implementation. Significantly, employers have struggled to analyze the number of employees who work 30 hours or more a week and the costs associated with providing such employees with affordable coverage. In addition, new recordkeeping and reporting requirements, for which little guidance has been released, left employers with many unanswered questions and made it difficult to institute efficient compliance systems.

Mark J. Mazur, Assistant Secretary for Tax Policy at the U.S. Department of the Treasury (“Treasury”), indicated in a statement on Treasury’s website that the delay “is designed to meet two goals. First, it will allow us to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.” Notably, at this time, it does not appear that the implementation of the individual mandate, requiring American workers to purchase health insurance or pay a tax, has been delayed—nor is the ACA otherwise generally stayed. Valerie B. Jarrett, Senior Advisor to President Barack Obama, further explained on The White House Blog: “As we implement this law, we have and will continue to make changes as needed.” She went on to state that:

In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening. So in response to your concerns, we are making two changes.

First, we are cutting red tape and simplifying the reporting process. We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination. So we plan to re-vamp and simplify the reporting process. Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.

Second, we are giving businesses more time to comply. As we make these changes, we believe we need to give employers more time to comply with the new rules. Since employer responsibility payments can only be assessed based on this new reporting, payments won’t be collected for 2014. This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers.

Just like our effort to turn the 21 page application for health insurance into a 3 page application, we are working hard to adapt and to be flexible in employer and insurer reporting as we implement the law.

The government plans to issue formal guidance detailing this transition period in the coming weeks. In addition, as noted in Mr. Mazur’s statement, by the end of the summer, Treasury expects to publish proposed rules for implementing the ACA’s information reporting requirements (under Section 6055) by insurers, self-insuring employers, and other parties providing health coverage. The Administration has stated that it will continue to invite business and employer groups to comment and discuss how the ACA and Employer Mandate will impact their operations and workforces.

While employers wait for the guidance, this news provides some welcome relief and breathing room to allow employers to continue to work with their legal counsel and benefits experts to evaluate how best to comply with the ACA's myriad regulations. Employers would also be well served to use this time to work with business groups to make their voices heard to government regulators over the next 18 months with the mission of achieving responsible and effective health reform.

Employers should also keep in mind that other aspects of the ACA remain in effect despite delay of the Employer Mandate. For example, benefit design issues remain important. Employers using or considering wellness programs will want to be cognizant of, and take advantage of, the final wellness rule. In addition, non-discrimination requirements and the ACA’s broad whistleblower provisions remain in effect, as does

2 the Cadillac tax on January 1, 2018. Prudent employers will realize that this welcome development should not arrest their plans to control health care costs, provide affordable coverage, and move forward with compliance activities otherwise required by the ACA.

As guidance is forthcoming and regulations are issued, we will continue to advise employers of all sizes in all industries on how to implement the ACA in a meaningful and cost-effective fashion that best serves their unique needs.

****

For more information about this Advisory, please contact:

Frank C. Morris, Jr. Kara M. Maciel Washington, DC Washington, DC 202/861-1880 202/861-5328 [email protected] [email protected]

Elizabeth B. Bradley Adam C. Solander Washington, DC Washington, DC 202/861-5329 202/861-1884 [email protected] [email protected]

This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company.

About Epstein Becker Green Epstein Becker & Green, P.C., founded in 1973, is a national law firm with approximately 275 lawyers practicing in 11 offices, in Atlanta, Boston, Chicago, Houston, Indianapolis, Los Angeles, New York, Newark, San Francisco, Stamford, and Washington, D.C. The firm is uncompromising in its pursuit of legal excellence and client service in its areas of practice: Health Care and Life Sciences, Labor and Employment, Litigation, Corporate Services, and Employee Benefits. Epstein Becker Green was founded to serve the health care industry and has been at the forefront of health care legal developments since 1973. The firm is also proud to be a trusted advisor to clients in the financial services, retail, and hospitality industries, among others, representing entities from startups to Fortune 100 companies. Our commitment to these practices and industries reflects the founders' belief in focused proficiency paired with seasoned experience. For more information, visit www.ebglaw.com.

July 2013 HEALTHCARE REFORM: AFFORDABLE CARE ACT

Supermarket Industry Impact The Affordable Care Act (ACA) imposes complex challenges for supermarkets to provide health care coverage that meets employees’ needs while continuing to operate a business in an extremely competitive environment. Independent food retailers and wholesalers employ 944,000 full-time, part-time, and seasonal workers all operating under fluctuating and unpredictable work schedules in order to meet varying consumer demand. In addition, the supermarket industry operates on a one percent profit margin, so health coverage and compliance costs must remain affordable in order for companies to maintain employee benefits, a robust workforce, and competitive consumer prices.

Position Regulations implementing the health care law (and any related legislation amending the law) must provide flexibility and minimize new burdens in order for retailers and wholesalers to continue providing health coverage that is affordable to both the employee and the employer.

The National Grocers Association (NGA) supports the following amendments to the ACA:

1.) Amend ACA’s definition of a full-time employee (Sec. 1513 of ACA) to be 40 hours a week or include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 174. The ACA redefines a full-time employee as those averaging 30- hours per week. This will have far-reaching consequences on how food retailers manage their workforce, adjust work schedules, and offer employee benefits well beyond health care. NGA supports S. 1188 and H.R. 2575 which redefine a full-time employee as those working 40 hours per week. 2.) Provide flexibility for employers voluntarily offering health coverage to part-time employees. Applying restrictions to part‐time employee coverage will make these benefits unaffordable to the employer and in some cases conflict with collectively- bargained agreements. As a result, employers may be forced to no longer voluntarily offer coverage to part‐time employees who will likely seek coverage and tax credits through health exchanges. 3.) H.R. 1249 to ensure Restaurant Menu Labeling (Sec. 4205 of ACA) is not expanded to grocery stores that already provide nutrition information on a vast majority of foods. 4.) H.R. 1254 to repeal mandatory auto-enrollment for health coverage. (Sec. 1511 of ACA) which will increase administrative costs and cause confusion when employees fail to opt- out but are required to be enrolled and a premium is deducted from their paychecks. Sec. 1511 should be repealed. 5.) H.R. 2529, S. 1368 in 112th Congress to restore Flexible Spending Account (FSA) card purchases of Over-the-Counter (OTC) medicine without a prescription. 1

Background Under the ACA, beginning in 2015 (delay announced July 2, 2013), “large employers” (50+ full- time equivalents) must offer coverage to full-time employees (averaging 30 hours/week) and that employer-offered coverage must be “affordable” (not cost the employee more than 9.5 percent of his/her household income) and provide a “minimum value” of at least 60 percent of the average benefit costs covered or face a tax penalty. The law also prohibits annual or lifetime benefit limits and prohibits plans from including waiting periods longer than 90 days before enrolling employees into coverage (not impacted by delay). In addition, employers with more than 200 full-time employees are required to automatically enroll full-time employees in health coverage if no election is made by the employee. The law does not require employers to provide coverage to part-time employees, but if an employer voluntarily offers health coverage to part- time employees, annual and lifetime coverage limits are prohibited, preventive care must be provided without cost-sharing, and other market reforms must be met.

