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Benefits in the News

Older News | July 27, 2016

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Will Long Term Care Ruin Retirement Plans?
Michael W. Crook and Ronald Sutedja via SSRN
7/26/2016
13 pages. "[R]oughly 85% of couples will utilize long term care prior to death. Long term care expenses impact financial plan sustainability at a declining rate as wealth increases from $1 million to $10 million. At a portfolio value of $1 million, adding long term care expenses to the simulation results in ruin, defined as depleting the portfolio entirely prior to the death of both members of the couple, about 30% of the time."
The Beautiful, Rhythmic Beat of Seasonal Employees Under the ACA
Ryan Moulder, Esq., via Accord Systems, LLC
[Guidance Overview]
7/26/2016
"A seasonal employee placed in an initial measurement period will be in what is referred to as a limited non-assessment period. This is significant because the instructions to the Form 1095-C make it clear that an employee in a limited non-assessment period is not considered a full-time employee for purposes of Form 1095-C reporting. Therefore, if an employer properly sets up its look back measurement method (which should be documented) for a 12 month period, seasonal employees will soon create a perfect ACA rhythmic beat."
Are Early Social Security Claimers Making a Mistake?
Center for Retirement Research at Boston College
7/26/2016
"Comparing the calculated household replacement rates with target rates from previous research shows that, overall, roughly 65 percent of households claiming at 62 are not prepared; the rate for the disadvantaged group is twice the rate of the advantaged group.... A simple probit regression suggests that health and employment shocks and the absence of a DB pension are related to the lack of preparedness for both the disadvantaged and advantaged."
One Court Case That Could Really Hurt Obamacare Insurers
Morning Consult
7/26/2016
"It's a little unclear what will happen if the House succeeds in its lawsuit, but the general wisdom among analysts is that insurers will still be required by law to continuing giving consumers the cost-sharing reductions. Thus, the GOP has argued in hearings, it's not consumers who will suffer if federal money stops going to the program.... But that cost must be made up elsewhere, probably in monthly premiums. In January, the Urban Institute predicted that a House win in the case would cause silver plan premiums to increase $1,040 per person in 2016, and this number would increase over time. Marketplace enrollment would decrease by 1 million people, and federal government costs would increase by $3.6 billion in 2016."
The New Schedule J for Form 5500: Big Changes for Small Group Health Plans
Stinson Leonard Street
[Guidance Overview]
7/26/2016
"Approximately 6,200 small group health plans currently file a Form 5500, at an aggregate cost of $4.1 million, but under the proposed changes that number would increase to an estimated 2,158,000 small group health plans at an estimated aggregate cost of $227.9 million.... Schedule J alone is estimated to affect an estimated 2,205,900 group health plans of all sizes and will increase Form 5500 filing costs by $202.6 million, while the total increased burden from all proposed Form 5500 changes for group health plans is estimated to be a 2.2 million hours and $241.6 million."
Because Healthcare Costs Are Too High, California Decides to Increase Insurers' Administration -- and Costs
Benefit Revolution
[Opinion]
7/26/2016
"The law requires health plans to let large groups know whether a proposed rate change is higher or lower than the average rate increase for individual plans available through Covered California, and is higher or lower than the average rate increase for individual plans negotiated by [CalPERS]. This notice requirement is effective for groups renewing June 1, 2016, and after, as specified by regulatory guidance from the California Department of Managed Health Care.... Clearly, insurers are going to have to invest more time, energy, expertise and money into the creation of these new notices. And ... the vast majority of policyholders will push them aside or give them a cursory glance."
Health Insurance Coverage in California in 2013 and 2014, After Implementation of the ACA (PDF)
Employee Benefit Research Institute [EBRI]
7/26/2016
"From 2013 to 2014, health insurance coverage expanded among individuals under age 65 in California, and the uninsured rate fell.... The 2013-2014 reductions in the uninsured rate were primarily due to expanded individual health insurance and Medicaid coverage, as there was very little increase in employment-based coverage.... [W]orkers in small firms had the highest uninsured rate in 2013, but workers in firms with more than 50 employees (particularly those in the 50-99 employee group) experienced the greatest reductions in uninsured rates."
Industry Slams Exec Pay Proposal, Others Call for More
Bloomberg BNA
7/26/2016
"A coalition of industry groups slammed the proposal, arguing the regulators exceeded their Dodd-Frank mandates in an attempt to impose a 'one-size-fits-all approach' to the issue rather than a principles-based approach. They also faulted the proposal for its definitions of 'risk-takers' subject to the restrictions, the wait time and the record-keeping costs it would impose."
