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Benefits in the News

Older News | December 18, 2014

arrow icon Ten Steps DC Plan Sponsors should take in 2015

"[1] Evaluate the impact of competing financial priorities on employees' ability to prepare for retirement.... [2] Examine options designed to respond to participants' retirement security needs.... [3] Conduct an in-depth analysis of your current, or future, managed account provider.... [4] Design a structure that is based on the investment behaviors of your participants rather than general market assumptions.... [5] Monitor participants' progress against their retirement goals.... [6] Reconfirm the capital preservation option in your DC plan remains the most appropriate for participants.... [7] Consider the impact disability could have on employees' ability to accumulate funds for retirement ... [8] Customize the plan's auto-features to improve participant outcomes.... [9] Consider the appropriateness of liquid alternatives within the plan.... 10. Complete an annual four-point tune-up of design, fees, operation, and compliance."
arrow icon Congress Extends Transit Benefit Tax Parity but Limited to 2014 (PDF)
Buck Consultants at Xerox
12/18/2014 [Guidance Overview]

"Some employers may have allowed employees to make after-tax elections in 2014 that exceeded the prior $130 limit. It is possible that the IRS will require that employers refund any excess FICA taxes that were withheld for 2014 and adjust the 2014 Form W-2 to reflect the correct income amount for federal income tax purposes. The IRS required similar adjustments when the transit limit was increased retroactively for 2012. Employees cannot retroactively increase their transit elections, however, so employers that did not allow after-tax transit benefit elections in 2014 would not have withholding and reporting adjustment obligations."
arrow icon Text of CMS Quality Rating System (QRS) Frequently Asked Questions (FAQs) (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
12/18/2014 [Official Guidance]

FAQs include: "[1] If a [Qualified Health Plan (QHP)] issuer offers multiple products (e.g., EPO, HMO, POS, PPO) in the Marketplace, can products be combined for the Quality Rating System (QRS) and the QHP Enrollee Experience Survey (QHP Enrollee Survey) reporting? [2] Do the [QRS] and the QHP Enrollee Experience Survey requirements only apply to QHP issuers participating in State-based Marketplaces (SBMs)? [3] What are the deadlines for QHP issuers to contract with data validators and survey vendors in preparation for [QRS]) and the QHP Enrollee Experience Survey data submission? Are these deadlines flexible? [4] Will CMS accept state-mandated quality measure data to meet [QRS] requirements?" [Dated November 16, 2014; published online December 17, 2014.]
arrow icon Text of Amicus Brief by AARP to Supreme Court in Tibble v. Edison (PDF)
Joint Committee on Employee Benefits [JCEB], American Bar Association

"Alarmist arguments that decry an outcome for the petitioners as a death knell for employee retirement plans are cast more heat than light. The ERISA duty of prudence requires fiduciaries of employer sponsored defined contribution plans to regularly monitor and re-evaluate long standing plan investment options. Industry standard of practice has borne out this requirement to include regular re-evaluation of investment share class and fees, a recommendation resoundingly echoed by responsible employers and retirement management consulting groups.... A formalized legal requirement to evaluate existing investment options for imprudent fees will not weaken the 401(k) system. Rather, it merely embraces the procedures that plan sponsors and their fiduciaries should already be following.... Requiring periodic fiduciary consideration of mutual fund fees as part of a prudent investment evaluation merely recognizes a fiduciary duty that is already embraced as standard practice." [Tibble v. Edison International, No. 13-550 (9th Cir. Aug. 1, 2013; cert. pet. granted Oct. 2, 2014)]
arrow icon Text of Federal District Court Opinion Awarding Attorney's Fees to Providers Who Were Not Provided with ERISA Appeal Process by Health Insurer (PDF)
U.S. District Court for the Northern District of Illinois

"The first factor requires a court to consider 'the degree of the offending parties' culpability.' ... Although [Independent Blue Cross (IBC)] may not have acted in bad faith, its failure to follow ERISA's notice and appeal requirements to the detriment of healthcare providers suggests some level of culpability.... As to the second factor, IBC does not dispute that it is able to pay an award of attorney's fees. The third factor also tilts in favor of a fee award, as it will deter other insurers from denying benefits without providing ERISA-compliant notice and appeal procedures. This is particularly important given the fact that cases like this one do not always result in a monetary damage award, at least not a significant award; as a result, insurers have less of a monetary incentive to provide ERISA-compliant procedures until after a suit is initiated. Finally, members of the plan who contract with IBC have benefited from [the Pennsylvania Chiropractic Association's] efforts to ensure that IBC provides adequate notice and appeal procedures. Thus, an award of attorney's fees is appropriate." [Pennsylvania Chiropractic Association v. Blue Cross Blue Shield Association, No. 09 C 5619 (N.D. Ill. Dec. 17, 2014)]
arrow icon IRS Retirement News for Employers, December 18, 2014 (PDF)
Internal Revenue Service [IRS]
12/18/2014 [Guidance Overview]

