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Benefits in the News

Older News | February 11, 2016

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FY 2017 Congressional Budget Justification by the Employee Benefits Security Administration (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]
2/10/2016

45 pages. "[$6,500,000 is] requested to support multiple pilots to implement new and different approaches to increasing retirement coverage in States, particularly for workers who are traditionally unable to access employment-based retirement benefits. Funds are requested through FY 2018 to allow sufficient time for inter-agency collaboration to craft grant solicitations that meet technical and evaluation requirements; the posting of grant solicitations with time to allow selected States to develop effective grant proposals; providing technical briefings and conducting outreach to better inform potential grantees; and the evaluation of proposals based on solicitation criteria to select grantees."
Small Business Retirement Plan Options: 401(k) Plans vs. SIMPLE and SEP IRAs
Employee Fiduciary
2/10/2016

"401ks are not the only retirement plan option for small businesses -- IRA-based alternatives exist. These alternatives should be considered when a business does not need the key virtues of a 401k plan -- high contribution limits and design flexibility -- but wants to help employees save for retirement. Like a 401k plan, these alternatives offer automatic payroll deduction, making retirement savings easy." [Charts outline contribution limits and pros/cons for each type of plan.]
It's That Time Yet Again: Creditable Coverage Disclosures to CMS Due by February 29 (PDF)
Xerox HR Services
2/10/2016 [Guidance Overview]

"Each year, group health plan sponsors that provide prescription drug coverage to individuals eligible for Medicare Part D must disclose to [CMS] whether that coverage is 'creditable' or 'non-creditable.' The disclosure obligation applies to all plan sponsors that provide prescription drug coverage, even those that do not offer prescription drug coverage to retirees. Calendar year plans must submit this year's disclosure to CMS by February 29, 2016."
Evaluating Auditor Proposals
Fiduciary Plan Governance, LLC
2/10/2016

"Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals.... [The authors] suggest you also determine if there are any 'non-starters' in the criteria that would eliminate a candidate regardless of how it responds in other areas."
Corrections to CBO's Analysis of Replacement Rates for Social Security
Congressional Budget Office [CBO]
2/10/2016

"[R]eplacement rates were defined to be initial benefits as a percentage of average late-career earnings; for those calculations, earnings consisted of the last five years of earnings that were at least half of a worker's average indexed earnings, adjusted for growth in prices. The estimates reported in December inadvertently included years with earnings below those intended amounts.... The corrected version shows substantially lower mean initial replacement rates for retired and disabled workers[.]"
HIPAA Phase 2 Audits Include Business Associates
International Foundation of Employee Benefit Plans [IFEBP]
2/10/2016

"Here's a closer look at Phase 1 and Phase 2 audits and the background information you'll need to prepare for a possible audit."
Pension and Health Plans: 2015 Year End Review (PDF)
Schulte Roth & Zabel LLP
2/10/2016 [Guidance Overview]

Topics include: [1] The 'Cadillac Tax'; [2] Delayed ACA reporting; [3] Legal challenges to the ACA; [4] Repeal of automatic enrollment; [5] Expanded preventive care services; [6] Substantial hospital inpatient services and minimum value; [7] Pace Act; [8] ACA fees and penalties; [9] Nondiscrimination for fully insured health plans; [10] IRS determination letter program; [11] Form 5500 filing deadlines remain the same; and [12] NYC Commuter Benefits Law.
Obama Asks Congress for $100M Proposal on MEPs
Bloomberg BNA
2/10/2016

"President Barack Obama is asking Congress for a $100 million legislative proposal that would expand access to retirement accounts and 'sow the seeds' for future retirement models that would provide portable benefits coverage through innovations in multiple employer pension plans. Legislation would expand coverage in two ways: through innovation grants to spur the provision of new multiple-employer benefit models and the creation of open multiple employer plans[.]"
Investment Considerations Under ERISA for Defined Contribution Plan Fiduciaries (PDF)
Blitman & King, LLP, for Euclid Specialty Managers
2/10/2016

17 pages "While ... a self-directed defined contribution plan carries less fiduciary risk than a traditional defined benefit plan ... too many plan sponsors are underestimating the fiduciary responsibilities -- and thus liability risk -- when offering a defined contribution plan.... [This whitepaper highlights] some of the fiduciary responsibilities faced by plan sponsors of defined contribution plans under ERISA."
Retirement Security Proposals Included in the President's FY 2017 Budget (PDF)
The White House Blog
2/10/2016

40 pages. Retirement security proposals begin on page 14, and include: [1] Automatically enroll Americans without access to a workplace retirement plan in an IRA; [2] Provide tax cuts for auto-IRA adoption, and for businesses that choose to offer more generous employer plans or switch to auto-enrollment; [3] Expand retirement savings options for long-term, part-time workers; [4] Encourage state retirement savings initiatives; [5] Increase coverage by supporting new, more flexible benefit models; and [6] Give the PBGC the authority to adjust premiums.
Text of IRS Notice of Proposed Rulemaking and Public Hearing: Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014
Internal Revenue Service [IRS]
2/10/2016 [Official Guidance]

