Employee Benefits Headlines
Gathered from the web by the editors at BenefitsLink.com.
[Official Guidance] Text of IRS Notice 2009-93 Allowing Various Information Statements to Use a Truncated Social Secuity Number (PDF)
5 pages. Identity theft is becoming such a large problem that the IRS is allowing the use of truncated (partial) Social Security Numbers on the copies of various statements that go to retirement plan and IRA participants for 2009 and 2010. Paper payee statements for forms in the 1098, 1099 and 5498 series for 2009 and 2010 are eligible for the program. (Internal Revenue Service)
The Lighter Side of Employee Benefits: 'Can We Have Bikini Fridays?' And Other Strange Requests
Excerpt: "In a new survey by CareerBuilder, hiring managers shared the most memorable requests or recommendations they have received in the office suggestion box." (CareerBuilder.com)
Employers See Some Improvement, in Senate Health Care Reform Bill
Excerpt: "Latest version says large employers with more than 50 full-time employees would be assessed a fine up to $750 for every employee who works more than 30 hours a week if any employee received health insurance subsidies from the government." (Workforce Management; free registration required)
Senate Health Reform Bill Contains Minimal Employer Penalties for Not Offering Health Coverage
Excerpt: "Employer-sponsored plans would be affected by H.R. 3590 in a variety of ways including these: Immediate Actions to Expand Coverage. A high-risk pool would established until 2014 to provide coverage for those denied benefits because of preexisting conditions; a temporary reinsurance program would provide reimbursement to participating employment-based plans for a portion of the cost of providing health insurance coverage to early retirees (those between 55 and 65); the Health Insurance Portability and Accountability Act would be amended to improve the electronic transmission of claims information . . . ." (Wolters Kluwer)
[Guidance Overview] ITS Regulations on Employer Comparable Contributions to HSAs
Excerpt: "The regulations also address comparability rules for qualified HSA distributions, which are direct distributions from health flexible spending accounts (FSAs) or health reimbursement accounts (HRAs) to HSAs. If an employer offers qualified HSA distributions to any employee, the employer must offer such distributions to all employees who qualify as eligible individuals under any HDHP. Conversely, an employer may offer qualified HSA distributions to eligible individuals enrolled under the employer's HDHP but not to eligible individuals who are not enrolled in the HDHP. The final regulations on HSA comparable contributions apply to employer contributions made on or after Jan. 1, 2010." (Watson Wyatt Worldwide)
Considering a Conversion? Roth, That Is
Excerpt: "The issues aren't quite the same as those one faces when considering the deepest aspects of personal faith and religious doctrine, but a 'Roth conversion' can pose some difficult issues for investors nonetheless. And we're going to hear much more about this going forward because of a scheduled change in the law: Unless something unexpected happens in D.C., come 2010 there will no longer be income limits on Roth IRA conversions. There will be a lot written on the issue of whether one should convert or not, as well as endless articles describing all kinds of 'strategies' to potentially leverage the change (some legitimate and others more questionable). For me, three things are important in considering this kind of 'conversion' . . . ." (The Vanguard Group, Inc.)
Weekly Flu News, November 19
Excerpt: "The 2009 H1N1 influenza pandemic has not only resulted in a surge of patients throughout our healthcare system, but also a surge in media coverage of the disease. In continuing our commitment to keep you informed on key issues related to emergency preparedness and response, we are sending these weekly alerts which highlight recent news reports and publications related to H1N1. These articles highlight some of the issues you and your organization may be facing in the wake of the current influenza pandemic." (Troutman Sanders LLP)
[Guidance Overview] USERRA Benefits Under Title IV of ERISA (PDF)
1 page. Excerpt: "According to the final rule, so long as the participant is reemployed within the time limits prescribed by USERRA, even if the reemployment occurs after the plan's termination date (bankruptcy filing date, in the case of the bankruptcy of a covered plan sponsor filed on and after September 16, 2006), the PBGC will treat the participant as having satisfied the reemployment conditions as of the plan's termination date.Thus, the participant's benefits would be guaranteed for periods up to the plan's termination date. This final rule is effective December 17, 2009 and will apply to reemployments covered under USERRA initiated on or after December 12, 1994 (the effective date of USERRA). This is great news for affected participants. Starting December 17, 2009, the PBGC will start adjusting final benefit determinations of affected participants and make back payments with interest. The PBGC emphasizes that the scope of this final rule is very narrow. It only applies to the unique circumstances affording special protection to participants serving in the uniformed services entitled to benefits under USERRA." (Transamerica Center for Retirement Studies)
Pension Funding and Individual Accounts in Economies with Life-Cyclers and Myopes
