Benefits In Brief

Large employers (those issuing more than 250 W-2s for 2011) must report the value of their employees’ health coverage on the W-2s they issue for 2012 (in January of 2013).  Given the complexities of this process, the time to start preparing is now.  As explained in this article, the IRS has just issued another round of guidance on this reporting requirement.  This is likely to be the last guidance available before the requirement takes effect.

A cornerstone of last year’s Affordable Care Act (“ACA”) was the establishment of state-based “American Health Benefit Exchanges.”  These Exchanges are to serve as health insurance clearinghouses, allowing health care consumers to connect with insurers.  Each Exchange must also maintain a “Small Business Health Options Program” (or “SHOP”), through which small employers may obtain health insurance for their employees.  In mid-July, the Department of Health and Human Services (“HHS”) proposed two sets of regulations concerning these new Exchanges.

As we reported in our May 2011 article, the Internal Revenue Service (“IRS”) has replaced Schedule SSA to the Form 5500 with a new Form 8955-SSA (“Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits”), beginning with the 2009 plan year.  The IRS has now released the 2009 Form 8955-SSA.  It has also extended the August 1, 2011, deadline for the 2009 and 2010 filings.

As explained in our November 2010 article, last year’s Affordable Care Act (“ACA”) restricted the ability of employer health plans, including flexible spending arrangements (“FSAs”) and health reimbursement arrangements (“HRAs”), to reimburse expenses incurred for over-the-counter (“OTC”) medications. With the exception of insulin, expenses for OTC medications may now be reimbursed only if the medications are prescribed by a physician. Sponsors of FSAs face a June 30 deadline for amending their plans to comply with this ACA restriction.

In a recent decision, a Florida federal trial court waded into an area of the law that has generated substantial concern among employers wishing to implement wellness programs that include both a carrot and a stick. The result was surprisingly good news for those employers.

Most sponsors of Section 401(k) plans are familiar with the standards for allowing active employees to withdraw their elective deferrals on account of “financial hardship.” The same hardship withdrawal standards apply to Section 403(b) deferrals. However, far more stringent in-service withdrawal standards apply to nonqualified deferred compensation arrangements that are subject to Code Section 409A.  These “unforeseeable emergency” standards apply to Section 457(b) plans, as well. In its Revenue Ruling 2010-27, the IRS has helped to define the scope of these unforeseeable emergency standards.

The Internal Revenue Service has announced that a new Form 8955-SSA (“Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits”) has replaced Schedule SSA to the Form 5500.

As we reported in our February 2011 article, both political parties have long agreed on the need to repeal the expanded Form 1099 reporting requirements enacted as part of last year’s Affordable Care Act (“ACA”). On April 14, President Obama finally signed legislation retroactively repealing these requirements. This repeal was delayed by a disagreement as to how to offset the cost of the repeal. The final legislation achieves this offset by requiring larger repayments of excess “federal assistance credits” received by individuals who purchase health coverage through one of the ACA’s state-wide “Exchanges.”

The health care reform provisions of the Affordable Care Act (the “Act”) will require significant changes in the procedures followed by most employer health plans when processing claims for benefits, as well as appeals from denials of those claims.  The only plans that need not comply with these new claims and appeals procedures are those that are “grandfathered” under pre-Act law (in accordance with the guidance addressed in our June 2010 article).  All non-grandfathered plans must comply with these expanded claims and appeals procedures as of the first plan year beginning on or after September 23, 2010.

Among the many changes made by the Affordable Care Act (“ACA”) is a requirement that group health plans (other than plans that are “grandfathered” under the rules described in our June 2010 article) provide benefits for a comprehensive list of preventive health services.  Moreover, these benefits must be provided on a first-dollar basis (i.e., subject to no deductible or co-payment) and with no other cost-sharing requirement (such as coinsurance).  This requirement applies as of the first plan year beginning on or after September 23, 2010.

As explained in our May 2010 article, the Affordable Care Act imposed a number of benefit mandates on employer health plans, most of which will take effect with the first plan year beginning after September 23, 2010. However, certain plans that were in existence on March 23, 2010 (the Act’s enactment date) enjoy limited “grandfather” protection. Some of the benefit mandates do not apply at all to these grandfathered plans, while others apply only at a later date. Unfortunately, the Act did little to define the scope of this grandfather protection. The three agencies charged with administering the Act have now issued interim final regulations providing useful guidance on this topic

Among the items included in the recent economic stimulus package (formally known as the American Recovery and Reinvestment Act) is a temporary subsidy of COBRA premiums for involuntarily terminated employees. Although the Act omits language from the House bill that would have mandated an extension of COBRA coverage through age 65, it does require employers and other plan sponsors to facilitate this federal subsidy of COBRA premiums. The subsidy will cover 65% of the monthly premium, for a period of up to nine months.

On January 29^th, President Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009.  The Ledbetter Act was a direct response to the U.S. Supreme Court’s 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co., in which the Court held that Ms. Ledbetter’s Title VII claim against Goodyear was barred by the statute of limitations.  By redefining when a discriminatory act is deemed to occur, the Act will allow additional employment discrimination claims to proceed to trial.  The likely result will be more backpay awards, and also greater liability for compensation-based benefits.

When the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) created the concept of a “Roth 401(k) contribution,” things got off to a slow start. For one thing, it was not at all clear how the Roth IRA concept, which has been around for some time, would be transplanted to an employer-sponsored plan.

A recent case in Pennsylvania illustrates the importance of understanding and documenting when COBRA premium payments are made. In Hall v. Glenn O. Hawbaker, Inc., the court found that a COBRA-qualified beneficiary had mailed her premium payment for September coverage on October 5th. Based on this finding, the court denied the beneficiary’s motion for a preliminary injunction that would have reinstated her COBRA coverage.

The short history of cash balance plans has been a tale of extremes. Once the darling of consultants, cash balance plans became something of a pariah after a wave of lawsuits cast doubt on their legality. The Pension Protection Act of 2006 (“PPA”) and a recent appellate court decision, however, may put cash balance plans back in the good graces of employers.