Health & Welfare Plans Newsletter

June 28, 2016

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Employee Benefits Associate
Perkins Coie LLP
in WA

Employee Benefit Policy and Legal Expert
Employee Benefit Research Institute [EBRI]
in DC

Employee Benefit Research and Communications
Employee Benefit Research Institute [EBRI]
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Duncan Financial Group
in PA

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Webcasts and Conferences

Prohibited Transactions
July 21, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

The Final 430 Regulations: Changes in Funding Rules
August 11, 2016 WEBCAST
(ASPPA College of Pension Actuaries [ACOPA])

Mid-Sized Retirement & Healthcare Plan Management Conference
September 25, 2016 in NV
(University Conference Services)

Fundamentals 15: Participant Disclosure [2016]
July 11, 2017 WEBCAST
(FIS Relius Education)

Form 5500 for DFEs
July 13, 2017 WEBCAST
(FIS Relius Education)

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[Official Guidance]

Text of CMS FAQ: Alternative Schedule for Payment of Charges for Reconciliation of the Cost-Sharing Reduction Portion of Advance Payments for the 2014 and 2015 Benefit Years (PDF)
Unnumbered document, dated June 27, 2016. "To request flexibility on the payment schedule for reconciliation of the cost-sharing reduction component of advance payments, an issuer must demonstrate that full payment will present a liquidity hardship, that the company expects to remain solvent through the end of 2016, and that the company does not have reasonable access to another source of funding. It must also provide [certain additional] financial data and attestation to CMS no later than 11:59 p.m. ET on Tuesday, July 5, 2016." (Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS])  


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[Guidance Overview]

Employers: Are You Ready to Pay the PCORI Fee?
"Health Insurers are responsible for paying the fee on fully insured health policies. The plan sponsor (generally the employer) is responsible for paying the PCORI fee for self-insured health plans.... The PCORI rules provide an exception to the fee requirement for an HRA where it is offered along with a self-insured major medical plan that has the same plan year as the HRA.... There is no exception from the PCORI fee for an HRA offered along with fully insured major medical coverage." (ABD Insurance & Financial Services)  

[Guidance Overview]

Agencies Issue Proposed Regs on Expatriate Coverage, Excepted Benefits, Lifetime and Annual Limits, and Short-Term, Limited Duration Insurance (PDF)
"The Proposed Rule does not address whether the reasonable good faith rule will continue to apply. However, in the absence of language to the contrary, it seems that the reasonable good faith rule should continue to apply at least until the final rule is published.... The Proposed Rule does not state that expatriate health plan administrators are limited to entities within the United States.... [S]elf-funded plans administered by foreign entities that satisfy the requirements to be an expatriate health plan administrator could fall within the scope of the [Expatriate Health Coverage Clarification Act (EHCCA)] ... The Proposed Rule does not provide a format or content for demonstrations of creditable coverage." (Groom Law Group)  

Text of Sixth Circuit Opinion: Assignment of Benefits Confers Derivative Standing Only for Claims That Could Be Made by Plan Participant (PDF)
"Healthcare provider Harrogate Family Practice, LLC... brought suit under Section 502 of [ERISA] to ... enjoin Blue Cross Blue Shield of Tennessee from recouping payments for services Harrogate provided to Blue Cross members.... Harrogate argues that it has direct standing to sue as an ERISA beneficiary or, in the alternative, that it acquired derivative standing via an assignment of benefits from Blue Cross members. We conclude that while Harrogate does have derivative standing through an assignment of benefits, its claim regarding recoupments falls outside the scope of that assignment and therefore we affirm the judgment of the district court." [Brown v. BlueCross BlueShield of Tenn., No. 15-5739 (6th Cir. June 27, 2016)] (U.S. Court of Appeals for the Sixth Circuit)  

Hewitt Breached FMLA Administration Contract by Granting Wrong Leave Amount with No Verification or Notice to Employer
"Hewitt Associates breached its consulting agreement with RBS Citizens Financial Group when it failed to comply with the provisions of the 'delivery model' after incorrectly advising an employee that he had an additional 16 weeks of protected leave without verifying the leave or notifying RBS of the discussion.... Specifically, Hewitt failed to meet its duty to verify his eligibility for leave and send him an FMLA confirmation letter; to notify RBS of his intent to take leave; to send an FMLA approval or denial letter to him and notify RBS it did so; and to send updated employment status to the HR service center." [RBS Citizens Financial Group, Inc. v. Hewitt Associates, LLC, No. 13-1696 (D. Conn. June 22, 2016)] (Wolters Kluwer Law & Business)  


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Manufacturing Industry is Leading the Adoption of High-Deductible Health Plans
"Manufacturing is the only one of the three industries to offer a combination of HDHPs and traditional plans at a higher rate than traditional plans only (48 to 46 percent, respectively), and manufacturing employees selected an HDHP over a traditional plan 46 percent of the time. The findings suggest an opportunity for manufacturing employers to encourage their employees to participate in health savings accounts (HSAs) or flexible spending accounts (FSAs) as a means of covering higher out-of-pocket costs associated with HDHPs." (Benefitfocus)  