Topics include: Plan sponsors: [1] Set up a plan by December 31; [2] Retirement plan records; [3] Form 5500-SUP; [4] Plan check-ups -- a retirement plan needs regular care; and [5] Correcting common Roth contribution mistakes. Plan participants: [1] Types of retirement plan contributions; [2] Limit your elective deferrals to the annual amount; [3] Saver's credit; [4] IRA year-end reminders; [5] Required minimum distributions; [6] Changes to the IRA one-rollover-per-year rule. Updated: [1] Mark your calendar -- deadlines for retirement plans; [2] Updates from Department of Labor; [3] Publication 1-EP, Understanding the Employee Plans Examination Process (10-2014); [4] Publication 1020, Appeal Procedures Employee Plans Examinations (11-2014); [5] Publication 4810, Specifications for Electronic Filing of Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits.
arrow icon Text of Federal District Court Opinion: ERISA Did Not Preempt State Law Claims by Former Executive Arising from Agreement to Terminate Benefits Under Section 457(f) Plan in Exchange for Cash Payment (PDF)
United States District Court for the Northern District of Texas

"Kirkindoll could not have brought his state-law claims regarding the March 2011 Agreement under Section 502(a)(1)(B) of ERISA....In his state-law claims regarding the March 2011 Agreement, Kirkindoll does not seek to recover benefits due to him under the terms of an ERISA plan, to enforce his rights under the terms of an ERISA plan, or to clarify his rights to future benefits under the terms of an ERISA plan. Instead, he complains that, by signing the March 2011 Agreement, he was entitled to receive $234,068.18 within 30 days, and that he was never paid as promised.... Kirkindoll does not contend that he is owed the sum of $234,068.18 under the terms of the Plan, nor could he." [Kirkindoll v. National Credit Union Administrative Board, as Conservator of Texans Credit Union, No. 3:11-CV-1921-D (N.D. Tex. Dec. 17, 2014)]
arrow icon Without Direct Employer Action, Alternate Health Care Delivery Models and Payment Reform May Stall at Current Levels
Aon Hewitt

"[W]hile employers find alternative provider delivery models and payment reform attractive, most admit they do not understand them or the value they provide. As a result, they may miss a significant opportunity to lead and improve results (health and financial) for their workforce and business.... Despite their lack of understanding of the models, the survey showed 60 percent of companies are providing or are considering providing a financial incentive for employees and dependents to use these new models through plan design changes, narrow network options, HRA/HSA contributions or cash."
arrow icon Probationary Periods: ACA and California Law are Back in Sync (SB 1034)
Fox Rothschild LLP
12/18/2014 [Guidance Overview]

"Senate Bill 1034 becomes effective January 1, 2015 and repeals the 60-day waiting period limit previously imposed on certain health insurance plans in California. Now employers can go back to the 90-day probationary period with benefits as a reward to employees who 'pass' probation. This comes just in time for the year-end employee handbook updates."
arrow icon What Do Plan Participants Consider When Choosing a Financial Advisor?
Spectrem Group

"[F]or nearly nine-in-ten (89 percent) of retirement plan participants, honesty and trustworthiness are the most important criteria in choosing a financial advisor. Eighty-five percent of retirement plan participants surveyed ... place the highest premium on a financial advisor's transparency and being kept in the look on what they are doing in regard to their investments. For eight-in-ten, a financial advisor's investment track record and fees or commissions charged are the most important factors in choosing an advisor. Other factors retirement plan participants consider important when choosing an advisor include having access to products from a variety of different companies (73 percent), website and online services offered (63 percent) and the renown of the financial advisor's brand or company (61 percent)."
arrow icon Federal Spending Bill Brings Multiemployer Pension Changes in Through the Back Door
Benefits and Compensation with John Lowell

"[F]or employers participating in reasonably well funded plans (green zone), there should not be much that is needed. For the remainder (red zone or yellow zone) of plans, however, employers may need to weigh their options. They might consider doing some or all of the following: [1] Review all of their collective bargaining agreements that cause them to be participating sponsors of multiemployer plans.... [2] If withdrawal from the plan is an option, request a withdrawal liability calculation to see how painful that strategy might be. [3] Consider the pros and cons of remaining in the plan as part of the company's overall risk management strategy. [4] Consider engaging an independent actuary (not affiliated with the plan's actuary) to assist with any strategy decisions."
arrow icon Public Easily Swayed on Attitudes About Health Law
Kaiser Health News

"Six in 10 respondents to the monthly tracking poll from the Kaiser Family Foundation ... said they generally favor the requirement that firms with more than 100 workers pay a fine if they do not offer workers coverage. But minimal follow-up information can have a major effect on their viewpoint, the poll found. For example, when people who support the 'employer mandate' were told that employers might respond to the requirement by moving workers from full-time to part time, support dropped from 60 percent to 27 percent. And when people who disapprove of the policy were told that most large employers will not be affected because they already provide insurance, support surged to 76 percent."
arrow icon 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2013
Employee Benefit Research Institute [EBRI]

"On average, at year-end 2013, 66 percent of 401(k) participants' assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock.... More 401(k) plan participants held equities at year-end 2013 than before the financial market crisis (year-end 2007), and most had the majority of their accounts invested in equities.... Seventy-one percent of 401(k) plans included target-date funds in their investment lineup at year-end 2013."
arrow icon ACO Quality Results: Good But Not Great
Health Affairs

"Opportunity for continued quality improvement aside, a troublesome snag for the program could be a very low correlation between improved quality and earned savings: [the authors'] analysis shows that, in performance year one, improved quality and earned savings only correlate at 8.6 percent, so low that it is statistically insignificant. In practice, this means that better quality is not associated with better financial results."
arrow icon The Future of Technology and Services for Retirement Plans