Does Your Severance Plan Trigger ERISA? Why You Should Care and What You Should Do
Foley & Lardner, via Lexology
7/26/2016
"[T]he court focused on whether the severance payable under the employment agreement involved a 'separate and ongoing administrative scheme.' It highlighted several facts that demonstrated the existence of such an ongoing administrative scheme that caused ERISA to apply. For example, the employer had the discretion to decide whether a termination was with or without cause, the payments and provision of benefits continued over five years (rather than being paid in a lump sum), and the employer had the ongoing duty to monitor the non-compete, non-solicitation, and medical coverage provisions." [Zgrablich v. Cardone Industries Inc., No. 14-4665 (E.D. Penn. Feb. 3, 2016)]
ING's Penalty for ERISA Claims Procedure Violations Partly Tossed by Ninth Circuit
Bloomberg BNA
7/26/2016
"[T]he Ninth Circuit held that a benefit plan governed by [ERISA] can't be liable for statutory penalties for failing to follow appropriate claims procedures, because those penalties can be assessed only against plan administrators and not plans themselves. This clarified prior precedent and adopted the views of seven other federal appellate courts. The decision turned on the fact that ERISA plans and the administrators of those plans are distinct legal entities under the statute." [Lee v. ING Groep, N.V., No. 14-15848 (9th Cir. July 25, 2016]
CMS Proposes Mandatory Cardiac Bundled-Payment Pilot
Modern Healthcare Online; free registration required
7/26/2016
"A new mandatory program [proposed by CMS] would make hospitals in 98 markets financially accountable for the cost and quality of all care associated with bypass surgery and heart attacks.... n 2014, hospitalizations for heart attacks for more than 200,000 beneficiaries cost Medicare over $6 billion ... Yet for every treatment, the cost could vary by as much as 50%, the agency said.... The CMS also plans to expand its first and mandatory bundled-payment model -- which took effect in January and covers total hip and knee replacements -- to include surgeries repairing hip and femur fractures."
401(k) Fiduciary Alert: Regulators Targeting 12b-1 Fees, Is Revenue Sharing Far Behind?
Fiduciary News
7/26/2016
"We're beginning to see more intense scrutiny of 12b-1 fees by the SEC. While an increasingly smaller percentage, the ICI estimates that through 2014, about 17% of all 401k plan assets still invest in funds with 12b-1 fees ... We all know financial service providers have an incentive to use 12b-1 fees.... Given the plan sponsor shares this conflict-of-interest liability, why is nearly one out of every five dollars of 401k plan assets still using funds with 12b-1 fees?"
Help 401(k) Participants Make Better Investment Decisions
Lawton Retirement Plan Consultants
7/26/2016
"Some of your plan participants enjoy trading their 401(k) accounts. They believe they can market-time their buys and sells to take advantage of market fluctuations.... Require these individuals to meet with the investment advisor that works with your plan. You can identify who they are by looking at the website reports that your recordkeeper produces. They will be the individuals who are not close to retirement who check their balances every day and make frequent trades."
Understanding the Numbers Would Motivate 401(k) Participants to Save More
PLANSPONSOR
7/26/2016
"Many participants know they are not saving enough -- 68% say their 2015 contributions were below where they should have been.... 48% of participants admit they simply do not spend enough time thinking about and planning for retirement.... 28% have never rebalanced their 401(k) account, 31% have never made a change to their initial choice of investment options, and 18% have never increased their contribution amount."
Pension Funded Status Decreased in Q2 2016 Due to Continued Interest Rate Declines (PDF)
Segal Rogerscasey
7/26/2016
"During the second quarter of 2016, the funded status of the model pension plan examined in each issue of Prism dropped by 3 percentage points: from 79 percent to 76 percent. This decline was the result of a 2 percent asset increase and a 6 percent liability increase during the quarter."
The Proposed 457(f) and 409A Regs: A Closer Look
Cammack Retirement Group
[Guidance Overview]
7/26/2016
"One of the first clarifications provided in the proposed regulations is that the rules under 409A apply 'separately and in addition to the rules under 457.' Thus, both the 409A regulations and the 457 regulations would apply to 457(f) plans when finalized. So the regulatory environment for 457(f) plans remains complex, though important clarifications regarding the interaction between 457(f) and 409A was provided in the proposed 457 regulations."
Final ACA Nondiscrimination Rules Under Section 1557 Now Effective
Seyfarth Shaw LLP
[Guidance Overview]
7/26/2016
"For many employer-sponsored plans, Section 1557 will be triggered by receipt of a Medicare Part D subsidy, the HHS subsidy provided to plans covering Medicare-equivalent prescription drug coverage. Because the final rules apply to 'an entity that operates a health program', it is unclear whether the rules allow disaggregation of health plans offered by an employer."
