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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.

First Circuit Reverses Lower Court Ruling that Private Equity Funds are Liable for a Portfolio Company’s Pension Liability

On November 22, 2019, the U.S. First Circuit Court of Appeals reversed a district court’s finding that Sun Capital Partners III and Sun Capital Partners IV (collectively, the “Funds”) formed a “partnership-in-fact” in connection with the Funds’ investment in a bankrupt portfolio company (Scott Brass) that incurred pension plan withdrawal liability. Our prior review of the district court’s ruling is available on our blog here. ERISA imposes joint and several liability on each member of a controlled group for certain liabilities, including pension plan withdrawal liabilities. A “controlled group” includes trades or businesses that are under common control, which typically means 80% common ownership. Notwithstanding the fact that Sun Capital Partners III and Sun Capital Partners IV owned 30% and 70% of Scott Brass, respectively, the district court previously determined that by the Funds’ co-investment in the portfolio company, the two formed a “partnership-in-fact” that owned 100% of Scott Brass… Continue Reading

Additional Nondiscrimination Relief for Closed Defined Benefit Plans Through 2020

In Notice 2019-60, the IRS granted additional nondiscrimination relief for certain “closed” defined benefit plans (i.e., plans frozen as to new participants before December 13, 2013, but that provide ongoing benefit accruals for existing participants). This relief is in addition to the relief originally provided in Notice 2014-5, which permits employers who sponsor both a “closed” defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Code Section 401(a)(4) on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis. The new nondiscrimination relief provides that these closed defined benefit plans will also be deemed to satisfy the nondiscrimination requirements that relate to plan benefits, rights, and features (such as optional forms of benefits and certain ancillary benefits) that were provided under the plan at the time it was… Continue Reading

Logos and the Ordinary Observer Test

The Federal Circuit recently held in Columbia Sportswear North America, Inc. v Seirus Innovative Accessories, Inc. that logos may be considered in the ordinary observer test.[1]  Seirus Innovative Accessories (“Seirus”) makes and sells cold weather gear, and a lower court had ruled on summary judgment that U.S. Patent No. D657,093 to Snyder was infringed by Seirus’s gloves and glove liners:  The Federal Circuit reversed the summary judgement in part because the lower court improperly disregarded Seirus’s logo in the ordinary observer test. The ordinary observer test is used to determine whether a claimed design is infringed and provides that an accused product infringes a claimed design if the two designs are substantially the same in the eye of an ordinary observer.   In this case, Seirus’s gloves and glove liners included a logo that repeatedly interrupted a wave design, and Seirus argued that?due to the logos?the gloves and glove liners were… Continue Reading

New Proposed Rules Require Price Transparency by Group Health Plans

The U.S. Departments of the Treasury, Labor, and Health and Human Services (the “Departments”) recently issued proposed rules requiring fully-insured and self-funded employer-sponsored group health plans and health insurance issuers to provide participants with an Internet-based tool that shows estimated cost-sharing information for specific covered services and providers (based on network rates and allowable amounts for out-of-network providers) prior to receiving services, similar to the information currently provided to participants via an Explanation of Benefits (or EOB) after services are rendered. The participant would also be able to request a hard copy of this information. In addition, the proposed rules would require the group health plan to publish its network negotiated rates and historical allowed amounts for out-of-network providers. Grandfathered plans and excepted benefits would not be subject to the proposed rules. The proposed rules have a 60-day comment period, and the Departments have proposed that the rules would be… Continue Reading

Annual Increases in Civil Monetary Penalties for Violations of HIPAA Privacy and Security Rules

HHS recently issued a final rule (the “HHS Rule”) that sets out the inflation-adjusted civil monetary penalty (“CMP”) amounts that HHS is authorized to assess or enforce, including for violations of the HIPAA privacy and security rules. The adjusted CMP amounts are applicable to HIPAA violations by a HIPAA covered entity or business associate that occur after November 2, 2015, for which a CMP is assessed on or after November 5, 2019  The HHS Rule is available here.

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