"Gary Josephs, managing principal at Retirement Benefits Group ... says participants have already benefitted strongly from digital innovation at retirement plan providers, and that it's not hard to picture what the client service portal of the future could look like. He believes providers will eventually create a digital plan experience for participants similar to that of today's iPhone or iPad user."
arrow icon Pension Plans and Derivatives in the New Regulatory Environment: Capital and Margin Concerns and Possible Solutions (PDF)
Cleary Gottlieb, via American Benefits Council

13 presentation slides. "New margin and capital requirements may significantly increase costs and collateral requirements for public and private pension plans and impose significant capacity constraints on banks in connection with listed and over-the-counter derivatives. This is due to uncertainty regarding the treatment of creditors' rights to close out, net and apply collateral in a pension plan insolvency proceeding. [This presentation discusses] several solutions -- all of which will require industry participation -- to these issues."
arrow icon The Dark Side to Uncontrolled Drug Benefits
International Foundation of Employee Benefit Plans [IFEBP]

"Obviously, plan sponsors have financial reasons for steering people toward a generic drug instead of a more expensive (and possibly heavily marketed) brand-name drug. Or for limiting how much of a costly drug people can get at one time. However, putting controls on access to prescription drugs can be healthier for plan participants, benefiting them far more than it might hurt them[.]"
arrow icon FSI to Fight Rollout of State-Sponsored Auto IRAs

"Having states involved in retirement savings squeezes out financial advisers, said David Bellaire, executive vice president and general counsel at the [Financial Services Institute (FSI)]. 'We see this as unnecessary, unwise competition against small [financial advisers] that are working hard to address these needs,' Mr. Bellaire said. 'There's significant research that shows that investors, particularly those that are planning for retirement, have better outcomes when they work with financial advisers.' "
arrow icon Critics Challenge Corporate Wellness Program ROI
Society for Human Resource Management [SHRM]

"Even with the modest rise in health care costs over the past several years, sources familiar with the issue believe businesses have reached a tipping point and that the expense of providing medical benefits to workers has become unsustainable. Cost-containment efforts therefore are putting more pressure on wellness programs to deliver on the promise of reducing health care expenses. However, as ... recent studies have shown, wellness plans may not be producing the return on investment (ROI) that employers expect and need."
arrow icon Obama's myRAs Meant as Complement to Employer-Sponsored Plans, Treasury Official Says
Bloomberg BNA

"President Barack Obama's proposal for 'starter' retirement accounts is meant solely to jump-start savings by workers not currently with access to employer-sponsored retirement plans, a senior Treasury Department official said during a Senate subcommittee hearing. 'Employees who are eligible for employer plans will not be the target audience for the myRAs. They will have many good reasons to continue participating in those plans instead of myRAs, which will complement and not compete with 401(k) or other employer plans,' [according to J. Mark Iwry, Senior Adviser to the Secretary and Deputy Assistant Secretary (Retirement and Health Policy)]."
arrow icon Explaining the ACA Look-Back Measurement Method to Employees
Mintz Levin via Lexology
12/18/2014 [Guidance Overview]

"At bottom, the look-back measurement method for determining an employee's full-time status affects whether and when an employee must be offered group health plan coverage. It is, therefore, something that must be communicated to employees.... For group health plans that are subject to ERISA ... this is the job of [an SPD].... Where an employer wants to get out ahead of the formal ERISA disclosure rules, or where an understanding of ERISA's disclosure requirements is in short supply, some employers have sought to explain the look-back measurement method in a separate memorandum or other informal communication to employees.... Nothing prevents an employer from supplementing the formal ERISA disclosure requirements, and better and more complete communication benefits both the employer and the employee."
arrow icon 'Cromnibus' Spending Bill Makes Significant Changes to Law Governing Multiemployer Pension Plans
12/18/2014 [Guidance Overview]

"The new law makes clear that neither surcharges nor contribution increases required by funding improvement or rehabilitation plans are to be considered (i) to determine a withdrawing employer's allocable share of unfunded vested benefits or (ii) in calculating a withdrawing employer's payment amount. This provision does not apply to increases in contributions other than those required by a funding improvement or rehabilitation plan (for example, contribution increases to provide increased benefits). These changes go into effect for contribution rate increases required during plan years beginning after December 31, 2014."
arrow icon Important Updates and Upcoming Deadlines Concerning Employee Benefits in Puerto Rico
12/18/2014 [Guidance Overview]

"On December 15, 2014, the PR Treasury published Tax Policy Circular Letter 14-05, announcing the limits applicable to Puerto Rico for 2015, including the limits that are incorporated into the Puerto Rico Internal Revenue Code from the U.S. Internal Revenue Code.... Senate Bill P.S. 1189 seeks to extend window period to pre-pay at a reduced rate the tax amounts accumulated under a retirement plan... [The authors] have confirmed with the PR Treasury that an amendment to reflect the outcome of the Windsor decision and the IRS guidance is considered a 'qualification amendment' and, therefore, must be submitted for qualification with the PR Treasury."
arrow icon Reference-Based Pricing and the ACA's Rules on Out-of-Pocket Limits
Segal Consulting
12/18/2014 [Guidance Overview]

