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Older News | July 2, 2016

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409A Deferral Election Results: A Mixed Bag
Milliman Retirement Town Hall
[Guidance Overview]
7/1/2016
"As with many of 409A's rules, the restrictions on deferral elections require tight timing. This blog will highlight the differences between permissible 401(k) and NDCP deferral elections while also describing some of the plan design options available to provide participants with at least some flexibility when making their NDCP deferral elections with respect to salary and bonuses."
Text of Draft CMS Letter for Issuers Who Request Alternative Schedule of Payment of CSR Portion of Advance Payments (2014 and 2015 Benefit Years) (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/1/2016
Marked as "Draft"; undated and unnumbered document. "If you fail to make timely payment in accordance with the installment payment schedule or enter into insolvency, rehabilitation, early pre-liquidation, or fail to make the initial 10 percent payment, the full balance of the charge will become immediately due. You are permitted to make an early payment toward your outstanding debt. We note that early payments will be applied to interest first and the remaining portion will reduce the principal balance. Please return this letter with the information on page three completed to provide your written agreement and approval no later than no later than 11:59 p.m. ET on Tuesday, July 12, 2016."
What to Do If Your Company Receives a Marketplace Notice
Graydon Head & Ritchey LLP
7/1/2016
"If you offered minimum value, affordable coverage to the employee(s) listed on the notice or if the employee is enrolled in your health plan (regardless of whether it is minimum value or affordable), you should not be subject to a shared responsibility penalty. Further, if these employee(s) were not offered coverage due to not being full-time, the employee is entitled to financial assistance and no penalty will be issued as a result of this employee qualifying for financial assistance."
Text of CMS Final Regs: Expanding Uses of Medicare Data by Qualified Entities
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
[Official Guidance]
7/1/2016
111 pages. "This final rule implements requirements under Section 105 of the Medicare Access and CHIP Reauthorization Act of 2015 [MACRA] that expand how qualified entities may use and disclose data under the qualified entity program to the extent consistent with applicable program requirements and other applicable laws, including information, privacy, security and disclosure laws. This rule also explains how qualified entities may create non-public analyses and provide or sell such analyses to authorized users, as well as how qualified entities may provide or sell combined data, or provide Medicare claims data alone at no cost, to certain authorized users. In addition, this rule implements certain privacy and security requirements, and imposes assessments on qualified entities if the qualified entity or the authorized user violates the terms of a data use agreement required by the qualified entity program."
CMS Finalizes Rule Giving Providers and Employers Improved Access to Information for Better Patient Care
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
[Guidance Overview]
7/1/2016
"The new rules, as required by the Medicare Access and CHIP Reauthorization Act (MACRA), allow organizations approved as qualified entities to confidentially share or sell analyses of Medicare and private sector claims data to providers, employers, and other groups who can use the data to support improved care.... The rule also includes strict privacy and security requirements for all entities receiving patient identifiable and beneficiary de-identified analyses or data, as well as expanded annual reporting requirements."
DOL Final Investment Advice Regulation's Impact on the Retail Investor Marketplace (PDF)
Groom Law Group, via The Investment Lawyer
[Guidance Overview]
7/1/2016
16 pages. "The purpose of this article is to: [1] provide a summary of the definition of 'investment advice' under the Final Regulation; [2] discuss the impact of the Final Regulation and the prohibited transaction exemptions, particularly the BIC and PTE 84-24, on the distribution of products and services; and [3] provide some recommendations on how to proceed."
Disney Faces Another ERISA Lawsuit Over Sequoia Fund
Bloomberg BNA
7/1/2016
"In a proposed class action filed June 28, Disney workers allege that the company's retirement plan investment committee should have dumped its Sequoia Fund holdings when the fund's increasing stake in the troubled Valeant -- which the workers dub 'the Pharmaceutical Enron' -- caused a substantial drop in stock price that led to lost retirement savings."
Pension Finance Update, June 2016
October Three Consulting
7/1/2016
"Financial markets have been roiled in the past week by Brexit, adding to pain pension sponsors had already been suffering this year. Both model pension plans we track suffered setbacks in June -- Plan A lost 4% last month, while Plan B was off 2%. Through the first half of 2016, Plan A is now down 10% and Plan B is down 5%."
IRS Announcement: ACA Information Returns May Continue To Be Filed After June 30, 2016
Internal Revenue Service [IRS]
[Official Guidance]
7/1/2016
"The ACA Information Returns (AIR) system will remain up and running after the [June 30] deadline. If you are not able to submit all required ACA information returns by June 30, 2016, please complete the filing of your returns after the deadline.... [F]ilers of Forms 1094-B, 1095-B, 1094-C and 1095-C that miss the June 30, 2016, due date will not generally be assessed late filing penalties under section 6721 if the reporting entity has made legitimate efforts to register with the AIR system and to file its information returns, and it continues to make such efforts and completes the process as soon as possible."
Chart: California State and City Paid Sick Leave Laws
Fox Rothschild LLP
[Guidance Overview]
7/1/2016
This 9-page chart compares the principal provisions of the California paid sick leave law and similar laws in six California cities.
