Health & Welfare Plans Newsletter

February 9, 2010

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[Official Guidance]
Text of Model Employer CHIP Notice to Employees About Availability of Premium Assistance Under State Medicaid Programs or Child Health Assistance Programs
3-page Microsoft Word document. Excerpt: "The Model Employer CHIP Notice was designed as a template to cover an array of situations where employees may be entitled to notice and may reside (or their families may reside) in States across the nation. Employers may use the model template as a national notice to fulfill their employer notice disclosure obligation under ERISA . . . and the parallel provisions of . . . the PHS Act and . . . the Internal Revenue Code. The notice is required to be provided automatically, free of charge. . . . [T]he approach of the Model Employer CHIP Notice is to provide a very brief description of premium assistance and rely on State contact information for State-specific program descriptions."
(Employee Benefits Security Administration)

[Guidance Overview]
US Labor Department Publishes Employer Notices on Medicaid and CHIP Programs
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

[Guidance Overview]
IRS Requirement of Reporting and Excise Taxes for Health Plan Non-Compliance
Excerpt: "This new reporting obligation makes compliance with group health plan requirements more important than ever. To avoid excise taxes under this new self-reporting regime, employers and administrators of group health plans should have procedures and processes in place that are reasonably designed to ensure compliance. If plan failures nonetheless occur, the employer and other responsible parties must promptly take action to correct the violation within 30 days, or face expensive excise tax penalties."
(McGuireWoods LLP)

[Guidance Overview]
Interim Final Regulations Under Mental Health Parity and Addiction Equity Act (PDF)
Excerpt: "Practice Pointer: Although several commenters requested clarification on how to determine whether a plan is maintained 'pursuant to' a [collective bargaining agreement] if the plan covers both union and non-union employees, the Agencies declared such a determination to be outside the scope of these Interim Regs."
(Alston & Bird)

[Guidance Overview]
IRS Issues 2009 Version of Publication 970: Tax Benefits for Education
Excerpt: "EBIA Comment: Qualified educational assistance programs allow employers to provide assistance to employees for a broad range of educational expenses, including expenses for graduate-level courses and for courses that are not job-related (subject to certain limitations). Under Code Section 127, amounts paid or incurred by an employer under such programs are deductible by the employer and are excludable from the employees' taxable income."
(Employee Benefits Institute of America)

Even When Treated, Depression Costs Employers
Excerpt: "Workers with depression stay home sick more often than healthy colleagues, even when their disease is treated, according to a Thomson Reuters report released on Tuesday. The report, commissioned by drug maker Sanofi Aventis, suggests that employers would benefit from better treatments of their workers for depression. Depression is the leading cause of disability among Americans aged 15 to 44, according to the National Institute of Mental Health."
(Reuters via The New York Times; free registration required)

West Virginia Groups Push for Health Insurance Coverage of Birth Control for Teens
Excerpt: "A state law passed in 2005, called the Prescription Fairness Act, requires insurers to cover the cost of contraceptives. But it allows both private insurers and the state's Public Employees Insurance Agency to exempt dependent minors from that coverage. Last week, 10 members of the House of Delegates introduced a measure (HB4272) to remove that exemption."
(The Charleston Gazette)

North Texas Company Offers Babysitting Service to Employers
Excerpt: "Some North Texas companies may soon be adding something new to their benefits packages. It's not just a move to keep employees happy; it's a way to avoid lost work time. The companies are becoming a little more family friendly."
(CBS Stations Group of Texas L.P.)

Investigation of Fireman's Fund Termination of Retiree Medical Benefits
Excerpt: "At the end of September, Fireman's Fund Insurance Company ('FFIC') notified most of its retirees that it intends to discontinue providing medical benefits for the overwhelming majority of its retirees effective January 1, 2010. Cohen Milstein is currently investigating whether FFIC is permitted to make those changes."
(Lewis, Feinberg, Lee, Renaker and Jackson PC)

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Executive Compensation; Benefits in General

[Guidance Overview]
IRS Guidance on Miscellaneous HEART Act Changes (PDF)
4 pages. Excerpt: "Section 111 of the HEART Act adds section 45P to the IRC. IRC section 45P provides a small business employer a credit against its income tax liability if it makes differential wage payments to 'qualified employees' who are on active duty in the uniformed services for more than 30 days. The amount of the credit is 20% of the sum of the eligible differential wage payments made to qualified employees during the taxable year of the small business employer."
(Transamerica Center for Retirement Studies)

[Guidance Overview]
IRS Correction Program for 409A Plan Documents
Excerpt: "This new 409A guidance will be helpful to employers who may have overlooked certain deferred compensation arrangements that were not updated to comply with Section 409A by the December 31, 2008 deadline. But even if your plans have been previously reviewed for 409A compliance, you should not disregard this new guidance. The Notice provides clarifications regarding some common plan provisions that will be considered compliant with Section 409A requirements."
(Nixon Peabody LLP)

