In Notice 2017-44, the IRS issued model amendments to describe the method of bifurcation for defined benefit plans that offer bifurcated benefit distribution options (i.e., partial lump sum and partial annuity distributions). Bifurcated benefits could arise if a plan that offered a lump sum option wished to offer participants the additional option of taking part of the benefit in a lump sum and part as an annuity. View IRS Notice 2017-44.
In a recent Chief Counsel Advise Memorandum, the IRS analyzed two factual scenarios in which a 401(k) plan participant missed certain loan payments. In the first scenario, the participant missed two consecutive installment payments, which were due in separate calendar quarters. Payments made subsequent to the missed payments were deemed to “cure” the prior missed payments, which resulted in a rolling cure period that would extend to the end of the calendar quarter following the quarter in which the last installment payment was made. Ultimately, the participant made a payment to the plan that included an amount for the two prior missed payments as well as the payment then due. Because all missed payments were cured within the applicable cure period, the IRS concluded that no deemed distribution of the loan proceeds had occurred. In the second scenario, the participant missed three consecutive payments, which were all due in the… Continue Reading
Court Requires Federal Agencies to Address Issues regarding Out-of-Network Physician Payments for Emergency Services
The Affordable Care Act (“ACA”) provides that if a group health plan or health insurer offers coverage for emergency services and such services are provided by an “out-of-network” provider, the cost-sharing required (i.e., copayment or coinsurance) must be the same as would apply to in-network services. On June 28, 2010, HHS, DOL, and the Treasury (collectively, the “Agencies”) published an Interim Final Rule regarding this emergency services provision. In order to address the risk that patients could still, in some states, be balance billed for the difference between the out-of-network providers’ charges and the amount paid by the health plan or health insurer, the Agencies included in the Interim Final Rule a requirement that a health plan or health insurer must provide benefits for out-of-network emergency services in an amount equal to the greatest of the following: (i) the in-network negotiated rate; (ii) the rate based on the same method… Continue Reading
In Lifetime Industries, Inc. v. Trim-Lok, Inc., No. 2017-1096, 2017 U.S. App. LEXIS 17257 (Fed. Cir. Sept. 7, 2017), the Federal Circuit reviewed a district court’s dismissal of a patent infringement suit under Rule 12(b)(6) for failing to adequately plead direct or indirect infringement. Applying the Iqbal/Twombly standard to the claims, the Federal Circuit reversed the dismissal, concluding that the allegations—largely based on one assembly of an infringing combination and the defendant’s knowledge of the patent—supported claims of both direct and indirect infringement. The decision shows that even without the benefit of form pleading, sufficiently alleging infringement under Iqbal/Twombly remains a relatively low hurdle that most patentees will be able to satisfy. The plaintiff’s infringement allegations Lifetime Industries owns U.S. Patent 6,966,590 (“the ’590 patent”), which issued in 2005 and “generally describe[d] a two-part seal for use in a mobile living quarters (also referred to as a ‘recreational vehicle’ or ‘RV’)… Continue Reading
The DOL recently filed suit against Macy’s and two of its third party administrators (“TPAs”) alleging violations of ERISA’s fiduciary rules and related offenses with respect to the payment of out-of-network (“OON”) healthcare claims, as well as against Macy’s for alleged violations of HIPAA’s wellness rules and ERISA’s fiduciary rules. The applicable SPD indicated that the amount payable for services received from OON providers would be based on the lesser of the provider’s actual charge or the average charge for similar services by providers in the participant’s geographic area, while the TPAs actually determined the reimbursement amounts based on a percentage of the Medicare Allowable Rate. In addition to penalties, the DOL’s complaint requests that the court require the plan to reprocess all OON claims during the applicable time period in a manner consistent with the then written terms of the plan. Many employer-sponsored health plans have similar issues regarding… Continue Reading
Ninth Circuit Finds Summary of Material Modifications Violates ERISA for Failure to Reasonably Apprise Participant
A participant exceeded the lifetime maximum limit on benefits under a retiree health plan and then sued the employer and third party administrator for failure to adequately disclose the lifetime limit. The employer maintained an active employee health plan and a retiree health plan. However, the employer only used one summary plan description (“SPD”) for both plans. The SPD consisted of the 2006 SPD and a series of summaries of material modifications (“SMMs”) describing amendments to the plans since 2006. A 2010 SMM applied to the active employee plan and the retiree health plan. It stated that items marked with an asterisk did not apply to retirees. A heading labeled “Health Care Reform*” contained an asterisk, but the layout of the SMM did not make it clear which of the subsequently described changes, including the removal of the lifetime limit, fell under this Health Care Reform heading and thus did… Continue Reading
In response to the extreme need for charitable assistance for victims of Hurricane Harvey and Tropical Storm Harvey (collectively, “Harvey”), the IRS recently issued Notice 2017-48, which provides special tax relief for certain employer-sponsored leave-based donation programs designed to aid Harvey victims (the “Notice”). Under such programs, employees may elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to a charitable organization described in Section 170(c) of the Internal Revenue Code (“Qualified Charity”). Ordinarily, such leave-based donations would result in taxable income to the donating employees. However, the Notice provides that the IRS will not assert that the leave-based donations constitute gross income or wages of the donating employees if the payments are: (1) made to a Qualified Charity for the relief of victims of Harvey; and (2) paid to the Qualified Charity before January 1, 2019. In addition, the IRS will… Continue Reading
In Disaster Relief Announcement 17-09, the PBGC announced that it is waiving certain penalties and extending certain deadlines in response to Hurricane Harvey. In accordance with the relief granted by the IRS in Tax Relief Notice TX-2017-09, the PBGC will provide relief relating to PBGC deadlines to persons responsible for meeting PBGC deadlines who reside or are located in the disaster area consisting of Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton Counties in Texas (“Designated Persons“). The relief generally extends from August 23, 2017 through January 31, 2018 (the “Relief Period“). Importantly, the relief offered by the PBGC does not cover every situation in which relief may be warranted. For example, it does not provide relief for certain filings that involve particularly important or time sensitive information where there may be a high risk of substantial… Continue Reading
As currently drafted, following the transition period, the Exemptions will be unavailable to any fiduciary whose contract with a retirement investor includes a waiver or qualification of the investor’s right to bring or participate in a class action or other representative action in court. In FAB 2017-03, the DOL announced a policy limiting enforcement of this provision in the Exemptions. Specifically, the DOL announced that it will not pursue a claim against any fiduciary or treat any fiduciary as being in violation of the Exemptions solely because the contract between the fiduciary and the investor includes an arbitration agreement that prevents the investor from participating in class action litigation. FAB 2017-03 is available here.
The DOL recently published a notice (the “Notice“) proposing to extend the “transition period” currently in effect for the Best Interest Contract Exemption and the Principal Transactions Exemption (the “Exemptions“), which were issued in connection with the DOL’s new plan fiduciary definition. During the transition period, fiduciaries may rely on the Exemptions by adhering to the “Impartial Conduct Standards” (i.e., an advisor must give prudent advice that is in retirement investors’ best interest, charge no more than reasonable compensation, and avoid misleading statements). The other conditions applicable to the Exemptions will not become effective until the transition period ends. The Notice proposes to extend the transition period, which is currently scheduled to end on January 1, 2018, through July 1, 2019. The Notice also proposes a delay in the effective date of certain amendments to Prohibited Transaction Exemption 84-24 until July 1, 2019. The Notice is available here.