BenefitsLink Health & Welfare Plans Newsletter for April 9, 2002

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April 9, 2002 - 6,435 subscribers

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IRS Clarifies that Form 5500 Not Required for Most Cafeteria Plans, Even for Past Years
Excerpt: "Pursuant to the Notice, cafeteria plans, educational assistance programs, and adoption assistance programs are now exempt from the reporting requirements of IRC Section 6039D. Thus, Form 5500 no longer needs to be filed if the sole purpose for filing is to satisfy the reporting requirement of IRC Section 6039D.... [T]he Notice provides further relief in that it suspends the requirement of filing 'delinquent' submissions that were required solely because of IRC Section 6039D." (SunGard Corbel)

Union's Move to Mail-Order Prescriptions Ignites Controversy
Excerpt: "New York's largest healthcare workers' union hopes to save millions of dollars in pharmaceutical expenses by having its members fill prescriptions for maintenance medications by mail." (Reuters Medical News via Medscape; free registration required)

Some Insurers Increasing Premiums After Chronic Disease Diagnoses
Excerpt: "The Wall Street Journal on April 9 profiles Wisconsin-based insurer American Medical Security Group Inc. and its practice of annually reunderwriting individual health insurance policies." (KaiserNetwork.org)

Evaluation of a Consumer-Oriented Internet Health Care Report Card
Excerpt: "Health care 'report cards' have attracted significant consumer interest, particularly publicly available Internet health care quality rating systems. However, the ability of these ratings to discriminate between hospitals is not known.... Conclusion ... [T]he ratings poorly discriminated between any 2 individual hospitals' process of care or mortality rates during the study period." (Journal of the American Medical Association)

Overview: Expenses for Weight-Loss Program Treating Obesity or Hypertension Are Deductible
Excerpt: "In this Revenue Ruling, the IRS clarifies when weight-loss expenses may be deductible under Code Section 213 (and thus reimbursable under a health FSA).... [A]dministrators can now rely on a physician's written statement that the patient is obese-- evidence of another medical condition exacerbated by obesity isn't necessary. But administrators will still need to scrutinize documentation of weight-loss program expenses." (EBIA Weekly)

Second Circuit Upholds Plan Exclusion of Long-Term Home Health Care Services
Fay v. Oxford Health Plan (2d Cir. 2002). Excerpt: "The spouse in this case had severe multiple sclerosis and had received coverage for a period of time for full-time in-home health care under his wife's employer-sponsored health plan. However, effective January 1, 1996, when the employer changed insurers, home health care became covered under the plan for only a limited number of four-hour visits per year.... [T]he couple sued in federal court." (EBIA Weekly)

Benefit Denial by Non-Fiduciary Claims Administrator Is Entitled to Deferential Standard of Review
Marx v. Meridian Bancorp, Inc. (3d Cir. 2002). Excerpt: "The employer entered into an administrative services agreement with an insurance company to provide claims administration and the contract expressly provided that the claims administrator was not acting as a fiduciary in connection with the plan. The participant's claim for LTD benefits was denied by the claims administrator ..." (EBIA Weekly)

Health Plan TPA Found Liable as Fiduciary for Failure to Properly Manage and Administer Plan Assets
Hope Center, Inc. v. Well America Group, Inc. (S.D. Fla. 2002). Excerpt: "[T]he court concluded that the TPA had breached its fiduciary duty by failing to pay benefits due under the plan, failing to timely notify participants and beneficiaries of the plan's financial problems, and using plan assets to pay the plan administrator instead of satisfying claims due under the plan." (EBIA Weekly)

Perks Make Life Comfortable for Executives, Even in Retirement
Excerpt: "Many companies are extending the perks of the corner office well into executives' retirement.... Company officials say the continuing benefits help them recruit executives and are often used to reward outgoing executives for a successful tenure." (New York Times; free registration required)

Let Sleeping Co-Workers Lie
Excerpt: "[William] Anthony admits Workplace Napping Day-- this is the third year the Anthonys have publicized the event-- sounds a little frivolous, but he insists there are countless good reasons to take his cause seriously.... Anthony offers a final word of caution to would-be secret snoozers: 'Nap on your break, not sleep on the job.'" (ABCNews.com)

CMS Addresses "Product Withdrawal" and "Market Exit" Exceptions to HIPAA Guaranteed Renewability
CMS Program Memorandum, Transmittal No. 02-01 (March 2002). Excerpt: "HIPAA [generally] requires health insurance issuers ... to guarantee the renewal of health insurance coverage ... Two circumstances permitting an issuer to refuse to renew a policy are (1) when the issuer terminates a particular product ('product withdrawal'), in which case the issuer may fail to renew policies with respect to that product, and (2) when the issuer ceases to offer any products in a particular market ..." (EBIA Weekly)

Review of 2001 Federal Health Policy Activities
Excerpt: "Rarely has a session ever been as interesting and unpredictable as this first session of the 107th Congress. Several significant healthcare issues remained under consideration in the final days of the session; however, in the end, little was enacted in the healthcare arena." (Healthcare Executive via AHealthyMe.com)

Changes In Insurance Coverage: 1994-2000 and Beyond
Excerpt: "The rate of employer-sponsored insurance increased sharply, so that more people had employer coverage. However, these increases were offset by reductions in other forms of coverage, particularly Medicaid and state-sponsored insurance and private nongroup coverage, so the overall rate of uninsurance did not change." (Health Affairs)

