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DOL Overtime Regulations Update
12/21/2015
By: Donald Berner

The timing of the issuance of DOL's new overtime rule has been a matter of much projection and debate.  Prior to last week, the estimated arrival date for the final rule was summer of 2016.  Last week, the Secretary of Labor expressed his desire to ensure the rule is issued in the early spring of 2016.  Considering the potential for Congressional action and other litigation, the early spring 2016 date makes sense.  A key concern for worker advocate groups is to ensure the rule is published early enough that any Congressional action takes place while President Obama is still in office.  An early spring release meets this key goal.  So for employers working on contingency planning for the new rule, you might move your completion date up a bit if you expected this to be a summer/fall of 2016 activity. 

 
DOL Proposes Significant Increase in Required Salary for FLSA Exemptions
07/01/2015
By: Forrest Rhodes

After over a year of waiting and wondering, the Department of Labor finally issued its proposed amendments to the white-collar exemptions under the Fair Labor Standards Act.  These are often referred to as the salaried exemptions because of the threshold requirement that the employee be paid on a salary basis at a minimum salary level.  As you may recall, the impetus for these changes was direction from President Obama that the exemptions were too many employees were being treated as exempt.  In other words, the stated goal of the proposed changes was to make sure that more employees will become non-exempt and thus entitled to overtime. 

DOL’s tool for effectuating that direction is to raise the required minimum salary for exempt status from its current level of $455 per week ($23,660 per year) to $921 per week ($ 47,892 per year).  The proposed changes also affect the qualifying salary for “highly compensated employees,” who are exempt under less rigorous duties requirements.  A highly-compensated employee will now have to be paid total annual wages (salary, bonuses, commissions, etc.) of at least $122,148 (an increase from the current $100,000).  In addition, the amended regulations will provide for annual updates to the requisite salary levels.  Of note, while the currently proposed changes target only the required salary levels, DOL said that it continues to look at whether changes to the job duties tests applicable      Continue Reading...

 
DOL Proposes Rule to Raise Minimum Wage for Federal Contract Workers
06/12/2014
By: Donald Berner

The Department of Labor issued a proposed rule raising the minimum wage for employess working on federal government service and construction contracts to $10.10 per hour. The proposed rule implements Executive Order 13658, which was announced by President Obama on February 12. The Executive Order applies to new and renewed contracts with the federal government after January 1, 2015. The proposed rule now goes through a public comment period. To read the DOL's press release click here.  Stay tuned for further developments on the proposed rule.   

 
DOL Updates COBRA Notice Regulations and Model COBRA Notices
05/20/2014
By: Jason Lacey

Earlier this month, the Department of Labor (DOL) issued proposed amendments to the COBRA notice regulations and released updated model notices for the COBRA general notice and the COBRA election notice.

Proposed Regulations. The proposed changes in the actual regulations are largely unremarkable. The DOL is basically proposing to give itself the ability to update the model COBRA notices at any time by posting a new one to its website, rather than actually amending its regulations each time a model notice is updated. (The original model notices were issued as appendices to the actual regulations.)

The preamble to the proposed regulations provides some assurance that the new model notices may be relied on even though the regulations aren't final: “Until rulemaking is finalized and effective, the Department of Labor will consider use of the model notices available on its website, appropriately completed, to be good faith compliance with the notice content requirements of COBRA. The Department notes that the use of the model notices is not required. The model notices are provided solely for the purpose of facilitating compliance with the applicable notice requirements.”

New Model Notices. Both the model general notice and the model election notice have been updated and posted to the DOL website.

  • General Notice. Ignoring the ARRA COBRA-subsidy notices (remember those?!), this is the first update to the model general notice since 2004. Other than some general wordsmithing, the primary change is to add some general discussion of Marketplace coverage and the related premium-assistance tax credits      Continue Reading...
 
DOL Releases Same-Sex Spouse Guidance for Purposes of ERISA
09/18/2013
By: Jason Lacey

The DOL released guidance today (here) describing how it will interpret the term "spouse" for purposes of ERISA in light of the Supreme Court's decision in Windsor. There are no real surprises. The guidance is consistent with broader tax-based guidance released by the IRS a few weeks ago (here). 

