Health & Welfare Plans Newsletter

September 13, 2017

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[Guidance Overview]

Hurricane Recovery: Establishing a Charitable Leave Donation Program
"[E]mployers are given latitude to design a program that fits within the employer's particular needs, circumstances, and policies. At a basic level, the employer must decide who is eligible to participate in the program and what types of leave may be donated.... The employer must also determine in what increments leave can be donated, (i.e., hours, days, weeks)."
Morgan Lewis

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[Guidance Overview]

Qualified Disaster Relief Payments by Employers Not Taxable Income to Employees
"[S]ection 139 of the Internal Revenue Code allows [employers] to make qualified disaster relief payments to affected employees that are not includable in these employees' gross incomes. Employers may deduct any qualified disaster relief payments even though the payments are not included in employees' gross incomes. An employer need not obtain detailed receipts and documentation for qualified disaster relief payments so long as the payments reflect a reasonable estimate of the employee's losses and expenses attributable to the disaster."
McGuireWoods LLP

[Guidance Overview]

New York Issues Final Regs for Paid Family Leave
"Starting January 1, 2018, eligible employees can receive paid family leave benefits through New York's disability benefits law. The benefits are a percentage of the employee's average weekly wage or of the state average weekly wage, whichever is less. The law intends for paid family leave to be fully funded by employees."
Willis Towers Watson

Senators Introduce Legislation to Replace Obamacare with Block Grants to States for Health Care
"The Graham-Cassidy-Heller-Johnson (GCHJ) proposal repeals the structure and architecture of Obamacare and replaces it with a block grant given annually to states to help individuals pay for health care.... The block grant is run through CHIP and is subject to a mandatory appropriation. The grant dollars would replace the federal money currently being spent on Medicaid Expansion, Obamacare tax credits, cost-sharing reduction subsidies and the basic health plan dollars."

Background materials:


U.S. Senators Lindsey Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), Ron Johnson (R-WI) and former U.S. Senator Rick Santorum (R-PA)

Ninth Circuit: Plan SMM Addressing ACA Changes Violated ERISA
"The court observed that the employer had not issued a single amended SPD or cumulative SMMs, but had issued a series of summaries (totalling 25 pages) that needed to be read in conjunction with the 2006 SPD for an individual to determine available benefits. Moreover, the court observed that the SMMs were not organized using a comprehensive table of contents[.]" [King v. Blue Cross and Blue Shield of Ill., No. 15-55880 (9th Cir. Sept. 8, 2017)]
Thomson Reuters Practical Law

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Ninth Circuit: ERISA Preempts State Insurance Law Bans on Discretionary Clauses for Self-Funded ERISA Plans
"The Ninth Circuit has weighed into the national debate over discretionary clauses in ERISA plans, holding that ERISA preempts a state-law ban on discretionary clauses for self-funded disability plans, but not for fully-insured plans.... The Ninth Circuit focused its analysis on the difference between a fully-insured and a self-funded benefit plan." [Williby v. Aetna Life Ins. Co., No. 15-56394 (9th Cir. Aug. 15, 2017)]
Seyfarth Shaw LLP

Recent DOL Actions Address Impermissible Wellness Programs as Well as Fiduciary Status of Changed Out of Network Provider Payment Methodologies (PDF)
"The DOL claims that the failure to outline the correct out-of-network provider reimbursement methodology in the plan document constituted a breach of fiduciary duty by Macy's as plan administrator, and also by Anthem and Cigna, the third party administrators ('TPAs') of the self-funded Health Plan. The DOL further claims that the wellness program's failure to offer a reasonable alternative standard, and disclose the availability of such standard, was a breach of fiduciary duty, a prohibited transaction, and a violation of the HIPAA wellness rules."
Groom Law Group

Words Matter for Benefits Compliance
"A recent complaint filed against Macy's by the [DOL] ... [alleges that] changes in its plan's out-of-network reimbursement formula were not reflected in the plan documents or participant communications and second, the company did not follow the HIPAA rules that apply to smoking cessation surcharges. If the allegations are true, the DOL wants Macy's (not the plan) to: [1] Reimburse participants for any extra money that they paid for out-of-network services; and [2] Refund all of its tobacco surcharges, even to individuals who didn't try to go through the cessation program.... Here's what allegations against Macy's teach us about health plan details and benefits compliance[.]"
HUB International