(Following items are in both editions of the BenefitsLink Newsletter)

Labor Department Rule Expands Electronic Disclosure Options for Employee Benefit Plans
Press release, April 8, 2002. Excerpt: "[DOL has] published a final rule expanding the options available for employee benefit plans interested in using electronic technologies to communicate employee benefit plan information.... [F]or non-workplace communications, participants and beneficiaries must be given certain basic information necessary to make an informed decision about receiving documents electronically, and then affirmatively consent to receive plan communications in electronic form." (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Text of DOL Final Regulation on Use of Electronic Communications for Plan Disclosures (PDF)
14 pages. Excerpt: "The rules establish a safe harbor pursuant to which all pension and welfare benefit plans covered by Title I of ERISA may use electronic media to satisfy disclosure obligations under Title I of ERISA. The rules also provide standards concerning the use of electronic media in the maintenance and retention of records required by sections 107 and 209 of ERISA." (U.S. Department of Labor, Pension and Welfare Benefits Administration)

Opinion: Professional Employers Organization Replies to Paper by Center for Changing Workforce (PDF)
6 pages. Excerpt: "The Center for a Changing Workforce report ignores the realities of Professional Employer Organization (PEO) arrangements: PEOs enhance statutory rights and protections of worksite employees -- often providing protections that do not otherwise exist; PEOs, as co-employers, do not displace existing client-employee relationships or responsibilities; and PEOs generally increase rather than decrease worker access to employment-related benefits." (National Association of Professional Employer Organizations)

U.N. Says Elderly Will Soon Outnumber Young for First Time
Excerpt: "A million people now turn 60 every month, a demographic revolution that will mean older people will outnumber the young for the first time in history ... even rich nations have long wondered how they will continue to finance pensions and health care for future generations." (New York Times; free registration required)

Analysis: IRS Issues Long-Awaited Proposed Regulations on Golden Parachute Payments (PDF)
10 pages. Excerpt: "On February 19, 2002, the Internal Revenue Service proposed new regulations to Section 280G of the Internal Revenue Code. The new regulations provide amendments and clarifications to the proposed regulations issued on May 5, 1989, and would apply to so-called golden parachutes, i.e., any payments that are contingent on a change in ownership or control, occurring on or after January 1, 2004." (Frederic W. Cook & Co., Inc.)

Opinion: Apple's New Option Grant to Jobs Is a 'Bad Trip'
Excerpt: "After handing out history's largest option grant in a single day to Chief Executive Officer Steve Jobs -- and then subsequently watching the company's stock price fall by 61 percent -- the board turned around and gave him a new mega-grant last October. How else can one explain that decision?" (Graef Crystal, on Bloomberg.com)

Warren Buffett's Opinion: Stock Options and Common Sense
Excerpt: "At Berkshire we frequently buy companies that awarded options to their employees -- and then we do away with the option program. When such a company is negotiating a sale to us, its management rightly expects us to proffer a new performance-based cash program to substitute for the option compensation being lost." (Warren Buffett in the Washington Post)

A British Solution to Stock Options: Weigh Success Against the Market's
Excerpt: "Stock options that reward executives who create shareholder value can be ineffective in two types of markets: rising and falling.... Some British companies have found a solution to the problem. They make an award of options, or sometimes shares, contingent on surpassing an external benchmark." (New York Times; free registration required)

Commentary: Will a Deck of Options Always Be Stacked?
Excerpt: "The knee-jerk reaction is to scrap stock options. That is not the best solution ... A better incentive would emerge, hopefully, from rules that restrict the number of options awarded and regulate how they can be exercised." (New York Times; free registration required)

Options Foe Carl Levin Is Not So Lonely Now
Excerpt: "[Senator Carl Levin] has proposed legislation that would strip companies of the lucrative tax benefits they receive when options are exercised, unless they deduct the cost of options on their income statements." (New York Times; free registration required)

Newly Posted or Renewed Job Openings -

Retirement Service Specialists

for Constantin Control Associates
in NJ, NY

Account Manager

for Lockton Companies
in MO

Plan Specialist - Plan Sponsor Desk (Los Angeles)

for Transamerica
in CA

Plan Administrator

for Scudder Investments
in NH

Conversion Consultant

for Charles Schwab & Co. Inc.
in OH

Executive Director

for Public School Retirement System of Kansas City, Missouri
in MO

Conversion Analyst

for Charles Schwab & Co. Inc.
in OH

Newly Posted Webcasts (Post Yours!)

The Changing Face of Health Insurance

on April 5, 2002
presented by Alliance for Health Reform

Newly Posted Conferences (Post Yours!)

16th Annual Employee Benefits Institute

in MO on May 3, 2002
presented by Employee Benefits Institute of Kansas City and UMKC

401(k) Plans Intermediate eSeminar

in ALL STATES on August 14, 2002
presented by McKay Hochman

401(k) Plans Intermediate eSeminar

in ALL STATES on June 25, 2002
presented by McKay Hochman

401(k) Plans Intermediate eSeminar

in ALL STATES on April 22, 2002
presented by McKay Hochman

401(k) Plans Intermediate eSeminar

in ALL STATES on October 2, 2002
presented by McKay Hochman

401(k) Plans Intermediate eSeminar

in ALL STATES on December 3, 2002
presented by McKay Hochman