Excerpt: "The present paper studies the growth and efficiency consequences of pension funding with individual retirement accounts in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We distinguish between economies with rational and hyperbolic consumers and compare the consequences of voluntary and mandatory retirement plans. Three major findings are derived in our study: First, we quantify the commitment effect of social security for myopic individuals by roughly 1 percent of aggregate resources. It is possible to recapture this commitment technology in IRAs, if those are annuitized. Second, despite the fact that our consumers have an operative bequest motive, the welfare gain from the (implicit) longevity insurance of the pension system is significant and amounts to roughly 0.5 percent of aggregate resources. However, mandatory annuitization reduces unintended bequests so that future generations are significantly hurt. Finally, our results highlight the importance of liquidity effects for social security analysis. These efficiency gains are only attainable if accounts are voluntary and not mandatory." (Social Science Research Network)
Trends and Experience in 401(k) Plans, 2009 (PDF)
8 pages. Excerpt: "A new survey by Hewitt Associates . . . shows employers continue to design their 401(k) plans in a way that encourages positive saving and investing behaviors and helps employees meet their increasing retirement income needs. These efforts include significant increases in the adoption of automated features and target date funds, better investment education tools and an increased focus on lowering plan expenses." (Hewitt Associates via Retirement Made Simpler)
Interpreting the Tax on Cadillac Health Plans (PDF)
3 pages. Excerpt: "The idea of taxing so-called Cadillac plans may not sound unreasonable upon first glance. But an actuarial view quickly reveals that the high cost of these plans has as much to do with the characteristics of the covered population as it does with benefit richness. It also reveals that the method of determining the taxable benefit threshold may create unintended consequences -- especially when coupled with other benefit-level requirements under various reform proposals, leaving little room between benefit floors and the ceiling in certain slices of the insurance market. Is there a better way to structure a ceiling for maximum benefits? One solution might entail better defining actuarial value and using the refined notion to address both the floor and the ceiling." (Milliman)
House Health Care Reform Bill Would Make It Nearly Impossible to Reduce Retiree Medical Benefits
Excerpt: "The version of health care reform passed by the House of Representatives on November 7, 2009, the 'Affordable Health Care for America Act' ('H.R. 3962' or the 'House Bill'), contains, among its myriad rules and requirements, a provision that would have a dramatic effect on many employers. Section 110 of H.R. 3962 limits the ability of a group health plan sponsor to reduce retiree medical benefits. As currently drafted, Section 110 would not become effective until enactment. The fate of this provision remains uncertain, of course, as the Senate has not approved a health care reform bill, and the provision is not in either of the bills currently under consideration in the Senate. Employers who are contemplating changes to their retiree medical benefits should consider acting quickly -- before the potential new restrictions may become effective." (Jones Day)
[Guidance Overview] Text of IRS Retirement News for Employers, Fall 2009 (PDF)
13 pages. This edition includes the following titles: Roth & Roll: 2010 Roth IRAs & Rollovers; 5500 for 2009 and Later Required to be Filed Electronically; Establishing a SEP or SIMPLE IRA Plan; IRA Investments; New Web Tool for SARSEP Plans; We're Glad You Asked!; New on the Web; Employee Plans Published Guidance; Desk Side Chat?With Monika Templeman: The Importance of Internal Controls and Plan Self-Correction; DOL News; Mark Your Calendar; Timing is Everything. (Internal Revenue Service)
Senate Health Bill Improves Employer Responsibility Provision
Excerpt: "The 'employer responsibility' provisions of the health reform bill that Senate leaders unveiled . . . reflect notable progress in lessening the disincentives that the Senate Finance Committee health bill would have created for employers to hire workers from low- or moderate-income families. Significant disincentives to hire or retain such workers remain, however, for a substantial number of employers, a matter that will require serious attention when the legislation goes to conference." (Center on Budget and Policy Priorities)
[Guidance Overview] Oral Alteration of Plan Terms Not Enough to Support Fiduciary Duty Claim
Excerpt: "Former pension plan participants may not claim a breach of fiduciary duty solely on the basis of alleged oral misrepresentations that purported to alter plan terms, according to the U.S. Court of Appeals in New York City (CA-2) in Ladouceur v. Credit Lyonnais. Oral promises cannot vary the terms of an ERISA plan." (Wolters Kluwer)
Asset Income Is Now Less Important Than Earned Income for Replacement Ratio Calculations
Excerpt: "The percentage of aggregate income for persons aged 65 or older attributed to earnings has risen in nearly 30 years from 15.9% to 26.0%, while the percentage attributed to asset income has dropped from 22.4% to 12.8%. and the percentage attributed to pension income has dropped from 19.5% to 15.3%. Aggregate income from Social Security and pensions has remained steady at about 58% over the same period, according to statistics compiled by the Congressional Research Service (CRS) from the Current Population Survey collected by the U.S. Census Bureau." (Wolters Kluwer)
