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New Legislation Extends Relief for Telehealth Coverage Prior to Satisfying HDHP Deductible

The Consolidated Appropriations Act of 2022 (“CAA”), enacted on March 15, 2022, extends the optional relief previously provided under the CARES Act regarding the ability of a high deductible health plan (“HDHP”) to cover telehealth services without application of the deductible. Under the CARES Act relief, which applied to plan years beginning on or before December 31, 2021, a participant in an HDHP that adopted the relief could obtain pre-deductible telehealth services without compromising his or her ability to make contributions, or have contributions made, to a health savings account. See our prior blog post about the CARES Act relief here. The extension of the telehealth relief under the CAA is not retroactive to January 1, 2022, but instead is effective only for months beginning after March 31, 2022, and before January 1, 2023, thus creating a gap in the relief for calendar year plans (and certain non-calendar year plans)… Continue Reading

Eleventh Circuit Affirms Summary Judgment Because ERISA Plan Included Unambiguous Reservation of Rights Language

In Klaas v. Allstate Ins. Co., Allstate sponsored an employee welfare benefit plan subject to ERISA that paid life insurance premiums for certain retirees. Allstate made various representations that this benefit would continue for the remaining lives of the retirees. In 2013, Allstate informed the retirees that it would stop paying their life insurance premiums. The retirees sued alleging Allstate violated ERISA by no longer paying those premiums after making representations that the benefit would continue for a lifetime. The Eleventh Circuit affirmed the district court’s ruling, holding that no ERISA violation occurred because Allstate’s plan documents contained a no-vesting clause and an unambiguous reservation of rights provision that gave Allstate the right to modify or terminate retiree life insurance at any time.  This case is a good reminder to pay careful attention to what insurers and third-party administers put into your plan documents. Unlike retirement plans subject to ERISA,… Continue Reading

Retirement Plan Death Beneficiary Provisions that Reduce Potential Liability

When a retirement plan participant dies without a valid beneficiary designation on file, death benefits will typically be paid pursuant to the plan’s default beneficiary provisions. These provisions should be drafted to avoid placing an undue burden on the plan administrator (which is often the plan sponsor). When the plan document requires the plan administrator to determine a participant’s heirs, the process of administering the death benefit can be costly and time-consuming and may lead to the risk that the plan will have to pay a duplicate benefit. For example, a duplicate payment could result because children from a previous marriage were overlooked, the participant remarried after terminating employment, or competing heirs provide incomplete or misleading information. However, plans can be drafted to provide that the default beneficiary is the participant’s surviving spouse, and if there is no spouse, the participant’s estate. If the estate is not probated, the risk should be shifted from… Continue Reading

Benefit Compliance Tip: Be Sure to Sign on the Dotted Line

Benefit plan administration can be complicated and challenging, but sometimes it is not the complex issues that cause the biggest problems; it’s the simplest, such as remembering to ensure plan documents and amendments are actually signed. Far too often, when new plans or plan amendments are adopted, the board or a plan committee will adopt resolutions approving the new plan or amendment, but the actual documents are never signed. Unfortunately, this area of non-compliance may go unnoticed until an IRS or DOL audit or the sale of the plan sponsor, where signed documents are requested but the plan sponsor cannot find them. To avoid being caught with unsigned plan documents, plans sponsors should: Adopt procedures so that immediately after new plans or amendments are adopted, the documents are signed and dated by an authorized signer; After documents are signed, maintain the executed documents in an easy to find location, and… Continue Reading

As Plan Administrator, the Employer is Liable – Not the Service Provider (i.e., What Kind of Indemnification Are You Getting?)

The plan administrator of an employee benefit plan (employee welfare or retirement) has the general fiduciary responsibility under ERISA to ensure the operational and documentary compliance of the plan. Under ERISA, the sponsoring employer is the plan administrator unless another person or entity is named in the plan. This generally means the employer retains ultimate responsibility and liability for legal compliance even though the employer may rely heavily on the plan’s third-party service providers. One way to mitigate this liability is to obtain indemnification from a service provider for the service provider’s errors, for which the employer (as plan administrator) would still be legally liable. The default language in third-party service provider contracts often provides indemnification only for the service provider’s “gross negligence”, but not its “ordinary negligence”, thus leaving the employer responsible for correcting (and paying for) errors caused by the service provider that do not amount to “gross negligence” or “intentional… Continue Reading

