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ACA FAQs Part XII – Preventive Care Rules

As discussed in our prior post, the Department of Treasury/IRS, Department of Labor, and the Department of Health and Human Services (the “Departments”) recently issued its twelfth set of Frequently Asked Questions addressing cost-sharing limitations and a slew of preventive services issues.  The cost-sharing rules are covered in our prior post; here, we’ll discuss the preventive care rules.  By way of reminder, non-grandfathered group health plans are required to cover specified preventive services.  The FAQs address some open questions that were not addressed in the regulations.

Out-of-Network Services.  A plan with a network is generally not required to cover preventive services out-of-network without cost-sharing.  However, if a preventive service is not available from any in-network provider, then the FAQs say a plan cannot impose cost-sharing when it is obtained from an out-of-network provider.

Over-the-Counter Medications. The FAQs make clear that plans do have to cover OTC items and services that are part of the preventive care recommendations (e.g. aspirin for those at risk for heart disease), unless those items or services are prescribed by a health care provider.

Polyps. The FAQs state that if a polyp is removed as part of a colonoscopy, the plan may not impose cost-sharing for the polyp removal.  The Departments based their determination on clinical practice and comments from various professional medical associations indicating that polyp removal is an integral part of a colonoscopy.

In contrast, plans can impose cost-sharing for a treatment that is not a specified preventive service,

Health Reform FAQs Part XII on Cost-Sharing Limits

The Department of Treasury/IRS, Department of Labor, and the Department of Health and Human Services (the “Departments”) recently issued its twelfth set of Frequently Asked Questions. As Kevin Knopf, Special Counsel at the U.S. Treasury Department, once observed, the FAQs are numbered using Roman numerals, “like all important things…such as the Superbowl.”  The latest FAQs (which, by number, correspond to the 1978 showdown between the Dallas Cowboys and Denver Broncos) address cost-sharing limitations and a slew of preventive services issues.  This post will address the cost-sharing limitations.

Cost-Sharing Limits Generally. Health care reform imposes two cost-sharing limitations on non-grandfathered group health plans for plan years beginning in 2014:

  • First, for any group health plan (including self-funded plans) the out-of-pocket maximum cannot exceed a specified dollar amount.  For plan years beginning in 2014, the maximum will equal the combined annual out-of-pocket and deductible limits that a high-deductible health plan (“HDHP”) may impose.  This amount is adjusted annually for cost-of living increases, so it is not yet known what it will be in 2014, but for 2013 the HDHP limit is $6,250 for self-only coverage and $12,500 for coverage that is not self-only coverage (i.e. “family” coverage).  However, after 2014, this amount will be indexed separately from the HDHP maximums based on increases in premium costs in the United States as measured by HHS.  (The choice of premium costs is odd since premiums do not factor into the out-of-pocket maximum, but that is what the

Are You Smarter Than a Plan Administrator?

Are You Smarter Than a Plan Administrator?

February 26, 2013

Authored by: Denise Erwin and Jennifer Stokes

We want our employees to make healthy choices so that they will have long and healthy lives (and also to decrease the cost of health benefits).  We also want our employees to participate in the 401(k) plan so that they can build a nest egg for retirement and enjoy those long, healthy lives (and maybe also so that we don’t have to refund deferrals to our  HCEs).  Whatever our motivations, it seems that the latest trend in encouraging desired behavior in the employee benefits arena is gamification.  Think “Farmville” except the “crops” that your employees will be growing are their dreams that they want to harvest in retirement (travel, a vacation home, or just being able to continue to pay the bills).  Imagine those crops wilting unless they are “watered” and “fed” by employees who earn “plant food” and “water” by correctly answering retirement-related questions.  Maybe the game could even show the field of dreams wilting at current deferral levels but encourage employees to use a retirement cost calculator to determine what level of deferrals might lead to a successful harvest in retirement.   For your employees who are not particularly motivated by watching crops grow, think “Angry Birds” as part of your wellness program except employees may be able to earn “birds” to fling at the infuriating “pigs” in their lives (smoking, obesity, you name it) by correctly answering health-related questions.  These particular game examples would, of course, be rife with intellectual property concerns,

IRS Audit Trends & Issues

IRS Audit Trends & Issues

February 25, 2013

Authored by: Chris Rylands and Lisa Van Fleet

Continuing our series of posts reporting on the recent TE/GE meetings, today we focus on the audit trends and issues that the IRS officials in attendance identified.  In addition to providing insight on the IRS’s focus, the list serves as a good compliance checklist for plan sponsors.  Are you making these errors?  If so, you can (and should) fix them now before the IRS comes knocking.

