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Benefits in the News

Older News | November 26, 2014

arrow icon Health Spending: Temporary Downturn or New Normal?
Jeffrey C. Bauer, for HFMA
11/26/2014 [Opinion]

"Purchasers (governments and employers) and their third-party payers have hit the limits of what they are willing and able to spend on health care.... [M]ost patients are not able to pay the substantial increases (50 to 100 percent) in their out-of-pocket costs under the [ACA's] mandated insurance plans.... Traditional providers no longer control the medical marketplace.... The new clinical paradigms -- precision medicine and disease management -- are already reducing the demand for inpatient-focused acute care."
arrow icon Who Are the 10-Percent Savers?
Putnam Investments

"[T]he average age of participants in an employer-sponsored defined contribution plan deferring 10% or more was 41.6 years.... The majority of 10% savers -- 58% -- had a household income of less than $100,000. In fact, 38% earned between $50,000 and $100,000. Many of those earning less than $50,000 were also able to set aside 10% -- about 20% of the group in this survey. At the high-income level of the spectrum, 30% of the 10%+ savers had a household income ranging from $100,000 to $175,000, and only 12% had an income higher than $175,000."
arrow icon New ACA Guidance Permits Employer-Initiated Measurement Period Changes
Ogletree Deakins
11/26/2014 [Guidance Overview]

"IRS Notice 2014-49 introduces a proposed method for applying the look-back measurement period in two scenarios. The first one involves a transfer of employment within the same applicable large employer (ALE) between two positions with different look-back measurement periods. In the second scenario, the employer changes the applicable look-back measurement period for an entire employee classification group. The final regulations previously released ... did not clarify how to apply the look-back measurement period methodology in either of these two cases."
arrow icon IRS Publication 1-EP: Understanding the Employee Plans Examination Process, Revised November 2014 (PDF)
Internal Revenue Service [IRS]

3 pages. "The goal of Employee Plans Examinations is to promote voluntary compliance by reviewing the operation of retirement plans for consistency with plan terms and pension law.... There are several ways a retirement plan is selected for examination ... A specially-trained examiner will notify you by phone or letter that your plan has been selected for audit ... The audit may include a complete review of plan operations or it may focus on specific issue ... The most common areas of review include [followed by a list] ... Most plan failures can be corrected using EPCRS."
arrow icon Use 401(k) Match Structure to Improve Retirement Readiness
Pension Consultants Inc.

"[O]nce the level of available resources is known, [the authors] recommend focusing on the behavioral outcome desired from the participant. For example, let's say a company decides 3% of employee's income is an acceptable expense for their matching benefits program. How might that match be offered to have the greatest impact on participant behavior, keeping in mind that most employees save only the amount needed to receive the match?"
arrow icon A Tale of Four Cities: Pension Reform in and Out of Bankruptcy
Public Sector Inc.
11/26/2014 [Opinion]

"Creating a workable cash-out option is an important pension reform worth considering because it has the potential to dramatically reduce the cycle-time required before a defined benefit plan can be permanently closed out. As the Vallejo experience illustrates, ignoring the unfunded pension liabilities is not a viable option."
arrow icon Insurers' Listings of In-Network Doctors Often Out of Date
The Wall Street Journal; subscription may be required

"Many insurers are offering smaller networks of doctors in their Medicare Advantage and commercial health plans this year. But those networks may be even narrower than they seem, physicians and regulators say, because the lists often include names and addresses that are erroneous or out-of-date. In some cases, the doctors shown as participating in plans have moved, retired or died, surveys show. Others are listed under the wrong specialty, work in hospitals full-time and don't see outpatients, or don't accept the plan being offered."
arrow icon U.S. Public Pensions on Solid Footing?
Pension Pulse
11/26/2014 [Opinion]

"[F]ar too many U.S. public pension funds are still holding on to the pension rate-of-return fantasy, believing fairy tales when it comes to discounting their future liabilities using rosy investment assumptions.... [T]here is a huge dispersion when it comes to the health of U.S. public pension plans.... Third, and most critically, the governance at U.S. public pension plans needs to be drastically improved."
arrow icon FASB Drops Extraordinary Item Reporting: Section 162(m) Impact
Thompson Hine
11/26/2014 [Guidance Overview]

"Some performance-based compensation awards that are exempt from the Section 162(m) $1 million deduction limitation are calculated by excluding items of gain, loss or expense that are within the FASB definition of 'extraordinary events.' ... In October, FASB agreed to drop the segregation, separate reporting and strict definition of extraordinary items. Accordingly, except as provided through the effective date provision, companies will no longer need to segregate on the income statement those items that are currently defined as extraordinary."
arrow icon NAIC Releases Draft Model Law Addressing Managed Care, Provider Network Adequacy
Epstein Becker Green

