On April 23, 2013, the Departments of Labor, Health and Human Services and the Treasury (the “Departments”) issued an updated template and sample completed template for summaries of benefits and coverage (“SBCs”) that must be provided for coverage beginning in 2014.  The Departments also released Frequently Asked Questions that include the following guidance:

  • The only change to the existing SBC template is the addition of statements regarding whether a group health plan offers minimum essential coverage that meets the requirements for providing minimum value.  (See ACA’s Cost-Sharing Limitations on Employer Health Coverage for an explanation of the minimum essential coverage and minimum value requirements.)  If an employer or issuer is unable to modify the SBC template to include this additional information and continues to use the template provided for 2013, the new information for 2014 may be disclosed in a separate document that is provided with the SBC.  No other changes have been made to the SBC template, including to the examples that must be included, to the instructions for providing SBCs, or to the uniform glossary.
  • The Departments have extended for another year enforcement relief that they issued last year.  Pursuant to this relief, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to provide the required SBC content in a format that is consistent with the final regulations.  In addition, the Departments have also extended the safe harbor for providing SBCs electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan.
  • Because annual limits on essential health benefits will no longer be permissible starting in 2014, a plan may, at its option, delete the following row that appears on the first page of the SBC template:  “Is there an overall limit on what the plan pays?”.  Otherwise, the plan should answer “no” to this question.
  • If an educational institution, such as an institution of higher education, maintains insured health coverage for its students, the institution will have met its requirements for providing SBCs if another party, such as the health insurance issuer, timely provides completed SBCs to the students.
    Continue Reading Departments Publish Updated SBC Template, Making Few Changes for 2014

The Department of Labor resolved key issues related to cleared swaps transactions in a recent advisory opinion.  The opinion concludes that margin posted by an employee benefit plan in connection with a cleared swap is not a “plan asset” for purposes of ERISA, and that a Clearing Member does not act as a fiduciary of the plan when the Clearing Member exercises discretionary account liquidation rights upon the plan’s default.  The opinion also provides guidance on prohibited transaction issues raised by the clearing process.
Continue Reading Labor Department Addresses Key Issues for Cleared Swaps

Misclassification of workers remains a hot button issue.  The IRS continues to scrutinize employers’ worker classification practices, and it is likely that health reform will cause the Department of Labor to review classification issues even more closely than it has in the past.  

In an effort to encourage employers to reclassify independent contractors as employees, the IRS created the Voluntary Classification Settlement Program in 2011.  The program limits the tax liabilities of employers who voluntarily reclassify independent contractors.  Recently, the IRS expanded the program to cover a wider range of situations and provided additional clarifications.
Continue Reading Worker (Mis)Classification: IRS Expands Voluntary Settlement Program

The IRS and Department of Labor recently announced additional relief for victims of Hurricane Sandy.

Loans and Hardship Distributions from Defined Contribution Plans

In Announcement 2012-44, the IRS relaxed the rules governing loans and hardship distributions from 401(k), 403(b) and state and local government 457(b) defined contribution plans.  There are several components to the relief:

  • Grounds for hardship distribution:  The IRS has stated that a plan will not fail to comply with the rules governing hardship distributions if it makes a distribution on account of a need arising from Hurricane Sandy.
  • No limit on future contributions:  The guidance also relaxes restrictions that would typically be placed on the participant’s ability to make contributions to the plan for a six-month period following a hardship distribution.
  • Relaxed procedural requirements:  Under the IRS guidance, the plan administrator will not be treated as failing to comply with the plan’s procedural requirements for approval of hardship distributions or loans, provided that it makes a good-faith diligent effort under the circumstances to comply and makes a reasonable effort to assemble any forgone documentation as soon as practicable.
  • Plan document relief:  To the extent that the plan must be amended to permit the loans or distributions pursuant to the Hurricane Sandy relief guidance, the deadline for adopting the amendment is the end of the first plan year beginning on or after January 1, 2013.

Continue Reading Additional Relief for Victims of Hurricane Sandy

On November 26, 2012, the IRS and Departments of Labor and Health and Human Services published in the Federal Register proposed regulations that would permit group health plans to provide greater incentives for participation in wellness programs.  The proposed regulations include a welcome implementation of statutory changes that were made by the Affordable Care Act, but they leave unanswered important questions about compliance with the Genetic Information Nondiscrimination Act of 2008, as amended (GINA) and the Americans with Disabilities Act, as amended (ADA).  Employers putting wellness programs in place should be mindful of the possibility that a program might comply with the proposed regulations but still violate a requirement of GINA or the ADA.

If finalized, the proposed regulations will be effective for plan years beginning in 2014 or later–the same effective date as the changes to the statute.  Until then, existing regulations that were issued in 2006 continue to apply.  Comments on the proposed regulations are due by January 25, 2012.
Continue Reading Proposed Regulations Will Permit Greater Incentives for Participation in Wellness Programs

Courts continue to apply the fiduciary exception to the attorney-client privilege to the fiduciaries of ERISA-governed plans.  Under the fiduciary exception, plan participants and the Secretary of Labor can obtain testimony or documents relating to confidential communications between plan fiduciaries and their lawyers regarding plan administration.

Although the Third Circuit has ruled that the fiduciary

Beginning in 2011, the medical loss ratio (MLR) requirements of the Affordable Care Act require health insurers to spend at least 85% of premiums for large group policies on medical expenses and activities to improve health care quality.  If an insurer does not meet this requirement, it must rebate to the employer a portion of the collected premiums.  The employer, in turn, is responsible for determining whether and how to pass along the rebate to plan participants.  By August 1, 2012, insurers in the large group market were expected to return $386 million in rebates to employers.

Employers must consider both the implications under ERISA and the Internal Revenue Code in determining how to use the rebates.  Although employers are responsible for determining how to use the rebate, insurers are responsible for notifying employees (and their dependents) who participate in the plan that the employer has received the rebate.  Accordingly, employers should expect questions from both current and former employees regarding their use of the rebate.
Continue Reading How Employers Can Use Medical Loss Ratio Rebates