The ACA also includes two mandates that specifically impact the supermarket industry: 1.) Nutrition Labeling of Standard Menu Items at Chain Restaurants (Sec. 4205): A restaurant menu labeling requirement that FDA has proposed to expand to grocery stores. 2.) Prohibition on Over-the-Counter medicine (OTCs) purchases (Sec. 9003) with a Flexible Spending Account (FSA) debit card unless a consumer obtains a doctor’s prescription.

Regulations/Implementation Since January 2013, federal agencies have released several compliance rules for implementing the Shared Responsibility for Employers Regarding Health Coverage provisions of the ACA. The Administration has stated that these rules may be relied upon for compliance purposes in 2014; however on July 2, 2013 the Obama Administration announced it would delay enforcement of the employer mandate until January 1, 2015. The supermarket industry has been actively engaging the Administration and federal agencies regarding the following regulations:

1.) Determining employee eligibility for coverage: The “Shared Responsibility for Employers” Proposed Rule provides employers a “measurement period of up to 12 months to determine whether new variable-hour employees or seasonal employees are full-time employees” followed by a corresponding “stabilization period” for maintaining coverage. 2.) 90-Day Waiting Period Limitation: A March 2013, Proposed Rule clarifies that ACA’s 90- day waiting period limitation does not begin until an employee becomes eligible for coverage but no longer than 13 months from the date of hire. Employers offering coverage to part-time employees are allowed eligibility conditions, such as 1,200 cumulative hours of service. 3.) Coverage Affordability Requirement: Proposed Rule provides safe-harbor for employers to comply with ACA’s “affordability” requirements by demonstrating that self-only coverage offered to employees does not exceed 9.5 percent of an employee’s wages. 4.) Coverage Minimum Value Requirement: HHS final regulations provide options for employers to certify that the coverage they offer meets a “minimum value” of at least 60% of the average benefit costs covered to avoid a tax penalty.

5.) Mandatory Employee Auto-enrollment: Sec. 1511 of ACA requires employers with more than 200 full-time employees to automatically enroll eligible employees in health coverage even if no election is made by the employee. In February 2011, the Department of Labor “concluded that its automatic enrollment guidance will not be ready to take effect by 2014.”

The National Grocers Association (NGA) is the national trade association representing the retail and wholesale grocers that comprise the independent sector of the food distribution industry. An independent retailer is a privately owned or controlled food retail company operating a variety of formats. Most are serviced by wholesale distributors, while others may be partially or fully self-distributing. Independents are the true "entrepreneurs" of the grocery industry and dedicated to their customers, associates, and communities. The independent grocery sector is accountable for close to 1 percent of the nation's overall economy and is responsible for generating $129.5 billion in sales, 944,000 jobs, $30 billion in wages, and $27 billion in taxes. NGA members include retail and wholesale grocers, state grocers associations, as well as manufacturers and service suppliers.

Talking Points: Amending the Definition of a Full-Time Employee in the Affordable Care Act (ACA)

 The Affordable Care Act (ACA) imposes complex challenges for supermarkets to provide health coverage that meets both the employee’s needs while continuing to operate a business in an extremely competitive environment.  Independent grocers employ 944,000 full-time, part-time, and seasonal workers many who operate under fluctuating and predictable work schedules (including management) to meet variable customer demand.

The 2 biggest challenges of the ACA for my business:

The Full-Time Definition: The ACA re-defines a “full-time” employee as those averaging 30 hours per week which will have far reaching consequences on the industry.

Determination of a “large employer” under the ACA is complex (set at 50 full time equivalents). Consider a definition that simply uses a determination of full-time employer.

 The definition of full-time at 30 hours per week is fundamentally reshaping labor markets.  Employers must have a clear grasp of the number of full and part-time employees for business and workforce needs such as meeting customer demand, designing employee benefits, and planning for business expenses and tax liability.  The law’s definition of full-time as 30 hours per week does not reflect employees’ desire for flexible hours. Changing the definition avoids disruptions in the workforce and maintains flexible work options for employees.  Although employers have been given a year transition period to comply with the law, we simply cannot wait a year to see what happens to address the 30 hour threshold because the workforce is already starting to change. Once the labor market shifts, employees won’t be able to recapture lost wages, flexible hours, or more generous benefits.  Amending the definition of a full-time employee from 30 hours to 40 hours a week is good for employers and their employees because: • It will be easier for employers to provide more hours to all employees, increasing their take-home pay. • It will help employers offer more generous health coverage to full-time employees without making premiums prohibitive. • It will aid lower-income employees in accessing more affordable coverage options.  Increasing the threshold for full-time employees to 40 hours a week is also good for small businesses because it changes the small employer calculation, increasing the number of employees a small employer may employ before qualifying as a large employer.

THE ASK:

Tell your Member of Congress to work in a bipartisan manner to immediately address these challenges and create a legislative fix for the definition of a full-time employee.

 If elected official is not already a cosponsor, please ask them to become a co-sponsor of the Forty Hours is Full Time Act (S. 1188 in the Senate or H.R. 2988 in the House) or the Save American Workers Act (H.R. 2575 in the House) all bills which amend the definition of a full- time employee to 40 hours per week.  If member is a co-sponsor please thank them and ask if they will help make this bill become law by putting pressure on other Members of Congress, specifically leadership.

Question & Answer: Definition of a Full-Time Employee under the Affordable Care Act (ACA)

Why do we need to change the ACA definition of full-time employee at 30 hours per week per month?

 The definition of full-time at 30 hours per week per month is fundamentally reshaping labor markets.  Employers must have a clear grasp of the number of full and part-time employees for business and workforce needs such as meeting customer demand, designing employee benefits, and planning for business expenses and tax liability.  The law’s definition of full-time as 30 hours of service per week does not reflect employees’ desire for flexible hours. Changing the definition avoids disruptions in the workforce and maintains flexible work options for employees.

How did federal law define full-time before the ACA? Where did 30 hours per week come from?

