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Health & Welfare Plans Newsletter

September 7, 2010

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[Official Guidance]
Text of IRS Rev. Rul. 2010-23: Making Obsolete the Existing Revenue Ruling on Reimbursement of Drug Expenses by FSAs, HRAs, HSAs, MSAs (PDF)
1 page. Excerpt: "Because the definition of medical expenses has been changed, the Internal Revenue Service has concluded that the ruling position stated in Rev. Rul. 2003-102 is no longer determinative. Accordingly, Rev. Rul. 2003-102 is declared obsolete as of the effective date of section 9003 of the Affordable Care Act."
(Internal Revenue Service)

[Official Guidance]
Text of IRS Notice 2010-59: Text of IRS Notice 2010-59: Drugs (Except Insulin) Purchased After 2010 Cannot Be Reimbursed from FSAs, HRAs, HSAs, MSAs Unless Prescribed (PDF)
6 pages. Excerpt: "The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements (HRAs). Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles."
(Internal Revenue Service)

[Guidance Overview]
What External Review Requirements Must be Met Under PPACA
Excerpt: "These new requirements apply to both individual and group health plans (insured and self-funded), but do not apply to grandfathered plans."

New Ways for Local Governments and Nonprofits to Manage Retiree Benefits
Excerpt: "Right now, municipalities across America are confronting a multi-million-dollar problem. It could be a city or a town. A school district. A police or fire department. Or a hospital. With GASB 45 rules in effect now for all public employers, administrators need to measure and disclose their liability for 'other postemployment benefits' (OPEB), which is to say, the cost of providing retiree medical, dental, prescription drug, life, and disability coverage."

Where Americans Get Acute Care: Increasingly, It's Not at Their Doctor's Office
Excerpt: "Historically, general practitioners provided first-contact care in the United States. Today, however, only 42 percent of the 354 million annual visits for acute care -- treatment for newly arising health problems -- are made to patients' personal physicians."
(Health Affairs)

Mental Health Parity Act May Affect Your Medical Benefits
Excerpt: "The law takes effect at the beginning of a health plan's new year, so many people won't see any changes until January. At that point, people who will see the most benefit are those who previously had high copays and deductibles on mental health services."
(Los Angeles Times)

Insurers Adjust Standards for Doctors and Hospitals
Excerpt: "While this push by insurers on quality implies that consumers will get better care because doctors and hospitals will be measured against the best performers, there may be an unintended consequence: It could leave patients with fewer choices of medical care providers, depending on which health plans they purchase."
(Chicago Tribune)

Health Care Wastefulness Is Detailed in Studies
Excerpt: "In a snapshot of systemic waste, researchers have calculated that more than half of the 354 million doctor visits made each year for acute medical care, like for fevers, stomachaches and coughs, are not with a patient's primary physician, and that more than a quarter take place in hospital emergency rooms."
(The New York Times; free registration required)

Report Touts Employer Benefits of Employer Group Waiver Plan with Wrap-Around Secondary Plan
Excerpt: "Employers providing prescription drug benefits to Medicare-eligible retirees could enjoy 'a potentially significant savings opportunity' with a particular plan configuration called EGWP + Wrap, according to a new PricewaterhouseCoopers (PwC) report. The [report asserts that the arrangement could potentially reduce employers' pre-tax cash cost by 20% or more below current levels under the Retiree Drug Subsidy program] and would not require a substantial change from the current drug benefit design from retirees' standpoint."

New IRS Guidance on Health Care Reimbursement
Excerpt: "The IRS said that Notice 2010-59 provides guidance on new section 106(f) of the Internal Revenue Code, added by section 9003 of the Affordable Care Act. That section sets forth a new standard, effective January 1, 2011, for reimbursement of expenses for over-the-counter drugs from all workplace health plans . . . ."

Health Insurance Options for Those with a Preexisting Condition
Excerpt: "For people with preexisting medical conditions, looking for health insurance in the private market may feel like the ultimate fool's errand. A 2009 report by the Commonwealth Fund found that 36% of people who tried to buy insurance in the private market were denied coverage or charged more because of a preexisting condition or had the condition excluded from their coverage."
(Los Angeles Times)

Who Should Provide Anesthesia Care?
Excerpt: "The issue is potentially important to patients and to health care reformers seeking to restrain costs and reduce reliance on high-priced medical specialists."
(The New York Times; free registration required)

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Benefits in General; Executive Compensation

[Guidance Overview]
Court Affirms Ruling that Denial of Severance Benefits Was Abuse of Discretion: Employee Was Constructively Terminated
Excerpt: "The court also rejected the administrator's contention that the employee was required to waive all claims against the company and sign a confidentiality agreement before he could even be considered for severance benefits. Again, that's a misreading of the plan, the district court explained. Signing the waiver of claims and confidentiality agreement are conditions precedent only to the receipt of benefits, not eligibility for benefits."
(Wolters Kluwer)

[Guidance Overview]
Court Dismisses ERISA Suit over Merrill Lynch's WealthBuilder Plan
Excerpt: "Merrill Lynch's WealthBuilder Plan did not violate [ERISA] because it was a top-hat plan, a federal judge ruled in throwing out a proposed class-action lawsuit by three financial advisers against the company. In deciding the Merrill Lynch plan did not run afoul of ERISA's minimum vesting requirements, [the court] asserted that it fit the guidelines for such plans because it was unfunded and intended for a select group of highly compensated employees."

Last Chance to Correct for 409A
Excerpt: "I cannot overemphasize how important it is for every employer in America with non-qualified deferred compensation plans or employment, severance or change in control agreements that are subject to Code Sec. 409A (which includes just about all of them) to review its compliance with 409A one more time before December 31, 2010. This is because the IRS has given us one last chance to correct drafting issues in compensation plan documents and agreements that are subject to 409A, without penalty, under Notice 2010-6."
(Michael Melbinger via Winston & Strawn LLP)

Webcasts and Conferences

"401(k) Plans: What Every Practitioner Should Know" - Charlotte
in North Carolina on October 7, 2010
presented by SunGard Relius

"401(k) Plans: What Every Practitioner Should Know" - Kansas City
in Kansas on October 5, 2010
presented by SunGard Relius

"401(k) Plans: What Every Practitioner Should Know" - Minneapolis
in Minnesota on October 6, 2010
presented by SunGard Relius

Retirement Plan Option Webcast
in New York on September 8, 2010
presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

Press Releases

EPIC Hires Sales Manager
EPIC Advisors, Inc.

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Newly Posted Employee Benefits Jobs

Equity Plan Client Services Specialist (Contract)
for SunGard Financial Systems
in NJ

Equity Plan Implementation Coordinator-(Contract)
for SunGard Financial systems
in NJ

Health and Welfare Sr. Analyst (Contractor)
for SunGard Financial Systems
in NJ

IRA Special Assets Associate (Contractor)
for SunGard Financial Systems
in NJ

Account Manager IRC23152
for Lincoln Financial Group
in IN

Structured Settlements Associate (Contractor)
for SunGard Financial Systems
in NJ, NY

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