16 pages. "One specific limitation governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant's service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan. This document contains proposed regulations that would provide guidance relating to this specific limitation.... Comments must be received by March 15, 2016. Outlines of topics to be discussed at the public hearing scheduled for March 22, 2016 must be received by March 15, 2016."
Multiple Employer Plans: What's in It for Participants? (Quite a Lot)
Russell Investments
2/10/2016

"The President's 2017 Budget proposal ... includes support for the idea of open multiple employer plans (MEPs). The MEP concept has received a lot of attention in recent months: for small employers looking for an easy and effective vehicle to offer workplace-based retirement saving, MEPs may well be a good fit. They could prove to be a good structure for participants, too."
Congress Must Take Action on Retirement Income 'Fiduciary Regulation'
Securities Industry and Financial Markets Association [SIFMA]
2/10/2016 [Opinion]

"The bipartisan bills would strengthen consumer protections for retirement savers while also maintaining access to quality financial advice for small businesses and low- and middle-income Americans.... The bills would also require advisors to communicate key information -- including full and fair disclosure on compensation and all investment fees to ensure investors are well-informed. And, consistent with the [DOL's] goals, the bills punish advisors who fail to act in their client's best interest by holding them liable for damages and imposing financial penalties."
U.S. Supreme Court Ruling: ERISA Equitable Relief Not So Equitable?
Troutman Sanders
2/10/2016

"The moral of the story is that self-insured plans that wish to enforce their subrogation and ... recovery rights must act quickly before the proceeds from any law suit against a third party to recover the medical expenses have been commingled with the plan participant's other assets.... [It] remains to be seen if the same tracing requirement that applies to third party settlements in the subrogation context extends to overpayments from pension and disability plans. Lastly, the Court's ruling could spur legislative initiatives to expand the ERISA remedies available to plan fiduciaries." [Montanile v. Bd. of Trustees of Nat. Elevator Ind. Health Benefit Plan, No. 14-723 (U.S. Jan. 20, 2016)]
Feds Want Healthcare.gov to Become an Active Purchaser
FierceHealthPayer
2/10/2016

"The proposed reforms, tucked into the 2017 Notice of Benefit and Payment Parameters released by [CMS] late last year, suggest that CMS wants to trade a wide array of plan choices on the federal exchange for more tailored options.... These standardized options for bronze, silver and gold plans would include a single provider tier, a fixed in-network deductible, a fixed annual limitation on cost sharing, and standardized copayments and coinsurance for a key set of essential health benefits ... Insurers would not be required to offer standardize options in 2017 and 'would retain flexibility to offer non-standardized plans.' "
ERIC Report Card for Health Care and Retirement Provisions in the President's Proposed 2017 Budget: Needs Improvement
The ERISA Industry Committee [ERIC]
2/10/2016 [Opinion]

"The ERISA Industry Committee (ERIC) is disappointed President Obama did not use his 2017 fiscal year budget to promote important proposals that would allow the employer-provided health and retirement benefits system to grow. 'The budget is an ideal time to propose measures that improve and support the employer-sponsored retirement and health care system, like full repeal of the 40 percent excise tax and taking PBGC premiums "off-budget",' said Annette Guarisco Fildes, president and CEO, ERIC."
2015 in Review: ERISA Civil Enforcement Recoveries Remain Low, Criminal Investigations Continue to Rise
Sutherland Asbill & Brennan LLP
2/10/2016

"The DOL reported total monetary recoveries of $696.3 million in FY 2015, an increase of $96.6 million over FY 2014. While this was a significant increase ... the total monetary results for FY 2015 still lagged behind the 15-year average of approximately $1.3 billion in annual recoveries.... In FY 2015, almost half of the $96.6 million improvement -- $46.7 million -- came from the Informal Complaint Resolution System, which has been steadily replacing Prohibited Transactions Corrected and Plan Assets Protected as the largest source of recovery."
FY 2017 Budget Proposal Would Tax ESOP Dividends Twice
The ESOP Association
2/10/2016

"Since 1985, individuals who work for a company that offers an ESOP have avoided double taxation on the dividends they receive. The Administration's proposal would eliminate that incentive, thereby hurting companies and employees alike."
More Managed Accounts in 401(k) Plan Lineups, But Client Understanding Lags
Financial Planning
2/10/2016

"In the past four years, the number of employers offering managed accounts more than tripled but Fidelity found that 49% of individuals don't understand how managed accounts work.... When employees are asked what the biggest benefit is of using managed accounts in their retirement plan, 48% said that managed accounts are constantly monitored by a professional."
The Proposed Budget and Health Care: A Quick Rundown
Health Affairs
2/10/2016