 This is the first time that federal law has defined “full-time.” Previously, employers voluntarily provided benefits to employees based on the needs of their particular business and workforce.  The Fair Labor Standards Act (FLSA) requires some employers to pay hourly workers time and a half after they work 40 hours per week.  In a hearing, HHS stated that 30 hours was selected based on a survey of employers, however 30 hours per week per month does not reflect the typical standard used by employers in the E-FLEX coalition or the average hours worked by Americans today.  The most recent data from the Bureau of Labor Statistics shows that the average weekly hours for all private-sector employees is 34.5 hours.

Employers have a year of transition- why don’t we wait and see what happens in 2014?

 The definition at 30 hours per week is changing the workforce now.  The law requires employers to measure their workforce in 2014 to comply in 2015.  Once the labor market shifts, employees won’t be able to recapture lost wages, flexible hours or more generous benefits.

Won't employers push workers down to part-time status even if the threshold increases?

 Some may, but only if it makes sense for that particular business. What most employers want is to be able to offer their workers more flexible hours and more affordable benefits.

How will changing the definition of full-time employee affect employees?

 It will be easier for employers to provide more hours to all employees, increasing their take-home pay.  It will help employers offer more generous health coverage to full-time employees without making premiums prohibitive.  It will aid lower-income employees in accessing more affordable coverage options.

Does changing the definition help small employers?

 Yes. Increasing the threshold for full-time also changes the small employer calculation, increasing the number of employees a small employer may employ before qualifying as a large employer.

August 2013 PATENT TROLLS The problem of Patent Assertion Entities (PAEs) also known as “patent trolls” is no longer limited to big technology companies, it has spread from Silicon Valley to Main Street. Patent trolls are increasingly targeting end users of widely adopted technology, particularly small business owners, retailers, and startups threatening jobs and the economy. Patent trolls are for-profit firms with few employees beyond lawyers with a primary business of purchasing patents and asserting them through litigation. Patent trolls impose enormous costs on the economy costing an estimated $80 billion a year and have become a real issue for grocers. Trolls have targeted retailers for litigation over clickable menus on their websites and for offering Wi-Fi in their stores. Recently, NGA has been working with a massive coalition of both small and large businesses with the common goal of reducing unwarranted and abusive patent litigation.

Both the White House and Congress have made significant steps toward patent trolling proposals bringing real momentum to the patent reform movement recently. Both the White House and and Chairmen of the House and Senate Judiciary committees, Bob Goodlatte (R-VA.) and Patrick Leahy (D- VT) have released proposals to protect innovators from frivolous patent troll litigation.

While neither of the current patent troll proposals are perfect, they show true momentum and a bipartisan commitment to reforming the current patent system. NGA will continue to work with other industry groups to ensure policies are enacted that protect grocers from frivolous patent litigation. See below for a summary of what the White House and Goodlatte proposals entail:

WHITE HOUSE LEGISLATIVE RECOMMENDATIONS  Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking Patent Trademark Office (PTO) review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance.  Permit more discretion in awarding fees to prevailing parties in patent cases.  Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents.  Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use.  Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards.  Use demand letter transparency to help curb abusive suits.  Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

WHITE HOUSE EXECUTIVE ACTION STEPS  Making “Real Party-in-Interest” the New Default. The PTO will begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the PTO.  Tightening Functional Claiming. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will develop strategies to improve claim clarity.  Empowering Downstream Users. The PTO will publish education/outreach materials such as a web site offering answers to questions by those facing demands from a possible troll.  Expanding Dedicated Outreach and Study. Expand PTO, DOJ, and FTC outreach efforts, including events across the country to develop consensus around updates to patent policies and laws.  Strengthen Enforcement Process of Exclusion Orders. an interagency review of existing procedures will be launched to evaluate the scope of exclusion orders and work to ensure the process is transparent, effective, and efficient.

GOODLATTE DISCUSSION DRAFT SUMMARY Federal Courts:  Incentivizing Settlement in Patent Litigation – develops a process to help encourage and facilitate settlement discussion in appropriate cases and reduce protracted litigation in general.  Discovery Burdens – provision helps to reduce abusive discovery tactics, by developing procedures providing for limited initial discovery, to focus document production on core materials.  Case Management – provides for procedures to ensure initial disclosure and early case management conference practices in District Courts, to help identify any potentially case- dispositive issues.  Complaint Requirements – requires the Supreme Court to update the current model allegation of patent infringement form to require more information and greater specificity.  Customer-Suit Exception – allows a manufacturer of the allegedly infringing product to intervene and stay cases against downstream customers and retailers, who are not in the best position to defend an infringement suit. This provision helps protect small businesses.  IP Licenses in Bankruptcy –does not change existing law, but ensures that the courts follow U.S. law and not the laws of foreign countries. U.S. Patent & Trademark Office:  Transparency in Patent Assertions – ensures proper recordation of patents and improves transparency in patent assertions (demand letters and litigation) by providing real-party-in-interest information to the PTO.  Small Business Education and Outreach – ensures small businesses continue to have a strong voice at the PTO, will work to provide information to small businesses facing accusations  Improving Information Access and Transparency – creates webpage to ensure that the public has a way to access data collected by the PTO.  Studies on Patent Transactions, Quality and Examination – provides for studies to examine existing technologies to improve patent examination, recommendations to promote greater transparency

OTHER LEGISLATION Aside from what is mentioned above, significant legislation regarding patent trolls has been introduced in both Chambers and can be seen below:  Shield Act. Introduced on Feb. 27, 2013, the Saving High Tech Innovators from Egregious Legal Disputes Act of 2013 (H.R. 845), was co-sponsored by Rep. Peter DeFazio (D-Ore.) and Rep. Jason Chaffetz (R-Utah). The legislation proposes a “loser-pays” regime for patent litigation brought by NPE's.  End Anonymous Patents Act. Introduced on May 16, 2013, the End Anonymous Patents Act (H.R. 2024), sponsored by Rep. Ted Deutch (D-Fla.), seeks the disclosure of patent ownership.  Patent Abuse Reductions Act. Introduced on May 22, 2013 (and referred to the Senate Committee on the Judiciary on that same date), the Patent Abuse Reductions Act (S. 1013), sponsored by Sen. John Cornyn (R-Texas), is a comprehensive bill with new pleading requirements, discovery limits, and cost-shifting provisions.  Goodlatte-Leahy Discussion Draft. On May 23, 2013, the leaders of the House and Senate Judiciary committees, Bob Goodlatte (R-Va.) and Patrick Leahy (D-Vt.), respectively, released a 38-page, as yet unintroduced, “Patent Discussion Draft.” It is another comprehensive proposal that also includes settlement incentives and an identification of the real party in interest.  Patent Litigation and Innovation Act of 2013. Introduced on July 10, 2013 (and referred to the House Committee on the Judiciary on that same date), the Patent Litigation and Innovation Act of 2013 (H.R. 2639), sponsored by Rep. Hakeem Jeffries (D-N.Y.), is also a comprehensive bill.

