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October 1, 2008

Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy.

Today's sponsor is International Foundation of Employee Benefit Plans

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[Official Guidance] Text of Golden Gate Restaurant Association Case from Ninth Circuit Upholding San Francisco Mandatory Healthcare Expenditure Law (PDF)
38 pages. Excerpt: "On April 17, 2008, we heard oral argument on the merits of the City's appeal. We now reverse the judgment of the district court and remand with instructions to enter summary judgment in favor of the City . . . . The Ordinance mandates that covered employers make 'required health care expenditures to or on behalf of' certain employees each quarter. . . . The Ordinance does not require any employer to adopt an ERISA plan or other health plan. Nor does it require any employer to provide specific benefits through an existing ERISA plan or other health plan. . . . Because the City-payment option offers San Francisco employers a realistic alternative to creating or altering ERISA plans, the Ordinance does not 'effectively mandate[] that employers structure their employee healthcare plans to provide a certain level of benefits.'" (U.S. Court of Appeals for the Ninth Circuit)

[Guidance Overview] Issue Exhaustion and ERISA
Excerpt: "Sticking with my theme of ERISA today, the Ninth Circuit has a decision of first impression concerning issue exhaustion and ERISA in the denial of benefits context. In Vaught v. Scottsdale Healthcare (9th Cir 09/29/2008), the Ninth Circuit declined to impose an 'issue exhaustion' requirement under ERISA." (Workplace Prof Blog)

[Guidance Overview] Personal Injury Attorneys Not Liable to Plan for Disbursement of Recovered Funds
Excerpt: "This decision will likely make the rounds among the plaintiff's bar. In it, the district court dismissed an ERISA plan's claims against personal injury attorneys who had disbursed settlement funds at the behest of their client." (Health Plan Law blog by Attorney Roy F. Harmon III)

[Guidance Overview] San Francisco Health Care Security Ordinance Not Preempted by ERISA
Excerpt: "In the Golden Gate case, the district court had enjoined the employer spending requirements of the San Francisco Health Care Security Ordinance, holding that ERISA preempted the spending requirement. The Ordinance requires all covered employers to make a certain level of health care expenditures on behalf of their covered employees. However, the Ninth Circuit reversed, holding that the Ordinance is not preempted by ERISA." (Attorney B. Janell Grenier via

[Guidance Overview] Court Rules That State External Review Law Is Not Preempted by ERISA
Excerpt: "EBIA Comment: This court's holding with regard to the Washington external review law is no surprise considering that the law is, according to this court, 'virtually indistinguishable' from the state law analyzed by the Supreme Court in Rush. Nevertheless, it is important to remember that the Supreme Court did leave open the possibility that certain external review laws could conflict sufficiently with ERISA to be preempted (for instance, laws creating a new cause of action under state law or laws imposing elaborate and burdensome procedures that might undermine ERISA's civil enforcement procedures)." (Employee Benefits Institute of America)

States Act to Reduce Health Insurance Costs
Excerpt: "In the last two years, at least three states have included health improvement in new programs intended to make health insurance more affordable for small employers. . . . In return for reduced premiums, deductibles and co-payments, participants [in Rhode Island] must select and visit a primary care doctor for a checkup, complete a 15-page health questionnaire and promise to try to adopt healthy behaviors and to abstain from smoking. People with chronic health problems have to agree to follow their doctors' directions on how best to manage the disease." (The New York Times; free registration required)

2009 Medicare Premiums, Deductibles and Coinsurance
Excerpt: "The Centers for Medicare & Medicaid Services (CMS) recently announced the changes to the Medicare Part A and Part B premiums, deductibles and coinsurance paid by beneficiaries that become effective on January 1, 2009. There will be no increase in the standard monthly Part B premium or deductible . . . . The Part A numbers, however, will increase by 4.3 percent. The table [on the target page] summarizes the Part B and Part A numbers and also includes the base Part D beneficiary premium announced in August, which will increase less than 1 percent." (The Segal Group, Inc.)

House and Senate Approve Insurance-Related Measures; House Approves Breast Cancer Protection and Injury Clarification Legislation
Excerpt: "['Michelle's Law'] would amend ERISA, the Public Health Service Act, and the Internal Revenue Code to require group health plans to continue providing coverage for qualifying dependent college students for one year after the first day of a medically necessary leave of absence or until the date such coverage would otherwise terminate under the plan." (The ERISA Industry Committee)

House and Senate Approve Mental Health Parity Legislation, but in Different Bills with Different Offsets
Excerpt: "The House and Senate on September 23 approved legislation that would require health plans offering mental health coverage to provide equivalent benefits for mental illness as they do for other medical conditions, but because the legislation was approved as separate pieces and contains different offsets, it still is not cleared for President Bush's consideration. House and Senate negotiators earlier this summer agreed on the overall policy provisions of the legislation, but continue to disagree over whether and how to offset the 10-year, $3.9 billion cost of the legislation." (The ERISA Industry Committee)