Cost Is Top Reason for Not Filling a Medication Prescription
"Although 97% of Americans who received a prescription for medication in the last 90 days filled it, the most-cited reason among respondents who did not fill their prescription was cost (67%) ... 12% of all respondents said that cost drove them to purchase prescription medication outside the United States."
HealthLeaders Media

Senate Finance Committee Hearing: Issues Impacting Health Care Cost and Coverage
Includes written testimony from: [1] Avik Roy, Foundation for Research on Equal Opportunity; [2] Edmund F. Haislmaier, The Heritage Foundation; [3] Andrew M. Slavitt, Former Acting Administrator, CMS; and [4] Aviva Aron-Dine, Ph.D., Center on Budget and Policy Priorities.
Committee on Finance, U.S. Senate

Senate Eyes Compromise in Insurance Subsidy Battle
"With some insurers already jumping ship because uncertainty about the future of the [ACA], lawmakers on the HELP Committee hope to vote on a bill by the end of this week intended to stabilize the individual markets. [Sen. Lamar Alexander (R-TN)] said his party and the Democrats are aligned on several key themes, including congressional approval of cost-sharing reduction payments.... Alexander said the two sides only agree in full on expanding copper plans, which could attract more people into the markets and spread risk out across insurance pools. The plans would cover less of the out-of-pocket costs in exchange for significantly cheaper premiums."
Courthouse News Service

[Opinion]

American Academy of Actuaries Comment Letter to Senate HELP Committee on Stabilizing the Individual Health Insurance Market (PDF)
"[A]ctions that would help stabilize and improve the individual health insurance market include: [1] Continued funding of cost-sharing reduction (CSR) payments; [2] Effective enforcement of the individual mandate; [3] Enrollment outreach and assistance; [4] External stability funding (for instance, in the form of reinsurance); and [5] Avoiding actions that would increase uncertainty or threaten stability."
American Academy of Actuaries

Benefits in General

[Official Guidance]

Web Page of IRS Help and Resources for Victims of Hurricane Irma
The IRS has published a web page containing a comprehensive list of disaster relief for victims of Hurricane Irma. Also posted are IRS news releases, legal guidance, and links to other disaster relief resources.
Internal Revenue Service [IRS]

[Official Guidance]

Web Page of IRS Help and Resources for Victims of Hurricane Harvey
The IRS has published a web page containing a comprehensive list of disaster relief for victims of Hurricane Harvey. Also posted are IRS news releases, legal guidance, and links to other disaster relief resources.
Internal Revenue Service [IRS]

Executive Compensation
and Nonqualified Plans

The Do's and Don'ts of CEO Pay Ratio Communications
"[D]isclosing the median worker's job title helps personalize a company's brand and may be worthwhile to consider for an organization in a single line of business.... It's trickier to decide whether or not to provide a peer comparison for the CEO pay ratio disclosure ... [It] will be difficult to anticipate what pay ratios will be at peer companies, which will make it a riskier proposition because of the potential variability of CEO pay at those peers.... [It's] worthwhile to draft messages that incorporate your employee value proposition, helping you frame your company's narrative."
Willis Towers Watson

Do Performance Shares Actually Perform?
"In the sample plan [evaluated by two MIT professors], 50% of each grant ... is tied to TSR relative to 11 peers over a three-year period. Although the company's annualized TSR ranked 10th, the CEO still received 80% of the target payout. The authors opine that this is not truly 'pay for performance.' Instead, they reason, if the TSR ranks in the lower half of the peer group, the payout should be less than half."
myStockOptions.com

Prepare for the Impact of Four Accounting Rule Changes
"[F]our recent changes in the accounting rules [may] have an impact on equity and other incentive compensation in the upcoming award and proxy season. The first two are well-known to executive compensation professionals. The second two do not directly relate to equity compensation, but could affect the financial performance metrics for outstanding grants and future grants, especially those with performance periods that include the 2017 fiscal year[.]"
Winston & Strawn LLP

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BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2017 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 those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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