"Plan sponsors of non-grandfathered plans that have or are considering a reference-based pricing program must review the program to ensure that it complies with several factors related to quality and access. The Departments will consider all the facts and circumstances when evaluating whether a plan is using a reasonable method to ensure adequate access to quality providers at the reference price, including the following: Type of Service ... Reasonable Access ... Quality Standards ... Exception Process ... Disclosure ... It is likely that existing programs will not fully comply with these new rules, particularly some of the participant disclosure and exception process rules, and will need to be revised."
arrow icon Accounting for Pensions and Other Postretirement Benefits, 2014: Reporting Under U.S. GAAP Among Fortune 1000 Companies
Towers Watson

"For fiscal-year-end 2013, the average discount rate used to calculate the present value of pension obligations was 4.77% -- an increase from 3.94% in 2012. The average return for plan sponsors was 11.46%. At the end of 2013, 76% of companies had projected benefit obligation (PBO) funded status of greater than 80% -- a substantial improvement from 2012, when just 29% had a funded status greater than 80%."
arrow icon 2014 Plan Sponsor ACA and Year-End Checklist (PDF)
Alston & Bird LLP
12/18/2014 [Guidance Overview]

12 pages. "2014 has been another busy year of regulations and guidance affecting health and welfare benefit plans.... Many of the rules and regulations went into effect in 2014, while others were issued in 2014 but will not be effective until 2015 or later.... To help you ensure that nothing slips through the cracks, [this article provides] the highlights for 2014."
arrow icon 2014 Form 5500 Released to the Public
Bond Beebe Accountants & Advisors

"In addition to the changes to the form, there were also two changes made to the instructions worth noting: [1] The instructions now include a warning to check the filing status after e-filing. An error message saying the filing status is 'Processing Stopped' or 'Unprocessable' may indicate a problem with the electronic signature that could cause the form not be acknowledged as being filed. [2] The instructions to line 1c(13) of Schedule H have been changed to elaborate on the definition of interest in registered investment companies."
arrow icon Latest HIPAA Settlement: Compliance is an Ongoing Process
Davis Wright Tremaine LLP

"[OCR Director Jocelyn] Samuels' statements underscore the importance of monitoring information systems and conducting compliance audits. Samuels calls for entities to 'review[] systems for unpatched vulnerabilities and unsupported software that can leave patient information susceptible to malware and other risks.' ... [T]he newly released Experian Data Breach Industry Forecast for 2015 predicts the health care industry will be 'plagued' with data breaches in the coming year, stating that '[t]he potential cost of breaches for the healthcare industry could be as much as $5.6 billion annually.' "
arrow icon Multiemployer Pension Plan Reform: So Now What?
Fox Rothschild LLP
12/18/2014 [Guidance Overview]

"The idea behind the 'Multiemployer Pension Reform Act of 2014' is that by making certain changes to multiemployer pension plans, and specifically to underfunded pension plans, PBGC finances will improve. Of course the first part of this repair is that the annual PBGC insurance premiums for multiemployer plans will double to $26 per participant in 2015, and increase over time."
arrow icon ERISA Issues for Solicitor's Fees

"[T]he person making the referral is receiving 'indirect' compensation (that is, the solicitor's payment by the investment manager), which makes that person a 'covered service provider' or 'CSP.' ... The DOL takes the position that a referral to a discretionary manager is the same as the recommendation of an investment. If it is individualized, based on the particular needs of the plan (or a participant), the DOL says it's a fiduciary act.... 'The fiduciary nature of such advice does not change merely because the advice is being given to a plan participant or beneficiary.' That conclusion means that the CSP should engage in a prudent process and its compensation must be 'level'[.]"
arrow icon State-Based Marketplaces Using 'Clearinghouse' Plan Management Models Are Associated with Lower Premiums
Health Affairs

"State-based Marketplaces using 'clearinghouse' plan management models had significantly lower adjusted average premiums for all plans within each metal level compared to state-based Marketplaces using 'active purchaser' models and the federally facilitated and partnership Marketplaces. Clearinghouse management models are those in which all health plans that meet published criteria are accepted. Active purchaser models are those in which states negotiate premiums, provider networks, number of plans, and benefits."
arrow icon PBGC Final Regs Clarify Treatment of Benefits Rolled Over from DC Plan If DB Plan Is Terminated and Trusteed by PBGC
Wolters Kluwer Law & Business
12/18/2014 [Guidance Overview]

"[A] benefit resulting from rollover amounts generally will be in the second highest priority category of the asset allocation among various classes of benefits and will not be subject to the PBGC's maximum guarantee or phase-in limitations.... The PBGC's goal in issuing the final regulations is to promote lifetime income options for employees by removing the fear that the amounts that 401(k) or other DC plan participants rolled over to DB plans would be restricted under guarantee limits should the PBGC step in and pay benefits."
arrow icon Healthcare Executives Are Vastly Underestimating Changes in Healthcare Utilization
Jeff Hoffman, for HFMA

"For the utilization of inpatient services, on average, executives expect a 3 percent decrease. Per [Milliman Health Care Guidelines (HCG)] benchmarks, a well managed population should expect to see a 30 percent decrease, relative to a loosely managed population. Fifty-three percent of executives expect growth in the utilization of emergency services. HCG benchmarks suggest a 35 percent reduction of visits per person between loosely and well managed populations."
arrow icon Class Action Suits Mounting for ERISA Plan Clawbacks
Healthcare Payer News

