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Agencies Update Group Health Plan Required Disclosure Documents

Federal agencies recently issued updated versions of certain documents that are required to be disclosed to individuals under applicable employer-sponsored group health plans. A set of FAQs regarding the Affordable Care Act (“ACA”) was issued by the federal Departments of Labor (“DOL”), Health and Human Services (“HHS”), and Treasury (collectively, the “Departments”), which describe recent changes made by the Departments to the “summary of benefits and coverage” template under the ACA (“SBC”). Among other minor changes to the SBC, certain verbiage on the SBC and the associated uniform glossary were revised to reflect the prior elimination, as of January 1, 2019, of the tax penalty related to an individual’s failure to comply with the so-called “individual mandate” under the ACA. The FAQs also provide additional guidance regarding the updated SBC coverage examples calculator that was released by HHS late last year. The revised SBC and SBC coverage examples calculator each… Continue Reading

IRS Emphasizes Requirement to Retain Executed Copies of Plan Documents

The IRS recently released Chief Counsel Memorandum 2019-002 (the “CCM”), in which it emphasized an employer’s obligation to timely sign and retain a copy of its qualified plan document pursuant to Section 6001 of the Internal Revenue Code or risk plan disqualification. The IRS issued the CCM in response to the Tax Court’s holding in Van Lanes Recreation Center v. Commissioner, TC Memo 2018-92. In Van Lanes, the Tax Court held that the IRS had abused its discretion by disqualifying a plan when the employer failed to produce a signed copy of the restated plan document. The Tax Court determined that there was both credible evidence that the restated plan had been adopted and credible explanations for the absence of the signed documents including flooding of the employer’s premises and seizure of its accountant’s computers. Plan documents must be signed by the plan sponsor or someone authorized to act on… Continue Reading

Supreme Court Vacates and Remands IBM Stock Drop Case

In a per curiam opinion, the U.S. Supreme Court vacated the decision of the U.S. Circuit Court of Appeals for the Second Circuit in favor of a group of IBM retirement plan participants who alleged that IBM, in its capacity as plan sponsor of the IBM Company Stock Fund (which is an ESOP governed by ERISA), breached its duty to prudently manage the ESOP’s assets. The participants alleged that IBM had a duty to disclose enormous losses being incurred by its microelectronics business and that the company’s failure to disclose such losses resulted in an artificially high stock price, which dropped significantly once those losses were eventually disclosed (see our prior blog post on the Second Circuit’s opinion here). In its opinion, the Supreme Court remanded the case back to the Second Circuit so that court could consider new arguments briefed by IBM in its appeal to the Supreme Court… Continue Reading

In Sixth Circuit, a Change in Contribution Payment Methods under a Group Health Plan is not a Loss of Coverage under COBRA

In Morehouse v. Steak N Shake, the U.S. Court of Appeals for the Sixth Circuit (the “Sixth Circuit” or “Circuit Court”) reversed a federal district court’s prior holding that a change in contribution payment methods under a group health plan constitutes a loss of coverage under COBRA. The plaintiff was a participant in Steak N Shake’s (“SNS”) group health plan when she sustained a work-related injury. Due to her injury, she took a leave of absence (and thus incurred a reduction in her work hours) and began receiving workers’ compensation benefits. Because the participant was not receiving her usual salary from SNS, SNS instead deducted her contributions toward her plan coverage from her workers’ compensation checks. When the participant’s workers’ compensation payments terminated, SNS informed her that she must continue to pay her required plan contributions out-of-pocket in order to continue her coverage under the plan. When she did not… Continue Reading

Newly Passed SECURE Act Will Impact Qualified Retirement Plans

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) was signed into law on December 20, 2019. This law will likely impact most tax qualified retirement plans, and some of the changes appear to be immediately effective. Plan sponsors should review their plans with counsel to determine what administrative modifications and plan amendments may be required. Key provisions of the SECURE Act include: • Changes to the eligibility and coverage requirements for certain long-term part-time employees. • Changes to the required minimum distribution (“RMD”) requirements, including increasing the age for RMDs from age 70½ to age 72. • Increased penalties for failures to file and/or provide certain retirement plan returns and notices, including the Form 5500, the registration statement for deferred vested participants, and the rollover notice. • Changes to rules applicable to non-elective safe harbor plans. Non-elective safe harbor plans are those that provide… Continue Reading

