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IRS Provides Transition Relief Regarding QSEHRA Notice Deadline

The IRS has provided transition relief under its Notice 2017-20 (the “IRS Notice”) regarding the employee notice requirement that small employers must meet if they want to provide a “qualified small employer health reimbursement arrangement” (“QSEHRA”) to their employees. As background, the 21st Century Cures Act (the “Cures Act”) permits certain employers who are not “applicable large employers” under the Affordable Care Act (i.e., generally, employers with fewer than 50 full-time or full-time equivalent employees) (“Eligible Employers”) to offer QSEHRAs for the reimbursement of substantiated medical care expenses incurred by employees or their family members, effective January 1, 2017. The Cures Act requires Eligible Employers to furnish a written notice to their eligible employees (“QSEHRA Notice”) at least 90 days prior to the beginning of the year in which the QSEHRA will be provided (or in the case of an employee who is not eligible to participate in the QSEHRA… Continue Reading

Disability Plan Can Disclose Disputed Substance Abuse Problem to Employer Without Violating ERISA

A former employee alleged that Aetna, as administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when Aetna reported to FedEx that the employee filed a disability claim for substance abuse and Aetna later failed to correct this report. FedEx’s drug policy stated that the disability vendor (Aetna) would notify FedEx when an employee sought benefits for substance abuse. The U.S. Court of Appeals for the Tenth Circuit found that compliance with FedEx’s policy could not constitute a breach of fiduciary duty and Aetna had not provided inaccurate information to FedEx and thus the appeals court upheld the district court’s summary judgment on the claim. Williams v. FedEx Corp. Services and Aetna Life Ins. Co., No 16-4032 (10th Cir. Feb. 24, 2017)

House Republicans Unveil Draft Healthcare Reform Legislation

The House Energy and Commerce and Ways and Means Committees introduced two bills on March 6, 2017, collectively entitled the American Health Care Act.  The Energy and Commerce bill primarily addresses Medicaid and other state-based program funding issues while the Ways and Means bill focuses on the Affordable Care Act’s (“ACA”) fees and taxes, insurance subsidies, and other provisions that directly affect employer-provided health coverage. It’s important to note what these bills are and what they aren’t.  The bills do not represent the complete repeal of the ACA or the final word on what the American Health Care Act may look like when finished.  These are reconciliation bills intended to repeal and replace portions of the ACA by a simple majority vote in a way that would not be subject to a blocking filibuster in the Senate if brought to a vote.  The trade-off is reconciliation bills are limited to… Continue Reading

DOL Delays New Fiduciary Duty Rule

In proposed regulations recently released, the DOL delayed the effective date of its new fiduciary duty rule and related exemptions by 60 days, from April 10, 2017 to June 9, 2017. The DOL’s announcement follows a presidential memorandum issued on February 3, 2017, directing the DOL to reconsider the new fiduciary duty rule to determine whether it may adversely affect the ability of individuals to gain access to retirement information and financial advice. The 60-day extension is intended to give the DOL time to collect information and to consider comments it receives related to issues raised in the presidential memorandum before the rule and exemptions become effective. For additional information on the fiduciary duty rule in its current form, please see our blog post. View the proposed regulations.

Eighth Circuit Holds that Failure to Follow the Plain Language of the Plan is Abuse of Discretion

Within three years following the acquisition of Anheuser-Busch Companies (the “Company”) which resulted in a change-in-control, the Company sold its entertainment division. The Company’s pension plan provided that a plan participant “whose employment with the Controlled Group is involuntarily terminated within three (3) years after the Change in Control” would be eligible for enhanced pension benefits. The Company determined that the employees of the entertainment division were not eligible for enhanced pension benefits because they continued working with the successor entity after the sale and therefore did not terminate employment. The district court and the Eighth Circuit disagreed. Applying a plain-text analysis to the plan, the Eight Circuit determined that because the employees were no longer employed with the controlled group, their “employment with the Controlled Group” had terminated. Although the plan granted the Company discretion to interpret terms and decide benefits, it was an abuse of discretion to not… Continue Reading