August 2013 FARM BILL/FOOD STAMP UPDATE

 The 112th Congress failed to pass a farm bill last year due to budget and policy differences as well as election-year politics.  Farm policies began to expire on September 30, 2012, but in a last minute deal to avert the fiscal cliff on January 1, 2013, the 112th Congress passed a retroactive and one year extension of the farm bill until September 30, 2013.  The 113th Congress began to revisit the farm bill in spring of 2013. The House and Senate Agriculture Committees passed their respective farm bills in mid-May, both which were free SNAP choice language, made cuts to SNAP ($20.5 billion in the House, $4.1 billion in the Senate), and approved funding for a Healthy Food Financing Initiative (HFFI).  On June 10, the Senate passed the farm bill (S. 954) on a 66-27 vote.  On June 20, the House unexpectedly defeated the farm bill (H.R. 1947) on a 195-234 vote.  On July 11, the House passed an agriculture only farm bill (H.R. 2642) on a 216-208 vote.  It remains uncertain as to how the House will handle the nutrition title and how the respective Chambers will conference a split farm bill.  There is speculation that when Congress returns from the August recess, they may offer a nutrition title which cuts SNAP by $40 billion.  At this point, no one knows whether a new farm bill can be enacted in 2013. Pessimists wonder how the political, budget, and policy differences between and within the House and Senate can be reconciled, especially as it relates to food stamps before current policy begins to expire on September 30, 2013. Short term extensions are a likely outcome at this point.  Since most SNAP programs are governed by continuing legislation and are exempt from sequestration, SNAP will continue to operate even if Congress fails to pass a farm bill, though retailers should soon anticipate some changes as they relate to Cost of Living Adjustments (COLA) and American Recovery and Reinvestment Act (ARRA) sunsets.

10-Year Outlays: CBO’s May 2013 Baseline Budget (Current Spending Levels) vs. 2013 House and Senate Agriculture Committee Farm Bills as Reported (Dollars in Billions)

Dark Orange (top): Baseline Light Orange (middle): S. 954 Senate Farm Bill Medium Orange (bottom): H.R. 1947 House Farm Bill

$973 Total $955 $940 $764 Nutrition $760 $744 Crop $84 $89 Insurance $93 Conservati $62 $58 on $57 Commodit $59 $41 y $40 $4 All Other $6 $6

10-Year Change in Outlays Caused by 2013 House and Senate Farm Bills as Reported, Relative to May 2013 CBO Baseline Budget (Current Spending Levels) (Dollars in Billions)

Light Purple (top): S. 954 Senate Farm Bill Dark Purple (bottom): H.R. 1947 House Farm Bill

-$17.8 Total -$33.3 -$3.9 Nutrition -$20.5 $5.0 Crop Insurance $8.9 -$3.5 Conservation -$4.8 -$17.4 Commodity -$18.6 $2.1 All Other $1.7

USDA a.

United States AUG 0 1 2013 Department of Agriculture SUBJECT: SNAP- Fiscal Year 2014 Cost-of-Living Adjustments and ARRA Sunset Impact on Allotments Food and Nutrition Service TO: All Regional Directors Supplemental Nutrition Assistance Program 3101' Park Center Drive

Alexandria, VA This memorandum provides the fiscal year (FY) 2014 Cost-of-Living Adjustment (COLA) 22302-1500 to Supplemental Nutrition Assistance Program (SNAP) income eligibility standards and deductions that are effective as of October 1, 2013. In addition, this memorandum provides the maximum SNAP allotments that are effective as ofNovember 1, 2013.

Cost of Living Adjustments. Attached are FY 2014 COLAs for the 48 contiguous States and DC, Guam, and US Virgin Islands. COLAs for Alaska and Hawaii are also included, except for the maximum allotments which will follow under separate cover. Under the Food and Nutrition Act of2008, COLAs are effective as of October 1, 2013.

The shelter cap values increased $9 to $4 78 for the 48 States and DC. The shelter cap values for Alaska, Hawaii, Guam and the U.S. Virgin Islands also increased. The minimum standard deduction for household sizes 1 through 3 increased to $152 a month for the 48 States and D.C. Alaska, Hawaii, Guam, and the U.S. Virgin Islands also experienced minimal increases in their standard deduction amounts.

For the purpose of the FY 2014 COLA, maximum allotments remain unchanged through October. The American Recovery and Reinvestment Act of 2009 (ARRA) provided that SNAP allotments be the higher of either (a) the June 2008 Thrifty Food Plan (TFP) plus 13.6 percent or (b) the latest June TFP. Therefore, ARRA maintains the maximum allotment of $668 for a household size of four. Updates for Alaska and Hawaii will be released later in August as FNS will not receive the TFP for these areas until mid-August.

Sunset of the ARRA Maximum Allotments. Under ARRA, maximum allotments were to remain the same each year until the regular TFP adjustment increased allotments above those set by the Recovery Act. This provision sunsets effective November 1, 2013.

As a result, on November 1, 2013, maximum allotments will decrease for the 48 States and D.C, Guam, and the U.S Virgin Islands. Updates for Alaska and Hawaii will be released later in August. For a family of four receiving a maximum allotment, benefits will decrease from $668 to $632, a decrease of$36, or 5.4 percent.

Due to the ARRA sunset, States must adjust all household SNAP allotments twice this year: once on October 1, 2013, and again on November 1, 2013. Because these are statutory provisions, they cannot be waived or consolidated into one effective date.

AN EQUAL OPPORTUNITY EMPLOYER All Regional Directors Page 2

Regional Offices should ensure that their States are apprised of these changes and aware of the impact that the November 1, 2013, reduction in allotments will have on their SNAP households. Regional offices should also remind their States of the budgeting and shopping strategies, meal planning ideas, and nutrition advice available to SNAP households through SNAP-Ed, USDA's 10-Tips Nutrition Series, the MyPlate symbol, and the resources at ChooseMyPlate.gov.