[Opinion] The Pension Committee Comments on H.R. 2748, the Retirement Security Needs Lifetime Pay Act of 2009 (PDF)
3 pages. Excerpt: "The tax incentive for annuities in H.R. 2748 currently excludes qualified defined benefit (DB) plans. We strongly urge you to treat qualified defined benefit plans no less favorably than other sources of retirement income. With so many people reaching retirement age but having to postpone retirement due to declining account balances, our public policies should encourage the expansion of the defined benefit system, rather than create another reason for employers to end their defined benefit plans in favor of defined contribution plans. As lump sums are currently available in many DB plans, an incentive to select the annuity option in all defined benefit plans is good public policy ? whether it encourages expansion of defined benefit plans, discourages further cutbacks in DB benefits, or gives participants more of a reason to elect the annuity option over the lump sum option. We believe this incentive should be available to all annuities provided from defined benefit plans, whether or not they are backed by the PBGC or an annuity contractfrom a private insurance company." (American Academy of Actuaries)
IRS Pilot Program to Allow Truncated Social Security Numbers on Information Returns
Excerpt: "The IRS on Thursday announced a pilot program aimed at deterring identity theft (Notice 2009-93). Under the program, filers of certain paper information returns will be allowed to truncate the payee's Social Security number on the payee statement. The change affects statements for 2009 and 2010. Only paper payee statements for forms in the 1098, 1099 and 5498 series are eligible for the program. Filers must meet certain requirements, spelled out in the notice, but if they do, they will be treated as having met the various IRS and Treasury requirements that a payee's Social Security or taxpayer identification number be included on the statement." (American Institute of Certified Public Accountants)
Congressional Update: Senate Health Care Bill, November 19, 2009
Excerpt: "Several other provisions of the recently introduced Senate health care overhaul bill include an additional 5% tax on cosmetic surgery that is not medically necessary; the cosmetic surgery tax is expected to generate $5.8 billion over ten years. Fees on medical devices would be reduced from $4 billion (Senate Finance proposal) to $2 billion. The House bill proposes a 2.5% excise tax instead of an industry wide fee. Projected to generate $400 million, there would also be a limit on a deduction available for Blue Cross Blue Shield plans; the deduction would only apply if companies have a medical loss ratio of at least 85%. A procedural vote to begin debate on the bill is set for Saturday, November 21." (Adams and Reese LLP)
[Opinion] Who Needs Placement Agents, Anyway? No Place in the Public Pension Boardroom for Mercenaries
Excerpt: "Until there are prohibitions on pension marketers making campaign contributions to board members and strict controls on contributions to anybody else involved in pension governance, the trustees can profit from their decisions to hire investment advisors. Requiring them to get a lobbying license almost makes it a laughable exercise unless there are explicit prohibitions embedded in the law. Otherwise the law would become a 'license to steal.' Board members who accept such payola should be disqualified for voting on any issue that involves a campaign contributor and on any investment or contract/vendor decision remotely related. The proposed CalPERS legislation should include a provision similar to that as well." (Governing.com)
[Official Guidance] Text of DOL Notice Withdrawing Final Regs on Investment Advice to Participants (PDF)
2 pages. Excerpt: "[A] number of commenters raised legal and policy issues concerning the exemption and, in particular, questioned the adequacy of the final class exemption's conditions to mitigate the potential for investment adviser self-dealing. The Department believes that the questions raised in these comments are sufficient to cast doubt on the conditions' adequacy to mitigate advisers' conflicts. If conflicts are not mitigated advice might be tainted. Therefore the Department has set aside its previous assumption that participants and beneficiaries who follow advice delivered pursuant to the final class exemption will commit investment errors at one-half the rate of those who are unadvised, together with its previous conclusion that the final class exemption's benefits justify its cost." (Employee Benefits Security Administration, U.S. Department of Labor)
Private Pensions: Sponsors of 10 Underfunded Plans Paid Executives Approximately $350 Million in Compensation Shortly Before Plan Termination
Excerpt: "To identify case study examples GAO analyzed a listing of the 1,246 underfunded plans that were terminated from 1999 to 2008 and selected public companies with large unfunded liabilities, large unfunded liabilities per participant, and a large number of plan participants. GAO reviewed documents provided by companies and executives, and interviewed PBGC and company officials. GAO also reviewed Securities and Exchange Commission (SEC) filings and PBGC documents disclosing plan underfunding at the time of termination and missed contributions. Executive compensation figures may be understated because some company executives could not be located, did not respond to document requests, declined interviews, and did not give GAO access to their tax records." (U.S. Government Accountability Office)
