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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.

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

Fixed-Indemnity Health Plan Benefits Includible in Gross Income

Generally, a fixed-indemnity health plan pays benefits based on a time period, such as $100 per day, and not based on the amount of medical care expenses actually incurred. The IRS issued an Office of Chief Counsel Memorandum (the “Memorandum”) stating that benefit payments under an employer’s fixed indemnity health plan are included in the employee’s gross income and wages if the employer pays for the cost of the coverage or if the premiums are paid for on a pre-tax basis through a cafeteria plan. Such benefits are not included in gross income and wages if employees pay premiums on an after-tax basis. The advice in the Memorandum may not be used or cited as precedent but does provide insight regarding how the IRS would view a similar tax situation. View the Memorandum.

Employers Should Continue to Comply with the ACA

President Trump signed an executive order on January 20, 2017, generally directing the heads of government agencies to halt enforcement of Affordable Care Act (“ACA”) provisions that cause financial or regulatory burdens on a host of entities, to the extent permitted by law. While this executive order did not specifically use the word “employer” in the list of entities, the list can be construed to include employers providing health coverage to employees. The executive order itself does not relieve employers of any obligations to comply with the ACA, and this action should not occur until the various federal agencies issue guidance delaying or halting the enforcement of specific ACA provisions. The Departments of HHS, Labor, and the Treasury are unlikely to take any action until their new Secretaries are confirmed. In the meantime, employers should continue to comply with the ACA pending issuance of future guidance. View the executive order.

Safeguards to Defend Against Conflict of Interest Allegations in the Administration of ERISA Welfare Benefit Claims

In cross-motions for summary judgment in Geiger v. Aetna Life Insurance Company, the U.S. Court of Appeals for the Seventh Circuit considered whether Aetna, the designated claims fiduciary and insurer of disability benefits provided under an employer-sponsored ERISA welfare benefit plan, abused its discretion when it terminated the plaintiff’s disability benefits.  The plaintiff was a former employee of the employer-plan sponsor.  The terms of the plan specifically granted discretionary authority to Aetna with respect to determining benefits and construing the terms of the plan. However, the plaintiff alleged that Aetna had operated under a conflict of interest, as the party that both determined eligibility for and paid plan benefits, and thus abused its discretion in denying her claim.  In deciding that Aetna did not abuse its discretion, the Court considered the following four safeguards that Aetna had undertaken to minimize any conflict of interest: (i) Aetna obtained numerous independent physician… Continue Reading

Federal District Court Issues Preliminary Injunction Blocking Enforcement of ACA Section 1557

The U.S. District Court for the Northern District of Texas issued a preliminary nationwide injunction December 31, 2016, blocking HHS from enforcing Section 1557 of the Affordable Care Act in Franciscan Alliance, Inc. et. al. v. Burwell. We previously reported on Section 1557 (which prohibits discrimination in certain healthcare programs and activities for Title IX reasons, e.g., race, color, national origin, sex, age, or disability), the final Section 1557 regulations issued by HHS, and the potential effects on healthcare providers, insurers, and employer-provided health care coverage here. The Franciscan Alliance plaintiffs are three religiously affiliated healthcare providers (later joined by five states) that claimed (i) HHS impermissibly extended Title IX to include gender identity and termination of pregnancy as forms of sex discrimination contrary to Title IX’s history and legislative intent, (ii) Section 1557 requires covered entities to perform and/or provide insurance coverage for abortion and transition-related procedures, and (iii)… Continue Reading

Federal Agencies Release Additional Frequently Asked Questions on Special Enrollment Opportunities, Preventive Services, and Qualified Small Employer HRAs

On December 20, 2016, the federal Departments of Health and Human Services, Labor, and the Treasury issued a set of three frequently asked questions (“FAQs”) addressing issues under the Affordable Care Act (the “ACA”). These FAQs confirm that: (i) an individual who loses eligibility for individual coverage purchased through the public health insurance marketplace is entitled to a HIPAA special enrollment opportunity in employer group health plan coverage, if eligible, even if other coverage in the marketplace or in the individual market remains available; (ii) for non-grandfathered group health plans subject to the ACA, the effective date for the revised Women’s Preventive Services Guidelines released on December 20, 2016, is the first plan year beginning on or after December 20, 2017 (e.g., January 1, 2018 for calendar year plans); and (iii) the Qualified Small Employer Health Reimbursement Arrangement introduced in the 21st Century Cures Act and available to small employers… Continue Reading

ERISA Final Rules for Disability Benefits Claims Procedures

The U.S. Department of Labor issued final regulations revising the ERISA claims procedures that apply to employee benefit plans offering disability benefits. Generally, these final regulations extend certain procedural rules applicable to claims submitted under group health plans to disability benefit claims submitted under ERISA plans that provide disability benefits. The final regulations apply to claims for disability benefits filed on or after January 1, 2018. View the final regulations here.

Small Employers Can Reimburse Premiums and Medical Expenses

The 21st Century Cures Act, which recently passed in Congress and President Obama has stated he will sign, creates a new “qualified small employer health reimbursement arrangement” (“QSEHRA”) effective January 1, 2017. The QSEHRA is a new form of health reimbursement arrangement (“HRA”) that can reimburse substantiated medical care expenses, including premiums, of up to $4,950 per year (as adjusted for inflation) or up to $10,000 per year (as adjusted for inflation) if the QSEHRA reimburses family member expenses. The QSEHRA is available to an employer that (i) is not an “applicable large employer” under the Affordable Care Act (“ACA”) (which generally means having at least 50 full-time or full-time equivalent employees, determined on a controlled group basis) and (ii) does not offer a group health plan to any of its employees in the controlled group. Unlike “regular” HRAs, the QSEHRA generally is not considered a group health plan for… Continue Reading

Civil Monetary Penalties Increased for Violations of HIPAA Privacy and Security Rules

The U.S. Department of Health and Human Services (“HHS”) recently issued an interim final rule (the “HHS Rule”), which sets out inflation adjustments to the civil monetary penalty (“CMP”) amounts that HHS is authorized to assess or enforce, including for violations of the HIPAA privacy and security rules. The HHS Rule was issued for compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which was enacted on November 2, 2015 (the “2015 Act”). The 2015 Act requires federal agencies to (i) adjust the level of CMP amounts with an initial “catch up” adjustment and (ii) make subsequent annual adjustments for inflation. The HIPAA CMP amounts had not been adjusted since 2009. Under the HHS Rule, HIPAA CMP amounts are increased by 10.2% for violations of the HIPAA privacy or security rules by a covered entity or a business associate, as follows:       Prior $$… Continue Reading

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