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Older News | May 24, 2015

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arrow icon The Funded-Status Seesaw and DB Decision-Making

"While it's not impossible, and it won't necessarily be painless, [there are] three ways that funded status can increase: [1] Contributions are made to the plan. [2] Interest rates rise. [3] Plan assets return more than the plan liability. The first route has little -- or no -- risk ... [S]ponsors have been waiting years, basically, for the rate to rebound and maintain a rate above, say, even 6%.... Whatever the choice to manage or transfer risk, the investment strategy to do so and its precise execution are critical to its success."
arrow icon Documentation Hardship for Hardships (and Participant Loans, Too)
Benefits Bryan Cave
5/22/2015 [Guidance Overview]

"[It] may be impossible for many recordkeepers to 'transfer' the hardship and loan documentation in electronic format to the plan sponsor. But every plan sponsor should probably request it from the recordkeeper and request that the electronic data be transmitted to the plan sponsor with each future hardship distribution and each participant loan. And, then, of course, there's the fiduciary obligation to review the information and make certain of compliance with the rules since the plan sponsor may not be able to rely on the recordkeeper to do that. And failing or refusing to do this, maybe the IRS's real objective will be met -- the plan will be amended to eliminate participant loans and hardship distributions in order to avoid leakage."
arrow icon Coalition Letter to Senators Supporting Small Group Expansion (S. 1099) Legislation (PDF)
Society for Human Resource Management, U.S. Chamber of Commerce, and 17 other trade associations
5/22/2015 [Opinion]

"[We] applaud your introduction of legislation (S. 1099) maintaining the current definition of a small group market as 1-50 employees, and giving states the flexibility to expand the group size if the market conditions in their state necessitate the change.... Repealing the ACA-mandated expansion and returning to the historical role of state determination would allow flexibility and ensure a broad array of coverage options and mitigate dramatic premium increases. Expanding the small group market to include groups up to 100 at this time would reduce choice for this segment of the market.... [E]xpanding the small group market to include all groups with up to 100 employees would have an immediate impact on premiums due to new rating rules, required Essential Health Benefits, and minimum actuarial value and cost sharing requirements."
arrow icon Three Considerations Before Allowing Your Employer to Make Your 401(k) Decisions

"[M]ore employers have ... [adopted] plans where employees must actively choose not to participate or 'opt-out'. If they ignore the paperwork and do nothing, they'll be automatically enrolled in their employer's 401(k) plan and begin accumulating retirement funds. It sounds like a good thing; a way to turn inertia into something positive. You don't have to do a thing and your retirement savings begin to accrue. But the question remains, should you just sit back and let your employer make your 401(k) decisions for you?"
arrow icon Medicare Physician Payment Rates: Better Data and Greater Transparency Could Improve Accuracy
U.S. Government Accountability Office [GAO]

"The American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a process in place to regularly review Medicare physicians' services' work relative values (which reflect the time and intensity needed to perform a service). Its recommendations to [CMS] ... may not be accurate due to process and data-related weaknesses.... The Protecting Access to Medicare Act of 2014 included a provision for GAO to study the RUC's process for developing relative value recommendations for CMS.... CMS should better document its process for establishing relative values and develop a process to inform the public of potentially misvalued services identified by the RUC. CMS should also develop a plan for using funds appropriated for the collection and use of information on physicians' services in the determination of relative values."
arrow icon 'Cadillac Tax' a Major Roadblock to Consumer-Driven Health Plans (CDHPs) and Affordable Health Care (PDF)
Employers Council on Flexible Compensation [ECFC]

A two-page flier describing the Cadillac Tax, how it is assessed, and its impact on consumer-driven health plans.
arrow icon The Titanic Redux (PDF)
Chelko Consulting Group

"We've all heard the phrase, 'Doing that is like rearranging the deck chairs on the Titanic.' The point of the phrase is to call out the disproportionality of action taken in the face of a really big problem. And so it may be when we consider three heavily promoted health care cost management techniques: [1] Consumerism / High Deductible Health Plans, [2] the Defined Contribution Approach to determining the amount of employer health plan subsidies, and [3] Private Exchanges."
arrow icon Lessons for Advisers from Supreme Court's Decision on 401(k) Excessive Fees Lawsuit
Investment News

"In the past, advisers were able to go about their business with retirement plans and only know about the investments that go into the menu. Nowadays, with the Labor Department releasing its fiduciary proposal and with plaintiffs' attorneys scoring wins for employees, 'advisers have to be mini ERISA lawyers,' [said Marcia Wagner, managing director of The Wagner Law Group]. 'They have to understand not just how you invest and what's prudent, but they have to understand the law, the terminology and the statute of limitations.' "
arrow icon High Court Affirms Ongoing Duty to Monitor Plan Investments, but Says Little on Scope of that Duty (PDF)
Buck Consultants at Xerox

