Benefits in Brief

New Fees Payable by Health Plan Sponsors and Insurers

Kenneth A. Mason — Fri, 18 May 2012 00:00:00 GMT

Under the Affordable Care Act (“ACA”), both health insurers and sponsors of self-funded employer health plans will be assessed a fee to fund a new Patient-Centered Outcomes Research Institute. This fee will start at $1.00 per covered life for the first year (which is the first plan year ending on or after October 1, 2012), but will then double to $2.00 per covered life during the following year. The first deadline for paying this fee is July 31, 2013.

As Fee Disclosure Deadlines Approach, DOL Issues Additional Guidance

Robert A. (Rob) Browning — Fri, 18 May 2012 00:00:00 GMT

After more than four years of regulatory starts and stops, plus the threat of a legislative solution, two separate sets of fee disclosure regulations issued by the Department of Labor (“DOL”) will finally become effective this summer. Covered service providers must provide certain compensation and fee information to plan fiduciaries by July 1, and fiduciaries of participant-directed plans must provide participants with certain plan expense and investment fee information by August 30. As those deadlines approach, the DOL has just issued additional guidance (in the form of Field Assistance Bulletin 2012-02) on the participant fee disclosure rules, and has indicated that it plans to issue similar guidance regarding the service provider fee disclosure requirements in the very near future.

COMMON PLAN MISTAKES: Miscalculating Matching Contributions

Chadron Patton — Fri, 18 May 2012 00:00:00 GMT

Miscalculating an employer matching contribution is one of the most common mistakes in the administration of a Section 401(k) plan. This mistake often occurs because the plan sponsor calculates the matching contribution using an incorrect timing assumption—for example, a pay-period basis, rather than an annual basis.

Federal Appeals Court Rejects Equitable Remedies When SPD Promises More Generous Benefits Than Pension Plan Document

Lawrence Jenab — Fri, 18 May 2012 00:00:00 GMT

A federal appeals court has handed down the first significant decision to interpret the Supreme Court’s recent ruling on ERISA remedies. In CIGNA Corp. v. Amara, the Supreme Court suggested three methods by which participants might enforce the terms of an SPD that promises greater benefits than the underlying plan document: estoppel, reformation, and surcharge. In Skinner v. Northrop Grumman Retirement Plan B, participants tested two of these methods. The Ninth Circuit rejected both.

THE FIDUCIARY CORNER: Costly Fiduciary Breaches in 401(k) Fee Case Provide Many Lessons

Gregory L. Ash — Fri, 18 May 2012 00:00:00 GMT

The recent decision in Tussey v. ABB, Inc. provides many lessons for 401(k) plan fiduciaries. One such lesson is to avoid having an overly rigid investment policy statement. Failing to follow the protocol outlined in a plan’s IPS for replacing an underperforming investment option led the Tussey court to tag the plan’s fiduciaries with substantial liability for the participants’ lost earnings.

IRS Proposes Methods for Valuing Employer Health Coverage

Kenneth A. Mason — Tue, 01 May 2012 00:00:00 GMT

In order to implement several provisions of health care reform, the Affordable Care Act (“ACA”) will require “large employers” (those with 50 or more full-time employees) to determine whether their employer health plans provide “minimum value.” In Notice 2012-31, the IRS has proposed three different methods by which an employer might make this determination.

IRS Announces 2013 Amounts for HSAs and HDHPs

Chadron Patton — Mon, 30 Apr 2012 00:00:00 GMT

In Revenue Procedure 2012-26, the IRS has announced the 2013 inflation-adjusted amounts for health savings accounts (“HSAs”) and qualifying high deductible health plans (“HDHPs”), all as determined under Section 223 of the Internal Revenue Code.

Ready Reference Chart: W-2 Reporting of Employer Health Coverage

Kenneth A. Mason — Thu, 15 Mar 2012 00:00:00 GMT

Employers that issued 250 or more w-2s for 2011 must report the value of any employer-provided health coverage on their employees’ 2012 W-2s. The chart found at this link shows the types of coverage that should be included in that reporting, the types that should not be included, and those for which reporting is optional.

IRS Revises Procedures for Determination Letters

Robert A. (Rob) Browning — Thu, 01 Mar 2012 00:00:00 GMT

The IRS has recently made changes to its determination letter program that are designed to (i) eliminate features that are of limited utility to plan sponsors, and (ii) improve efficiency by reducing the time it takes to process applications. However, under the modified procedures, some employers adopting pre-approved plans will no longer be able to apply for (or receive) determination letters with respect to their plans. This article reviews the changes to the determination letter program and the impact on qualified plan sponsors who seek assurance that the form of their plan satisfies the requirements of the Tax Code.

COMMON PLAN MISTAKES: Failure to Defer from "Compensation"

Chadron Patton — Thu, 01 Mar 2012 00:00:00 GMT

The failure to properly withhold salary deferral contributions from a participant’s compensation is one of the most common mistakes that arise in the administration of a Section 401(k) defined contribution retirement plan. This common mistake generally occurs because the plan sponsor fails to apply the proper definition of compensation under the plan.