"One proposal would attempt to curb surprise balance bills by out-of-network providers by requiring hospitals to take steps to match patients with in-network providers and requiring physicians who regularly provide services in a hospital to accept an appropriate in-network rate as payment in full. Another proposal would allow HHS to develop uniform definitions and principles for standardizing medical billing and making it more transparent. Self-insured non-federal governmental plans would be prohibited from opting out of various federal consumer protection laws, such as the Mental Health Parity Law.... The Internal Revenue Service budget request includes $402 million in ACA funding, including $105 million for taxpayer services, $20 million for enforcement, and $277 million for operations support."
Are You Ready for a Cash Balance Plan? (PDF)
Retirement Management Services
2/10/2016

"What is a cash balance plan? ... How much can I contribute for myself each year? ... Those contributions are really high -- is this legal? ... Where is the money invested? ... How is the plan funded? ... What happens if I can't afford to fund the plan for a particular year? ... Can I give key employees a higher allocation than the rest of my staff? ... Should I terminate my 401(k) plan and just have a cash balance plan?"
Parity of Mental Health and Substance Use Benefits with Other Benefits: Using Your Employer-Sponsored Health Plan to Cover Services (PDF)
Substance Abuse and Mental Health Services Administration [SAMHSA], U.S. Department of Health and Human Services [HHS]
2/10/2016 [Guidance Overview]

"If you are someone who is trying to figure out how to use your health coverage provided by your employer to pay for your mental health or substance use [MH/SU] services -- this sheet is for you.... In this document, we explain MH/SU parity, answer questions about the parity law, and provide ways to learn more. We hope you use this information to get the mental health and substance use services you and your family need paid for (either fully or partially) by your health plan."
Subsidizing Student Health Insurance with Stipends: New Agency Guidance and Relief
Mintz Levin
2/10/2016 [Guidance Overview]

"The guidance does not say which subsidy type arrangements create [employer payment plans (EPPs)] and which do not. All we know is that not all arrangements whereby a school subsidizes coverage under student health plans will be EPPs. It appears that, if the student is an employee, and the amounts are paid towards student health insurance coverage, then the subsidy is an EPP. If the student not an employee, then a stipend towards student health insurance coverage will not be an EPP because there is no employer-employee relationship with which to create an EPP."
Text of IRS Disaster Relief Announcement ARK-2016-04, for Victims of Severe Storms, Tornadoes, Straight-line Winds and Flooding in Arkansas
Internal Revenue Service [IRS]
2/10/2016 [Official Guidance]

"Victims of the severe storms, tornadoes, straight-line winds and flooding that took place beginning on Dec. 26, 2015, in parts of Arkansas may qualify for tax relief ... Individuals who reside or have a business in Benton, Carroll, Crawford, Faulkner, Jackson, Jefferson, Lee, Little River, Perry, Sebastian, and Sevier Counties may qualify for tax relief.... [C]ertain deadlines falling on or after Dec. 26, and on or before May 16, 2016, have been postponed to May 16, 2016. This includes 2015 income tax returns normally due on April 18."
Text of PBGC Disaster Relief Announcement 16-03, In Response to Severe Storms, Tornadoes, Straight-Line Winds and Flooding in Arkansas
Pension Benefit Guaranty Corporation [PBGC]
2/10/2016 [Official Guidance]

"This Disaster Relief Announcement provides relief relating to PBGC deadlines ... [to] any person responsible for meeting a PBGC deadline (e.g., a plan administrator or contributing sponsor) that is located in the disaster area for which the [IRS] has provided relief in ARK-2016-04, Feb. 8, 2016, in connection with filing extensions for Form 5500 series returns ... The disaster area consists of Benton, Carroll, Crawford, Faulkner, Jackson, Jefferson, Lee, Little River, Perry, Sebastian, and Sevier Counties."
Text of Sixth Circuit Opinion: No Lifetime Health Benefits for Moen Retirees (PDF)
U.S. Court of Appeals for the Sixth Circuit
2/9/2016

"[T]he Moen-UAW collective bargaining agreements do not provide unalterable healthcare benefits for life to the [plaintiff retirees] and their dependents.... First and foremost, nothing in this or any of the other CBAs says that Moen committed to provide unalterable healthcare benefits to retirees and their spouses for life.... Second, ... everything they say about the topic was contained in a three-year agreement.... Third, each of the last three CBAs says that '[c]ontinued hospitalization, surgical and medical coverage will be provided without cost to past pensioners and their dependents prior to March 1, 1996.' ... Fourth, while the authors of the CBAs opted not to say that retiree healthcare benefits were vested for life, they explicitly vested pension benefits for qualifying retirees.... Fifth, the agreements contain reservation-of-rights clauses that evidence an intent not to vest and that apply to employees and retirees.... Sixth, these principles yield a similar conclusion when applied to the plant closing agreement.... Seventh, the above analysis not only respects the language of the relevant agreements and Tackett, but it also brings our court into alignment with other circuits around the country." [Gallo v. Moen, No. 14-3918 (6th Cir. Feb. 8, 2016)]
The Future of DC Outsourcing (PDF)
Russell Investments
2/9/2016

