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Association Health Plan Final Regulations Issued

The DOL released final regulations expanding the groups of employers that may participate in one ERISA-covered employee group health plan (an “Association Health Plan”). Generally, employers (including working owners with no employees) may participate in an Association Health Plan as long as they are in the same industry, state, or metropolitan area. A major benefit of joining together to participate in one ERISA-covered group health plan, as opposed to being treated as maintaining separate ERISA group health plans, is that the total number of employees participating in the Association Health Plan, from all participating employers, will determine whether the Association Health Plan is treated as “large group,” “small group,” or individual coverage for purposes of the mandates under the Affordable Care Act (the “ACA”). The ACA places a number of requirements on small group and individual coverage that do not apply to large group health plans. An Association Health Plan… Continue Reading

$4.3 Million in Civil Monetary Penalties Awarded for Encryption Failures under HIPAA

An administrative law judge for HHS upheld an award of $4.3 million in civil monetary penalties (the “Penalties”) against a Texas-based healthcare provider for violations of the HIPAA privacy and security rules (the “HIPAA Rules”). The provider is a “covered entity” under HIPAA (“CE”), and the Penalties are the fourth largest ever awarded to the Office of Civil Rights (“OCR”), the HHS agency that enforces the HIPAA Rules, by an administrative law judge or secured via a settlement for HIPAA violations. The Penalties stemmed from an OCR investigation of the CE in response to three separate HIPAA breach reports the CE filed with OCR during 2012 and 2013 involving the theft of an unencrypted laptop computer and the loss of two unencrypted thumb drives, which resulted in the impermissible disclosure of electronic protected health information (“EPHI”) of over 33,500 individuals. OCR’s investigation found that, although the CE had written encryption… Continue Reading

Consider Periodic Internal Plan Audits to Ensure Proper Application of Plan’s Definition of “Compensation”

A frequent, but often times avoidable, operational error for retirement plans is the failure to use the proper definition of compensation for various purposes, including, without limitation, calculating employee deferrals and employer contributions. A retirement plan’s definition of compensation typically includes dozens of components that all must be properly coded in the plan sponsor’s payroll system as eligible or ineligible plan compensation. Plan sponsors should periodically compare the plan’s definition of “compensation” to the employer’s payroll records to verify that the proper definition of compensation has been used for all plan purposes, including calculating employee deferrals and employer contributions. Performing such an audit can help identify any errors and help to minimize the amount of any corrective contributions and other fees and expenses that may be associated with correcting the error.

Employer Document Retention Policies: Relevant ERISA Requirements

Many employers maintain policies for compliance with the various laws governing document retention. In developing such a policy, it is important for employers to consider the rules applicable to documents related to plans subject to ERISA: Section 107 of ERISA mandates a six-year document retention period for purposes of its reporting and disclosure requirements (e.g., documents supporting the content of a Form 5500 must be retained for six years after the filing date). Section 209 of ERISA requires an employer to retain benefits records for each employee sufficient to determine the benefits which are or may become due to that employee. No end date is specified, but a proposed DOL regulation specifies that pension records must be retained for “as long as any possibility exists that they might be relevant to a determination of benefit entitlements.” Employers should ensure that their document retention policies have been reviewed for consistency with… Continue Reading

Plan Loans: Plan Document and Forms May Require Updates Due to Tax Reform

Under the terms of many defined contribution plans, if a participant incurs a termination of employment, any outstanding loan will become immediately due and payable. If the participant is unable to repay the loan, the participant’s account balance will be offset by the amount of the outstanding loan, and this offset will be treated as a taxable distribution from the plan unless the participant contributes the amount of the loan offset to an eligible retirement plan (such as an IRA). As we previously reported on our blog, the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, extended the period of time a participant has to make such a contribution from 60 days after the date of the offset to the due date (including extensions) for filing the participant’s federal income tax return for the year in which the plan loan offset occurred. Plan sponsors should confirm… Continue Reading

IRS Increases ACA Employer Affordability Percentage for 2019

Generally, the Affordable Care Act (the “ACA”) requires coverage under a group health plan sponsored by an “applicable large employer” (at least 50 full-time equivalent employees) to be “affordable”, as determined under the ACA, in order to avoid certain ACA penalties. “Affordability” is based on whether the premium for employee-only coverage is less than a certain percentage of an employee’s household income or a designated safe harbor amount. The IRS has increased the affordability percentage for 2019 to 9.86 percent, up from 9.56 percent in 2018.

