Employer-sponsored group health plans, whether insured or self-insured, must immediately focus on and prepare for implementation of the new requirements established under last year's Health Insurance Portability and Accountability Act (HIPAA). Interim regulations implementing portions of the law, which amended the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, recently were issued by the federal regulatory agencies and address new requirements in four major areas: limitations on pre-existing condition exclusions; nondiscrimination in health coverage; health benefit plan disclosure; and certification of participants' prior group health plan coverage. Regulations have yet to be issued on other aspects of HIPAA, such as mental health "parity" and lengths of stay for childbirth.

In nearly all cases, employers will have to amend their health plans and establish new procedures to comply with HIPAA. The new rules will increase plan costs, particularly the requirements that pregnancy not be treated as a pre-existing condition and that newborns be covered immediately. Other new restrictions on pre-existing conditions will, for many plans, eviscerate the protection offered under current rules. In light of the increased administrative burdens associated with these new restrictions, plan sponsors may wish to evaluate whether it is cost effective to retain any pre-existing condition limits. Plans must also establish new administrative systems or contract with their insurers and third-party administrators to provide the required certificates of prior coverage. Also, plans will have to revise their SPDs and communication processes to ensure that participants receive required notices and information.

This Perspectives Update summarizes the key issues raised by the law and explains the guidance provided on pre-existing condition exclusion restrictions, nondiscrimination, certification, and disclosure in the recently issued interim regulations from the IRS, the Department of Labor (DoL), and the Department of Health and Human Services.

The U.S. Department of Labor's Pension and Welfare Benefits Administration (PWBA) and the International Foundation of Employee Benefit Plans (IFEBP) will jointly conduct a 10-city Educational Outreach Conference to help employee benefit practitioners understand the new health care law.

Representatives from PWBA will clarify benefit practitioners' rights and obligations under the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which forbids companies and their health insurers from excluding preexisting conditions for more than 12 months, or for 18 months for workers who may enroll much later in a company plan.

The programs, to be held in 10 cities from May to September, are designed to educate employee practitioners on the new guidelines for HIPAA. Discussions also will focus on the reporting and compliance requirements for Form 5500 annual reports.

The educational programs provide an effective way for PWBA to assist service providers and plan administrators in complying with the agency's enforcement programs. The programs target single and multiemployer plan trustees, plan administrators and other plan professionals involved in the management and preparation of the Form 5500 annual reports.

In addition to presenting new guidelines on HIPAA, the conferences will include discussions on legislative and regulatory issues such as the audit bill, pension simplification, the participant contribution regulation and Statement of Position 92-6 issued by the American Institute of Certified Public Accountants.

Day-long programs will be held in Tampa on May 19; Houston, May 20; Philadelphia, June 18; San Diego, July 8; St. Louis, July 15; Chicago, July 22; and Boston, Sept. 9. Two-day programs, with the second day's emphasis on multiemployer plans, will be held in San Francisco, July 9-10; Tarrytown, N.Y., July 29-30; and Cincinnati, Aug. 4-5.

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• Health Insurance: Management Strategies Used by Large Employers to Control Costs. HEHS-97-71. May 6, 1997.
  http://www.gao.gov/new.items/he97071.pdf
• Medicare HMO Enrollment: Area Differences Affected by Factors Other Than Payment Rates. HEHS-97-37. 23 pp. plus 2 appendices (15 pp.) May 2, 1997.
  http://www.gao.gov/new.items/he97037.pdf
• Medicare HMOs: HCFA Can Promptly Eliminate Hundreds of Millions in Excess Payments. HEHS-97-16. 17 pp. plus 5 appendices (41 pp.) April 25, 1997.
  http://www.gao.gov/new.items/he97016.pdf
• Medicare Post-Acute Care: Cost Growth and Proposals to Manage It Through Prospective Payment and Other Controls. T-HEHS-97-106. 13 pp. plus 1 appendix (2 pp.) April 9, 1997.
  http://www.gao.gov/new.items/he97106t.pdf

Question 2: My company is no longer considered a railroad employer. All of the employees are now under Social Security. I earned 5 years of Railroad Retirement before the changeover, short of the 10 year vesting requirement. If, in the future, I go to work for another railroad, can I add my new credits to those I already have for vesting purposes? Also, I want to know how much I can get from Railroad Retirement if I become vested, but I can't seem to get a definitive answer. Can you help me?

Answer (click here).

This sophisticated self-running DOS spreadsheet program does all the math, applies all the legal limits, and prints the results. It determines automatically the maximum permitted integration spread, the tax code's limitations on contributions and their deductibility by the employer.

Four types of plans are supported --

• Profit sharing (but not 401(k))
• Money purchase
• Simplified Employee Pension (SEP)
• Salary Reduction SEP (SARSEP)

QP-SEP Illustrator can be used by both incorporated and unincorporated (partnership and sole-proprietor) plan sponsors or their advisors. Users rave about the way the self-employment calculations are done automatically ... you will, too.

OK, OK, this report is not really a book in the curl up at night and unwind sense. It is written by a committee. Writing ability was not the first qualification on the resumes of those who worked on this project. Those negatives aside, the final result is a comprehensive look at the United States Social Security system as it is and as it will be. If you spend a few hours with this report (say a morning), you can follow, and possibly join, the debate on what the system will be for those born after World War II.

My principal criticism with the report is that it does not stress that all the options affect younger citizens. The opening summary should have made clear that all citizens age 55 or older will basically continue under the current rules. Lip service is made to the sharing the burden of change by not exempting older Americans. We all know that any tax or entitlement is at some danger while Congress is in session. But fundamentally the message to older Americans is this: We understand you planned your life based on current rules and it is wrong to make major changes without due notice. It is younger Americans who will feel the gain or pain of changes made, or not made. Older Americans will little notice the final resolution of this debate.

