Health & Welfare Plans Newsletter

October 13, 2015

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Associate Consultant / Retirement Plan Administration Specialist
Spectrum Pension Consultants
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The Newport Group
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Wells Fargo
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Verisight
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Great-West Financial
in WI

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Newport Group
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Employee Benefits Firm
in DC

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OneAmerica Financial Partners, Inc
in IN

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in NY

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Webcasts and Conferences

Get Ready for 2016: Avoid Getting Stuck in the Mud with ACA Reporting
October 14, 2015 WEBCAST
(Employee Benefit News)

Actuarial 101 for Non-Actuaries
November 3, 2015 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Legislative and Regulatory Update
November 4, 2015 WEBCAST
(PenServ Plan Services, Inc.)

Best Practices for Administering Auto Enrollment Plans
November 17, 2015 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Ascend 2016 Conference
October 17, 2016 in MO
(Ascensus)

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Paid Sick Leave: It's an Epidemic
"Currently, California, Connecticut, Massachusetts, Oregon and Washington D.C. have state- (or district-) wide laws requiring employers to provide paid sick time for their employees. President Obama recently signed an executive order requiring federal contractors and subcontractors to provide paid sick leave on a national level.... San Francisco, Oakland and Emeryville, California have their own paid sick leave laws, as well as Seattle, Washington; New York City, New York; Philadelphia, Pennsylvania and nine cities in New Jersey. Next year, voters in Michigan and San Diego may vote on paid sick leave laws.... In the last year, in ... 22 states, the legislature considered -- or is still considering -- bills requiring paid sick leave[.]" (Snell & Wilmer)  


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Seventh Circuit Rejects In-Network Providers' Bid For ERISA Claims Procedures
"[T]he court observed that ERISA's claims procedures are available only to 'participants' and 'beneficiaries.' The plaintiffs conceded they are not participants, and the court rejected plaintiffs' arguments that they are beneficiaries.... The providers did not have assignments of claims from their patients and could not point to any plan term that would make them beneficiaries.... The dismissive tone of the Seventh Circuit's decision, which relied on little more than the text of the statute, also suggests that the court did not view the decision as a close one." [Pennsylvania Chiropractic Assoc. v. Independence Hospital Indemnity Plan, Inc., Nos. 14-2322, 14-3174 and 15-1274 (7th Cir. Oct. 1, 2015)] (Seyfarth Shaw LLP)  

Seventh Circuit Rules ERISA Does Not Preempt Illinois Law Prohibiting Discretionary Clauses
"[T]he Seventh Circuit affirmed a [district court] ... decision holding that Illinois's anti-discretionary clause regulation ..., [which prohibits] discretionary clauses in insured employee benefits plans offered or issued in Illinois, was outside the scope of the preemption power of [ERISA].... [T]he Seventh Circuit ... applied its two-part test for determining whether a law 'regulates insurance.' The court stated that [the Illinois regulation] was [1] 'specifically directed toward entities engaged in insurance' and [2] 'substantially affect[ed] the risk pooling arrangement between the insurer and the insured.' " [Fontaine v. Metropolitan Life Ins. Co., No. 14-1984 (7th Cir. Sept. 4, 2015)] (Wilson Elser)  

Wellness Programs Aim for the Wrong Target -- And Miss
"In contrast to every other study showing high satisfaction among participants ... [one recent study] surveyed all employees, not just participants. It showed that 52% of employees did not participate in even a single wellness program or activity. Employers offered a maximum of $880 but paid out an average of $365 with 40% of employees receiving $0.... [A second] employee poll showed that physical health, the highly profitable obsession of wellness vendors and consultants, counts for only 5% of employee well-being -- far less than job satisfaction, stress, financial wellness and personal issues." (George D. Burns via They Said What?)  

