Health & Welfare Plans Newsletter

March 22, 2018

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[Guidance Overview]

Tax Reform's Impact on Fringe Benefits; More COLA Adjustments
"IRS Publication 15-B for 2018 clarifies that no deduction is permitted to an employer for [expenses incurred for providing] any transportation, or for any payment or reimbursement to employees for commuting expenses, except as necessary for the safety of the employees.... [A]mounts ... which were part of a salary reduction agreement to pay for the transportation expenses are still not deductible by the employer, even if it is not a direct employer payment of the transportation expenses. This only impacts the employer's deduction, it does not change the fringe benefit exclusion that precludes the amounts from being treated as taxable W-2 wages for employees."
Winstead PC

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[Guidance Overview]

Fringe Benefits Affected by the Tax Cuts and Jobs Act
"[E]mployers may continue to deduct amounts for employer-provided moving expenses as an ordinary and necessary business expense if the employer includes the amounts in the employee's taxable wages.... Absent the ability to deduct the costs associated with [qualified transportation fringe benefits under IRC section 132(f)], employers are assessing the viability of such fringe benefits and pondering tax-advantageous alternatives ... . However, certain employers in certain jurisdictions (e.g., New York City, San Francisco, and Washington, D.C.) are required by local law to offer employees a pre-tax deferral or employer subsidy to offset commuting expenses."
Ogletree Deakins

Third Circuit Adopts Plan-Friendly Interpretation of a 'Mental or Nervous Disorder' Limitation
"The Third Circuit stated that the plan's language made clear that to remain eligible for benefits beyond 24 months, it was the plaintiff's burden to 'prove she was totally disabled from any occupation solely due to a physical condition.' The Third Circuit further explained that the terms of the mental nervous limitation in the plan ... means 'that benefits may be terminated when physical disability alone is insufficient to render a claimant totally disabled.' " [Krash v. Reliance Standard Life Ins. Group, No. 17-1814 (3d Cir. Feb. 12, 2018)]
Seyfarth Shaw LLP

Update on ACA Employer Mandate Enforcement
"So far, it appears IRS has only sent assessment notices in connection with an employer's failure to offer minimum essential coverage to at least 70% of its full-time employees and their dependents -- but not yet due to coverage that is 'unaffordable' or fails to provide minimum value."
Conduent

Deep Dive: Association Health Plans
"This [article compares] features of the three types of arrangements when such arrangements are offered on a fully-insured basis.... [A chart describes] which ACA plan design and rating rules apply to different types of plans, i.e. large or small plan rules ... addresses the extent to which state law community rating rules apply ... [and details the] group health association's ability to provide participants with the types of health insurance advantages procured by very large employers, such as lower plan administration rates."
Benefits Bryan Cave

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Is an Opt-Out Program Right for Your Health Plan?
"[E]mployers looking to influence employees to waive the employer plan should consider whether they may just be rewarding employees who would already waive coverage anyway. Alternatively, the opt-out may encourage healthy individuals to drop coverage, leaving the employer with a pool of employees who will incur higher-dollar claims."
HUB International

CalPERS Makes Innovative Health Plan Change for 2019
"The board approved a value-based insurance design (VBID) plan for PERS Select. VBID is designed to improve coordination of care through engagement with a personal doctor and uses incentives to improve member health and wellness.... The new VBID design takes effect as a two-year pilot in the 2019 plan year for the PERS Select Preferred Provider Organization non-Medicare plan."
CalPERS

Cigna-Express Scripts Deal Poses Challenges to Insurers
"If Cigna Corp. completes its acquisition of Express Scripts Holding Co., the PBM's health insurer clients will have to decide whether to keep working with an entity now owned by a fellow payer.... Express Scripts currently has 51 health plan clients ... Ten of those are Blue Cross Blue Shield-affiliated plans, which could opt to go with Anthem's in-house PBM -- IngenioRx -- once it debuts in 2020."
AISHealth

[Opinion]

Three Bad Arguments for Government Paid Leave
"[1] All other industrialized countries have paid leave, so Americans should too. This argument ... represents a logical fallacy, colloquially the 'bandwagon fallacy.'.... [2] Only 15% of workers have access to paid leave.... [A]ctivists use a BLS statistic that does not count benefits that can be used as paid family leave.... [3] Government paid leave is popular.... Americans often agree that working mothers and fathers should receive paid leave following birth or adoption of a child, but they disagree sharply about how it should be provided. And Americans do not think that paid family leave is a policy priority."
Cato Institute

Benefits in General

[Guidance Overview]

Will Your Plan Need to Follow the New Disability Claims Procedures on April 1?
"Affected plans can include welfare plans (including 'wrap' plans with short-term disability and long-term disability benefits), certain pension plans, and 401(k), 403(b), and non-qualified 'top hat' deferred compensation plans ... Any plan for which disability is determined by the plan administrator or its delegate, and not by the Social Security Administration or a disability insurer, must be administered in accordance with the new rules beginning April 1, 2018, and the plan's claims procedures must comply in form with the new rules."
Husch Blackwell

Executive Compensation
and Nonqualified Plans

Emerging Trends in Pay Ratio Disclosure
"Few companies use statistical sampling to identify their median employees and ... companies rely on the de minimis exemption, but not the data privacy exemption. Companies also exclude employees acquired in acquisitions. Very few companies use supplemental pay ratios, even if they have pay ratios that are on the higher end of the range."
Pillsbury Winthrop Shaw Pittman LLP

Selected Discussions
on the BenefitsLink Message Boards

Continuation of Nonqualified Plan After Payout Due to Change in Control
Say a parent company with two operating subsidiaries sponsors a nonqualified plan in which balances pay out upon the first to occur of death, disability, severance, or change in control. There are participants employed by the parent company directly in addition to the two subs. The plan's change in control definition is sale of 50% or more of parent's stock or parent's assets. On a FMV basis, Sub 1 accounts for 70% of parent company's assets; Sub 2 accounts for the other 30%. Parent company sells Sub 1 and triggers a change in control for parent company employees. Parent company will continue running Sub 2 and will continue to employ the same parent-company employees. Has anyone seen a scenario like this where the plan balances are paid out because of the change in control, but the plan is not otherwise terminated? So, assuming no amendments to the plan before the change in control, the existing balances would be forced out, then the parent-company employees could start deferring again? Technically it's just a permissible payment trigger that causes the distribution of prior balances, so I see no reason why the plan couldn't continue. Thoughts?
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BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2018 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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