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Health & Welfare Plans Newsletter

April 13, 2010

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[Guidance Overview]
Health Reform Makes Important and Immediate Change In Tax Treatment of Employer-Provided Health Insurance Coverage in Wisconsin
Excerpt: "The Act amended federal tax law so that employers can offer tax-free health insurance coverage to adult children of employees during those taxable years in which the children are age 26 or under for the entire taxable year, whether or not those children are tax dependents for federal income tax purposes. . . . Under the Act, this change is immediately effective and has an immediate impact on many Wisconsin employers. Under Wisconsin law effective on January 1, 2010, employers with group health plans covered by Wisconsin insurance carriers (and self-funded public sector health plans) that offer dependent health insurance coverage to their employees must include coverage for certain adult dependent children up to age 27."
(Michael Best & Friedrich LLP)

[Guidance Overview]
Implications for Multiemployer Welfare Benefit Plans under Health Care Reform
Excerpt: "Multiemployer welfare benefit plans will have particular difficulty navigating the new requirements because the text of the Reform Act and the Reconciliation Act affecting many of the key issues (most particularly effective dates and the impact of grandfathering) is very ambiguous, leaving the resolution of those issues open to interpretation. We expect to issue future client alerts on these issues once the ambiguities are clarified through the issuance of regulations and other authoritative guidance."
(Proskauer Rose LLP)

Health Care Reform: The Employer's Perspective: Reducing the Cost of Health Care to 'Early Retirees'
Excerpt: "In order to support employer-provided coverage for certain retirees, the Health Care Act allocated five billion dollars to finance a temporary program to reimburse employers (who self-insure) or insurance companies (for fully-insured arrangements) a percentage of claims paid by the plan on behalf of an early retiree, the early retiree's spouse (or surviving spouse) or an eligible dependent of the early retiree. This 'reinsurance program' is intended to be effective 90 days after enactment of the Health Care Act, sometime around June 23, 2010, and will end on the earlier of when funds are depleted or January 1, 2014. At that time it is anticipated that early retirees will be able to choose from additional health care options from health insurance exchanges."
(Thorp Reed & Armstrong, LLP)

Webinar Recording: Health Care Reform Compliance: What Every Employer Needs to Know Now
Excerpt: "This informative webinar will provide an overview of the new responsibilities placed on employers, the penalties associated with noncompliance, and the significant impact on strategic decisions facing employers on the nature of their group health plans. Speakers will also discuss practical tips aimed at helping employers meet their obligations under this new legislation."
(Nixon Peabody LLP)

DOD Publishes Final TRICARE Secondary Payer Rule
Excerpt: "The Department of Defense (DOD) has published a final rule that implements U.S. Code Title 10 section 1097c, as added by section 707 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364). This law states that, like Medicare, TRICARE is secondary to employer-provided health insurance."
(International Foundation of Employee Benefit Plans)

Health Savings Account Funds Unlikely to Cover Retiree Health Costs
Excerpt: "Health savings accounts (HSAs) are likely to play a minor part in savings for health care costs in retirement, according to a report issued by the Employee Benefit Research Institute (EBRI). That is because both statutory contribution limits and currently low interest rates constrain the amount HSAs are able to generate, compared with the large amount needed to pay for retiree health expenses."
(Wolters Kluwer)

Fight Over ERISA Preemption Moves to Courts and Regulators
Excerpt: "As debate raged over death panels and doctors' fixes during the last year, a quiet battle was fought behind the scenes to preserve the ability of employers to continue paying their own health care costs. Known as self-insurance but more accurately as self-funded plans, a substantial number of companies choose to pay their employee health care expenses directly out of their own general funds rather than buy a group plan from a private insurance company. In Alaska, approximately 60 percent of privately covered employees have a self-funded company plan and make up 32 percent - the largest share - of the overall workforce, according to state officials."
(Passion for Subro!)