A same-sex couple will be treated as married (and therefore as "spouses") for purposes of ERISA if their marriage is valid in the state in which it was celebrated. This includes marriages entered into in foreign countries that recognize same-sex marriage. It does not matter that the couple may reside in a state (like Kansas) that does not recognize same-sex marriage.

Consistent with the IRS's guidance, the DOL also clarified that same-sex couples who are in non-marriage relationships, such as civil unions or domestic partnerships, will not be recognized as spouses for purposes of ERISA. They must, in fact, be married.

The DOL's guidance was limited to the definition of spouse for purposes of ERISA and does not address other federal statutes under the jurisdiction of the DOL, such as the FMLA.

Provisions of ERISA that affect spousal rights include:

  • HIPAA special enrollment rights.
  • COBRA notice and election rights.
  • Survivor benefits and other spousal rights under retirement plans.
  • Rights under qualified domestic relations orders (QDROs).

For prior coverage of the Windsor case and related guidance, see here and here.

 
New Guidance Will Limit HRAs and Employer Use of Individual Market Coverage
09/16/2013
By: Jason Lacey

A continuing area of uncertainty under health care reform has been the treatment of health reimbursement arrangements (HRAs) and other arrangements that might be used to allow employees to purchase health insurance through individual policies with the employer subsidizing some or all of the cost. A new notice from the IRS, HHS, and DOL (here) provides some clarity on these - and some related - issues.

Employer Payment Plans. As a preliminary matter, this guidance gives us a new term: "employer payment plan." This refers to an arrangement by which an employer provides payment or reimbursement of individual market insurance premiums in the manner described in an old Revenue Ruling (Rev. Rul. 61-146). Historically, these employer payment plans have been permissible and have allowed employers to provide pre-tax subsidies of individual market coverage.

Integration of Plans with Individual Market Coverage. A concern with HRAs and employer payment plans is that they may be treated as violating two key health care reform mandates: the prohibition on annual limits and the requirement to provide no-cost preventive care services. Previous FAQ guidance (see coverage here) said that HRAs would be treated as satisfying the annual limit rule if they were "integrated" with other coverage that satisfies the annual limit rule.

This guidance effectively confirms that treatment and provides a similar rule for preventive care. But the guidance goes on to say that HRAs and employer payment plans may not be treated as integrated with individual market coverage. Thus, an HRA or employer payment plan      Continue Reading...

 
No Penalty for Failure to Provide Exchange Notice
09/13/2013
By: Jason Lacey

In a single FAQ posted to its website this week, the DOL acknowledged that "there is no fine or penalty under the law" for failing to provide the notice to employees describing the public insurance exchanges (or "Marketplaces"). Many of us had come to this conclusion already, so it was not entirely a new development. But at a minimum it provides some further comfort that there will not be a serious consequence to employers who might foot-fault on the requirement (e.g., overlook an employee when distributing the notice). 

Does this lack of a penalty give employers license to willfully ignore the notice requirement? It could be interpreted that way. After all, if the police said they would no longer issue speeding tickets, would anyone feel compelled to pay attention to the signs?

But I don't recommend taking it too far. Here are at least three reasons complying with the requirement may be important even in the absence of an express penalty.

  1. The DOL will still be looking for evidence of compliance with the requirement. We won't know this for sure until after October 1, but I suspect when the EBSA folks at DOL open an audit and send out their standard (and quite lengthy) list of documents to be reviewed in connection with the audit, the exchange notice will be on the list. If you can't produce evidence that you distributed it, you are likely to receive a stern talking-to. Worse still, if the failure appears to be      Continue Reading...
 
DOL Addresses ERISA Accounts for Defined Contribution Retirement Plans
07/15/2013
By: Jason Lacey

In a recent advisory opinion, the DOL has addressed - for perhaps the first time in published guidance - a key issue related to "ERISA accounts" established by service providers for 401(k) and other defined contribution retirement plans.

