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Effective January 1, 2019, Arizona-based small employers will be required to provide continuation of employer-sponsored health plan benefits to qualifying former employees and their covered dependents. Currently, employers who employ at least 20 employees (as calculated by determining the number of employees employed on more than fifty percent of the employer’s typical business days in the previous calendar year) are required to offer continuing group coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA or “federal COBRA”). Arizona’s new law, referred to as a “mini-COBRA,” will apply to employers with at least one but not more than 20 employees during the preceding calendar year.
Under the law, former employees who elect to continue coverage will receive benefits at the group cost, including the employer’s contribution and administrative fee (capped at five percent of the premium). To be eligible for continued coverage under the new law, employees and their covered dependents must 1) be enrolled in a group medical insurance plan for a minimum of three months, 2) be ineligible for Medicare coverage, and 3) experience a “Qualifying Event” thereafter losing coverage. The law defines a “Qualifying Event” as follows: voluntary or involuntary termination of employment for a reason other than gross misconduct or reduction of hours required to quality for coverage;divorce or separation from the employee; death of the employee; the employee becomes eligible for Medicare coverage; a dependent child ceases to be a dependent child under the insurance plan; a retired former employee and his or her dependents lose coverage within one year before or after the employer files for bankruptcy.
Within 30 days of the occurrence of a Qualifying Event, mandated employers must provide written notification to an employee of his or her right to continue coverage(though the law considers a written notice timely if it is postmarked within 44 days of the Qualifying Event and mailed to the employee’s last known address).In the event that a covered dependent resides at a different address than the employee, the employer must deliver a separate written notice to the dependent. The written notice must inform the employee and his or her dependents of their right to continue coverage, the amount of the full cost of coverage (including the employer’s administrative fee), the process and deadlines for electing continuation of coverage, the dates and times for making payments, and the consequence for failure to pay in a timely manner (i.e., loss of coverage). For those employees and/or dependents receiving mini-COBRA coverage, employers are also required to provide at least 30 days advance notice of any changes to coverage (e.g., rates, plan, benefits,etc.).
To continue coverage, employees must provide written notification to the employer within 60 days of the date of the employer’s notice. After electing coverage, employees have 45 days to submit the initial premium to the employer. Mini-COBRA coverage terminates upon the earliest of the following events: 18 months following the commencement of coverage; the employee’s failure to timely pay premiums; the date on which the employee or a covered dependent becomes eligible for coverage under Medicare, Medicaid, or any other health benefit plan (with respect only to that person); the date on which an employer terminates coverage under the health benefit plan for all employees (the employee and covered dependents are eligible to participate in a replacement plan); or the date a dependent child would otherwise lose coverage under the terms of the health benefit plan due to age (with respect only to that dependent child). In the event that a covered dependent is deemed disabled at the time of the Qualifying Event, the dependent may be eligible for extended coverage.
Mini-COBRA Broken Down
Continued Coverage: Employees and their covered dependents receive continued employer-sponsored health plan benefits at the group cost.
Mandated Employers: Employers with at least one but no more than 20 employees during the preceding calendar year.
Eligible Employees: Employees must be covered under a group medical insurance plan for a minimum of three months; ineligible for Medicare coverage; experience a Qualifying Event.
Notification Requirements: Employer’s notice required within 30 days of the Qualifying Event. Separate notice required if a covered dependent resides at a different address.
Employer’s Administrative Fee: Capped at five percent.
Election of Coverage: Employees have 60 days from the date of employer’s notice to submit written notice of their desire to continue coverage. Initial premium is due within 45 days of electing coverage.
How Long Does Coverage Last: Generally 18 months, though coverage time may vary under certain circumstances.
Employers who would like more information about Arizona’s mini-COBRA law are encouraged to contact the attorneys at Milligan Lawless for assistance.
If you are a member or manager of an Arizona limited liability company (or professional limited liability company), your obligations may be significantly expanded under a law that begins to take effect as early as August of 2019. This article summarizes the impact of the new law relating to fiduciary duties of members and managers, and provides some thoughts as to how you can understand and manage those obligations.