Research Shows Employers That Adopt Consumer-Driven Health Plans Favor Health Saving Accounts As Key Funding Option
Excerpt: "The analysis is based on survey results of 370 employers polled in the summer of 2009. In the issue brief titled 'CDH plans shift to HSAs', researchers report that 44% of employers offer a CDH plan to their workers, a slight fall from 2008 (45%) but up from 28% in 2006." (Employee Benefit News; free registration required)
DOL's Employee Benefits Security Administration Withdraws the Controversial Final Advice Rule
Excerpt: "The latest move regarding the advice rule follows EBSA's recent extension of the applicability and effective dates of the January 2009 rule to May 17, 2010 (see EBSA Delays Advice Rule ? Again ). EBSA said the extension expires on the rule's withdrawal. 'The department decided to withdraw the rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule and the class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries,' EBSA commented in a news release." (PLANSPONSOR.com; free registration required)
A Family's Flu Suffering and an Employer Dilemma
Excerpt: "When a UPS employee and his wife came down with swine flu, they endured tragedy and an estimated $1 million in medical bills. Their story points out how exposed some workers can be to the illness and how little employers can do for them, beyond education and encouraging good hygiene." (Workforce Management; free registration required)
Health Reform Bill Passed by House Restricts Employer Curtailment, Termination of Retiree Benefit
Excerpt: "The health reform bill that passed the House of Representatives on Saturday, November 7, contains a provision that, if enacted, would limit severely the ability of employers to curtail or terminate retiree medical benefits provided to retired individuals and their beneficiaries. Moreover, the new rule (Section 110 of H.R. 3962) would be effective upon enactment. . . . Recommendations: (i) Consider how the potential enactment of this provision may affect your company. (ii) Review your company's retiree medical arrangements with a view to making a decision soon whether to retain or alter the current arrangement. Part of the review would entail determining whether and when retiree benefits can be curtailed or terminated in light of plan documents and collective bargaining agreements and obligations. (iii) Form an evaluation of the business effects of a prohibition on curtailing or terminating retiree medical benefits and determine a course of action." (Jackson Lewis LLP)
Critical Issues in Health Reform: Actuarial Perspectives
Excerpt: "Actuaries bring a crucial and unique perspective to the health care reform dialogue. The role of the Academy's Health Practice Council is to bring that actuarial perspective to the attention and aid of policymakers through the introduction of a new series of policy statements: Critical Issues in Health Reform. [on the targdt page], you'll find links to each of those informative statements, as well as other thought-provoking pieces on the wide-ranging subject of health care reform. " (American Academy of Actuaries)
Fidelity Says 401(k) Savings Accounts Recover from 2008 Decline
Excerpt: " Fidelity Investments said the average balance on customers' 401(k) retirement accounts has returned to September, 2008 levels on contributions and third- quarter investment gains. Account balances in plans for U.S. workers benefited from the 22 percent year-to-date gain in the Standard & Poor's 500 Index along with continuing employee contributions, the Boston- based firm said in a statement today, after reviewing 11 million accounts managed by Fidelity. . . . Average account balances rose 13 percent to $60,700 from June to September, Doshier said, and are up 28 percent from $47,500 at the end of March. The gains include investment returns, employee contributions and employer's matches. A typical 401(k) holds a mix of equities, bonds and cash." (Bloomberg L.P.)
[Official Guidance] DOL Cancels Earlier-Published Bush Administration Final Regulation on Investment Advice to Participants
Excerpt (DOL press release of Nov. 19, 2009): 'The department decided to withdraw the rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule and the class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries. The department recently extended the applicability and effective dates of the final rule until May 17, 2010. That extension expires upon the effective date of this withdrawal." (Employee Benefits Security Administration, U.S. Department of Labor)
Company Stock Can Be a Source of Fiduciary Worry
Excerpt: "[E]ven with a careful, diligent approach, plan sponsors may still find themselves embroiled in company stock problems. Company stock can pose a basic dilemma for plan sponsors. ERISA, the body of law that covers retirement plans, requires fiduciaries to act prudently and offer diversified investments to participants -- but it also allows investment in a single security -- the company's stock. Historically, company stock investments have had volatile returns, which can be challenging for plan fiduciaries." (The Vanguard Group, Inc.)