Marital Histories, Gender, and Financial Security in Late Mid-Life: Evidence from Four Cohorts in the Health and Retirement Study
Center for Retirement Research at Boston College
7/26/2016
"Middle Baby Boomers are more likely to have negative wealth (i.e. debt) or zero wealth, and those who have positive wealth have lower levels of wealth. On the other hand, Middle Baby Boomers working full-time have higher earnings than earlier cohorts, especially women. More recent cohorts are less likely to be continuously married than previous cohorts.... [T]he economic benefits of continuous marriage are more pronounced for wealth than earnings."
Seventh Circuit: ERISA Permits Indemnification or Contribution Among Fiduciaries
Drinker Biddle
7/26/2016
"The Seventh Circuit's opinion indicates that when multiple fiduciaries are accused of breaching their fiduciary duties, contribution and indemnification claims among them are permitted, and as a matter of equity, the allocation of recovery on such claims as among the respective fiduciaries depends on the degree each had responsibility and their relative knowledge, experience, control, and authority." [Chesemore v. Fenkell, Case Nos. 14-3181, 14-3215, and 15-3740 (7th Cir. July 21, 2016)]
It's Key to Factor in Health Costs When Saving for Retirement
CNBC
7/26/2016
"According to Fidelity Investments, the average 65-year-old couple retiring this year are likely to spend $245,000 on medical care not covered by Medicare -- 29 percent more than they did 10 years ago. That figure doesn't include long-term care, which can run as high as $200,000 a year for a private room in a nursing home. The data from the Employee Benefits Research Institute are even grimmer. A 65-year-old couple who would like a 90 percent chance of having enough money for lifetime health care should set aside $392,000. Health-related costs are rising by twice the rate of overall inflation."
DOL Proposes Major Overhaul to Form 5500 Reporting
Society for Human Resource Management [SHRM]
[Guidance Overview]
7/26/2016
"The proposed revisions will improve data mining by including searchable data fields ... Easier access to data from these forms, however, means there will be more scrutiny moving forward. More minable data means that government agencies and plaintiffs' lawyers will be looking at this information. The agencies are also asking for more specific information about service provider fees, which have been the subject of government scrutiny and litigation[.]"
Terminated Participants: Out of Sight, Out of Mind -- And That's the Problem
Cammack Retirement Group
7/26/2016
"[The DOL] has recently launched an initiative to audit retirement plans to confirm whether or not they have terminated, vested participants that might be owed plan benefits.... Many retirement plans do not have the written description in place about how the sponsor will work to locate lost participants, the time frames and responsibilities. And many of those that do have such procedures in place are not completing the process on the regular timely basis specified in the plan document."
You Are Never Too Old to Convert to a Roth IRA
Slott Report
7/26/2016
"No matter what your age, you should ask yourself three questions. First, when will the money be needed? Do you need your IRA money immediately for living expenses? If so converting may not be for you. Second, what is your tax rate? If you are retired and your income is lower, that may favor conversion. The third question to ask yourself is whether you have the money to pay the tax on the conversion. It is best to pay the conversion tax from non-IRA funds."
Mental Health Parity and Addiction Equity Act Enforcement Is a Priority for Federal Agencies
Segal Consulting
[Guidance Overview]
7/26/2016
"The federal government is stepping up its enforcement of the MHPAEA.... The MHPAEA regulations require plan sponsors to follow a complex evidence-based process to support the application of certain medical-management tools to MH/SUD care. Evidence and documentation supporting the application of these tools must be provided to participants and their health care providers."
DC Plan Sponsors Can Build Better Lineups and Reduce Fiduciary Risks through a Discretionary Investment Approach
SEI
7/26/2016
"Factors like investment complexity, increased fee pressure, litigation and the increased reliance on DC plans as the primary retirement savings vehicle, place tremendous pressure on plan sponsors.... [S]imply choosing brand-name funds, passively managed funds or funds provided by recordkeepers are no longer automatically safe choices.... [P]lan sponsors and committees are often understaffed, stretched for time or simply lack the expertise to effectively manage and monitor complex investment portfolios."
Two-Thirds of Plan Providers Are Optimistic on Impact of DOL Rule to Their Asset Retention Rates
LIMRA
7/26/2016
"64 percent of the top retirement plan record-keepers and providers believe the [DOL] fiduciary rule will have a positive or neutral effect on their overall asset retention rate over the next two years.... 28 percent of companies felt the rule would help them increase asset retention while 36 percent felt it would have no impact on their current asset retention rate.... 75 percent of plan providers surveyed say they will change how their call centers respond to calls related to retirement plan distribution options."