Ordinary Equity Issuances to Company Insiders Can Result in HSR Act Violations and Penalties

Directors, officers, and other persons who directly or indirectly hold common stock worth close to or more than $80.8 million (the threshold amount for 2017) should consult legal counsel before acquiring any more shares to determine if compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act“), is required prior to completing any additional acquisitions. In recent years, the Federal Trade Commission and the U.S. Department of Justice have more aggressively enforced the HSR Act, including inadvertent failures to file that occur when an insider of a company with significant equity value acquires a small number of shares-whether through a restricted stock grant, shares issued as director compensation, the exercise of a stock option, open market purchases, or otherwise. For example, in January 2017, the agencies imposed a fine of $780,000 on an individual who was a founder, officer, and director of a company for his… Continue Reading

Review of Plans Affected by ERISA Final Regulations for Disability Benefits Claims Procedures

Last December, we reported on the DOL’s release of final regulations revising ERISA’s claims procedures for disability benefits. A more in-depth review of the types of benefit plans affected by these final regulations is available on our companion blog, HB Health and Welfare.

En Banc Ninth Circuit Applies Ongoing Duty to Monitor Investments Standard in Tibble

The U.S. Court of Appeals for the Ninth Circuit, sitting en banc, recently held that plaintiffs’ breach of fiduciary duty claims were not barred by ERISA’s six year limitations period, even when the retirement plan investments in question were selected by the plan’s fiduciary more than six years prior to plaintiffs’ suit. The Ninth Circuit applied the U.S. Supreme Court’s recent decision in this case, which confirmed that fiduciaries have an ongoing fiduciary duty to monitor investments in retirement plans and to remove imprudent ones. (For additional information on the Supreme Court’s decision, please see our prior post.) The Ninth Circuit distinguished between a fiduciary’s duty to prudently select investment alternatives from the fiduciary’s duty to prudently monitor them. Consequently, a fiduciary’s ongoing duty to monitor plan investments could result in a series of breaches as an investment alternative is retained over time. The Ninth Circuit remanded the case back… Continue Reading

IRS Proposed Regulations Clarify the Definition of Tax “Dependent”

The IRS recently issued proposed regulations regarding the definition of “dependent” under the Internal Revenue Code (“Code”). The proposed regulations generally update existing regulations to conform to amendments previously made to Code Section 152 and other Code sections by the Working Families Tax Relief Act of 2004 (“WFTRA”) and subsequent legislation. Under WFTRA, Code Section 152 was amended to provide that a federal income tax dependent is either a taxpayer’s “qualifying child” or “qualifying relative.” These definitions are relevant for employers that sponsor (i) group health plans if such plans provide coverage for an employee’s dependent who is not his or her spouse or child under age 27, but who is the employee’s federal income tax dependent, and (ii) dependent care assistance programs which reimburse covered employees for qualifying dependent care expenses of qualifying children and certain other federal income tax dependents. The proposed regulations also provide new guidance with… Continue Reading

New IRS Guidance Permits Use of Forfeitures to Fund Safe Harbor Contributions, QNECs, and QMACs

On January 18, 2017, the IRS published proposed amendments to regulations under Section 401(k) of the Internal Revenue Code, which would permit the use of forfeitures to fund safe harbor contributions, qualified non-elective contributions (“QNECs”), and qualified matching contributions (“QMACs”). Existing regulations provide that employer contributions may only qualify as safe harbor contributions, QNECs, or QMACs if they are non-forfeitable and not eligible for early distribution at the time they are contributed to the plan. The proposed regulations, which may be relied upon currently, would instead require that safe harbor contributions, QNECs, and QMACs be non-forfeitable and not eligible for early distribution at the time they are allocated to participants’ accounts. View the proposed regulations.

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