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Does Your EAP or Wellness Program Need a Summary of Benefits and Coverage?

Even though health reform’s legal status is up in the air, plan sponsors are still taking cautious steps forward to make sure they are ready if it survives the Supreme Court challenge. One of those steps, which is coming soon, is the Summary of Benefits and Coverage requirement, which has to be initially provided for the first open enrollment period beginning on or after September 23, 2012.

Many plan sponsors mistakenly assume that their employee assistance programs (EAPs) or wellness programs are not subject to these requirements. However, as we discussed in our post on W-2 reporting of health coverage, EAPs that provide counseling (even for only a few sessions) and wellness programs that provide medical care are technically group health plans under ERISA. Among other implications, this means they are subject to SBC requirements.

That said, plan sponsors do have some structuring alternatives that may help ease compliance with this requirement and avoid the need for a separate SBC. For example, if a plan sponsor documents the EAP or wellness program as part of its group health plan, a separate SBC for the EAP or wellness program may not be required. However, the plan sponsor may need to tweak the SBC disclosures to take into account these additional benefits. The EAP or wellness provider may not be equipped to help complete the SBC, and any insurer or TPA (for a self-funded plan) may not be aware that EAP or wellness services are being

Department of Labor Issues Further Fee Disclosure Guidance

Department of Labor Issues Further Fee Disclosure Guidance

May 23, 2012

Authored by: benefitsbclp

On May 7, 2012 (and updated May 17), the Department of Labor issued Field Assistance Bulletin 2012-02, consisting of 38 questions and answers that clarify some of the issues raised since the issuance of the final regulations on participant fee disclosures with respect to designated investment alternatives in individual account plans. The Q&As cover a range of issues, including:

Brokerage Windows. The participant fee disclosure regulations (§2550.404a-5(h)(4)) provide that brokerage windows are not “designated investment alternatives,” but do not provide specific guidance on how the regulation applies to brokerage windows and what disclosures are required. The FAB clarifies that brokerage windows are covered by the regulations, but that they are subject only to plan-related disclosures of administrative fees and expenses under §2550.404a-5(c). The disclosures include (1) a description of the window (how and to whom to give investment directions, account balance requirements, limitations or restrictions on trading, how the window differs from the plan’s designated investment alternatives) and whom to contact with questions; (2) a general statement that there may be investment fees and charges associated with the participant’s investment selections (such as fees and expenses for opening, accessing, maintaining, and terminating the window, commissions and fees for trading) and directions on how to obtain information on those fees for any particular investment; and (3) the fees actually charged against a participant’s account in connection with the window during the preceding quarter.

Broad-Based Investment Platforms. Some plans provide an investment platform comprised of a large number of registered

Facebook and 409A: When $300 Million Isn’t Enough

Facebook and 409A: When $300 Million Isn’t Enough

May 22, 2012

Authored by: benefitsbclp

On May 18th, two famous, photogenic Olympians found themselves almost $300 million richer. A banner day for anyone, and yet they may have felt at least a twinge of regret. Why? They contend that 409A should have made them much richer, to the tune of as much as $1.2 billion.

At this point, Hollywood has made the story almost old-hat. In December 2002, then Harvard students Tyler and Cameron Winklevoss had an idea. They would develop a web site that connected Harvard students. If successful, they would expand the concept to other campuses. In November of 2003, after several false starts, the Winklevoss twins retained the services of a young, talented programmer to implement their vision. Three months later, without the knowledge of the Winklevoss twins, Mark Zuckerberg gave birth to Facebook. After a successful run at Harvard, the social networking site spread to other campuses, and then took over the world.

In 2004, the Winklevoss twins (and their company ConnectU) filed suit against Facebook, claiming that Mark Zuckerberg had copied their social networking ideas and source code and used them to create Facebook. In 2008, the parties settled, reportedly for $65 million – $20 million in cash and a specified number of shares of Facebook. The problem was the valuation of Facebook stock at the time of the settlement.

Around the time of the settlement, Microsoft made an investment in Facebook. This investment valued Facebook at $15 billion. The Winklevoss twins apparently used this valuation, with a per share

IRS Fires Shot Across the Bow on Health Reform Minimum Value and Reporting Guidance – Part 3

As we have posted about previously, the IRS has requested comments on the determination of “minimum value” (discussed here) and reporting on “minimum essential coverage” (discussed here).  In this, our final post of the series, we summarize the IRS’s request for comments regarding reporting by employers subject to “play or pay” penalties in Notice 2012-33.

