by Amy M. Gordon, Megan Mardy and Todd A. Solomon
Recently issued guidance addresses the unique compliance issues surrounding expatriate health plans under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (ACA).
To read the full article, click here.
by Amy M. Gordon and Joanna C. Kerpen
The U.S. Departments of Labor, Health and Human Services, and the Treasury recently issued new guidance and templates regarding the summary of benefits and coverage requirement under the Patient Protection and Affordable Care Act.
To read the full article, click here.
by Lisa K. Loesel, Todd A. Solomon, Jacob Mattinson and Brian J. Tiemann
Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes. Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act.
To read the full article, click here.
by Joseph S. Adams and Jeffrey M. Holdvogt
In a corporate spin-off, both the existing company and the new company (spinco) must consider the implications for employees, employee benefit plans and executive compensation arrangements. Benefit plans and compensation arrangements can represent significant liabilities and responsibilities, and typically are expressly allocated in an employee matters agreement (EMA). This article provides a brief summary of some of the key employee benefit plans issues to consider in a spin-off.
To read the full article, click here.
by Amy M. Gordon, Jamie A. Weyeneth and Megan Mardy
Recently issued Affordable Care Act guidance clarifies the prohibition on waiting periods in excess of 90 days and eliminates the requirement to issue HIPAA group health plan certificates of creditable coverage after December 31, 2014.
To read the full article, click here.
by Stephen D. Erf, Heather Egan Sussman and Sabrina E. Dunlap
The U.S. Department of Labor recently issued a final rule implementing new expanded rights for families of military members and veterans, and greater access to Family and Medical Leave Act (FMLA) leave for airline flight crews. Companies should review and update their FMLA policies to account for this new rule.
To read the full article, click here.
by Amy M. Gordon and Jamie A. Weyeneth
Final HIPAA privacy and security regulations issued by the U.S. Department of Health and Human services will require action by group health plan sponsors by September 2013.
To read the full article, click here.
by Amy M. Gordon, Susan M. Nash and Jacob Mattinson
As part of the Patient Protection and Affordable Care Act, the U.S. Department of Health and Human Services (HHS) recently released final regulations regarding the transitional reinsurance program fee effective in CY 2014. Effective May 10, 2013, the regulations address the estimated amount of annual contributions that will be paid to HHS from employer-sponsored group health plans, the types of welfare plans that are subject to the fee, the applicability of the fee to COBRA coverage and the treatment of certain retiree benefits.
To read the full article, click here.
by Amy M. Gordon, Anne W. Hance and Susan M. Nash
The U.S. Department of Health and Human Services (HHS) Essential Health Benefits Final Rule and actuarial value regulations offer few surprises and much needed certainty to enable group health plans and health insurance issuers to move forward with designing their essential health benefits packages for the 2014 benefit year.
To read the full article, click here.
by Susan M. Nash, Mary K. Samsa and Maggie McTigue
The U.S. Department of Labor (DOL) audits already evaluate a company’s compliance on a spectrum of laws, statutes and regulations. However, the DOL has updated and revamped its audit letter to now also capture compliance aspects of the Patient Protection and Affordance Care Act. Not only is the DOL looking for certain compliance information on health plans, but also for the various records and documents related to the plan.
To read the full article, click here.
by Anne W. Hance and Amy M. Gordon
The U.S. Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) released on January 30, 2013, two proposed rules and a final rule relating to the Affordable Care Act’s (ACA) requirement that individuals maintain “minimum essential coverage” (MEC) or be subject to a “shared responsibility” payment.
For example, self-funded student health insurance coverage and Medicare Advantage Plans are proposed to be designated as MEC. Additionally, sponsors of other types of coverage that meet designated criteria, such as providing consumer protections required by the Affordable Care Act, may apply to HHS for recognition as MEC.
Next Steps
Health insurance issuers will want to consider whether the various products they offer or administer will meet the MEC requirements set forth in HHS’s proposed rule, in order to respond to inquiries from customers, to meet notice requirements (including inserting model statements into existing plan documents, as applicable), and potentially to respond to exchanges making eligibility determinations. If a product does not constitute MEC, issuers may want to consider whether to continue to offer the product in its current form or revise the coverage to meet the MEC requirements.
Sponsors of group health plans will need to consider the separate affordability standards for employees and for related individuals and the implications for group health plan participants, and either modify coverage to meet the MEC standards, or consider the consequences of the shared responsibility payment.
by Amy M. Gordon and Susan M. Nash
The U.S. Department of Labor (DOL) pushed back the deadline for employers to notify their workers that they can purchase medical benefits on health insurance exchanges. The original deadline was March 1, 2013, and has now been moved to late summer or early fall 2013. The DOL said it was aiming for a “smooth implementation process” that would balance the need to give employers sufficient time to comply with the desire that notices be distributed closer to the October 1, 2013 start of exchange enrollment.
In its announcement, the DOL said it might provide “generic language” that employers could distribute to satisfy the notice requirement. Alternatively, the DOL said it might allow use of a template that was discussed in the proposed rules published in the Federal Register (See Volume 78, Number 14, Tuesday, January 22, 2013).
The notices are required to have three components:
We will keep you updated as further guidance is released.
by Amy M. Gordon and Susan M. Nash
As you are probably aware, Congress has passed and President Obama has signed the American Taxpayer Relief Act of 2012 (ATRA), which avoided the “fiscal cliff.” This newsletter outlines what that means for your employer-provided fringe benefit plans.
Qualified Transportation Plans
ATRA extends through the end of 2013 the transit parity rule that makes the combined monthly limit for qualified transit pass and vanpooling benefits equal to the considerably higher monthly limit for qualified parking benefits. In 2012 the combined limit for transit pass and vanpooling benefits was only $125 per month, while the 2012 limit for qualified parking benefits was $240. As a result of the legislation, the combined transit pass/vanpooling limit for 2012 rises to $240. Note, however, the 2013 limit has not yet been announced.
Qualified Adoption Assistance Benefits
The income exclusion for employer-provided adoption assistance benefits and the expansion of the adoption tax credit made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) are now permanent. The benefit limit is still $10,000.
Qualified Educational Assistance Programs
The exclusion for qualified educational assistance programs was also subject to EGTRRA’s sunset date and would have expired at the end of 2012. ATRA deleted the EGTRRA sunset date, restored the exclusion and made the exclusion permanent. The benefit limit is still $5,250.
Employer-Provided Child Care
EGTRRA created a tax credit for employers that provide child-care services. ATRA deleted the EGTRRA sunset date, making the credit permanent.
