KimberlyC

I recognize there is no official guidance yet from HHS on what constitutes "essential health benefits" under PPACA, but I am trying to discover what employers are doing/attorneys are counseling in the interim. Several of my clients limit chiropractic visits to a specified annual dollar amount (e.g., $1,000). The annual limits on essential health benefits need to be removed (or phased out for grandfathered plans) this year. Is it reasonable good faith to retain the annual limit until there is guidance deciding whether chiropractic services are essential health benefits? if the plan sponsor removes the dollar limit and either imposes an annual limit on chiropractic visits or requires preauthorization of chiropractic services after the 5th visit will this adversely impact the health plan's grandfathered status? These clients are self-insured and aren't bound by insurance company decisions (which appear to be going both ways on the chiropractic services/essential health benefit issue).

Helath Reform uses the same defintion of group health plan as HIPAA special enrollment rules. Look to Section 9831(a)(2) of the Code, which exempts plans with fewer than 2 particpants who are current employees. This is the exception for retiree plans for HIPAA special enrollment rules, Michelle's law, benefits for mothers and newborns, mental health parity, and health reform. So none of these laws applies to a retiree health plan provided the plan is separate from the employer's plan for active employees. This of course begets the age-old quesiton of what is a separate plan.

The proposed cafeteria plan regulations provide that a cafeteria plan may not discriminate in favor of highly compensated employees with regard to eligibity to participate in the plan (or with respect to contribuions and benefits provided under the plan). The eligiblity test is a two-part test. First, the cafeteria plan will not be discriminatory if the plan benefits a group of employees who qualify under a reasonable classification established by the employer, as defined in Treas. Reg. 1.410(b))-4(b). Second, the group of employees included in the classification must satisfy the safe harbor percentage test or the unsafe harbor percentage component of the facts and circumstances test in Treas. Reg. 1.410(b)-4©. Treas. Reg. 1.410(b)-4(b) provides that a classification must be reasonable and established under objective business critieria that identify categories of employees. Reasonable classfications include specified job categories, nature of compensation, geographic location and similar boa fide busines critiera. The employer would like to exlude true temporary employees (e.g., who work for six months or less to fill FMLA and other leave spots), but does not wish to impose a six-month wait for all employees. In 2006 ABA Qs and As, the IRS indicated an exclusion for temporary emloyees under a qualifed retirement plan may violate Section 410(a) because it may relate to a service requirement instead of simply relating to a job catogey (contrast with on-call employees). Any thoughts on whether the exclusion of temporary employees would violate the reasonable classification test? Note: we go with the 1,000 hour rule for all retirement plans regarless of job description.

I am looking at the opposite issue for a client. They would like to grandfather the old assumptions, proviing particpants with the greater of (i) the lump sum amount under the pre-2008 assumptions or (ii) the lump sum amount under the 2008 assumptions. I am concerned that the plan may have to perform Section 401(a)(4) nondiscrimination testing for the 5-year period. The amendment would be neutral on its face and would not be a subterfuge to preserve a greater benefit for HCEs near retirement (in fact, they are concerned about long-term NHCEs near retirement), but both HCEs and non-HCEs could benefit and elect a lump sum during the five-year period and it is impossible to know how the elections will play out. The different assumptions may make the two lump sums two optional forms of benefits. Is anyone else looking at this?

Does anyone have any opinion on this? I just picked up a client that has plan AE directly referencing Applicable Interest and Mortality. Were plans with this situation changing AE each year when the Applicable Interest rate changed? If so, would this be considered a similar situation? In the case of AE provisions which morph per pre-existing plan document provisions, there is no need for 411(d)(6) protection. Yes, the actuarial equivalence changes per the terms of the plan document and it is a two edged sword. The benefits/conversions can increase/decrease per the pre-existing terms of the plan without it being considered a violation of 411(d)(6).Having spent quite a bit of time recently analyzing the 417(e) rates and what uses they are/can be/ put to, I'm fairly comfortable relying on pre-PPA document provisions that incorporate automatic changes as being exempt from 411(d)(6) concerns. Of course, one should confirm same with an ERISA attorney if they have a specific case that needs this. I am looking at the opposite issue for a client. They would like to grandfather the old assumptions, proviing particpants with the greater of (i) the lump sum amount under the pre-2008 assumptions or (ii) the lump sum amount under the 2008 assumptions. I am concerned that the plan may have to perform Section 401(a)(4) nondiscrimination testing for the 5-year period. The amendment would be neutral on its face and would not be a subterfuge to preserve a greater benefit for HCEs near retirement (in fact, they are concerned about long-term NHCEs near retirement), but both HCEs and non-HCEs could benefit and elect a lump sum during the five-year period and it is impossible to know how the elections will play out. The different assumptions may make the two lump sums two optional forms of benefits. Is anyone else looking at this?