BenefitsLink Welfare Plans Newsletter May 23, 2005 Today's sponsor: ALM (Click on company name or banner to learn more.) Complete Benefits Law Guidance from Law Journal Press The nation's workforce and health care system are constantly evolving and so are the legal issues. Law Journal Press helps you handle any benefits law question with up-to-date, authoritative books on all aspects of the field. Get legal and practical advice from leading experts on everything from COBRA to ERISA, "contingent" employees to family and medical leave, and more. Browse our product listings for detailed information and special offers. (Please visit our sponsors. We try to make sure their products and services will be of interest to you. Thanks! --Editor) Analysis: IRS Defers (But Does Not Eliminate) Cafeteria Plan and FSA Forfeitures (PDF) 10 pages. Insightful, detailed analysis of Notice 2005-42. Excerpt: "[T]he new rule does NOT fit well with existing law and may result in a host of administrative and compliance headaches.... [T]he rule as written could create additional HIPAA and COBRA compliance obligations for Health FSAs." (Alston+Bird LLP) Overview: The IRS Loosens the 'Use it or Lose it' Rule for Flexible Spending Accounts (PDF) 1 page. Excerpt: "Notice 2005-42 states that employers that decide to offer the new grace period are required to amend their cafeteria plan documents on or before the last day of the current plan year (generally, on or before December 31, 2005)." (Dow, Lohnes & Albertson, PLLC) Overview: Flexible Spending Accounts May Reimburse Expenses Incurred After Year End (PDF) 2 pages. Excerpt: "The IRS just issued Notice 2005-42, which will reduce the impact of the 'use-it-or-lose it rule' by allowing employers to give cafeteria plan participants an additional 2-1/2 months after the close of a plan year to use contributions or benefits that were unused during that plan year. Importantly, this optional grace period may be implemented for the current plan year." (Mellon Financial Corporation) Overview: IRS and Treasury Extend the FSA Use-It-or-Lose-It Rule Excerpt: "For years, Congress and industry associations have prevailed upon the government to eliminate or at least liberalize the use-it-or-lose-it rule. With the issuance of Notice 2005-42, qualifying medical or dependent care expenses incurred within two and a half months of the close of a plan year may be reimbursed with unused FSA dollars from the immediately preceding plan year." (Mintz Levin Cohn Ferris Glovsky and Popeo P.C.) Overview: The New Use It or Lose It Rule for Cafeteria Plans Excerpt: "'Use it or lose it,' is the infamous principle of Section 125 flex/cafeteria plans. Positive account balances traditionally cause a December stampede to purchase eyeglasses and other medical what-nots. The expenses must be incurred by December 31 or the balance is forfeited to the employer. For a country that wants to contain medical expenses, the rule that 125 savings must be spent or forfeited is a little silly. IRS has issued some welcome relief with new Notice 2005-42." (Rackemann, Sawyer & Brewster) Overview: IRS Extends 'Use it or Lose It' Period Under Cafeteria Plans Excerpt: "The IRS Notice is effective immediately, but plan sponsors are not required to add the grace period, and it will not go into effect automatically. To take advantage of the new grace period, an employer must amend its cafeteria plan document to provide for a grace period which applies to all participants. The grace period can begin with the current plan year, so long as the employer amends its plan before the end of this plan year." (Faegre & Benson LLP) Overview: IRS Modifies Use-It-or-Lose-It Rule to Allow Cafeteria Plans a 2 1/2 Month Grace Period Excerpt: "Plan sponsors should keep in mind that offering a grace period will require a plan amendment before the end of the plan year to which the grace period relates, as well as participant communications that explain how the grace period works." (Employee Benefits Institute of America Inc.) EBSA Advisory Opinion 2005-07A Regarding the Georgia State Health Benefit Plan Excerpt: "Whether the status of the Georgia State Health Benefit Plan as a 'governmental plan' within the meaning of section 3(32) of ERISA would be adversely affected if it were extended to cover the employees of certain federally qualified health centers in the State of Georgia." (U.S. Employee Benefits Security Administration) Overview: Former Employee May Pursue COBRA Claims Excerpt: "Plan administrators are not required to prove actual receipt of COBRA election notices; instead, they should be prepared to prove that notices were provided in a timely fashion (e.g., by first-class mail to the last-known address of the qualified beneficiary). This decision points up an important exception: At least one other court has held that proof of mailing was not enough when the plan administrator knew that the election notice was not actually received." (Employee Benefits Institute of America Inc.) Disease Management Companies -- Mismeasurement or Just Optimistic Measurement of ROI Excerpt: "[T]he optimism does not necessarily originate with the disease management companies themselves. Rather, you need to either look in the mirror or give a mirror to your benefits consultants. It turns out that most 'specifications' in RFPs written by health plans and self-funded employers have so many built-in, hidden, measurement biases that a disease management company almost can't help hitting or beating their savings targets simply by measuring the way they are asked to measure." (Employee Benefit News) Principal Applies Modeling and Disease Management Techniques to Control Health Costs Excerpt: "The Principal Financial Group