Fiduciary Duties Defined
A fiduciary, in simple terms, is a person who owes to another person certain duties, such as good faith, trust, special confidence, and candor. In the business context, fiduciary duties help ensure that each officer, director or manager of a business is acting in a manner that is consistent with the company’s objectives and the interests of other owners. Under Arizona law directors and officers of corporations, and members of a partnership have long been deemed to owe fiduciary duties to the corporation or partnership. Until relatively recently, it had been unclear whether managers or members of Arizona LLCs owe fiduciary duties to the company and the other members. There had not been a statute addressing the issue, and Arizona case law had generally been interpreted so as not to impose fiduciary duties on LLC members unless the Operating Agreements imposes such duties on the members.
Imposition of Fiduciary Duties on Members or Managers of LLCs
On April 10, 2018, Arizona Governor Ducey signed the Arizona Limited Liability Company Act (ALLCA). ALLCA will apply to all Arizona LLCs formed after August 31, 2019; on August 31, 2020, Arizona’s current LLC law will expire, and ALLCA will apply to all Arizona LLCs, regardless of their date of formation. One notable change brought about by ALLCA is the imposition of fiduciary duties on members and managers of Arizona LLCs. Under ALLCA, fiduciary duties will be imposed on members and managers if: (1) the LLC does not have a written Operating Agreement, or (2) if the LLC has an Operating Agreement that is silent on the subject of fiduciary duties.
For Members in a Member-Managed LLC
Under ALLCA, members of a member-managed LLC will owe a duty of loyalty and a duty of care to the LLC and to the other members; in addition, the members will be obligated to act in a manner consistent with a contractual obligation of good faith and fair dealing. See A.R.S §29-3409.
For Managers in a Manager-Managed LLC
Similarly, a manager of a manager-managed LLC will owe the LLC and the members essentially the same duties of loyalty and care as the members in member-managed LLCs owe to the company and to one another. A manager must also discharge his or her duties and obligations under the ALLCA in a manner that is consistent with the obligation of good faith and fair dealing. In a manager-managed LLC, the members will not owe fiduciary duties to one another solely because they are members of the LLC; the existence and scope of any fiduciary duties of a member in a manager-managed LLC will depend on the extent to which the member controls or participates in the management of the company.
Eliminating or Altering Fiduciary Duties in the Operating Agreement
An Arizona LLC can depart from certain ALLCA provisions in the LLC’s Operating Agreement, and with the exception of a few items, the LLC’s Operating Agreement will supersede the provisions of the ALLCA. A.R.S. §29-3105; See A.R.S. §29-3409(F) and A.R.S. §29-3409(N). This means that certain of the duties imposed under the statute can be expanded, limited or eliminated by the Operating Agreement. The Operating Agreement cannot, however, eliminate the managers’ or members’ contractual obligation of good faith and fair dealing, or the duty to refrain from willful or intentional misconduct.
To ensure that any fiduciary duties imposed on you as a member or manager of an Arizona LLC are aligned with your interests as a member or manager, you should consider whether you want to be bound by the provisions of ALLCA relating to fiduciary duties. If you want to modify or eliminate those duties, to the extent permissible under ALLCA, please contact us or another legal adviser.
This article is made available for informational purposes only and is not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.
 Arizona law recognizes an implied covenant of good faith and fair dealing in every contract; this covenant obligates parties to a contract to act in good faith, and in a manner that is consistent with fair dealing.
Steven T. Lawrence recently had the opportunity to discuss the current state of the M&A climate with Jordan Geotas and George Odden of CP Capital Advisory Services.
In an article entitled “Failure in an M&A Transaction for the Physician Owner,” Milligan Lawless partner Steve Lawrence provides tips on how to avoid pitfalls during the M&A Transaction Process.
To read the full article Click Here.
We are pleased to announce the arrival of Attorney Robert J. Itri as our newest shareholder. Bob is an experienced attorney whose practice areas include Litigation and Intellectual Property. Bob represents clients in matters before the United States Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) and the Arizona Corporation Commission. He also brings a high level of experience in business matters to the firm, representing both start-up and existing businesses in complex litigation matters encompassing intellectual property and securities, arbitration and enforcement actions, contract, trade secret, business tort and shareholder litigation.