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A Few “Highlights” of the HIPAA/HITECH Final Rule

We’ve already explored the changes from the new HIPAA/HITECH omnibus final rule in detail in our client alert.  However, we wanted to highlight a few important provisions (and one perhaps not as important) of the rule and provide some additional commentary.

First, as noted in the alert, business associate agreements generally do not need to be amended for the final rules until September 23, 2014.  However, if the agreement is renewed or extended (other than as part of an evergreen renewing contract), it must be amended at that time.  The key condition, however, is that the agreement must have been in place by January 25, 2013 (the date the regulations were published in the Federal Register).  If it was not, then the deadline is a full year earlier, or September 23, 2013.  HHS recently posted some sample business associate contract language on its website here.

Additionally, as has been widely reported, the “harm standard” for breaches has been replaced with factors HHS viewed as more objective.  Specifically, in the preamble, they state:

“[T]the definition of breach to clarify that an impermissible use or disclosure of protected health information is presumed to be a breach unless the covered entity or business associate, as applicable, demonstrates that there is a low probability that the protected health information has been compromised.”

Therefore, any impermissible use or disclosure (which also encompasses any impermissible access or acquisition) is a breach unless the plan (really, the plan administrator) can demonstrate otherwise.  HHS

FAQs Part XI – Exchanges, Medicare Part D, Guns, and More!

On January 24, the Departments overseeing health care reform implementation issued additional FAQs.  (Despite this being the 11th installment of FAQs, the Departments still has yet to address the most frequently asked question we receive from clients about the Affordable Care Act, which is, “Are you kidding me?”  A.: “No.”).

The Departments addressed the following issues in the FAQs:

  • Under health reform, employers were supposed to provide a notice of the availability of coverage through health insurance exchanges by March 1.  That deadline has been pushed back until after regulations can be issued.
  • The FAQs also talk about HRAs.  Essentially, unless the health reimbursement arrangement is truly and completely integrated with a group health plan (meaning the participant only gets the HRA if he or she is also enrolled in major medical coverage from the employer that complies with PPACA), it will be noncompliant beginning January 1, 2014.  Readers may recall that the CCIIO (part of the alphabet soup under HHS) gave HRAs a pass on the rules eliminating lifetime and annual limits until January 1, 2014.
  • The Departments clarified that nothing in the act prohibits a health care provider from asking his/her patient about guns.  Under PPACA, wellness and health promotion programs are prohibited from asking about the legal ownership and use of firearms and some individuals were concerned that this provision would restrict conversations with their providers regarding guns.
  • Regarding Medicare Part D, some self-insured

Qualified Plans at Risk When Jumbled with True Tax Expenditures, Part II

GAO

In the first post of this series, we discussed the approach described by the Government Accountability Office (GAO) in evaluating tax expenditures and laid out the issues that impact treating the deduction, exclusion and deferral mechanisms for tax-qualified retirement plans the same as the “spending” tax expenditures.  In this second article, we will focus on two of the critical questions posited by the GAO in the GAO Report that are intended to assist Congress with its upcoming effort to revise the Code.

What is the Tax Expenditure’s Intended Purpose?

Examples used in the GAO Report include the following:

  • To encourage taxpayers to engage in particular activities.
  • To adjust for differences in individuals’ ability to pay taxes.
  • To adjust for other provisions of the tax code.
  • To simplify tax administration.

The last example above makes for eye-rolling.  When it comes to the complex tax scheme of the qualified plan system, changes made by Congress since the promulgation of ERISA in 1974 have typically made tax administration more complex.  It is anticipated that any changes Congress would make in 2013, possibly well-intentioned, will still result in full employment for the small group of Americans who are responsible for administering the plans and the IRS’s relatively small group of agents who are charged with tax administration of this complex system.

The first example above is one that directly

Newtown & Mental Health Parity

January 25, 2013

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Newtown & Mental Health Parity

January 25, 2013

Authored by: Chris Rylands

Last week, the White House released its plan for legal actions it will recommend to try and ensure that a tragedy like the one in Newtown does not recur (although the video from President Obama’s weekly address on this issue does not mention mental health services).  Much of the debate since that announcement has predictably been focused on the Second Amendment issues, but there was one benefits-related point buried near the end of the White House’s plan: finalizing the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) regulations.  The plan says the regulations will be issued next month and the administration has already taken the step of advising Medicaid directors of the applicable ability of MHPAEA to their programs.