Background. Service providers to defined contribution retirement plans often receive revenue sharing payments with respect to the plan's investments. As part of their service agreements, these service providers may agree to give a portion of those revenue sharing payments back to the plan in the form of an "ERISA account" or "ERISA budget account." Amounts credited to the ERISA account are often used by the plan or plan sponsor to pay expenses associated with plan administration, such as auditing fees and plan communication costs. 

The structure of the ERISA account varies from agreement to agreement. Some ERISA accounts are held on the service provider's books. Some ERISA accounts are held as a separate account within the plan's trust arrangement. In either case, there has been some question as to whether or when amounts credited to the ERISA account are treated as "plan assets" for purposes of ERISA. 

Plan Assets When Plan Actually Receives Them. The recent advisory opinion describes an arrangement in which the ERISA account is held on the service provider's books as part of its general assets until it is directed by a plan fiduciary to deposit those amounts into a plan account. On those facts, the opinion concluded that the amounts credited to the ERISA account likely did not become plan      Continue Reading...

 
Final Regs Make Few Changes to Contraception Mandate
07/10/2013
By: Jason Lacey

Final tri-agency regulations were released recently on the religious employer exemption from health care reform's contraception mandate, and there is little change from the approach outlined in the proposed regulations (see discussion here). In short, the regulations finalize a moderate expansion of the definition of "religious employer," but continue to require religiously affiliated nonprofit organizations to seek an "accommodation" that allows individuals covered under their plans to obtain contraception coverage at no cost through an insurance carrier.

Applicability Date. A key piece of the final regulations is the effective-date provision, which provides nonprofit organizations some additional time to comply with the accommodation requirement. The regulations generally apply for plan years beginning on or after January 1, 2014, rather than applying for plan years beginning on or after August 1, 2013, as previously expected. Nonprofit organizations that had been relying on a one-year safe harbor from application of the mandate (see description here and here) may continue relying on the safe harbor until the first plan year beginning on or after January 1, 2014. CMS has updated its guidance on the nonenforcement safe harbor (here). 

Definition of Religious Employer. The definition of religious employer is unchanged from the proposed regulations. Although not intended to expand the number of organizations that qualify as religious employers, the change is intended to clarify that religious employers providing educational, charitable, and social services may qualify for the exemption even though some of their constituents or employees may not be of the same      Continue Reading...

 
Employer Exchange Notice: DOL Guidance and Model Notice
05/10/2013
By: Jason Lacey

A new technical release from the DOL provides important guidance for employers on the obligation to give employees a notice regarding health coverage available through the public exchanges.

Effective Date. As discussed in a prior post, this notice obligation was scheduled to become effective March 1, 2013, but was delayed until guidance was issued. Under this new guidance, notice must be given to all current employees by October 1, 2013, and must be given to each new employee hired on or after October 1, 2013, within 14 days of the start date.

Covered Employers. Although this notice requirement was enacted as part of health care reform, it applies to employers through the FLSA. So all employers to which the FLSA applies are required to provide the notice. It does not matter whether the employer offers health coverage to employees or whether the employer is subject to the play-or-pay mandates.

Who Gets the Notice? The notice must be given to all employees, whether full-time or part-time and whether or not covered under the employer's health insurance plan. However, notice is not required to be given to dependents or other individuals who may be covered under the employer's plan.

Content Requirements and Model Notice. The notice must provide employees with information about the public exchanges and inform them that they may be eligible for a tax credit to subsidize coverage obtained through the exchange. But the notice must also advise that employees who choose to obtain coverage through the exchange will lose any employer      Continue Reading...

 
More ACA FAQs: Mini-Med Plans and Clinical Trials
05/01/2013
By: Jason Lacey

We are now up to Part XV of the tri-agency FAQs providing guidance on various ACA-related issues.

The most important guidance in these FAQs relates to the treatment of mini-med plans that obtained a waiver from the prohibition on annual limits. But the FAQs also acknowledge, in so many words, that there are some issues on which further guidance simply will not be provided before 2014, so we're going to have to use our best judgment.

