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IRS Issues Reminder about Filing Multiple Employee Plan Return Extensions

The Internal Revenue Service (IRS) posted a reminder on its website that it will not process any Form 5558, the request for extension of time to file Form 5500, Form 5330 and Form 8955-SSA, if the Form 5558 requests an extension for more than three employee benefit plans. If the IRS receives a Form 5558 that lists more than three plans between now and July 31, 2012, the Form 5558 will be returned to the filer to submit separate Forms 5558 for each plan on the list. After July 31,2012, such Forms 5558 will not be returned, nor will they be processed. A link to this reminder is available here.

Departments of DOL, Treasury and HHS Release FAQs on Health Reform and Mental Health Parity

The Departments of Labor, Treasury and Health and Human Services (the “Departments”) jointly released the seventh set of frequently asked questions regarding the implementation of the market reform provisions under the health reform law. The FAQs provide that until final regulations are issued, group health plans and health insurance issuers are not required to comply with the proposed regulations implementing the requirement to provide a summary of benefits and coverage (“SBC”) to participants. The requirement in the health reform law that group health plans distribute a SBC was originally effective March 23, 2012. Generally, the SBC is a four page document, separate from the SPD, that is intended to provide individuals with a way to compare coverage under health plans. The FAQs also indicate that the final regulations, once issued, will include an applicability date that gives group health plans and health insurance issuers sufficient time to comply. Along with… Continue Reading

IRS Eases Rules for Deduction of Employee Bonuses

The Internal Revenue Service recently released a Revenue Ruling allowing an employer using an accrual method of accounting for income tax purposes to take a deduction in the current year for a fixed total amount of bonuses payable to a group of employees, even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year. A current year deduction is allowed where the total amount of the bonuses is determinable through either (1) a formula that is fixed prior to the end of the taxable year, or (2) other corporate action made before the end of the taxable year that fixes the bonuses payable to the employees as a group. The Revenue Ruling is available here.

UK: Automatic Enrollment into Pension Schemes Required Starting October 2012

Starting in October 2012, the UK Pensions Act requires employers in the UK to automatically enroll certain eligible employees who are not otherwise in a workplace pension scheme into a workplace pension scheme by a specified date. The automatic enrollment requirement will be implemented in phases, with the requirement applying first to large employers (in late 2012 and early 2013) and then to medium and small employers in phases between 2013 and 2016. Eligible employees include employees who work or ordinarily work in the UK (under their contract) who are between age 22 and state pension age who earn above a current minimum annual salary of £7,475. Those employees will be required to be automatically enrolled into a pension plan and receive contributions from their employer. More information on this new requirement is available here.

UK: Output VAT Due on Salary Sacrifice Schemes Beginning January 1, 2012

Effective January 1, 2012, when an employee in the United Kingdom opts to forgo salary to receive goods or services from his or her employer (a “salary sacrifice scheme”), the employer must account for output on value-added tax (VAT) on these goods and services if the arrangement constitutes a salary sacrifice scheme for VAT purposes. Prior to this change, HM Revenue & Customs had accepted that the reduction in salary under a salary sacrifice scheme did not constitute consideration for the benefits received and output tax was not due. This change is explained in Revenue & Customs Brief 28/11, which is available here.

New York Mandates Health Insurance Coverage for Autism

New York legislators recently passed a law requiring insurers to cover the screening, diagnosis and treatment for autism spectrum disorders. The coverage may be subject to annual deductibles, copayments and coinsurance, but may not contain visit limitations. This mandated coverage applies to every insurance policy which provides physician services, medical, major medical or similar comprehensive-type coverage, and will be effective for policies issued or renewed after November 1, 2012. A copy of this new law is available here.

D.C. Circuit Court Rules Health Reform’s Individual Mandate Constitutional

In a 2-1 split decision, the United States Court of Appeals for the District of Columbia ruled that the individual mandate under the health reform law is constitutional. In directly addressing whether the individual mandate would violate the commerce clause of the U.S. Constitution, the court noted that, “Congress, which would, in our minds, clearly have the power to impose insurance purchase conditions on persons who appeared at a hospital for medical services – as rather useless as that would be – is merely imposing the mandate in reasonable anticipation of virtually inevitable future transactions in interstate commerce.” The court rejected the notion that only voluntary, affirmative acts, can cause an individual to enter into or affect, interstate commerce. A copy of the opinion is available here.

OCR Announces HIPAA Privacy and Security Audit Program

As part of the American Recovery and Reinvestment Act of 2009, the U.S. Department of Health and Human Services is required to periodically audit covered entities and business associates to ensure compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its privacy, security and breach notification standards. To implement this mandate, the Office for Civil Rights (OCR) announced that it is piloting a program to perform up to 150 audits of covered entities (such as health plans and healthcare service providers). Audits conducted during this pilot phase will begin in November of 2011 and conclude by December of 2012. Additional information about the HIPAA Privacy and Security Audit Program is available here.

Health Coverage Tax Credit Increased

The Trade Adjustment Assistance Extension Act of 2011 increased the health coverage tax credit (HCTC) that is generally available to eligible individuals under the Trade Adjustment Assistance Program and the Alternative Trade Adjustment Assistance Program. As amended, the HCTC allows a taxpayer to take a credit equal to 72.5 percent of the amount paid by the taxpayer for coverage of the taxpayer and family members under qualified health insurance during the taxable year. The increased credit applies to all coverage months beginning after February 12, 2011. A copy of the Trade Adjustment Assistance Extension Act of 2011 is available here.

Securities and Exchange Commission Issues No Action Letter on 401(k) Plan Fee Disclosure Rules

The Securities and Exchange Commission issued a no action letter providing that information provided by a plan administrator to participants and beneficiaries will be treated as a communication satisfying the requirements of Rule 482 if the information is required by and complies with the Department of Labor’s fee disclosure regulation. The letter is available here.

November 2011
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