"A fractious and potentially costly family of provider-led class action lawsuits [is] moving through courts, pitting accusations of illegal clawbacks against the likes of Aetna and UnitedHealth Group. In New Jersey, a federal judge has certified a class of providers suing UnitedHealth Group for allegedly illegal payment recoupments under ERISA... Similar to complaints against other insurers, the providers suing UnitedHealth allege that the insurer conducted post-payment audits, concluded that it made erroneous overpayments, and then demanded to be repaid[.]"
arrow icon Target Date Funds Make Real Estate a Viable Option for DC Plans
Institutional Investor

"Although it can be difficult for individual investors with smaller portfolios to enter that asset class, more and more funds are being offered within DC plans that provide real estate exposure. Plan sponsors, however, are not adopting these plans in great numbers -- although that may be changing."
arrow icon Top Five 401(k) Plan Trends for 2015
Lawton Retirement Plan Consultants

"For many years 50% of the first 6% was the most common matching formula.... [L]eading edge employers have stretched their matching contributions to 25% of the first 12% ... Just as auto enrollment became commonplace in large plans in recent years, expect annual re-enrollment to become the norm in the next few years.... Expect to continue to see personalized education migrate to predominately online venues.... [E]xpect many more employers to offer Roth 401(k) contribution ability and an in-plan conversion feature.... As employer cost pressures continue, expect more employers to pass on all plan related costs to participants."
arrow icon Treasury Finalizes Rules for New Retirement Savings Account: The myRA

"[T]he new regulations state that the myRA is going to be treated as a Roth IRA. This means all of the interest growth inside the myRA on the new electronic savings bond will come out tax free if certain holding period and trigger events are satisfied. By treating the myRA as a Roth IRA, the Treasury Department also helped exclude myRA account balances from required minimum distribution requirements after age 70-1/2. This could be a big benefit for some individuals looking for tax and investment class diversification."
arrow icon Upcoming Health and Welfare Plan Requirements Checklist for Employers
McDermott Will & Emery
12/17/2014 [Guidance Overview]

"As 2014 draws to a close, employers should turn their attention to several upcoming compliance obligations for the health and welfare benefit plans they sponsor. [In this article] is a list of upcoming health and welfare compliance initiatives that require action by employers, including preparation for upcoming fees and penalties under the [ACA], filing of required forms and distribution of relevant notices."
arrow icon Employers Should Prepare Now for Big Changes Coming to Multiemployer Pension Plans
Polsinelli PC
12/17/2014 [Guidance Overview]

"[E]mployers who have collective bargaining agreements that require contributions to multiemployer pension funds should begin analyzing the potential impact now ... Review the current funded status of each multiemployer pension fund. Request an updated withdrawal liability estimate from each multiemployer pension fund and all supporting documentation ... Consider making inquiries through the fund's employer trustees as to whether the fund will implement any of the changes under the Act.... Review any public statements that union representatives have made regarding the changes under the Act, whether in support of or against such changes.... Re-evaluate the company's risks of continuing to participate in the fund and adjust collective bargaining strategy accordingly."
arrow icon Big Business Promoted Private Pensions to Crush Unions
Bloomberg View
12/17/2014 [Opinion]

"[T]he long, tangled history of U.S. private pensions is equally a story of how business sought to manage labor, conserve profits and block the expansion of a modern welfare state. Research by historians such as Jennifer Klein and Steven Sass helps explain why the U.S. is almost unique in its reliance on private, company-sponsored pensions instead of comprehensive, government-sponsored benefits."
arrow icon IRS Releases Inflation-Adjusted Limits for 2015
Towers Watson
12/17/2014 [Guidance Overview]

"[Rev. Proc. 2014-61 includes] 2015 inflation-adjusted limits for certain benefit-related tax provisions. [This chart] shows the limits that apply to health flexible spending arrangements, qualified transportation fringe benefit plans, adoption assistance programs, qualified long-term care premiums and qualified retirement plans. The chart also identifies the Social Security taxable wage base, personal exemption and standard deduction amounts for 2015."
arrow icon Text of D.C. Court of Appeals Opinion Regarding Liability of 'Related Person' for Premiums to United Mine Workers Health Plan After Employer Ceased Operations and Contributions (PDF)
U.S. Court of Appeals for the District of Columbia Circuit

17 pages. "The Coal Act requires coal operators and 'any related person' to pay for miners' health care in monthly installments. 26 U.S.C. Section 9712(d)(3), (4); see 29 U.S.C. Section 1145. A cause of action to collect such installment payments separately accrues with each missed payment.... Like the MPPAA installment liability, ... Coal Act installment liability separately accrues with each missed payment.... Bibeau maintains that it owes interest only on delinquent contributions... The remedial provision, 29 U.S.C. Section 1132(g)(2), does not distinguish between unpaid contributions and interest ... Accepting Bibeau's approach would mean that if employers were not 'delinquent' for purposes of interest until they received notice from the Plan, then they would also not be 'delinquent' for purposes of unpaid contributions." [Holland v. Bibeau Construction Co., No. 13-7093 (D.C. Cir. Dec. 16, 2014)]
arrow icon Being Proactive v. Reactive: ACA's Prohibition on Discrimination in Group Health Insurance
Benefits Bryan Cave
12/17/2014 [Guidance Overview]

"[T]he IRS has informally indicated that an extension of eligibility to former employees who are [highly compensated individuals (HCIs)] would raise an eligibility discrimination issue, and all former employees should be considered in the test....If the IRS does not change its position when it issues new guidance, ... all former employees will need to be aggregated and tested in a group distinct from active employees. Thus, if the group of former employees extended continued coverage benefits all or mostly HCIs, it will not pass the eligibility test....[If] an insured plan is determined to be discriminatory, the penalty for the employer would be much more severe than the penalty for a discriminatory self-funded plan."
arrow icon There Are No 'Economies of Scale' in 401(k) Plans -- Unless You Are Trying to Beat the Market
Employee Fiduciary
12/17/2014 [Opinion]

