Over the years, employee stock ownership plans (ESOP) have evolved in many ways. Currently, ESOP transactions began to resemble traditional M&A transactions including financial structures, warrants and market rate sub-debt. In a recent presentation at the NCEO Employee Ownership Conference, Allison Wilkerson discusses current marketplace trends in structuring ESOP transactions, including the importance of pre-transaction structure analysis and post-transaction planning. Allison also goes over the beneficial tax planning opportunities associated with ESOP transactions.
On May 11, 2017, the United States Court of Appeals for the Ninth Circuit reversed a district court ruling, and upheld a California law that invalidates a plan provision that assigns the final determination on benefit payout determinations to an insurer. How will this impact the future of discretionary clauses in California life and disability insurance agreements?
Earlier this year, the IRS released proposed regulations which permit employers to use forfeitures to fund safe harbor contributions, QNECs and QMACs.
CMS recently released a final rule with the goal of stabilizing Exchange markets for 2018. The agency also issued several significant guidance documents where CMS extended the deadlines for 2018 rate and Exchange qualified health plan application submissions, adopted a good faith compliance standard for 2018 and delegated additional plan certification responsibilities to states. While these steps may provide some comfort for issuers, the agency did not address the most significant areas of issuer concern when it comes to 2018 Exchange participation. Namely, the Final Rule and guidance documents do not resolve ongoing uncertainty regarding cost-sharing reduction funding, the enforcement of the individual mandate or ongoing efforts to repeal the Affordable Care Act.
Late last week, President Donald Trump signed an executive order directing federal agencies to look into exempting religious employers from the Affordable Care Act’s (ACA) contraceptive mandate. Qualifying religious employers (e.g. houses of worship) are already exempt from providing contraceptive coverage under their benefit plans, and an accommodation process is provided for certain non-profit employers and closely held for-profit employers with religious objections to providing contraceptive coverage.
This new executive order is aimed at organizations like universities and charities, including entities such as the plaintiffs in Zubik v. Burwell. Last year, in Zubik, the US Supreme Court failed to decide whether the contraceptive-coverage mandate requirements (Contraception Mandate) and its accommodation violated the Religious Freedom Restoration Act of 1993 (RFRA) by forcing religious non-profits to act in violation of their religious beliefs. Although the ACA regulations included an exemption from contraceptive coverage for the group health plans of religious employers, the exemption did not provide that such services would not be covered. The services are just not covered through a cost-sharing mechanism born by the religious employers. The Contraception Mandate requires these organizations to “facilitate” the provision of insurance coverage for contraceptive services that they oppose on religious grounds. Many religious organizations were opposed to the requirement to facilitate, since they felt the requirement made them complicit in making contraception available, which violates their RFRA rights.
In Revenue Procedure 2017-37, 2017-21 IRB, the IRS issued the annual inflation-adjusted contribution, deductible and out-of-pocket expense limits for 2018 for HSAs. For clear comparison, we have outlined the changes from 2017 to 2018.
On Thursday, May 4, 2017, the US House of Representatives passed the American Health Care Act by the slimmest of margins with no Democrats voting in favor of the bill. Amendments to the original bill attracted more support from both moderate and conservative Republicans by the introduction of two amendments: one that gives more leeway to the states to request waivers from the more onerous provisions of the ACA that cannot be changed through the budget reconciliation process, and a second one that adds $8 billion of funding to the bill to help improve the “high-risk pools” that could be set up by states to provide coverage to individuals with pre-existing conditions who cannot find affordable insurance in the open market.
McDermott will be holding its annual Employee Benefits Innovators Roundtable Series this month. The roundtables offer experienced benefits professionals an opportunity to discuss cutting-edge, topical employer-driven benefit programs with their peers and members of McDermott’s employee benefits team. We are meeting in four locations this year. Join us in one of the following cities:
May 9 | Silicon Valley, California
May 11 | Los Angeles, California
May 22 | Chicago, Illinois
May 24 | New York, New York
The topics for our roundtable series sessions will include:
- The Future of Employee Benefits Under the Trump Administration
- Should Your Plan Cover All Drugs? (FDA-Approved/Unapproved, Off-Label, Marijuana, etc.)
- ERISA Retirement Plan Fee Litigation – Learning From Recent Class Actions
- Paying Off Student Loans as an Employee Benefit
- Equal Privacy and Cybersecurity – Now Part of Your Plan’s Independent Audit
- Human Rights Campaign (HRC) Equality Index – Opposite-Sex Domestic Partner Benefit
For more information about how to register for one of our roundtables, please contact Erin Nelson.
Based on a recent audit conducted by the Treasury Inspector General for Tax Administration (TIGTA), the IRS’ processes and procedures to ensure compliance with the employer information reporting requirements mandated by the employer shared responsibility provision (the play or pay rules) of the Affordable Care Act (ACA), have fallen short of their intended goals. (see Audit Report No. 2017-43-027). According to TIGTA, due to faulty processes, the IRS did not have “accurate and complete data for use in its compliance strategy to identify noncompliant employers potentially subject to the employer shared responsibility payment.” System errors also resulted in the agency being unable to process paper information returns “timely and accurately,” TIGTA noted. Approximately 16,000 paper Forms 1094-C and 1.4 million paper Forms 1095-C had not been processed as of five months after May 31 (the deadline). The TIGTA offered several recommendations to the IRS to improve management practices. The IRS agreed with all but one of these recommendations and is developing a more accurate system for identifying employers that are not complying with the employer shared responsibility requirements.
With approximately 68 million US employees without access to a retirement savings plan through an employer, there has been increased movement by states to sponsor retirement type arrangements for private sector employees. Partner Andrew Liazos presented “State-Run Retirement Plans – What Labor Allowed” discussing insights and strategies for retirement, health and executive compensation plans. He addresses the various state retirement plan approaches, such as auto enrollment IRAs, state marketplaces, prototype plans and Medical Expenditure Panel Surveys.