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Health & Welfare Plans Newsletter

May 27, 2010

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The Department of Health and Human Services recently published regulations explaining how plan sponsors may apply for the early retiree reinsurance program in the Affordable Care Act. The upcoming webcast, Early Retiree Reinsurance Program: Information You Need Now to Apply, will discuss the new regulations and focus on what plan sponsors need to do to participate.
Register now to attend this webcast on Thursday, June 10.

[Guidance Overview]
Early Retiree Reinsurance Program under Health Care Reform
Excerpt: "Plan sponsors cannot use the proceeds as general revenue. Reimbursements must be used (1) to reduce the sponsor's health benefit premiums or health benefit costs, (2) to reduce plan participants' premium contributions, copayments, deductibles, coinsurance or other out-of-pocket costs, or (3) in some combination of the two."
(Towers Watson)

[Guidance Overview]
Flexible Spending Accounts under Health Care Reform (PDF)
2 pages. Excerpt: "This issue . . . focuses on two new requirements that will apply to health care flexible spending accounts (FSAs): prohibiting reimbursement of over-the-counter medications obtained without a prescription beginning January 1, 2011 and limiting annual contributions to $2,500 beginning January 1, 2013."
(Seyfarth Shaw LLP)

[Guidance Overview]
Health Care Reform Program to Reimburse Early Retiree Medical Claims
Excerpt: "[I]t is important to note that the program is temporary and will end once the projected claims total the allotted $5 billion amount. Since claims will be paid out on a first-in first-out basis, many people believe the program funding will be exhausted well before the statutorily prescribed expiration date of January 1, 2014. (It appears that this end date was chosen because the health insurance exchanges required to be established by that time are expected to provide early retirees with other coverage options.) Employers will want to factor this risk into their analysis of whether to pursue HHS certification of their plans."
(Faegre & Benson LLP)

[Guidance Overview]
IRS Guidance on the New Small Employer Health Care Tax Credit
Excerpt: "Health insurance coverage may also include dental, vision, nursing home care, and other specified plans. However, the different types of health insurance coverage are not aggregated for the purposes of this requirement; each must have a separate determination of whether it is a qualifying arrangement."
(Buchanan Ingersoll & Rooney PC)

Employers Preparing to Expand Wellness Efforts, Survey Finds
Excerpt: "The costs of the health care reform law make it more important than ever that employers keep their workers healthy and motivated to adopt healthy lifestyles, a vast majority of employers said in a recent survey. Not only did 78 percent of employers agree or somewhat agree with that statement, but most also said they are likely or very likely to create or expand corporate wellness programs as a result of an incentive provision in the new law."
(Workforce Management; free registration required)

News Outlets Look at What COBRA Enrollees Can Do When Their Coverage Expires
Excerpt: "As the first of the laid-off to receive a 65 percent subsidy on the cost of continuing their former employer's coverage under COBRA prepare to try to afford coverage without the subsidy, news outlets are helping people examine their options."
(Henry J. Kaiser Family Foundation)

Recent Study Connects Long Work Hours with Heart Problems
Excerpt: "Are long hours leading to employee heart disease and heart attacks? One study says, 'Yes.' And even though most organizations won't be able to hire more staff to take some of their workload, there are actions HR leaders can take to alleviate some of the problem."
(Human Resource Executive Online)

Companies Offering Pre-65 Retiree Medical Benefits Intend to Pursue Reimbursement under Health Care Reform Program
Excerpt: "Hewitt estimates that the average federal reimbursement will represent between $2,000 and $3,000 per pre-65 retiree per year, or approximately 25 percent to 35 percent of total health care costs. As an example, for a company that covers 1,000 pre-65 retirees, participation in the ERRP could result in $2 million to $3 million in reinsurance proceeds per year."
(Hewitt Associates)

Body 'Wear-and-Tear' Claims Reflect Aging of American Workforce
Excerpt: "Research by The Hartford Financial Services Group, Inc. finds workers' frameworks are showing wear and tear. Nearly one in four employees on a short-term disability claim were unable to work due to a disabling illness impacting their skeleton or muscles, specifically backs, knees and feet, according to an analysis of nearly 750,000 short-term disability claims. A press release said employees who were age 50 and older accounted for 40 percent of back and spine claims."

Why the National Federation of Independent Business Supports the Constitutional Challenge to the Health-Insurance Mandate
Excerpt: "For decades small business owners have been telling anyone who would listen that they need health-care reforms that lower costs. But President Obama and his allies in Congress pushed through a law that will dramatically raise health-care costs and increase the overall cost of doing business. What's more, the federal mandate requiring that nearly all U.S. residents carry health insurance by 2014 seriously threatens our basic constitutional rights and individual freedoms."
(The Wall Street Journal)

The Decline of Employer-Sponsored Coverage Under Health Reform: Is This a Bad Thing?
Excerpt: "[T]he deck is stacked against employer-sponsored coverage. The only things in the new health care law that encourages it are small-business subsidies for offering coverage and large-employer penalties for failing to do so. The former are scheduled to sunset after 2016 and the latter are small relative to a typical insurance premium. In the long run, they're no match for the forces against employer-sponsored coverage."
(Henry J. Kaiser Family Foundation)

An employer writes:

"I have to tell you that of all the job boards Iíve ever used, this one has the best quality of candidates. I donít get flooded with tons of resumes, and even the candidates who arenít fit for the jobs we have donít miss the mark by much."

Executive Compensation; Benefits in General

[Guidance Overview]
Supreme Court Rules on Standard for Receiving Attorneys' Fees Under ERISA
Excerpt: "The Supreme Court acknowledged the five-factor test that lower courts use in deciding whether to award attorneys' fees but reasoned that the five-factor test was not required for 'channeling' a court's discretion because the factors did not bear an obvious relation to ERISA § 502(g)(1) or to the Court's fee-shifting jurisprudence. However, in a footnote, the Court stated that judges are not precluded from using the five-factor test once they determine whether there has been some success on the merits."
(Tax Management Inc.)

Memphis-Based FedEx to Offer Insurance to Same-S.ex Domestic Partners in 2012
Excerpt: "In a move hailed by advocates of diversity and g.ay rights, FedEx will offer health insurance benefits for same-s.ex domestic partners starting Jan. 1, 2012. The shipping giant, which already offers the benefits in California and to FedEx Office employees, said the change comes at the request of employees."
(The Commercial Appeal)

Deconstructing Stock Options
Excerpt: "In 'The Non-Option,' David Walker expertly dissects one of the puzzles of employee stock option compensation: why stock options are always granted at the then-current market price for the stock, resulting in 'at-the-money' options. If parties could tailor their compensation packages to individual needs and desires, one would expect that at least some firms would agree to give their employees stock options that had an exercise price lower than market price (known as 'in-the money' options)."

Webcasts and Conferences

Advisory Group to the Internal Revenue Service Tax Exempt and Government Entities Division (TE/GE) Meeting
in District of Columbia on June 3, 2010
presented by Internal Revenue Service (IRS)

Getting It Right - Know Your Fiduciary Responsibilities Webcast Series Ė Part I
Nationwide on June 9, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Getting It Right - Know Your Fiduciary Responsibilities Webcast Series Ė Part II
Nationwide on June 10, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Health Insurance Underwriting
in California on June 30, 2010
presented by No. Calif. Chapter of Certified Employee Benefits Specialists (ISCEBS)

Press Releases

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