"Here is my problem with these 'magic' MEPs. At what level do we achieve 'scale?' And what will be the investment vehicle -- mutual funds? If mutual funds are used, how much will small plan sponsors save? Very few funds have significant minimum purchase requirements, so the savings would be limited. True savings would come from aggregating about $1 billion and hiring institutional investment managers directly -- just like the large pension and endowment plans do now."
arrow icon ACA Cadillac Tax: Essential Issue for 2015 Labor Contract Negotiations
Clifton Budd & DeMaria, LLP

"The Cadillac tax has been recently described as more of a 'Camry' or 'Chevy' tax.... [E]ven ACA-silver tier plans, depending on geographic location, could be subject to the excise tax soon after 2018 due to the tax's thresholds being tied to the general CPI-U, rather than the faster increasing index of health care costs. According to a recent Towers Watson survey, 54% of employer plans will trigger the excise tax by 2020 if current health care benefit strategies remain unchanged.... Employers who will be negotiating new three year contracts in 2015 do not have the luxury of deferring consideration of this issue as the Cadillac tax will begin before the expiration date on such contracts."
arrow icon Tax Extenders Reinstated Temporarily
Michael Kitces in Nerd's Eye View
12/17/2014 [Guidance Overview]

"In its final form, the legislation 'patches' the tax extenders for one year, retroactively reinstating a wide range of provisions that technically lapsed at the end of 2013, to now be available for the current 2014 tax year. This includes the popular rule allowed those over age 70-1/2 to make a qualified charitable distribution (QCD) from an IRA, satisfying the current year's required minimum distributions while simultaneously completing a charitable bequest and excluding the IRA distribution from income entirely for tax purposes, with just enough time left to complete a QCD before year end."
arrow icon Estimating Stock Compensation Volatility

"[This study] found that stock compensation volatility estimates are predicted just as well by using historical volatility as by blending historical with implied volatility. Further, longer-term windows of up to 15 years were shown to outperform the comparable-window forecasts typically in use."
arrow icon American Airlines Settlements to Be Eligible for IRA Rollover

"Both the U.S. House and Senate have passed a bill (H.R. 2591) amending the 2012 FAA Modernization and Reform Act to extend an expired deadline for bankrupt airline employees and former employees who received retirement plan settlements to roll over these settlement amounts to IRAs."
arrow icon More Details on myRA Program; Comerica Identified as Custodian

"The Treasury Department's myRA terms and conditions document, titled 'Master Terms of myRA Custodial Account,' indicates that Comerica Bank is the custodian for myRAs. Earlier this year, the Treasury Department issued a request for proposal seeking a financial partner to administer these custodial accounts. Though not publicly announced, Comerica is identified as providing this service."
arrow icon Teacher Retirement Plans: Case Studies in Washington and Ohio Indicate Value of Defined Benefit Plans (PDF)
National Institute on Retirement Security [NIRS]

"Evidence from these two states suggests that teachers are unlikely to choose an alternative retirement plan design unless the state undertakes significant risk in the individual account portion of the plan. Furthermore, because research suggests that offering a choice could have adverse effects on teacher retention and quality, policymakers should proceed with caution before implementing a choice between a DB pension and a combined DB-DC plan."
arrow icon Text of CMS Bulletin #15: Guidance for Issuers on Special Enrollment Periods Related to the Passive Re-Enrollment Process During the 2015 Open Enrollment Period (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
12/17/2014 [Official Guidance]

"CMS will provide the following Special Enrollment Periods (SEPs) for a small number of Qualified Individuals affected by the passive re-enrollment process. These SEPs will allow certain Qualified Individuals to enroll in a Qualified Health Plan through the Federally-facilitated Marketplace with a January 1, 2015 coverage effective date. The SEPs [listed in a table in this document] are specifically for Qualified Individuals who may otherwise experience a gap in coverage as a result of the passive re-enrollment process ... CMS is providing Qualified Individuals 60 days to select a plan from the later of the following two dates: [1] January 1, 2015; or [2] Five days after the date provided on the enrollment confirmation message."
arrow icon ISS Modifies Elements of Its CEO Pay-for-Performance Test
Meridian Compensation Partners, LLC

"The first modification alters ISS scoring methodology under its quantitative pay-for-performance tests that may result in slightly fewer U.S. companies showing a pay misalignment. The second modification revises ISS's peer group selection methodology for certain energy companies."
arrow icon Tick, Tock: The Time for Year-End Financial and Tax Planning with Equity Comp Is Almost Over

"The clock is running out for year-end decisions that may have a big impact on your equity awards, including restricted stock units or stock options. [This article provides] an introduction to the major issues arising with equity compensation at the close of the year."
arrow icon 2014 Pension Plan Report Card, and Planning Ahead for 2015
P-Solve LLC

"With lower rates and decent asset returns, most plan sponsors will be starting off the New Year worse off then they started 2014.... 2015 will not be as advantageous for offering lump sums; however, sponsors that are looking to systematically de-risk their plans that did not do a cashout window in 2014 may still want to look at offering one in 2015.... Plan sponsors will want to have a game plan for identifying what the 'right' contribution amount is for 2015 as it may be different from the minimum required contributions once all factors are taken into account."
arrow icon De Facto Private Right of Action Under HIPAA: Is Ohio Next?
Thompson Hine