State agencies with questions regarding these adjustments should contact their respective Regional Office representatives. Regional Office staff with questions should contact Angela Kline at Angela.Kline(a),fns.usda.gov. ~rm=r.-\A~...., Director Program Development Division

Attachment( s) SUPPLEMENAL NUTRITION ASSISTANCE PROGRAM OCTOBER 1, 2013 TO SEPTEMBER 30, 2014

Net Monthly Income Eligibility Standards (100 Percent of Poverty Level)

Household Size 48 States, DC, Guam, Virgin Alaska Hawaii Islands I $958 $1,196 $1,103 2 $1 ,293 $1,615 $1,488 3 $1,628 $2,035 $1 ,873 4 $1,963 $2,454 $2,258 5 $2,298 $2,873 $2,643 6 $2,633 $3,292 $3,028 7 $2,968 $3,711 $3 ,413 8 $3 ,303 $4,130 $3,798 Each additional member $335 $420 $385

Gross Monthly Income Eligibility Standards (130 Percent of Poverty Level)

Household Size 48 States, DC, Guam, Virgin Alaska Hawaii Islands 1 $1,245 $1,555 $1,434 2 $1 ,681 $2,100 $1,934 3 $2,116 $2,645 $2,435 4 $2,552 $3,190 $2,935 5 $2,987 $3,735 $3 ,436 6 $3,423 $4,280 $3 ,936 7 $3,858 $4,825 $4,437 8 $4,294 $5,369 $4,937 Each additional member $436 $545 $501

Gross Monthly Income Eligibility Standards For Households Where Elderly Disabled Are A Separate Household (165 Percent of Poverty Level)

Household Size 48 States, DC, Guam, Virgin Alaska Hawaii Islands I $1 ,580 $1,974 $1,820 2 $2,133 $2,665 $2,455 3 $2,686 $3,357 $3 ,090 4 $3,239 $4,048 $3,725 5 $3 ,791 $4,740 $4,361 6 $4,344 $5,432 $4,996 7 $4,897 $6,123 $5,631 8 $5,450 $6,815 $6,266 Each additional member $553 $692 $636 SUPPLEMENAL NUTRITION ASSISTANCE PROGRAM MAXIMUM MONTHLY ALLOTMENTS OCTOBER 1, 2013 TO OCTOBER 31, 2013 (Allotments under ARRA)

MAXIMUM SNAP ALLOTMENTS

Household Size 48 States and DC I $200 2 $367 3 $526 4 $668 5 $793 6 $952 7 $1 ,052 8 $1 ,202 Each additional person $150

Household Size Guam I $295 2 $541 3 $775 4 $985 5 $1 ,169 6 $1 ,403 7 $1 ,551 8 $1 ,773 Add on $222

Household Size Virgin Islands I $257 2 $472 3 $676 4 $859 5 $1 ,020 6 $1 ,224 7 $1 ,353 8 $1 ,546 Add on $193

MINIMUM SNAP ALLOTMENTS OCTOBER 1, 2013 TO OCTOBER 31,2103

Household 48 States Guam U.S. Virgin Size and DC Islands I - 2 $16 $24 $21 SUPPLEMENAL NUTRITION ASSISTANCE PROGRAM DEDUCTIONS OCTOBER 2013 TO SEPTEMBER 2014

STANDARD DEDUCTIONS

Area Household Size 1 -2 3 4 5 6+ 48 States and DC 152 152 163 191 219 Alaska 260 260 260 260 274 Hawaii 215 215 215 220 252 Guam 306 306 326 382 438 Virgin Islands 134 135 163 191 219

MAXIMUM SHELTER DEDUCTIONS

Area Maximum Amount 48 States and DC 478 Alaska 764 Hawaii 644 Guam 561 Virgin Islands 377 SUPPLEMENAL NUTRITION ASSISTANCE PROGRAM MAXIMUM MONTHLY ALLOTMENTS NOVEMBER 1, 2013 TO SEPTEMBER 30, 2014 (Allotments after ARRA sunset)

MAXIMUM SNAP ALLOTMENTS

Household Size 48 States and DC I $189 2 $347 3 $497 4 $632 5 $750 6 $900 7 $995 8 $1 ,137 Each additional person $142

Household Size Guam I $279 2 $512 3 $733 4 $931 5 $1 ,106 6 $1 ,327 7 $1 ,467 8 $1 ,676 Add on $210

Household Size Virgin Islands I $243 2 $446 3 . $639 4 $812 5 $964 6 $1 ,157 7 $1 ,279 8 $1 ,462 Add on $183

MINIMUM SNAP ALLOTMENTS NOVEMBER 1, 2103 TO SEPTEMBER 30, 2014

Household 48 States Guam U.S. Virgin Size and DC Islands I -2 $15 $22 $19 Questions and Answers

Are cost of living adjustments (COLAs) done every year? Yes, these cost of living adjustments happen every year. The maximum benefit is adjusted every year. Other adjustments include updates to the standard deduction, shelter deduction, income tests (gross and net), and D-SNAP allotment. By law, States must make these SNAP adjustments each October 1.

What is the 2009 American Recovery and Reinvestment Act (ARRA)? The ARRA is also known as the stimulus package. It became law in 2009 in order to foster economic activity in response to the recession.

How did ARRA affect SNAP? ARRA increased the maximum SNAP allotment to provide larger benefit amounts to clients. This increase in benefits is expected to end on November 1, 2013.

When will the changes from ARRA go into effect? SNAP benefits may go down starting on November 1.

How much will my benefits change on November 1, 2013? Your benefits depend on many things—income, household size and expenses. So it is hard to say how your benefits will change. This table gives you an idea what the reduced amount might be for households that have no income.

SNAP Maximum Monthly Benefit Levels Household Size October 1, 2013 November 1, 2013 Difference (ARRA stimulus levels) (June 2013 TFP levels) 1 $200 $189 -$11

2 $367 $347 -$20

3 $526 $497 -$29

4 $668 $632 -$36

5 $793 $750 -$43

6 $952 $900 -$52

7 $1,052 $995 -$57

8 $1,202 $1,137 -$65

Add on $150 $142 -$8

How will I be notified of a change in my SNAP benefits?

You will be notified by your State. You may also hear about these changes via the news, posters in local offices, or from retailers where you shop with your SNAP benefits. You might also get a notice in the mail about the changes to your case.

How do I check the balance for my SNAP benefits to know how much I have? Different States offer different ways to check your balance. However, a couple of easy ways are:

 Check the SNAP balance on your last grocery receipt.  If your State provides information for your SNAP account on-line, sign in and check your balance on-line.  Call your State’s EBT customer service number. Customer service numbers for clients are located in the left column of the chart.  Call the toll-free number on the back of your EBT card.

How can I figure out how to feed my family healthful foods on a lower budget? USDA provides several resources to help you prepare healthy meals on a low budget:

 10-Tips Nutrition Series  ChooseMyPlate.gov  Plan, Compare and Prepare  Eat Right When Money’s Tight.

The SNAP Recipe Finder helps you create cookbooks and shopping lists. Use it to search for recipes based on total cost or cost per serving.

What should I do if I need food right away?