Changing the Plan Year on Mini-Med Plans. Employers and insurance carriers offering mini-med plans were required to obtain a waiver from the prohibition on annual limits. Under the waiver program, plans were allowed to continue until the end of the plan year ending in 2014. Creative employers and carriers began exploring whether they could change their plan years now and effectively extend waiver through most of 2014. For example, a plan with a plan year ending June 30 might change to a plan year ending November 30 and rely on the waiver until November 30. 

These FAQs provide, unequivocally, that a change in the plan year will not be effective to extend a plan's waiver. The waiver only applies until the end of the plan year ending in 2014, based on the plan year the plan was using when it applied for the waiver.

In other words, nice try.

Why would this matter? Well, it now appears that mini-med coverage extending into 2014 will be sufficient to allow employers with fiscal year plans to avoid some of the      Continue Reading...

 
New SBC Guidance and Templates
04/24/2013
By: Jason Lacey

The latest set of Affordable Care Act FAQs (Part XIV) announces the release of updated templates for the SBC and uniform glossary. The updated templates are designed to provide employers and insurers with tools to comply with the SBC requirement for the second year of applicability.

Note that many fiscal-year plans may not yet have begun their first year of applicability for the SBC requirement, which essentially begins with the first open-enrollment period beginning on or after September 23, 2012.

Limited Template Changes. The updated templates reflect only two significant changes. They add language for describing whether the coverage does (or does not) provide minimum essential coverage (MEC), and they add language for describing whether the coverage does (or does not) provide minimum value (MV). There is no change in the language describing whether benefits are (or are not) subject to annual limits, and the template keeps the same two coverage examples (childbirth and diabetes).

Extended Enforcement Relief. Perhaps the most significant guidance in the FAQs is an extension of much of the helpful enforcement relief that was provided through previous FAQs. For example:

  • Compliance emphasis. IRS, DOL, and HHS will continue to emphasize "assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law" (Part VIII, Q2) and "will not impose penalties on plans and issuers that are working diligently and in good faith to comply" (Part IX, Q8).
  •      Continue Reading...
 
PPACA Waiting Period Rules: 90 Days Means 90 Days
03/27/2013
By: Jason Lacey

HHS, DOL, and IRS recently proposed regulations interpreting the health care reform mandate limiting health plan waiting periods to no more than 90 days. The guidance is fairly straightforward, but does not include one clarification we were anticipating: 3 months cannot be used as a substitute for 90 days. 90 days means 90 days. Period.

What is a waiting period? Under the rules, a waiting period is any period of time that must pass before coverage may become effective for anyone who has otherwise satisfied the plan's eligibility criteria. Eligibility criteria that are based solely on the lapse of a time period count as part of the waiting period. So, for example, if a plan requires employees to work in a particular job classification to be eligible for coverage, time spent working in an ineligible job classification does not count as a waiting period, and the 90-day period may be imposed once an employee moves to an eligible job classification. But if a plan merely requires 60 days of full-time employment to become eligible, those 60 days of employment count toward the waiting period, so another 90 days may not be imposed.

Variable-hour employees. We know from the regulations on the look-back measurement method (see coverage here) that we may need some time (up to 12 months or so) to determine whether a variable-hour employee meets an eligibility requirement relating to average hours worked. These proposed regulations clarify that the period during which a variable-hour employee's hours of service are being measured      Continue Reading...

 
New ACA FAQ Guidance Addresses Cost Sharing, Preventive Care, and Expatriate Plans
03/10/2013
By: Jason Lacey

Two more sets of tri-agency FAQs have been released, providing additional interpretive guidance on the Affordable Care Act. They are Part XII and Part XIII in the series.

Cost-Sharing Limitations. Part XII includes two important clarifications on the cost-sharing limitations that will apply to group health plans beginning in 2014.

(1) Deductible. The rule that limits the annual deductible under a plan to $2,000 for self-only coverage and $4,000 for family coverage will apply only to non-grandfathered plans in the individual and small-group markets. Grandfathered plans and large-group plans will be permitted to impose higher deductibles. This may be important for large-group plans that want to offer an option with a high deductible that meets the minimum requirements for a 60% actuarial value plan.

(2) Out-of-pocket maximum. The rule that limits overall cost-sharing under a plan to $5,000 for self-only coverage and $10,000 for family coverage will apply to all non-grandfathered plans. So even large-group plans will be limited.