Areas of Focus. At the outset, it’s helpful to know where the IRS is looking for trouble, so you can have some idea where agents are coming from when you get the dreaded audit letter.  The officials at TE/GE gave these insights:

  • Most audits are focused on 3 or 4 particular issues depending on the market segment (i.e., the business of the employer) and the size of the plan (generally less than 100 participants is a small plan while other plans are considered large).  The IRS did not give examples of the issues on which they are focusing, but to the extent you or your advisors are aware of other IRS audits in your market segment and for plans of your size, you may be able to identify them.
  • There is no current targeted audit project for governmental plans.
  • 403(b) plans will be an area of focus going forward.
  • With regard to 401(k) audits, there will be a heavy emphasis on internal controls.  They mentioned this multiple times, so it’s a good idea to review and document your

“Slayer Statute” Options for Plan Administrators

“Slayer Statute” Options for Plan Administrators

February 22, 2013

Authored by: benefitsbclp

One of the sadder tasks encountered by a plan administrator is sorting out who is the appropriate recipient of benefits when a participant has been murdered by the intended beneficiary of such benefits.  Over time, we have advised many plan administrators in handling situations like this one dealing with their pension, 401(k), life insurance and accidental death plans and, in doing so, have developed a variety of alternatives each with varying levels of cost and risk.   These alternatives, each of which is summarized in more detail below, include: (1) commencing an interpleader action, (2) securing a receipt, release, and refunding agreement, and (3) obtaining an affidavit of status (e.g., heirship).

In arriving at these alternatives, we have considered applicable law, including state statutes and ERISA preemption.  Most individual states have enacted so-called “slayer” statutes, which generally provide that an individual who kills the decedent cannot benefit from his or her crime and, therefore, forfeits all benefit rights he or she possessed as the primary beneficiary.  While some courts have held that these state slayer laws may be preempted under ERISA’s broad preemption doctrine, a similar result is likely to be reached through applicable federal common law principles.  In fact, an Eastern District of Pennsylvania court recently addressed this situation in In re Estate of Burklund (January 28, 2013). The Burklund court declined to decide the ERISA preemption issue since the Pennsylvania state law and the federal common law that would apply if ERISA preempted Pennsylvania’s

IRS Talks About Play or Pay (and a Mini-Med Issue to Boot)

In one brief session at the recent TE/GE meetings, we heard from some of the IRS drafters of the PPACA shared responsibility/play or pay regulations under 4980H of the Internal Revenue Code.  They provided a few insights on upcoming guidance and raised one issue with which we disagree.

Employer Reporting. First, they said they are working on guidance on the employer reporting of health coverage to the IRS on Form 6056.  This is relevant to play or pay because they advised that the IRS intends to collect that information and compare it with who received premium tax credits and cost sharing reductions after the fact. (See our earlier discussion of the play or pay regulations to understand the interaction.)  Once they make that comparison, they will then pursue penalties.   This means that any play or pay penalties will not be assessed until 2015, at the earliest.

Special Employment Situations. Additionally, they advised that future guidance will address special employment situations.  In particular, they said to “stay tuned” for rules on adjunct professors, which will likely be out soon.

Mini-Med Plans and Transition Relief.  Finally, they noted that mini-med plans that have received a waiver from HHS/CCIIO generally should be eligible for the special transition relief for fiscal year plans, if they can survive into 2014 (more on that below).  For those unfamiliar, the regulations provided a special transition rule for plans that had a non-calendar plan year as of December 27,

A Texas-Sized Incentive to Defy ACA’s Contraceptive Mandate

A Texas-Sized Incentive to Defy ACA’s Contraceptive Mandate

February 20, 2013

Authored by: benefitsbclp

TexasTexas state Rep. Jonathan Stickland is trying to help companies that refuse to comply with the Affordable Care Act’s (ACA) contraceptive mandate, which took effect January 1 for most companies.  This freshman representative is protesting “ObamaCare” by introducing a bill (TX H.B. 649) that would grant companies a tax break if they offer healthcare to their employees (as required by ACA) but refuse to include emergency contraceptive coverage because of the religious convictions of their owners.