Contact your regional food bank and ask for the nearest food distribution site. Or call your State’s information line and ask for the nearest food pantry or food distribution site COURT STRIKES DOWN FEDERAL RESERVE BOARD RULE ON DEBIT FEES; THE FEDERAL RESERVE APPEALS

On July 31, 2013 the United States District Court for the District Court in the case of NACS et al v. The Board of Governors of the Federal Reserve System declared an important victory for merchants in the fight for fair and proportionate debit fees. Judge Leon found “Upon consideration of the pleadings, oral argument, and the entire record therein, the Court concludes that the Board has clearly disregarded Congress's statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction.” While the Judge ordered the Federal Reserve (FRB) to begin the process of developing an interim rule that would replace the current rule setting debit fees at 21 cents plus 5 basis points on the value of the transaction, the FRB on August 21, 2013 told the Court that it would appeal. At this time the Judge has order a stay pending appeal, which means the current debit fees set by the FRB will remain in effect for banks with over $10 billion in assets.

August 2013

FDA’S CHAIN RESTAURANT MENU LABELING REGULATIONS SHOULD NOT EXPAND TO GROCERY STORES

Position FDA should adopt the proposed rule’s “Option 2” that would limit restaurant menu labeling regulations to establishments that primarily sell restaurant foods. “Option 2” allows the FDA to meet its statutory obligations without hurting mainstream grocery stores. Grocery stores are not chain restaurants and should not be captured under this menu labeling law’s regulations. NGA strongly supports the “Common Sense Nutrition Disclosure Act” H.R. 1249 introduced by Representative Cathy McMorris Rodgers (R- WA), Loretta Sanchez (D-CA), and a bipartisan group of Representatives. This bill comprehensively addresses grocers’ concerns over the proposed FDA menu labeling regulations.

Background FDA has proposed regulations that would regulate grocery stores under a “Nutrition Labeling of Standard Menu Items at Chain Restaurants” provision included in the Affordable Care Act (ACA). The law was intended to provide a uniform standard for chain restaurants with 20 or more locations to comply with various state and local menu labeling laws, none of which have regulated grocery stores. By expanding these regulations to the supermarket industry, FDA would impose a $1 billion initial cost on grocery stores. FDA also proposed an alternate option known as “Option 2” that would limit restaurant menu labeling to establishments that have 50 percent or more of their floor space devoted to restaurant or restaurant-type food, which is more consistent with Congressional intent and with state and local laws.

Congress Did Not Intend for Grocery Stores to be Included in the Menu Labeling Law. Congress never intended to capture grocery stores in a restaurant menu labeling law. The menu labeling law is intended to provide a uniform standard for chain restaurants to comply with various state and local menu labeling regimes, none of which have been used to regulate grocery stores. When the law was passed, menu labeling sponsors and advocates cited chain restaurant menus and vending machines— never grocery stores. In fact, supermarkets were often mentioned as venues where customers can easily find nutritional information.

Grocery Stores Are Not “Similar” To Restaurants.  95 percent of foods sold at grocery stores already comply with the Nutrition Labeling and Education Act. In addition, stores display nutritional information for fresh meat and poultry items and proactively use more user-friendly nutritional guidance on the front of food packages and on shelf-tags.  Food laws have historically recognized operational differences between supermarkets and restaurants. Labeling laws for food safety, allergens, ingredients, nutrition panels, and country-of- origin labeling have all been applied to supermarkets, but not to restaurants.  The sale of restaurant food is not the primary business of grocery stores. Grocery stores are not equipped to redesign formats for multiple new signs and menu displays throughout a store.

Menu Labeling Imposes a Significantly Greater Burden on Grocery Stores.  Initial compliance costs of menu labeling for grocery stores will exceed $1 billion, including nutrition analysis of each item, developing corresponding menu boards and signs, store-level training, and recordkeeping. Any variability or changes in ingredients, recipes or suppliers requires new nutrition analysis, verification, and labeling/signage. The U.S. Office of Management and Budget Office listed this particular menu labeling mandate as the third most costly and burdensome regulation in fiscal year 2010 alone.  The menu labeling process is reinitiated for new items, creating a barrier to new or smaller suppliers to individual stores within a grocery chain. As a result, grocery stores may need to transfer purchases of locally-sourced, fresh foods to more formulaic items.

Status In March of 2013, Representative Cathy McMorris Rodgers (R-WA) and Loretta Sanchez (D-CA) introduced H.R. 1249 the “Common Sense Nutrition Disclosure Act” with a number of bipartisan co- sponsors. These bills comprehensively address grocers’ concerns over the proposed FDA menu labeling regulations. NGA will continue to seek co-sponsors for this common sense bipartisan bill and will work to get a bill introduced in the Senate.

July 2013 TAX POLICY

Position The National Grocers Association (NGA) believes Congress should act now to reform the nation’s complex and cumbersome tax code. Reform must be balanced, fair, equitable, and provide nondiscriminatory lower rates for both C-Corporations and pass-through entities such as S-Corporations and LLCs. Tax increases and uncertainty are not the answer to restoring economic growth.

Temporary tax provisions that stimulate capital investment, business growth, and job creation such as the Work Opportunity Tax Credit (WOTC), the 15 year straight-line cost recovery for qualified leasehold improvements (including qualified retail improvements), the 100% accelerated bonus depreciation, the increased expensing of up to $500,000 in equipment, New Market Tax Credits, and enhanced charitable deductions for contributions of food inventory should be considered for permanent inclusion in the Code before they expire on December 31, 2013.

Background Corporate Tax Reform Today, the United States has the highest corporate tax rate in the world. Congress should act to reform the tax code and bring the overall corporate rate down to a level that promotes job growth. NGA believes that tax reform must be balanced, fair, equitable, and provide lower rates for both C-Corporations and pass-through entities such as S-Corporations. Because pass-through entities are taxed at the individual rate, corporate tax reform that does not include a reduction of individual rates puts these companies at a competitive disadvantage and harms their ability to grow their businesses and increase jobs. NGA’s 2011 Independent Grocers Financial Survey reported that 51 percent of respondents operated as S- Corporations, 18 percent operated as LLCs, and 30 percent operated as C- Corporations. A 2012 S- Corporation study, of which NGA is a member, conducted by Ernst and Young concluded that pass- through entities employ 54 percent of the private sector workforce and pay 44 percent of federal business income taxes. Moreover, a large fraction of pass-through entities pay their business taxes at the top two individual income tax rates.