Reminder: Employer Obligations Regarding Employee Life Insurance Coverage

In our prior blog post here, we discussed the case of Anastos v. IKEA Property, Inc., which highlighted the importance of an employer?ÇÖs understanding of how its group term life insurance coverage is impacted by changes in employment status, such as termination of employment, retirement, or a leave of absence. This understanding is necessary for the employer to correctly communicate to employees when life insurance coverage will end, when evidence of insurability will be required, and the requirements necessary to convert coverage. In Anastos, the employer drafted its retiree benefit plan to state that eligible retirees could continue life insurance and that, in most cases, coverage would be guaranteed with no medical certification required. When a retiree attempted to obtain this coverage, the employer admitted that its plan was misleading and that it could not obtain underwriting to provide that kind of life insurance continuation benefit. The retiree sued, and… Continue Reading

Reminder: A Release of Claims May Not Offer Blanket Protection Against Potential ERISA Claims

A recent federal district court case,?áAnastos v. IKEA Property, Inc., illustrates that a release agreement executed upon employment termination may not offer blanket protection for employers against potential future ERISA or other claims that arise after termination (and after the release agreement has been executed). In Anastos, an employee sued his former employer alleging the information provided to him about the employer?ÇÖs retiree life insurance program led him to believe that no medical certification would be required to continue his life insurance coverage post-retirement. After the employee retired, his employer informed him that life insurance coverage was not available post-termination under the employer-provided plan and that, instead, he would have to convert the coverage to a whole life insurance policy with MetLife. MetLife required a medical examination before it would issue the policy, and the employee would not be able to satisfy the medical examination requirement. The employer filed a… Continue Reading

Guidance on Benefit Plan Cybersecurity Best Practices

Plan participants now enroll, change elections, review benefits, apply for plan loans and hardship distributions, and access account information through websites and cellphone apps. As electronic access to plan information has increased, so has the interest of hackers in obtaining the wealth of information stored electronically. Recently, the DOL?ÇÖs Employee Benefits Security Administration (the ?Ç£EBSA?Ç¥) issued the following cybersecurity guidance documents to help plan sponsors comply with their duties to protect plan information: Tips for Hiring a Service Provider with Strong Cybersecurity Practices: These tips are intended to help plan sponsors and plan fiduciaries meet their duties under ERISA to prudently select and monitor service providers. They include a list of questions to ask and considerations to make when evaluating potential service providers. Cybersecurity Program Best Practices: This guidance provides a list of 12 best practices intended to help plan fiduciaries mitigate cybersecurity risks and make prudent decisions when selecting… Continue Reading

Voluntary Correction Program Applications ?Çô Best Practices

The IRS recently issued a list of the top errors it finds in Voluntary Correction Program (?Ç£VCP?Ç¥) submissions, which is available here. The errors listed generally relate to issues associated with the submission of files in the correct PDF format, failing to pay the correct user fee, or the incorrect submission of the Form 8950. Filing a VCP application can be a useful method for plan sponsors to correct operational issues that have spanned numerous years or?á other issues for which self-correction is unavailable. Errors in the submission can delay resolution of the application or, in some cases, cause a rejection of the application. In addition to the common errors outlined by the IRS, plan sponsors should also use care to avoid the following additional common issues: Failure to Submit a Comprehensive Filing ?Çô If one operational error is found, plan sponsors should conduct a self-audit prior to filing a… Continue Reading

Fifth Circuit Decision is a Reminder to Employers on Structuring Severance Plans

Last week?ÇÖs decision by the U.S. Court of Appeals for the Fifth Circuit in Atkins v. CB&I, LLC is a reminder that employers may prefer to structure bonus and severance programs so as to be covered by ERISA and thus avoid being subject to unfavorable state laws. In Atkins, five employees brought suit in Louisiana state court claiming their employer?ÇÖs project incentive bonus plan?Çöwhich pays a single bonus payment to employees who are laid off or complete their roles in a specific project?Çöconstituted an illegal wage forfeiture agreement under the Louisiana Wage Payment Act. Each of the employees had quit and consequently forfeited their bonuses under the plan?ÇÖs terms. The employer removed the suit to federal district court claiming the bonus plan was a severance plan subject to ERISA and thus ERISA, as controlling federal law, preempted the employees?ÇÖ state law claims. The district court agreed. The Fifth Circuit reversed… Continue Reading

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