Class Certification Granted in Lawsuit Alleging That Defendant Engages in Certain Revenue Sharing Practices That Violate ERISA (PDF)
Excerpt: "U.S. District Judge Stefan Underhill recently granted plaintiffs' motion for class certification in Haddock v. Nationwide Financial Services Inc., No. 3:01-cv-1552 (SRU) (D. Conn.), a lawsuit alleging that defendant engages in certain revenue sharing practices that violate ERISA. Judge Underhill found that plaintiffs met all of the requirements for certifying a class under Rule 23(b)(2). . . . In 2001, trustees for a number of employer-sponsored profit-sharing retirement plans filed a putative class action against defendant (the plans' investment provider), alleging that certain payments it received from mutual funds or their affiliates were actually provided in exchange for offering the funds as plan investment options under defendant's variable annuity contracts, rather than for administrative services rendered, and that such payments constituted a breach of fiduciary duty under ERISA. In April 2006, the district court denied defendant's motion for summary judgment in a widely publicized opinion that held, inter alia, that there were triable issues of fact on whether defendant was an ERISA fiduciary by virtue of its authority to eliminate and substitute underlying fund investment options and/or on the basis that revenue sharing payments might be plan assets under ERISA." (Sutherland Asbill & Brennan LLP)
[Guidance Overview] IRS Guidance Regarding Unused Paid Time Off and an Employer's Qualified Retirement Plan (PDF)
3 pages. Excerpt: "This guidance affects sponsors of and participants in qualified defined contribution plans, including 401(k) plans and multiemployer plans. It does not directly address 403(b) plans or governmental 457(b) plans, and IRS spokesmen have provided mixed unofficial messages regarding its applicability to these plans. As a result, sponsors of these types of plans should not take any action without the advice of legal counsel." (Prudential Retirement)
Journal of Pension Economics and Finance enters New Phase
Excerpt: "The Journal of Pension Economics and Finance (JPEF), the only academic journal focusing on the economics and finance of pensions and retirement income programs, announces a new editorial structure and a broadening of its mission effective January 2010. Since 2002, the JPEF has provided an invaluable and influential forum for original research and international policy debate in the pensions area. Demographic aging and tumultuous capital markets are challenging the future of retirement around the globe. The JPEF will lead the way in exploring what these factors imply for retirement security and pension sustainability, and in demonstrating which new models will ensure resiliency in retirement systems. JPEF publishes original research papers; it also offers an Issues & Policy section with reviews of the state of debate on pension policies around the world. In addition, the journal includes reviews on publications of key interest to its readers. JPEF is co-sponsored by the International Organization of Pension Supervisors (IOPS) and the OECD." (Pension Research Council; registration required to download fulltext of paper)
What Determines Movement Across Health Care Plans?
Excerpt: "In sum, the authors find that adverse selection is more important than adverse retention in explaining insurance plan dynamics for this pool. However, these effects are modest relative to the impact of changing the mix of employer and employee premiums. If the relative price of a FFS plan were increased considerably, the authors suggest that it is 'entirely possible that an adverse selection death spiral would set in, and the generous FFS plan would ultimately no longer be available.' Pointing to the importance of demographics such as age and sex in explaining both spending differentials and plan mobility decisions, the authors end on 'a note of optimism about the ability to have a competitive choice process for health insurance,' since insurers can easily observe these characteristics and price insurance plans accordingly." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
[Guidance Overview] Unforeseeable Emergencies and Hardship Withdrawals: What Every 457 Plan Administrator Needs to Know
Excerpt: "The circumstances that constitute an unforeseeable emergency (UE) should be based on facts and made on a case by case basis. The IRS has not provided guidance on what is adequate documentation to validate the UE request and this has created some uncertainty among administrators about whether they are requiring enough documentation from plan participants who are applying for a UE. NAGDCA recently spoke with Cheryl Press, a Senior Counsel for Tax Exempt and Government Entities at Chief Counsel IRS, regarding the feasibility of using self-certification to satisfy the regulations regarding distributions from a section 457 plan for unforeseeable emergencies." (National Association of Government Defined Contribution Administrators)
QDROs Can Be Particularly Problematic When Plan Assets Contain Employer Securities
Excerpt: "Divorce is messy. Even once the settlement agreement has been reached, signed and filed with the court, our client still faces one remaining hurdle; the dreaded Qualified Domestic Relations Order (QDRO)." (Morningstar)
[Guidance Overview] November 30, 2009: Deadline for Plan Sponsors to Finalize 2009 Required Minimum Distribution Procedures (PDF)