"The Court acknowledged the Ninth Circuit's point that 'characterizing the mere continued offering of a plan option, without more, as a subsequent breach would render the statute of limitations meaningless. ' Thus, according to the Court, there exists an as yet unspecified threshold lower than the Ninth Circuit's 'significant change in circumstances' for bringing a breach of fiduciary duty claim concerning investments selected prior to the six-year window.... ERISA's limitations period has stymied efforts to challenge the prudence of investments that have long been part of a plan's line up. This ruling may pry open the door for many such challenges." [Tibble v. Edison Int'l, No. 13-550 (U.S. May 18, 2015)]
arrow icon Text of Letter from Senators to President Obama Requesting Clarification on Application of ERISA to State-Based Retirement Savings Programs (PDF)
26 U.S. Senators

"We respectfully request that you ask the [DOL] and the Department of the Treasury to ... clarify that: [1] California's and Illinois' Secure Choice Retirement Savings Programs, and similar IRA-based programs enacted in the future, are not preempted by ERISA; [2] the retirement savings vehicles created by those laws, and similar IRA-based vehicles created by the laws of other states in the future, are not 'plans' subject to ERISA; and [3] contributions to the savings vehicles created by those laws, and similar IRA-based vehicles created by the laws of other states in the future, are tax-preferred at the federal level. Furthermore, please provide specific guidance on what other types of state-based IRA vehicles are not to be subject to ERISA, including information on the program features that could be adopted without triggering ERISA."
arrow icon Analysis of the DOL Fiduciary Proposal's Impact on Independent Registered Investment Advisers
Drinker Biddle
5/22/2015 [Guidance Overview]

"A recommendation to a participant to take a distribution, and advice regarding the investment of assets to be rolled over to an IRA, are fiduciary investment advice under the proposed regulation. This is in contrast to existing guidance in DOL Advisory Opinion 2005-23A ... In other words, the proposal applies to a recommendation, regardless of whether the adviser already is a fiduciary to the plan and regardless of whether the adviser is otherwise providing services to the plan or participant.... For an RIA who is not already serving as a fiduciary to a plan, the proposal could be significant."
arrow icon The Actuarial Approach: Periodic Matching of a Retiree's Assets and Liabilities
Ken Steiner, FSA Retired

"[A]ny spending approach that does not periodically match a retiree's assets with her liabilities runs a significant risk of failing to achieve the retiree's spending objectives.... This [article] illustrate[s], with an example, the matching of assets and liabilities achieved by the Actuarial Approach[.]"
arrow icon IRS Further Explains Large-Employer ACA Reporting
Thompson SmartHR Manager
5/22/2015 [Guidance Overview]

"Under the new guidance, if a large employer's workforce is comprised entirely of part-time employees who were not full-time in any month of the year, it does not have to submit a Form 1095-C. The guidance also indicates how to report on coverage to employees during their months of hire and termination, and provides more details on reporting COBRA coverage for three categories of COBRA qualified beneficiaries."
arrow icon Philadelphia Paid Sick Leave Law Takes Effect (PDF)
Buck Consultants at Xerox
5/22/2015 [Guidance Overview]

"The new law requires employers with at least 10 employees to provide paid sick leave and smaller employers to provide unpaid leave.... As Philadelphia's sick leave ordinance took effect, the state legislature was considering preempting local leave laws. The state Senate has already passed a bill (SB 333) that would apply retroactively to January 1, 2015 to prevent Pennsylvania municipalities from imposing their own sick leave requirements on businesses."
arrow icon FASB Eases Benefit Plan Measurement Date Rules

"For employers with a fiscal year-end that does not coincide with a month-end, the amendments will permit the entity to adopt an accounting policy to measure benefit plan assets and obligations as of the month-end closest to the fiscal year-end. If this policy is adopted, the practical expedient must be applied consistently to all of its plans. For any employer that must remeasure plan assets and obligations in an interim period due to a significant event, the amendments allow the entity, on an event by event basis, to remeasure the plan using the month-end closest to the date of the significant event."
arrow icon Americans Are Aging, But Not as Fast as People in Germany, Italy and Japan
Pew Research Center

"[In] the United States, the share of people aged 65 or older will rise dramatically by 2050. However, the U.S. isn't experiencing the same gray wave that many other developed nations in Europe and Japan are. At least one-in-five people in Japan, Germany and Italy are already 65 or older, and most other European countries are close behind. In the U.S., 13% of the population is 65 or older, ranking the country 42nd on this measure out of about 200 other places in 2010[.]"
arrow icon President Obama Taps Thomas Reeder as PBGC Director
Pensions & Investments

"Mr. Reeder, whose nomination was announced Wednesday, has served as health-care counsel at the Internal Revenue Service since March 2013. He was senior benefits counsel on the Senate Finance Committee staff from 2009 to 2013, and held numerous tax policy positions with the Department of Treasury. He has also worked in private law practice."
arrow icon ACA FAQs Address Coverage of Preventive Services
The Wagner Law Group
5/22/2015 [Guidance Overview]

"FAQ XXVI clarifies that if a provider recommends a particular type [of contraception] as medically necessary for an individual, the group health plan must defer to the professional's determination. Medical necessity considerations include the severity of side effects, differences in permanence and reversibility of contraceptives, and an individual's ability to appropriately use the item or service."
arrow icon Where There's Smoke There's Questions: Designing Compliant Wellness Programs That Target Tobacco Use
Verrill Dana LLP
5/22/2015 [Guidance Overview]