The interim final MHPAEA rules were issued in 2010 and since then, the DoL has issued some FAQs (here, here, here, and here), often in connection with FAQs issued for health reform.  As this Politico article notes, the focus on health reform has been at least partially to blame for the delay.  But even once the rules are finalized, there could be gaps if individuals cannot find providers who take insurance, as noted in this New York Times piece.  And of course, in some cases, there is still, unfortunately, a perceived stigma with seeking mental health services.

For their part, plan sponsors may want to consider promoting the availability of mental health services, to the extent they are available under

Qualified Plans at Risk When Jumbled with True Tax Expenditures

Qualified Plans at Risk When Jumbled with True Tax Expenditures

January 24, 2013

Authored by: benefitsbclp

This is the first post in a three part series where we’ll focus on the impact that upcoming “tax reform” and the “second fiscal cliff” negotiations might have on qualified retirement plans, particularly on 401(k) plans.  The impetus for writing this series is not the political rhetoric emanating from Washington nor is it something already proposed like the report of the Simpson-Bowles Commission.  Rather, the impetus is the recent paper issued by the United States Government Accountability Office (the “GAO”) entitled Tax Expenditures: Background and Evaluation Criteria and Questions (the “GAO Paper”).

The GAO does not identify any particular “tax expenditure” in the GAO Paper.  Rather, the GAO paper is intended to assist Congress in understanding the effectiveness of tax expenditures as it embarks on its effort to revise the Internal Revenue Code (the “Code”).

The GAO describes tax expenditures as “reductions in a taxpayer’s tax liability that are the result of special exemptions and exclusions from taxation, deduction, credits, deferrals of tax liability, or preferential tax rates.”  This quote comes from James R. White, Director, Strategic Issues, GAO in a letter dated November 29, 2012 to The Honorable John Lewis, Ranking Member, Committee on Ways and Means, Subcommittee on Oversight, United States House of Representatives (“White Letter”).  The White Letter is a cover letter for the GAO report.  The GAO further states in the White Letter that an estimated $1 trillion in revenue was foregone from the 173 tax expenditures reported for fiscal

Fiduciary Fitness Requires Training, or At Least the DoL Thinks So

This recent post on the Plan Sponsor Council of America’s website states that the Department of Labor has recently requested evidence of fiduciary training as part of its audits. While there is no express ERISA requirement that fiduciaries be trained, the DoL seems to take the view that training is evidence of a fiduciary properly exercising his or her duty of prudence.  (It also happens to be one of our New Year’s Resolutions for fiduciaries too.)

The first step is deciding whom to include.  Basically, a fiduciary is (1) anyone with discretionary authority over the management or administration of an ERISA plan, (2) anyone with discretionary authority over the management or disposition of its assets, or (3) anyone who provides investment advice for a fee.  (Individuals in category (3) should have their own training already.)  Fiduciaries of the plan include the trustee, the plan administrator, the person responsible for reviewing claims or appeals, and any designated administrative committees.

When scheduling a training session, you should ensure that all the relevant individuals are included.  For example, if you have a plan committee that meets regularly, all of its members should be trained.  If there is a separate investment committee, those individuals should also be trained.  (If you do not have a designated plan or investment committee, you should consider one or both to help establish clearer lines on who has fiduciary responsibility and liability.)  Whether or not you have a committee (but especially if you

The NHL Goes Back to the Past (Pension-wise)

After a long lockout, the NHL will begin its season this weekend thanks, in part, to a pension plan.  Among the sticking points for the players, as noted in this article, was the desire to return to a defined benefit pension plan.  The NHL was somewhat ahead of its time in 1986 when it switched to a DC-only style retirement plan.  However, the players in this recent round of bargaining pushed hard for a pension plan, and succeeded.  While the NHL has not released very many details about the pension plan, and some of the information we’ve found is conflicting, this report from CSN Washington suggests that players can be eligible for the maximum benefits permitted by law.

While it is interesting to see an institution as prominent as the NHL buck a clear trend in the retirement space, it goes without saying that this is probably not the beginning of a sea change in retirement benefits back to defined benefit plans.  As noted in this Globe and Mail article, even Kevin Westgarth, a Los Angeles Kings forward and a member of the NHLPA’s bargaining committee, called moving to a pension plan “way out of style.”  .