4 pages. Excerpt: "Under WRERA, if all or a portion of a distribution during 2009 is eligible for a rollover solely because it is no longer an RMD, that portion of the distribution is not treated as an eligible rollover distribution for purposes of the direct rollover rules, including the mandatory 20% income tax withholding and 402(f) notice requirements. However, if a defined contribution plan distributes an amount in 2009 that would have been an RMD in whole or in part but for WRERA, a plan may, but is not required to, offer the participant a direct rollover for the RMD portion. If the plan does not offer a direct rollover of the RMD portion of a 2009 distribution, or if the plan does offer a direct rollover but the recipient receives it in cash, the plan administrator must apply 10% withholding to that portion of the distribution (and give the participant an option to elect no withholding), rather than the mandatory 20% withholding. Additionally, the notice of an eligible rollover distribution does not need to be provided if the distribution is limited to the amount that would have been the 2009 RMD." (Morgan, Lewis & Bockius LLP)
Federally Funded Defined Benefit Plan: Options for the Future
Excerpt: "Milliman's client had a crisis with its pension plan. This nonprofit organization was unusual, in that its defined benefit pension plan was funded by the federal Medicare program. The plan provided a modest formula of 1% of final earnings, multiplied by credited service. Funding was fixed several years ago at a very low percentage of total compensation. The amount was sufficient to cover the cost for the annual accrual; until recently, the assets and liabilities were approximately equal. Then the recession hit, and in 2008 the plan lost around 28% of its assets. Taking into account the new requirements under the Pension Protection Act of 2006 (PPA), Milliman came up with a preliminary ten-year funding projection: the plan sponsor was required to make up the asset losses over a seven-year period." (Milliman)
[Guidance Overview] Year End Update Regarding COBRA Subsidy
Excerpt: "First, Employers are not required to issue any information reporting documents (Forms W-2 or 1099) to involuntarily terminated workers to report the amount of the COBRA subsidy. Employers claiming the credit must, however, maintain documentation to support the credit claimed. Second, Employers must claim the COBRA subsidy using Form 941 and must file such claims on a Form 941 filed for a quarter in the year in which the subsidy was provided to the assistance-eligible individual." (Miller & Chevalier Chartered)
[Guidance Overview] Timing Requirements for Qualified Retirement Plan Amendments
Excerpt: "There is no one-size-fits-all checklist that identifies each interim plan amendment that must be adopted -- required amendments depend in large part on the provisions in a particular plan document -- but there is guidance. Notice 2008-108 provides the IRS's most recent cumulative list of statutory and regulatory changes as of October 1, 2008, that may require plan amendments. An updated list is expected later this month or in early December." (Miller & Chevalier Chartered)
[Guidance Overview] Section 409A Reporting Required This Year for Plan Document Violations, Including Outstanding Discounted Options
Excerpt: "We expect there to continue to be very little code Z reporting in 2009 due, in part, to the IRS's correction program in Notice 2008-113 for operational violations. However, one type of Code section 409A income that will need to be reported this year is the section 409A income from any outstanding discounted options. While most discounted options were corrected or exercised during transition, there may still be some outstanding. The spread on any such options outstanding as of the end of 2009 will need to be reported as code Z income. This will require a careful review of Notice 2008-113, as well as the more detailed guidance in the proposed regulations, and consideration of whether and how the employer will obtain the associated withholding taxes in connection with the Code section 409A income." (Miller & Chevalier Chartered)
[Guidance Overview] With Lawsuits Increasing Against Pension Plan Sponsors, Individual Fiduciaries Should Protect Themselves Against Financial Risks
Excerpt: "If you are a fiduciary for your employer's retirement savings plan, you already know that life isn't getting any simpler. Lawsuits against plan fiduciaries are on the upswing, and some have been found personally liable for plan losses under ERISA, the Employee Retirement Income Security Act of 1974. What you may not know is that neither your company's directors' and officers' insurance nor the bond that all retirement plan sponsors are required by law to carry will indemnify you for claims involving benefit plans. The former excludes such claims, the latter covers only plans themselves. Instead, you need fiduciary liability insurance, and if you don't know whether you have it, you should find out." (CFO.com)
FCC Seeks Comments on Use of Broadband to Promote Health Care Delivery and Services
Excerpt: "Comments in response to the FCC's public notice on health care issues are due December 4, 2009. The Federal Communications Commission (FCC) has formally requested comments from the health care sector on ways in which broadband and other advanced communications services can be used to promote better health outcomes and the more efficient delivery of health care services. The FCC intends to use these comments to assist in its development of a National Broadband Plan to be presented to Congress in February 2010. Among other things, Congress has directed the FCC to include in its National Broadband Plan 'a plan for the use of broadband infrastructure and services in advancing health care delivery.'" (McDermott Will & Emery)
[Guidance Overview] Employer's Guide to Wellness Programs (PDF)
55 pages. Excerpt: "Wellness initiatives can implicate a variety of federaland state laws. The federal laws at the center of the wellness storm are the Health Insurance Portability and Accountability Act (HIPAA) -- specifically, its nondiscrimination rules -- and the Americans with Disabilities Act (ADA), particularly after its modification by the ADA Amendments Act of 2008. This Employer's Guide explores the compliancelandscape of wellness programs in considerable detail, and also adds some practical observations and anecdotal experience." (Lockton Benefits Group)