Dependent Care Assistance Plans (DCAP)/Dependent Care Tax Credit (DCTC)
For purposes of the income exclusion for DCAP payments and the DCTC, the deemed earned income of a spouse who is a full-time student or incapable of self-care will remain at $250 per month for one qualifying individual and $500 per month for two or more qualifying individuals. (These amounts were scheduled to decrease to $200 and $400, respectively, in 2013.) EGTRRA’s other changes to the DCTC have also been made permanent. These changes include the amount of employment-related expenses that taxpayers may take into account ($3,000 for one qualifying individual and $6,000 for two or more qualifying individuals), the percentage for determining the credit (35 percent) and the income level at which the credit begins to phase out ($15,000). Certain changes to the earned income credit and child tax credit have also been extended or made permanent, which may be relevant when calculating a participant’s federal income tax savings from claiming the DCTC versus participating in a DCAP.
by Amy M. Gordon, Jacob Mattinson and Susan M. Nash
As part of the Patient Protection and Affordable Care Act (ACA), the U.S. Department of Health and Human Services (HHS) recently released proposed regulations regarding the estimated amount of annual contributions that are required to be paid to HHS from employer-sponsored group health plans to finance state transitional reinsurance programs. The reinsurance programs are intended to help stabilize premiums for coverage in the individual market during the first three years the state health insurance exchanges are operational (2014 through 2016). HHS is estimating the annual contribution rate for 2014 will be $63 per covered life (employees and their dependents). This will undoubtedly impact the overall cost of providing coverage under an employer-sponsored group health plan and should be taken into account by employers for purposes of estimating cost trends.
by Amy M. Gordon and Susan M. Nash
New proposed employer wellness program regulations have been released under the Patient Protection and Affordable Care Act.
To read the full article, click here.
by Amy M. Gordon, Susan M. Nash and Jacob Mattinson
As part of the regulations under the Patient Protection and Affordable Act (PPACA), the U.S. Office of Personnel Management (OPM) proposed a requirement that OPM contract with private health insurance companies to ensure that at least two multi-state plans are offered in each state’s Affordable Insurance Exchange. Under the law, a multi-state plan issuer may phase in the states in which it offers coverage over four years, but must offer a multi-state plan in exchanges in all States and the District of Columbia by the fourth year. The proposed regulations generally address OPM’s approach to the offering of multi-state plans and the attributes of the multi-state plans to be offered. Comments are being solicited, and are due within 30 days after the rules are published in the Federal Register, which is expected to take place this week.
by Diane M. Morgenthaler, Ruth Wimer and Jacob Mattinson
With the fiscal cliff approaching in 2013, several favorable tax provisions affecting individuals and businesses are set to expire. Given this uncertainty, employers must prepare for changing payroll taxes and new limits on flexible spending account contributions, adoption assistance benefits and educational benefits.
To read the full article, click here.
Wednesday, December 5, 2012
7:30 – 9:30 am CST
UBS Tower
One North Wacker Drive, 2nd Floor
Michigan II Ballroom
(Northeast Corner of Wacker & Madison)
To register, please click here.
This year will be remembered as another year of rapid change in employee benefits. The year-end tasks are plentiful, but if you live in fear of a missed deadline, then let our retirement and welfare experts guide you through the home stretch and assist with your year-end task lists as we review this year’s employee benefits regulatory and legislative developments.
Speakers
Joni Andrioff, Shareholder, Littler Mendelson
Susan Nash, Partner, McDermott Will & Emery
by Joseph S. Adams, Todd A. Solomon, Jacob Mattinson and Brian J. Tiemann
Voters in Maine, Maryland and Washington approved the legalization of same-sex marriage in their states. In addition, voters in Minnesota rejected a state constitutional amendment to define marriage as an opposite-sex union. The outcome of these referendums adds complexity to the options and obligations of employers in providing benefits for employees’ same-sex spouses and partners.
To read the full article, click here.
by Todd A. Solomon and Brian J. Tiemann
Voter referendums on same-sex marriage will be on the November ballots in four states: Maryland, Washington, Maine and Minnesota. The outcome of these referendums may complicate the options and obligations of employers in providing benefits for employees’ same-sex spouses and partners.
To read the full article, click here.
by Amy M. Gordon and Susan M. Nash
With the end of 2012 quickly approaching, and for 2013 planning purposes, this newsletter provides a high-level list of the important changes to be aware of under the Patient Protection and Affordable Care Act and the effective date of those required changes.
To read the full article, click here.
by Jeffrey Holdvogt, Diane Morgenthaler and Adrienne Walker Porter
The Internal Revenue Service recently announced cost-of-living adjustments (COLA) to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2013. Although many dollar limits currently in effect for 2012 will change, some limits will remain unchanged for 2013. McDermott Will & Emery has prepared a chart of these 2013 COLA changes.
To read the full article, click here.
by Amy M. Gordon and Susan Nash
The Internal Revenue Service (IRS) has released the 2012 version of Form 8889 (Health Savings Accounts [HSA]) and its Instructions. The Form 8889 is filed by HSA holders as an attachment to the IRS Form 1040. The Form 8889 is generally used to report contributions and distributions to and from the HSA. The 2012 versions of the form and instructions are substantially similar to the 2011 versions, however the 2012 form and instructions have been updated to include the 2012 contribution limits, and to reflect that qualified HSA distributions from health flexible spending accounts (FSA) or health reimbursement accounts (HRA) are no longer permitted. Please note the 2012 HSA contribution limits are $3,100 for an individual and $6,250 for a family.
by Amy Gordon, Susan Nash, Maureen O'Brien
Recent guidance issued by the Departments of Health and Human Services and Labor and the Internal Revenue Service clarifies health care reform rules regarding waiting periods and the definition of full-time employee for purposes of the employer requirement to provide health care coverage beginning in 2014. The Internal Revenue Service has also issued guidance relating to the determination of wages for purposes of determining affordability of health care coverage under the Affordable Care Act.
Click here to see IRS Notice 2012-58 and here for Technical Release 2012-02. McDermott will be releasing a detailed analysis of the new guidance soon.
An IRS compensation rule aimed at health insurers could actually apply to a wide range of companies.
It is well known that the Patient Protection and Affordable Care Act (PPACA, or the federal health care reform law) significantly limits the ability of health insurance companies to deduct payment of compensation beginning in 2013. What is not so well known is that the Internal Revenue Service might apply this limitation to health care services providers that are not typically considered to be insurance companies, to captive insurance companies, and even to companies outside the health insurance industry.
To read the full article, click here.
by Amy M. Gordon, Susan M. Nash and Jamie A. Weyeneth
If you are an employer that sponsors a fully insured medical plan option for your employees, and you had that fully insured medical plan option in place for the 2011 calendar year, you may be eligible for a Medical Loss Ratio rebate.
To read the full article, click here.
by Christopher M. Jedrey, Joel L. Michaels, Susan M. Nash, Paul W. Radensky and Eric Zimmerman
While the Supreme Court of the United States has in large part resolved questions regarding the constitutionality of the Patient Protection and Affordable Care Act, participants in the health care industry should prepare for ongoing uncertainty in the manner and degree to which states will participate in the expansion of Medicaid.