ACA Health Plan Subsidies to Become Easier to Get for 2017
Bloomberg BNA
7/26/2016
"Additional verification of eligibility will only be required if the difference between stated income and [IRS] or Social Security data is at least 25 percent, or $6,000 ... Currently, additional verification is required if the discrepancy is only 10 percent or greater.... The new data-matching standards 'will allow more consumers to get their household income immediately verified by the Marketplace when they submit an application,' the CMS said."
Exploring Single-Payer Alternatives for Health Care Reform
RAND Corporation
7/25/2016
"Single-payer proposals are wide-ranging reform efforts spanning financing and delivery, but vary in the provisions. [The author] modeled two sets of national scenarios -- one labeled comprehensive and the other catastrophic -- and compared insurance coverage and spending relative to the ACA in 2017.... [T]he comprehensive scenario increased national health care expenditures by $435 billion and federal expenditures by $1 trillion relative to the ACA."
Health Insurance Marketplace Subsidy Notices
Miller Johnson
[Guidance Overview]
7/25/2016
"A non-full-time employee cannot trigger a pay or play penalty.... If an ALE offered a non-full-time employee affordable, minimum value coverage ... the ALE may want to appeal the Subsidy Notice to limit the amount of the APTC that the employee must repay.... Non-ALEs (generally employers with less than 50 full-time and full-time equivalent employees) are not subject to the pay or play penalty.... But a non-ALE may consider appealing a Subsidy Notice on behalf of an employee who was offered affordable, minimum value coverage, to limit the amount of the APTC that the employee must repay."
IRS Provides Helpful Guidance Regarding Opt-Out Payments Under the ACA
Miller Johnson
[Guidance Overview]
7/25/2016
"An eligible opt-out arrangement is an arrangement under which an employee's right to receive the opt-out payment is conditioned on the employee providing reasonable evidence that the employee, spouse and dependents ... have alternative minimum essential coverage ... Reasonable evidence of alternative coverage includes an employee's 'attestation' that the employee, spouse and dependents, if any, have alternative minimum essential coverage other than through the individual market -- whether obtained on- or off-the-Marketplace ... [E]employers are permitted -- but not obligated -- to require the employee to provide evidence of alternative coverage."
Text of U.S. Chamber of Commerce Memorandum in Support of Motion for Summary Judgment in Challenge to DOL Fiduciary Rule (PDF)
U.S. Chamber of Commerce
7/25/2016
52 pages. "The Department has achieved this regulatory alchemy through a two-step process. First, it adopted an overbroad interpretation of who is a fiduciary under ERISA and certain parallel provisions of the Tax Code.... Second, the Department provided limited relief from the prohibitions resulting from this overbroad 'fiduciary' interpretation ... The Department thus exploited its limited interpretive authority to impose unworkable restrictions that necessitate exemptions, and then exploited its authority to grant exemptions by conditioning them on 'agreement' to an entirely new regulatory framework that the Department has no power to construct. And, precisely because the Department lacks enforcement authority in this area, it has delegated enforcement to private and class action litigation." [U.S. Chamber of Commerce, et al. v. Perez, No. 16-1476 (N.D. Tex., motion filed July 18, 2016)]
Text of ACLI and NAIFA Memorandum in Support of Motion for Summary Judgment in Challenge to DOL Fiduciary Rule (PDF)
American Council of Life Insurers [ACLI] and National Association of Insurance and Financial Advisors [NAIFA]
7/25/2016
45 pages. "The regulation at issue here is a misguided and unprecedented intervention in the retirement savings marketplace. It will unnecessarily restrict consumers' access to annuity products and important information about those products. Yet the rulemaking failed to examine meaningfully the effects of the Rule on the annuity marketplace.... [T]he Rule will unnecessarily drive up the costs of guaranteed lifetime income products, distort the marketplace for retirement products generally, interfere with consumers' access to truthful information about those products, and worsen, not help resolve, the profound challenges facing retirement investors." [U.S. Chamber of Commerce, et al. v. Perez, No. 16-1476 (N.D. Tex., motion filed July 18, 2016)]
GOP Nominates Trump, Releases Platform (PDF)
Xerox HR
7/25/2016
"Stating that the 'greatest asset of the American economy is the hard-working American,' the platform deems getting people back to work by fostering job creation to be its 'first priority' and 'overarching goal.' As such, the platform reflects the party's outlook on reforming current laws affecting healthcare, employment, labor and retirement. Many provisions in the platform are quite general in nature and echo policy positions previously outlined by Republicans. Highlights that will resonate with employers [are listed and described]."