Preventive Care. Part XII also provides detailed guidance on miscellaneous issues related to the requirement for non-grandfathered plans to offer preventive-care services without cost-sharing. Some highlights:

(1) Out-of-network services. Plans generally are permitted to impose cost-sharing with respect to preventive-care services obtained out of network. However, if a service that is required to be covered by the plan is not available through any in-network provider, the plan must cover the out-of-network service without cost-sharing.

(2) Over-the-counter items. Some of the covered preventive-care items include over-the-counter drugs and devices, such as aspirin. A plan is only      Continue Reading...

 
DOL Updates Health Plan Self-Compliance Tools
03/07/2013
By: Jason Lacey

The DOL has updated the self-compliance tools it makes available to group health plans to include a new checklist relating to health care reform.

The health care reform checklist goes through a series of detailed questions that will help a plan sponsor confirm that it is in compliance with the key group market reforms, such as coverage of dependent children to age 26 and cost-free preventive care. There are particularly extensive provisions addressing grandfathered plan status and the SBC requirement.

A second checklist relates to the HIPAA portability provisions and related requirements for group health plans, including mental health parity. (See related prior coverage here.)

Plan sponsors or administrators would be well-advised to go through these lists once a year or so to determine if there are any areas in which their plans are deficient. It is always easier to correct problems that are identified before the DOL finds them.

 
Forgot to File Form 5500? There's an App For That.
02/15/2013
By: Jason Lacey

Most employee benefit plans that are subject to ERISA are required to file Form 5500. This includes both retirement plans (including most 403(b) plans) and welfare-benefit plans, although many welfare-benefit plans covering fewer than 100 participants are exempt.

The failure to file Form 5500 can result in serious penalties. The DOL currently assesses a penalty of $300 per day, up to $30,000 per year for a failure to file Form 5500. Ouch.

But there is good news. The DOL maintains a voluntary compliance program that allows employers to correct a failure to file Form 5500 and pay a substantially reduced fee. Even in cases where there have been failures to file Form 5500 over multiple years, the maximum fee under the program is only $4,000. That's still a lot of money, but it's better than staring down something approaching a 6-digit penalty.

The program was recently updated (see here). The technical details of how the program works and what has changed will not be of interest to most of you. But it's a good time to remind ourselves the program exists - and should be used whenever possible.

 
Agencies Propose Changes to Contraception Mandate for Religious Employers
02/06/2013
By: Jason Lacey

The IRS, DOL, and HHS have proposed two key changes in the rules that exempt certain religious employers from complying with the mandate to cover all FDA-approved contraception and sterilization procedures for women (see proposed rules here). 

1. Definition of Religious Employer

Employers that are "religious employers" are wholly exempt from compliance with the mandate. The new rules would modify the definition of religious employer slightly. The definition would still be limited to houses of worship (churches, synagogues, mosques, and the like) and religious orders. But the change would clarify that those organizations will not fail to be religious employers even if they also provide educational, charitable, or social services, without regard to whether the persons served share the same religious values.

Example. A church with a parochial school that employs teachers or serves students who are not necessarily of the same religious faith may still qualify as a religious employer.

2. Broader Accommodation for Non-Profit Religious Organizations

A non-profit organization that is not a church or religious order but that meets specified criteria would be provided an "accommodation" exempting the organization from directly providing contraceptive coverage. The criteria are:

  • The organization opposes some or all of the required contraceptive coverage on religious grounds
  • The organization is a non-profit entity
  • The organization holds itself out as a religious organization
  • The organization self-certifies that it meets the first three criteria

This change is intended to exempt organizations such as religious-affiliated non-profit institutional health care      Continue Reading...

 
New Health Care Reform FAQs Answer Some Questions and Raise Others
02/01/2013
By: Jason Lacey

The IRS, DOL, and HHS have released their 11th series of FAQs (here) addressing various issues related to health care reform implementation.

Exchange Notice Requirement. In a helpful clarification, the agencies confirmed that employers will not have to provide a notice to employees regarding insurance exchanges until “regulations are issued and become applicable.” By statute, the notice is required to be distributed by March 1, 2013. This guidance effectively allows employers to delay compliance until further notice.