says it is using modeling and disease management techniques to help improve the health of employees of medical plan sponsors. The cost-cutting strategy is designed to identify and evaluate healthcare quality, evaluate potential health risks and take other actions to improve the health of medical plan members, the company says." (National Underwriter Life & Health; free one-time registration or paid subscription required) Hospital Helps Patients Make Medical Decisions: Program Offers Counseling, Videos, DVDs Excerpt: "The center provides free one-on-one counseling, along with videos and DVDs that explain the pros and cons of dozens of medical procedures. All hospitals routinely give patients information to help them make medical decisions, but Dartmouth Hitchcock is thought to have the nation's only center dedicated to that. Dr. James Weinstein, the center's medical director, hopes it will move medicine beyond informed consent to informed choice." (The Baltimore Sun; one-time registration required) Doctors Examine Merits of Health Plan Bonuses: Record Payouts Reward Certain Clinical Behaviors Excerpt: "The state's major health insurers say they paid thousands of primary care physicians millions of dollars in bonuses in 2004, with some handing out record payouts to doctors based on benchmarks ranging from technology improvements to asthma or breast cancer screenings." (Boston Business Journal vi bizjournals.com; one-time registration required) Profile: A Doctor -Lawyer-Gadfly v. Can.ada's Medical System Excerpt: "[D]r. Chaoulli ... never lost his taste for legal argument, or his distaste for Can.ada's publicly financed health care system. He has taken what was once regarded as a nuisance case, challenging the constitutionality of the system all the way to the Supreme Court - serving as his own lawyer, rolling his cardboard boxes stuffed with files into the chamber .... It has been a year since the Canadian Supreme Court heard the case, a rare delay that is raising eyebrows in legal circles." (The New York Times; one-time registration required) Insurers Charge Patients More to See Pricey Physicians Outside Health Care Network Excerpt: "Some health insurers are adding a new twist to the old approach of charging more for what's known as out of network care. They're measuring individual doctors' quality and fees -- and then charging more to see doctors deemed more expensive. Not surprisingly, it's a major change that has some doctors and patients upset. Many doctors warn that quality care could be at risk if they are sifted on the basis of cost, while patients grumble about being forced to switch physicians to ...." (AP via The Detroit News) Health Insurance Option Has Workers Pay More Excerpt: "For years, they were the kinds of health insurance plans one found at small businesses or among the self-employed, plans that had huge deductibles and required workers to pay a lot of medical bills themselves .... ... Now, as medical costs keep climbing, those high-deductible plans are spreading to the giant corporations that have long been the backbone of traditional job-related, low-deductible health insurance." (Los Angeles Times; one-time registration required) California to Estimate Future Cost of State Employee Retiree Health Benefits Excerpt: "State officials have begun work to estimate the future cost of providing health and dental benefits to retired state employees in an effort to comply with accounting regulations issued last year, the San Diego Union-Tribune reports. Under the regulations, state and local governments must estimate and publicly report their unfunded liabilities for retiree health care coverage beginning in 2008." (California HealthCare Foundation) States in Action: A Quarterly Look at Innovations in Health Policy Excerpt: "This States in Action quarterly newsletter is part of a new Commonwealth Fund initiative on State Innovations. The initiative aims to increase understanding about state health system performance, identify and measure the effects of policies intended to improve performance, and spread information about promising practices." (The Commonwealth Fund) Opinion: Decoding Health Insurance –- From the Human Genome Project to Universal Health Care Excerpt: "[The] ability to predict illness is the potential for discrimination ... if confidential health information is released. Unfortunately the chances of such a breach of privacy occurring, despite lip service by politicians to prevent it legislatively, are probably inevitable. Not only is microarray technology easily accessible, but for-profit private insurance companies have strong incentives to use it to protect their bottom lines by denying service, claims or even coverage." (The New York Times; one-time registration required) One-Third of Big Employers Plan to Offer HSAs, According to Mellon Survey Excerpt: "The number of employers offering health savings accounts is set to more than quadruple next year, according to a report by Mellon Financial Corp.'s human-resources consulting practice. In a survey of 361 large employers, 32% of respondents said they planned to offer an HSA in 2006, up from 7% that now offer the option." (modernhealthcare.com) EBSA Advisory Opinion 2005-12A, ERISA Sec. 3(1), on behalf of Wings for Christ, Inc. Excerpt: "Whether a program of benefits offered by Wings for Christ would be an 'employee welfare benefit plan' within the meaning of section 3(1) of ERISA and whether such program would be subject to state insurance regulation as a MEWA within the meaning of ERISA section 3(40)." (U.S. Employee Benefits Security Administration) Making the Case for Rich Employment-Tuition Reimbursement Plans Excerpt: "United Technologies Corporation is widely