"[1] Is it acceptable to design a program where employees who use tobacco may avoid a higher insurance premium (or surcharge) only by quitting tobacco use? No.... [2] Are there any limits to the 'reasonable alternative standard' an employer can require for tobacco users to obtain the reward? Yes.... [3] Is it acceptable to design a program that restricts participation in certain health benefit options to employees who are tobacco-free (i.e., maintain a tobacco-free 'threshold' requirement for participation in certain health plans)? Generally, no.... [4] Does it matter whether an employer characterizes the different treatment of employees who use tobacco (and refuse to complete an alternative standard) and tobacco-free employees as a penalty or a reward? No."
arrow icon The Impact of Same-Sex Marriages on Benefit Plan Administration
Bloomberg BNA

"If the Court concludes that same-sex couples have a fundamental right to marriage or that states must recognize same-sex marriages lawfully performed out-of-state, then health plans that define a spouse as a member of the opposite sex will need to be amended to cover lawfully married same-sex spouses. In addition, employers would no longer be able to cherry pick the types of spousal benefits they provide and would have to make available the same benefits to same-sex married couples that they currently offer opposite-sex married couples."
arrow icon Eliminating the Company Stock Fund from Your Public Company's 401(k) Plan: Navigating the Securities and ERISA Fiduciary Issues (PDF)
Jenner and Block LLP, for American Benefits Council

33 presentation slides. Topics include: [1] Types of sunsetting; [2] Why it can be problematic; [3] Process; [4] SOX Blackout? [5] Company stock via brokerage window? [6] Impact of Dudenhoeffer and Tatum; [7] Fiduciary override; [8] Settlor action by the company; [9] Securities disclosure -- materiality; [10] Potential dangers of non-disclosure; [11] Best Practices.
arrow icon In-Plan Income Guarantees Available to More Retirement Plan Participants in 2014

"3 million participants have access to an in-plan income guarantee through their employee-sponsored retirement plan in 2014, a 32 percent increase from 2013.... [T]here was a 24 percent increase in the number of participants electing an in-plan guarantee to reach 71,300 in 2014. In 2014, the number of retirement plans offering in-plan guarantees grew 41 percent totaling 33,500 and over 132 billion in assets are in plans that offer a in-plan guarantee, up 27 percent compared with 2013."
arrow icon Two-Headed Nightmare: The Robos and the DOL
Kerry Pechter, of Retirement Income Journal, via LinkedIn
5/22/2015 [Opinion]

"The robo-advice threat and the DOL conflict-of-interest threat are two parts of the same threat to traditional distribution. Both aim to make the distribution of financial products and services less expensive, more objective and more transparent -- i.e., more consumer-friendly. Of the two, you should be more worried about the digital threat. Consider the DOL its messenger."
arrow icon Testimony to House Oversight Subcommittee Hearing on the Use of Administrative Actions in the Implementation of the ACA (PDF)
Elizabeth P. Papez, Esq., of Winston & Strawn LLP

11 pages. "[T]his Subcommittee recently questioned whether the administration's employer coverage and cost sharing regulations exceed constitutional limits and intrude upon Congress's legislative and appropriations authority. Parallel challenges to agency implementation of the Act's cost-sharing and premium tax credit provisions have also made their way into two pending lawsuits. Regardless of their outcome, these suits and the ongoing disagreement between the political branches regarding ACA's implementation highlight the constitutional obligations and risks that attend administration of complex legislation, and underscore the need for continuing legislative oversight." [Ms. Papez is Former Deputy Assistant Attorney General, Office of Legal Counsel, U.S. Department of Justice.]
arrow icon Republican Proposals for King v. Burwell Ruling
Health Care Lawsuits, a project of the Independent Women's Forum

"Top Republican legislators are pondering how to respond should the Supreme Court rule that the federal ObamaCare subsidies are illegal in 37 states (the states that didn't establish their own health insurance exchanges).... [T]hese subsidies trigger the individual and employer mandates in those states, meaning this ruling could significantly impact the way ObamaCare works. Here are a few Republican proposals for how to respond in this scenario[.]"
arrow icon Health Insurers Seek Hefty Rate Boosts
The Wall Street Journal; subscription may be required

"In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3% increase. In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products. Moda Health, the largest insurer on the Oregon health exchange, seeks an average boost of around 25%. All of them cite high medical costs incurred by people newly enrolled under the Affordable Care Act."
arrow icon Financial Literacy and Decisionmaking Among College-Educated Hispanics (PDF)
TIAA-CREF Institute

"This report examines the financial practices, experience, literacy and condition of college-educated Hispanics, i.e., those with high school degrees who report at least 'some college' as their highest level of educational attainment, to shed light on their overall financial capability. This group is seldom the singular focus of analysis. To our knowledge there are no other reports that comprehensively examine the personal finances of Hispanics with this level of education. This report can thus serve as a baseline for future research on the personal finances of college-educated Hispanics."
arrow icon The #1 Reason Multiemployer Plans Fail a DOL Audit
International Foundation of Employee Benefit Plans [IFEBP]

"Multiemployer plan trustees have a fiduciary duty under ERISA to make sure the fund is receiving all employer contributions that are due, based on participants' hours worked. This means they must follow up when employers neglect to send their contributions on time (in other words, when they're delinquent). This also means trustees need to make sure that the correct amounts are received. If trustees neglect this fiduciary responsibility, they can be personally liable. They help fulfill this duty by having a payroll audit performed by a knowledgeable and experienced auditor."
arrow icon EEOC Proposes Wellness Program Rule
Hodgson Russ LLP
5/21/2015 [Guidance Overview]