While pensions may be way out of style for most of us non-athletes, as noted in this article from Bankrate.com, many U.S. professional sports organizations actually offer some kind of pension plan for their players (we’ve previously discussed the pension plans for MLB players

HIPAA v. the iPhone

HIPAA v. the iPhone

January 16, 2013

Authored by: Chris Rylands and Steven Schaffer

HHS recently included on its website some helpful information regarding security of mobile devices in video format.  While primarily directed at health care providers, the videos are still useful for health plan sponsors/administrators (and their business associates).  (The way the HIPAA rules are written suggest that the plan itself should view the videos, but we doubt the actual physical document would learn much.)  Interestingly, the videos are emblazoned with disclaimers that following the videos does not guarantee compliance with HIPAA or any other law.

It is a particularly good idea for plan sponsors/administrators to review the videos given that HHS’s Office of Civil Rights (“OCR”) recently announced a “resolution agreement” with Hospice of North Idaho (“HONI”) in which HONI agreed to pay $50,000 and made certain future compliance commitments.  The OCR investigation started due to HONI’s voluntary report of a theft of an unencrypted laptop in accordance, it appears, with the breach notification rules instituted by HITECH.  Notably, the breach involved fewer than 500 participants (which is generally considered a small breach).  Once OCR investigated, it determined that HONI (1) did not conduct the requisite security rule assessment on an on-going basis, as required by HIPAA and (2) did not implement adequate safeguards with regarding to electronic PHI.

The bottom line is that plan sponsors and administrators should conduct the requisite risk assessments, particularly where employees may have access to protected health information on their laptops,

IRS Updates Retirement Plan Correction Program

IRS Updates Retirement Plan Correction Program

January 14, 2013

Authored by: benefitsbclp

After a long wait, an updated Revenue Procedure for the Employee Plans Compliance Resolution System (EPCRS) was released in the form of Rev. Proc. 2013-12.  The new Revenue Procedure makes some important changes to the EPCRS.

As many plan sponsors know, the EPCRS includes the self-correction program (SCP), which requires prescribed corrections but does not require submission to the IRS; the voluntary correction program (VCP), which requires both prescribed corrections and submission to and approval by the IRS; and correction of problems discovered on audit (Audit CAP).

The purpose of the updated Revenue Procedure is to improve some features of the EPCRS and clarify others, based in large part on comments from the employee benefits community.  The IRS expects to make more changes of this type in the future, also based on comments from the employee benefits community.  Generally speaking, the IRS was responsive to many of the concerns raised by the employee benefits community and addressed them in a helpful manner in the revised EPCRS.

The biggest news is that 403(b) plans, are now eligible for EPCRS.  In particular, 403(b) plan sponsors can now use VCP to correct failure to adopt a written 403(b) plan on time.

Correction procedures are also provided on an experimental basis for 457(b) plans, primarily for governmental 457(b) plans, in a new program separate from the EPCRS.

Other new or revised procedures in the EPCRS include:

  • SCP correction of recurring excess annual additions under Section 415(c) of the Internal

The Top 6 Facts You Need to Know About the IRS’s Proposed Play or Pay Regulations

Frequent readers of this blog will recall that the IRS previously issued some initial guidance on the employer “shared responsibility” (aka play or pay) rules under health reform.  (A summary of the shared responsibility provisions and the taxes is described in our post on the prior guidance.)

Well, the New Year’s resolution of the federal agencies overseeing health reform implementation is (or should be, if it isn’t) to provide more guidance on health reform. In keeping with that resolution, the IRS recently issued proposed regulations and a set of Q&As on play or pay.  The guidance covers several points and an exhaustive explanation is too long for a single post, so we will cover more details in future posts.   However, there were some key features to note from the proposed guidance:

  1. The controlled group rules apply for purposes of determining if you are subject to the taxes (i.e. you are an applicable large employer, generally one with more than 50 employees in the prior year, under the guidance).  Because the IRS has not issued final controlled group rules for tax-exempt and governmental employers, they should apply a good faith interpretation of the existing rules.
  2. However, the tax is assessed on a per-entity basis, without regard to the controlled group rules.  This means different members of the controlled group can offer different levels and types of coverage (assuming they can satisfy any applicable nondiscrimination rules), or choose not to
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