[Guidance Overview]
DOL FAQs on How Pharmacy Benefit Manager Compensation Is Reported for Form 5500 Schedule C Purposes
Excerpt: "EBIA Comment: It is interesting to see the DOL provide such specific guidance for PBMs. Those entities, and the plans they provide services to, will want to take note. But it is important to remember that Schedule C will not be required for an ERISA welfare plan unless it has a trust (or should have had a trust because Technical Release 92-01 does not apply). And in light of a growing number of cases addressing whether PBMs are ERISA fiduciaries, we find noteworthy the DOL's caveat that the guidance on rebates and discounts is for Schedule C purposes only and does not indicate the agency's view on other ERISA Title I provisions."
(Employee Benefits Institute of America)

Value of Golden Parachutes at America's 20 Largest Publicly-Traded Companies Decreased by Approximately 40% in Past Two Years
Excerpt: "A new study conducted by New York management consultant Alvarez & Marsal found the average value of change in control benefits provided to CEOs decreased to $22,987,661 in 2009 from $38,355,523 in 2007. Similarly, the average value provided to other non-executive officers fell to $7,975,671 in 2009 from $13,191,635 in 2007, according to a press release."

Are You Indemnified for a Fiduciary Breach Involving a Retirement or Health Plan?
Excerpt: "The beginning of the year is a good time to examine or assess your indemnification and insurance coverage. It is especially appropriate to focus on indemnification for a couple of reasons. First, it appears that the position recently taken by the Labor Department, and adopted by certain federal courts, has put into question the ability of plans, and arguably companies, to indemnify plan fiduciaries in instances where there has been an allegation of fiduciary breach."

New Jersey Cost-Cutting Measures Would Reduce Pensions and Health Benefits for Government Workers and Teachers
Excerpt: "The plans . . . would roll back pension benefits for government workers and teachers, and make public employees at all levels pay 1.5 percent of their salaries toward health benefits, matching what state workers contribute. Several steps would aim to crack down on perceived abuses. Most state workers would have to put in at least 35 hours a week to qualify for pension and health benefits. Those with multiple public jobs could choose just one for calculating retirement benefits."

Impact of FY 2011 Proposed Budget on HR and Employee Benefits
Excerpt: "The budget includes several proposals that affect human resources and employee benefits from an employer perspective, such as: 1) a proposed extension of the federal subsidy for COBRA benefits through December 31, 2010; 2) a legislative proposal that would introduce automatic individual retirement accounts (IRAs) for employers to offer employees; 3) retirement plan regulatory initiatives . . . ."
(Hewitt Associates)

CBO's Assessment of Policy Option to Reduce Employers' Payroll Taxes for Firms that Increase Their Payroll (PDF)
7 pages. Excerpt: "This letter [to the Honorable Robert P. Casey Jr.] responds to questions you posed about policy options to increase employment by reducing employers' payroll taxes for firms that increase their payroll. Last month, the Congressional Budget Office (CBO) released a report that addressed such options, as well as other possible approaches to achieving that goal. This letter reviews the analysis in that report and discusses how key design elements of such a policy would affect the resulting gains in employment."
(U.S. Congressional Budget Office)

IRS Compliance Audits on Employment Taxes Could Start This Month, According to Accounting Firm
Excerpt: "While the examinations may look at any reporting aspect of the return, Eisner says that the primary areas of focus are expected to be the following items: 1) worker classification (employee vs. independent contractor); 2) fringe benefits; 3) officer's compensation; 4) backup withholding; and 5) Form 1099 reporting."

New Edition of ESOPs and Corporate Governance
The NCEO has just released the third edition of its book ESOPs and Corporate Governance, which was written to help ESOP companies think through their governance issues. An important chapter details a survey on ESOP company governance practices. Other chapters address how to select trustees, legal obligations of trustees, best practices for boards (with an eye to concepts established by Sarbanes-Oxley), issues when employees are fiduciaries, and special legal considerations for ESOP companies.
(National Center for Employee Ownership)

Webcasts and Conferences

"409A Forgiveness: Round 2" Web Seminar
Nationwide on February 25, 2010
presented by SunGard Relius

"ADP/ACP Testing Techniques" - A Two-part Web Seminar
Nationwide on February 23, 2010
presented by SunGard Relius

2010 San Diego 401k/DC Evaluation Summit
in California on February 24, 2010
presented by Xponential Growth Solutions

Boston Mid-Sized Retirement & Pension Plan Management Conference
in Massachusetts on May 4, 2010
presented by University Conference Services

Press Releases

US Labor Department Publishes Employer Notices on Medicaid and CHIP Programs
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ASPPA and CFFP Form Education Partnership
American Society of Pension Professionals & Actuaries (ASPPA)

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