News Items

36 pages. "On average, VRPA plans had 43 participants and plan assets of $2.4 million.... In 2018, 22% of VRPA plans allowed employees to make voluntary contributions immediately after they joined their employer.... 41% of plan sponsors required eligible employees to have one year of service before they could make employee-elective contributions to their plans.... Forty-five percent of VRPA plans provided only a matching contribution in 2018. Eight percent of plans provided both a matching and a nonmatching employer contribution.... Two-thirds of VRPA plans with an employer contribution had adopted a safe harbor design ... As of December 2018, 15% of VRPA plans permitting employee-elective deferrals had adopted automatic enrollment."

"This notice expands the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) under section 223(c)(2) of the Internal Revenue Code without a deductible, or with a deductible below the applicable minimum deductible (self-only or family) for an HDHP.... The Treasury Department and the IRS, in consultation with HHS, have determined that certain medical care services received and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care for someone with that chronic condition. These medical services and items are limited to the specific medical care services or items listed in the [Appendix in this Notice] for the chronic conditions specified in the Appendix."

"[T]he challenge of trying to 'FIRE' out of work as quickly as possible -- sometimes as early as one's 40s or even 30s -- is that it leaves a very long time to be in 'retirement.' So long, in fact, that the classic '4% rule' of retirement should probably be more like a 3.5% rule ... But also so long that most human beings will struggle to be idle for so long... which often leads back to productive engagement that even ends out producing post-retirement employment income. Which ironically means that if many of those accumulating towards FIRE considered this likely income, they might even transition sooner instead! (Because even earning 'just' $20,000/year of side income in retirement can reduce nearly $500,000 from the required retirement savings!)"

"Those charged with global governance of pension plans and pension investment in multinational companies may wish to watch this development closely, as the EU may influence pension investing trends in other countries. The UK has already begun to require that Statements of Investment Principles for both DB and DC plans must address ESG considerations beginning in October, 2019."

"Many employers are reluctant to request an estimate, especially if they are considering selling the business, perhaps because they are trying to keep the negotiations quiet. If the employer requested an estimate every year or two, then suspicion would be less likely, and the employer would be informed of the potential liability on an ongoing basis."

"Where a qualification failure is not corrected, generally the assets of the MEP attributable to employee-participants of the failing employer will be distributed to them.... [T]he amounts so distributed 'would not, solely because of the participating employer failure, fail to be eligible for favorable tax treatment accorded to distributions from qualified plans.' The IRS, however, reserves the right to not apply this special treatment to a person (e.g., an owner-participant) that is responsible for the plan failure."

"Rev. Proc. 2019-20 ... reopens the determination letter program for statutory hybrid plans (e.g., cash balance plans) and merged plans, and provides sanction relief from plan document failures identified and corrected as part of those determination letter applications."

25 pages. "The 2019 benefit year risk adjustment model was recalibrated using blended coefficients from the 2016 enrollee-level External Data Gathering Environment (EDGE) data and 2014 and 2015 MarketScan data." [Also available: Technical Details (XLSX) and 2019 Benefit Year Risk Adjustment: SAS Version of HHS-Developed Risk Adjustment Model Algorithm Software (ZIP)

186 pages, July 10, 2019. "All enrollments made on or after July 10, 2019 should be processed in accordance with the operational requirements set forth in this document.... This manual provides operational policy and guidance on key topics related to eligibility and enrollment within the FFEs and FF-SHOPs, as well as within the SBEs-FP, which use the federal platform for eligibility and enrollment."

"This paper develops an empirical model to forecast the effects on employee contribution rates and on employer costs if the federal government changed the employer match or the default contribution rate for participants in the Thrift Savings Plan.... [R]aising the matching threshold from zero percent to 5 percent leads to employees contributing 3.3 percent more of their salaries to TSP. In contrast, an increase in the default contribution rate from zero percent to 3 percent increases employee contributions by 0.3 percent of their salary." [Working Paper 2019-06, Jul. 16, 2019]

"The revision to the Proposed Rule's scope would appear to give most insurance issuers and TPAs more flexibility in certain plan designs. Nonetheless, issuers and TPAs should exercise caution ... [T]he Proposed Rule's preamble does not include language in the current rule's preamble that would have protected TPAs' activities in certain instances."

"Certain categories of employment are excluded from PFML ... Employers may require employees to use intermittent PFML in increments.... Employers may pay different contribution rates for different groups of employees ... Employers may apply for a private plan exemption only once per quarter ... Penalty for failure to maintain an approved private plan."

"Buyers contemplating acquiring a business that contributes to an underfunded multiemployer pension plan must perform significant due diligence to assess the financial ramifications, including the potential effect of such underfunding on the price it is willing to pay for the business.... [B]ecause both an asset sale and an attempted transfer of multiemployer pension plan obligations to a joint venture entity can trigger withdrawal liability for the seller, ... sellers must also consider the withdrawal liability exposure of the target."

