As previously reported, California’s Healthy Workplaces, Healthy Families Act of 2014 (California’s Sick Leave Law) took full effect on July 1, 2015, although some provisions were effective as of January 1, 2015. The new law generally requires most employers to allow employees to accrue paid sick leave. This On the Subject discussed requirements employers must meet, including Assembly Bill 304, which amends California’s Sick Leave Law to make immediate changes.
On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act (the Act) into law. In addition to containing several revenue offsets, the Act significantly increased penalties for incorrect information returns, including those required by the Affordable Care Act (ACA).
The Internal Revenue Service (IRS) may impose penalties for both failing to file and filing incorrect or incomplete information returns and/or payee statements after the due dates for such forms pursuant to Internal Revenue Code Section 6721 and 6722. These penalty provisions apply to a variety of information reporting requirements including Forms W-2 and 1099, and now more recently to Forms 1094-B, 1095-B, 1094-C, and 1095-C relating to compliance with the ACA.
Recent cyber-attacks on health insurers have heightened awareness that sensitive participant and beneficiary information may not be adequately secure. There will undoubtedly be other attacks on databases maintained by service providers to employee benefit plans, which raises an important question for Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries: what should be done now to protect participant and beneficiary information entrusted to service providers against future attacks and unauthorized disclosure? While the extent of a fiduciary’s responsibility to protect personal identifiable information of participants and beneficiaries is unclear, the fiduciary provisions of ERISA can be interpreted to impose a general duty to protect this information when it is part of a plan’s administration. In addition, plan fiduciaries also may have obligations under other federal and state laws governing data privacy and security that are not preempted by ERISA. This article addresses the nature of the problem, identifies the types of data breaches that can occur with employee benefit plans, provides an overview of relevant law that may apply, and sets forth practical steps that can be taken by plan fiduciaries with service providers to address privacy and security concerns.
Click here to read the full article from Benefits Law Journal.
On June 25, 2015, the Supreme Court of the United States ruled in King v. Burwell that the Affordable Care Act (ACA) requires premium tax credits to be made available in states that use a federal exchange. The case challenged an Internal Revenue Service (IRS) regulation allowing tax credits in federal exchanges. The Supreme Court upheld the regulation as consistent with the statute. Our On the Subject provides a discussion on the issue.
Click here to read the full article.
On June 26, 2015, in Obergefell v. Hodges, the Supreme Court of the United States determined that it is unconstitutional for a state to ban same-sex couples from exercising the fundamental right to marry. As a result of this decision, all states are now required to permit same-sex couples to marry and to recognize same-sex marriages validly entered into in other jurisdictions. Immediately prior to the Supreme Court’s decision, 37 states and the District of Columbia permitted same-sex marriage, meaning the impact of the Obergefell decision will be most significant in the remaining 13 states.
On June 25, 2015, the Supreme Court of the United States upheld one of the main pillars of the Affordable Care Act (ACA): the tax credits that allow millions of Americans to afford health care insurance on the public exchanges. In King v. Burwell, Chief Justice Roberts, writing for a 6–3 majority, held that middle- and low-income individuals who purchase health care insurance through a federally facilitated health care exchange are entitled to the same tax credits that are available to purchasers through state-run health care exchanges. The ruling puts to rest one of the remaining challenges to the general framework of the ACA. Accordingly, our On the Subject discusses how employers should continue to plan for compliance with the current and upcoming obligations required under the ACA.
On 4 May 2015, the National Development and Reform Commission, the National Health and Family Planning Commission, and four other ministerial departments of the Chinese central government jointly published the Notice of Promoting the Reform of Drug Pricing. As of 1 June 2015, the price ceiling for most drugs has been eliminated, with the intention of reducing government intervention in drug pricing and adopting a market-driven pricing system.
The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) have issued a set of Frequently Asked Questions (FAQs) clarifying the limitations on cost sharing under the Affordable Care Act.
In many transactions, particularly those where the buyer is a portfolio company of a private equity fund, the buyer agrees to cause its 401(k) plan to accept a transfer of assets from the seller’s 401(k) plan. The asset transfer from the seller’s plan provides the buyer’s with an asset base with which to negotiate the best possible administrative fee structure, and seamlessly transfers the retirement plan benefits of employees being retained or hired by the buyer. If the seller’s plan contains employer stock as an investment however, the buyer should be aware of fiduciary concerns that may arise under the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
“Stock-drop” litigation is a well-known phenomenon centering on plan fiduciary liability to plan participants when the value of employer stock investments in a retirement plan drops significantly. Less well-known is the fiduciary liability exposure facing new 401(k) plan sponsors and fiduciaries accepting a transfer of assets from the seller’s plan that includes former employer stock. Holding a significant block of a single security that is not company stock implicates ERISA prudence and diversification issues, and must be closely monitored.
Fiduciaries of 401(k) plans considering accepting asset transfers of former employer stock have often been advised to engage counsel to evaluate the prudence of holding the former employer stock in the buyer’s plan as an investment alternative (even if “frozen” to new investment) and establish a timeline for requiring that plan participants divest the former employer stock within one to two years of the asset transfer from the seller’s plan.
In light of the decision in Tatum v RJR Pension Inv. Comm., 2014 U.S. App. LEXIS 14924 (4th Cir. Aug. 4, 2014), buyer 401(k) plan sponsors and plan fiduciaries must now be even more careful to engage in a process that separates fiduciary from non-fiduciary acts and carefully follows established procedures for implementing any required divestitures of former employer stock. In Tatum, the plan was not properly amended to require the divestiture of former employer stock. This failure to properly amend the plan converted a plan design decision, which was a non-fiduciary or “settlor” decision, into a fiduciary act. In Tatum, the plan fiduciaries also failed to follow a prudent process for determining whether or not to eliminate former employer stock and for determining the timeline for implementing such divestitures.
The Tatum decision highlights that, in addition to fiduciary risk in holding former employer stock in the buyer’s 401(k) plan as an investment, there is also fiduciary risk in the process of eliminating former employer stock as an investment in the buyer’s plan.
When establishing a new 401(k) plan, the buyer should consult with legal counsel regarding the risks involved in accepting an asset transfer from a seller’s plan that includes former employer stock. Any new plan sponsors or plan fiduciaries that are contemplating accepting former employer stock as part of an asset transfer should consider whether or not they should engage an independent third party to monitor the former employer [...]
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HIPAA covered entities have reported that the HHS Office for Civil Rights recently sent pre-audit screening surveys to a pool of covered entities that may be selected for the previously delayed second phase of HIPAA compliance audits. This On the Subject describes the phase two audit program and identifies steps that covered entities and business associates should take to prepare for these audits.
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