"The draft model law ... includes several new criteria to be examined in determining the sufficiency of a provider network, including geographic population dispersion and new health care delivery system options such as telehealth and telemedicine. Provider directories are also addressed ... with a new requirement that online provider directories be available and updated at least monthly. Print copies of provider directories must be available upon request, as well as accessible versions of the directories for individuals with disabilities or limited English language proficiency."
arrow icon CDHPs Enroll Nearly a Quarter of Covered Employees
Society for Human Resource Management [SHRM]

"Enrollment in consumer-directed health plans (CDHPs) spiked from 18 percent to 23 percent of all covered employees in plan year 2014 ... Meanwhile, enrollment in health maintenance organizations (HMOs) fell to just 16 percent, the lowest level of enrollment seen since ... 1993. Enrollment in traditional plans -- including preferred-provider organizations (PPOs), point of service (POS) plans, and indemnity plans, combined -- fell from 64 percent to 61 percent."
arrow icon Don't Try to Take a Lump-Sum Distribution from a Qualified Plan After Thanksgiving
Slott Report

"Lump-sum distributions from a qualified retirement plan may be eligible for special tax breaks. The special tax breaks include net unrealized appreciation on company stock that's highly appreciated in value over the years it's been in your plan.... To qualify as a lump-sum distribution, the distribution must occur in one tax year and your account balance must be zero by the end of that year."
arrow icon Proposed ACA Changes Could Offer Navigators Unfair Advantage Over Brokers
Insurance Broadcasting

"Key among the controversial proposals is the requirement that all exchanges, qualified health plan insurers, and Web-based brokers and agents provide telephonic interpreter services in at least 150 languages. That requirement does not extend to navigators and assisters, although HHS is asking for public comment on whether it should.... The proposed rule also clarifies that all non-navigator assisters are required to maintain a physical presence in their service areas, but can provide assistance by telephone, Internet, or by other remote means."
arrow icon Employers May Be Deferring Adoption of New Mortality Tables (PDF)
Altman & Cronin, LLP

"Of nearly 20 participants with fiscal year ends before 12/31/14, roughly 40% said they would be adopting new mortality tables for their upcoming reporting, while 60% said they would be deferring adoption of the new tables. Interestingly, for the 55 participants with calendar fiscal years, the majority also indicated they would not be adopting the new tables as of December 31, 2014. Even for the 45 participants with fiscal years ending after December 31, more than half indicated that they would not adopt the new tables in their current fiscal year."
arrow icon Compliance and Communication Needed In Compensation Disclosure
Bloomberg BNA

"[In] 2015 29 percent of companies surveyed plan to add a description of their engagement actions, over 35 percent of companies surveyed plan to do a better job of explaining how they arrived at their pay decisions by including some kind of alternative to the summary compensation table and 38 percent of companies surveyed plan to add graphical descriptions to enhance the understanding of their disclosures."
arrow icon Standards for Health Insurance Provider Networks: Examples from the States
Families USA

"This brief profiles laws, regulations, and guidance in place in states around the country. Rather than offering a 50-state survey of standards, the brief instead highlights good examples of network adequacy protections. These protections can serve as models for other states or for the federal government as they take steps to ensure that all health plan provider networks deliver meaningful access to care."
arrow icon Administration Warns Employers: Don't Dump Sick Workers From Plans
Kaiser Health News

"As employers try to minimize expenses under the health law, the Obama administration has warned them against paying high-cost workers to leave the company medical plan and buy coverage elsewhere.... Because most large employers are self-insured, moving even one high-cost worker out of the company plan could save a company hundreds of thousands of dollars a year. That's far more than the $10,000 or so it might give an employee to pay for an exchange plan's premiums."
arrow icon Health Insurance Coverage and Health Care Access and Affordability in Massachusetts: Holding Steady in 2013
Urban Institute

"The 2013 [Massachusetts Health Reform Survey] provides a new baseline for assessing the impacts of the state's efforts to improve the affordability of care and reduce health care spending because it coincides with the first full year under the provisions of Chapter 224 of 2012 and precedes the roll-out of major changes under the [ACA] that began in January 2014. Findings show that while Massachusetts has maintained high levels of health insurance coverage and health care use, the cost of care continues to remain a significant burden, especially for low- and middle-income individuals and families."
arrow icon New Jersey Pension System Funding Plummets Under New Rule

"Under new pension accounting standards, issued by [GASB], the New Jersey system's overall funded level stands at 44 percent for fiscal 2014, compared to the 63 percent previously determined by standard actuarial methods. Eighty percent or more is generally considered healthy."
arrow icon GOP Leaders Urge SEC to Ditch Pay-Ratio Rule

"[In a letter to SEC Chair Mary Jo White], House Financial Services Committee Chairman Jeb Hensarling, Texas Republican, joined by fellow Republicans Reps. Scott Garrett and Bill Huizenga, disputed that the 'absence of a median pay ratio disclosure was a proximate cause of the financial crisis' and warned that the proposed rule would be unduly costly and detract from more important SEC priorities."
arrow icon Health Plans Excluding More Drugs as Costs Rise