"HIPAA does not provide a private cause of action to individuals affected by a health care privacy breach. This means that an individual whose PHI has been used or disclosed by a health care provider in violation of HIPAA may not bring a civil claim against the health care provider under HIPAA. Moreover, HIPAA specifically preempts any contrary provision of state law ... Recent decisions by state courts, however, have held that HIPAA is the standard industry practice for health care providers and may form the basis for state law negligence claims involving disclosure of patient medical records."
arrow icon Supreme Court Invites Solicitor General Brief on Petition for Certiorari in Vermont ERISA Preemption Case

"Issue: Whether the Second Circuit -- in a two-to-one panel decision that disregarded the considered opinion advanced by the United States as amicus -- erred in holding that [ERISA] preempts Vermont's health care database law as applied to the third-party administrator for a self-funded ERISA plan." [Gobeille v. Liberty Mutual Ins. Co., No. 14-181 (2d Cir. Feb. 4, 2014; cert. pet. filed Aug. 13, 2014)]
arrow icon Text of Superseding Ninth Circuit Opinion: District Court Directed to Consider Surcharge as Equitable Remedy Where Benefits Paid in Error (PDF)
U.S. Court of Appeals for the Ninth Circuit

37 pages. "The opinion filed on June 6, 2014 ... is withdrawn. [This] superseding opinion will be filed concurrently with this order.... [B]ecause the district court made its ruling prior to the Supreme Court's decision in CIGNA Corp. v. Amara, the district court did not consider the availability of the 'monetary remedy against a trustee, sometimes called a 'surcharge,' which the Court held may be 'appropriate equitable relief' for purposes of Section 1132(a)(3). Accordingly, we vacate the district court's ruling that Gabriel is not entitled to any form of 'appropriate equitable relief' and remand for the district court to reconsider the availability of surcharge in this case, and, if available, whether Gabriel has adequately alleged a remediable wrong." [Gabriel v. Alaska Electrical Pension Fund, No. 12-35458 (9th Cir. Dec. 16, 2014)]
arrow icon Findings from the SHRM/EBRI 2014 Health Benefits Survey (PDF)
Employee Benefit Research Institute [EBRI]

"[O]nly 1 percent of plan sponsors are planning to eliminate health benefits in 2015.... A relatively large number of employers continue to introduce wellness rewards and penalties ... Few employers are planning to make changes to eligibility for spousal coverage and part-time worker benefits, and few are moving toward tiered networks, private health insurance exchanges, value-based insurance design, and reference pricing."
arrow icon Multiemployer Pension Plan Reforms: Lessons from the Lame-Duck Session (PDF)
Earl Pomeroy, via American Benefits Council
12/17/2014 [Opinion]

"While Solutions Not Bailouts drew loud opposition, no alternatives to address this problem, other than involving a bailout funded by taxpayers -- a political fantasy -- were presented as alternatives. There is a reason for this: if there were an easier way to save failing pensions, those concerned about the fate of these plans would have embraced it. Pretending something can be fixed less painfully later is not a plan, it's denial. After three years, several congressional hearings and many public events on Solutions Not Bailouts, no serious alternative plans emerged -- a clear indication there were no easy or painless ways to tackle this problem."
arrow icon Lockheed Settles Lawsuit Over Retirement Plan Investments
The Daily Record

"Lockheed Martin Corp. agreed to the provisional settlement of a $1.3 billion lawsuit by workers who claimed the Bethesda-based defense contractor mismanaged their retirement benefit plans, soaking them with fees while depriving participants of returns on company stock at least equal to those of investors on the open market. The accord, which requires court approval, was disclosed [Tuesday, December 16] by U.S. District Judge Michael Reagan ... The workers filed their class action in 2006."
arrow icon Seven Questions to Ask Non-Profit Plan Sponsors
The Principal Blog

"[1] Does your organization's management and board feel confident with the plan's governance and their own responsibilities as plan fiduciaries? ... [2] Who is helping you with your fiduciary due diligence? ... [3] Do you have an investment policy statement and review process in place? ... [4] Do you have an education policy in place? ... [5] What challenges has your organization faced as a result of plan regulatory changes.... [6] If your plan uses multiple providers, or has legacy plan assets with multiple providers, how do you coordinate appropriate administration? ... [7] How are you measuring the success of your plan?"
arrow icon Overview of the Multiemployer Pension Reform Act of 2014 (PDF)
Dexter Hofing LLC
12/17/2014 [Guidance Overview]

8 pages. "Significant changes the Act makes include the following: [1] Repeals the sunset provisions of the Pension Protection Act of 2006; ... [2] Limits the effect that future required contribution increases will have on employer withdrawal liability; [3] Adds to the list of documents that a plan is required to provide to participants, beneficiaries, unions or employers upon request; [4] Increases PBGC premiums to be paid by multiemployer pension plans; ... [5] Modifies rules regarding mergers of plans and partitioning of plans by the PBGC; [6] Adds a new zone status for seriously underfunded plans called 'Critical and Declining' and allows a plan in that status to cut some previously protected benefits; [7] Extends PBGC guarantees to some pre-retirement death benefits."
arrow icon IRS Advisory Committee Asks 403(b) Plan Sponsors and Service Providers to Participate Now in Confidential Online Survey About Plan Compliance Issues
Employee Plans Subgroup, IRS Advisory Committee on Tax Exempt and Government Entities
12/17/2014 [Guidance Overview]