"Nevada employers with 50 or more employees in the state will be required to provide employees with at least 0.01923 hours of paid leave for each hour worked in a 'benefit year,' which employees may use for any reason.... [An] employee who works 40 hours a week will earn approximately 40 hours of paid leave a year.... [T]he Law will become effective on January 1, 2020."

"The state intervenors and the House argued that the individual mandate ... simply presented individuals with a 'lawful choice,' made unenforceable by the TCJA since there was now no legal consequence for not buying insurance. In other words, the state intervenors argued, 'shall' does not really mean shall; rather, the individual mandate is now voluntary.... [T]he state intervenors and House [argued] that, by eliminating the penalty but not the rest of the ACA, Congress had expressly deemed the mandate severable." [Texas v. Azar, No. 19-10011 (5th Cir. oral arg. Jul. 9, 2019; audio recording)]

"[H]ouseholds with a defined contribution plan were 2.1–2.9 percent less likely to own a home after the Great Recession compared to households with a defined contribution plan.... Future retirees face a potentially riskier housing market and are less likely to have a defined benefit plan. As a result, future retirees may be more willing to use their housing equity to increase consumption in retirement than was observed in past generations."

"A Washington-based health insurer (Premera Blue Cross) and 30 state attorneys general have reached a $10 million settlement in an investigation resulting from a data breach involving the protected health information (PHI) of more than 10 million individuals.... The settlement requires the insurer to: [1] Pay $10 million to the states ($5.4 million will be paid to Washington State and $4.6 million will be divided among the remaining 29 states). [2] Complete a lengthy list of compliance steps to protect PHI in its possession."

20 presentation slides. "Average premiums for two-person families broke $1,000 per month for the first time in 2019. Total combined annual premiums plus deductible for a four-person family now tops $25,000.... The average individual deductible decreased 6% for 2019. The average family deductible decreased 8% for 2019.... HMO plans continue to dominate the market, representing 56% of all plan selections, the same as in 2018."

"[A]lthough several commenters recommended that the SEC take the position in the final regulation that state regulation of the activity of broker-dealers would be preempted by Reg BI, the SEC declined to do so.... FINRA has indicated that it will need to review and likely modify its guidance to broker-dealers.... [W]ith the SEC guidance finalized, the focus switches again to the DOL, which has indicated that it intends to reissue regulations by year end, supplementing the SEC guidance, with regard to fiduciary investment advice."

"ESOP fiduciaries need to be cognizant of the impact of the reduction in corporate income taxes when determining the fair market value of ESOP plan assets. Such fiduciaries should also carefully review their ESOP valuation methodologies for reasonableness in light of these tax law changes to determine whether any changes are needed to protect against potential DOL scrutiny.... ESOP fiduciaries should ensure that they understand the valuation methodologies and assumptions being used, and that projections and assumptions are not based on conflicting interests."

"In order to qualify for the safe harbor [exemption from ERISA] for individual insurance coverage, all of the following conditions must be satisfied: [1] The purchase of any individual health insurance coverage is completely voluntary for employees.... [2] The employer, employee organization, or other plan sponsor does not select or endorse any particular issuer or insurance coverage.... [3] Reimbursement for non-group health insurance premiums is limited solely to individual health insurance coverage ... [4] The employer, employee organization, or other plan sponsor receives no consideration in the form of cash or otherwise in connection with the employee's selection or renewal of any individual health insurance coverage.... [5] Each plan participant is notified annually that the individual health insurance coverage is not subject to ERISA."

"Employers should consider whether the following applies: [1] I need to provide coverage to a population that may not be eligible for our employer sponsored group health plan. [2] I'd like to offer coverage to new hires after a designated effective date. [3] I'd like a new way to meet our financial objectives. [4] I have a Gig population. [5] I have a growing contingent workforce and am looking for ways to attract and retain them. If you checked any of [those boxes], your organization may want to explore the new HRA options[.]"

"The concept of retirement has robbed the public of the responsibility and accountability required with personal finance.... People fund retirement plans blindly. They don't focus on cash flow, they focus on accumulation. And when it's time for cash flow, they're heavily disappointed.... [H]ow, if it has been failing for so long, are we still buying into this? This retirement plan notion, that focuses on accumulation and setting money aside; and then one-day, someday, you might actually retire. It hasn't worked and it won't work."

"While since the 1990s many companies have come to favor other equity grants, such as restricted stock units (RSUs) and performance shares, stock options remain a major form of equity compensation. Companies can grant two types: nonqualified stock options (NQSOs), the more common variety, and incentive stock options (ISOs), which offer some tax benefits but also raise the complexities of the alternative minimum tax (AMT)."

"For the time being, the Third Circuit's decision puts a hold on the expanded exemptions under the Trump Administration's November 2018 final regulations, until the states' APA-based challenge can be heard on the merits. The Third Circuit stopped short of vacating the regulations altogether -- though that was the ultimate remedy sought by the states. Entities that could have used the final regulations' expanded exemptions will not be able to do so." [Pennsylvania v. President of U.S., Nos. 17-3752, 18- 1253, 19-1129, 19-1189 (3d Cir. Jul. 12, 2019)]