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How do you think the Supreme Court will rule in the health reform case?

Now that oral arguments  have concluded in U.S. Department of Health and Human Services, et al. v State of Florida, et al., we want your opinion!  How do you think the Supreme Court will rule on the issues below.  For more information on each of these, please see our prior posts from Monday (Anti-Injunction Act), Tuesday (Individual Mandate), and Wednesday (Severability/Medicaid).  Feel free to leave a comment explaining how you voted!

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Thank you!

What the Supreme Court is Hearing Today: Wednesday – Severability and Medicaid

Update (12:45 PM ET): Audio and transcript from this morning’s arguments is available here.

Update (3:12 PM ET): Audio from the afternoon arguments is available here.

Over the last few days we have posted brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our prior posts for some background and a discussion of Monday’s and Tuesday’s arguments. As with Tuesday’s arguments, the individuals challenging the law are joined by the National Federation of Independent Businesses (“NFIB”). Additionally, similar to the arguments over the AIA described in Monday’s post, the Court appointed a special counsel to argue in favor of complete severability of the Individual Mandate.

Today, they will hear a total of two and a half hours of argument: 90 minutes on the issue of Severability, a break for lunch, and then 1 hour on PPACA’s expansion of Medicaid. We will take each argument separately.

Severability

What are they arguing about? If the Court determines that the Individual Mandate is unconstitutional (as discussed in yesterday’s post), then can the Mandate be removed from the law by itself with the rest of the

What the Supreme Court is Hearing Today: Tuesday – The Minimum Coverage Provision (a.k.a. the Individual Mandate)

Update: The audio and transcript of  today’s oral arguments is now available here.

Yesterday, today, and tomorrow we are posting brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”). As the audio of the oral arguments is released, we will post links to the audio here. Go to our first post for some background and a discussion of Monday’s arguments. Note that, in arguing over the constitutionality of the Individual Mandate, the individual respondents are joined by the National Federation of Independent Businesses (“NFIB”).

Today, the Court will hear two hours of argument on the Minimum Coverage Provision (a.k.a. the Individual Mandate).

What are they arguing about? Does Congress have the power to force you to buy health insurance or pay a penalty? The issue is fundamentally about Congress’s authority to regulate interstate commerce under the Commerce Clause of the Constitution (for an additional discussion of this point, see our October post on this issue). The Court will consider whether the Individual Mandate falls within Congress’ ability to regulate commerce among the states or to tax and spend for the general welfare.

What does the U.S. Government say? Of course Congress can do this, says the U.S. Government. The health care market accounts for 17.6%

What the Supreme Court is Hearing Today: Monday – Anti-Injunction Act

Update: Audio of today’s arguments are now available here.

Over the next few days we are going to post brief descriptions of the arguments the Supreme Court will hear in U.S. Department of Health and Human Services, et al. v State of Florida, et al., the case challenging the landmark health reform law, the Patient Protection and Affordable Care Act (“PPACA”).  As the audio of the oral arguments is released, we will post any links to the audio here.

By way of background, there are three parties to this litigation: (1) the U.S. Government who is defending the constitutionality of the law, (2) individuals (sometimes jointed by the National Federation of Independent Businesses) who are essentially arguing that they are harmed by the requirement to purchase insurance, and (3) 26 States, some of which are advocating that the individual mandate violates laws they have passed and some of which are advocating that the Medicaid expansion enacted under the health reform law is unconstitutionally coercive.

First up is the 90 minutes of argument on the Anti-Injunction Act.

What are they arguing about? The Anti-Injunction Act (the “AIA”) is a tax statute that prevents anyone from suing to preemptively prevent the collection or assessment of a tax.  Its purpose is to keep all of us from suing about taxes we do not like until after the IRS has had a chance to determine how the tax will be enforced and assessed.  Once the tax is assessed,

Preventing Assignment of Health Plan Benefits

Preventing Assignment of Health Plan Benefits

March 22, 2012

Authored by: benefitsbclp

A recent South Carolina federal district court case underscores the importance of a robust anti-assignment clause in health plan documents.  In the case, the court held that a hospital could not stand in the shoes of a plan participant and sue a health plan to force payment of benefits to the hospital.  Prior to receiving treatment, the participant had signed a standard form assigning his benefits to the hospital.  When the plan denied benefits, the hospital sued to force the plan to pay.

The plan in question had a strong anti-assignment provision.  The court basically said that the plan’s anti-assignment clause governed and rendered the participant’s assignment invalid.  The court said that the fact that the plan could, and did, pay benefits directly to providers on behalf of participants in other circumstances did not change the result.  The court stated that the direct payment of benefits to providers was not inconsistent with the anti-assignment provision because payment to a third party (here, the hospital) made that party a beneficiary, not an assignee.  The hospital had its own rights as a third-party beneficiary, but was not an assignee because it did not receive an assignment of the participant’s rights due to the anti-assignment provision in the plan.

This case highlights the need for plan sponsors to make sure their health plan documents and SPDs contain robust, unambiguous anti-assignment provisions.  While this case involved a single provider and a single participant, there are circumstances where a single provider could acquire

Five Common 409A Design Errors: #4 No Six-Month Delay for Public Company Terminations

This post is the fourth in our benefitsbclp.com series on five common Code Section 409A design errors and corrections. Go here, here and here to see the first three posts in that series.

Code Section 409A is, in part, a response to perceived deferred compensation abuses at companies like Enron and WorldCom. The story of Code Section 409A’s six month delay provision is inextricably tied to the Enron and WorldCom bankruptcies.