To read the full article, click here.
by Amy M. Gordon, Susan M. Nash and Maureen O'Brien
On June 28, 2012, the Supreme Court upheld the most significant provisions of the Patient Protection and Affordable Care Act (the Act), including the controversial individual mandate. The vote was 5-4 and the majority opinion was written by Chief Justice John Roberts. Ironically, the justices concluded that the mandate was not a valid exercise of Congress' commerce clause power but was a proper use of Congress' tax authority. One of the most complicated issues that everyone struggled with, the severability issue, is now moot because the individual mandate was upheld.
Click here to view the Supreme Court opinion.
Please join us for a webcast discussing the opinion on Friday June 29, 2012, from 12:00-2:00 p.m. EDT. To register, click here.
by Maureen O'Brien and Susan Nash
The Internal Revenue Service (IRS) recently released guidance on the implementation of the $2,500 limit on health flexible spending accounts (FSA) scheduled to go into effect in 2013. IRS Notice 2012-40 (Notice) clarifies the application of the new limit for plan years beginning after 2013 and solicits comments regarding whether to modify the use-or-lose rule set forth in the current proposed regulations under Section 125 of the Internal Revenue Code of 1986, as amended (Code).
The Notice states that the $2,500 limit on contributions to health flexible spending accounts is applicable for plan years beginning on or after January 1, 2013. This means that non-calendar year plans do not need to institute a mid-year limit to comply with applicable law. In addition, the Notice states that the $2,500 limit does not apply to heath savings accounts or health reimbursement accounts or “flex-credits” granted by an employer. In addition, for cafeteria plans under Section 125 of the Code with grace periods which allow use of contributions for up to two and one-half months after the end of the plan year, the $2,500 limit does not apply to any amounts contributed for the previous plan year and available during such grace period.
If an employee erroneously contributes more than $2,500 to his or her health flexible spending account for plan years beginning on or after January 1, 2013, the Notice provides for a correction method for employers to refund amounts over the limit to the employee and adjust the employee’s reportable wages for the applicable tax year. This correction method is available only if the employer has complied with the written plan requirements of Section 125 of the Code, the erroneous contribution was due to reasonable mistake and not willful neglect by the employer and the employer’s cafeteria plan is not under examination for the plan year in which the erroneous contributions occurred.
The Notice also provides that employers may amend the cafeteria plan anytime prior to December 31, 2014 to comply with the new FSA limit. Such amendment may express the limit as a maximum dollar amount or use another method to express the new $2,500 limit. The $2,500 limit will be subject to cost of living increases and this type of indexing should be considered when drafting any required amendments.
Finally, the Notice requests comments on modifications to the use-or-lose rule for health flexible spending accounts currently in effect given implementation of the new dollar limit. McDermott will continue to update employers on any changes to the use-or-lose rule for health flexible spending account plans.
by Paul J. Compernolle, Michael T. Graham and Maggie McTigue
The U.S. Court of Appeals for the Fifth Circuit recently held that a paragraph in an asset purchase agreement qualified as an amendment to an employee benefit plan, highlighting a split between circuits of the U.S. Courts of Appeal.
by Amy M. Gordon, Susan M. Nash and Jamie A. Weyeneth.
The Internal Revenue Service recently issued requests for comments in advance of issuing proposed regulations on health care reform reporting and minimum value requirements.
To read the full article, click here.
by Amy Gordon, Susan Nash, Megan Mardy and Patrick Ryan.
The U.S. Department of Treasury recently issued proposed regulations regarding fees imposed on certain types of health plans to fund the Patient-Centered Outcomes Research Trust Fund.
To read the full article, please click here.
by Amy M. Gordon, Joanna C. Kerpen and Susan M. Nash
Recently issued final regulations and related guidance clarify the requirement under the Patient Protection and Affordable Care Act that group health plans and health insurance issuers provide a summary of benefits and coverage and a uniform glossary. The guidance includes final regulations and sample summaries and instructions.
To read the full article, click here.
by Amy M. Gordon and Jamie A. Weyeneth
The new Michigan Health Insurance Claims Assessment Act imposes a 1-percent tax on “paid claims” for health-related services of employer-sponsored health and welfare plans.
To read the full article, please click here.
by Elizabeth A. Savard, Todd A. Solomon and Brian J. Tiemann
The Illinois Department of Revenue recently issued guidance reversing its position on the state income tax treatment of benefits for non-dependent civil union partners.
Federal law excludes amounts that an employer pays toward medical, dental or vision benefits for an employee and the employee’s spouse or dependents from the employee’s taxable income. However, because civil union partners are not recognized under federal law, employers that provide these same benefits to employees’ civil union partners must impute the fair market value of the coverage as income to the employee that is subject to federal income tax, unless the civil union partner otherwise qualifies as the employee’s “dependent” pursuant to Section 152 of the Internal Revenue Code.
The Illinois Department of Revenue previously indicated that Illinois would follow the federal approach in taxing the fair market value of employer-provided coverage for non-dependent civil union partners because state law did not provide an exemption from such taxation. However, recent guidance issued by the Department of Revenue reverses that position and indicates that employer-provided benefits for a non-dependent civil union partner are now exempt from Illinois state income taxation. Illinois civil union partners are directed to calculate their state income taxes by completing a mock federal income tax return as if they were married for purposes of federal law.
In addition, for federal tax purposes, employees may not make pre-tax contributions to a Section 125 cafeteria plan on behalf of a non-dependent civil union partner (i.e., contributions for the partner generally must be after-tax) and may not receive reimbursement for expenses of the non-dependent civil union partner from flexible spending accounts (FSAs), health reimbursement accounts (HRAs) or health savings accounts (HSAs). However, for Illinois state tax purposes, the employee now can be permitted to pay for the non-dependent civil union partner’s coverage on a pre-tax basis.
Employers providing medical, dental or vision benefits to civil union partners residing in Illinois should take action to structure their payroll systems to tax employees on the fair market value of coverage for employees' non-dependent civil union partners for federal income tax purposes, but not for state purposes.
by Amy Gordon and Susan Nash
The Patient Protection and Affordable Care Act (PPACA) requires non-grandfathered group health plans to provide coverage for certain preventive services on a first dollar basis (i.e. without deductibles, co-payments, co-insurance or other cost-sharing). Interim final regulations provide an exemption for a very narrow subset of religious employers with respect to coverage of contraceptive services. To qualify for the exemption the entity must be a nonprofit religious employer that offers insurance to its employees. Many entities affiliated with religious institutions, such as hospitals and universities, do not meet this narrow exception.