"Express Scripts will exclude 66 brand-name drugs from its main formulary, or list of drugs that it covers, in 2015. This marks an increase from 48 in 2014. Likewise, CVS will exclude 95 drugs, up from about 70 in 2014. Benefits firms push back against high-priced drugs when less expensive clinical equivalents are available ... [In 2014, Express Scripts] decided to stop covering Advair, which can cost more than $370 per month, after determining that less expensive competing drugs treat asthma just as well. Advair maker GlaxoSmithKline offered a lower price, though, and now the drug is back on Express Scripts' main formulary in 2015."
arrow icon Broker-Dealers Sound Off as AIG Leads Off with First Annuity for 401(k)s

"Though AIG's American Pathway DIA has been around since last year, the carrier built an endorsement that would permit the contract to fit into the framework of QLACs. In that context, clients up to 83 can buy the contract and defer receipt of their income for anywhere between 12 months to 40 years.... But there are plenty of questions. For instance, can money that starts out in a qualified account and is then used to buy a QLAC be converted to a Roth IRA just before the income stream starts?"
arrow icon Proposed Approach to Changes in Measurement Methods (PDF)
Buck Consultants at Xerox
11/25/2014 [Guidance Overview]

"The proposed approach explained in this [article] could also be used in mergers and acquisitions involving employers using different measurement methods. Until further guidance is issued (or at least until the end of 2016), employers may use the proposed approach to determine the status of employees as full time or not full-time following a corporate transaction"
arrow icon California Guarantees Paid Sick Leave to Employees
Ballard Spahr LLP
11/25/2014 [Guidance Overview]

"An employer must provide an employee with written notice that sets forth the amount of paid sick leave available for use, either on the employee's itemized wage statement or in a separate writing provided on the designated pay date with the employee's payment of wages.... [If] an employee separates from an employer and is rehired within one year, previously accrued and unused paid sick days must be reinstated, and the employee is permitted to use those reinstated days upon rehire."
arrow icon PBGC Removes Five-Year Phase-In Period, Guarantee Limits for Rollovers to DB Plans
Bloomberg BNA
11/25/2014 [Guidance Overview]

"The PBGC will treat the rollover amounts as an accrued benefit deriving from mandatory employee contributions -- which have a higher claim on plan assets than nearly all other benefits under the plan -- and determine the accrued benefit using the rules of tax code Section 411(c)(2)(B)."
arrow icon New IRS Revenue Ruling Clarifies Taxation of Transit Benefits Provided via Electronic Media
Bloomberg BNA
11/25/2014 [Guidance Overview]

"Drawing [the] bright-line distinction [between TID- and MCC-debit cards], while understandable in 2006, ultimately proved to back the IRS into a corner.... [T]echnological developments rendered obsolete the rationale for categorically distinguishing the tax treatment of the two cards.... IRS regulations allows employers to provide employees with vouchers or similar items before the employee has in fact incurred the transit costs. The IRS highlighted this requirement in the new ruling."
arrow icon Preparing for HIPAA Compliance Audits
Privacy & Security Law Blog, from Davis Wright Tremaine LLP

"The next phase of OCR HIPAA audits is expected to begin in 2015.... [It] is expected that OCR will conduct limited scope offsite or 'desk' audits of both covered entities and business associates in 2015. The return of comprehensive onsite audits appears likely ... Once a covered entity is selected for an OCR HIPAA audit, it can expect to receive a data request that will include a request to identify all of its business associates. OCR has stated that it will only give audited entities two weeks to respond to the data request. It is therefore critical that covered entities prepare for HIPAA audits before they are selected for an audit."
arrow icon Unbundled Target Date Funds: Improving Participant Outcomes Through a Customized Approach
Towers Watson

"[C]ustomizing TDFs creates great potential for maximizing participant retirement outcomes. Plan-specific characteristics to incorporate include plan objectives, participant demographics and behaviors, and other corporate benefits such as a legacy defined benefit (DB) plan. Creating a customized TDF solution allows plan sponsors to unbundle the key decision points of a TDF series, and tailor the design of the glide path, portfolio construction and implementation to plan specifications.... The move toward unbundled recordkeeping relationships (achieving fee transparency, and separating administrative and investment services and fees) in favor of transparency and open architecture is the most prevalent practice today."
arrow icon Managing Health Care Costs During Retirement: What Pre-Retirees Can Do Now
Morningstar Advisor

"Pre-retirees should investigate long-term care insurance and HSAs as ways to hedge against health-care cost inflation and longevity risk in retirement, says Fidelity's John Sweeney."
arrow icon Minimum Essential Coverage, Other Health Care Reform Guidance Issued
Journal of Accountancy
11/25/2014 [Guidance Overview]