Under established IRS tax principles, participants’ rights under a non-qualified plan can be no greater than the claims of a general creditor. Because deferred compensation plans often pay out upon termination of employment, a plan participant with knowledge of a likely future bankruptcy could potentially terminate employment and take a non-qualified plan distribution to the detriment of the company’s creditors (a number or Enron executives with advance knowledge of Enron’s accounting irregularities did just this). This opportunistic cash out is obviously unfair to the company’s creditors. In addition, the cash out only helps hasten the likely bankruptcy because non-qualified plan payments come from the general assets of the company.

How did Congress solve this problem? By requiring that a payment of deferred compensation to any of the most highly compensated employees of public companies (called “specified employees”) be delayed at least six months if the payment is due to a separation from service. The thought was that for public companies (like Enron and WorldCom), plan participants would not have enough time to

Data Security Breaches – Are you Prepared?

Data Security Breaches – Are you Prepared?

March 16, 2012

Authored by: Denise Erwin

In the event of a data security breach, evaluating the situation and taking action right away is important. One type of data security breach that employers need to be aware of and that has been receiving attention lately relates to the privacy and security of health information. Over the past year, enforcement of the HIPAA Privacy and Security Rules has become a priority for the Department of Health and Human Services (“HHS”) Office of Civil Rights (“OCR”), as seen by the amount of settlement fines related to violations and the recent flurry of HIPAA compliance audits. For example, last year, Massachusetts General Hospital was fined $1 million to settle potential HIPAA violations related to patient information left on a train by an employee commuting to work. Just this week, HHS announced that Blue Cross Blue Shield of Tennessee agreed to pay $1.5 million to settle possible violations of the HIPAA privacy and security rules, which was the first enforcement action which resulted from a breach report required by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act Breach Notification Rule.

This increased activity in HIPAA enforcement is the result of provisions in the HITECH Act, which introduced new breach notification standards and requires OCR to develop procedures for auditing compliance with HIPAA.

HITECH Requirements

The HITECH Act, enacted in 2009, addresses the privacy and security concerns associated with the electronic transmission of health information, in part, through several provisions that

March 15th: Code Section 409A Day

March 15th: Code Section 409A Day

March 12, 2012

Authored by: benefitsbclp

Your company sponsors an annual bonus program. Bonuses are tied to company calendar year performance. The bonus plan says that payments are to occur by March 15th of the year following the performance year. March 15th has always struck you as an odd date.

A friend at another company calls you up, very excited. Her company’s financial performance last year was stellar, and she’s expecting a large payment by March 15th. Another friend at a different company mentions that he’s buying new furniture on the 17th. The proximate cause? Annual bonuses are paid on March 15th.

It is no coincidence that companies often pay out annual bonuses around March 15th. In the case of a company with a calendar year tax year, paying bonuses by March 15 will generally allow the company to deduct the bonuses in the tax year which ends on the prior December 31. But there may be another reason for structuring bonus payouts in this manner: to comply with Code Section 409A.

Code Section 409A generally applies when the right to an amount arises in one year, but the amount can be paid in the next. So, for example, an annual bonus paid shortly after the end of a calendar year could potentially be subject to Code Section 409A.

However, amounts paid by the 15th day of the third month following the end of the year in which the amount “vests” are exempt from Code Section 409A as “short term deferrals.” Thus, March 15th.

But what

Five Common 409A Design Errors: #3 Multiple Forms of Payment

Five Common 409A Design Errors: #3 Multiple Forms of Payment

March 8, 2012

Authored by: benefitsbclp

This post is the third in our benefitsbclp.com series on five common Code Section 409A design errors and corrections. Go here and here to see the first two posts in that series.

Let’s say that you are negotiating your CEO’s new employment agreement. Because she is preparing for retirement, the CEO would like to be entitled to a stream of monthly lifetime separation payments upon her voluntary termination. This type of lifetime benefit makes sense for your company, and, based on the CEO’s long and faithful service to the company, you agree.

The CEO then asks for a provision calling for an immediate lump-sum payment upon her involuntary termination. The amount of the payment would be the present value, using reasonable actuarial assumptions, of the monthly separation pay annuity. This request seems reasonable – the fact that things may go sour in the future doesn’t change the fact of the CEO’s long service. And in an involuntary termination situation, who would want to receive payments over a period of time rather than in a lump sum? Should you agree to this request?

No. And regular readers of this blog will not be surprised as to why – Code Section 409A.

Code Section 409A generally requires that payments be made in a single form following each permissible payment triggering event. This means, for example, that a plan couldn’t provide for payment of an amount in a lump-sum if a change in control occurs in a January

Spring is Around the Corner…Do You Need a Plan Audit?

The employee benefit plan audit season is quickly approaching for calendar year plans. If the number of participants in your defined contribution plan, defined benefit plan, or employee stock ownership plan crossed the magical threshold of 100 or more participants in 2011, your annual Form 5500 filing responsibilities now include engaging an independent accounting firm to perform an audit of your plan. Form 5500s are due by the seventh month following the end of the plan year. Therefore, if you sponsor/administer a calendar year plan, you must file the Form 5500 by July 31; however, a 2½ month extension is automatically made available by filing IRS Form 5568. Even with an extension, it is important to get the audit process underway sooner rather than later (even if this isn’t your first plan audit).

As part of the audit process, the auditor will examine various documents to determine your adherence to the terms of the plan, timeliness of deposits (especially, 401(k) salary deferrals and loan repayments), accuracy and completeness of personnel files, and the handling of forfeitures.  If plan assets are held by a trust company or an insurance company, your plan may qualify for a limited-scope exemption.  Although you will still be required to have independent audit, the scope of the audit will not include an audit of plan investments.

Perhaps the most daunting task from the perspective of a plan administrator is gathering all the required documents – so start now. You don’t

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