Stand-Alone HRAs. Three of the FAQs address issues related to health reimbursement arrangements (HRAs). The technical clarifications are as follows:

(1) An HRA cannot be treated as “integrated” with individual insurance coverage.

(2) An HRA can only be treated as “integrated” with major-medical coverage if participation in the HRA is conditioned on being enrolled in that major-medical coverage.

(3) Most amounts credited to an HRA before January 1, 2014, will continue to be available for reimbursements on and after January 1, 2014 without causing the HRA to violate the annual-limit rules under Section 2711 of the Public Health Service Act.

While all of this seems straightforward enough, the proverbial elephant in the room is the fundamental question whether stand-alone HRAs will be deemed to violate the prohibition against annual and lifetime limits under Section 2711 of the Public Health Service Act. These FAQs are the strongest indication yet that future guidance will say they do violate the prohibition, effectively eliminating stand-alone HRAs. 

Plan sponsors that maintain stand-alone HRAs - or are considering implementing one for 2014 - will want      Continue Reading...

 
Agencies Release Joint Proposed Regulation on Wellness Plans
12/03/2012
By: Jason Lacey

The IRS, DOL, and HHS have issued a joint proposed regulation addressing wellness plans and the wellness exception to the HIPAA nondiscrimination rules. 

Background. Section 2705 of the Public Health Service Act, as added by the Affordable Care Act, provides statutory affirmation of the wellness-plan rules that have existed by regulation for several years as part of the HIPAA nondiscrimination rules (rules that prohibit, among other things, discrimination on the basis of health factors). It also gives the relevant governmental agencies (IRS, DOL, and HHS) express authority to issue further rules on wellness plans that increase the permissible reward or penalty to as much as 50% of the cost of associated heath-plan coverage.

Proposed Regulations. The proposed regulations largely follow the structure of the existing wellness-plan regulations, requiring, among other things, that wellness programs requiring a particular health outcome (e.g., smoking cessation, biometric screening results, minimum BMI, etc.) provide reasonable alternatives and limit the reward or penalty offered or imposed in connection with the plan. However, there are a couple of points worth highlighting:

  • Participation v. Health-Contingent. The proposed regulations label wellness programs as either "participatory" or "health-contingent." It is only the health-contingent programs that are subject to more rigorous regulation under the proposed rules. Participatory programs include fitness-club memberships, general health education, and other similar programs that do not provide for a reward or include any conditions based on satisfying a standard related to a health factor.
  • Size of Reward. The requirements that must      Continue Reading...
 
IRS, DOL, and HHS Issue Joint Guidance on 90-Day Waiting Period Limitation Under PPACA
09/04/2012
By: Jason Lacey

Notice 2012-59 provides guidance on the requirement under Section 2708 of the Public Health Service Act (added by PPACA) that a group health plan not apply any waiting period that exceeds 90 days. The rule applies for plan years beginning on or after January 1, 2014.

Among the clarifications offered by the guidance:

  • Definition of Waiting Period. A "waiting period" is defined as a period of time that must pass before coverage can become effective for an individual who is otherwise eligible to enroll under a plan. Eligibility conditions based solely on the lapse of time cannot exceed 90 days, but other eligibility conditions (e.g., working full time or working in a covered job classification) are permissible, even if they have the effect of excluding an individual from coverage under the plan for more than 90 days.
  • Determining Full-Time Status for Variable-Hour Employees. If a plan limits coverage to full-time employees, it may take a reasonable period of time to determine whether a newly hired employee meets the full-time standard, if it is not clear on the date of hire that the employee will work the required number of hours (e.g., 30 hours per week). In general, this determination must be made within a year after the employee is hired, and if the employee satisfies the eligibility requirements, coverage must be offered beginning within 13 months after the date of hire. Otherwise, the plan may be treated as indirectly avoiding the 90-day-waiting-period requirement.

This notice      Continue Reading...