Quarterly Survey of Public Pensions: First Quarter 2016
U.S. Census Bureau
7/1/2016
"This report provides national summary data on the revenues, expenditures and composition of assets of the largest defined benefit public employee pension systems for state and local governments. This report produces three tables: Tables 1 and 3 include data on cash and security holdings and Table 2 provides data on earnings on investments, contributions and payments."
Insurers Suffer Large Losses in Individual Market
Healthcare Finance News
7/1/2016
"Despite receiving huge subsidies, insurers suffered larger losses selling qualified health plans in the individual market than they did selling nearly identical policies in the small group market ... Lower-than-expected enrollment in the new insurance exchanges, and significant insurer losses, have resulted in substantial premium increases and insurer withdrawals from state markets ... Researchers say this casts doubt on the long-term sustainability of certain aspects of the ACA."
Summary of the Quarterly Survey of Public Pensions: First Quarter 2016 (PDF)
U.S. Census Bureau
7/1/2016
"For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $3,252.2 billion in the first quarter of 2016, increasing by 0.1 percent from the 2015 fourth-quarter level ... Compared to the same quarter in 2015, assets for these major public pension systems decreased 4.0 percent from $3,388.5 billion.... Employee contributions declined 3.6 percent quarter-to-quarter, from $11.5 billion to $11.1 billion during the first quarter of 2016, but experienced a year-to-year increase of 5.5 percent, from $10.5 billion in the first quarter of 2015."
Large Employers' Response Strategies to ACA Mandates Are Keeping Health Insurance Costs Stable
Wolters Kluwer Law & Business
7/1/2016
"Total health premium cost per employee rose 5.0% from 2014 to 2016.... [W]hile total plan cost increased by 2.8% for 2014-2015 and 2.1% for 2015-2016, the amount of premiums that employers paid also increased, by 3.1% and 2.5% for the same periods, respectively.... [E]mployer contribution share increased slightly in most age groups and decreased only slightly for those 55 and older."
Corporate Pension Sponsors Fight for Ex-Employees' 401(k) Assets
Institutional Investor
7/1/2016
"[United Technologies Vice President and Chief Investment Officer Robin Diamonte] grew tired of watching retiring and separating plan participants become fodder for call centers trolling to open new IRA accounts. To counter this pressure, she and her peers at International Paper Co. and IBM Corp. have launched campaigns to inform employees of their choices when it comes to their 401(k) accounts.... Diamonte faces an uphill battle. As U.S. defined contribution assets have grown to trillions of dollars, brokerages and mutual fund firms big and small have responded with aggressive efforts to vacuum up the 401(k) assets of separating and retiring employees."
State 1332 Waiver Update: Vermont and Hawaii
Families USA
7/1/2016
"Vermont wants to waive the requirement to maintain a website where people can enroll in the SHOP ... Instead, Vermont Health Connect's website (the state marketplace where individuals enroll in coverage) would include educational and online tools to allow employees to compare plan choices, but insurers would directly enroll small businesses and their employees into plans.... Hawaii wants to waive SHOP requirements, which do not mesh well with its Prepaid Health Plan -- a 40-year old state law that requires Hawaii employers to cover their employees."
Using a 'Preference Checklist' to Make Retirement Decisions
TIAA Institute
7/1/2016
"Because the optimal [Social Security] claiming age varies depending on factors such as longevity, successful interventions need to be effective and selective: delaying claiming age for those who should delay, but not for those who should claim early. [The authors] investigate a recently developed choice architecture tool, a preference checklist (a list of choice-relevant factors that consumers might want to consider, but often do not)."
The Next Big Debate in Health Care
The Wall Street Journal; subscription may be required
7/1/2016
"With 91% of the population now covered by some form of health insurance, and the coverage rate higher in some states, the next big debate in health policy could be about the adequacy of coverage. That particularly means rising payments for deductibles and their impact on family budgets and access to care.... [P]ayments toward deductibles by consumers who have insurance through large employers rose 256% from 2004 to 2014; over the same period, wages increased 32%."
TPA's Alleged Incentive to Deny Claims Does Not Trigger Nondeferential Review
Thomson Reuters / EBIA
7/1/2016
"[M]any plan sponsors seek to avoid a conflict by delegating full discretionary authority to a TPA that has no financial interest in the claims decision. But claimants often question whether TPAs are truly independent, since they are hired by a party who is financially liable for approved claims. This decision represents an important acknowledgement of the professionalism of TPAs -- whose reputation is on the line each time they decide a claim." [Jones v. PepsiCo, Inc., No. 15-0426 (S.D.N.Y. May 6, 2016)]
OECD Focus on Pensions: ESOPs Acknowledged, Social Investing Promoted (PDF)
Groom Law Group
7/1/2016
"The Organisation for Economic Cooperation and Development (OECD) Working Party on Private Pensions (WPPP) ... [final version of] its Core Principles of Private Pension Regulation... added, following comments by numerous US and European stakeholders, acknowledgement of US-style ESOPs.... This [article focuses] on the new ESOP provisions in the Core Principles, the beginning of apparent advocacy of ESG investing by pension funds, and a few of the other areas that are beginning to attract the attention of the WPPP."