Compliance Technology Solutions Under the DOL Fiduciary Rule
Michael Kitces in Nerd's Eye View
7/25/2016
"The financial services industry has not adopted a standardized advice process for advisors to consistently adhere to, in order to demonstrate their fiduciary duty of care and due diligence. Nor is there any clear agreed-upon framework to determine when a particular recommendation is 'best' or not, based on a specific set of client goals and circumstances.... [T]he DOL fiduciary rule may actually spawn the next generation of 'robo-advice' software, designed not directly for consumers, but as a compliance-driven solution to ensure that all advisors in the organization are giving the same consistent advice[.]"
Consumers Often Lose When Health Insurers Merge
The New York Times; subscription may be required
[Opinion]
7/25/2016
"There are clearly benefits to better-coordinated care, but that does not justify all of these mergers. Coordination can often take place without concentrating so much market power in the hands of a few companies. And rather than making the system more efficient, recent research has found that increased concentration has driven up the cost of health care."
What to Consider Before Launching a Provider-Sponsored Health Plan
PricewaterhouseCoopers
7/25/2016
"Today's New Health Economy demands that providers shoulder greater risk. In response, health systems and physician groups contemplate taking full control of the healthcare dollar by launching their own health plans.... Measure your investment needs.... Take stock of the environment.... Define your purpose, and then execute on it.... Tout your unique advantage -- trusted brand, niche offerings and community presence.... Deepen relationships with other insurers."
Application for Benefit Suspension: Bricklayers & Allied Craftsmen Local No. 7 Pension Plan
U.S. Department of the Treasury
7/25/2016
"The Bricklayers & Allied Craftsmen Local No. 7 Pension Plan application proposing benefit suspensions can be found [at the link]. The application is organized by the items specified in Revenue Procedure 2016-27. The Bricklayers Local 7 application is currently being reviewed and the review is expected to take several months. Bricklayers Local 7's representative has advised [Treasury] that individualized participant notices were sent via U.S. mail on July 1st."
Beyond Risk Tolerance: The New Fiduciary Rule for Advisors and Retirement Planning
Seeking Alpha; free registration may be required
7/25/2016
"The game changes almost totally for the bulk of advisors, from independents to those who work at big firms, shifting the advisory business away from commissions and third party fees and incentives, disclosed or undisclosed, and variable compensation schemes ... to what will likely become fee-only compensation favoring retainer arrangements or a menu of flat fees."
IRS Proposes Additional Regs Clarifying Handling of 'Opt-Out' or 'Cash-In-Lieu' Programs Under ACA
Benefit Revolution
[Guidance Overview]
7/25/2016
"You must now not only verify that the person has other coverage; but you must verify that it is group (not just individual) coverage. That is not necessarily easy to do. Often times insurers will still assign a 'group' number to an individual card so as to align the insured's internal records with other records the insurer keeps. This effectively turns your HR staff into the 'cash in lieu police' while angering employees who don't understand why they are not getting an award for an individual plan[.]"
SEC Proposal: The End of Equity Compensation Plan Disclosure?
Bloomberg BNA
7/25/2016
"[T]he SEC proposes to eliminate the now obsolete disclosure requirements regarding equity compensation plans.... The SEC explained that the information required under Item 201(d) can be found in other financial statements and that the listing standards by the national exchanges now require that almost all equity plans be approved by shareholders."
Opt-Out Payment Arrangements and Employer Impact
Compliance Dashboard
[Guidance Overview]
7/25/2016
"The proposed regulations clarify that if an individual declines to enroll in employer-sponsored coverage for a plan year and does not have the opportunity to enroll in coverage for one or more succeeding plan years, the individual is treated as ineligible for those succeeding years. Subsequently, this ineligibility for the plan could render that employee eligible for premium tax credits. Said another way, if employees are not given an opportunity to enroll at least annually, they are not considered eligible for the plan which could cause ALEs to be liable for Section 4980H penalties."
Evaluating an Early Retirement Offer
CAPTRUST Financial Advisors
7/25/2016
"What's the severance package? ... How does all of this affect your pension? ... Does the offer include health insurance? ... What other benefits are available? ... Can you afford to retire early? ... What if you can't afford to retire? Finding a new job ... What will happen if you say no?"