"[T]he final regulations provide that, for purposes of determining the affordability of coverage, the required contribution is reduced by any contributions made by an employer under a Sec. 125 cafeteria plan that [1] may not be taken as a taxable benefit; [2] may be used to pay for minimum essential coverage; and [3] may be used only to pay for medical care as defined in Sec. 213 ... The final regulations clarify that, in general, HRA contributions count toward affordability of health care coverage, and not minimum value, if an employee may use the HRA contributions to pay premiums for the primary plan only or to pay cost-sharing or benefits not covered by the primary plan in addition to premiums."
arrow icon Government Workers Get First Crack at Phased Retirement

"The nation's largest employer, the federal government, on Nov. 6 began accepting applications for phased retirement. While the rules apply only to federal workers, they could serve as a pilot project for the private sector.... During phased retirement, employees will be paid for part-time work, supplemented by a partial annuity, and will continue to accrue additional service credits toward their final annuity. The employees also will spend 20% of their time mentoring younger workers."
arrow icon IRS Publication 1020: Appeal Procedures for Employee Plans Examinations, Revised November 2014 (PDF)
Internal Revenue Service [IRS]
11/25/2014 [Official Guidance]

"This publication explains: What to do if you agree to the proposed plan disqualification [and] steps to take to appeal to the IRS Office of Appeals if you don't agree with the examination findings. These instructions apply to proposed actions in a revocation letter, nonqualification letter or discrepancy adjustment report for: [1] Form 5500-series annual return of employee benefit plans information examinations relating to: Revocations ... [and] Nonqualifications ... [2] Form 1040/1120 Income tax discrepancy adjustments resulting from these revocations or nonqualifications ... [3] Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, for minimum funding deficiencies, prohibited transactions and other employee plans excise taxes ... and [4] Form 990-T, Exempt Organization Business Income Tax Return, reporting the unrelated business income tax liability of the employee plan's trust."
arrow icon Massachusetts Attorney General Advises on Domestic Violence Leave Act
Proskauer's Law and the Workplace
11/25/2014 [Guidance Overview]

"[T]he Advisory clarifies that the Act only applies to employers with 50 or more employees in Massachusetts.... The Advisory clarifies that there is no mandatory form of notice and lists several possible methods.... It remains unclear whether an employer is required to provide intermittent leave. The Act establishes that an employee may take up to 15 days of leave in any 12-month period. However, it is unclear whether the 12-month period is a rolling 12 months, or a fixed 12-month period."
arrow icon ERIC Comment Letter to PBGC on Proposed Collection of Information by PBGC Concerning Payment of Premiums (PDF)
The ERISA Industry Committee [ERIC]
11/25/2014 [Opinion]

"[1] Plan sponsors can increase the strength and duration of their defined benefit plans through a variety of de-risking methods. The PBGC should support the efforts of companies that continue to sponsor and/or administer defined benefit plans. [2] The Information Collection Request is somewhat vague and open-ended with respect to the type of information that the PBGC plans to collect. The PBGC should provide additional clarification with respect to the data that needs to be reported."
arrow icon Obama Officials Seek to Clarify Abortion Coverage Rules
Kaiser Health News

"The [proposed regulations issued Nov. 21] specify ways in which insurers can assess and collect separate payments for abortion coverage, which must total at least $1 per month. But anti-abortion groups are complaining that the guidance in the new rules does little to address the bigger problem: It is still extremely difficult for the average consumer to tell which plans include elective abortion coverage and which do not."
arrow icon PBGC Guarantees 401(k) Rollovers to DB Pensions

"If a private-sector pension plan goes bankrupt, the PBGC guarantees payments, up to $60,165 a year. Under the new rules, you'll be able to add your 401(k) assets to your pension, which would increase the amount of your pension paycheck. The amount you add to your pension from your 401(k) wouldn't be subject to the $60,165 limit."
arrow icon Feds Say It Again: Don't Pay or Reimburse Employees' Individual Insurance Premiums (PDF)
11/25/2014 [Guidance Overview]

"[T]he agencies stressed that employers who pay or reimburse premiums for individual health insurance coverage will violate health reform law requirements, even if the amounts are treated as taxable compensation. The agencies then explained that an employer violates various laws by paying individuals with high claims to waive coverage under the employer's health plan. Finally, the agencies explained that schemes for reimbursing individual health insurance premiums are group health plans that must comply with health reform law mandates even if the employer has no involvement in choosing the health coverage."
arrow icon SHOP Marketplace Premiums Flat in 2015
The White House Blog

"Businesses seeking coverage on the SHOP Marketplace in 2015 will find that, on average across the 32 States where the Federal government operated the SHOP Marketplace in both 2014 and 2015, the premium for the lowest-cost bronze, silver, and gold policies has remained steady or declined slightly relative to 2014. The premium for the median policy within each metal tier also saw very slow growth on average, rising just 2.1 percent for bronze plans, 0.7 percent for silver plans, and 1.6 percent for gold plans. On average across the States where the Federal government is operating the SHOP Marketplace in 2015, businesses can choose from 25 different plans."
arrow icon A Road Less Travelled: Including Alternative Investments in a 401(k) Plan (PDF)
Marcia Wagner, via 401k Advisor