Oh HSA Can You See ... a $2,600 Minimum HDHP Deductible
ABD Insurance & Financial Services
[Guidance Overview]
7/1/2016
"As a result of a California law taking full effect in 2017, the minimum HDHP individual deductible will be $2,600.... California AB 1305 generally requires fully insured California policies to have an embedded individual deductible on a family plan that is no greater than the policy's individual deductible for coverage starting in 2017.... [T]he HDHP rules prevent including an embedded individual deductible that is lower than the minimum required deductible for family HDHP coverage ($2,600 in 2016/2017).... For fully insured 2017 California HDHP policies, the individual deductible will need to be increased to at least $2,600 to maintain HDHP status."
IRS Issues Proposed Regs Under Code Sec. 457
Proskauer Rose LLP
[Guidance Overview]
7/1/2016
"[T]hese rules: [1] [recognize] a termination by an employee for 'good reason' as an involuntary severance from employment; ... [2] recognize required compliance with a noncompetition agreement as a substantial risk of forfeiture; ... [3] permit, in certain situations, elective deferral of current compensation and a rollover of existing substantial risk of forfeiture; [4] define bona fide severance pay plans that are exempt from Code Section 457 ... [5] define bona fide sick pay and vacation plans that are exempt from Code Section 457[.]"
Text of EBSA Fact Sheet: Interim Final Rule Adjusting ERISA Civil Monetary Penalties for Inflation (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]
[Guidance Overview]
7/1/2016
"Beginning in 2017, the Department will adjust the new ERISA Title I penalty amounts annually for inflation no later than January 15 of each year.... EBSA will post any changes to ERISA Title I penalty amounts on its website. Annual inflation adjustments are not subject to notice and rulemaking.... The table [in this fact sheet] shows the current penalty amounts enforceable by EBSA and the inflation adjusted penalty that will go into effect for penalties assessed after August 1, 2016."
IRS Proposes New 457 Regs for Nonqualified Deferred Compensation Plans of Tax-Exempt and Governmental Employers
Faegre Baker Daniels LLP
[Guidance Overview]
7/1/2016
"IRS Notice 2007-62 had signaled the IRS's intent to impose restrictive rules for what constitutes a 'substantial risk of forfeiture' under section 457(f), consistent with the rules under Code section 409A. However, the proposed regulations defining a section 457(f) substantial risk of forfeiture are more flexible and accommodating for designing deferred compensation arrangements than had been described in the Notice."
EEOC Issues Guidance on Notice Requirements for Wellness Programs That Solicit Medical Information
The Wagner Law Group
[Guidance Overview]
7/1/2016
"The EEOC has warned that it will vigorously investigate notice complaints received from employees. Accordingly, employers that sponsor wellness programs that make health-related inquiries or involve medical examinations must be sure that they review the new notice requirements and understand how their wellness program procedures are impacted."
IRS Issues Supplemental 409A Guidance on Deferred Compensation Plans
Holland & Knight
[Guidance Overview]
7/1/2016
"[T]he proposed regulations modify current rules under Section 409A, including with respect to: [1] the short-term deferral rule ... [2] the definition of 'eligible issuer of service recipient stock' ... [3] recurring part-year compensation; [4] amounts payable following the death of service providers and their beneficiaries; [5] the conflict of interest exception to the prohibition on the acceleration of payments[.]"
Brexit and DB Plans
October Three Consulting
7/1/2016
"Cash-sensitive DB sponsors are generally protected from swings in market interest rates by the ERISA minimum funding interest rate stabilization rules. For them, the fallout from Brexit is generally irrelevant ... Earnings-sensitive sponsors are not. Market interest rates were, pre-Brexit, already significantly down for the year. Brexit has driven them down further. If these lower rates continue to year end, liabilities for financial disclosure purposes will increase significantly.... Pre- and post-Brexit decreases in interest rates, if they persist to year end, will increase ... PBGC variable-rate premiums (provided they are not affected by the variable premium cap)."
The Regulatory State Reaches the Wellness Industry
National Center for Policy Analysis Health Policy Blog
[Opinion]
6/30/2016
"Because employers cannot use underwriting for medical risk to charge different premiums to different employees, it is hard to avoid the conclusion that wellness programs are less designed to make or keep employees well, as to ensure healthy people are attracted to the employer and sick people are not. Evidence suggests this is the real consequence of workplace wellness programs."
Strategies for Health System Innovation After Gobeille
JAMA
6/30/2016
"Given the impediments to comprehensive monitoring of health information that Gobeille creates, states should consider the following strategies. Data sharing agreements with self-insured plans ... Data reporting from health care professionals and facilities ... Federal regulatory action ... Congressional action."
