Benefits In Brief

With annual enrollment season fast approaching, now is the time to consider new 2011 disclosure obligations.  In particular, with the enactment of the Affordable Care Act (the “Act”), several new notices must be provided to plan participants.  Many plan sponsors may want to consider including these new notices in the 2011 open enrollment materials that they send to employees.  These notices include:

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.

It may be summer now, but sponsors of tax-favored retirement plans should keep in mind the many required amendments for which a year-end deadline is fast approaching.  This article highlights some of the more important changes that sponsors must address before the sun sets on 2010.

When is it appropriate to accept the sticker price listed on a product without asking the salesman for a better deal?  Maybe never, at least if you’re a fiduciary of a $2 billion 401(k) plan spending the participants’ money, according to a federal court in California.  (Tibble v. Edison International, 7/8/2010).  That’s true even if an independent consultant advises you to buy the higher-priced product.

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.

On July 15, 2010, the Department of Labor (“DOL”) issued “interim” final regulations regarding the fee information that service providers must disclose to fiduciaries of ERISA-covered retirement plans. This information is intended to assist fiduciaries in assessing the reasonableness of contracts or arrangements for the provision of services to the plan, including the reasonableness of the service provider’s compensation and the potential for conflicts of interest.

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

As we reported in our September 2008 article, most tax-favored retirement plans must be amended by the end of the 2010 plan year to reflect the mandatory provisions of the Heroes Earnings Assistance and Relief Tax Act (the “HEART Act”).

As part of a recent IRS compliance initiative, 1,200 sponsors of 401(k) plans will soon be asked to complete a lengthy Questionnaire. This Questionnaire contains 69 questions, many divided into numerous subparts. Employers will have 90 days to respond. According to the IRS, “failure to complete the Questionnaire will result in further enforcement action” — up to and including an audit of the plan. Any employer receiving this Questionnaire should therefore move promptly to gather the voluminous and detailed data needed to respond, much of which may not be readily available.

In the weeks and months leading up to the enactment of the Affordable Care Act, one of the oft-repeated “campaign promises” made by promoters of the legislation was, “If you like your current health care coverage, you can keep it.” In keeping with the spirit of that promise, the Act includes provisions that exempt so-called “grandfathered” plans from some, but not all, of the benefit mandates in the Act. Unfortunately, the Act leaves many questions unanswered with respect to the application of these grandfather rules.