Beginning in 2014, employers who could be subject to PPACA’s “pay or play” penalties must file returns with the IRS that include the following information:

  • Name and EIN;
  • The date the return is filed;
  • A certification of whether the applicable large employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan;
  • If so, a certification of:
    • The duration of any waiting period;
    • The months during the calendar year when coverage under the plan was available;
    • The monthly premium for the lowest cost option in each enrollment category under the plan; and
    • The employer’s share of the total allowed costs of benefits provided under the plan.
  • The number of full-time employees for each month of the calendar year;
  • For each full-time employee, the name, address, and taxpayer identification number (TIN) of the employee and the months (if any) during which the full-time employee (or any dependents) were covered under the eligible employer-sponsored plan; and
  • Such other information as may be required by the Secretary of the Treasury.

Companion returns with the above information (except

IRS Fires Shot Across the Bow on Health Reform Minimum Value and Reporting Guidance – Part 2

In addition to requesting comments on the determination of “minimum value” (discussed in our prior post here), the IRS is also asking for comments regarding the information reporting requirements regarding “minimum essential coverage” under PPACA and for reporting by employers subject to “play or pay” penalties.

Minimum Essential Coverage Reporting. Under PPACA, every health insurance issuer, self-funded plan sponsor, governmental agency administering governmental health insurance programs, and any other entity that provides minimum essential coverage is required to file annual returns reporting who is covered under its plan or policy. For insured plans, the IRS intends to require the insurer to report.

The reporting must include, name, address, taxpayer ID number (usually a social security number) of each covered person, dates of coverage during the calendar year, and any other information Treasury may require. Additional reporting is required for policies offered through an exchange.

An employer must also separately report its own name, address, and EIN, the portion of the premium that it pays, and any other information Treasury may require.

Reporting is made to the IRS with a copy provided to each individual. It will be effective for coverage on or after January 1, 2014.

Why do we have to report this? Employers will want to report this information to avoid being hit with “play or pay” (or “shared responsibility”) penalties.  Employees eligible for minimum essential coverage are not eligible for the tax credit to help them defray the cost of health insurance from the exchange. If

Recent Guidance on Normal Retirement Age Regulations for Governmental Plans

The IRS and Treasury Department recently issued Notice 2012-29, which provides new guidance for the final “normal retirement age” regulations relating to governmental plans. The Notice provides that the IRS and the Treasury intend to further extend the effective date for governmental plans to comply with the final regulations to annuity starting dates that occur in plan years beginning on or after the later of:

  • January 1, 2015, or
  • the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after the date that is three months after the final regulations are published in the Federal Register.

The Notice also provides that the IRS and Treasury will make two important clarifications in the final regulations:

  • The final regulations will clarify that governmental plans that do not provide for in-service distributions before age 62 do not have to have a definition of normal retirement age that complies with the final regulations or even define normal retirement age; and
  • The final regulations will expand the age-50 safe harbor rule, which currently applies only for plans in which substantially all of the participants are qualified public safety employees, to also apply to a group substantially all of whom are qualified public safety employees. This means that a governmental plan could satisfy the normal retirement age requirement by using a normal retirement age as low as 50 for qualified public safety employees, and a later normal retirement

Recent CCIIO and IRS Medical Loss Ratio Guidance

Recent CCIIO and IRS Medical Loss Ratio Guidance

May 7, 2012

Authored by: benefitsbclp

Both the Center for Consumer Insurance Information and Oversight (CCIIO – a division of the Centers for Medicare and Medicaid Services) and the IRS have recently issued guidance related to the Medical Loss Ratio requirement under the Patient Protection and Affordable Care Act (“PPACA” or “health reform”). As you may know, the MLR requirements generally mandate that insurers spend a certain percentage of premiums (85% for “large group” plans, 80% for “small group” and individual plans) on (1) claims and (2) healthcare quality improvement activities. If they do not, they must provide rebates to enrollees. Insurers are also required to report on MLR compliance to CCIIO. Employers must properly allocate such rebates between the employer and employees, and satisfy applicable reporting and withholding obligations.


The FAQs released on April 20, provide very few surprises, but provide some helpful answers. They confirm that self-funded plans, Medicaid MCOs, and Medicare Advantage and Part D plans are not subject to the MLR requirements. The FAQs also state that insurance coverage labeled as “blanket” coverage may be subject to the requirements if it qualifies as coverage in the group market or individual market under the Public Health Service Act. Additionally, the FAQs state that coverage issued to a sole proprietor covering the proprietor and his/her spouse is considered individual market coverage.