Prescription Drug Trends, September 2008 (PDF)
6 pages. Excerpt: "The share of prescription drug expenses paid by private health insurance increased substantially over the past sixteen years (from 26% in 1990 to 44% in 2006), contributing to a decline in the share that people paid out-of-pocket (from 56% in 1990 to 22% in 2006)." (Kaiser Family Foundation)

ERISA, the States, and the Candidates' Health Reform Proposals
Excerpt: "No vitally important employee benefits issue is as hidden in the presidential candidates' health reform proposals as is ERISA preemption. However, the proposals from Sens. John McCain (Ariz.) and Barack Obama (Ill.) will dramatically affect how employer-provided health care benefits operate in relation to ERISA." (Wolters Kluwer)

Financing for Massachusetts Preserves Health Plan
Excerpt: "Massachusetts received the Bush administration's seal of approval for its universal health care plan on Tuesday when it reached agreement with federal officials on financing a three-year continuation of the landmark experiment." (The New York Times; free registration required)

IRS Provides Guidance on Reservist FSA Distributions
Excerpt: "The Internal Revenue Service has issued Notice 2008-82 providing guidance on qualified reservist distributions (QRDs) from health flexible spending accounts (FSAs) and including a transition rule allowing plans to be retroactively amended for QRDs made before January 1, 2010." (; free registration required)

Recognizing the Value of Flexible Benefits in Asia
Excerpt: "This empowering aspect of flex helps set it apart from traditional health plans. In a world of diverse employees who value different benefits at different stages of their lives, employees can tailor their benefit packages to suit their individual needs and wants, making benefit choices that fit well with their priorities. For example, college graduates entering the workforce might not value medical insurance as much as educational assistance, a new pair of fashionable eyeglasses or a gym membership, while a new parent might embrace maternity and pediatric benefits. And a 55-year-old employee might value additional medical protection and more savings for retirement." (Mercer LLC)

Global Health Management: Discovering Value and Savings
Excerpt: "Throughout the world, leaders of multinational companies and their shareholders are becoming increasingly concerned about rising health care costs and the impact on their companies' futures and fortunes. Their concerns have merit, as total health care costs in developed nations likely will double faster than previously thought. Before a company embarks on a global approach to managing health benefits, it should carefully identify and evaluate the specific issues that will affect outcomes. Without a thorough understanding of the total global picture, companies may incur unnecessary costs, and their solutions may become nothing more than a reactive Band-Aid." (Mercer LLC)

Employer Health Plan Mandate on Dependent Coverage During College Medical Leaves of Absence
Excerpt: "Legislation now heading to the president for his signature will require employer health plans to allow employees to continue coverage for a dependent child on a medically necessary leave of absence or who has been reduced to part-time student status due to a severe illness or injury." (Mercer LLC)

Judges Say San Francisco Can Charge Employers for Its Health Plan
Excerpt: "In a decision that could set the stage for a test of the supremacy of a longstanding federal labor law, a panel of federal judges found Tuesday that San Francisco had the right to charge employers to help pay for its universal health care plan, the first in the nation." (The New York Times; free registration required)

[Opinion] Ninth Circuit Decides - San Francisco Health Care Law Not ERISA Preempted
Excerpt: "Over the years following this issue, I have reluctantly agreed with the findings of ERISA preemption against these types of laws (see here for an example). However, I am now persuaded that the Ninth Circuit's ruling is consistent with the Travelers precedent from 1995 that unless a law is historically a matter of local concern, there should be a presumption against finding ERISA preemption. It seems to me that courts have read ERISA incorrectly in this regard in past cases." (Paul M. Secunda viz Marquette University Law School Faculty Blog)

[Opinion] 9th Circuit Holds San Francisco Ordinance Not Preempted: Is There a Conflict in the Circuits?
Excerpt: "For most of the decision, the unanimous three-judge panel methodically describes and then disposes of all the arguments made by the [Golden Gate Restaurant Association] and its numerous amici (including the Department of Labor) in favor of preemption. The opinion is written as if the court is perfectly aware that its decision is likely to wind up on the steps of the Supreme Court . . . ." (Pension & Benefits Blog)

[Opinion] What Do We Want Health Insurance To Be?
Excerpt: "Ultimately the comprehensive versus less comprehensive insurance question frames a fundamental tradeoff that is almost never stated clearly in public debate, perhaps because it is regarded as too stark for the public to digest. Do we want and can we afford to provide subsidies to make more expensive comprehensive coverage, from preventive to catastrophic care with more modest out-of-pocket costs, affordable for people who are already struggling from the burden of health care costs? Or should government subsidies and tax policies encourage less comprehensive and somewhat cheaper insurance with higher deductibles, higher out-of-pocket costs for routine care and back-end catastrophic protection?" (Kaiser Family Foundation)

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Links to Items on Executive Comp, Benefits in General