Health Care Reform Impacts Employers and Plan Sponsors
Excerpt: "Adding to the confusion of employers, the legislation becomes effective on a piecemeal basis over a period of many years. Although some articles claim otherwise, the vast majority of changes will not affect employers and plan sponsors until plan years beginning on or after September 23, 2010 -- i.e. the January 1, 2011 plan year for calendar year plans. The list [on the target page] provides a general overview of the effective dates of some of the changes being widely discussed."
(Berenbaum Weinshienk PC)

Baffled by Health Care Reform? Some Lawmakers Also Seem None Too Clear
Excerpt: "In a new report, the Congressional Research Service says the law may have significant unintended consequences for the 'personal health insurance coverage' of senators, representatives and their staff members. For example, it says, the law may 'remove members of Congress and Congressional staff' from their current coverage, in the Federal Employees Health Benefits Program, before any alternatives are available."
(The New York Times; free registration required)

Employers Criticized for Complying with SEC, Accounting Rules Requiring Disclosure of Adverse Impact of Health Reform Law
Excerpt: "Both Congress and the Administration have taken issue with large employers for complying with accounting and securities rules that require them to disclose the adverse impact of a change under the new law that will eliminate their ability to deduct a government subsidy given to companies who provide qualified drug coverage to retirees. . . . The lawmakers have asked the companies for a large number of documents, including: analyses related to the projected impact of health care reform on the company, documents, including email messages sent to or prepared or reviewed by senior company officials related to the projected impact of the law, and an explanation of the accounting methods used by the company since 2003 to estimate the financial impact on the company of the retiree drug subsidy."
(HR Policy Association)

Could Health Overhaul Incentives Hurt Some?
Excerpt: "The new health care law promises to extend coverage to millions of Americans and to cut costs by cultivating healthy habits and preventive care. But could its emphasis on wellness undermine one of its central achievements: putting an end to the practice of charging sick people more for health insurance? "
(The New York Times; free registration required)

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Executive Compensation; Benefits in General

[Guidance Overview]
State Rules on Post-Termination Forfeitures of Bonuses and Commissions
Excerpt: "In many states, an employer may legally require an employee to forfeit a bonus or commission if the employee is no longer employed on the date the bonus or commission is to be paid. In other states, these types of forfeiture provisions are expressly prohibited. Whether a forfeiture provision is legally permissible will vary based upon many factors, including: (i) the state in which the employee is employed; (ii) whether the compensation being forfeited is a commission (based on sales made) or a bonus (based upon company or individual performance); (iii) how and when the commission or bonus is calculated, earned, and paid; and (iv) when, why, and how the employee's employment terminates."
(Troutman Sanders LLP)

[Guidance Overview]
Past Layoffs Could Provide Tax Refund for Companies
Excerpt: "A recent court ruling suggests that companies may be able to recover FICA taxes linked to severance pay. But to take full advantage of the first refund year, they'll have to file before April 15."

Does Supreme Court's Decision in Jones v. Harris Associates Contain any Lessons for Corporate Boards Setting Compensation?
Excerpt: "At first blush, the recent U.S. Supreme Court decision in Jones v. Harris Associates would not seem to be relevant to directors on corporate boards who are responsible for setting executives' compensation. The decision in Harris Associates is based not on state law fiduciary principles that apply to most corporate boards, but rather on a specific federal statute, §36(b) of the Investment Company Act of 1940, as previously interpreted by the Second Circuit Court of appeals in Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923, 928 (2nd Cir. 1982). However, two other factors suggest to me that we should pay attention to this decision."
(Michael Melbinger via Winston & Strawn LLP)

Webcasts and Conferences

2010 Annual Spring Conference
in Arizona on April 22, 2010
presented by Western Pension & Benefits Conference - Phoenix Chapter

401(k) Plan Basic Operation
in California on May 19, 2010
presented by Actuarial Consultants, Inc.

Annual Plan Administration Basic Training
in California on May 19, 2010
presented by Actuarial Consultants, Inc.

Health Care Reform: A First Look for Employer-Sponsored Health Plans
Nationwide on April 8, 2010
presented by EBIA / Thomson Reuters

Medical Management in Medicare Advantage: Payer/Provider Collaborative Care Summit
in California on August 5, 2010
presented by Opal Events

Press Releases

IRI Releases Retirement Planning Pyramid Tool
Insured Retirement Institute (IRI)

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