Federal Appeals Court Upholds $243,000 Damage and Fee Award for Employer’s Failure to Provide SPD and Election Forms

Lawrence Jenab — Thu, 01 Mar 2012 00:00:00 GMT

A recent ruling from the federal Court of Appeals highlights two critical ERISA basics: fiduciary duties and disclosure requirements. In Kujanek v. Houston Poly Bag, the Fifth Circuit upheld an award of damages and fees of more than $243,000 for an employer’s failure to provide a participant with a copy of a retirement plan’s summary plan description (“SPD”) and a rollover election form. As explained more fully in the rest of this article, that amount could increase significantly when the lower court reconsiders the question of statutory penalties.

IRS Cautions Against “Sham” Retirements

Kenneth A. Mason — Thu, 01 Mar 2012 00:00:00 GMT

In a recent ruling, the IRS reiterated its long-standing position that a “pension plan” may not allow active employees to obtain a distribution from the plan – at least, not before their attainment of the plan’s normal retirement age (or, if earlier, age 62). Sponsors of pension plans (both defined benefit and “money purchase”) should therefore take steps to prevent “sham” retirements by employees who want to begin receiving a pension but then immediately return to work for the plan sponsor.

Medical Loss Ratio Rebates: ERISA Plan Assets?

Julia M. Vander Weele — Thu, 01 Mar 2012 00:00:00 GMT

The Department of Labor (DOL) has issued new guidance on the medical loss ratio rules. The guidance reminds plan sponsors of fully insured group health plans that there are potential plan asset considerations involved in the receipt of any MLR rebate. As a result, plan sponsors who receive such rebates must think carefully about how to allocate them.

THE FIDUCIARY CORNER: You ARE Your Brother's Keeper - Co-Fiduciary Liability Under ERISA

Gregory L. Ash — Thu, 01 Mar 2012 00:00:00 GMT

Plan fiduciaries must not only make sure that their own conduct complies with ERISA’s exacting standards, they also have a duty to monitor the conduct of the plan’s other fiduciaries. The failure to do so can result in personal liability under ERISA’s co-fiduciary duty rules, as demonstrated by Smith v. Stockwell Construction Co. (W.D.N.Y. Dec. 10, 2011).

IRS Guidance Facilitates Lifetime Income Options

Kenneth A. Mason — Thu, 01 Mar 2012 00:00:00 GMT

The IRS has issued a package of proposed regulations and revenue rulings dealing with “lifetime income options.” These regulations and rulings apply to both defined contribution and defined benefit plans, and to a variety of life situations. What they share in common is an intent to encourage employers to help their employees more prudently manage their retirement assets during the “drawdown” phase of their retirement.

Agencies Issue Guidance on Automatic Enrollment, Employer Mandate, and Waiting Periods

Julia M. Vander Weele — Tue, 21 Feb 2012 00:00:00 GMT

The agencies charged with implementing health care reform are continuing to churn out guidance for health plan sponsors. The latest FAQs defer the effective date of the “automatic enrollment” requirement. They also offer a number of insights into how the agencies intend to address both the employer “shared responsibility” requirement and the 90-day limitation on eligibility waiting periods.

Agencies Finalize Guidance on Summary of Benefits and Coverage

Kenneth A. Mason — Fri, 10 Feb 2012 00:00:00 GMT

The agencies charged with implementing health care reform have just issued final regulations (and related guidance) on the requirement for a uniform “summary of benefits and coverage.” This guidance gives plan administrators and insurers another six months to draft and distribute these SBCs. Certain of the more burdensome aspects of the August 2011 proposed regulations have also been eased. Nonetheless, prompt action will be needed to draft compliant SBCs in time for the upcoming open enrollment season.

Department of Labor Finalizes, Delays 401(k) Fee Disclosure Rules

Gregory L. Ash — Thu, 02 Feb 2012 00:00:00 GMT

After months of delay, the Department of Labor (“DOL”) today released final regulations under Section 408(b)(2) of ERISA, requiring retirement plan service providers to disclose information about their services and fees to plan sponsors. In doing so, the DOL delayed the effective date of those rules and made minor modifications to them. The final regulations defer the compliance date from April 1 to July 1, 2012. As a consequence, plan sponsors will also have more time to comply with the related participant-level fee disclosure rules.

More IRS Guidance on W-2 Reporting of Health Coverage

Kenneth A. Mason — Wed, 18 Jan 2012 00:00:00 GMT

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.

Health Care Reform: What's Gone Away? and What's Coming in 2012?

Chadron Patton — Wed, 16 Nov 2011 00:00:00 GMT

The tide of regulations interpreting the 2010 Patient Protection and Affordable Care Act (“PPACA”) began to ebb in 2011, and portions of the law have even been repealed or put on hold. Nonetheless, health plan sponsors will still face new compliance burdens in 2012. This article briefly addresses these aspects of the PPACA.