[Official Guidance] Text of IRS Rev. Proc. 2008-59: Ordinary and Necessary Business Expenses of Employees Traveling Away from Home (PDF)
31 pages. Updates and restates the rules for determining the amount of an employee's ordinary and necessary business expenses for lodging, meals, and incidental expenses incurred while traveling away from home that are deemed substantiated under 1.274-5 of the Income Tax Regulations. Rev. Proc. 2007-63 is superseded. (Internal Revenue Service)

[Guidance Overview] Guidance Modifying Section 409A No-Ruling Policy
Excerpt: "On September 26, the IRS issued Revenue Procedure 2008-61, modifying and amplifying Revenue Procedure 2008-3, 2008-1 I.R.B. 110, with respect to areas in which rulings and determination letters will not be issued as to the tax consequences of arrangements described in Section 409A of the Internal Revenue Code." (Hewitt Associates)

Failed Bailout Demonstrates Support for Executive Compensation Reform
Excerpt: "In an effort to build political support for its passage, several executive compensation provisions were included in the failed bill. Any future legislation likely will contain executive compensation reform because of its bipartisan popularity." (Workforce Management; free registration required)

By Rejecting Severance, AIG's Ex-CEO Shines a Light on Executive Pay Debate
Excerpt: "The government's role in saving AIG from bankrup.tcy last week may have put pressure on Willumstad to forgo the severance, some observers say, especially since he served as CEO for only three months. But his action has brought more attention to the heated debate over the appropriate level of compensation for CEOs of failing companies." (Workforce Management; free registration required)

Multinational Employers May Have Obligations Under IRC Section 409A
Excerpt: "Section 409A requires companies that receive personal services from a U.S. tax-paying employee to: Document, in advance of the services, any arrangement used to defer receipt of any of the compensation earned by the worker and follow specific rules when making any elections to further defer that compensation. Document, in advance, when such deferred compensation can be paid and follow strict rules that limit the circumstances under which the worker can be paid such deferred compensation. Limit the types of funding arrangements that can be used to make payment." (Faegre & Benson LLP)

Helping Employees Make the Most of the Benefits their Companies Offer
Excerpt: "If you want to offer employees an inexpensive benefit that will foster loyalty and boost productivity, consider a navigation system. No, not a GPS, but a tool that will guide them in making a host of decisions about everything from tuition-reimbursement programs to 401(k) strategies to consumer-directed health plans. By offering more and better education around benefits, companies not only help employees make the most of their perquisites, but also gain from increased retention, higher productivity, and related forms of goodwill." (

Connecticut PEO Legislation Requires Licensing
Excerpt: "Legislation signed into law by Connecticut Governor Jodi Rell includes a licensing program that provides employer status to the professional employer organizations (PEOs) delivering human resource management, employee benefits, payroll and workers' compensation to thousands of small business owners in Connecticut." (; free registration required)

FASB Fine-Tunes New Disclosures About Pension and Retiree Medical Plan Assets
Excerpt: "A refined FAS 132(R), Employers' Disclosures about Pensions and Other Postretirement Benefits, should describe the objectives of employers' disclosures about their pension, retiree medical and other postretirement benefit plan assets and investment risks, FASB decided at its Sept. 24 meeting." (Mercer LLC)

Employee Ownership Update for September 30, 2008
NCEO Executive Director Corey Rosen discusses John McCain's endorsement of ESOPs, a new survey of technology and life science companies finding that both private and public companies are relying less on stock options than they did in prior years, a class-action lawsuit against Sam Zell over how he structured the ESOP at the Tribune Company, and nominations for the NCEO's board. (National Center for Employee Ownership)

Newly Posted Events
(Post Yours!)

Fuel Relief and Flex: What Employers Are Doing Webcast
Nationwide on October 9, 2008
presented by International Foundation of Employee Benefit Plans

Newly Posted Press Releases
(Post Yours!)

Ninth Circuit ERISA Decision Threatens Health Care Coverage For Millions Of American Workers
American Benefits Council

The Annual Enrollment Season Takes on New Significance, Given the Economy, Says Aon Consulting
Aon Consulting

Travis Software Releases Summer 2008 Upgrade for
Travis Software Corp.

MassMutual Retirement Services Expands Sales Coverage in Midwest

Fiduciary360 to Provide On-going Fiduciary Training to Council on Foundations Members
Fiduciary360 (fi360)

Online 401k Partners With Five New Payroll Companies
The Online 401(k)

Synapses Solutions Help Clinch PSCA Gold Awards
Synapses Inc.

Class Certification Decision in 401(k) Case
Lewis, Feinberg, Lee, Renaker & Jackson, P.C.

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Plan Administrator
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in AZ

Pension Plan Administrator
for Howard Simon & Associates
in IL

401(k) Plan Specialist
for Retirement Plan Services, L.L.C.
in MO

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for Prudential Financial
in IA

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for Gallagher Retirement Services
in CA

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