"DC outsourcing ... allows sponsors to exploit scale and buying power to provide their employees with sophisticated retirement solutions without having to build the necessary expertise and functionality in-house. [This article provides] an overview of ... DC outsourcing -- covering everything from the fundamentals (why, what and how to outsource) to contracting to issues of residual fiduciary liability -- with links to ... more detailed discussions."
San Diego Church Challenges California Abortion Coverage Mandate
Courthouse News Service
2/9/2016

"California's mandate does not include an exemption for group health insurance plans purchased by churches or other employers that have religious beliefs against abortion. Skyline claims the mandate is at odds with the way the Knox-Keene Act treats religious employers, citing an exemption that allows religious employers to opt out of providing contraceptive coverage. Religious employers are also exempt from providing health insurance coverage for infertility treatments, according to the complaint."
'Panda Days' and Paid Time Off: What Perks Perk Up Employees
OneExchange from Towers Watson
2/9/2016

"Perks are essential in attracting and retaining talent, and companies are offering more and more varied perks to hire the very best they can. Nearly 3 in 5 (57%) job seekers reported benefits and perks being among their top considerations before accepting a job ... The perks vary widely, but common themes emerge among the most popular benefits, namely parenting, lifestyle, education or skill building, and cash perks."
Text of Treasury Department Notice: Reopening of Comment Period on Central States Pension Fund Application to Reduce Benefits
U.S. Department of the Treasury
2/9/2016 [Official Guidance]

"On October 23, 2015, the Department published a notice of availability and request for comments regarding an application to Treasury to reduce benefits under the Central States, Southeast and Southwest Areas Pension Plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to reopen the comment period and provide more time for interested parties to provide comments. Comments must be received on or before March 1, 2016."
Allocating Expenses Among Participant Accounts in DC Plans
Cammack Retirement Group
2/9/2016

"There are numerous options available to allocate plan expenses among participants, each having its own positive and negative attributes. [This article explores] the three most popular models and the associated benefits and drawbacks."
Statement of Pension Rights Center at Treasury Department Public Session on Central States Pension Fund Benefit Reduction Application
Pension Rights Center
2/9/2016 [Opinion]

"Here's how the Central States application flunks every condition set by MPRA: First, the application fails to demonstrate that the Central States Pension Fund took all reasonable steps to avoid insolvency ... Second, the plan did not equitably distribute the benefit cuts.... Third, even with the steep and unjust proposed cuts, the ability of the Central States Pension Fund to survive for the long term is extremely uncertain -- a key factor that the law says must be considered before the Treasury Department can approve any application to cut retiree pension benefits.... Mr. Feinberg, please reject the application.... There are better solutions."
Text of DOL Report to Congress: Improving Health Coverage for Mental Health and Substance Use Disorder Patients Including Compliance with the Federal Mental Health and Substance Use Disorder Parity Provisions (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]
2/9/2016 [Guidance Overview]

337 pages. "Since the passage of the Mental Health Parity and Addiction Equity Act (MHPAEA), the Departments of Labor, Treasury and Health and Human Services have enforced the law, assisted consumers, and continuously clarified the responsibility of plan sponsors and insurance companies providing mental health and substance use disorder coverage.... Through investigations of employment-based plans, regulations and guidance, and outreach, the Departments strive to ensure that coverage for mental health and substance use disorder treatment is provided comparably with that offered for other medical care.... This report includes examples of situations where EBSA was able to intervene on behalf of participants and ensure that participants received coverage for the healthcare they needed."
DOL Sues IAM National Pension Fund and Nine Trustees, Alleges Various Fiduciary Breaches (PDF)
United Actuarial Services, Inc.
2/9/2016

"The allegations are just that -- allegations -- until proven by the preponderance of the evidence in a court of law. However, the allegations provide examples of the types of behaviors and facts that the DOL considers to cross the lines of fiduciary duty and/or violate the rules on prohibited transactions under ERISA.... The allegations highlight areas for self-examination by pension plan trustees to ensure their plan and fellow trustees avoid the behaviors contained in the lawsuit."
State Health Coverage Innovation and Section 1332 Waivers: Implications for States (PDF)
Deloitte Center for Health Solutions
2/9/2016

10 pages. "This health policy brief presents a number of potential waiver-associated coverage alternatives, including those being discussed by some states.... [S]tates may include multiple innovative concepts in their applications.... [E]ven with the new HHS and Treasury guidance, the analysis required to support a 1332 waiver application may require states to leverage actuarial, policy, technology, and data expertise.... If a state can show that its state law would more effectively accomplish the ACA's coverage, affordability, and regulatory goals, the law gives states the flexibility and autonomy to try new approaches."
Defined Benefit Funds Stick with Commodities
Pensions & Investments
2/9/2016