"While the standard in the Proposed EEOC Rule for determining whether a program is reasonably designed to promote health is similar to the standard articulated in the FAQ guidance, the HIPAA Wellness Rule standard applies only to health-contingent programs while the standard in the Proposed EEOC Rule applies to all wellness programs, including participatory programs.... The Proposed EEOC Rule provides that offering a reasonable alternative standard and giving notice to the employee of that alternative as part of a health-contingent program under the HIPAA Wellness Rule would likely fulfill an employer's obligation to provide a reasonable accommodation under the ADA. The EEOC goes on to note, however, that the ADA requires employers to provide reasonable accommodations for participatory programs even though the HIPAA Wellness Rule does not require participatory programs to provide reasonable alternative standards."
arrow icon Exchange-Only Health Plans Average Higher Premiums Than Competitors That Sell Plans Both On and Off-Exchange

"[H]ealth plans that are only sold through exchanges averaged higher premiums than health plans that were sold both on-exchange and off-exchange. The biggest difference in average premiums was for bronze plans, where premiums were approximately 15% more expensive on average for exchange-only plans. Exchange-only silver plans were nearly 7% more expensive than their on/off-exchange competitors and gold plans were approximately 5% more expensive."
arrow icon Missouri Rep. Ann Wagner Wages 'War' Against DOL Fiduciary
Investment News

"A leading opponent of a Department of Labor proposal to raise investment-advice standards for brokers working with retirement accounts is pursuing an aggressive strategy -- that includes denying the agency funds to implement it -- to stop the rule.... Ms. Wagner argues that the rule would significantly raise regulatory and liability costs for brokers and price them out of serving the middle-income market of retirement savers."
arrow icon Latest Twist on the Annuity Hits the Market: The Retirement Spending Account
Investment News

"An investment account is more flexible than an annuity: If there's an emergency, you can sell it. If you die young, your heirs get the proceeds. But there's no guarantee it will last if you live longer than you expect.... Another downside to the Natixis product is its annual fee of about 1% of assets per year. Because it is sold only through financial advisers, that's on top of any fees they charge for advice."
arrow icon Text of OPM Final Regs: Federal Employees Health Benefits Program -- Subrogation and Reimbursement Recovery
Office of Personnel Management [OPM]
5/20/2015 [Official Guidance]

"[OPM] is issuing a final rule to amend the Federal Employees Health Benefits (FEHB) Program regulations to reaffirm the conditional nature of FEHB Program benefits and benefit payments under the plan's coverage as subject to a carrier's entitlement to subrogation and reimbursement recovery, and therefore, that such entitlement falls within the preemptive scope of the FEHA Act. FEHB contracts and brochures must include, and in practice already include, a provision incorporating the carrier's subrogation and reimbursement rights, and FEHB plan brochures must contain an explanation of the carrier's subrogation and reimbursement policy."
arrow icon Notre Dame Birth Control Protest Denied Again

"In a two-to-one ruling, the U.S. Court of Appeals for the Seventh Circuit cleared the way for a trial of the university's challenge but denied any immediate religious exemption. This marked the first time that a federal appeals court had rejected a claim that the Supreme Court's ruling last June in the case of Burwell v. Hobby Lobby Stores should shield a non-profit religious organization from any role whatsoever in carrying out the [ACA's] contraceptive mandate. The issue seems certain to return to the Justices, probably next Term, although Notre Dame could try to get some temporary relief by returning quickly to the Supreme Court." [Notre Dame v. Burwell, No. 13-3853 (7th Cir. May 19, 2015)]
arrow icon Text of Seventh Circuit Opinion: Injunction Again Denied to Notre Dame in Contraceptive Mandate Case (PDF)
U.S. Court of Appeals for the Seventh Circuit

50 pages. "[B]ased on the sparse record before us, there is a strong argument that given the government's legitimate interest in the provision of contraceptive coverage to women without cost to them, notice to the government would strike the proper balance between legitimate governmental and sincere religious interests. That was the accommodation sought and received by Wheaton College... All of Notre Dame's suggested alternatives would impose significant financial, administrative, and logistical obstacles by requiring women to sign up for separate coverage either with a government agency or with another private insurer. Such obstacles were considered by the Supreme Court in Hobby Lobby in support of the same accommodation that Notre Dame refuses to accept.... The burden of establishing an entitlement to a preliminary injunction was of course on the university, not on the government. The burden has not been carried." [Notre Dame v. Burwell, No. 13-3853 (7th Cir. May 19, 2015)]
arrow icon Subcommittee Chairman's Statement at Hearing on the Use of Administrative Actions in ACA Implementation
Subcommittee on Oversight, Committee on Ways and Means, U.S. House of Representatives
5/20/2015 [Opinion]