Failure of FMLA Notice to Include Job Restoration Rights Might Be Interference If Employee Prejudiced
Wolters Kluwer Law & Business
6/30/2016
"The FMLA notice a federal reserve bank sent to an employee failed to inform him of his right to job restoration, the Fourth Circuit found. And because there was sufficient evidence to show he would have structured his leave differently had he known his job was protected, the court vacated the grant of summary judgment against his FMLA interference claim." [Vannoy v. The Federal Reserve Bank of Richmond, No. 14-2375 (4th Cir. June 28, 2016)]
401(k) Investment Options: Less is More
SquaredAway Blog, by the Center for Retirement Research at Boston College
6/30/2016
"A new study ... [examined] how employees reacted when one large U.S. employer reduced the number of investment options. The results were lower fees and less turnover, saving employees an average of $9,400 over a 20-year period. Further, their new portfolios were less risky. The employer, a non-profit organization, cut the number of investment options roughly in half, from the 90 different funds initially in the plan."
What Fee is Reasonable for a Plan Audit?
Fiduciary Plan Governance, LLC
6/30/2016
"By leaving cost out of the evaluation until the very end you will be able to make a sound determination whether, given all that you are seeing in the way of resources, services, experience and quality, any of the fee proposals are out-of-line. If any are, your next step should not be eliminating but questioning further."
Seven Things Business Leaders Should Know (and Do) About Health Care
Altarum Institute
[Opinion]
6/30/2016
"[1] Our nation can and must broaden our definition of health and health care because our population is changing.... [2] We don't have a free market in health care -- and now is the time for the public and private sector to work together.... [3] The effect of retail health care on consumers.... [4] You are going to hear all about new care models for your employees that may or may not be better -- the devil is in the details.... [5] Consolidation is all the rage.... [6] Pharma will continue to reign as king -- you should be at the table.... [7] The Internet and data are changing how consumers access and use health care, with huge potential -- embrace it."
Text of DOL Final Regs: Federal Civil Penalties Inflation Adjustment Act Catch-Up Adjustments
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]
[Official Guidance]
6/30/2016
105 pages; includes provisions for all DOL agencies, including EBSA. "This section ... addresses the civil monetary penalties administered by EBSA to enforce title I of [ERISA]. Paragraph 2(a) explains how the Department determined the date each civil monetary penalty was last adjusted by law or regulation (other than the Prior Inflation Adjustment Act, as amended), and Paragraph 2(b) describes the calculation of the catch-up adjustment for each ERISA civil monetary penalty through the use of a table. Paragraph 2(c) addresses the restructuring of 29 CFR Part 2575 and other technical changes to the Department's regulations needed to reflect the amendments made to the Prior Inflation Adjustment Act by the Inflation Adjustment Act."
Loss of Determination Letter Program Detrimental to Large Employers and Their Employees
The ERISA Industry Committee [ERIC]
[Opinion]
6/30/2016
"Today's decision hurts everyone -- plan sponsors, employees, and their families -- and will have massive rippling effects throughout the benefits world.... 83% of respondents stated that their external auditor requested and used the IRS determination letter as proof of compliance with federal laws and regulations ... 76% of respondents confirmed there will be a significant increase in legal and audit costs ... 25% of respondents stated that audit and legal costs are paid by plan participants[.]"
Pension Risk Increases Slightly in 2016
Willis Towers Watson
6/30/2016
"Among companies in the WTW Pension 100, the median [pension risk index] score ticked up from 1.7% in 2015 to 1.9% in 2016. If current market conditions persist, sponsors' financial positions will deteriorate further by year-end 2016. Plans using an LDI strategy will likely fare much better, as strong long bond returns should mitigate the negative impact of falling interest rates."
Excessive Fee Lawsuit Against Small 401(k) Plan Dismissed -- by Plaintiffs
National Association of Plan Advisors [NAPA]
6/30/2016
"Less than a month after filing, plaintiffs in the case of Damberg v. LaMettry's Collision, Inc.... filed for a voluntary dismissal of their lawsuit.... The case -- which some held out as a harbinger of this type litigation moving down market -- stood out in an environment where for a decade the vast majority of the so-called 'excessive fee' revenue-sharing lawsuits have been filed against multi-billion dollar 401(k) plans."
Key Takeaways from the Newly Issued Proposed Section 409A Regs
Wilkins Finston Friedman Law Group LLP
[Guidance Overview]
6/30/2016
"Exempt stock rights (stock options and stock appreciation rights) can be awarded to service providers who are expected to commence work for the service recipient within 12 months, if they actually do commence work within that period.... Liberal timing rules apply to payments triggered by the service provider's death.... 'Clawbacks' on exempt stock rights are permitted.... A payment can qualify as a 'short-term deferral' even if the payment is made after March 15 of the year following vesting, where the payment is prohibited by federal securities law restrictions."
GAO to Investigate Central States' Investments
Pensions & Investments
6/30/2016
"The investigation was requested June 21 by 10 senators and 41 congressmen, who asked GAO officials to consider several issues, including how the pension fund's fiduciaries and relevant parties ensured conflict-free investment advice with reasonable fees. The letter also asked about the investment strategy and returns from 1997 to 2015, including comparisons to similar funds for each asset class."
