Health & Welfare Plans Newsletter

November 6, 2017

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[Official Guidance]

Text of CMS Memo: Evaluation of EDGE Data Submissions for the 2017 Benefit Year (PDF)
13 pages. "In this bulletin, [CMS describes] the operational processes and metrics for when and how CMS intends to evaluate the sufficiency of data in terms of the 'quantity' and 'quality' of an issuer's EDGE server data submissions for the 2017 benefit year. CMS will use this evaluation to determine which States will receive interim risk adjustment summary reports in March 2018 and which issuers will be included in final risk adjustment transfer calculations or be assessed a default risk adjustment charge in a risk pool market within a State following the final data submission deadline of April 30, 2018, for the 2017 benefit year." [Unnumbered document, Nov. 3, 2017]
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]

[Advert.]

Online Learning Course: HSA and HRA Basics

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

This e-learning course will provide an in-depth look at HSA and HRA programs as well as how these programs interact with an HCFSA.


[Guidance Overview]

IRS Updates Q&A on Procedures for Enforcement of Employer Mandate
"The procedures which were updated on November 2, 2017 are the IRS' strongest signal that the employer mandate penalties are imminent. This article describes the details the IRS has provided regarding the enforcement of the employer mandate penalties and the corresponding appeals procedures."
Accord

[Guidance Overview]

At Last, Employer Mandate Tax Assessment Guidance
"[T]he ALE Member's response to Letter 226J will be 'due' on the due date stated on Letter 226J, which probably will be only 30 days from the issuance date appearing on Letter 226J. Subtract mailing time and internal routing time and you may have just two or three weeks to deliver to IRS your well-considered, written, well-documented, objection to a substantial employer mandate tax assessment. If you lack ready access to well-organized data about your 2015 group health plan enrollment, employee affordability, eligibility and IRS reporting of your coverage offers (including 2015 Forms 1094-C and 1095-C), you may find this a daunting task."
Balch & Bingham LLP

Timing Is Everything: Tenth Circuit Overturns Insurer's Disability Decision as Arbitrary and Capricious
"The more unexpected result is the Court's finding that a claimant's last day worked and date of disability may be the same. This defies the typical interpretation many administrators use where the date of disability follows the last day worked.... Further, the Court found it was unreasonable for the administrator to rely on the employer's assertions alone. This case thus serves as a reminder to conduct an independent investigation." [Owings v. United of Omaha Life Ins. Co., No. 16-3128 (10th Cir. Oct. 17, 2017)]
Seyfarth Shaw LLP

Employer That Failed to Refute FMLA and Overtime Claims Ordered to Pay Discharged Worker Over $70k
"An employer failed to refute a dispatcher's claims that she was denied overtime pay, discouraged from taking leave to undergo eye surgery, and fired in retaliation for asserting her FMLA rights. Granting the [employee's] motion for summary judgment on her FLSA and FMLA claims, a federal court in Florida awarded her $70,222 in damages ... [including] two-years lost wages of $32,561.75 plus liquidated damages in the same amount." [Affonso v. Southeastern Florida Transportation Group, LLC, No. 14-81309 (S.D. Fla. Oct. 6, 2017)]
Wolters Kluwer Law & Business

[Advert.]

New COBRA Audit Guidelines

Sponsored by Lorman and BenefitsLink

Nov. 28 webinar. In addition to general COBRA compliance, we'll review the IRS Audit guidelines, to help you identify and prepare for the areas of focus in an IRS COBRA audit. Discount for BenefitsLink readers.


