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PBGC Issues Policy Statement on Recharacterization of Contributions

The Pension Benefit Guaranty Corporation (PBGC) issued a policy statement on accepting and responding to amended premium filings based on recharacterization of contributions (that is, redesignating contributions made and reported for one plan year as being attributable to the prior year). The PBGC states that this recharacterization is not an appropriate basis for an amended premium filing or premium refund. This policy statement is available here.

IRS Amends Determination Letter Program

The Internal Revenue Service (IRS) announced that it will change several aspects of its employee plans determination letter program, which will take effect for determination letter applications filed on or after February 1, 2012 (for plans assigned to a five-year remedial amendment cycle) or May 1, 2012 (for plans assigned to a six-year remedial amendment cycle). Among the changes made, the IRS has eliminated elective demonstrations regarding coverage and nondiscrimination requirements. Furthermore, only plans that have made limited modifications to a pre-approved volume submitter plan may file the shorter Form 5307. These changes to the determination letter filing procedures will be reflected in Revenue Procedure 2012-6, which will be published on January 3, 2012. This announcement is available here.

IRS Issues 2011 Cumulative List of Changes for Cycle B Plans

The Internal Revenue Service (IRS) issued Notice 2011-97, which includes the 2011 Cumulative List, the list of statutory, regulatory, and guidance changes that the IRS will look for when reviewing individually designed plans submitted for determination letters during the Cycle B submission period, which begins February 1, 2012 and ends January 31, 2013. Notice 2011-97 is available here.

IRS Extends Transition Relief for Puerto Rico Plans

The Internal Revenue Service (IRS) issued Notice 2012-6 which extends until December 31, 2012, the transition relief in Rev. Rul. 2011-1 for transfers from a dually qualified Puerto Rico retirement plan trust to a trust for a plan that is intended to satisfy only the qualification requirements of the Puerto Rico Code. This relief also gives plan sponsors additional time to consider the effect of the changes to the Puerto Rico Code enacted earlier this year. Additionally, the IRS intends to issue guidance in response to comments it received regarding Rev. Rul. 2011-1. This guidance is available here.

Definition of Essential Health Benefits Left to States

The Department of Health and Human Services (HHS) outlined its proposal for defining ?Ç£essential health benefits?Ç¥ which must be provided by group health plans beginning in 2014. The Patient Protection and Affordable Care Act directs the Secretary of HHS to define essential health benefits, but provides that it must at least include ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services (including behavioral health treatment), prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services (including oral and vision care). Under the HHS proposal, essential health benefits will be defined by a benchmark plan selected by each state. States may choose one of four benchmark plans: one of the three largest small group plans in the state by enrollment, one of the three largest state employee health plans by enrollment, one… Continue Reading

Supreme Court to Hear Oral Argument on Health Reform in March of 2012

The U.S. Supreme Court has announced that oral argument in the collection of cases challenging the constitutionality of the Patient Protection and Affordable Care Act has been set for the last week of March 2012.

Federal District Court Holds Puerto Rico Law 80 on Severance Plans Completely Pre-Empted by ERISA

A participant in a severance plan sued her employer for income tax withholding amounts in contravention of Puerto Rico’s Law 80. Law 80 prescribes the amount of severance that must be paid to employees in Puerto Rico and further provides that it is not subject to Puerto Rico income tax withholding. The U.S. Federal District Court held that her claim was completely pre-empted by ERISA because the severance plan in question was an ERISA plan. The court would have had to interpret the terms of the plan to determine whether the severance benefits it provided conflicted with Law 80. As such, Law 80 “related” to the plan and was thus pre-empted. Colon-Rodriguez v. Astra/Zeneca Pharmaceuticals, LP, No. 3:11-cv-01495-FAB (D.P.R. Dec. 13, 2011).

DOL Issues Revised Guidance Regarding Use of Electronic Media to Satisfy Participant-Level Fee Disclosure Requirements

The Department of Labor (DOL) released Technical Release 2011-03R, which restates and clarifies the scope of previously issued Technical Release 2011-03. Technical Release 2011-03 provided guidance in the form of an interim enforcement policy regarding the use of electronic media to satisfy the fee disclosure requirements for participant-directed individual account plans with respect to disclosure of certain fee information required for participant directed investment plans and disclosures through continuous access websites for such information. Technical Release 2011-03R is available here.

PBGC Releases 2012 Premium Payment Instructions

The Pension Benefit Guaranty Corporation (PBGC) released its 2012 Premium Payment Instructions guide, which provides information for defined benefit plans paying premiums for plan years beginning in 2012 and also includes instructions for each data element that must be reported. The 2012 Premium Payment Instructions are available here.

PBGC Issues Guidance on Reportable Events

The Pension Benefit Guaranty Corporation (PBGC) released a Technical Update providing temporary guidance on compliance with certain reportable events requirements under Section 4043 of ERISA. The update addresses two issues: (1) valuing assets, vested benefits and unfunded vested benefits for plan years beginning in 2012, and (2) the waiver of or a simplified notice for reporting certain missed quarterly contributions for small plans for the 2012 plan year. This guidance is available here.

December 2011