 
DOL Adds An FAQ on SBCs and Medicare Advantage Plans
08/08/2012
By: Jason Lacey

The DOL has posted one additional FAQ to its website addressing the narrow question whether a summary of benefits and coverage (SBC) must be provided with respect to a Medicare Advantage benefit option under a group health plan. The DOL takes a nonenforcement position, meaning a group health plan that offers a Medicare Advantage benefit option will not be treated as failing to satisfy the SBC requirement if it does not provide an SBC with respect to the Medicare Advantage option.

* Reminder: SBCs generally must be provided in connection with a plan's first open-enrollment period beginning on or after September 23, 2012. For prior coverage of SBCs, see here.

 
DOL Withdraws Controversial Guidance on Participant-Level Disclosures in 401(k) Plans with Brokerage Windows
08/01/2012
By: Jason Lacey

The Department of Labor has withdrawn the controversial "Q&A-30" in Field Assistance Bulletin 2012-02, which would have required some investment-specific disclosures regarding fees and expenses in 401(k) plans that offered only a brokerage window, self-directed brokerage account, or similar arrangement and did not designate any specific investment options beyond the brokerage platform. In an amended bulletin (Field Assistance Bulletin 2012-02R), the DOL replaced Q&A-30 with a new Q&A-39 that does not require any investment-specific disclosures in brokerage-window-only plans, but does contain strong language warning plan fiduciaries that merely offering a brokerage window to participants may not be fully consistent with the general fiduciary obligations imposed by ERISA.

As brief background, the DOL's participant-level fee-disclosure regulation (which goes into effect this year) requires specific annual and quarterly disclosures to participants in most participant-directed 401(k) and other individual-account plans regarding plan-level and investment-level fees and expenses. (The initial disclosures are due by August 30, 2012, for calendar-year plans.) The investment-level information applies only to investments that are "designated investment alternatives." A brokerage window is not a designated investment alternative. So the regulation generally has been read to mean that no investment-level disclosures are required in a plan that does not have any designated investment alternatives but rather offers participants a brokerage window or self-directed brokerage account through which investments may be made in a large number of publicly available investment securities.

Q&A-30 went beyond that by nonetheless requiring investment-level disclosures in brokerage-window-only plans with respect to investment options that were either designated      Continue Reading...

 
DOL Updates Self-Compliance Tool for Mental Health Parity and Addiction Equity Act of 2008
07/20/2012
By: Jason Lacey

The Department of Labor (DOL) has updated its Self-Compliance Tool for Part 7 of ERISA: HIPAA and Other Health Care-Related Provisions to address the requirements of the Mental Health Parity and Addiction Equity Act of 2008. The tool provides a detailed checklist of various requirements that group health plans must comply with, and will be useful to employers and plan administrators wanting to confirm their plans are up to speed. The Mental Health Parity provisions are addressed in Part II of the checklist.

 
DOL: "Open MEP" is Not a Single ERISA Plan
06/14/2012
By: Jason Lacey

The Department of Labor (DOL) has opined that a large 401(k) plan covering over 9,800 employees of 500 different employers is not a single retirement plan, but rather is a collection of separate plans established by each participating employer.

The plan was set up as a "multiple employer plan" and referred to as an "open MEP" because the employers adopting the arrangement were not related to each other by ownership, industry, or any other unifying factor. The DOL concluded this lack of "genuine organizational relationship" among the employers was fatal to the intended treatment of the plan as a single plan.

Although this opinion does not impair the tax-qualified status of open MEPs, it does mean that employers participating in open MEPs will be required to separately comply with the standards imposed under ERISA, such as the plan document, summary plan description, and Form 5500 requirements. In addition, each employer is treated as a fiduciary under ERISA and is charged with, among other things, prudently selecting and monitoring investment and service providers, including the sponsor of the open MEP and its affiliated service providers.

In light of this opinion, employers considering an open MEP should carefully evaluate the extent to which participation in the plan will, in fact, relieve it of responsibilities it otherwise has as an employer offering retirement benefits to its employees.

 
DOL Releases FAQs on Mental Health Parity Requirements
06/06/2012
By: Jason Lacey

The U.S. Department of Labor (DOL) has released a set of FAQs on the obligations of group health plans with respect to mental health and substance abuse benefits. The FAQs specifically discuss changes made by the Mental Health Parity and Addiction Equity Act of 2008.