Furthermore, exactly this point is why changes MUST be debated and decided NOW. The post World War II "boomer" generation reaches 55 in 2001. Regardless of how the deficit is to be resolved, dividing this cohort into an "old way/new way" notch will threaten the success of the solution.

• Defense Health Care: Medical Surveillance Improved Since Gulf War, But Mixed Results in Bosnia. NSIAD-97-136. May 13, 1997.
  http://www.gao.gov/new.items/ns97136.pdf

Stock Options in a 401(k) Profit Sharing Plan
The Department of Labor (DOL) has issued a proposed exemption from ERISA's prohibited transaction rules for a plan design proposed by Travelers Group, Inc. Under the plan, Travelers would contribute stock options on its stock to its 401(k) profit sharing plan.

Government Provides Health Care Certification Forms
Employer groups have been asking for model forms to use in certifying creditable coverage for individuals who lose their coverage under a group health plan. In an unusual interim regulation issued jointly by the Departments of the Treasury, Labor, and Health and Human Services, the government has provided three model certification forms, along with guidance on certifying coverage.

DOL Okays Limited Electronic Information Distribution
In accordance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Department of Labor (DOL) has issued interim rules regarding the disclosure of summary plan description (SPD) and related information through electronic media, such as electronic mail. Many plan administrators have requested guidance on this issue, and there has been much speculation regarding its outcome.

Improving Productivity By Staying at Work
In recent years, employers have dramatically changed their methods of providing and managing medical benefits for employees. Their actions clearly stemmed from the rising costs of medical coverage. Since the financial impact of disability has been less obvious, however, many employers have been slow to act.

Ninth Circuit Permits Employees to Challenge Use of Excess Plan Assets
The Ninth Circuit Court of Appeals has ruled that plan participants can challenge an employer's authority to change plan terms and conditions when those changes involve excess plan assets attributable to employee contributions.

DOL Issues Regulations Implementing HIPAA's Disclosure Requirements
The Department of Labor (DOL) recently issued interim regulations regarding amendments made to ERISA's disclosure requirements by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Those regulations address alternative delivery mechanisms (see "DOL Okays Limited Electronic Information Distribution"), as well as the content of group health plan summary plan descriptions (SPDs) and material reductions in services or benefits.

PBGC Seeks Comments on Benefits Valuation
The Pension Benefit Guaranty Corporation (PBGC) has asked for public comments on proposed changes to its regulation covering how the agency values benefits in terminating pension plans. The most important proposed change would incorporate a new mortality table for valuing benefits.

Marijuana Not a Medical Expense
Now that several states have revised their laws to allow taxpayers to obtain controlled substances (such as marijuana) for "medical purposes," the IRS has issued a revenue ruling regarding the tax deductibility of these substances. Because marijuana and other controlled substances are still illegal under federal law, it should come as no surprise to most taxpayers that the IRS has denied such substances tax-favored status.

PBGC Announces Top 50 Assumptions
Every year the Pension Benefit Guaranty Corporation (PBGC) publishes a list of 50 companies whose pension plans are seriously underfunded. While the Top 50 list has never been particularly popular with plan sponsors or their advisors, the 1996 list provoked particularly negative comments because of the PBGC's use of "conservative" assumptions in the underfunding calculation.

EEOC Proposes Age Discrimination Waiver Regulations
The Equal Employment Opportunity Commission (EEOC) has proposed a regulation clarifying procedures for obtaining waivers of Age Discrimination in Employment Act (ADEA) claims. Added by the Older Workers Benefit Protection Act of 1990, waivers must be "knowing and voluntary" in order to be valid. The proposed regulation specifies both procedural and informational requirements for valid waivers.

Question 29: A reader asks: When the contributions to a 401(k) plan for a participant (deferrals, match and profit sharing contribution) exceed the 415 limit, how can the error be corrected? May the employer just pull out the matching contribution and put it in a suspense account in order to correct the defect? Or does the employer have to use one of the remedial programs, such as VCR or APRSC?

Answer (click here).

The Cato Institute Project on Social Security Privatization is developing an alternative to the current Social Security system--Personal Security Accounts. Rather than paying taxes into a communal fund, individuals would redirect their payroll taxes into individually owned, privately invested accounts, similar to 401(K) plans and Individual Retirement Accounts. The benefits of moving the capital of the current Social Security system into private pension funds include:

substantial increases in retirees' incomes as a result of market-based returns on pension investments.

worker empowerment as a result of first-hand participation in private investment markets, and

increased economic growth through greater investment and higher savings rates

• Issues in Mental Health Care Benefits: The Costs of Mental Health Parity (February 1997 #182)
  http://www.ebri.org/ListOfIssueBriefs.htm

Today managed care is dominating this country's health care reform debate. In view of the Administration on Aging's (AoA) mandate to serve as a visible advocate on behalf of the elderly, this paper sets forth operating principles to guide the aging network in its activities related to managed health care systems.

Although the principles are primarily focused upon managed health care arrangements for Medicare recipients, they also have applicability to Medicaid participants and elderly persons participating in various types of managed long-term care (LTC) arrangements.

Managed care can be thought of as a combination insurance company and health care delivery system which covers health care costs in return for the premium paid. Each plan has its own network of providers, such as doctors, hospitals, skilled-nursing facilities, and other health care providers. Premium costs and copayments for services received vary from plan to plan and the circumstances of the enrollee. The variety of plans available varies considerably in different geographic parts of the country.

There is no question that managed care is a rapidly growing reality in the lives of persons with disabilities and the elderly. The challenge faced by older consumers and the aging network is to obtain the possible benefits of managed care, while guarding against its possible pitfalls.