"The question before us is not whether the Administration is implementing the healthcare law. It's whether the Administration is undermining the rule of law. And the answer is yes. This Administration is too eager to take unilateral actions to resolve thorny political problems. It has created a false narrative that Congress is unwilling to take on these challenges. In fact, as we will hear today, Congress has amended the Affordable Care Act over a dozen times. The Administration's problem is that they are acting out of expediency, but not following the Constitution. So, the old phrase comes to mind, 'the road to Hell is paved with good intentions.' "
arrow icon Text of IRS Q&As About Employer Information Reporting on Form 1094-C and Form 1095-C
Internal Revenue Service [IRS]
5/20/2015 [Official Guidance]

18 Q&As, covering: [1] Basics of Employer Reporting: Questions 1-5; [2] Reporting Offers of Coverage and other Enrollment Information: Questions 6-13; [3] Reporting for Governmental Units: Questions 14-15; and [4] Reporting Offers of COBRA Coverage: Questions 16-18.
arrow icon Text of IRS Q&As on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056), updated May 20, 2015
Internal Revenue Service [IRS]
5/20/2015 [Official Guidance]

Topics include: [1] Basics of Employer Reporting: Questions 1-4; [2] Who is Required to Report: Questions 5-12; [3] Methods of Reporting: Questions 13-17; [4] How and When to Report the Required Information: Questions 18-31.
arrow icon Aetna Fined for Violating Autism Coverage Law
Courthouse News Service

"Aetna Life and Health Insurance will pay up to $4.5 million to settle claims they failed to cover diagnosis and treatment of autism spectrum disorders. [Missouri] Gov. Jay Nixon announced the settlement Tuesday, which includes the state's largest fine ever for insurance law violations.... In the settlement, Aetna admitted that it failed to offer autism coverage in some cases.... Aetna also admitted it violated the autism mandate in 2012 and paid a $1.5 million fine under a settlement agreement, which required it to undertake a full and complete audit to ensure compliance. Aetna admitted it did not perform the full compliance audit."
arrow icon Companies Look to Transition Retirees to Health Exchanges
Aon Hewitt

"Challenges and opportunities created by the Affordable Care Act are prompting two-thirds of companies to consider altering their pre-65 retiree health strategies over the next few years ... Of those, 35 percent are favoring sourcing health coverage through the public exchanges under a defined contribution approach. Twenty-eight percent are considering eliminating pre-65 retiree coverage and subsidies altogether."
arrow icon PBGC Launches Pilot Program for Smaller Asset Managers
Pension Benefit Guaranty Corporation [PBGC]

"Earlier this month, PBGC published a pre-solicitation notice for smaller asset managers to invest in a U.S. fixed income portfolio with allocations ranging from $50 million to $250 million. This program creates new opportunities for smaller asset managers by reducing the required amounts of the assets they manage and their mandates. Before the pilot program, these contracts were out of reach to the firms because the minimum amounts of the investments, often in the billions, were too large for the firms to accommodate."
arrow icon Institutionally Priced Retirement Income Solutions Deliver More Income (PDF)
Institutional Retirement Income Council [IRIC]

"Plan sponsors can use their bargaining power, scale, ability to standardize, and distribution efficiency to improve the retirement security of plan participants by offering their retiring plan participants a limited selection of retirement income generators (RIGs) that take advantage of institutional pricing rather than retail pricing.... This article examines three RIGs that can be offered in employer-sponsored DC plans: systematic withdrawals, immediate annuities, and guaranteed lifetime withdrawal benefits (GLWB, which are also known as guaranteed minimum withdrawal benefits, or GMWB).... [The authors] compare how each RIG performs assuming institutional pricing typically available within a DC plan relative to retail pricing typically available outside a DC plan."
arrow icon 26 Senators Ask Obama to Remove Barriers to State-Based Retirement Savings Programs
National Association of Plan Advisors [NAPA]

"More than a quarter of the U.S Senate -- including the ranking members of the Senate HELP and Finance Committees -- have asked the Obama administration to act quickly to remove 'any potential uncertainty' regarding the legality of various state-based retirement programs. The letter, addressed directly to President Obama, requests that the Department of Labor and Treasury ... ensure that ... the 'Secure Choice Retirement Savings' programs in California and Illinois, as well 'similar IRA-based programs enacted in the future,' are not preempted by ERISA[.]"
arrow icon DOL's Proposal to Expand Fiduciary Definition Would Bring Many Service Providers Into Scope
Morgan Lewis
5/20/2015 [Guidance Overview]

10 pages. "The reproposed definition of 'fiduciary' is intended to expand the scope of activities that will result in fiduciary status and application of the prohibited transaction rules, particularly covering many services that broker-dealers and other financial advisers provide to plans, plan participants, and Individual Retirement Account (IRA) owners. The DOL has provided exceptions for certain activities that, in its view, should not result in fiduciary status. The reproposal leaves ope n questions about what types of investment-related activities or communications may still be viewed as nonfiduciary even though they do not fall within one of the six carve-outs."
arrow icon California Pressured to Explain Why It Revoked Blue Shield Not-for-Profit Status
Kitsap Sun