Risk Selection Threatens Quality of Care for Certain Patients: Lessons from Europe's Health Insurance Exchanges
"[T]ying reimbursement to a patient's health care expenses in the previous year reduces the risk of losses but discourages efficiency among insurers. Dutch officials mitigated this risk by, among other things, relying on expenditures from multiple prior years.... Other potentially effective strategies include allowing insurers to charge, within an acceptable range, higher premiums for higher-risk patients and removing age as a determining factor in setting rates." (The Commonwealth Fund)  

Health Insurer Shutdown Jolts N.Y. Marketplace
"The pending demise of Health Republic, the largest of the nonprofit cooperatives created under the Affordable Care Act and the only co-op in New York, removes a significant player from the state's insurance industry. It also left the insurers' 215,000 members, about half of whom are individuals and half are insured through small businesses, in need of new coverage. Individual Health Republic plans will end on Dec. 31, and small-group plans end as early as Oct. 31, although some will continue into next year." (The Wall Street Journal; subscription may be required)  

Kentucky CO-OP Blames Inadequate Risk-Corridor Funding for Closure
"Earlier this month, the CMS said it would pay only 12.6% of requested risk-corridor payments. For Kentucky Health Cooperative, that meant it would receive only $9.7 million from its request of $77 million. The co-op was collecting far less in insurance premiums than it was paying out in medical claims.... Medical-loss ratios at co-ops in Arizona, Connecticut, Michigan and Montana all topped 90% in the first quarter this year, leaving little room for extra investments." (Modern Healthcare Online; free registration required)  

[Opinion]

Federal Government Is Abandoning Health Insurance CO-OPs
"Although the original intent was to provide government grants to the co-ops, these were changed to government loans which the co-ops would have to pay back ... Adding the burden of debt service onto the backs of these co-ops basically destroyed their competitive advantage, especially at a time that they were facing high start-up costs. Further, as an extra measure, the insurers had included in ACA a rule that prohibited the co-ops from advertising. Thus the insurers saw to it that the co-ops were placed at a competitive disadvantage." (Physicians for a National Health Program [PNHP])  

[Opinion]

Be Wary of Control Checklists that Profess to be Risk Assessments
"The only sane way to 'become secure' is to start with a bona fide risk assessment (a.k.a., risk analysis, in HIPAA parlance).... [T]he industry trend is to profess they 'manage risk', but it's amazing how quickly they turn right back to the 'checklists' because a risk assessment takes too much 'hard thinking.' ... The easier way is to use someone's 'certified' checklist of controls, with no assessment of the threats and vulnerabilities (risks), and then pat yourself on the back and call it risk management." (Clearwater Compliance)  

Benefits in General; Executive Compensation

[Guidance Overview]

Did the SEC Get It Right with Time-Based Equity in Its Clawback Proposal?
"Those who interpret statutory language for a living (mostly lawyers) might wonder how the SEC reached this conclusion.... [T]he SEC applied a nuanced reading of [Dodd-Frank section 954] and determined that the rule applies only to stock options that themselves have a performance-based vesting hurdle.... In the end, the SEC's decision made life easier for companies that would need to enforce clawbacks, but also will cause compensation committees to take a closer look to see if their pay mix is balanced properly between compensation that is and isn't subject to clawback." (Towers Watson)  

Now's the Time to Review Compensation Arrangements Relating to Unvested Rights
"U.S. citizens who are employed by, or serve as directors of, non-U.S. entities can incur significant tax penalties (regardless of where they live) if compensatory arrangements violate Section 409A....Common provisions that make an arrangement subject to Section 409A include the requirement to pay the executive severance upon termination, or the ability of the executive to quit and be entitled to separation pay upon a change-of-control.... If the document failure is found now, it can be corrected on or before December 31, 2015, and if no change-of-control occurs before December 31, 2015, the correction will not entail a penalty or additional tax." (Dorsey & Whitney LLP via JD Supra Business Advisor)  

Is Your Company's Severance Policy Subject to ERISA? Should You Care? (PDF)
"There are clearly advantages to having a program governed by ERISA rather than applicable state law. However, left unsaid in the Okun decision is the sponsor's potential reporting and disclosure deficiencies under ERISA. Specifically, since [the employer] did not consider the arrangement subject to ERISA, it took no steps to file the one-time notice with the DOL, nor the annual returns that presumably would be required (assuming a small plan exception would not be applicable). This could result in substantial penalties." (Wilkins Finston Friedman Law Group LLP)  

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