Anthem Said to Face U.S. Skepticism Cigna Deal Can Be Fixed
Bloomberg
6/30/2016
"The Justice Department has told Anthem Inc. that the health insurer's planned takeover of Cigna Corp. threatens competition and probably can't be fixed by selling parts of their businesses ... The Justice Department has indicated that it's open to hearing about proposals from the company to resolve the problems ... Still, its skepticism that the deal can be fixed raises the likelihood that the U.S. will sue to block it. The government is on track to make a decision on the combination by around mid-July[.]"
Conflicted Interpretations Arising from DOL Final Fiduciary Rule
Bob Veres in Inside Information
[Opinion]
6/30/2016
"Was it the DOL's intent to provide incentives for you to apply your AUM fees to a client's cash accounts, so you could comply with the new regs? Do you think the DOL believes you should give up your investment judgment and simply recommend whatever happens to be on the Morningstar list of least expensive options? Don't you think the BICE exemptions were purely and simply an accommodation to product manufacturers who were selling investments that would otherwise be hard to justify as a fiduciary recommendation?"
Aegon and Transamerica Settle Participant Excessive Fee Suit
PLANSPONSOR
6/30/2016
"The original complaint suggested that the defendants burdened the plan with layers of superfluous fees; that the plan pays fees higher than its peers; and that the fees go mostly to Aegon, which serves as recordkeeper and investment manager for the plan through its Transamerica affiliates.... [T]he settlement will bring about structural changes in the way the company runs its retirement savings plan  -- and how it calculates fees. Payments will also be made to compensate class members."
Sixth Circuit Nixes Provider ERISA Suit
Squire Patton Boggs, via National Law Review
6/30/2016
"The more nuanced question became whether the provider had derivative standing under ERISA by virtue of the assignments of benefits. Blue Cross insisted that the assignment of benefit forms provided only for direct payment and therefore did not grant an assignment of rights sufficient to confer derivative standing.... [T]he Court found that the recoupment suit fell outside the scope of the assignments of benefit, and thus the provider was not entitled to any relief. This provider had a contract with Blue Cross and the Court found that its claims were more properly contractual, rather than arising from ERISA." [Brown v. BlueCross BlueShield of Tenn., No. 15-5739 (6th Cir. June 27, 2016)]
Ten DOL Fiduciary Rule Questions Answered
International Foundation of Employee Benefit Plans [IFEBP]
6/30/2016
"[1] Who is a fiduciary under the final rule? ... [2] What is best interest? ... [3] What is a conflict of interest? ... [4] Weren't advisers fiduciaries before now? ... [5] What sort of recommendations are considered 'advice'? ... [6] What is investment or retirement 'education'? ... [7] What are 'general communications'? ... [8] What is a Best Interest Contract Exemption? ... [9] When does the final rule go into effect? ... [10] Is the rule a done deal?"
Target Date Fund Innovations -- A Series of Short Videos
Vanguard
6/30/2016
Video segments include: [1] Trends, due diligence, and customization; [2] Market volatility; [3] What role does fixed income play in a multiasset portfolio? [4] Healthy scrutiny and the DC lineup; [5] The TDF sub-asset allocation decision; [6] Shocking the glide path; and [7] What should sponsors think about?
Section 409A Proposed Regs: IRS Changes Affect Nonqualified Deferred Comp and Stock Plans
myStockOptions.com
[Guidance Overview]
6/30/2016
"[T]hese proposals formalize previously informal guidance that the IRS has been providing, offer new flexibility in some areas, and set forth a few new requirements. The IRS is allowing reliance on this guidance now and will not assert any position that runs counter to it. The proposed regulations present a lengthy list of items."
Proposed Section 409A Regs Make Several Notable Changes
Miller & Chevalier
[Guidance Overview]
6/30/2016
"Though the IRS emphasized that the proposed regulations make narrow, discrete clarifications and changes to the final and 2008 proposed regulations, ... changes to four areas ... are likely to have a greater impact on the design and operation of deferred compensation plans. [1] You can still 'fix' noncompliant arrangements the year before vesting.... [2] Changes to stock option/SAR Rules.... [3] Employee-Independent Contractor.... [4] Payment events triggered by beneficiaries."
What Can DB Sponsors Do About Upcoming Mortality Changes?
Russell Investments
6/30/2016
"Once the IRS updates their prescriptive tables ... sponsors can expect funded ratios ('FTAP' and 'AFTAP' in IRS nomenclature) to drop, which will trigger higher contributions requirements (due to a larger funding shortfall to fill), and could push some sponsors into 'benefit restriction' or 'at-risk' territory below 80%.... [L]ump sum payments will increase (as most lump sums are just the present value of annuities), making lump sum offers less attractive to sponsors."