"As with any investment, the plan sponsor needs to understand and analyze the alternative investment to ensure that it is prudent and made solely in th interest of plan participants and beneficiaries ... However, the analysis becomes more complicated, because fiduciaries also must resolve the question of whether the investment itself is deemed to be holding plan assets. If so, additional fiduciary considerations come into play[.]"
arrow icon Text of CMS Draft 2016 Actuarial Value Calculator Methodology (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
11/25/2014 [Official Guidance]

"The AV Calculator represents an empirical estimate of the AV calculated in a manner that provides a close approximation to the actual average spending by a wide range of consumers in a standard population. This draft document is meant to detail the specific methodologies used in the AV calculation. The revised version of this draft document incorporates updates to account for the draft 2016 AV Calculator." [Also available: 2016 AV Calculator (Excel spreadsheet)]
arrow icon City of Oakland Joins Two Other California Cities in Mandating Paid Sick Leave
Ford & Harrison LLP
11/25/2014 [Guidance Overview]

"Under the new measure, which goes into effect March 2, 2015, employers are required to provide up to 72 hours of paid sick leave rather than the minimum 24 hours provided by state law. The new ordinance also allows employees to carry over more unused paid sick leave than permitted under state law. Further, unlike the state's law, Oakland's measure permits employees to designate certain non-family members for whom they can use their paid sick leave. Similar to state law, the new ordinance does not require an employer to pay an employee for unused leave at the time of the employee's separation from employment.... A comparison table showing some key differences in each jurisdiction's paid sick leave laws is [provided]."
arrow icon Judge to the State's Defense of the Illinois Pension Reform Law: No Dice
Seyfarth Shaw LLP

"The Court struck down the State's affirmative defense claims that it could diminish benefits despite Article XIII of the [Illinois] Constitution based upon an exercise of the State's 'reserved sovereign powers or police powers.' There was 'no such legally valid defense' according to the Court, because the pension protection clause of the Constitution does not provide for any such exception or limitation. In light of this conclusion, the Court did not even need to address the merits of the State's defense.... [T]he Governor and Attorney General have stated that they will move for an immediate appeal ... to the [Illinois] Supreme Court." [In re Pension Litigation, No. 2014 MR 1 (7th Ill. Nov. 21, 2014)]
arrow icon Lower Subsidies Could Lead to Exchange Sticker Shock for Enrollees
HealthLeaders InterStudy

"The news that some exchange carriers will offer lower premiums in 2015 was a surprise in many markets. But the biggest surprise could await exchange customers who stick with their existing exchange plan without shopping around. An unintended consequence of lower premiums is lower subsidies, which raises the percentage of premium that enrollees pay for their plan."
arrow icon How to Transition an Employee to Your Standard Ongoing 12-Month Measurement Period After the Initial ACA Measurement Period
Benefit Revolution
11/25/2014 [Guidance Overview]

"Once a new variable hour, seasonal employee or part-time employee has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period, at the same time and under the same conditions as other ongoing employees.... [Here] is a simple visual sample of what your standard measurement periods might look like if you had a 1/1 renewal and selected 12-months. The vast majority of employers are electing to use 12-months to gain the longest period over which to average hours and to avoid having to repeat the ongoing calculation more than once a year."
arrow icon Tips on Making the Most of Your First 401(k)

"While many employers do a good job of educating their employees about how to use their plans, others do not -- or perhaps employees simply aren't listening. About 52 million Americans participated in 401(k) plans in 2012, yet many still are not saving enough for retirement or have developed bad habits, such as taking out loans that inhibit the growth of their accounts.... [Here are] tips on everything from saving enough to picking the right investments to simply taking the long view about the whole process."
arrow icon Flowchart of Employer Responsibility Under the ACA
Henry J. Kaiser Family Foundation
11/25/2014 [Guidance Overview]

"The Affordable Care Act does not require businesses to provide health benefits to their workers, but larger employers face penalties if they don't make affordable coverage available. The Obama Administration announced 'transition relief' under which the penalties will go into effect in 2015 for employers with 100 or more employees and in 2016 for employers with 50 or more workers. This simple flowchart illustrates how those employer responsibilities work."
arrow icon New IRS Guidance for Transportation-Related Benefits Restricts Use of Cash Reimbursements
Practical Law Company
11/25/2014 [Guidance Overview]

"[IRS Rev. Rul. 2014-32] addresses several examples involving payment methods for certain employer-provided transportation benefits, and whether the benefits must be included in employees' gross income.... IRS takes the position that the rule permitting employers to use cash reimbursements if the only available voucher (or similar item) is a terminal-restricted debit card is 'no longer warranted'."
arrow icon Changes Issued for Tax Notices Required to Be Provided to Persons Entitled to Receive a Retirement Plan Distribution
Winstead PC
11/25/2014 [Guidance Overview]