The Employee Plans subgroup of the IRS Advisory Committee on Tax Exempt and Government Entities would like input from the 403(b) plan community -- plan sponsors and vendors/providers alike -- regarding the problems they face/see in administering 403(b) programs and what steps/actions they think the IRS could take to help facilitate the compliance process. Click here to participate in the survey (all responses are anonymous and will not be sent to the IRS).
arrow icon IRS Employee Plans News 2014-23, December 16, 2014 (PDF)
Internal Revenue Service [IRS]
12/17/2014 [Guidance Overview]

Topics include: [1] Certain funding elections for Cooperative and Small Employer Charity Act and eligible charity plans due December 31 2014; and [2] Informational Forms 5500 and 5500-SF, and final Form M-1.
arrow icon CRomnibus includes 'Expatriate Health Coverage Clarification Act' (PDF)
ABD Employee Benefits
12/17/2014 [Guidance Overview]

"The CRomnibus provides a permanent statutory exemption from most of the ACA's requirements for statutorily-defined 'expatriate health plans.'... Expatriate health plans now officially qualify as an eligible employer-sponsored plan that is minimum essential coverage. This means that an expatriate health plan will satisfy the enrollee's individual mandate.... [T]he exemption does not apply for the new health information reporting requirements for the beginning of 2016."
arrow icon State of the Insured Retirement Industry: 2014 Review and 2015 Outlook
Insured Retirement Institute [IRI]

20 pages. "[As] Boomers increasingly work to calculate savings goals and contemplate their expected expenses and longevity, they are becoming less confident in their ability to achieve a successful retirement. But when those investing for retirement work with financial professionals and/or incorporate annuities into their retirement strategies, they report being better prepared and more confident.... Despite some macroeconomic challenges, the insured retirement industry is financially sound and in a strong position to expand its share of the retirement market as continually evolving demographics lead to increased consumer demand."
arrow icon Guidance on Reimbursing Individual Health Insurance Premiums and Offering High-Risk Employees a Choice Between Enrollment and Cash
Sibson Consulting
12/17/2014 [Guidance Overview]

"In some circumstances, it is acceptable to provide more favorable treatment based on a health factor, a practice known as benign discrimination. For example, some plans allow disabled dependents to remain covered past age 26. However, the Departments state that offering cash in lieu of coverage only to employees with high medical claims risk is not a permissible form of benign discrimination under the HIPAA rules."
arrow icon Text of Amicus Brief by Pension Rights Center to Supreme Court in Tibble v. Edison (PDF)
Pension Rights Center

"Participants should be permitted to enforce the fiduciary duty to review and replace imprudent investments more than six years after the funds were chosen in light of the mechanics of the market for mutual funds available to 401(k) plans. Participants in plans managed by fiduciaries who do not comply with the duty to review and replace imprudent investments will pay unnecessarily high fees on their retirement savings. Further, insulating fiduciaries from claims challenging their failure to monitor mutual fund expenses after six years will reduce competition over fees and raise the cost of mutual fund investments in 401(k) plans, thereby eroding the retirement savings of American workers." [Tibble v. Edison International, No. 13-550 (9th Cir. Aug. 1, 2013; cert. pet. granted Oct. 2, 2014)]
arrow icon Text of Eighth Circuit Opinion Upholding 'Prejudice and Good Faith' Standard When Awarding Penalties for Failure to Provide COBRA Notice (PDF)
U.S. Court of Appeals for the Eighth Circuit

"The Coles finally contend the district court abused its discretion by considering the wrong factors when declining to award statutory penalties.... We believe instead the district court did not abuse its discretion where there was no evidence Trinity Health willfully failed to notify the Coles of their COBRA rights or of the retroactive termination of their coverage, and where the district court reasoned 'if Trinity Health intended to act in bad faith, free health care coverage would not have been extended to the Coles.' " [Cole v. Trinity Health Corp., No. 14-1408 (8th Cir. Dec. 15, 2014)]
arrow icon The Importance of Workplace Retirement Plans and Guaranteed Lifetime Income (PDF)

"The latest [National Retirement Risk Index (NRRI)] update indicates that the percentage of households at risk of being unable to maintain their pre-retirement standard of living has improved slightly to 52 percent, from 53 percent three years earlier.... Twenty percent of households with a DB plan through their current employer are at risk of not being able to maintain their living standard in retirement, while 53 percent with only a DC plan are at risk. The percentage of households at risk jumps to 68 percent when the household does not currently participate in a workplace retirement plan of any kind."
arrow icon Multiemployer Pension Reform Bill Passed by Congress, Obama Expected to Sign
Segal Consulting
12/16/2014 [Guidance Overview]

"MEPRA reflects many of the recommendations included in Solutions not Bailouts, the Report issued by the Retirement Security Review Commission of the National Coordinating Committee for Multiemployer Plans [NCCMP]. The one receiving the most attention is the provision that gives trustees of deeply troubled plans the ability to help their plans avoid insolvency by reducing some benefits (including benefits in pay status), subject to various safeguards and requirements. This Bulletin briefly describes the key provisions of MEPRA, which generally become effective for plan years beginning on or after January 1, 2015."

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