Nondiscrimination Rule Expands Administrative Practices, Notice/Language Requirements and Coverage for Certain Plans
Cheiron
[Guidance Overview]
7/25/2016
"Employers and plan sponsors should determine whether they are subject to the regulation. If so, many requirements are already effective. However, they have until October 16, 2016 ... to comply with the notice requirements and until the first plan year beginning on or after January 1, 2017 to make coverage changes to health insurance or group health plan benefit design."
The Problem with Investment Committees
Russell Investments
7/25/2016
"Three ways to help remain loyal to an investment decision when the inevitable rough patch occurs are: [1] Document and regularly review the committee's objectives and investment beliefs. [2] Clearly articulate how each investment is expected to contribute to the objectives and how it is consistent with the stated investment beliefs. [3] Regularly remind the decision makers of the range of possible outcomes associated with each investment with an emphasis on the environment in which the strategy is expected to underperform and the potential magnitude of this underperformance."
Oregon Retirement Savings Plan Set to Launch in 12 Months
MyCentralOregon.com
7/25/2016
"Estimates ... say the Retirement Savings Plan is expected to grow to more than 500,000 active accounts by 2032.... The format of investment will be a Roth Individual Retirement Account (Roth-IRA).... The savings rate will be 5 percent of wages for new enrollees, unless workers choose a different level.... Unless investors choose otherwise, money will be invested in age-based funds with risk profiles that evolve over time, based on the years to retirement.... Workers at larger employers will be first to start saving at the time of launch in July 2017. The plan will be phased in over several years, and workers at smaller employers will be added at later dates."
Testimony of American Academy of Actuaries to House Ways and Means Committee Hearing: 'Rising Health Insurance Premiums Under the ACA' (PDF)
American Academy of Actuaries
7/25/2016
"[H]ow 2017 premiums differ from those in 2016 will depend on many factors. Key drivers include the underlying growth in health costs and the sunset of the reinsurance program, each of which will increase premiums relative to 2017.... Insurers have more information than they did previously regarding the risk profile of the enrollee population ... However, some uncertainty remains, as a market equilibrium in terms of enrollment levels and risk profiles likely has not yet been reached."
Automation Having Significant Impact on Retirement Plan Participation
Employee Benefit News
7/25/2016
"Retirement plan participation has increased 19% in the past five years because of design features that make it simple and quick for employees to participate in their workplace retirement plans.... Generationally, millennials are reaping the biggest benefit from this industry shift toward automatic features."
1.5M Workers Gained Employer-Sponsored Healthcare Coverage in 2015
HealthPayer Intelligence
7/25/2016
"[T]he number of consumers enrolled in employer-sponsored healthcare coverage rose from 55.8 million in 2014 to 57.3 million in 2015. In fact, at large firms, the number of employees covered under employer-sponsored insurance rose by 1.6 million people. However ... at smaller companies with less than 50 employees, the enrollment rate in this type of coverage was reduced from 28.3 percent to 27.1 percent between 2014 and 2015."
Taking on the Retirement Gap: Bipartisan Interest Grows in Open MEPs
K&L Gates LLP
7/25/2016
"Both the Senate Finance and the Senate Health, Education, Labor, and Pensions (HELP) Committees have highlighted the broad policymaker, industry, and stakeholder interest in the concept, which was included in the Finance Committee's Savings and Investment Working Group Report and the President's FY 2017 budget request. Moreover, industry and stakeholder support for open MEPs will likely continue to grow in the wake of recent guidance from the [DOL] endorsing state MEPs."
Competing Wellness Rules Pose Compliance Challenges
Bloomberg BNA
7/25/2016
"New workplace wellness regulations that address participation incentive limits under disability and genetic anti-discrimination laws are inconsistent with overlapping federal laws, so employers must scrutinize their programs closely to ensure compliance."
The Public Pension Problem Is Much Worse Than It Appears
Investor's Business Daily
[Opinion]
7/25/2016
"Most state and local pension funds closed the books on their latest fiscal year on June 30, and during that 12-month period the bellwether Standard & Poor's 500 increased by less than half a percentage point. While many funds have yet to report their results for the year, early returns suggest that the industry fell well short of its lofty investment goals."
Health Care Cost Hikes Are 'Eating Into Employer Revenue' Faster Than Inflation.
Xerox HR Insights
7/22/2016
"Since the most recent recession, the annual increase in health care costs has eased from 11.6 percent in 2010 to 8 percent through the first half of 2016. During the same period, the United States Bureau of Labor Statistics stated inflation rate in the U.S. has been 1.4 percent. The rising expense of health care is causing employers to shift more costs to employees, resulting in consumers weighing price into their decisions of where and when to seek health care, with some even delaying treatment due to cost."