Individual Tax Rates On January 1, 2013 Congress made a fiscal cliff deal that increased personal income tax rates on many NGA members operating as pass-through entities by raising the tax rate of 35 percent to 39.6 percent for individuals making more than $400,000 ($450,000 for couples) annually. Bush-era tax cuts on personal income taxes were made permanent in the remaining four tax brackets of 33 percent, 28 percent, 25 percent, and 10 percent.

For business entrepreneurs that operate as pass-through entities (taxed on an individual level) these rate increases adversely affect the financial resources that are retained for operating capital and business expansion.

Estate Tax While full repeal of the estate tax remains NGA’s ultimate goal, we applaud Congress for restoring certainty to family-owned businesses in the fiscal cliff bill by making permanent the current estate tax exemption of $5.120 million per individual ($10.240 million per couple, indexed to inflation, with portability of any unused portion to surviving spouse) plus stepped up basis. It did, however, raise the top rate from 35 percent to 40. While this adjustment isn’t exactly what NGA advocated for, the alternative would have reverted the estate tax back to $1 million exemption with a top rate of 55 percent

Because the estate tax falls on assets, it reduces incentives to save and invest, ultimately, hampering growth. The estate tax is especially burdensome to family-owned retail grocers and wholesalers. Well 1 over half of the assets of a typical supermarket—the highest of any other industry sector—are not liquid, so the death of an owner creates a serious obstacle to continuation of the business. Because the estate tax is assessed on the value of a business at the owner’s death, it often forces families to borrow funds to pay the tax. As a result it reduces the ability to invest and hampers growth of the business, or forces the sale of the business.

Extension of Pro-Growth Tax Provisions The Work Opportunity Tax Credit (WOTC), 15 year straight-line cost recovery for qualified leasehold improvements (including qualified retail improvements), the 100% accelerated bonus depreciation, the increased expensing of up to $500,000 in equipment, New Markets Tax Credit, and enhanced charitable deductions for contributions of food inventory are, in many cases the only reasons independent retail grocers or wholesalers have been able to expand their businesses or hire new workers. NGA is pleased that Congress included temporary extensions of all of these provisions in the fiscal cliff bill on January 1, 2013. NGA urges Congress to make these pro-growth measures a permanent part of the tax code before they expire at the end of 2013.

Last In, First Out Accounting Method (LIFO) NGA strongly opposes repeal of the Last-In, First-Out (LIFO) inventory accounting method. LIFO is a widely accepted accounting practice that has been recognized by the Internal Revenue Code since 1939. LIFO is used for both financial statement and tax purposes and is the most accurate means of determining inventory asset value and tax liability for certain businesses, in particular many in the supermarket industry. LIFO assumes that the inventory sold by a company in a given year is the inventory last acquired by the company. Many supermarket retailers and wholesalers have elected to use LIFO in order to more accurately valuate their actual inventory replacement cost. Most retailers and wholesalers maintain significant inventories of product that are subject to consistent inflation.

Many companies have elected to use LIFO to avoid being penalized by having to pay taxes on “phantom profits” that do not exist. LIFO repeal proposals would repeal these deductions retroactively, in effect slapping a massive federal tax on companies. These reserves are neither cash nor assets and are by no means liquid. The reserve figure simply represents the total amount of deductions the company has taken over the years under LIFO that exceed the deductions that would have been available had the company used FIFO. The IRS’s Revenue Code’s LIFO provisions provide that LIFO reserves will not be taken into income unless a company liquidates or voluntarily changes its inventory accounting method.

Status Both the House Ways and Means and Senate Finance Committees have started the process of overhauling the tax code with the goal of passing comprehensive reform before the 113th Congress ends on January 3, 2015. NGA has and will continue to work with both tax writing committees to ensure that the independent grocers’ voice is heard.

August 2013 Genetically Modified Organism Food Labeling “GMO” Background

What is Genetically Modified (GM)?

For nearly twenty years, farmers and food manufacturers have used GM technology to add desirable traits from one plant to another. GM has allowed farmers to reduce insecticide use and grow plants that are better able to survive droughts. Researchers are developing new technologies that may eliminate certain human food allergies to specific foods while producing foods that are more nutritious in certain vitamins—particularly important in certain developing countries. Today nearly 80% of the foods sold in the US include GM ingredients. Over the year the FDA scientists and medical professionals have deemed GM products to be safe, possessing no greater short or long term health risk than traditional plan breeding.

Legislative History Opponents to GM have worked for a number of years to enact legislation in states to require the labeling of certain foods that contain GM. In California, a ballot initiative (Prop 37) was ultimately defeated in November 2012 along a 51-48% vote. Prop 37 would have required the labeling of GM food, with some exceptions. It would have also disallowed the use of the word “natural” if the product contained GM ingredients, while also permitting private rights of action against retailers selling mislabeled products. Retailers would have been required to keep detailed records as would farmers, food manufactures and other parties in the food’s supply chain. The law exempted foods sold in restaurants and alcoholic beverages. Major newspapers around California came out in opposition to the initiative due. There is a ballot initiative (Initiative 522) underway in the state of Washington that will be voted on this fall. The initiative would require, beginning July 1, 2015, any food offered for sale in Washington to require GM labeling (raw, processed, seed / seed stock). Alcohol is exempt from the WA initiative. The Seattle Times has editorialized “CONSUMERS absolutely have a right to know what they are eating is safe, but Initiative 522’s purpose of singling out genetically engineered foods for labeling isn’t the answer to our health questions. The dialogue should center on science. And so far — there is no reliable evidence crops containing genetically modified organisms, commonly referred to as “GMO” foods, pose any risks.”

In 2013 Connecticut passed the first GMO labeling law in the country; however the law isn’t “triggered” until four other states, including one along CT’s border, have enacted similar laws and the total population of the NE region states that have passed GMO labeling exceed 20 million. Vermont has come close to passing legislation and is expected to once again see legislation introduced in 2014. A bill did pass the Vermont House in 2013. In Oregon labeling proponents attempted to get mandatory labeling on the ballot, but failed to get enough signatures. Legislation has introduced since 2007 in AL, ME, NH, MA, RI, NY, NJ, MD, DE, WV, VA, KY, NC, TN, IN, IL, MI, MO, IA, MN, NM, HI, WA, and TX.

Federal legislation has been introduced in the House by Representative DeFazio (H.R. 1699 ) and in the Senate by Senator Boxer (D-CA) (S. 809). During the 2013 Senate Farm Bill debate Senator Sanders (I-VT) introduced an amendment to give states the right to require GM labeling for food, beverages, or other edible products. The amendment failed along a 26-73 vote.

