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Health & Welfare Plans Newsletter

May 7, 2010

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[Guidance Overview]
HHS's Regulations on Early Retiree Reinsurance Program (PDF)
5 pages. Excerpt: "The guidance does not discuss in detail the claim submission process, including timing and frequency of payments. However, the guidance states that 'claim submissions will be processed on a first-in, first-out basis until program funding is expended.' Claims for plans with multiple administrators will likely need to be aggregated by individual before submission for reimbursement."
(Buck Consultants)

Prohibition on Lifetime and Annual Limits Under Health Reform (PDF)
2 pages. Excerpt: "There are a number of issues plan sponsors should consider related to the PPACA's prohibition on lifetime and annual limits, including: Estimating the financial impact of eliminating annual and/or lifetime limits, Formulating plan design strategies that can offset cost increases resulting from the removal of limits . . . ."
(The Segal Group, Inc.)

[Guidance Overview]
Treasury Guidance on Health Care Reform's New Tax Treatment of Coverage for Adult Children
Excerpt: "Notice 2010-28 also provides important information for plan sponsors that are now imputing income to employees for coverage provided to older children in response to the many state insurance laws mandating extended coverage. Plan sponsors that are now imputing income may stop doing so for that group of children covered by the new tax provision."
(The Segal Group, Inc.)

[Guidance Overview]
Tax Treatment of Health Care Benefits for Children under Age 27
Excerpt: "Child Cannot Attain Age 27 During the Taxable Year - The exclusion applies only to reimbursements for the medical care of children who are not age 27 or older at any time during the taxable year. For this purpose, the taxable year is the employee's taxable year, which the employer may assume is the calendar year. Employers may also rely on the employee's representation of the child's birth date."
(Deloitte via

New Benchmarks for Wholesale Drug Pricing Have the Health Industry Scrambling to Adapt. (PDF)
3 pages. Excerpt: "New benchmarks for the wholesale pricing of prescription drugs are now in effect, and payors are now struggling to determine how the changes will affect them. Health plans and pharmacy benefit managers alike must now pay careful attention to pricing methodologies and must maintain an open dialog with one another to ensure pricing consistency and transparency."
(Best's Review via Milliman)

Getting Employees Active in Health Matters Requires Support, According to Survey
Excerpt: "That was the result of a new survey by the Midwest Business Group on Health (MBGH) sponsored by drugmakers Merck and Novartis. A news release said employees believe the most credible source for health information is their doctor, while those with chronic conditions will often have the most involvement with a health coach, who is viewed as an extension of the employer, rather than their doctor."

Implementing Health Reform: Web Portals and Retiree Reinsurance
Excerpt: "The [Early Retiree Reinsurance Program] is open both to sponsors that self-insure and those that are insured. It is available to state and local governments as well as to private employers and employee organizations."
(Health Affairs)

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Executive Compensation; Benefits in General

[Official Guidance]
IRS Publishes Interim Report on Colleges and Universities Compliance Project; Useful Compensation Data (PDF)
79 pages. Part VI of the report contains charts showing the distribution of specific types of benefits provided to one or more of the organization's 6 highest-paid officers, directors, trustees or key employees, including life, disability, long-term care contributions; split-dollar life insurance; loans/credit extension (forgiveness of debt/interest); severance or change of control payments; personal use of organization vehicles; and expense reimbursement (non-accountable plan). Also shows participation in specific types of deferred compensation plans, and describes general compensation policies.
(Internal Revenue Service)

Bill to Expand Federal Workers' Telecommuting Options Falls Short in House
Excerpt: "Legislation that would give federal workers the option to work from home ran into a significant roadblock Thursday, failing to get the two-thirds majority in the House that would have expanded telework options across the government."
(The Washington Post; free registration required)

Department of Labor Regulatory Agenda Reflects Emphasis on Disclosure
Excerpt: "The Department of Labor's Spring 2010 Regulatory Agenda identifies three new proposed regulations that are being formulated: Improved Fee Disclosure for Welfare Plans, QDIA Target Date Disclosure, and Amendments to the Claims Procedure Regulation."
(Deloitte via

New NCEO Issue Brief on ESOP Distribution Policies
Until 2010, the IRS reviewed ESOP plan documents simply to assure that the maximum payout terms were specified. Now, however, the IRS wants to see the actual distribution policy, whether in the plan or as a separate document. This issue brief provides sample language and detailed commentary to help you create such a policy. (National Center for Employee Ownership

ERISA's Exhaustion of Administrative Remedies Requirement: An Effective Tool to Defeating Class Certification (PDF)
Pages 11-14 of 17 pages. Excerpt: "In reaching its conclusions, the Eighth Circuit made no distinction between the application of exhaustion requirements in individual and class claims. Insofar as class claims are predicated on an alleged systemic violation by the plan, one might question the need for developing an administrative record regarding the particular facts and circumstances of the named plaintiff's claim. Nevertheless, the Chorosevic decision confirms that, absent exhaustion of at least the named plaintiff's claim, there is no basis for proceeding with individual or class claims."
(Proskauer Rose LLP)

The Latest Uncertainty in Benefit Claim Litigation - The Proper Scope of Conflict Discovery After Glenn (PDF)
Pages 7-10 of 17 pages. Excerpt: "Proskauer's Perspective: We would not quibble with the notion that some limited discovery into conflict considerations may be warranted in some circumstances after Glenn. But we are concerned with how far some courts have gone. They seem to have forgotten that individual benefit claims are, in many respects, like administrative review proceedings and that, to treat them like full-blown federal court litigation for discovery purposes undercuts ERISA's goal of resolving such claims inexpensively and expeditiously."
(Proskauer Rose LLP)

Supreme Court Rules That 'Single Honest Mistake' Does Not Justify Stripping Administrator of Judicial Deference
Excerpt: "The ruling in Frommert hopefully will encourage the creation of ERISA plans by eliminating at least one deterrent: the specter of courts having the final say regarding how a plan should be administered and how benefits thereunder should be paid. We also hope that the decision will achieve the other results intended by the Court: reducing the complexity and costs of ERISA litigation, and protecting the statute's underlying principles of uniformity, predictability, and efficiency."
(Proskauer Rose LLP)

Webcasts and Conferences

DOL Update and COBRA Premium Subsidy Requirements: What Every Employer Should Know
in Massachusetts on May 19, 2010
presented by WEB Worldwide Employee Benefits Network MA Chapter

Helping Your Age 50+ Employees Retire Successfully
Nationwide on May 20, 2010
presented by TRI-AD

Teleconference: The New Form 5500 Schedule C Reporting Requirements - What Investment Fund Managers and Plan Service Providers Need to Know
Nationwide on May 12, 2010
presented by New York City Bar Association - Employee Benefits and Executive Compensation Committee

Press Releases

U.S. Labor Department and SEC Issue Guidance on Target Date Funds
U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

ASPPA Urges House to Oppose Doggett Proposal
American Society of Pension Professionals & Actuaries (ASPPA)

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