Federal Paid Leave Proposal Introduced in Congress
"[T]he 'Workflex in the 21st Century Act' (HR 4219) would ... [allow an employer] the option of providing a certain number of paid leave hours (to be determined based on [the] organization's size and the employee's length of service) and a workplace flexibility (workflex) option. In exchange for providing these two benefits, [the employer] would be relieved of the obligation to follow any paid leave proposals at the state or local level."
Fisher Phillips

Effect of On-Site Clinics on HDHPs and HSAs
"An on-site health clinic may offer the following permissible medical benefits at no cost, without affecting HSA eligibility: 'permitted' coverage (such as vision and dental care), 'preventive care' (such as shots and screenings), and 'insignificant' medical benefits (collectively, permissible benefits).... If an on-site clinic provides 'significant benefits' for free or at reduced-cost (i.e., below fair market value), an employee may lose eligibility for an HSA."
Jackson Lewis P.C.

[Opinion]

How Ethics and Transparency Can Solve the PBM Crisis
"The pharmacist should be at the center of care coordination to ensure that each prescription is the right medication ... Under a pay-for-performance model, the PBM's goals align with those of the plan sponsor.... The PBM should then facilitate any needed changes to the prescription through the prescriber.... Medications selected for the formulary must be the most effective, regardless of cost or rebate.... PBMs must proactively focus on clinical efficiency and accuracy."
Employee Benefit News

Benefits in General

House Tax Reform Bill Unveiled (PDF)
"In addition to proposing reductions in individual and corporate tax rates, the House Bill proposes far-reaching changes to the taxation of executive and nonqualified deferred compensation and relatively minor changes to IRA and qualified retirement plan rules, clarifies that unrelated business income tax (UBIT) applies to state and local government plans, and changes the tax rules that apply to various types of fringe benefits provided to employees. Notably, the House Bill does not contain changes to the tax incentives for retirement savings."
Groom Law Group

Tax Reform Contemplates Changes to Employee Benefits
"Elimination of certain income tax exclusions ... Loosen[ed] restrictions on hardship distributions from 401(k) plans ... Reduction in minimum age for in-service distributions from 457(b) plans and [DB] plans ... Extended rollover period for plan loan offset amounts ... Modified nondiscrimination testing rules for frozen legacy plans ... Additional limitations on archer medical savings accounts (Archer MSAs)."
Proskauer's ERISA Practice Center

Tax Cuts and Jobs Act: Good News for 401(k) Plans, Bad News for Nonqualified Deferred Compensation
"While there were no adjustments to contributions to 401(k) plans under the Act, that does not mean that the final version of the bill will not include some form of Rothification.... The Act liberalizes certain rules relating to hardship distributions.... This proposal would eliminate many standard forms of deferred compensation, such as 401(k) mirror plans. It also removes from the Code, with respect to services performed after December 31, 2017, Sections 409A, 457(b) (for tax exempt employers), 457(f), and 457A ... The exclusions for adoption assistance, dependent care, qualified moving expenses, and employee achievement awards are repealed."
The Wagner Law Group

Executive Compensation
and Nonqualified Plans

Proposed Tax Law Would Doom Nonqualified Deferred Compensation as You Know It
"Amounts will be considered subject to a substantial risk of forfeiture only if the service provider's right to the compensation is contingent on the future performance of substantial services, which is far narrower than the Section 409A definition.... This broad language would appear to include stock options, stock appreciation rights, phantom equity and other equity-based compensation arrangements; however, the inclusion of incentive stock options as deferred compensation is not entirely clear ... Section 457 plans maintained by tax-exempt employers are not excluded from the Bill's definition of nonqualified deferred compensation and would also be subject to its requirements."
Paul Hastings LLP

U.S. Tax Reform: Death to Nonqualified Deferred Compensation?
"An employee will no longer be permitted to electively defer compensation out of salary or bonus.... [T]axes may be incurred on account of accruals of benefits under an nonqualified 'excess plan' that wraps around a tax-qualified plan. In addition, the new law would extend to stock options and stock appreciation rights, and also would seem to apply to things like profits interests.... This approach to taxation of nonqualified deferred compensation is currently the rule for tax-exempt organizations under Code Section 457(f)."
Squire Patton Boggs

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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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