Express Scripts, Anthem Face ERISA Lawsuit Over Drug Pricing
"Express Scripts Inc. and Anthem Inc. are accused in a proposed class action of breaching their ERISA fiduciary duties by entering into a 10-year, multibillion-dollar prescription-drug agreement that caused plan participants to overpay for benefits ... In March, Anthem sued Express Scripts for allegedly overcharging for prescription drugs in violation of the parties' agreement.... The latest lawsuit, filed June 24 in the U.S. District Court for the Southern District of New York, is brought by participants in three medical plans sponsored by Verizon Communications Inc., AmTrust Financial Services Inc., and LG&E and KU Energy LLC. The plans have more than 26,000 participants combined." (Bloomberg BNA)  

Out-of-Pocket Spending for Hospitalizations Among Nonelderly Adults Increased 37% Since ACA
"From 2009 to 2013, total cost sharing per inpatient hospitalization increased by 37%, from $738 in 2009 to $1013 in 2013 ... This rise was driven primarily by increases in the amount applied to deductibles, which grew by 86% from $145 in 2009 to $270 in 2013, and by increases in coinsurance, which grew by 33% ... from $518 in 2009 to $688 in 2013. In 2013, total cost sharing was highest for enrollees in individual market plans ... and consumer-directed health plans ... Cost sharing varied substantially across regions, diagnoses, and procedures." (JAMA Internal Medicine)  

Illinois Insurance Regulator Approves Aetna Purchase of Humana
"In Illinois, Medicare Advantage plans, in which private insurers manage a customer's health benefits for the government, have enough competition because members can always turn to the traditional Medicare program if they are not happy, the state Department of Insurance said in its June 23 order." (The New York Times; subscription may be required)  

Wisconsin Governor Fights Back Against New ACA Automatic Enrollment Rules
"Gov. Scott Walker is pushing back against attempts by the federal government to pick health care plans for people on Obamacare exchanges.... The process is initiated when an enrollee's health insurance provider leaves the exchange. CMS could ultimately be authorized to automatically reassign the enrollee to a different provider.... 'The auto enrollment options offered violate long standing State and Federal contract law principles,' [Wisconsin Commissioner of Insurance, Ted Nickel] said. 'Wisconsin's Insurance laws and regulations rest upon the principle that insurance is an area of free contractual activity.' " (Watchdog.org)  

[Opinion]

It Is Well with My Soul (PDF)
"[S]ince we're all gonna die, what can employers do to make a positive difference? ... A very large company, one with 25,000 or so employees, can expect 40-50 deaths annually. A mid-size company, say one with 2,000 employees, can expect on average about 4 deaths, with one or more from cancer.... We go to great lengths to help our plan members save for retirement and provide investment education to maximize the utility of our 401(k) benefits. We should do no less to prepare our plan members for what else comes naturally after retirement, and (at least for some family members and unlucky employees) during our working years." (Chelko Consulting Group)  

Benefits in General

[Official Guidance]

Text of IRS Disaster Relief Notice WV-2016-02, for Victims of Severe Storms, Flooding, Landslides and Mudslides in West Virginia
"[I]ndividuals who reside or have a business in Greenbrier, Kanawha and Nicholas Counties may qualify for tax relief.... [T]he IRS gives affected taxpayers until November 15, 2016 to file most tax returns ... that have either an original or extended due date occurring on or after June 22, 2016 and on or before November 15, 2016.... This relief also includes the filing of Form 5500 series returns ... The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series[.]" (Internal Revenue Service [IRS])  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

IRS Proposes Updates to Sec. 409A Rules
"The proposal introduces a single rule, applicable for all purposes, that looks generally to when an event results in currently taxable income.... The proposed rules ... [allow] a payment at death to be paid at any time designated by the payor or payee up to and including December 31 of the calendar year following the calendar year in which death occurs.... A separate portion of the release adjusts 409A proposed regulations issued in late 2008 (but not yet finalized) that prescribe how to measure the income required to be taken into account in the case of noncompliance with 409A." (Ropes & Gray LLP)  

Executive Nonqualified Deferred Compensation Plans: Employer Considerations
"Nonqualified executive compensation plans can be instrumental in helping employers attract and retain top leadership talent, enabling their executives to have a better chance of reaching their retirement replacement income goals. Given the potential pitfalls and the uncertainty surrounding the Top Hat status, employers should document how they determine which employees would be eligible for these plans and be able to demonstrate the steps they undertook to properly restrict eligibility to the appropriate group of employees." (Cammack Retirement Group)  

Press Releases

ECFC Announces IRS Expert Donna Crisalli as Technical Advisor
ECFC [Employers Council on Flexible Compensation]

DOL Files Suit Requiring Fiduciaries to Restore $5.9M in Losses to Triple T Transport Employee Stock Ownership Plan
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2016 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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