"Despite a difficult return environment, pension funds continue to allocate to commodities. Total commodity assets of defined benefit plans in the P&I 1,000 were $22.5 billion, a 16.2% decrease from the prior year.... At Sept. 30, 2015, there were 55 pension funds that invested in commodities, up from 17 in 2006."
Top Three 2016 Retirement Plan Committee Priorities
BenefitsNav
2/9/2016

"[1] Survey employee sentiment and research behaviors.... [2] Review investment menu simplicity and focus.... [3] Money Market reforms and consideration of alternatives.... As retirement plan committee members, your responsibility is to be prudent and document your process; not to hold the crystal ball which accurately predicts the future."
Are There Exceptions to the Exhaustion of Administrative Remedies Requirement?
Lane Powell PC
2/9/2016

"You already know that claimants with a denied claim must submit an appeal and exhaust administrative remedies before filing suit. But are phone calls sufficient to trigger the appeal process? And, can a claimant trump the exhaustion requirement by alleging the denial was in 'bad faith' and, therefore was a 'special circumstance?' .. Claim denial letters are not contracts.... Alleging bad faith by the insurer fails to constitute a 'special circumstance' sufficient to waive the exhaustion of administrative remedies requirement.... Phone calls are insufficient to constitute an 'appeal.' " [Moss v. Unum Group, No. 15-30341 (5th Cir. Feb. 3, 2016; unpub.)]
Recently Filed Cases Show Continuing Evolution of Participant Fiduciary Claims
CAPTRUST Financial Advisors
2/9/2016

"These cases include allegations that 401(k) plan fiduciary committees and their members breached their responsibilities by: [1] Constructing a custom target date strategy that included hedge funds that suffered significant losses; [2] Not using the least expensive mutual fund share classes available to the plan -- or using mutual funds when less expensive commingled trusts or separate accounts of essentially the same investment strategies were available; [3] Allowing the plan to pay excessive recordkeeping and administrative fees in a multiple employer plan arrangement; [4] Using a money market fund rather than a stable value fund as the plan's cash-equivalent alternative."
HIPAA Breach Notification Deadline Fast Approaching
Troutman Sanders
2/9/2016

"Breaches discovered in 2015 and involving fewer than 500 individuals should be reported to the Secretary through the Office of Civil Rights Breach Portal no later than February 29, 2016."
The Days of Mapping Disengaged Participants Strictly Into Highly Defensive Investment Options Are Clearly Over
PLANSPONSOR
2/9/2016

"It was not all that long ago that investors automatically enrolled into retirement plans were almost exclusively placed in stable value funds, or perhaps money market funds -- investment approaches deemed to be safe and prudent for any of the small number of people actually defaulted into retirement plans ... Today, nearly a decade after passage of major reforms in the Pension Protection Act (PPA), the steady stream of highly customizable products and services targeted at automatically enrolled defined contribution plan participants tells a different story."
Why Another Healthcare Consortium Warrants Pessimism
Frenkel Benefits
2/9/2016 [Opinion]

"The suggestion that this employer group will discover efficiencies in the market which these large insurers ... have not, is a slap in the face to the intelligence and motives of these large national insurers. Their data and expertise on this subject is far greater than that of this loosely tied group.... [We] already know the reason why the U.S. healthcare system is so costly.... The three largest drivers were administrative complexity, overtreatment as well as fraud and abuse. In order to fix the U.S. healthcare system on the macro level, it needs to be greatly simplified and better regulated."
Developments on Normal Retirement Age Regs for Governmental Plans
Ice Miller LLP
2/9/2016 [Guidance Overview]

"With this Notice of Proposed Rulemaking, the IRS has attempted ... to establish certain safe harbors by which the normal retirement age under a governmental plan would satisfy the requirements of Code Section 401(a).... [It] will be particularly helpful [for governmental plan sponsors to] comment on the following issues/concerns: [1] If your plan uses a different criteria for normal retirement age, you should consider asking for it to be added as a safe harbor. [2] What should a plan with no in-service distributions do to meet the pre-ERISA vesting rules?"
Preview of Medicare Advantage and Part D Advance Notice and Call Letter: CMS Likely to Address Risk Adjustment, Provider Network, and Other Issues
McDermott Will & Emery
2/9/2016 [Guidance Overview]

"The federal government will soon kick off the all-important annual sub-regulatory cycle for the Medicare Advantage (MA) and Part D programs, issuing proposed policy changes and payment rates for calendar year 2017. The proposed guidance -- expected to be issued on February 19 -- is likely to include substantial proposed changes to the MA risk adjustment methodology and may address increased provider network oversight for MA Organizations (MAOs), among other topics."
DOL Rule Heralds New Era in Distribution
InsuranceNewsNet.com
2/9/2016