Now, the U.S. Department of Health and Human Services (HHS) has provided additional guidance for nonprofit employers that do not cover contraceptive services under their current plans because of religious beliefs and that do not fit within the previous exemption. These employers will have an additional year, until August 1, 2013, to comply with the new law. Employers wishing to take advantage of the additional year will have to certify that they are eligible for this delayed implementation. The announcement also indicates that employers that do not offer coverage of contraceptive services will be required to provide notice to employees stating that such services are available with income-based support at sites such as community health centers, public clinics and hospitals.
by Amy Gordon, Susan Nash and Ashley McCarthy
The Internal Revenue Service (IRS) has issued revised guidance, Notice 2011-28, regarding the requirement under the Patient Protection and Affordable Care Act (PPACA) that employers report to employees the cost of their employer-sponsored group health plan coverage on Forms W-2. This requirement applies to calendar year 2012 W-2s, which employees will receive from their employer in 2013.
The guidance provided assistance on calculating aggregate reportable cost. Aggregate cost may be calculated in accordance with one of several methods including the “COBRA applicable premium” method, the “premium charged” method (for fully-insured coverage), or a “modified COBRA premium” method.
In addition to medical coverage, employers must include in the cost of employer-sponsored group health plan coverage, coverage under an Employee Assistance Program, wellness program coverage, on-site medical clinic coverage (but only aggregate reportable cost to the extent that the coverage is provided under a group health plan and the employer charges a premium for such coverage to beneficiaries of federal continuation coverage [e.g., COBRA]), Health Flexible Spending Account coverage (FSA), but only where the employer itself contributes to the FSA or otherwise provides flex credits through a Internal Revenue Code Section 125 cafeteria plan, and coverage under a dental plan or vision plan if such plans are not excepted from the Health Insurance Portability and Accountability Act (HIPAA). Employers do not need to include in the cost of employer-sponsored group coverage the cost of coverage under a dental plan or vision plan if such plans are excepted from HIPAA, amounts contributed to an Archer medical savings account (MSA) or a Health Savings Account, amounts of any salary reduction election to an FSA, the cost of coverage under a multiemployer plan, cost of coverage under a Health Reimbursement Arrangement not included in aggregate reportable income, and the cost of coverage provided under a self-insured group health plan that is not subject to federal continuation coverage requirements (i.e., a church plan).
by Amy M. Gordon, Todd A. Solomon and Brian J. Tiemann
The U.S. Department of Health and Human Services (HHS) issued a bulletin on December 16, 2011, outlining and requesting comments on its proposed regulatory approach to allow states to define what is an “essential health benefit.”
To read the full article, please click here.
Friday, November 18, 2011
10:00 – 11:00 am CST
As the year draws to a close, please join us for a focused and concise update on the most important employee benefit issues.
Mark your calendars
McDermott Will & Emery will present a 60-minute complimentary webcast, hosted by the leaders of our employee benefits and compensation practice, that will highlight key year-end considerations for:
Who should attend
All vice presidents of human resources, in-house counsel, compensation and benefits directors, chief financial officers and others responsible for overseeing corporate or executive benefits and/or retirement plans.
To register, please click here.
For more information, please contact McDermott Events.
by Todd A. Solomon, Brett R. Johnson and Kay Kemp
In Revenue Procedure 2011-49, the Internal Revenue Service (IRS) has modified the procedures by which it issues opinion and advisory letters to Master or Prototype (M&P) and Volume Submitter retirement plans (together, pre-approved plans). In addition, the guidance clarifies the limited types of employer modifications and amendments that can be made without causing an M&P or Volume Submitter plan to fail to be “identical” to an approved M&P or Volume Submitter plan (and, therefore, to fail to be covered by the pre-approved plan’s advisory or opinion letter). Acceptable changes include the following:
Prior guidance that allowed employers to modify or amend plans to correct typographical errors and/or cross-references has been eliminated.
The new guidance also provides that neither M&P opinion letters nor Volume Submitter advisory letters will cover hybrid plans, plans with section 401(h) accounts (medical benefits), or plans covered by Internal Revenue Code Section 414(x) (small employer combined defined benefit/defined contribution plans). Numerous other pre-approved plan filing requirements are specified in the guidance (revising Revenue Procedures 2005-16 and 2007-44), including, for example, requirements that amendments adopted by a pre-approved sponsor or practitioner on behalf of adopting employers must be provided to the adopting employers.
Mass submitters, sponsors, practitioners and adopting employers should review Revenue Procedure 2011-49 prior to undertaking opinion or advisory letter submissions or amendments. Please contact your regular McDermott lawyer if you have any questions regarding Revenue Procedure 2011-49.
by Raymond M. Fernando, Diane M. Morgenthaler and Adrienne Walker Porter
The IRS recently announced the 2012 cost-of-living adjustments to the applicable dollar limits for various employer-sponsored retirement and welfare plans. Plan sponsors should update payroll and plan administration systems for the new 2012 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions. Also, because 2012 marks the first year that the IRS has increased employee benefit plan limits since 2009, plan sponsors may want to consider updating plan documents to include the new cost-of-living adjustments, to the extent such adjustments are not automatically incorporated by cross-reference. Please click here for a full list of the 2012 IRS limits.
Tuesday, October 25, 2011 (7:30am breakfast and networking, 8:00am program)
Since June 1, 2011, Illinois has recognizee civil unions, and insured employee benefits plans in Illinois must offer a civil union partner the same benefits as offered to an opposite-sex married partner. Other states, like New York, have recently gone further, and offer full recognition of same-sex marriages. Although federal law defines marriage as between only a man and a woman under the Defense of Marriage Act, the federal government now has refused to defend this law, and efforts are underway to repeal this legislation. In the midst of all these changes, what is the status of these developments? What are the market trends and best benefit practices for same-sex partners and domestic partners? Come hear the answers from Todd Solomon, the expert who literally wrote the book on this topic, and from a national employer who has implemented a comprehensive domestic partner benefits strategy and domestic partner tax gross ups.
Speakers:
Cost Members: $30 Non-members: $50
Contact: Lynne McEvoy
Email: lynne.mcevoy@mcgladrey.com
Phone: 312.634.4490
Website: www.webnetwork.org
UBS Tower
One North Wacker Drive
2nd floor, Mighigan II ballroom
Chicago, IL 60606
by Susan M. Nash and Elizabeth A. Savard
Group health plans that offer prescription drug coverage are required to issue a notice of creditable or non-creditable coverage to Medicare-eligible participants and beneficiaries each year prior to the annual Medicare Part D open enrollment period. In the past, the Medicare Part D open enrollment period ran from November 15 through December 31, so the notice had to be provided by November 15. The Patient Protection and Affordable Care Act moved the Medicare Part D open enrollment period earlier, beginning in 2011, to October 15 through December 7. Therefore, this year's notice of creditable or non-creditable coverage must be provided by October 15, 2011.
A plan's notice of creditable or non-creditable coverage describes whether prescription drug coverage under the plan is "creditable" -- i.e., expected to pay out at least as much as standard Medicare prescription drug coverage, on average for all participants. This information is designed to help Medicare-eligible individuals avoid late enrollment penalties, which can apply when an individual who does not have creditable coverage fails to enroll in Medicare Part D when first eligible.