"The changes not only reflect the change in the rollover rules but also discuss the In-Plan Roth Rollover tax treatment. The changes include a clarification that refunds of automatic enrollment contributions are not eligible to be rolled over, if your plan has implemented automatic enrollment in salary reduction or deferral contributions of persons when they are first eligible. There is one notice for a plan without a Roth account and a separate notice for a plan with a Roth Account."
arrow icon San Diego County Pension Fund Searching for New Investment Chief
The Wall Street Journal; subscription may be required

"A large California pension fund is searching for a new chief investment officer amid concerns about a complicated investment strategy that uses derivatives to boost performance. The board of San Diego County Employees Retirement System authorized the move [on Nov. 21] in an 8-1 vote that requires the $10 billion fund to install an internal investment chief instead of relying on an outside firm for that role.... The switch to a new governance structure ... represents the latest clash between outside consultants and the pension funds that rely on them for advice, as public retirement systems wrestle with how to fulfill mounting obligations to retirees."
arrow icon Text of IRS Notice 2014-74: Safe Harbor Explanations -- Eligible Rollover Distribution (PDF)
Internal Revenue Service [IRS]
11/24/2014 [Official Guidance]

23 pages. "This notice amends the two safe harbor explanations in Notice 2009-68 ... that can be used to satisfy the requirement under Section 402(f) of the Internal Revenue Code that certain information be provided to recipients of eligible rollover distributions. Amendments to the safe harbor explanations reflected in this notice relate to the allocation of pre-tax and after-tax amounts, distributions in the form of in-plan Roth rollovers, and certain other clarifications to the two safe harbor explanations. The amendments to the safe harbor explanations (and attached model notices) may be used for plans that apply the guidance in section III of Notice 2014-54 ... with respect to the allocation of pretax and after-tax amounts"
arrow icon Minimum Essential Coverage and the Multi-State Plan
Health Affairs
11/24/2014 [Guidance Overview]

"Under the final [IRS regulation], the required contribution is reduced by employer contributions to a 125 cafeteria plan if [1] the employee does not have the option to take the contribution as a taxable benefit (such as cash), [2] the contribution may be used to pay for [minimum essential coverage], and [3] the contribution may only be used to pay for medical care.... Employer contributions to an HRA can only count toward an employee's required contribution if they are required under the terms of the plan or can otherwise be determined within a reasonable time before the employee must decide whether to enroll in the group health plan.... [A] determination of affordability is based on the employer contribution that would be charged to an employee who does not participate in [an employer's] wellness program, unless the program relates to tobacco use[.]"
arrow icon Federal District Court: Participant in Possession of Accurate SPD Cannot Rely on Oral Misrepresentation (PDF)
U.S. District Court for the District of Massachusetts

"Here, Forristall argues that Fedex's liability stems from Strong's mistaken impression that Mary remained eligible for coverage under Forristall's [group health] insurance plan after the divorce and his failure to correct the relevant data entries in Fedex's computer system. This argument, however, directly touches on Fedex's recordkeeping and disclosure duties as an ERISA plan administrator, which include providing participants with an accurate written description of the plan.... To permit plan participants to bring state law claims premised on oral explanations that deviate from the statutorily required written plan description would undo Congress's intent of insuring the integrity and consistency of ERISA plan administration." [Forristall v. Federal Express Corp., No. 1:13-cv-11454-RGS (D. Mass. Nov. 21, 2014)]
arrow icon Adoption Benefits Can Boost Recruitment Efforts for Employers
Bloomberg BNA

"Typically, adoption benefits employers offer include financial reimbursement for adoptive parents' legal fees, travel costs and home studies -- total costs to families can range into the tens of thousands of dollars -- as well as paid or unpaid leave of from one to 18 weeks, like that offered parents of newborn biological children[.]"
arrow icon HHS Wastes No Time Issuing Proposed Rules Modifying Minimum Value Rules
Mintz Levin
11/24/2014 [Guidance Overview]

"HHS has proposed to amend its final MV regulations to require that, in order to provide minimum value, an employer-sponsored plan not only must meet the quantitative standard of the actuarial value of benefits, but also must provide a benefit package that meets a minimum standard of benefits. Moreover, in order to satisfy MV, an employer plan must provide substantial coverage of both inpatient hospital services and physician services.... HHS proposes that the changes to its MV final regulations will apply to employer-sponsored plans, including plans that are in the middle of a plan year, immediately on the effective date of the final regulations."
arrow icon CalPERS Retirees Will Outnumber Active Workers Soon

"The growing number of retirees, partly due to aging baby boomers, is one reason a staff report last week argues that CalPERS has too much 'risk' and should consider a number of options during a board workshop early next year. Among the options listed are a more conservative investment allocation, a lower earnings forecast, an employer choice of asset allocations with different risk and expected returns, and workers sharing the risk through contributions, benefit design or cost sharing."
arrow icon IRS Clarifies Key Rollover Question
Ed Slott, in Financial Planning
11/24/2014 [Guidance Overview]