"The [DOL] rule designed to corral conflict of interests among financial advisors will likely lead to new ways of distributing insurance products into qualified retirement plans, say insurance carrier executives.... Instead of advisors heading the for the proverbial career exit in the wake of sagging sales, carriers and distribution partners seem to be poised to find innovative ways to sell more financial products through qualified retirement plans."
More Than 10 Million People with Medicare Have Saved Over $20 Billion on Prescription Drugs Since 2010
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
2/9/2016

"Nearly 10.7 million Medicare beneficiaries have received discounts over $20.8 billion on prescription drugs -- an average of $1,945 per beneficiary -- since the enactment of the Affordable Care Act. In 2015 alone, nearly 5.2 million seniors and people with disabilities received discounts of over $5.4 billion, for an average of $1,054 per beneficiary. This is an increase in savings compared to 2014, when 5.1 million Medicare beneficiaries received discounts of $4.8 billion, for an average of $941 per beneficiary."
2016 Opens with Dismal Performance of the Financial Markets Lowering Funded Status (PDF)
Milliman
2/9/2016

"The funded status of the 100 largest corporate defined benefit pension plans dropped by $31 billion during January ... The funded status deficit widened to $326 billion from $295 billion at the end of December 2015, due to large investment losses incurred during January.... A small drop in the benchmark corporate bond interest rates used to value pension liabilities also contributed to the increase in the funded status deficit. As of January 31, the funded ratio dropped to 80.9%, down from 82.7% at the end of December."
IRS Delays Enforcement Action Against Employers Offering Premium Reduction Arrangements in Connection with Student Health Coverage
Ice Miller LLP
2/9/2016 [Guidance Overview]

"[T]his guidance does not grant any relief to colleges and universities who are using student health insurance coverage to satisfy the employer shared responsibility requirement to offer coverage to full-time employees or pay a potential penalty. Since student health insurance coverage is not group health plan coverage, an institution providing such coverage to graduate students who are full-time employees of the institution may also face additional penalties under the employer shared responsibility regulations."
Intel Class Action Opens New Frontier in 401(k) Litigation (PDF)
The Wagner Law Group
2/9/2016

"The reasonableness of the Intel plans' investment fees is one of the many fiduciary issues raised in the new Intel case, but the core issue is whether the plan's investment options should include exposures to alternative asset classes....[T]he Intel plans offered customized model portfolios that included a target date strategy, as well as a balanced strategy. These model portfolios provided exposures to various asset classes, including alternative investments, that is, hedge funds and private equity. The participant complaint alleges that the alternative investment allocations were too high and that they were determined imprudently by the plan fiduciaries."
Farm Contractors Balk at Obamacare Requirements
National Public Radio
2/9/2016

"Contractors who provide farm labor must now offer workers health insurance are complaining loudly about the cost in their already low-margin business. Some are also concerned that the forms they must file with the federal government under the Affordable Care Act will bring immigration problems to the fore. About half of the farm labor workforce in the U.S. is undocumented."
Senate Makes Moves to Block Fiduciary Rule
National Association of Plan Advisors [NAPA]
2/8/2016

"Wrapping up a week of legislation designed to block, slow or thwart the [DOL's] fiduciary rule, the U.S. Senate finally got into the act with two pieces of legislation. Sen. Johnny Isakson (R-Ga) ... introduced the Affordable Retirement Advice Protection Act that would require a vote by Congress before any final rule by the administration goes into effect. On the same day, Sen. Roy Blount (R-Mo.) introduced ... legislation that its sponsors said would 'prevent the [DOL] from moving forward on an unnecessary and burdensome new regulation that will make it harder for ... all Americans, to save for retirement.' "
Health and Welfare Plans: Big Compliance Burdens, Big Penalty Exposures
Mintz Levin
2/8/2016 [Guidance Overview]

"This post examines the compliance environment of health and welfare plans generally and group health plans in particular. An employer who offers benefits must also meet the requirements of a number of laws including the Affordable Care Act, ERISA, the Internal Revenue Code, HIPAA, the Public Health Service Act, and state insurance laws. These laws vary depending on the type and size of plan and may require governmental reporting, disclosures and notices to participants, administrative practices (such as claims processes) and mandated coverages.... [W]hat if an employer fails to meet its health and welfare plan legal requirements? Here are some of the key penalties[.]"
Ohamacare's Robin Hood Scheme and the Socioeconomics of Health
National Center for Policy Analysis Health Policy Blog
2/8/2016 [Opinion]

"Although they are loath to blame lifestyles, liberal health policy folks worry about health disparities. But the reality is most health disparities are due to behavior, not lack of health coverage. Indeed, about 60 percent of medical spending is on conditions linked to lifestyle. This includes diabetes, hypertension and high cholesterol.... People who probably had not spent their own money on medical care in the past decade now have encouragement to get a decade's worth of care the first year or two they are enrolled. As a result, everyone's premiums are skyrocketing and the state and federal exchanges are descending into an adverse selection death spiral."
SEC Proposal Could Alter Use of Mutual Funds in DC Plans
Pensions & Investments
2/8/2016