Employee Benefit Participation Rates, March 2016
U.S. Bureau of Labor Statistics [BLS]
7/22/2016
"The participation rate for employer-sponsored medical care benefits for civilian workers was 52 percent in March 2016 ... The participation rate was 49 percent for private industry workers and 73 percent for state and local government workers.... The participation rate for employer-sponsored retirement benefits, which include defined benefit and defined contribution plans, was 54 percent for civilian workers. The participation rate was 49 percent for private industry workers and 81 percent for state and local government workers."
An Action Plan for Employers Who Receive Exchange Notices (PDF)
Groom Law Group
[Guidance Overview]
7/22/2016
"[N]otifications are sent to all employers of individuals who are found to be APTC-eligible -- including those employers that are not subject to employer shared responsibility because they have less than 50 full-time employees (including full-time equivalents).... Employers should also keep in mind that different Exchanges may be sending different notification forms, may have marginally different processes for employer appeals, and may provide different levels of detail regarding the employee.... [This article describes] several alternative action items for Employers who receive an Exchange Notice -- along with the pros and cons of using each approach[.]"
Is Using Active Investment Management a Fiduciary Breach?
Fiduciary Plan Governance, LLC
[Opinion]
7/22/2016
"The question ... for investment fiduciaries who typically delegate investment management to third-parties like mutual funds and professional investment managers may not be, 'Is using active management a fiduciary breach?' but 'Is there a way to select the right ones?' The answer may be both simpler and more difficult than most of us, including investment advisors and others who make their livings purporting to do so, imagine."
DOL's Proposed Form 5500 Changes Could Improve Plan Design
Judy Diamond Associates
[Opinion]
7/22/2016
"Eric Ryles, Managing Director of Judy Diamond Associates [said,] 'Right now, information on the small group health market is essentially nonexistent. By requiring companies with fewer than 100 participants to file a 5500, the DOL has opened the door to increased competition resulting in better, cheaper plans for the covered employees.' Continues Ryles, 'Transparency of fees and coverage is always a good thing, and we will be ready to incorporate each and every proposed change as soon as they are incorporated into the form.' "
What's in an Investor's Best Interest? The Battle Continues
Castle Rock Investment Company
[Opinion]
7/22/2016
"So, what exactly is NAFA complaining about [in its challenge to the DOL fiduciary rule]? According to them, 'Congress intended ERISA fiduciary duties to apply only to those who participate in ongoing management of a plan or its assets.' ... NAFA completely disregarded that fiduciaries are those who render investment advice for a fee. Put it this way, an annuity can play a large role in someone's retirement, so how would selling annuities to people not be considered rendering investment advice?"
DOL Holds Modest Sway With Courts on Benefits Issues
Bloomberg BNA
7/22/2016
"Of the 77 cases that led to clear decisions on the questions raised by the DOL, the department has scored 44 victories and suffered 33 losses. That's a win rate of about 57 percent -- only modestly better odds than a coin flip. Although the department has filed ERISA-related briefs in all the federal circuit courts and several district and state courts, its win-loss record doesn't vary significantly by court. In most courts, the department has won about as many cases as it's lost."
Fight or Run Is Choice for Health Insurers After DOJ Suit
Bloomberg
7/22/2016
"Within minutes of the Justice Department filing its case in federal court, Aetna Inc. and Humana Inc. issued a joint statement, promising they'd fight in lockstep and 'vigorously defend the companies' pending merger.' ... Cigna Corp. seemed to use a related lawsuit also filed Thursday as a potential escape from Anthem Inc.'s $48 billion takeover of the company.... Anthem declined to comment on Cigna's comments Thursday, other than to say it was ready to challenge the department. If the deal falls apart under antitrust scrutiny, Cigna is owed a breakup fee of $1.85 billion, according to the companies' agreement."
The Downside of a 401(k) Loan
Financial Finesse
7/22/2016
"You lose out on any earnings.... Your payments may be higher.... You may not be able to take another loan.... You may be subject to taxes and penalties if you leave your job.... You're double-taxed on the interest."
OCR Fines HIPAA Covered Entity Over Multiple Noncompliance
Ice Miller LLP
7/22/2016
"OCR opened its investigation after receiving multiple breach reports ... including two reports involving unencrypted laptops and a large breach involving an unencrypted thumb drive ... OCR reported that OHSU had performed at least six Security Rule risk analyses, but they were not enterprise-wide in scope -- that is, the risk analyses did not address all of the ePHI maintained or transmitted within the organization."