Under health reform guidance, whether a policy is considered to be part of the “small group” or “large group” market turns on the number of employees of the employer

IRS Updates COBRA Audit Guidelines

The IRS recently updated its audit guidelines for field agents conducting reviews of employers COBRA programs.

In these updated guidelines, the IRS has advised agents that any COBRA audit should consist of a review of the following minimum level of documentation: (i) the employers procedure manual; (ii) form letters; (iii) internal audit procedures; (iv) the underlying group health plan documents; and (v) details of any past or pending COBRA-related litigation. If any of the foregoing materials appear deficient or problematic, agents are advised to make follow-up inquiries relating to the number of qualifying events, the method of notifying qualified beneficiaries, the method of notifying the plan administrator in connection with qualifying events, qualified beneficiary elections and the amount of premiums paid by COBRA beneficiaries. In performing more comprehensive reviews, the IRS advises agents to request an employer’s federal and state employment tax returns; lists of individuals affected by qualifying events; and lists of individuals covered by each group health plan and to compare those lists against the employer’s personnel records.

In outlining these materials, the IRS appears to have the expectation that agents will be seeking to confirm that an employer is offering COBRA coverage under all of the group health plans that are legally required to offer COBRA coverage, that all participants terminating employment are being offered COBRA coverage; that those being offered COBRA coverage are being provided the opportunity to elect any and all appropriate coverages and that the cost of those coverages are in conformance

IRS Fires Shot Across the Bow on Health Reform Minimum Value and Reporting Guidance – Part 1

On April 26, the IRS released three “requests for comment” on various provisions under the Patient Protection and Affordable Care Act (“PPACA” or “health reform”). While the IRS is soliciting comment, it also gave some indication of how it was leaning on each of the issues it addressed. This first post (of three) discusses the comments on the determination of “minimum value.”

Under PPACA, if an employer plan does not provide “minimum value,” then an employee may be eligible for a premium tax credit through the state-based insurance exchanges, if he or she meets the other applicable requirements. If an employee takes advantage of that tax credit, the employer will be subject to “pay or play” penalties under health reform. Therefore, “minimum value” matters. (It is worth noting that HHS previously found that about 98% of individuals covered by employer-sponsored plans were enrolled in plans providing minimum value as described in the IRS guidance.)

In Notice 2012-31, the IRS basically outlined three approaches it may use to determine minimum value:

  • The use of an actuarial value or minimum value calculator that will be provided by HHS and the IRS. Using either calculator, employers would enter certain plan information into the calculator (such as benefits, cost-sharing, etc.) and the calculator would determine if the plan provides minimum value.
  • Self-funded plans and insured large group plans would be allowed to use the minimum value calculator, which is expected to use claims data reflecting typical self-insured employer plans.

Fourth Circuit Latest To Hold That Remand to Plan Administrator Is Not Immediately Appealable

The Fourth Circuit Court of Appeals recently joined five other judicial circuits in ruling that a district court’s remand of a benefits claim to the plan administrator is not immediately appealable. A copy of the Fourth Circuit’s decision in Dickens v. Aetna Life Ins. Co. (4th Cir. Apr. 20, 2012) can be viewed by clicking here. The ruling comes on the heels on a similar ruling by the Eleventh Circuit in Young v. Prudential Ins. Co. of Am., 671 F.3d 1213 (11th Cir. Feb. 21, 2012), which we summarized earlier.

In Dickens, the plaintiff applied for long-term disability benefits after being diagnosed with clinical depression, anxiety, insomnia, among other conditions. A predecessor plan administrator granted the LTD benefits in 2004. Four years later, the successor plan administrator, Aetna, terminated the benefits on the grounds that the plaintiff no longer suffered from a debilitating illness. (The Social Security Administration (“SSA”), which had previously determined the plaintiff to be disabled, continued to pay disability benefits.) After exhausting his administrative appeals, the plaintiff sued to have his LTD benefits restored. The district court ruled that Aetna’s decision to terminate the LTD benefits was “arbitrary and unreasonable” because it failed to consider relevant evidence relating to the SSA’s award of disability benefits. The district court expressed no opinion as to whether the plaintiff was disabled under the definition in the LTD plan, and it never issued a final judgment. Aetna filed a direct appeal to the Fourth Circuit.

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