Plan sponsors will need to update their notices of creditable or non-creditable coverage to reflect the new dates for the Medicare Part D open enrollment period. The Centers for Medicare and Medicaid Services have updated their model notices of creditable and non-creditable coverage to reflect the new dates. No other substantive changes were made to the model notices. The updated notices are available here.
On September 8, 2011, the U.S. Court of Appeals for the Fourth Circuit dismissed two lawsuits challenging the constitutionality of President Obama's health care reform legislation, both on procedural grounds. In one case filed by the State of Virginia, the court dismissed a challenge to the legislation's constitutionality finding that the State of Virginia did not have standing to challenge the law. The State of Virginia argued that the federal health care reform law conflicted with a state law that says no Virginia resident can be forced to buy health insurance. The court found that the only basis for the Virginia state law was "to declare Virginia's opposition to the federal insurance mandate." In the second case, the Fourth Circuit dismissed a challenge to the federal legislation's constitutionality on the ground that the individual mandate was an improper tax on citizens. The court found that it did not have jurisdiction to rule on the case because federal law prohibits challenging a "tax" before it is collected. In this case, one dissenting judge wrote that jurisdiction did exist, but also stated that he would hold that the health care reform law was a constitutional exercise of Congress' power under the Commerce Clause.
The Fourth Circuit is now the third federal Court of Appeals to rule on the constitutionality of health care reform. Previously, the U.S. Court of Appeals for the Sixth Circuit upheld the constitutionality of the individual mandate under health care reform, while the U.S. Court of Appeals for the Eleventh Circuit struck down the individual mandate requirements as being unconstitutional. There are several other lawsuits pending across the Country. These new decisions, along with the prior decisions from the Sixth and Eleventh Circuits, set the stage for the issue of the constitutionality of the individual mandate under health care reform to reach the Supreme Court of the United States, perhaps as early as its 2012 term.
Lorman Education Services Live Audio Conference
Why Is This Guy Still on My Health Plan?
September 26, 2011
1:00 pm (EST), (12:00 p.m. [CST], 11:00 a.m. [MST], 10:00 a.m. [PDT])
1 hour 30 minutes
Instructor: Amy Gordon, Co-Chair of McDermott Will & Emery’s Health and Welfare Benefits Group
Companies have encountered many situations where an employee remains on the company's health benefits as an active employee for many years past the date in which the employee was actively at work for the company, both intentionally and unintentionally. This live audio conference will answer a common problem employers experience: what date should an employee be treated as a terminated employee when he/she is on a leave of absence or fails to return from a leave of absence, and how does this coordinate with the company-provided health and welfare benefits? This program will discuss the legal issues surrounding a leave of absence. It will explore how an employee may fall through the cracks and how to possibly change the administrative process. Finally, the program will address some of the potential pitfalls given the new Health Care Reform rules.
This live audio conference is designed for human resource managers, benefits administrators, payroll managers, controllers, CFOs, presidents, vice presidents, business and office managers, insurance professionals and attorneys.
Click here to register for the audio conference.
To receive a 20% discount courtesy of McDermott Will & Emery, please enter this code: 9696163.
by Amy M. Gordon and Jamie A. Weyeneth
Under Health Care Reform, for plan years starting on or after September 23, 2010, health plans may impose only "restricted annual limits" on essential health benefits as defined by Health and Human Services (HHS). All annual limits are prohibited for plan years starting on or after January 1, 2014. HHS issued guidance for health plans seeking a waiver of the restricted annual limit for plan years beginning before January 1, 2014. On August 19, 2011, HHS released guidance exempting all health reimbursement arrangements (HRAs) that were in effect on September 23, 2010, from applying for a restricted annual limit waiver. This guidance effectively excuses existing HRAs (including stand-alone HRAs) from complying with the restricted annual limit on essential health benefits for all plan years beginning before January 1, 2014.
Live Knowledge Congress Webcast
Strategies to Deal with the Patient Protection & Affordable Care Act
September 13, 2011, Noon to 2 pm (EST)
Panel includes Susan Nash, Co-Chair of McDermott Will & Emery’s Health and Welfare Benefits Group.
The Patient Protection & Affordable Care Act (PPACA or “Health Reform Bill”) has been the subject of significant legal and policy debate since it was enacted in April 2010. The legislation has been both hailed as an important victory in the battle to improve the quality and accessibility of healthcare in the United States, and challenged as unconstitutional and ineffective in reducing medical costs and otherwise incenting choice and value in medical care and services.
Amidst this debate, legal and business strategies for dealing with the aspects of Health Reform that have been, or soon will be, implemented are often left in the background. These strategies are critical for ensuring compliance and optimizing business performance as PPACA rolls out. No matter how the broader policy or legal debate resolves, entities affected by PPACA must consider the Act’s impact on reimbursement, cost protection, and other day-to-day operational issues.
Strategies to Deal with the Patient Protection & Afford Care Act LIVE Webcast is a must-attend for healthcare professionals, health policy directors, health executives, pharmaceutical and medical device manufacturers and others who are interested in developing practical strategies to deal with healthcare reform. The Knowledge Group has assembled a panel of key thought leaders and regulators to discuss the fundamentals and updates regarding this topic.
Click here to register for the event.
To receive a discount courtesy of McDermott Will & Emery, please enter this code: will8992.
by Amy M. Gordon, Susan M. Nash and Jamie A. Weyeneth
The U.S. Departments of Treasury, Labor, and Health and Human Services recently released joint guidance regarding mandatory coverage of contraceptive services for women under the preventive services requirements of health care reform. The new guidance coincides with the issuance of expanded preventive care coverage requirements for women released by the Health Resources and Services Administration (HRSA).
Click here to view the new women’s preventive services guidelines issued by HRSA. Recommended preventive services issued after September 23, 2009, are effective as of the first day of the first plan year/policy year beginning on or after the one-year anniversary of the date the recommendation is issued. Therefore, these new guidelines (including the religious employer exception) will apply for plan years/policy years beginning on or after August 1, 2012.
by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann
As same-sex marriages began taking place over the weekend in New York state (click here for more information on the benefit implications of that development), another development that could have even more far-ranging implications for benefit plans also occurred last week. Specifically, last week the Senate Judiciary Committee held hearings on a bill entitled the “Respect for Marriage Act” which would repeal the Defense of Marriage Act’s (DOMA) definition of marriage for purposes of federal law as a union between one man and one woman. If the Respect for Marriage Act were enacted, it would -- among other things -- significantly complicate the administration of benefit plans on a multitude of issues such income tax inclusion, COBRA, death benefits, etc. (For more information, click here). There could also be significant confusion regarding whether a same-sex marriage entered into in one state can or must be recognized by another state; the federal DOMA inspired many states to enact their own mini-DOMA statutes, the constitutionality of which might be in question if the Respect for Marriage Act were enacted.