Tips for Drafting Best Interest Contracts Under DOL Rule (PDF)
Sutherland Asbill & Brennan LLP
6/30/2016
"In the BIC contract or in a separate single written disclosure provided with the contract, the [financial institution (FI)] must clearly and prominently make certain disclosures. The content of the disclosures will be subject to customization to the FI's particular circumstances. As they apply to IRAs, a few of the disclosures are redundant to other contract terms. So long as the required information is provided clearly and prominently, a single disclosure of particular information is sufficient."
After Continued Stonewalling, House Committee Issues Subpoena of HHS Records on Unlawful Reinsurance Program
Energy & Commerce Committee, U.S. House of Representatives
[Opinion]
6/30/2016
"Despite Acting Administrator Slavitt's on-the-record commitments to produce the requested documents, on June 10, 2016, HHS sent a letter to the committee acknowledging that responsive documents exist, but it will not produce them. In refusing to produce the documents, the department cited the need to protect its 'confidentiality interests,' and claimed that providing documents to Congress about these final rules would 'have a chilling effect on future deliberations.' To date, HHS has not asserted any legal privileges -- let alone a valid one -- to justify withholding these final documents from Congress."
The 'Feel Free' Retirement Spending Strategy (PDF)
R. Evan Inglis, FSA, via Society of Actuaries
6/30/2016
"To determine a safe percentage of savings to spend, just divide your age by 20 (for couples, use the younger spouse's age). For someone who is 70 years old, it's safe to spend 3.5 percent (70/20 = 3.5) of their savings. That is the amount one can spend over and above the amount of Social Security, pension, employment or other annuity-type income.... Anyone who wants to spend more than the feel-free spending level (divide-age-by-20 rule), may want to consider buying an annuity to provide some of their income."
Agencies Propose ACA Regs on Expatriate Plans and Excepted Benefits
Seyfarth Shaw LLP
[Guidance Overview]
6/30/2016
"If your plan includes a benefit intended to qualify as a fixed hospital or other fixed indemnity policy, review to ensure the reimbursements do not vary depending on type of service and are made on a per diem basis. If your company offers expatriate plans that are intended to constitute minimum essential coverage, check with your carrier that the plan meets minimum value and that the carrier is a qualified expatriate health insurance issuer. Confirm that substantially all of those covered under the expatriate plan are qualified expatriates."
DOL Urges Expansive View of Pension Plan Standing
Bloomberg BNA
6/30/2016
"The question of constitutional standing has derailed a number of recent lawsuits involving defined benefit pension plans. Judges have reasoned that because benefits are by nature defined, it's difficult for participants to show that they've been injured by mismanagement, unless that mismanagement is so severe that it threatens their ability to receive benefits.... The department used its brief to attack this reasoning, arguing that a pension plan participant's right to 'proper fiduciary conduct' is sufficient to establish both constitutional and representational standing to sue the plan's fiduciaries."
Proposed Rules for Incentive-Based Compensation at Financial Institutions
Quarles & Brady LLP
[Guidance Overview]
6/30/2016
"The theory behind the proposed rules is to deny compensation for short-term actions that produce longer-term bad consequences ... and to reward 'balanced' risk and rewards assessments by bankers.... [T]he proposed rule also rewards things that were perceived as not being rewarded in the industry prior to 2008, such as enhanced compliance and risk management practices. By bringing such mandatory compensation practices down to mid-size community banks with only $1 billion in assets, the Federal regulators (including the Federal Reserve) intend to achieve a sweeping impact on virtually the entire banking industry, not just Wall Street."
Managing Repeated Requests for Leave as an ADA Reasonable Accommodation
FMLA Insights
[Guidance Overview]
6/30/2016
"EEOC appears to presume that any request for leave -- no matter the length -- is an effective accommodation. Before we even get to the undue hardship analysis, however, an employee should be required to establish that his request for additional leave is effective in helping him return to work in the near future.... [E]mployers typically conduct the undue hardship analysis only after the employee has exhausted FMLA leave and is requesting additional leave as an ADA accommodation. That's often too late."
What Does the Supreme Court's Spokeo Decision Mean in the ERISA Litigation Context?
Jackson Lewis P.C.
6/30/2016
"Spokeo holds that 'concrete' harm, which can arise from the violation of tangible or an 'intangible' right created by Congress, along with particularization, is all that is required by the standing analysis. However, Justice Alito also described some clear limitations on the definition of the term 'concrete.' ... Justice Alito's definition of the word concrete may offer some possible defenses to ERISA claims that are pled as no more than bare procedural violations or 'general grievances.' " [Spokeo v. Robins, No. 13-1339 (S. Ct. May 16, 2016)]
Handling Intermittent, Unpredictable Leave Requests After FMLA Ends
FMLA Insights
[Guidance Overview]
6/30/2016
"Because intermittent leave is irregular and unpredictable, however, an undue hardship defense will be easier to advance in these situations. Here, you are more likely to show that these continued intermittent absences adversely impact your operations and the ability to serve your customers/clients.... [It] is critical for the employer to continue to engage in the interactive process with the employee so that it can best determine whether any assistance can be provided to help them improve their attendance and return to work."
