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| October 14, 2008 |
| Here are the Web's best new links about compliance and cost aspects of plan operation, design and policy. |
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| EBIA's In Person Seminar Series |
| EBIA's In Person seminars provide education on employee benefits topics to professionals, including TPAs, attorneys, benefits consultants, human resources managers, plan administrators, insurance professionals, and accountants. For information about CE credit, course materials, speakers, locations, and agenda details, and to register, please visit EBIA's In Person Seminars. |
[Guidance Overview] Economic Stabilization Bill Could Affect Pensions; Includes Enhanced Mental Health Parity Rules
Excerpt: "[The legislation establishes a mechanism] to purchase 'troubled assets' from 'financial institutions.' The bill also includes enhanced mental health parity requirements for group health plans and other provisions that might be of interest to employers from a compensation and benefits perspective. This article highlights but a few relevant features of the Emergency Economic Stabilization Act ('EESA')." (Deloitte via BenefitsLink.com)
[Guidance Overview] Mental Health Parity Act – Ramifications for Your Health Plan
Excerpt: "In summary, if your health plan provides more restrictive coverage for mental health care (i.e., depression, schizophrenia or eating disorders) or substance use disorder (i.e., alcohol or drug abuse) than for the most frequent treatment of physical conditions (i.e., cancer, broken bones or heart disease) the plan will need to adjust its benefits to comply with the new law. If your plan sets limits on hospital inpatient days and outpatient days for mental health or substance abuse, but not substantially for other physical ailments, the plan will need to be amended to provide parity in coverage. In addition, if your plan has separate cost-sharing requirements or treatment limitations applicable to only mental health or substance use disorder benefits, these will need to be eliminated or applied to all benefits equally." (McDermott Will & Emery)
[Guidance Overview] IRS Guidance on Health FSA Distributions Under the Heart Act
Excerpt: "Earlier this year, the Heroes Earnings Assistance and Relief Tax Act (HEART Act) of 2008 became law. The HEART Act was designed to provide much-needed financial flexibility for our military. In its first guidance on the HEART Act, the IRS has released Notice 2008-82 which discusses Qualified Reservist Distributions (QRDs). QRDs provide certain military reservists with special options in their health care flexible spending accounts, but employer action is necessary to enable the process. This article explains the IRS guidance." (JPMorgan Chase & Co.)
[Guidance Overview] Health FSAs: IRS Issues Guidance on New 'Qualified Reservist Distributions'
Excerpt: "The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) amended IRC §125 to permit military reservists who are called to active duty to withdraw the unused portion of their health flexible spending arrangements (FSAs). IRS recently issued guidance explaining how the new distributions are to be administered and provided a transition period until January 1, 2010 for amending the plan document. IRS Notice 2008-82." (Deloitte via BenefitsLink.com)
[Guidance Overview] Second Circuit Vacates Judgment for Plan, Suggests Appointment of Counsel
Excerpt: "The federal courts have continued to adapt the MetLife v. Glenn decision into their approach in an ad hoc and unpredictable fashion. To be sure, several courts have seen the case as requiring little change. Others, such as the Second Circuit in Douglas, reached conclusions that reveal a new approach to old issues. In this unpublished decision, the Second Circuit reversed and vacated a district court judgment for the disability carrier where the claimant had failed to submit her claim within the time required by the policy." (Health Plan Law blog by Attorney Roy F. Harmon III)
Health Insurers Can Predict Claims Risks by Studying Policyholders' Hobbies and Grocery Bills (PDF)
2 pages. (A.M. Best Company, Inc. via Milliman)
Senators Call for Greater Disclosure of Health Insurance Costs to Workers
Excerpt: "Senators Max Baucus (D-MT), Charles Grassley (R-IA), Ron Wyden (D-OR), Mike Enzi (R-WY), and Ben Nelson (D-NE) on October 7 released a discussion draft [http://www.senate.gov/~finance/press/Gpress/2008/prg100708b.pdf] and are seeking public comment on legislation that would provide for greater disclosure of health insurance costs to workers. The Senators said that better informing workers about what they pay for health care and yearly cost increases may help to control health care costs." (The ERISA Industry Committee)
Many Cancer Patients Forgoing Care Because of Cost, According to Study
Excerpt: "One in eight people with advanced cancer turned down recommended care because of the cost, according to a new analysis from Thomson Reuters, which provides news and business information. Among patients with incomes under $40,000, one in four in advanced stages of the disease refused treatment." (USA TODAY)
Wall Street Concerns May Pressure Custodians of Health Savings Accounts to Drop Rates and Consolidate
Excerpt: "The economic nuke that nearly leveled Wall Street this month could lead to new pressure for financial firms to lower the interest rates they pay on health savings accounts (HSAs) and/or increase or add administrative fees, industry observers suggest. Some HSA custodians, however, say they expect to feel few, if any, tremors." (AISHealth.com)
The Most Expensive Drugs Are Getting Even More Expensive
Excerpt: "Specialty drugs -- often sold by biotech companies, and used to treat complex conditions such as cancer -- are some of the most expensive medicines on the market. As it turns out, their already high prices are rising much faster than inflation, and even faster than the prices of other prescription drugs. Last year, the wholesale price of specialty drugs rose 8.7%, three times the rate of inflation. The price of non-specialty, branded drugs rose 7.4%, while the price of generic drugs fell by 9.6%." (The Wall Street Journal)
General Motors Retirees Lose Company Health Care Coverage; Will Receive $300 Monthly To Purchase Coverage
Excerpt: "General Motors on Jan. 1, 2009, will cease to provide health care coverage for more than 100,000 retirees and their dependents and instead will add $300 to their monthly pension checks to purchase insurance, the Detroit Free Press reports. The move is an effort to reduce spending by GM, which spent $3.3 billion on retiree health coverage in 2007." (Kaiser Family Foundation)