Legislative prospects for the Respect for Marriage Act are difficult to predict. However, consistent with the Administration’s position to stop enforcing portions of DOMA (click here for more information), the President has indicated his willingness to sign the Respect for Marriage Act if presented to him.
by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann
Now that same-sex marriage has been legalized in the state of New York, employers should expect to begin seeing an increase in requests for spousal benefit coverage from employees who have legally married their same-sex partners. The new law takes effect on July 24, 2011.
To read the full article, click here.
by Susan M. Nash and Maureen O'Brien
On June 17, 2011, the U.S. Department of Health and Human Services (HHS) issued additional guidance with respect to the annual waiver limit program. The annual waiver limit program allows issuers or other group health plan sponsors to apply for a waiver from the annual limit requirements if they present evidence that meeting the annual limits would result in diminished access to benefits or a significant increase in premiums. Typically, issuers or group health plan sponsors that offer extremely basic coverage would be interested in applying for the annual limit waiver program.
Importantly, recipients of these waivers must take action between June 24, 2011 and September 22, 2011 in order to preserve those waivers through the end of 2013. In addition, new applicants must submit applications under the annual limit waiver program between June 24, 2011 and September 22, 2011 in order to receive a new waiver. Extensions or new applications not received on or before September 22, 2011 will not be eligible for an annual limit waiver and will need to comply with the requirements of the Patient Protection and Affordable Care Act (PPACA).
Additional Modifications to the Annual Limit Waiver Program
The following additional modifications were made to the annual limit program:
Click here for the new HHS Guidance.
by Todd A. Solomon and Brett R. Johnson
The Illinois Religious Freedom Protection and Civil Union Act, which legalizes civil unions for same-sex and opposite-sex partners, takes effect on June 1, 2011. The law entitles civil union partners to all of the legal rights and obligations that opposite-sex spouses have under Illinois state law by requiring that a party to a civil union be included in any use of the terms “spouse,” “family,” “immediate family,” “dependent,” “next of kin” or other terms that denote a spousal relationship throughout Illinois law. Illinois will recognize as a civil union any same-sex marriage, civil union or substantially similar legal relationship entered into in other states.
The application of the Illinois law is complicated by the intersection of federal and state law. The federal Defense of Marriage Act (DOMA) continues to define a “spouse” as a husband or wife of the opposite sex. A civil union in Illinois will not, therefore, be a “marriage” under DOMA. As a result of DOMA, parties to an Illinois civil union will not be entitled to federal law benefits applicable to opposite-sex spouses (e.g., qualified joint and survivor annuity (QJSA) and qualified pre-retirement survivor annuity (QPSA) benefits under tax qualified retirement plans, COBRA coverage, etc.). Note, however, that on March 16, 2011, both the U.S. House and Senate introduced legislation to repeal DOMA (The Respect for Marriage Act of 2011), and to tie federal law marital status to an individual’s marital status in the State where the individual entered into the marriage. The Respect for Marriage Act bills currently rest with the Judiciary Committees of the House and Senate, and the next step for each (e.g., Committee vote, hearings, Senate and/or House floor vote) is unclear.
Because the new Illinois civil union law may impact areas such as employee benefit plans, employer leave policies (including the Illinois Family Military Leave Act) and any other employer-provided benefits covering spouses, employers should ensure such programs are in compliance with the June 1, 2011 law change. More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here, while the impact on Religious Organizations benefits is discussed here.
by Susan M. Nash, Amy M. Gordon, Todd A. Solomon, Raymond M. Fernando and Adrienne Walker Porter
On April 7, 2011, Governor Jerry Brown signed into law California Assembly Bill 36 (AB 36). AB 36 conforms certain California income and employment tax laws to certain changes to the United States Internal Revenue Code (the Code) and Internal Revenue Service (IRS) guidance relating to the favorable tax treatment of health benefits coverage for adult children under age 27. The favorable state tax treatment afforded under AB 36 applies retroactively as of March 30, 2010, which also conforms to the effective date of the parallel provisions under the Code. For a more detailed summary of AB 36, see our related On the Subject, "Health Care Reform: California Adopts Favorable Federal Tax Treatment of Health Coverage for Adult Children Under Age 27."
Background
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Act), generally requires group health plans that provide dependent coverage for children to continue to make such coverage available for adult children until age 26, beginning as of the first plan year commencing on or after September 23, 2010. Effective as of March 30, 2010, the Act also afforded certain favorable tax treatment under the Code with respect to such coverage. See our related On the Subject, "Health Care Reform: IRS Guidance on Health Coverage for Children Under Age 27."
Discrepancies Between State and Federal Tax Laws
Some states’ tax laws do not automatically conform to corresponding changes in federal tax laws. Thus, although the Act made various changes to the Code relating to the tax treatment of health coverage and reimbursements for children under age 27, some states’ tax laws did not automatically conform to those changes. California recently adopted AB 36 to conform to such changes under the Code.
Next Steps for Employers and Plan Administrators
Employers and plan administrators should take action now in the following ways:
by Amy Gordon, Susan Nash and Maureen O'Brien
The 2011 budget agreement just passed by U.S. Congress on April 14, 2011, contains provisions that repeal and de-fund certain provisions of the Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act of 2010) (PPACA).
Specifically, the “free choice voucher” program mandated under Section 10108 of PPACA has been repealed. The free choice voucher provision of PPACA required employers to provide vouchers for workers whose employer-provided health insurance premiums cost between 8 percent and 9.8 percent of the worker’s family income. The vouchers could then have been used by the worker to purchase insurance in the private market or in the exchanges.
In addition, the 2011 budget agreement rescinds $2.2 billion of the $6 billion in start-up funding provided for the Consumer Operated and Oriented Plan program created under Section 1322 of PPACA and also rescinds $3.5 billion in performance bonus payments authorized in the 2009 State Children’s Health Insurance Program reauthorization.
by Ira B. Mirsky and Maureen O'Brien
On March 29, 2011, the Internal Revenue Service (IRS) released Notice 2011-28, which provides interim guidance to employers regarding informational reporting of the aggregate cost of applicable employer-sponsored group health plan coverage on Forms W-2. Pursuant to Notice 2010-69, this reporting is optional for all employers in connection with preparing Forms W-2 for the calendar year 2011. Most employers will be required to provide this reporting on Forms W-2, using Box 12 Code "DD," beginning with the Forms W-2 for the calendar year 2012 (i.e., Forms W-2 issued for calendar year 2012 in January 2013).
Notice 2011-28 provides an exception to the reporting requirements for some employers. Until issuance of further guidance, an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.
In addition, Notice 2011-28 contains an FAQ discussion which provides guidance concerning: (i) the employers subject to the reporting requirements; (ii) the methods for reporting the cost of coverage on the From W-2; (iii) the types of coverage the cost of which is required to be included in the amount reported on the Form W-2; and (iv) calculation methods that may be used to determine the cost of coverage. Notice 2011-28 also contains transition relief for certain employers and with respect to certain types of employer-sponsored coverage.