considered to be one of the most progressive employers in the country when it comes to education benefits. UTC's award-winning Lifelong Scholar tuition reimbursement program, now in its eighth year, is indeed rich, costing about $65 million annually. It is also generous in terms of how the money may be used. Employees may sign up for any college course they choose. All costs are covered and paid for up front." (Employee Benefit News) Links to Items on Executive Comp, Benefits in General Overview: State Court Decides that Divorce Decree Controls Over Beneficiary Designation Excerpt: "While this decision does not indicate whether the plan knew of the divorce decree, the case is another reminder that ERISA plans must remain on guard against competing claims to benefits payable at death and that the judicial procedure called 'interpleader,' although not without costs, is used by some plans to resolve such claims." (Employee Benefits Institute of America Inc.) Sixth Circuit Denies Claim for Statutory Penalties: Company Provided Participant-Requested Info Excerpt: "This case reminds us of a rule that may surprise some--participants or beneficiaries may claim statutory penalties under ERISA Section 502(c)(1) only when a plan administrator fails to comply with a request for information (there are some exceptions to this, most notably for COBRA initial notice and election notice failures, for which penalties may be awarded whether or not these documents were requested)." (Employee Benefits Institute of America Inc.) EBSA Advisory Opinion 2005-06A Regarding Applicability of the Claims Procedure Regs under ERISA Excerpt: "Whether accidental death and dismemberment benefits are subject to the requirements in 29 C.F.R. § 2560.503-1 for 'disability benefits' or whether they are 'other' welfare benefits subject to the general claims procedure provisions of 29 C.F.R. § 2560.503-1." (U.S. Employee Benefits Security Administration) EBSA Advisory Opinion 2005-08A on behalf of Blue Cross and Blue Shield of Minnesota Excerpt: "Whether certain distributions from insurance companies to their policyholders are 'plan assets.'" (U.S. Employee Benefits Security Administration) Newly Posted Events Newkirk Fund Central System - Online Demonstration Nationwide on June 14, 2005 presented by Newkirk Products, Inc. Newkirk Fund Central System - Online Demonstration Nationwide on July 12, 2005 presented by Newkirk Products, Inc. Newkirk Fund Central System - Online Demonstration Nationwide on August 16, 2005 presented by Newkirk Products, Inc. Newkirk Fund Central System - Online Demonstration Nationwide on August 31, 2005 presented by Newkirk Products, Inc. Newkirk Guidance Plus - Online Demonstration Nationwide on June 10, 2005 presented by Newkirk Products, Inc. Newkirk Guidance Plus - Online Demonstration Nationwide on July 15, 2005 presented by Newkirk Products, Inc. Newkirk Guidance Plus - Online Demonstration Nationwide on August 12, 2005 presented by Newkirk Products, Inc. Newkirk Guidance Plus - Online Demonstration Nationwide on August 19, 2005 presented by Newkirk Products, Inc. Newkirk Guidance Plus - Online Demonstration Nationwide on August 29, 2005 presented by Newkirk Products, Inc. Newkirk HMO Plus Online Document Publishing System - Online Demonstration Nationwide on May 24, 2005 presented by Newkirk Products, Inc. Newkirk HMO Plus Online Document Publishing System - Online Demonstration Nationwide on June 14, 2005 presented by Newkirk Products, Inc. Newkirk HMO Plus Online Document Publishing System - Online Demonstration Nationwide on June 28, 2005 presented by Newkirk Products, Inc. Newkirk SmartStatement - Online Demonstration Nationwide on June 21, 2005 presented by Newkirk Products, Inc. Newkirk SmartStatement - Online Demonstration Nationwide on July 19, 2005 presented by Newkirk Products, Inc. Newkirk SmartStatement - Online Demonstration Nationwide on August 23, 2005 presented by Newkirk Products, Inc. Newkirk SmartStatement - Online Demonstration Nationwide on August 31, 2005 presented by Newkirk Products, Inc. Teleweb: Global Health Care Issues- HIV/AIDS, Country Comparisons and Expatriates Nationwide on June 2, 2005 presented by International Foundation of Employee Benefit Plans Newly Posted Press Releases Federal Court Bars Former New York Resident From Selling Abusive Tax Plan To Employers (U.S. Department of Justice) Benefit Advisors Network Welcomes The Plexus Groupe Inc Dallas Ft. Worth Office (Benefit Advisors Network) Prescription Solutions' Online Pharmacy Receives Prestigious Accreditation by the National Association of Boards of Pharmacy (Prescription Solutions) Missing Connection -- Stakeholders May Lose When a Member's Only Resource for Prescription Coverage Information is the Internet (Rx Detections, Inc.) Newly Posted or Renewed Job Openings Trust Counsel for The Northern Trust Company in IL Senior Manager/Team Leader Qualified Retirement Plans for Advanced Benefits Consulting in MO Handy Links: View Today's Active Message Threads Search BenefitsLink Using the Web for Employee Benefits Research (hypertext article) Employee Benefits Library Copyright 2005 BenefitsLink.com, Inc.; except that you may reprint this newsletter in full (including this sentence) without obtaining our permission. Published by: BenefitsLink.com, Inc. https://benefitslink.com/about.html 1298 Minnesota Avenue, Suite H Winter Park FL 32789 (407) 644-4146 Fax: (407) 644-2151 Editor and Publisher: David Rhett Baker, J.D. Housekeeping: How to Sponsor an Issue Subscribe to a Daily Email Announcing Publication of Each Day's Newsletter Privacy Policy Archive of Previous Newsletters If you'd like to STOP this newsletter, just click on this link: STOP sending this newsletter to me