Many employers utilize “wrap plan” documents to consolidate their health and other employee welfare benefit programs into a single plan for ERISA purposes. Basically, a wrap plan document incorporates by reference the insurance policies and benefits booklets that comprise the entire plan. By consolidating employee welfare benefit programs into a single plan, a wrap plan document, when properly drafted, will ease the plan sponsor’s compliance obligations under ERISA’s plan document, reporting, and disclosure requirements. If welfare benefits are properly consolidated under a wrap plan, employers may be able to file a single Form 5500 for all their employee welfare benefit programs. Problems may arise if not all of the benefits programs that are considered ERISA “employee welfare benefit plans” are covered by the wrap document. It is thus critical that employers review all their welfare benefit programs to ensure they are properly covered under the wrap plan and included with the… Continue Reading
California recently enacted Senate Bill 855 (?Ç£SB 855?Ç¥), which expands certain requirements related to mental health and substance use disorders. SB 855 applies to any California ?Ç£health care service plan contract?Ç¥ or disability insurance policy issued, amended, or renewed on or after January 1, 2021. Significantly, SB 855 renders ?Ç£void and unenforceable?Ç¥ any provision in a health care service plan contract that reserves discretionary authority to the plan to determine eligibility for benefits or coverage, interpret the terms of the contract, or provide for standards of interpretation or review that are inconsistent with California law. If this provision is not preempted by ERISA as applied to an employer-sponsored group health plan, such mandate could eliminate the deferential standard of review that would otherwise be available under ERISA to the plan administrator. SB 855 is available here.
The U.S. Court of Appeals for the Tenth Circuit recently held that the choice of law provision contained in a long-term disability insurance policy (the ?Ç£LTD Policy?Ç¥) controlled when determining which state law applied to the case. The LTD Policy, which was subject to regulation under ERISA as an employee benefit plan, stated that it was governed by the law of Pennsylvania, where Comcast (the employer) was incorporated and had its principal place of business. The employee argued that Colorado law controlled, because Colorado is where the employee worked for Comcast and filed the lawsuit. This was important because Colorado insurance law prohibited granting discretion to the plan administrator to interpret the LTD Policy, whereas Pennsylvania law did not prohibit this deferential standard. Generally, a plan administrator?ÇÖs denial of benefits under an ERISA plan is reviewed by a court de novo (i.e., without deference being paid to the plan administrator?ÇÖs… Continue Reading
Use Care When Implementing CARES Act Retirement Plan Distributions ?Çô State Law and Benefit Offset Concerns
As we have previously reported on our blog here and here, the CARES Act provided relief to participants in retirement plans by allowing employers to amend their retirement plans to include certain coronavirus-related distributions and to permit increased loan amounts for certain qualified individuals. Many employers have agreed to adopt these changes, and under federal law, the treatment of these distributions is clear. But there are other issues that employers and employees should consider, including: The coronavirus-related distributions could be subject to taxation under state law, even if the employee later repays the distribution to the plan; and If employees are receiving unemployment and/or disability benefits, the coronavirus-related distributions may reduce or offset these benefits. However, the enhanced loans would not be subject to taxation and may not offset unemployment and disability benefits, which may make the enhanced loan a better option for employees who anticipate paying back the distribution.… Continue Reading
The DOL and the IRS Jointly Provide Relief from Certain Timeframes Applicable to Health and Welfare and Pension Plans
On April 28, 2020, the IRS and DOL issued a Final Rule extending certain timeframes under ERISA and the Internal Revenue Code for group health, disability and other welfare plans, pension plans, and the participants and beneficiaries under those plans. The timeframe extensions include, among other things, the time to elect COBRA and pay premiums, special enrollment timeframes under HIPPA and CHIPs, claims procedure timeframes, and certain external review process timeframes.?á Applicable plans must disregard the period from March 1, 2020 until 60 days after the announced end of the COVID-19 National Emergency for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the enumerated time periods and dates and for providing COBRA election notices. ?áIn addition, Disaster Relief Notice 2020-01 was issued addressing the timeframe relief and addressing certain other COVID-19 relief. The Final Rule is available here:?áhttps://www.dol.gov/sites/dolgov/files/ebsa/temporary-postings/covid-19-final-rule.pdf. Disaster Relief Notice 2020-01 is available here:?áhttps://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/disaster-relief/ebsa-disaster-relief-notice-2020-01.
In light of the recent economic developments stemming from the COVID-19 pandemic, many employers are evaluating their employee benefit plans and how employee and employer costs will be impacted. The following summary provides a list of questions we have been receiving from clients over the past week, along with action items to help employers address these issues. Health and Welfare Plans and Fringe Benefits Should benefits coverage continue while an employee is on an unpaid furlough? If so, how would the employee pay the employee?ÇÖs portion of the premium? Could the employee elect to drop coverage due to the reduction in hours of active service? Could the employer pay for coverage for some or all of its furloughed employees? Continued eligibility for benefits will depend on whether the employer treats the furlough as a termination of employment or as an unpaid leave of absence. The terms of the plan, including… Continue Reading