The IRS has requested comments on all aspects of the guidance under Notice 2011-28.
Click here for the interim final regulations and click here for a discussion of Notice 2010-69.
by Amy M. Gordon, Susan M. Nash, Michael T. Graham and Jamie A. Weyeneth
The U.S. Department of Labor has released new guidance further delaying enforcement of certain Health Care Reform claims, appeals and external review requirements. Although the guidance was issued by the Department of Labor, the enforcement grace period applies to the U.S. Departments of Health and Human Services, Labor, and Treasury. The Department of Health and Human Services is also encouraging states to provide similar grace periods with respect to insurance issuers. The enforcement delay is intended to give the Departments time to publish new regulations to implement the claims, appeals and external review requirements under Health Care Reform.
Highlights of the technical release are:
Enforcement Grace Period Extended to Plan Years Starting On or After July 1, 2011 (January 1, 2012 for calendar year plans)
Enforcement Grace Period Extended to Plan Years Starting On or After January 1, 2012 (formerly on or after July 1, 2011)
The full guidance is available at, U.S. Department of Labor Technical Release 2011-01.
by Joseph S. Adams, Todd A. Solomon and Brian J. Tiemann
Employers should take action now to prepare for requests for benefit coverage from employees planning to enter into a civil union once a new law legalizing civil unions for same-sex or opposite-sex partners takes effect in Illinois on June 1, 2011. The most common requests for benefits for a civil union partner are likely to be coverage under the employer’s medical, dental and vision plans, and survivor annuity coverage under defined benefit pension plans.
Medical, Dental and Vision Benefits. Employers with medical, dental or vision plans insured with contracts issued in Illinois will be required to extend coverage to an employee’s civil union partner if the plan provides coverage for other employees’ spouses. Employers that are required to or that voluntarily choose to extend such coverage to an employee’s civil union partner will need to ensure that the employee is properly taxed on these benefits. Because civil unions are not recognized under federal law, employers must impute income to the employee for federal income tax purposes, unless the partner qualifies as a “dependent” of the employee pursuant to Section 152 of the Internal Revenue Code. However, because civil union partners in Illinois are entitled to all of the rights and benefits as spouses, the value of employer-provided medical, dental and vision coverage is not taxable for Illinois state income tax purposes.
Retirement Benefits. The Illinois civil union law will not require non-government employers with qualified retirement plans to extend spousal benefits to civil union partners since these plans are regulated solely by federal law. However, employers may want to consider amending their plans if they want to provide full parity in benefits for civil union partners. Employers with defined contribution plans may want to identify civil union partners as default beneficiaries in the event an employee fails to designate a beneficiary or if the beneficiary predeceases the employee. Another option with respect to defined contribution plans is to permit an employee to obtain an optional hardship withdrawal for IRS-recognized expenses related to a civil union partner. Employers with defined benefit pension plans may want to permit an employee’s benefit to be paid over the joint life of the employee and his or her civil union partner and/or to allow a civil union partner to receive a death benefit if the employee dies before retirement.
More information on the employee benefit plan implications of the legalization of civil unions in Illinois can be found here.
by Amy M. Gordon and Michael T. Graham
On January 31, 2011, another Federal district court judge opined on the constitutionality of the controversial Health Care Reform legislation. In Florida v. U.S. Department of Health and Human Services, Judge Vinson of the U.S. District Court for the Northern District of Florida, in a case brought by governors and attorneys general from 26 states, held that the individual insurance mandate provisions in the legislation that require all persons to purchase health care insurance were unconstitutional.
In his opinion, Judge Vinson found that the individual insurance mandate exceeded the regulatory powers granted to Congress under the U.S. Constitution’s Commerce Clause. Judge Vinson held that the penalties associated with not purchasing health care insurance went beyond Congress’ broad authority to make laws that are “necessary and proper” to carrying out its designated responsibilities. He found that if Congress could regulate an individual’s inactivity through the Commerce Clause, then Congress could regulate virtually any kind of activity or inactivity with almost unlimited power. He concluded that if Congress could penalize an individual for deciding not to engage in certain commerce, the enumeration of individual rights in the Constitution would have been made in vain. In ruling on a second claim, Judge Vinson dismissed a claim that the legislation violated state sovereignty rights by requiring states to pay for a fractional share of the planned expansion of Medicaid.
Judge Vinson’s decision updates the federal judicial scoreboard on whether Health Care Reform is or is not unconstitutional at 2 and 2. However, unlike the Virginia federal court that also ruled against the individual mandate provision but upheld the rest of the legislation, Judge Vinson went further, concluding that the individual mandate was so inextricably connected to the other provisions in the legislation that its unconstitutionality required that the entire legislation be invalidated. Ultimately, while this ruling comes in what may be the most prominent challenge to Health Care Reform given that the case was filed by many states’ governors and attorneys general, it will merely become one of many opinions on the individual mandate’s constitutionality given that there are over 20 pending cases challenging the legislation.
On the Legislative front, on February 2, 2011, Senate Republicans were defeated by a vote of 51-47 in their effort to repeal Health Care Reform.
As of now, these two events will have little impact on employers and their group health plans. We recommend a wait and see approach. Senate Republican leaders expressed that they were not surprised that this effort was defeated and that votes were cast generally along party lines. As for the Florida court decision, Judge Vinson declined to require enforcement of his ruling pending an expected appeal by the Obama administration.
Because the individual mandate provision does not take effect until 2014, it is likely that the Federal courts will continue to provide differing opinions until the issues is settled by the Supreme Court. In fact after the Senate defeat, Democratic Senator Bill Nelson of Florida announced he would file legislation urging the justices to act quickly. McDermott Will & Emery will continue to monitor this important issue as it develops. If you have any questions, please contact us.
by Joseph S. Adams, Jonathan J. Boyles, Raymond M. Fernando, Andrew Liazos and Maureen O'Brien
New Nondiscrimination Requirement for Fully-Insured Health Plans. On December 22, 2010, the IRS released Notice 2011-1 addressing the timing of the application of the provisions of the Patient Protection and Affordable Care Act (PPACA), prohibiting insured group health plans from discriminating in favor of highly compensated individuals. The Treasury Department and the IRS, as well as the Departments of Labor and Health and Human Services (collectively, the Departments), have determined that compliance with these requirements should not be required (and, thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability have been issued. Because noncompliance with the new requirement can trigger an excise tax, this Notice was welcome relief for companies struggling to determine how to comply with these requirements by January 1, 2011.