Supporters of Labeling One of the most prominent advocates for GMO labeling is Whole Foods Market, which has committed to requiring labeling of all GMO products by its vendors by 2018. Whole Foods is also actively supporting a number of the state ballot initiatives and has dropped its membership in one state trade association over their opposition to GMO legislation. A number of independent grocers, especially those that operate in marketplaces where consumers have a high awareness of the GMO or organic issue may support GMO labeling or in the very least are actively marketing non-GMO products to customers.

Other supporters include the National Cooperative Grocers Association, a number of Alaskan fishery groups (Alaskan Salmon), Nature’s Path, Annie’s Inc., and other organic food companies and organizations.

Status NGA has not taken a position on GMO labeling; however NGA supported efforts by the California Grocers Association to raise concerns and challenges to Prop 37 given the unfair application of the initiative and the exposure grocers would have faced to frivolous lawsuits. NGA has had similar concerns in Washington.

Ensuring Safe and Affordable Food for American Families

The American food industry has led the world in healthy and plentiful food production for generations. Over the last two decades, the food industry has used genetically modified (GM) technology to produce more nutritious food at lower cost for consumers across the country. GM technology improves crops and reduces the use of chemicals, while lowering costs for the American people by as much as 30%. Today, up to 80% of the nation’s food products include GM ingredients.

The American food industry is committed to providing consumers with choices to fit their tastes, dietary preferences and requirements and budgets, as well as with important information to help make those choices. The U.S. Food and Drug Administration (FDA) currently sets national standards for food labeling based on sound science and extensive review. Some groups are attempting to create a system of conflicting state-based labeling requirements for GM foods, which would create confusion, reduce choices and increase costs for consumers.

When it comes to genetically modified food ingredients, the food and beverage industry is;

1) Committed to providing consumers with an abundant supply of safe, nutritious and affordable food.

2) Committed to the use of safe agricultural biotechnology that helps feed billions of people in the U.S. and around the globe, while preserving our natural resources.

3) Committed to an open dialogue with consumers about GM technology that will advance their knowledge, understanding and support of the technology.

4) Committed to responsible nationwide public policies that will protect consumers and facilitate informed consumer choices by providing them a single, federal framework for regulating the use and labeling of genetically modified food ingredients.

Healthier Foods at Lower Cost

For nearly twenty years, farmers and food manufacturers have used GM technology to add desirable traits from one plant to another, without introducing anything unnatural or using chemicals. As a result crops are more plentiful and potentially more nutritious.

Today nearly 80% of the food we eat is produced with GM ingredients, lowering costs for consumers up to 30%. These technological advances allow farmers and food and beverage companies to continue to provide consumers with safe, cost-effective and high quality food choices.

According to the U.S. Food and Drug Administration (FDA), and a number of US regulatory agencies that study and monitor food safety, GM foods and ingredients are safe and pose no health risks. Numerous scientific bodies and health groups, such as the World Health

Organization, the American Medical Association and the National Academy of Science, have concluded that food and beverages containing GM ingredients are materially no different than foods without them.

Protecting Consumers’ Health and Safety: Building on the Strong Foundation

Consumers should be armed with the information they need to make their own food choices. That’s why the U.S. Food and Drug Administration (FDA) currently provides a comprehensive federal framework for food labeling that uses sound science to give consumers the best information about the safety, composition and nutritional aspects of food products. This labeling policy has served consumers well by providing them with straightforward and meaningful information to make safe and healthful food choices.

Currently, FDA does not require foods to be labeled as having been produced with GM technology because it has found that there is no health risk associated with GM foods or any material difference between GM and non-GM foods. However, over the past several years, some groups have put forward ballot initiatives and legislation to require special labels for products containing these ingredients. Last year, California voters rejected a ballot measure (Proposition 37) that would have imposed a mandatory label. Voters in Washington will consider a similar measure this year, and efforts are underway to put a labeling measure on the ballot in Oregon in 2014. Connecticut recently passed labeling legislation, and efforts are being considered in neighboring states.

These state-based labeling initiatives – which only mislead consumers into thinking foods produced using GM technology pose a health risk or are different than what’s been on their shelves for the last 20 years – would create an unnecessary state patchwork of conflicting labeling requirements which would snarl inter-state commerce and create confusion, reduce choices and increase costs for consumers.

Bolstering Consumer Confidence in the Food Supply by Establishing a New, Single Federal Framework for Regulating the Use and Labeling of GM Technology

To establish a responsible federal policy framework that will protect consumers and facilitate informed consumer choices, as well as guard against a costly, unnecessary and inefficient state- by-state system, federal legislation is needed that will provide for a series of regulatory measures that will allow farmers, processors, food and beverage manufacturers and everyone in between to use GM technology to produce safe, abundant and affordable food.

Specifically, legislation is needed that would address the following principles:

 Mandate FDA Safety Reviews: Ensure consumers are protected by requiring the U.S. Food and Drug Administration (FDA) to conduct a pre-market safety review of all new GM technology to guarantee they are safe for use in food. This will be done through FDA mandatory consultations in the existing USDA framework

 Require Federal GMO Labeling for Safety: Directs FDA to mandate a label on any product that contains ingredients derived from genetically engineered plants if those ingredients present any health or safety risks

 Create a National Standard for Voluntary Labels: The legislation should direct the FDA to mandate labels on products containing a GMO ingredient only if it is determined that the ingredient presents a health or safety risk.

o In addition, the legislation should direct FDA to develop a new, uniform national framework to support voluntary “GMO-Free” labeling. FDA would develop a certification and verification process to support this requirement, which would also apply to any companies that want to voluntarily label their products for the presence of GM ingredients.

This action will ensure consumers have consistent information that will allow them to make informed decisions when they shop, and it will prevent confusion that can be caused by conflicting state standards.

 Increase Transparency: Increase transparency and avoid consumer confusion by creating a consistent federal definition for “natural” claims on product labels.

 Prevent Consumer Confusion: Prevent consumer confusion that would be caused by conflicting state standards, and better protect consumers by creating a new uniform national legal framework. This will ensure consumers receive consistent information based on sound science by precluding states from imposing any labeling requirements that are not identical to Federal requirements standards.

Save the Date! 2014 The Day In Washington Supermarket industry fly-in April 30 - May 1, 2014

Rooms Available at The Mayflower Renaissance special rate of $279/night

TENATIVE SCHEDULE *TIMES SUBJECT TO CHANGE April 30 11:00 am - 1:00 pm Registration & Lunch

1:00 pm - 5:00 pm congressional meetings

5:00 pm - 6:30 pm reception on capitol hill

May 1 8:00 am - 9:30 am breakfast on capitol hill

9:30 am - 11:00 am congressional meetings

11:00 am - 2:00 pm lunch/refreshments available

We Hope You’ll Join Us! Additional Information to Follow