IRS Fact Sheet: New Determination Letter Program Under Rev. Proc. 2016-37
Internal Revenue Service [IRS]
[Guidance Overview]
6/30/2016
"An [individually designed plan's (IDP's) IRC Section 401(b) remedial amendment period for required amendments will be tied to a Required Amendment List (RA List) unless legislation or other guidance states otherwise. Interim amendments will no longer be required for IDPs. The RA List is the annual list of all the amendments for which an IDP must be amended to retain its qualified plan status. IRS will publish the RA List after October 1 of each year... IRS anticipates making exceptions based on program capacity to work additional applications, and the need for rulings in certain areas. We'll measure need in a variety of ways including annual input from the EP community."
Text of IRS Rev. Proc. 2016-37: Modifications to the Determination Letter Program for Individually Designed Plans and to the Six-Year Remedial Amendment Cycle System for Pre-Approved Plans (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
6/29/2016
32 pages. "This revenue procedure modifies the [IRS] determination letter program for qualified plans to eliminate, as of January 1, 2017, the five-year remedial amendment cycle system for individually designed plans ... Effective January 1, 2017, a sponsor of an individually designed plan will be permitted to submit a determination letter application only for initial plan qualification, for qualification upon plan termination, and in certain other circumstances, as described in ... this revenue procedure.

"This revenue procedure provides an extended remedial amendment period under section 401(b) of the [Code] for individually designed plans.

"This revenue procedure describes and makes clarifying changes to the six-year remedial amendment cycle system for pre-approved qualified plans and modifies the six-year remedial amendment cycle system, as applicable, to reflect changes that have been made to the determination letter program for individually designed plans. In addition, this revenue procedure delays until August 1, 2017, the beginning of the 12-month submission period for master and prototype (M&P) plan sponsors and volume submitter (VS) practitioners to submit pre-approved defined contribution plans for opinion or advisory letters during the third six-year remedial amendment cycle.

* * *

"Consideration will be given annually to whether determination letter applications will be accepted for individually designed plans in specified circumstances other than for initial qualification and qualification upon plan termination. Circumstances that will be considered when evaluating whether to accept determination letter applications for certain amended plans or types of amendments in plans in certain future years, include, for example, significant law changes, new approaches to plan design, and the inability of certain types of plans to convert to pre-approved (that is, M&P and VS) plan documents. In addition, the IRS's current case load and resources available to process determination letter applications will be significant factors in deciding if and when to consider certain amended plans or types of amendments in plans under the determination letter program. Additional situations in which plan sponsors will be permitted to request determination letters will be announced in published guidance published in the Internal Revenue Bulletin. Treasury and the IRS intend to request, on a periodic basis, comments on the additional situations in which the submission of a determination letter application may be appropriate. Based on an analysis of the factors listed in this section 4.03(3), including the IRS's current resources and case load, the only determination letter applications for individually designed plans that will be accepted during calendar year 2017 (other than for Cycle A plans as described in section 4.01) are applications for initial plan qualification and qualification upon plan termination."

Chicago Paid Sick Leave Ordinance Is Inevitable
Seyfarth Shaw LLP
[Guidance Overview]
6/29/2016
"Employees must be permitted to carry over half of any unused accrued PSL from year to year, up to a max of 20 hours. In addition, if the employer is subject to the Family and Medical Leave Act (FMLA), employees can carry over up to 40 hours exclusively for FMLA-eligible purposes. However, if an employee carries over and uses the additional 40 FMLA hours, they cannot use more than an additional 20 hours of PSL in that 12-month period. Employers are not required to pay out unused PSL from year to year or upon termination."
Does the Dudenhoeffer Decision Do 'More Harm Than Good' for Stock-Drop Plaintiffs?
Dechert LLP
6/29/2016
"Dudenhoeffer generally confirmed that ERISA plan fiduciaries may rely on market pricing of publicly traded stock, and that they are not compelled to violate federal securities laws by acting on inside information.... In Amgen ... the Supreme Court confirmed that the 'more harm than good' standard is one that must be sufficiently addressed by plaintiffs at the pleadings stage. Although plan fiduciaries can no longer invoke the Moench presumption, the Amgen decision seems to have solidified the threshold that plaintiffs may need to reach at the pleadings stage in order for the case to continue."
Final Rules on Wellness Program Design: A Chart and FAQs
E is for ERISA
[Guidance Overview]
6/29/2016
"[This article includes] a chart summarizing permissible dollar or in-kind incentives for wellness program participation, along with some other requirements under the new ADA and GINA regulations, followed by some frequently asked questions on the new wellness program guidance."
Planning Opportunities for Non-Spouse Beneficiaries of Inherited Retirement Accounts
Michael Kitces in Nerd's Eye View
6/29/2016
"[T]he rules permitting a transfer from an inherited employer retirement plan to an inherited IRA also allow the assets to be shifted to an inherited Roth IRA, effectively giving the beneficiary the option of doing a Roth conversion even after the death of the original account owner. This is a strategy uniquely available to beneficiaries of inherited employer retirement plans, as an inherited IRA may not be converted to a Roth. The caveat, however, is that ... since an inherited Roth IRA (after conversion) still has required minimum distribution obligations, it will usually be preferable to convert any other type of pre-tax retirement account first!"