IRS Releases 2019 Inflation-Adjusted Amounts for HSAs and HDHPs

The IRS recently issued Revenue Procedure 2018-30, which sets the 2019 calendar year limits on (i) annual contributions that can be made to a health savings account (“HSA”) and (ii) annual deductibles and out-of-pocket maximums under a high deductible health plan (“HDHP”). The 2019 limits are as follows: Annual HSA contribution limits: $3,500 for self-only coverage ($50 increase from 2018); $7,000 for family coverage ($100 increase from 2018) Minimum HDHP deductibles: $1,350 for self-only coverage (no change from 2018); $2,700 for family coverage (no change from 2018) HDHP out-of-pocket maximum limits: $6,750 for self-only coverage ($100 increase from 2018); $13,500 for family coverage ($200 increase from 2018) View Rev. Proc. 2018-30.

DOL Announces Temporary Enforcement Policy in Response to Fifth Circuit Decision Invalidating New Fiduciary Rule

On May 7, 2018, the DOL issued Field Assistance Bulletin 2018-02 (“FAB 2018-02”), in which it announced a temporary policy related to enforcement of its new fiduciary duty rule and related exemptions (collectively, the “Fiduciary Rule”) in advance of an expected order to be issued by the U.S. Court of Appeals for the Fifth Circuit vacating the entire Fiduciary Rule (for more information on the Fifth Circuit’s decision to vacate the Fiduciary Rule, please see our prior blog post). Effective as of June 9, 2017, and until the DOL issues additional regulations, exemptions, or other applicable administrative guidance, the DOL will not pursue prohibited transaction claims against fiduciaries who provide investment advice so long as the fiduciary is working diligently and in good faith to comply with guidance previously issued by the DOL under the Fiduciary Rule, such as the best interest contract exemption or principal transactions exception. The DOL… Continue Reading

DOL Clarifies ESG Investing Guidance

The DOL recently released Field Assistance Bulletin (“FAB”) No. 2018-01, which provides guidance on earlier-issued Interpretive Bulletins 2015-01 and 2016-01 (the “IBs”) regarding how ERISA plan fiduciaries may exercise shareholder rights and the extent to which such fiduciaries may take into account environmental, social, or corporate governance (“ESG”) considerations when making plan investments. FAB 2018-01 includes additional observations regarding the IBs and cautionary notes for plan fiduciaries regarding (i) treatment of ESG factors as being economically relevant to a particular investment choice, (ii) following guidelines related to ESG factors in a plan’s investment policy statement, (iii) selection of ESG-themed investment alternatives as a plan’s “qualified default investment alternative”, and (iv) incurring significant plan expenses for shareholder engagement activities related to plan investments. View the FAB 2018-01.

New FAQs for the Mental Health Parity and Addiction Equity Act

The federal Departments of Labor (“DOL”), Health and Human Services, and the Treasury have jointly issued a set of proposed frequently asked questions (“FAQs”) which address nonquantitative treatment limitations (“NQTLs”) and health plan disclosure issues under the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”). Generally, the MHPAEA prohibits group health plans and issuers from imposing financial requirements or treatment limitations on “mental health benefits” and “substance use disorder benefits” (collectively, “MH/SUD Benefits”) that are more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits (collectively, “Med/Surg Benefits”). With respect to NQTLs, which include medical management, step therapy, and pre-authorization (versus “quantitative treatment limitations”, which are numerical, such as visit limits and day limits), a group health plan cannot impose an NQTL on MH/SUD Benefits in any classification unless, under the terms of the plan as written and in… Continue Reading

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