"The California Franchise Tax Board decided in August that Blue Shield of California, the state's third-largest health insurer, no longer qualified for exemption from state taxes as a not-for-profit company. The decision was noted in government records but the public didn't hear about it until March this year when a newspaper reported the change.... Blue Shield of California covers about 3.4 million people, making it the state's third-largest health insurer behind not-for-profit Kaiser Permanente and for-profit Anthem. Blue Shield, with about 5,000 employees, reported $13.6 billion in revenue last year."
arrow icon Did We Get the 'Old-Age Dependency' of Aging Countries All Wrong?
The Brookings Institution
5/20/2015 [Opinion]

"Over the coming decades, many countries in the developed and developing world alike will significantly age.... Are we then doomed to be overwhelmed by old folks who are after the young folks' money? Will every future worker not only have to work for himself, but also support half (or more) of the income of a retired person? Are we looking at a new society that will be dominated by people dependent on other people's work and income? ... The old-age dependency ratio has a fundamental weakness: its current definition still makes us believe that after 65 you become an 'old-age dependent.' Yet this will simply not be true in the future."
arrow icon Essential Health Benefits: List of the Largest Three Small Group Products by State, Updated May 19, 2015 (PDF)
Center for Consumer Information and Insurance Oversight [CCIIO], Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]

"This document provides information to facilitate States' selection of the benchmark plans that will serve as the reference plan for the essential health benefits (EHB). Using data from and States, this document provides a list of the three largest small group insurance products ranked by enrollment in the first quarter of 2014 for each State. In addition, we are providing a list of the three largest nationally available Federal Employee Health Benefit Program (FEHBP) plans, which is another benchmark option under 45 CFR 156.100(a). We are also providing the single largest Federal Employees Dental and Vision Insurance Program (FEDVIP) dental and vision plans respectively, based on enrollment in the first quarter of 2014."
arrow icon Largest U.S. Pension Funds Divided on Use of Shareholder Activism
The Wall Street Journal; subscription may be required

"Decades ago, Calpers became one of the first U.S. pensions willing to publicly challenge companies' policies and performance while Calstrs had little presence in the activist world. Those roles flipped in recent years amid a new wave of investor activism. Calpers kept its disagreements with companies mostly behind closed doors while Calstrs publicly called for breakups, sales and other operational changes sought by activist funds -- and in some cases invested side-by-side with them."
arrow icon Text of SEC Proposed Rule: Investment Company Reporting Modernization (PDF)
U.S. Securities and Exchange Commission [SEC]
5/21/2015 [Official Guidance]

506 pages. "The [SEC] is proposing new rules and forms as well as amendments to its rules and forms to modernize the reporting and disclosure of information by registered investment companies.... We have historically acted to modernize our forms and the manner in which information is filed with the Commission and disclosed to the public in order to keep up with changes in the industry and technology.... Our proposed reforms seek to [1] increase the transparency of fund portfolios and investment practices both to the Commission and to investors, [2] take advantage of technological advances both in terms of the manner in which information is reported to the Commission and how it is provided to investors and other potential users, and [3] where appropriate, reduce duplicative or otherwise unnecessary reporting burdens on the industry."
arrow icon SEC Proposes Rules to Modernize and Enhance Information Reported by Investment Companies and Investment Advisers
U.S. Securities and Exchange Commission [SEC]
5/21/2015 [Guidance Overview]

"The investment company proposals would enhance data reporting for mutual funds, ETFs and other registered investment companies. The proposals would require a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that would require census-type information. The information would be reported in a structured data format, which would allow the Commission and the public to better analyze the information. The proposals would also require enhanced and standardized disclosures in financial statements, and would permit mutual funds and other investment companies to provide shareholder reports by making them accessible on a website."
arrow icon Mandatory E-Filing Under PBGC Proposed Rule Applies Only to Notices to PBGC
Pension Benefit Guaranty Corporation [PBGC]
5/21/2015 [Guidance Overview]

"PBGC has received inquiries whether its proposed rule on mandatory e-filing for certain multiemployer notices would affect notices to participants. The proposed rule only affects notices to PBGC.... [T]he proposed rule would require the following notices to be filed electronically with PBGC: notices of termination under part 4041A, notices of insolvency and of insolvency benefit level under parts 4245 and 4281, and applications for financial assistance under part 4281 ... Further, the proposed rule does not involve the Multiemployer Pension Reform Act of 2014 (MPRA). Comments on the proposed rule are due June 2, 2015." [Announcement is dated May 20, 2015.]
arrow icon Supreme Court Recognizes ERISA Fiduciary Duty to Monitor Plan Investments
Skadden, Arps, Slate, Meagher & Flom LLP

"[T]he Supreme Court implicitly rejected 'continuing breach' theories of recovery that would treat the decision to acquire an investment and the decision to retain the investment as a single, continuous act and allow recovery of all investment losses incurred from the date of selection ... Instead, under the rationale of [Tibble v. Edison], as to investment options first made available to Plan participants outside the limitations period, any recovery would be limited to losses incurred as a result of a fiduciary's failure to properly monitor and remove imprudent investments within the six-year period preceding the filing of the claim."
arrow icon Incentive Plan Practices: Aligning Executive Pay with Performance
Steven Hall & Partners

"CEO compensation is overwhelmingly incentive-based. Target compensation is 85% variable and only 15% fixed.... Median annual incentive targets for CEOs equaled approximately 100% of base salary. Typical leverage provides the ability to earn half of the bonus at threshold performance levels and 200% for maximum achievement. 87% of the companies studied used at least one metric related to earnings."
arrow icon Reporting Unrelated Business Taxable Income on IRS Form 5500-SUP
SunGard Relius
5/20/2015 [Guidance Overview]