The FAQs serve as a good reminder about these rules. Among other things, group health plans are prohibited from imposing visit limits on mental health and substance abuse benefits that are more restrictive than visit limits on medical/surgical benefits. Plans also may not use a separate deductible for mental health and substance abuse benefits and may not operate in a way that treats mental health and substance abuse benefits less favorably than other benefits.

 
DOL Clarifies Non-ERISA Safe Harbor for 403(b) Plans
6/1/2012
By: Jason Lacey

In a recent advisory opinion, the U.S. Department of Labor (DOL) clarified the scope of its regulation on non-ERISA 403(b) plans. Under that regulation, certain 403(b) plans sponsored by 501(c)(3) organizations are considered exempt from ERISA. Among other things, the plans must be voluntary, must only allow for employee contributions (no employer contributions), and must limit other employer involvement.

The new advisory opinion describes an employer that maintains two plans: a 403(b) plan that allows for only employee salary-reduction contributions and a separate 401(a) qualified retirement plan through which employees receive matching contributions based on their contributions to the 403(b) plan. The DOL noted that simply maintaining two plans did not preclude the 403(b) plan from qualifying for the non-ERISA safe harbor. But in this case the close relationship between the two plans caused the 403(b) plan to fail the safe harbor. Specifically, the coordinated matching contribution provided through the 401(a) plan was too much employer involvement and caused the 403(b) plan not to be strictly "voluntary".

 
DOL FAQ's Update Guidance on the Summary of Benefits and Coverage (SBC)
5/29/2012
By: Donald Berner

The Department of Labor (DOL) recently posted a new set of FAQs (click to here to read the FAQ) to its website providing additional guidance on the requirement under health care reform to give health plan participants a four page uniform summary of benefits and coverage (SBC).  Some highlights include:

  • A new electronic-distribution safe harbor that specifically allows for distribution of the SBC with online enrollment materials.
  • A transition rule for arrangements that are partly insured and partly self-funded (e.g., an insured high deductible plan with integrated self-insured HRA) that allows using two or more partial SBCs for the first year of applicability.
  • A non-enforcement rule for expatriate coverage during the first year of applicability, effectively suspending the requirement to provide an SBC for expatriate coverage during the first year.
  • Assurance that penalties will not be imposed during the first year of applicability on employers "that are working diligently and in good faith to comply" with the rules.

The detailed requirements for preparation and distribution of the SBC are described in final regulations issued by the IRS, DOL, and HHS earlier this year.  (Click here to see the final regulation.)  The requirement to distribute an SBC generally applies to the first open enrollment period beginning on or after September 23, 2012.

 
Premium Refunds from Health Insurers May Trigger ERISA Issues
05/09/2012
By: Donald Berner

As part of the insurance-market reforms enacted by the Patient Protection and Affordable Care Act (PPACA), insurance carriers are required to spend a minimum percentage of premiums (generally 85%) on medical care and quality improvement.  If this percentage -- the "medical loss ratio" -- is not satisfied, premiums must be returned to the policyholder to the extent necessary to reach the required percentage.

A recent report by the Kaiser Family Foundation (read here) estimates that under this rule, carriers nationwide will be rebating as much as $1.3 billion in total premiums collected during 2011.  Of that, employer-sponsored plans are expected to receive approximately $900 million, and at least some rebates are expected in every state except Hawaii.

When a rebate is received with respect to an ERISA-covered plan, care must be taken to determine whether some portion of the rebate is a "plan asset".  If so, it must be treated in a manner that complies with the ERISA fiduciary obligations that apply to handling plan assets.  The Department of Labor (DOL) has provided some specific guidance on this issue (read here).  The guidance instructs that the rebate generally must be allocated between the employer and the plan participants.  The portion allocable to the participants is a plan asset and must either be returned to the participants or used exclusively for their benefit.

The facts of each arrangement must be considered, but a rebate generally will be allocated between the employer and the plan participants based on their relative contributions to the premiums      Continue Reading...

 


Authors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
Additional Sources
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