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Does the Retirement System Need HELP?

September 28, 2012


Does the Retirement System Need HELP?

September 28, 2012

Authored by: Chris Rylands

Last week, the Senate Committee on Health, Education, Labor & Pensions (“HELP”) held a hearing on what Sen. Tom Harkin (D-IA), the HELP Committee’s Chairman, refers to as the “retirement crisis.”  Sen. Harkin states  that the “retirement income deficit” (which he defines as the difference between the assets people need for retirement and what they have available) is approximately $6.6 billion.  The hearing was largely in response to Harkin’s report in which he outlines, in broad strokes, his plan to enhance retirement security.  Sen. Harkin’s plan has two basic prongs: (1) strengthen Social Security and (2) create a new retirement fund option that will be government-run, but largely privately funded. 

On the Social Security side, Sen. Harkin proposes to increase the benefits payable by modifying the formula for calculating benefits and improving the built-in cost of living adjustment for Social Security benefits.  He also proposes to remove the cap (currently, $110,100) on wages subject to the Social Security tax over a 10-year period.  The removal of the cap would come with an increase in benefits for those with wages over the cap, but the additional benefits would be less than the enhanced benefits he proposes for wages below the cap.

The more interesting side of his proposal is to build a system of “Universal, Secure, and Adaptable (‘USA’) Retirement Funds.”  USA Retirement Funds, in addition to having a subtle patriotic flair, would basically be individual accounts for each employee that would provide lifetime income benefits, like a pension. 

Health Care Reform Implementation Timeline

We recently held a health care reform roundtable where our clients and friends were able to share ideas about their preparations for upcoming Patient Protection and Affordable Care Act  compliance. Below is an implementation timeline that we shared with those in attendance. We hope you find it useful as well.

Health Care Reform: Moving Forward From 2012 to 2018

Implementation Timeline


January 1, 2012 Employers begin tracking information necessary to report the aggregate cost of each employee’s health coverage on Forms W-2 for 2012 and thereafter. August 1, 2012 First rebates from insurers due under medical loss ratio requirement. Plan sponsors must allocate rebates consistent with DOL rules. Plan years beginning on or after August 1, 2012 Non-grandfathered plans must begin providing FDA-approved contraceptives to women at no-cost. First open enrollment period or first plan year beginning on or after September 23, 2012, whichever is earlier Provide a summary of benefits and coverage (SBC) to eligible employees and participants. Plans must provide 60-day advance notice of any material changes to the SBC. Plan years beginning on or after September 23, 2012 (January 1, 2013 for calendar year plans) Any annual limit on essential health benefits cannot be less than $2,000,000.ª Plan years ending on or after October 1, 2012 (December 31, 2012 for calendar year plans) Choose method for calculating the average number of covered lives for purposes of determining the plan sponsor’s required annual fee to fund the Patient-Centered Outcomes Research

Limitation of Letter Forwarding Program May Affect VCP Submissions and Plan Terminations

In Revenue Procedure 2012-35, the Internal Revenue Service limited the use of its letter forwarding program to “humane purposes,” such as emergency situations, and specifically indicated that it will not be available to locate missing participants who may be entitled to a retirement benefit.  The new limitation applies to letter forwarding requests postmarked on and after August 31, 2012.

One of the practical implications of that was discussed by IRS officials in a recent phone forum.  The correction of certain operational failures under the Voluntary Correction Program (“VCP”) may affect former participants by, for example, requiring corrective allocations or distributions.  In those cases, the VCP submission must indicate the method that will be used to locate and notify those individuals of the failure and the correction.  Many submissions designate the IRS letter forwarding program as one or more methods that will be used for that purpose.  As a result, an IRS agent may contact the plan administrator to revise the proposed correction method in a pending VCP submission, particularly if no alternative method of locating former participants has been proposed.  Alternative methods will have to be proposed in all new VCP submissions.

One IRS official indicated that several acceptable alternative methods are described in the Department of Labor’s Field Assistance Bulletin 2004-02, which discussed fiduciary obligations with respect to locating missing participants in defined contribution plan terminations.  The alternative methods described in FAB 2004-02 include the Social Security Administration letter forwarding service and the use of Internet search tools, commercial locator services, and

How to Tell Who Gets to Play so You Don’t Pay

How to Tell Who Gets to Play so You Don’t Pay

September 11, 2012

Authored by: benefitsbclp

Late on a Friday, just before escaping for Labor Day weekend, the IRS, Department of Labor, and Department of Health and Human Services provided two pieces of guidance on two of health care reform’s more important provisions: determining full-time status of employees for purposes of the employer “play or pay” penalty and the 90-day waiting period requirement.  The two pieces of guidance refer to one another, so it is important to understand them both.  In addition, while neither piece of guidance takes effect until 2014, sponsors of health plans should begin planning now to address these pieces of guidance.  We addressed the 90-day waiting period guidance last Friday and this post will address the “play or pay” guidance.


For those unfamiliar, beginning in 2014, the Patient Protection and Affordable Care Act provides that any employer with more than 50 full-time equivalent employees must offer coverage that is “affordable” and provides “minimum value” or pay a penalty.  Coverage is “affordable” if the premium cost to an employee is no more than 9.5% of the employee’s household income.  The IRS has stated previously, and reaffirmed in this notice, that employers may use the employee’s wages reported on Form W-2 instead of actual household income.  A plan provides minimum value if it covers at least 60% of the total allowed cost of benefits under the plan.

If an employer fails to offer any coverage, and one employee receives a premium tax credit or cost-sharing reduction for health insurance

Guidance on the 90-Day Waiting Period under PPACA

Guidance on the 90-Day Waiting Period under PPACA

September 7, 2012

Authored by: benefitsbclp

On August 31, 2012, the Departments of Labor, Treasury and Health and Human Services jointly issued temporary guidance regarding the 90-day waiting period limitation under Public Health Service Act § 2708 that is part of PPACA.  The guidance can be found at DOL Technical Release 2012-02 and at IRS Notice 2012-59, which are identical.  In general, the limitation is meant to prohibit a group health plan or health insurance issuer from imposing a waiting period for coverage beyond 90 days.  The statute prevents an otherwise eligible employee or dependent from having to wait more than 90 days for coverage to become effective.

The guidance states that a “waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective.”  Being eligible for coverage means the employee or dependent has met all of the plan’s substantive eligibility conditions, such as being in an eligible job classification.

Eligibility based solely on the lapse of time is permissible so long as the time period does not exceed 90 days.  Other conditions are permissible unless they have the effect of undermining the 90-day rule.  A plan may be compliant where, under the plan’s terms, an employee may elect coverage that would begin on a date that does not exceed a 90-day waiting period even where employees take additional time to elect coverage.

However, one of the examples in

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