New Code Section 162(m)(6) Deduction Limit. On December 22, 2010, the IRS released Notice 2011-02 which provides guidance on the application of Section 162(m)(6) of the Internal Revenue Code, a new provision added by PPACA. Code Section 162(m)(6) limits to $500,000 the allowable deduction for remuneration for services provided by individuals to certain health insurance providers. Notice 2011-2 does several things including defining which individuals are subject to the limit, establishing a helpful exception for entities only receiving a de minimis amount of health insurance premiums, and clarifying that deferred compensation earned before 2013 will not be subject to the Section 162(m)(6) deduction limitation when paid after the end of the 2012 tax year if the employer is not a post-2012 covered health insurance provider. However, the Notice does not provide guidance on a hot issue for many large companies with captive insurance companies regarding whether the captive’s receipt of health insurance premiums could subject executives throughout the entire company to the new deduction limit.
Click here for more information regarding Notice 2011-1 and Notice 2011-2.
New Implementation Questions and Answers Issued Regarding Application of Various PPACA Requirements. The Departments have issued a fifth set of implementation questions and answers addressing a variety of issues under PPACA. This new guidance clarifies that compliance with automatic enrollment provisions for employers with 200 or more employees is not required until regulations or other guidance is issued interpreting this provision. This guidance also clarifies that the 60-day advance notice requirement with respect to material modifications to group health plans pursuant to Section 2715(d)(4) of the Public Health Service Act (added by PPACA) will not be required until group health plans are required to provide the summary of benefits and coverage explanation required under the same section of PPACA. Under Section 2715 of PPACA, the Departments are supposed to provide standards for group health plans to use in compiling and providing a summary of benefits and coverage explanation within 12 months from the date of enactment of PPACA, and group health plans must comply with the standards by March 23, 2012. The Departments have not yet issued the standards, and thus the 60-day advance notice requirement is not in effect.
by Joseph S. Adams, Raymond M. Fernando, Nancy S. Gerrie, Amy M. Gordon, Andrew C. Liazos, Susan M. Nash, Brian A. Benko, Kay Kemp, and Joanna Kerpen,
With the end of 2010 fast approaching, employers should take time to review their employee benefit plans and assess whether any actions, such as adopting plan amendments and implementing administrative changes, must be taken before December 31, 2010. Discussed below is a sample of the types of amendments or changes that may be required under various types of employee benefit plans.
For 2010, employers should review their qualified defined contribution plans for compliance with the HEART Act, new diversification regulations with respect to employer securities, waiver of required minimum distributions for 2009, and non-spouse beneficiary direct rollovers. Employers should also review their qualified defined benefit plans for compliance with the HEART Act, non-spousal beneficiary direct rollovers, PPA benefit restriction requirements and, for certain hybrid defined benefit plans (e.g., cash balance and pension equity formulas), the new final regulations. Also, employers that are Cycle E filers (that is, an EIN that ends in 5 or 0) should submit a determination letter request by January 31, 2011.
This year, in addition to qualified plan amendments, employers should review their group health plans and related documents for compliance with new healthcare reform requirements. For example, employers must determine whether their group health plans are “grandfathered” for the purposes of healthcare reform. Generally, group health plans must update plan documents for changes with respect to dependent care eligibility, lifetime and annual limits and pre-existing condition limitations. If a group health plan is a non-grandfathered plan for healthcare reform purposes, additional changes are required. Further, employers should update their group health plans for compliance with recent changes under HITECH, GINA, CHIPRA, MHPAEA and Michelle’s Law.
Employers also should review their nonqualified deferred compensation plans with a view to identifying any operational or plan document corrections that are necessary under applicable guidance. Completion of such corrections by the end of 2010 will result in more advantageous tax treatment. A review of employee agreements that contain continuation health coverage should also be performed to ensure that such arrangements are not discriminatory under new healthcare reform rules.
For a detailed discussion of all required amendments and changes to administrative procedure that may be required before the end of the 2010 plan year, please see our White Paper.
by Amy M. Gordon, Joanna C. Kerpen and Susan M. Nash
The Patient Protection and Affordable Care Act of 2010 mandated that employers report the aggregate cost of applicable employer-sponsored coverage on Form W-2, Wage and Tax Statement, beginning January 1, 2011. On October 12, 2010, the Internal Revenue Service (IRS) released Notice 2010-69, which provides interim relief to employers with respect to this reporting requirement. Thus this notice makes such reporting for 2011 voluntary versus mandatory. Employers who choose not to report the aggregate cost of applicable employer-sponsored coverage on Form W-2, Wage and Tax Statement, beginning January 1, 2011, will not be subject to any penalties for failure to meet such requirements. The U.S. Treasury Department and the IRS anticipate issuing guidance on the new Form W-2 reporting requirement before the end of the 2010 calendar year. If an employer does decide to report applicable employer-sponsored coverage on Form W-2, the IRS has also released a draft Form W-2 with some instructions.
In the second half of 2010, employers should review their current benefit plan offerings to ensure compliance with new regulations issued by the U.S. Departments of Health and Human Services, Labor and the Treasury under the Patient Protection and Affordable Care Act (PPACA). For more information, see “Health Care Reform: PPACA Interim Final Regulations on Pre-existing Condition Exclusions, Lifetime and Annual Limits, Rescissions and Patient Protections” (6/29/10). Employers must also determine whether group health plans in existence as of March 23, 2010 (the general effective date of PPACA) are “grandfathered” for the purpose of applying many of the changes under PPACA. Part of this determination is analyzing the benefits of maintaining grandfathered status versus the restrictions on plan design and cost-sharing changes that are necessary to maintain grandfathered status. For information regarding determining grandfathered status and actions that result in the loss of grandfathered status, see “Health Care Reform: Grandfathered Health Plan Regulations” (6/15/10).
The PPACA enacted IRC Section 162(m)(6) which imposes a $500,000 deduction limit on compensation paid by certain health insurers and their related companies to all employees and other individual service providers. This provision limits the ability of many health insurers and their related companies to fully deduct compensation paid to employees and other individual service providers in 2013 and later tax years. All health insurers will want to take action now to determine the effect of the new rules and to review the compensation structure for their highly paid employees and individual service providers in order to maximize potential deductions. See “Health Care Reform: New Deduction Limit on Compensation Paid by Certain Health Insurers” for a detailed discussion of this new provision. (6/30/10).
Under PPACA, both group health plans and insurers offering group health coverage must implement internal claims and appeals processes that comply with the claims and appeals procedures requirements under Section 503 of the Employee Retirement Income Security Act (ERISA). HHS, DOL and Treasury recently clarified the scope of an employer’s internal claims and appeals procedures and external review processes. See “Health Care Reform: Guidance on Claims and Appeals Rules” (7/29/10).
Finally, the PPACA retains the Retiree Drug Subsidy, but eliminates an employer's ability to deduct the amount of the subsidy. This change increases an employer’s income tax liability, in effect increasing the employer’s cost of providing prescription drug coverage to retirees. Employers should analyze the increased future tax liability and the current accounting charges necessary to retain retiree prescription drug coverage. A more detailed discussion of these issues can be found in “Health Care Reform: Elimination of Retiree Drug Subsidy Deduction” (7/21/10).
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