Teachers Union and Hedge Funds Go to War Over Pension Billions
The Wall Street Journal; subscription may be required
6/29/2016
"Some pension funds have withdrawn money from hedge-fund managers criticized by the teachers union. And some hedge-fund managers stopped making donations to advocacy groups targeted by [Randi Weingarten, President of the American Federation of Teachers]. Hedge funds, reluctant to buckle to the pressure, say Ms. Weingarten is doing a disservice to the teachers she represents, because funds should aim solely to earn the highest possible return on their assets. The personal beliefs or donations of hedge-fund managers, they argue, shouldn't be a factor in that decision."
IRS Issues Proposed Regs for Deferred Compensation Arrangements Sponsored by Tax-Exempt Organizations
Morgan Lewis
[Guidance Overview]
6/29/2016
"The regulations ... [1] permit the elective deferral of current compensation, which the IRS had previously said was not permitted under Code Section 457(f), provided that the elective deferral arrangement meets certain requirements ... [2] define for the first time what constitutes a bona fide severance pay plan that is not subject to Code Section 457; [3] describe for the first time what constitutes a bona fide sick and vacation leave program and, in particular, call into question programs that provide for large payouts of accrued sick and vacation leave upon termination of employment[.]"
Labor Force Transitions at Older Ages: Burnout, Recovery, and Reverse Retirement (PDF)
Lindsay Jacobs, Federal Reserve Board, and Suphanit Piyapromdee, University College London
6/29/2016
44 pages. "In this paper [the authors] study the effects of wage and health transition processes as well as the role of accrued work-related strain on the labor force participation on older males. We find that a model incorporating a work burnout-recovery process can account for such reverse retirement behavior that cannot be generated by health and wealth shocks alone, suggesting re-entry patterns result in large part from planned behavior.... [R]espondents are more likely to report high levels of job stress as they continue to work when they would have otherwise stopped working, recovered, and re-entered."
Proposed Changes to the Social Security Program, Described and Grouped by Category
U.S. Social Security Administration [SSA]
6/29/2016
"Recent Reports call for informed discussion, creative thinking, and timely legislation to address expected future deficits. Many policy makers have developed proposals and options to address this long-range solvency problem. Listed [in this article] is a broad range of policy options that would address Trust Fund solvency and other issues related to Social Security benefits and financing. Many of these options are part of comprehensive proposals intended to restore Trust Fund solvency."
IRS Chief Counsel Memo 2016-0035: Effect of Retirement Plan Distribution on Health Insurance Premium Tax Credit (PDF)
Internal Revenue Service [IRS]
[Guidance Overview]
6/29/2016
"You state that you took a distribution from a retirement account ... [T]he distribution was not included in the estimated household income used to compute your advance credit payments. Thus, ... your advance credit payments ... were more than the premium tax credit you are allowed ... The estimated household income used to compute advance credit payments is not used to determine a taxpayer's premium tax credit."
Proposed Section 409A Deferred Compensation Regs Offer Helpful Clarifications of Current Rules
Latham & Watkins
[Guidance Overview]
6/29/2016
"[T]he proposed regulations [1] limit the circumstances in which the amount payable may be less than fair market value, thus creating uncertainty as to whether the stock right exemption allows a below fair market value repurchase price in other circumstances.... [2] do not address whether the parties to a change in control transaction may convert an in-the-money stock right into the right to receive payment of the stock right's intrinsic value (sometimes referred to as the 'spread') in the form of cash installments as and when the stock right would have vested absent the transaction ... [3] do not address whether payment terms in a short-term deferral agreement must satisfy the 'applicable 2-1/2 month period' deadline at all times from the inception of the agreement[.]"
IRS Chief Counsel Memo 2016-0030: Effect of Medicare Eligibility on Employer Shared Responsibility Penalties (PDF)
Internal Revenue Service [IRS]
[Guidance Overview]
6/29/2016
"You indicated that you are receiving Medicare but are included in [your employer's] policy restricting part-time and seasonal employees from working more than 29 hours.... You asked whether the employer could in fact face potential liability under section 4980H if an employee in this category works more than 29 hours of service in a week.... An employee ... who is covered by Medicare is ineligible to receive the premium tax credit, and therefore generally would not lead to any employer liability under section 4980H(b).... [A] full-time employee who is eligible for Medicare could potentially trigger or increase the amount of an employer's liability for an assessable payment under section 4980H(a)."
Interesting Angles on the DOL's Fiduciary Rule, Part 11
FredReish.com
[Guidance Overview]
6/29/2016
"While the concept of reasonable compensation is old-hat for advisers and service providers to ERISA qualified retirement plans, it has not, by and large, been used in the IRA world.... The DOL explained the concept in a preamble ... 'reasonableness' is defined by free market practices ... in a market where the costs and compensation are transparent and, therefore, where the market is truly competitive.... Benchmarking is on its way to IRAs."

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