Temporary Extension of Unemployment Benefits: Emergency Unemployment Compensation
Excerpt: "The new tier IV benefit may provide up to an additional 6 weeks of benefits if the state unemployment rate is at least 8.5%; however, at this time tier IV benefits are largely symbolic as few workers will qualify for tier IV before the EUC08 program authorization expires. Congress is likely to address the expiring authorization of the EUC08 program (December 26, 2009) in the next few weeks. Bills that currently propose to extend the authorization of the EUC08 program through 2010 include H.R. 3404 and S. 1647." (opencrs.com)
Code Sections. 409A and 457A Present M&A Issues, Treasury Official Notes
Excerpt: "Practitioners doing due diligence in mergers and acquisitions (M&A) transactions have been among the first to identify issues under Code Secs. 409A and 457A that may require further guidance, observed Treasury Deputy Benefits Tax Counsel Helen Morrison. Speaking on an executive compensation panel at the Practising Law Institute's (PLI) 'Tax Strategies for Corporate Acquisitions, Dispositions, Spin-Offs, Joint Ventures, Financings, Reorganizations & Restructurings 2009,' in New York on October 28, 2009, Morrison reviewed the Treasury's guidance plans under Code Secs. 409A and 457A." (Wolters Kluwer)
Pressure Mounts for Special Process in Congress to Address Federal Debt, Including Health Care and Retirement Entitlements
Excerpt: "Noting that the regular order in Congress will not be able to deal with the increasing federal debt load, which is driven largely by entitlement programs such as Social Security and Medicare, Senate Budget Committee chair Kent Conrad (N.D.) concluded in a committee hearing on November 10 that a 'special process' is needed to compel legislators to fix the nation's fiscal problems." (Wolters Kluwer)
[Guidance Overview] Interim Final Regulations on Increased Penalties for HIPAA Violations (PDF)
2 pages. Excerpt: "The interim final regulations take effect on November 30, 2009, and apply to violations occurring on or after February 18, 2009. . . . . The interim final regulations establish the significantly increased penalty structure for HIPAA privacy and security violations. Covered entities should assure that they can demonstrate full compliance with HIPAA requirements to avoid significant liability." (Buck Consultants)
As Pensions Were Abandoned, Four Firms Paid Top Executives $49.5M in Benefits
Excerpt: "Top executives at four companies that jettisoned their employee pension plans received $49.5 million in retirement and severance benefits in the years before the companies filed for bankruptcy, while retirees saw their benefits cut by as much as two thirds, congressional investigators conclude in a report to be released today. The Government Accountability Office (GAO) reports that pensions at the companies, United Airlines, US Airways, Polaroid and Reliance Insurance, were underfunded by more than $11 billion when the companies turned them over to a government-backed insurance fund. The report says executives at those four companies and six others that abandoned their pension plans took in a total of $350 million in pay and perks in the years leading up to the bankruptcies." (USA TODAY)
[Guidance Overview] What You Need to Know About Average Contribution Percentage Testing for 403(b) Plans
Excerpt: "The arrival of the final 403(b) regulations has transformed many compliance issues; however, the regulations are just as noteworthy for what has not been altered. For example, 403(b)s that provide for employer matching or employee after-tax contributions have always been required to perform the Average Contribution Percentage (ACP) test. However, plan sponsors of new 403(b) plans or plan sponsors who have modified their plans to add employer matching or after-tax contributions as a result of the changing 403(b) landscape may be facing ACP testing for the first time this year." (PLANSPONSOR.com; free registration required)
Employers Continue to Shift Health Costs to Retirees
Excerpt: "Large U.S. employers are continuing to shift significant health coverage costs to retirees or exiting sponsored retiree health benefit programs altogether, according to Towers Perrin's 2010 Retiree Health Care Cost Survey. According to a press release, the survey finds that pre-65 retirees, who are not yet eligible for Medicare, will be hardest hit as they attempt to balance fixed incomes with steady increases in health coverage costs. At the same time, the survey also reveals that many employers are missing significant opportunities to deliver retiree benefit value while saving money and improving program effectiveness." (PLANSPONSOR.com; free registration required)
Insurance Companies Say Mammogram Coverage Won't Change
Excerpt: "Insurance companies contacted by USA TODAY say they will continue paying for annual mammograms amid widespread fears that new breast cancer screening guidelines from a federal task force could lead women to lose coverage for those tests. The guidelines ? suggesting that most women under 50 don't need routine mammograms and that women over 50 need them only every other year ? were issued Monday night by the U.S. Preventive Services Task Force." (USA TODAY)
[Guidance Overview] Clinical Evidence Protocols Rejected Under ERISA Plan's Medical Necessity Standard