"A reduction in mutual funds' illiquid holdings resulting from the Securities and Exchange Commission's proposal, if ultimately approved, could lead to lower overall returns for those funds. That, in turn, could lead some defined contribution plans to drop mutual funds as investment options and replace them with separate accounts or commingled funds. Also, the proposal could lead to a decline in the overall value of illiquid securities, affecting defined benefit plan investments."
CFP Board Begins the Process of Updating Its Fiduciary Standards of Professional Conduct
Michael Kitces in Nerd's Eye View
2/8/2016

"At this point, the CFP Board has not (at least publicly) set any specific agenda for what is expected to be changed in the process of updating the Standards of Professional Conduct, though it will almost certainly encompass recent controversial areas, like the CFP Board's 'fee-only' compensation definitions. And in fact, it's possible nothing substantive will be altered. Nonetheless ... there are several parts of the Standards of Professional Conduct that seem ripe for changes and improvement."
IRS Private Letter Ruling Addresses Elections to Contribute Unused Vacation to Retiree HRA or 401(k) Plan
Thomson Reuters / EBIA
2/8/2016 [Guidance Overview]

"Prior IRS rulings have looked favorably on the automatic and mandatory contribution of unused vacation into another plan -- and a recent ruling allowed employees to choose which of two retiree medical plans would get the contribution ... However, the choice between an HRA and a 401(k) plan is a new twist.... The nondiscrimination rules could be an obstacle in other situations and for other plans (including HRAs), depending on the design."
More Church Plan Changes in Budget Bill
FIS Relius
2/8/2016 [Guidance Overview]

"[This] update [describes] portions of the Church Plan Clarification Act, including: [1] Rules addressing limitations for grandfathered 403(b) defined benefit plans, [2] Rules preempting state laws relating to automatic enrollment in church plans, and [3] Rules permitting church plans to invest in group trusts."
Takeaways from the U.S. Supreme Court's Montanile Decision on ERISA Plan Reimbursement/Subrogation Claims
Tucker Ellis LLP
2/8/2016

"The Supreme Court thought the plan was wrong for not objecting to the 14-day letter, rather than concluding that the lawyer was wrong for sending the 14-day letter that created an artificial 'deadline' for resolving a dispute that was also artificial -- because the participant had originally promised to repay the funds.... The response from ERISA plans will have to be ... aggressively intervening in personal injury claims, or filing separate causes of action to seek a temporary restraining order to prevent the disbursement of funds until the reimbursement claim has been litigated."
DOL Proposals for State-Based MEPs and Auto-IRAs: It's a Start
Scott Cooley, in Morningstar Advisor
2/8/2016 [Opinion]

"One improvement to the DOL approach is simple and straightforward: In the multiple employer plan space, the department should encourage competition among providers rather than providing the state with a monopoly on the provision of certain MEPs.... Policymakers should also work to improve the state-based auto-IRA programs. Again, one questions whether the states should be granted an effective monopoly over provision of these programs.... Congress should also enact legislation to unify the contribution limits for various retirement accounts."
NYC Proposes Its Own Private-Sector Retirement Plan, Making a Bad Idea Even Worse
The Platinum 401(k), via LinkedIn
2/8/2016 [Opinion]

"Apart from the clear track record that having municipality oversight of private sector employee retirement funds opens the door for corruption and abuse, the entire structure of such a program flies directly in the face of the very reasons why [ERISA] was signed into law over 40 years ago.... New York City might be the poster child for municipal pension plan mismanagement, Illinois and the City of Chicago notwithstanding. Is this the 'extensive infrastructure, know-how, and cost benefits' that the City has gained that should now be leveraged for private sector employees?"
CalSTRS Gets New Power to Set State, School Rates for Pension Funding
Calpensions
2/8/2016

"Two years ago, after nearly a decade of CalSTRS pleading, the Legislature and Gov. Brown enacted a record rate increase. School district rates will more than double by the end of the decade, while teachers and the state have smaller increases.... In what could be a major change, the legislation lifted a cap that limited the basic CalSTRS state rate to 3.5 percent of pay. Now the CalSTRS board has the new power, beginning next year, to raise the state rate up to 0.50 percent of pay each year."
Federal Employees Health Benefits (FEHB) Program: An Overview (PDF)
Congressional Research Service [CRS]
2/8/2016

25 pages. "This report provides a general overview of FEHB. It describes the structure of FEHB, including eligibility for the program and coverage options available to enrollees, as well as premiums, benefits and cost sharing, and general financing of FEHB. The report also describes the role of the Office of Personnel Management (OPM) in administering the program." [Report No. R43922, dated Feb. 3, 2016.]
A Comparison of the Availability and Cost of Health Care Coverage for Workers in Small Firms and Large Firms
Henry J. Kaiser Family Foundation
2/8/2016