"The inclusion of the question regarding UBTI on the draft 2015 Form 5500-SUP suggests that the IRS is concerned that Plan Administrators may be failing to properly report and remit unrelated business income tax. By placing the question on the 5500-SUP, the IRS is placing the onus on Plan Administrators -- under penalty of perjury -- to identify and disclose the existence and amount of UBTI with each plan year. It is reasonable to expect that a 'yes' answer to this question on the 5500-SUP will cause the IRS to look for the related Form 990-T submission and payment of the calculated tax liability."
arrow icon Applicability of the Embedded Maximum Out-of-Pocket Limit to Large Group and Self-Funded Plans (PDF)
Groom Law Group
5/20/2015 [Guidance Overview]

"Despite the lack of clarity on this issue, it appears that the Departments do intend to require large group and self-funded plans to comply with the 'embedded MOOP' requirements implemented in the [2016 Notice of Benefit and Payment Parameters]. The Departments are primarily relying on the cross-reference in section 2707(b) of the Public Health Service Act to extend the embedded MOOP requirement to large group and self-funded plans."
arrow icon Ten Tips to Comply with California's Upcoming Sick Pay Mandate
Ogletree Deakins

"[1] PTO plans might -- or might not -- satisfy the obligation ... [2] Most employers and employees are covered ... [3] Notify employees of their new rights ... [4] Think about offering a lump sum benefit ... [5] Impose caps ... [6] Recognize very broad use rights ... [7] Consider variable pay ... [8] Plan to inform employees of available sick pay each pay period ... [9] Avoid retaliation ... [10] Stay informed."
arrow icon Pay for Performance Table and Best Practices for Proxy Disclosure

"[This article] focuses on the new 'pay for performance' table ... and best practices to address the additional requirement of a description of [1] the relationship between executive compensation actually paid versus the company's TSR and [2] the relationship between the company's TSR versus the TSR of its peer group. The proposed rules give flexibility to describe these relationships in either narrative or graph form (or both).... [T]he use of charts will tell a better story and be easier for shareholders to visualize and understand and thus, should be used to help illustrate the narrative description. [The authors] have provided sample charts[.]"
arrow icon New Fiduciary Regs Proposal, Part 3: People Are Talking (PDF)
Ferenczy Benefits Law Center LLP
5/20/2015 [Opinion]

"When all is said and done, the average person must judge his or her personal and retirement plan investments using tools that they can handle. The rules and disclosures of the Proposal are just too complex to do participants or plan fiduciaries any good. Of course, we all know that there are bad actors out there, and yes, we need to get them out of the business, but there has to be an easier, more effective way."
arrow icon Proposed Best Interest Contract Exemption Could Require Dramatic Changes for Financial Institutions
Faegre Baker Daniels LLP
5/20/2015 [Guidance Overview]

"Public disclosure is to be provided through a website, and client disclosure is to be provided as a point-of-sale disclosure, an annual disclosure and a potential limited-range-of-investment-options disclosure.... The website, freely accessible to the public, must provide three items: [1] Direct and indirect material compensation provided in connection with each Asset that is available and has, in fact, been purchased, held or sold within the last 365 days through the Adviser or Financial Institution; [2] The source of the compensation; and [3] How the compensation varies within and among Assets ... The website chart must also be machine readable[.]"
arrow icon 31 Million People Were Underinsured in 2014; Many Skipped Needed Health Care and Depleted Savings to Pay Medical Bills
The Commonwealth Fund

"While people buying coverage on their own are still more likely to be underinsured than those with employer coverage (37% vs. 20%), the share of people with employer insurance who are underinsured has doubled since 2003, when it was 10 percent.... 11 percent of people with employer plans and 24 percent with individual market plans had high deductibles in 2014, up from 2 percent and 7 percent respectively in 2003. People in small firms with insurance through their jobs were more likely to have a high deductible than those in larger firms (20% vs. 8%)."
arrow icon Galen Institute Testimony to House Oversight Subcommittee Hearing Examining the Use of Administrative Actions in the Implementation of the ACA
Galen Institute
5/20/2015 [Opinion]

"The Galen Institute has been chronicling changes made to the Affordable Care Act since it was enacted in 2010, and we count at least 50 changes -- 31 of them made by the administration. In addition, there have been 17 changes passed by Congress and signed into law by President Obama, and two changes made by the Supreme Court.... [This testimony] will discuss [1] examples of actions by the administration that are clearly contrary to the statute; [2] failed and successful congressional actions to provide legal authority to changing the law; and [3] additional changes only now being uncovered."
arrow icon Senator Cassidy Introduces King v. Burwell Alternative
National Center for Policy Analysis Health Policy Blog

"Senator Bill Cassidy (R-LA) has introduced the Patient Freedom Act, in anticipation of the Supreme Court deciding for the plaintiffs in King v. Burwell ... If a state wants to restore the Obamacare tax credits, it would be free to do so by establishing a state-based exchange.... It would be an obvious choice to take Dr. Cassidy's other option: Receive the federal dollars and use them in a way that empowers patients, rather than the federal government. Having made that choice, the state can then take one of two paths. It can either choose individual tax credits deposited in patients' Health Savings Accounts (HSAs) or per capita block grants."
arrow icon Fiduciaries of Large Pension Funds Fire Back at Share-Buyback Policies
Pensions & Investments