IRS and Treasury Issue Proposed Regulations Under Code Section 162(m)

The IRS and Treasury recently issued proposed regulations under Internal Revenue Code Section 162(m) to reflect changes enacted by the Tax Cuts and Jobs Act (“TCJA”) to the tax deductibility of compensation paid by publicly held corporations to certain executive officers. Code Section 162(m) disallows the deduction by any publicly held corporation for compensation paid in any taxable year to a covered employee that exceeds $1 million. The proposed regulations implement the changes from the TCJA by (i) updating the definitions of covered employee, publicly held corporation, and applicable employee compensation; (ii) implementing the elimination of the performance-based compensation exception; and (iii) clarifying the application of the “grandfather” rule for outstanding compensatory arrangements that were in effect on November 2, 2017 and not modified on or after that date. The proposed regulations also provide guidance on (a) the elimination of the transition period following a corporation’s IPO, (b) the impact… Continue Reading

HIPAA Covered Entity Settles Breach Notification Failure with OCR for $2.175 Million

The HHS Office for Civil Rights (“OCR”), which is the agency responsible for enforcement of the HIPAA privacy, security, and breach notification rules (“HIPAA Rules”), announced a recent $2.175 million settlement with a covered entity under HIPAA (the “Covered Entity”) for the Covered Entity’s failure to properly notify HHS of a breach of unsecured protected health information (“PHI”) as required by the HIPAA Rules, and other potential violations. Background OCR had investigated the Covered Entity in response to an individual complaint it received that alleged the Covered Entity had sent correspondence to the individual containing another person’s PHI. OCR’s investigation determined that the Covered Entity had mailed correspondence containing the PHI of 577 individuals to the wrong addresses. In some of the correspondence, the PHI consisted of the names and account numbers of the individuals and their dates of medical service. The Covered Entity had reported this incident to HHS… Continue Reading

Top Five Tips for Maximizing Insurance Claims in a Hard Insurance Market

When the book is closed on 2019, it will be remembered by many risk managers as the “hardest” insurance market in years. While the effects of a hardening market have been more pronounced in some sectors and magnified for specific coverages, policyholders across the board have experienced increases in premiums, reduced capacity, and more restrictive terms in all lines. These adverse market conditions have appropriately prompted many insureds to develop new strategies for renewals in 2019 and in the year ahead. Equal attention should be paid to the pursuit of outstanding claims. Effective claims management can not only increase recovery for the policyholder in the short run but may also influence future underwriting and the impact of continued hardening in markets over the coming year. Here are five tips for policyholders to increase recovery of claims in the current hard insurance market. Provide Timely Notice Of Claims & Continue To… Continue Reading

IRS Publishes 2019 Required Amendments List

In Notice 2019-64, the IRS published the Required Amendments List for 2019, which lists statutory and administrative changes in plan qualification requirements that (i) are first effective in the plan year in which the list is published and (ii) may require a plan amendment. This year’s list contains two items related to the final regulations for (x) hardship distributions, which implement legislative changes enacted in the Bipartisan Budget Act of 2018, and (y) certain collectively bargained cash balance/hybrid defined benefit plans maintained pursuant to one or more collective bargaining agreements ratified on or before November 13, 2015. The deadline for adopting any required amendments described in this year’s list is December 31, 2021. In addition, any required amendments that were listed in the 2017 Required Amendments List must be adopted (if applicable to an employer’s plan) by December 31, 2019. The 2017 list included three items that relate to (i)… Continue Reading

Extension of Due Date to Furnish IRS Form 1095 to Individuals and of Good Faith Transition Relief

In Notice 2019-63, the IRS extended the due date, from January 31, 2020 to March 2, 2020, for furnishing to individuals the 2019 Form 1095-B and Form 1095-C. This notice does not, however, extend the due date to file Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS, which are due by February 28, 2020 (paper filing) or March 31, 2020 (filing electronically), although certain other extensions may be available. This notice also extends the IRS’s good faith transition relief from penalties that could apply for incorrect or incomplete information reported on such forms furnished to individuals or filed with the IRS. This relief does not apply if the forms were not filed or furnished by the applicable due date. Notice 2019-63 is available here.

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