California Health Plan Bill Failures Lead to New Fights
Excerpt: "Schwarzenegger [vetoed all the health care bills sent to him], including the single-payer measure, citing 'annual shortfalls of $42 billion' in financing. The net effect of an almost two-year exploration of the politics of health care, therefore, was virtually nothing. That's in keeping with the Capitol's nearly unblemished record of failing to resolve complex public policy issues." (The Sacramento Bee)
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Links to Items on Executive Comp, Benefits in General
[Guidance Overview] The Emergency Economic Stabilization Act of 2008: Summary, Analysis and Implementation (PDF)
11 pages. Excerpt: "Despite its passage, the EESA raises various issues that remain to be worked out by Treasury. These include uncertainty regarding the actual mechanism and pricing of troubled assets to be purchased and the timing of such purchases. Congress also imposed various conditions, including limits on the funding mechanism, greater Treasury oversight and accountability for the program, and limits on executive compensation, that must be resolved in implementing the new law." (Paul, Hastings, Janofsky & Walker LLP)
[Guidance Overview] Executive Compensation Limits and Other Employee Provisions Under the Emergency Economic Stabilization Act of 2008 (PDF)
3 pages. Excerpt: "How will the Treasury enforce the new law? Does it have any real teeth? What about executives enjoying binding agreements? What if they refuse to 'cooperate'? Also, it is interesting to note that, once again, Congress believes the tax code is a good vehicle to moderate and regulate the behavior of executives and compensation committees as well as the magnitude of executive compensation. History would indicate, however, that this does not work well and, for the most part, has served only to shift the cost to the shareholders." (Dechert LLP)
[Guidance Overview] Emergency Economic Stabilization Act of 2008: Thoughts on the Landscape of Executive Compensation (PDF)
6 pages. Excerpt: "Partly to raise revenue and partly to make the [Troubled Assets Relief Program (the 'TARP')] palatable to a skeptical voter base, the Act includes several restrictions on compensation payable to senior executives of certain participating FIs and limits its tax deductibility. In addition, as described below, the Act amends the deferred compensation tax law applicable to certain off-shore entities, whether or not they participate in the TARP." (Dewey & LeBoeuf LLP)
[Guidance Overview] Discrimination Claims Under ERISA
Excerpt: "Historically, ERISA §510 claims have been most often asserted in relation to retirement/pension plans. However, recent cases have been brought under ERISA §510 in relation to health and welfare plans. Claims for ERISA §510 violations occur most often when an employer has terminated an employee, and the employee claims that the termination was in anticipation of the employee making a claim under a benefit plan or becoming eligible for benefits under a benefits plan." (Aiken & Aiken)
[Guidance Overview] Moral Hazard and Executive Compensation (PDF)
4 pages. Excerpt: "Moral hazard is an awkward phrase that means, when a party is insulated from risk, it may behave differently than if it were fully exposed to that risk. The concept has definite applicability to executive compensation. If an executive team is rewarded for the positive outcomes of good investments, but insulated from the negative consequences of investments that turn sour, then we may encourage excessive risk-taking. It is thought that moral hazard has been a major contributing factor to the current financial crisis gripping Wall Street. It is directly addressed by the recent legislation enacted by Congress that grants the Treasury Department power to purchase distressed assets from banks and other financial firms. Specifically, the Act prohibits participating companies from providing compensation incentives to senior executive officers 'to take unnecessary and excessive risks that threaten the value of the financial institution.'" (Faegre & Benson LLP)
[Guidance Overview] Summary of FASB Statement 123R, Share-Based Payment, October 9, 2008 (PDF)
14 pages. Excerpt: "Financial Accounting Standards Board (FASB) Statement No. 123 (revised 2004), Shared-Based Payment (Statement 123R) repeals the longstanding 'intrinsic value' method of accounting for equity compensation prescribed by APB Opinion No. 25 (Opinion 25), and replaces original Statement 123 with a mandate that generally all equity awards granted to employees be accounted for at 'fair value.'" (Faegre & Benson LLP)
How Much Sunlight Does it Take to Disinfect a Boardroom? A Short History of Executive Compensation Regulation
Excerpt: "This paper reviews the history of executive compensation disclosure and other government policies affecting CEO pay, and as well surveys the literature on the effects of these policies." (Social Science Research Network)
Connecticut High Court Approves G.ay Marriage
Excerpt: "Connecticut became the third state to legalize same-sex marriage with a state Supreme Court ruling that g.ay couples have the constitutional right to wed." (PLANSPONSOR.com; free registration required)
Newly Posted Events
ERISA Litigation: The Bailout Bill, the Financial Crisis, and the Impact on Your Practice
Nationwide on October 23, 2008
presented by ALI-ABA (American Law Institute-American Bar Association)
Investment Advice--Participants and Beneficiaries; Hearing
in District of Columbia on October 21, 2008
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)
Newly Posted Press Releases
Financial Crisis Recasts Debate on Pensions Versus 401(k)s
Watson Wyatt
Treasury Announces Executive Compensation Rules Under the Emergency Economic Stabilization Act
U.S. Department of Treasury
Financial Service Standards Wins PSCA Signature Award for Its 401k Service Solution™ Six-Step ERISA Process
Financial Service Standards, LLC
Pension Governance, LLC Releases Retirement Plan Risk Management Study
Pension Governance, LLC
Americans for Tax Reform and Rutledge Capital Release 2008 Election 401(k) Calculator
Americans for Tax Reform (ATR)
Goldleaf Partners To Provide 403(b) Services For Wisconsin Evangelical Lutheran Church (WELS)
Goldleaf Partners
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