"The chief financial officers of two large states and two large cities on Wednesday issued an open letter in their role as pension fiduciaries criticizing the practice of share-buybacks by corporations and questioning whether companies 'are adequately reinvesting for sustainable returns over the long term.' The four financial officers -- from New York state, New York City, Chicago and California -- are fiduciaries to pension funds with $860 billion in assets, covering 4.3 million participants[.]"
arrow icon How 12(b)-1 Fees and Revenue Sharing May Be the Real Victims of 'Narrow' Supreme Court Ruling

"Amid all the talk of creating a more transparent, client-first financial world, there are two sacred cows: 401(k) kickbacks, known as revenue sharing, and 12(b)-1 fees, known as a way to avoid upfront commissions by stowing the fees out of sight. Even the [DOL] and SEC walk on eggshells around these institutions that pay so much industry freight. The Supreme Court may not have gotten the memo to tread lightly.... [It] seems clear that fiduciary advisors will have a harder time stuffing client portfolios with mutual funds that are overstuffed with fees so that the 'sharing' can begin in a back room." [Tibble v. Edison Int'l, No. 13-550 (U.S. May 18, 2015)]
arrow icon Annuities With Guaranteed Living Benefits May Pose Risks to Financial System

"Annuities sold with guaranteed living benefits (GLBs) pose 'meaningful financial risks' to the U.S. financial system, the Financial Stability Oversight Council (FSOC) said in its annual report.... [T]he FSOC appeared to voice particular concern with fixed index annuities ... As to the emerging issue of pension risk transfers, the FSOC report said that consequences include the growth in the number of counterparties as well as changes in the type and amount of financial counterparty risk arising from the risk shifting transactions.... 'Accordingly, the backstop for pension plans switches from the [PBGC] to the state insurance guaranty funds,' the report said."
arrow icon U.S. Chamber of Commerce Comment Letter to EBSA on Proposed Information Collection Requests and Burden Estimates Associated with the DOL Conflict of Interest Proposed Rule and PTE Notices (PDF)
U.S. Chamber of Commerce
5/20/2015 [Opinion]

10 pages. "The potential magnitude of these burdens raises serious concern that the costs of the proposed regulation's information collection strategy may outweigh the benefits that the proposed regulation is likely to achieve. Rather than proceeding down a too-costly regulatory path, the government should consider more carefully whether there may exist prudent alternatives to achieve the desired protections and benefits."
arrow icon The 403(b) QLAC
Business of Benefits

"[A]s with all things 403(b) ... there are a few unusual twists when trying to put a [Qualified Longevity Annuity Contract (QLAC)] in a 403(b) arrangement.... Where the vendor will require a rollover to another contract, there can be issues for those 403(b) contracts which have been distributed from a plan: a vendor may be reluctant to do so for these contracts, given the 403(b) tax regulation requirements of employer control. If there is no employer, the vendor may not be willing to arrange for a QLAC. An employer's approval of a 403(b) QLAC may trigger ERISA status for a non-governmental, non-ERISA plan. The 403(b) plan document will need to provide for a QLAC, to the extent that the 403(b) contract still is in the plan."
arrow icon Rising Deductibles Will Make Underinsurance Worse
Physicians for a National Health Program [PNHP]
5/20/2015 [Opinion]

"[S]ince 2003, the category with the most comprehensive coverage -- employer-provided coverage -- has doubled the rate of underinsurance increasing from 10% to 20%. The greatest contributing factor has been the increase in the use of high deductibles."
arrow icon How This Trio of ACA Taxes and Mandates Falls Squarely on Taxpayers, Not Insurers
Benefit Revolution
5/20/2015 [Opinion]

"[F]ive years into this law riddled with more than 20 new taxes and fees, the devastating impact on the individual is finally gaining more coverage.... State governments pay insurers for the [Health Insurers] tax. The insurers then pay the tax to the federal government. The federal government then reimburses part of the cost to the states.... The states with the most managed care will be hurt the most.... As [Medicaid] enrollments mount, we can now see that the number of people signing up is blowing past bureaucrats' projections."
arrow icon 2016 Will Be Costly Year for ACA Compliance, Employers Say
Society for Human Resource Management [SHRM]

"Most employers (71 percent) think the costliest years are yet to come, but that doesn't mean they aren't already feeling a financial impact. Eighty-two percent say the law is increasing their organization's costs this year, with most projecting a 1 percent to 6 percent increase in compliance expenses."
arrow icon Promoting Wellness Takes More Than Incentives
Society for Human Resource Management [SHRM]

"Employers that did not use incentives reported lower participation rates -- a median of just 20 percent of employees. With the use of incentives, median participation rates increased to 40 percent. Employers offering rewards of more than $100 reported participation rates of 51 percent, compared with 36 percent for those with smaller rewards. Employers offering comprehensive programs reported participation rates of 59 percent, and participation in these programs was less sensitive to the types of incentives provided."

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