Excerpt: "This unpublished opinion from the Second Circuit is instructive in showing that evidence-based protocols, e.g., clinical studies, may exceed what is required to show medical necessity, even under an abuse of discretion standard of review. In this case, the claimant, Richard Durgin, challenged Blue Cross' denial of coverage for a 'standing component' on his motorized wheelchair under BCBS's 'Vermont Freedom Plan'." (Roy Harmon III via Health Plan Law)
West Virginia Senate Committee Votes Down Retiree Health Benefit Proposal
Excerpt: "Legislation to freeze the state's gas tax at its current rate, and to allow cities to close out critically underfunded police and firefighter pension funds are on track for passage, as a brief special legislative session enters its third day Thursday. However, one piece of Gov. Joe Manchin's special session agenda was in trouble Wednesday: a proposal to give school boards and other local governments a one-year reprieve from having to carry massive unfunded liabilities for future retiree health benefits on their financial books. Backers of the legislation (HB405, SB4405) believe it would benefit county school boards that will be selling bond issues next year in order to draw down federal economic stimulus funds for school construction and renovation." (The Charleston Gazette)
[Guidance Overview] IRS's 2009 Version of Form 2106 for Employees to Report Deductible Business Expenses
Excerpt: "EBIA Comment: The accountable plan rules allow employees to avoid tax on business expense reimbursements if three principal requirements are met: the expenses have a business connection, they are adequately substantiated, and any excess reimbursements are returned. If accountable plan reimbursements do not fully cover an employee's expenses, the employee may use Form 2106 to take a deduction for the unreimbursed expenses. Expenses may not be deducted, however, unless the employee maintains adequate records to substantiate them. Options like the standard mileage rate and standard meal allowances . . . can significantly simplify those requirements." (Employee Benefits Institute of America)
[Guidance Overview] EEOC Revision of 'Equal Employment Opportunity Is the Law' Poster to Address ADA Amendments and GINA
Excerpt: "EBIA Comment: Employers should update their EEOC posters right away in accordance with the applicable options, keeping in mind that special rules apply about where to post such notices. As a practical matter, we recommend using the November 2009 poster, which contains a full description of the current rules and would be less confusing for employees. Note that many of the employment nondiscrimination laws in the EEOC posters provide protections relating to fringe benefits (including group health plans) provided by employers." (Employee Benefits Institute of America)
[Guidance Overview] Court Refuses to Impose Separate Penalties for Multiple Beneficiaries Affected by a Single COBRA Notice Violation
Excerpt: "EBIA Comment: This appears to be the first reported case in which a court awarded penalties for a timely but deficient election notice. Regarding the question of whether multiple penalties are available, the few courts to address this issue have not been in agreement. Certain other courts have separately calculated and awarded statutory penalties for spouses or dependent children. Still another court, noting that a failure to provide an election notice to a former employee and his spouse constituted two notice violations, concluded that the violations had 'merged' so that a single penalty was appropriate. Notwithstanding that disagreement, this case illustrates an important lesson for plan sponsors. Care should be taken to ensure that election notices conform to the detailed requirements of the DOL's notice regulations because failure to do so creates the potential for large penalty awards in court." (Employee Benefits Institute of America)
Rising Obesity Will Cost U.S. Health Care $344 Billion a Year
Excerpt: "If Americans continue to pack on pounds, obesity will cost the USA about $344 billion in medical-related expenses by 2018, eating up about 21% of health-care spending, says the first analysis to estimate the future medical costs of excess weight. These calculations are based on the projection that in 10 years 43% of Americans adults may be obese, which is roughly 30 or more pounds over a healthy weight, if obesity continues to rise at the current rate. Extra weight increases the risk of diabetes, heart disease and many types of cancer." (USA TODAY)
[Guidance Overview] PPA & WRERA Qualified Plan Guidance: Action Items for 2009 (PDF)
6 pages. Excerpt: "Qualified plan amendments or action items required in 2009 relating to the Pension Protection Act of 2006 (PPA) and Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), including; (i) WRERA suspension of 2009 required minimum distributions, with operational compliance required by December 1, 2009, as well as model amendments in Notice 2009-82 which must be adopted by end of 2011 play year; (ii) revised model notices for eligible rollover distributions under Notice 2009-68, which must be put in place by end of 2009 plan year; (iii) sample amendments to add automatic enrollment to plans in Notice 2009-65 needs to be adopted by end of 2009 plan year; (iv) QACA and EACA notices, and qualified default investment alternative notice required at least 30 days in advance of plan year; (v) PPA amendments required by end of 2009 plan year. Also, other recent PPA qualified plan guidance include: (i) rollovers from employer plan or regular IRAs to Roth IRAs have no income limit in 2010, and (ii) contribution of paid time off at end of plan year or on termination of employment permitted." (Charles C. Shulman, Esq.)
Many Small Employers Dropping Health Plans
Of businesses having 3 to 9 employees,58 percent provided a health plan in 2002, but only 46 percent provided a health plan in 2008, says a study by the Kaiser Family Foundation. (Associated Press)
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