"One of the most hotly debated issues in the retirement planning community has been whether a client with pretax and after-tax employer-plan money can roll it over in two parts -- moving that after-tax cash to a Roth IRA tax-free, that is, while also directly moving the pretax money into a traditional IRA.... [A] new IRS notice provides an emphatic answer: Yes, they can.... Although the notice says it will generally apply to distributions taken in 2015 or later, it also says taxpayers can apply a reasonable interpretation of the existing rules. Practically speaking, the guidance is effective immediately."
arrow icon Proposed Enhancements for a Modest IRS Pilot-Compliance Program Limited to Owner-Employee Plans and Foreign Deferred Compensation Plans
Albert Feuer, via SSRN

"The article ... offers three suggestions about reporting improvements, many of which were previously implemented, but are no longer in use. First, sponsors of foreign plans maintained primarily for non-resident aliens and of domestic plans limited to owner-employees should provide more information on their respective annual U.S. income-tax returns about their plan contributions and distributions. Second, the Service should issue separate 5500 forms for the different kinds of non-ERISA plans required to make such filings.... Third, the Service's reporting regulations should be revised to be consistent with its practices, whether it be to require annual Form 5500 reports from Code Section 403(b)(1) plans or from unfunded plans."
arrow icon Obama, Gruber: Two Peas in a Pod
Leroy Goldman, in Blue Ridge News
11/24/2014 [Opinion]

"In an analogous but different way, MIT economics professor Jonathan Gruber turns out to be President Barack Obama's Alexander Butterfield. Don't misunderstand -- I am not suggesting that President Obama is guilty of obstruction of justice or contempt of Congress as Richard Nixon was. But I am suggesting that Gruber's taped revelations will turn out to be terribly and irreversibly damaging to President Obama and Obamacare. Gruber's tapes document how the Obama administration deliberately misled Congress and the American people in order to get Obamacare enacted and implemented. They make it impossible to deny what really happened."
arrow icon Text of PBGC Final Regs: Title IV Treatment of Rollovers from Defined Contribution Plans to Defined Benefit Plans
Pension Benefit Guaranty Corporation [PBGC]
11/24/2014 [Official Guidance]

"In April 2014, PBGC proposed to amend its regulations to clarify the treatment of benefits resulting from a rollover distribution from a defined contribution plan to a defined benefit plan, if the defined benefit plan was terminated and trusteed by PBGC. Under the proposal, a benefit resulting from rollover amounts generally would not be subject to PBGC's maximum guaranteeable benefit or phase-in limitations and would be in the second highest priority category of benefits in the allocation of assets. PBGC is now finalizing that proposal. Except for making minor clarifications suggested by commenters, the final regulation is the same as the proposed regulation. This rulemaking is part of PBGC's efforts to enhance retirement security by promoting lifetime income options."
arrow icon IRS Employee Plans News 2014-19, November 24, 2014 (PDF)
Internal Revenue Service [IRS]
11/24/2014 [Guidance Overview]

Topics in this issue: [1] Modified 403(b) plan Listing of Required Modifications coming soon; [2] Plans may file for determination letters -- Cycle D ends January 31, 2015, for individually designed plan sponsors whose EIN ends in 4 or 9 and multiemployer plans; and [3] Rollover chart.
arrow icon 2016 Benefit and Payment Parameters Proposed Rule: Reinsurance, Risk Adjustment, and Risk Corridor Programs; Health Insurance Rate Review; and the Individual and SHOP Exchanges
Health Affairs
11/24/2014 [Guidance Overview]

"Several methods are available to contributing entities for counting enrollees two of which -- the snapshot count and snapshot factor methods -- are explained in greater depth in the proposed rule ... The proposed rule also explains how contributing entities can prorate contributions if they cover enrollees for only part of the year.... The proposed rule extends to 2015 a safe harbor for non-compliance with the risk adjustment and reinsurance data requirements, recognizing the complexity of the requirements.... [The] rule proposes a number of changes in the ACA rate review program.... The proposed rule makes a number of changes in the rules governing exchanges (which are once again referred to as exchanges rather than marketplaces).... [HHS] is considering changing the default rule so that enrollees who do not affirmatively change plans would be auto-reenrolled into a low-cost plan (perhaps randomly) in the same metal level if the cost of the enrollee's plan increased, or increased more than a threshold amount (5 or 10 percent).... Proposed amendments to the SHOP rule would allow exchanges to assist an employer in administering continuation coverage by collecting premiums for such coverage directly from former employees."
arrow icon IRS Issues Final and Proposed Rules for Hybrid Pension Plans (PDF)
11/24/2014 [Guidance Overview]