Federal Judge Finds ACA Contraception Mandate Violates RFRA
Modern Healthcare Online; free registration required
7/22/2016
"U.S. District Judge Jean C. Hamilton said Thursday that HHS may not compel Republican state lawmaker Paul Joseph Wieland, his wife Teresa Jane Wieland or their insurer to include contraception coverage in their health plan.... [T]he government had argued that requiring the Wielands to subscribe to a group health plan that covers services, such as contraception, that the family won't use because of religious reasons, isn't a substantial burden on the family. The court, however, disagreed." [Wieland v. HHS, No. 13-1577 (E.D. Mo. July 21, 2016)]
Investors Are Getting Ripped Off on Index Fund Fees, Lawsuits Say
Bloomberg
7/22/2016
"In recent years, money has flooded into low-cost index funds and out of more expensive actively managed funds ... In the New York Life lawsuit, an index fund used in the two 401(k) plans was more profitable for the company than for plan participants, according to the complaint.... This isn't the first 401(k) lawsuit that has raised the issue of overpriced index funds. But it's the first time the whole case is about an index fund[.]"
Why Doesn't Your Company Want You to Put More in Your 401(k)?
WealthManagement.com
7/22/2016
"By getting more workers to increase contributions to their 401(k), you potentially raise the amount you'll need to pitch in as a matching contribution. If you match the first 3 percent that workers put in, for example, and you get another fifth of your workforce to meet that threshold, then auto-enrollment can look like an expensive decision. But auto-enrollment rarely costs as much as employers fear[.]"
The Effect of Brexit on Tax-Qualified Plans
Morgan Lewis
7/22/2016
"In the case of DB plans, Brexit potentially has implications for funding levels, lump sum payments, [PBGC] premiums, and financial accounting results -- all of which are the responsibility of the plan sponsor (rather than participants).... [DC plan participants] will bear the risk of both declining bond prices and more volatile financial markets generally. Plan fiduciaries may want to consider alerting participants to the issues raised by Brexit, the possible impact on plan investments, the advisability of staying the course in turbulent markets, [and] diversification considerations[.]"
Significantly More Information to Be Collected Under the Proposed Form 5500
Kilpatrick Townsend
[Guidance Overview]
7/22/2016
"With respect to group health plans, the main changes would include: [1] Eliminating the exemption for unfunded welfare plans with under 100 participants ... [2] Expanded use of Schedule C for certain small plans; [3] Adding a new Schedule J[.]"
Considering In-Kind Contributions to Defined Benefit Plans
Greensfelder
[Guidance Overview]
7/22/2016
"[A recently-issued prohibited transaction exemption] offers a glimpse into current DOL thinking as to how to structure a contribution-leaseback transaction.... [T]he DOL imposed several conditions required in previous rulings, including the retention of an independent fiduciary to negotiate and approve the transaction and a requirement to secure an appraisal report from an independent qualified appraiser confirming the fair market value of the property."
Proposed Regs Provide Permanent Relief for Expatriate Health Plans (PDF)
Xerox HR Services
[Guidance Overview]
7/22/2016
"Under ACA regulations, hours of service worked outside of the 50 U.S. states and the District of Columbia (i.e., where compensation for services constitutes income from sources outside of the U.S.) are not counted, regardless of the individual's residency or citizenship. This means that these employees likely will not have the requisite hours of service to be considered full-time employees and, therefore, would not have to be taken into account in determining whether an employer has offered coverage to substantially all of its full-time employees or in determining the amount of any assessment."
Engaging the Millennial Generation in Defined Contribution Plans (PDF)
Portfolio Evaluations, Inc.
7/22/2016
"Given the potential influence this sizable generation may have on retirement plans and their unique circumstances, plan sponsors should work with their record keepers to address behavioral issues within the population, as well as ways to better engage with this population."
Why Am I Getting This Marketplace Notice?
Vorys, Sater, Seymour and Pease LLP
[Guidance Overview]
7/22/2016
"The Marketplace is using employment information provided by the individual. That employment information may be old (resulting in Marketplace Notices for individuals who terminated employment before January 1, 2016) and/or may be addressed to a local workplace (resulting in Marketplace Notices going to locations not prepared to respond to them)."
Proposed Regs Affect Tax-Exempt Employers' Deferred Comp Plans
Nixon Peabody LLP
[Guidance Overview]
7/22/2016
"The regulations explain and clarify [1] what types of arrangements will not be treated as deferred compensation for purposes of Section 457(f); [2] how to calculate the amount of compensation that is taxed under Section 457(f); [3] key definitions; and [4] special rules that apply to deferrals of current compensation and extensions of risk of forfeiture[.]"

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