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CMS Issues Final Regulations on Data Collection to Support Standards on Essential Health Benefits and Qualified Health Plan Accreditation Entities

The Centers for Medicare and Medicaid Services recently issued final regulations establishing data collection standards to implement provisions of the Affordable Care Act, particularly those provisions requiring the Secretary of Health and Human Services to define ?Ç£essential health benefits.?Ç¥ The regulations outline the data to be collected from certain State-specific benchmark plans in order to support the definition of essential health benefits. The regulations also establish the first of a two-phase approach for recognizing accrediting entities for purposes of certifying qualified health plans. A copy of the final regulations can be found here.

Plan Terms Control Authority to Interpret and Administer Top-Hat Plans

The company’s long-term incentive plan and equity compensation plan permitted pro-rata payment of shares prior to full vesting if termination of employment occurred due to retirement or involuntary termination without cause. “Retirement” and “involuntary termination” were not defined in the plans. The plans gave an Executive Compensation Committee (ECC) authority to interpret and administer the plans. Two former executives terminated employment when company assets were sold and they declined to accept continued employment at transfer locations. The company’s Senior Vice President of Administrative Services, Authorized Representative and Fiduciary to the Benefit Plan Committee, who was not a member of the ECC, determined that the former executives did not terminate employment due to retirement or involuntarily without cause. The Court of Appeals found that the Senior Vice Presidents’ decision was not entitled to any deference because the plans gave discretionary authority only to the ECC and the ECC did not decide… Continue Reading

Sixth Circuit Holds No Fiduciary Breach in Transfer of Account Balances from Participant-Elected Fund to QDIA

After enactment of the Pension Protection Act, a defined contribution plan administrator decided to change the default investment from a stable value fund to a target date fund. The fiduciary sent notices to all participants who were 100% invested in the stable value fund that, unless instructed otherwise, it intended to transfer their balances into the target date fund. Two participants who had actively elected to participate in the stable value claimed they did not receive the notice. Each suffered a loss when their account balances were subsequently transferred. The participants sued for fiduciary breach. The U.S. federal district court held that the plan administrator was not liable due to the Department of Labor safe harbor regulation. The U.S. Court of Appeals for the Sixth Circuit upheld the district court reasoning that the safe harbor for qualified default investments applies any time a participant fails to make an election, not… Continue Reading

Guidance Issued on Notice Requirements for Funding-Related Benefit Limitations in Defined Benefit Pension Plans

ERISA Section 101(j) requires a notice to be provided to participants and beneficiaries if a defined benefit pension plan becomes subject to certain funding-based benefit limitations under ERISA. The IRS issued Q&As that address the timing of the notice, the interaction of the notice requirement with the ERISA 204(h) notice requirement, who must receive the notice, required notice content including an example notice, and method of delivery. Notice 2012-46 can be found here.

DOL Amends Method for Plan Fiduciaries to Report Noncompliant Service Providers

Under the new ERISA 408(b)(2) service provider fee disclosure regulations, responsible plan fiduciaries must file notices with the Department of Labor (DOL) to obtain relief from ERISA’s prohibited transaction provisions which may apply if a service provider fails to disclose information in accordance with the regulation’s requirements. On July 13, 2012, the DOL revised the mailing address and web-based submission process for filing such notices. Under the new rule, notices may be submitted electronically through a dedicated link on the DOL’s website, or by mail to a PO Box dedicated for such notices. A copy of the final rule can be found here.

IRS Issues Guidance Regarding Medicare Tax Effective January 1, 2013

Effective January 1, 2013, employers must withhold an additional Medicare tax of 0.9% from the wages of employees who earn $200,000 or more. The IRS issued Frequently Asked Questions (FAQs) to help employers implement this new tax. The FAQs state that the employer must withhold the additional tax beginning with the pay period in which it pays wages in excess of $200,000 to an employee. The tax applies only to the wages over the $200,000 threshold. There is no requirement to notify employees once the employer begins withholding the additional tax and there is no employer contribution required with respect to the tax. The IRS plans to release revised Forms 941, 943 and the tax return schemas for the Form 94X series of returns. The IRS’ FAQs can be found here.

Maximum Statutory Penalty Awarded for Failure to Provide SPD

A U.S. federal district court assessed the maximum penalty available under ERISA ($110 per day) against an employer for failing to timely provide an accurate and up-to-date summary plan description (?Ç£SPD?Ç¥) upon a participant?ÇÖs request. In 2010, the participant requested an SPD for the company?ÇÖs long term disability plan. The employer provided a copy of the 2006 SPD, at which point the participant asked if there was a more recent SPD. The employer did not respond, and so the participant hired an attorney. In response to the attorney?ÇÖs request for documents, the employer again provided the 2006 SPD and stated that additional information would be provided, though it never was. The attorney then arranged a visit to the employer?ÇÖs office to inspect the plan documents, at which point, five months after the initial request, the employer provided summaries of material modifications showing the changes to the plan since the 2006… Continue Reading

CCIIO Updates List of Group Insurance Products for Benchmarking Essential Health Benefits

Pursuant to the Affordable Care Act, non-grandfathered health plans or insurance policies offered on one of the state exchanges are required to cover essential health benefits beginning in 2014. Guidance released by the Department of Health and Human Services in December 2011 provided that states would have flexibility in selecting an existing health plan to set the ?Ç£benchmark?Ç¥ for items and services that must be included as essential health benefits. The Center for Consumer Information and Insurance Oversight recently released guidance which, among other things, updated the three largest small group insurance products ranked by enrollment for each state and provided lists of the three largest nationally available Federal Employee Health Benefit Program plans, both of which could serve as a benchmark to determining essential health benefits. It is important to remember that self-insured group health plans that are not grandfathered under the Affordable Care Act in 2014 will be… Continue Reading

Pension Reforms in Surface Transportation Reauthorization Package

On July 6, the President signed into law a surface transportation reauthorization package which includes pension funding relief for defined benefit pension plans, increases in PBGC insurance premiums, changes in the PBGC organizational structure, an extension until December 31, 2021 for transfers of excess pension assets to retiree health accounts, and an expansion of those transfer rules to fund retiree group term life insurance accounts. The pension funding provisions set a floor and a maximum for the interest segment rates used for funding purposes, based on a historic 25-year average of those segment rates (effectively decreasing the current funding costs). The funding relief, however, does not apply for calculating lump sum distributions, limits on deductible contributions to single-employer plans, PBGC variable-rate premiums, financial reporting under Section 4010 of ERISA, and qualified transfers of excess pension assets to retiree medical accounts. A copy of the bill can be found here. A… Continue Reading

Guess What? You Don?ÇÖt Own Your Tweets

This article in Lawyers.com?áexplores the privacy rights ramifications of a New York criminal court’s ruling that Twitter must comply with a subpoena and turn over a user’s tweets.?á Providing commentary in the piece?áis our Social Media Practice Group Chair David Bell.

July 2012