"The final rule provides greater flexibility than the 2010 regulations on the market rate of return, the statutory metric used to credit interest ... on participants' hypothetical account balances. Commenters on the 2010 rule pointed out that the proscribed permissible rates of return and some of the permissible indices were neither broad enough nor representative of true market rates of return. The IRS now specifies that the hybrid plan's interest-crediting rate cannot be greater than the set of rates or indices established in the new final rule[.]"
arrow icon DOL Regulatory Agenda, Fall 2014
U.S. Department of Labor
11/24/2014 [Guidance Overview]

A list of the upcoming regulatory projects of the DOL, including the Employee Benefits Security Administration [EBSA]. Also available: Fall 2014 Statement of Regulatory Priorities.
arrow icon 2016 Benefit and Payment Parameters Proposed Rule, Consumer Provisions; Hardship Exemptions
Health Affairs
11/24/2014 [Guidance Overview]

"CMS and the IRS have decided to grant an automatic hardship exemption to individuals who live in states that have failed to expand Medicaid, who have household incomes below 138 percent of the federal poverty level, who are under age 65, and do not qualify for traditional Medicaid or Medicare.... The benefit provisions ... contain a number of proposals for actual changes in current qualified health plan (QHP) benefits rules, but also propose a number of potential changes or approaches to changes for comment without actually adopting them as proposals. It is a very dense document, full of new ideas."
arrow icon Retirement Distributions: Choose the Right Mix for Your Situation
Charles Schwab

"Cover essentials with predictable income sources ... Fund discretionary expenses with fluctuating income ... Generate cash flow when you rebalance your portfolio ... When it comes to selling assets, it's usually better to part with investments held in taxable accounts before taking money from tax-deferred accounts.... A possible exception is if your IRA balance is very large."
arrow icon State of Oklahoma Asks Supreme Court for Faster ACA Appeal

"The state of Oklahoma, arguing that the Supreme Court should consider the views of a state government when it rules on the legality of federal tax subsidies to be paid to insurance-buying consumers under the [ACA], has urged the Court to review that state's case when it considers the already granted case of King v. Burwell. Following a request by the Obama administration, Oklahoma's case is on hold now at the U.S. Court of Appeals for the Tenth Circuit, while the Justices review the King case." [Oklahoma ex rel. Pruitt v. Burwell, No. CIV-11-30-RAW (E.D. Okla. Sept. 30, 2014)]
arrow icon Judge Rejects Overhaul of Illinois's Beleaguered State Pension System
The New York Times; subscription may be required

"Illinois ... argued that the constitutional clause was not airtight. All states have a fundamental authority known as their 'police power,' which gives them the duty and the legal tools to protect the safety and well-being of their citizens.... [Judge John W. Belz of the Sangamon County Circuit Court in Springfield] did not explain why he found those arguments unpersuasive. But in a court hearing on [Nov. 20], he pointed out that no court had used the 'police powers' argument to authorize changes in public pensions."
arrow icon Illinois State Circuit Court Rules State Pension Reform Bill Unconstitutional
Illinois Policy Institute

"[As] long as SB 1 is tangled up in the courts, Illinois' massive pension debt will continue to balloon. The unfunded pension liability is so large today that it would take three years of a complete government shutdown, during which the entire general fund went toward pensions, just to break even.... Illinois' unfunded pension liability grew to more than $111 billion this year, according to official estimates. That's a $48 billion increase just since 2009."
arrow icon IRS Releases 2015 Versions of Forms for Trustee Reporting of HSA Contributions and Distributions
Thomson Reuters / EBIA
11/24/2014 [Guidance Overview]

"The instructions in Form 5498-SA no longer indicate that complete identification numbers are reported to state and local governments, and they now mention employer identification numbers as a type of personal identification number that may be truncated.... These 2015 forms should not be used until 2016, when reporting for the 2015 tax year is due. Those preparing forms with truncated identification numbers should be careful to truncate only the identification number of the 'participant' (on Form 5498-SA) and the 'recipient' (on Form 1099-SA)."
arrow icon DOL's New Audit Focus: Health Plan Claims and Appeals, and Hard-to-Value Retirement Plan Assets
Proskauer's ERISA Practice Center

"DOL representatives have expressed concern that the complexity of health and welfare benefits adjudication creates an inherent risk of error (or, worse, fraud). The DOL is also concerned that benefits are being systematically denied at the initial claim level, because, more often than not, participants do not appeal the initial claims determinations. Further, the DOL is questioning whether plans are providing sufficient and understandable information regarding the reasons for denial of a claim, such that participants can adequately avail themselves of the appeals process."
arrow icon Retirees with Health Coverage Say They Are Financially Comfortable But Still Worry About Health Costs
Towers Watson

"This survey examines the attitudes of U.S. retirees who receive retiree health benefits from their employer via a private exchange. A majority of these retirees reported higher than anticipated health costs and 84% were concerned about future increases. Retirees were more satisfied than older employees with their finances and less likely to have reduced spending and delayed major expenditures."

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