"This brief expands on information presented in the 2015 Kaiser/HRET Survey of Employer-Sponsored Health Benefits to look exclusively at differences in offer rates, plan costs, and cost sharing between small firms and large firms."
How Well Do ESOP Acquisitions of Non-ESOP Companies Work?
Suzanne Cromlish, via National Center for Employee Ownership [NCEO]
2/8/2016

"Most successful ESOP companies implement various types of progressive organizational strategies ... that may help overcome a principal challenge to mergers and acquisitions, namely difficulties with cultural integration. They also almost always make the target employees part of the ESOP.... This study focused on how other companies were acquired by an existing ESOP and how these target companies become employee-owned, with two key questions in mind: How does an ESOP company accomplish a successful acquisition? What, if any, organizational behavior patterns are associated with this process?"
My Cash Balance Plan Had a Return in 2015 Less Than the Interest Crediting Rate. Now What?
Markley Actuarial
2/8/2016

"The funding requirements of a Cash Balance Plan allow for funding of an unfunded liability over 7 years. If your Cash Balance Plan had an asset balance of $100,000 and the interest crediting rate was 6%, what happens if the Plan had no return in 2015? This means that the Plan had a $6,000 loss which can be funded over the next 7 years ... If the cash is available for this contribution, making the contribution can provide tax benefits and reduce the unfunded liability of the Plan to allow for flexibility in contributions in future years."
Disapproving the Approval Process: IRS Provides Additional Guidance on the Curtailment of the Determination Letter Program
Dechert LLP
2/8/2016 [Guidance Overview]

"[S]ponsors of Cycle A plans who are eligible to obtain an updated determination letter may wish to consider submitting an application for a letter on or before January 31, 2017.... It remains to be seen how much the combination of initial IRS approval, available IRS model language and IRS approval of plan terminations, together with a presumably expanded voluntary-compliance-system, will provide employers with sufficient practical comfort regarding plan establishment and administration."
DOL Issues 2015 Form M-1; No Significant Changes
Thomson Reuters / EBIA
2/8/2016 [Guidance Overview]

"Although there were no significant changes to Form M-1 this year, administrators of MEWAs and ECEs should review the instructions carefully to ensure familiarity with all applicable requirements, as major changes were made a few years ago ... Also, remember that the copy of Form M-1 on the DOL website is only an information copy -- Form M-1 must be filed electronically through the Form M-1 Online Filing System."
New Mortality Tables: Effective Date of 2017 or Later Provides Opportunities to Plan and Make Key Decisions (PDF)
Markley Actuarial via Plan Consultant
2/8/2016

"Although the RP-2014 mortality table has been met with acceptance, the improvements of the MP table are the topic of considerable debate. The Society study did not provide a 'combined' (male and female) mortality table, so the IRS will have to develop this table through the regulations. Furthermore, the IRS must determine whether to apply the mortality in a true multidimensional approach (that is, the mortality for a 60-year-old varies by year of birth), or whether to continue the current approach of utilizing a base mortality table (RP- 2014) with annual improvements from another table (MP) to go beyond 2014."
409A Rules Cast a Very Wide Net in Defining What Constitutes a Nonqualified Deferred Comp Plan
Milliman Retirement Town Hall
2/8/2016 [Guidance Overview]

"Because 409A applies to all 'service providers' ... and 'service recipients' ... its regulatory reach is not limited to just arrangements between 'employers' and 'employees'.... Arrangements covering rank-and-file employees, directors, partners, independent contractors, consultants, and even other organizations potentially bear the risk of being subject to 409A.... 409A applies to any arrangement that provides for a 'deferral' of compensation. Such deferral arrangements may be elective or non-elective. It could be a paragraph in an employment agreement for just one individual or a 50-page document for a group. Even if it is informal (e.g., communicated through an internal memo) or even oral (i.e., the classic 'handshake agreement'), 409A could come into play if a deferral is recognized."
High-Deductible Health Plans: Effects and Alternatives
Robert Wood Johnson Foundation
2/8/2016

"A number of studies have shown that increasing consumers' share of costs reduces their care use.... At least some of the research so far seems to indicate that high deductibles and out-of-pocket expenses reduce use of necessary as well as unnecessary care, particularly in specific populations.... With an increased health system focus on value, one policy to more specifically target unnecessary care use may be value-based insurance design."
California Secure Choice Program: Market Analysis, Feasibility Study, and Program Design Consultant Services (PDF)
Prepared by Overture Financial LLC, for the California Secure Choice Retirement Savings Investment Board
2/8/2016

518 pages; dated Jan. 31, 2016. "About 6.8 million workers are potentially eligible for the California Secure Choice Retirement Savings Program. Likely participation rates (70-90%) are sufficiently high to enable the Program to achieve broad coverage well above the minimum threshold for financial sustainability.... Given its inherent portability, the Program should have a lower incidence of rollovers and cash-outs than employer-sponsored 401(k) plans, which often force workers with low balances to close their accounts. At the same time, pre-retirement withdrawals are likely to be higher for the Program given eligible workers' income profile."

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