This bill attempts to neutralize any federal fines by giving a business a tax break equal to the amount paid in federal penalties, up to the total amount the company pays in state taxes.  Fines for violating ACA’s contraceptive mandate are $100 per employee per day, which can add up quickly for large employers.  For example, Oklahoma-based Hobby Lobby recently announced it would not comply with the mandate and faces a fine of approximately $1.3M per day.  The Texas bill, if passed, could mean huge reductions in Texas state tax income.

However, the reach of the contraceptive mandate seems to be narrowing.  On February 1, the federal government proposed updated guidelines that would expand the exemption allowing certain religious-based nonprofits a means to opt out of the contraceptive mandate.  Instead, employees would be permitted to obtain contraceptive coverage through separate health policies.  In addition, numerous religious-based businesses have sued over this hot-button

Would You Like Insurance With Your Tax Refund?

February 19, 2013


Weights of money and health insThis article in the LA Times describes how H&R Block is already helping its patrons identify how much of a tax credit they may be eligible to receive under health care reform.  Most of the patrons who are quoted in the article are surprised to learn just how little the insurance will cost them.

H&R Block seems to think that 2012 income is somehow going to be key to determining if someone is eligible for the credit.  While the IRS may very well look at that, it’s worth pointing out that the actual eligibility for the credit will be finally determined after-the-fact based on the individual’s income for the year in which the credit is received.  Therefore, while 2012 income is informative, it is far from dispositive.

Furthermore, employers should be aware that these information efforts are taking place.  Employees may already start contacting HR departments to ask about the information they are receiving and asking how the employer’s plan compares.  One concern with this is that, to the extent an employer has many low-paid workers who are healthy, they may opt to go to the exchange rather than take the employer’s plan.  If the employer desires to keep those individuals enrolled in its plan to help with its experience rating, the employer may need to be proactive in advertising the benefits of

When the Government Speaks: DoL Enforcement Priorities

In this second post in our series of reflections from the recent Tax Exempt/Government Entities meeting with IRS and DoL officials, we’ll focus on the areas the DoL officials identified as enforcement priorities and some of the specific items they highlighted.

Health Plans.  As we previously posted, the DoL is starting to look at health plans and compliance with health care reform specifically.  They have also discovered that many plans lack what they consider to be a formal plan document.  They are starting to ask not just for proof of the plan document’s existence, but also proof of when it was adopted, going back to January 1, 2010.  Plan sponsors who have not adopted wrap plan documents for their health plans may want to consider implementing those soon.

ESOPs. ESOP enforcement continues to be a priority.  The officials stated that they believe appraisers are arguably already fiduciaries on the theory that they are providing investment advice (although, in our view, that position is not without its flaws).  They noted that trustees still have a duty to prudently select the appraisers and that, even if the appraiser is prudently selected, the trustee still has an obligation to make sure the assumptions on which the valuation is based are reasonable under the circumstances.   They also said that trustees should be wary of a seller’s role in selecting the appraiser.  Oh, and trustees should also read the appraisal.

Officials identified the following more egregious practices that they

When the Government Speaks: DoL Regulatory Initiatives

Last week I (Chris) had the good fortune to travel on Lisa’s behalf to Baltimore to attend an annual meeting of benefits practitioners with government representatives from the DoL and IRS national offices.  It served as a great opportunity to hear what guidance may be in the pipeline and what enforcement issues are catching the government’s attention.  Plan sponsors should take heed because those items getting the government’s regulatory or enforcement attention tend to (1) be very common and (2) serve as a good compliance check.  Over the next week or so, we’ll cover what they said and what you should be looking for coming down the pike.  First up: the Department of Labor’s regulatory agenda.  Based on statements from DoL officials:

  • No additional guidance is planned on the ERISA 408(b)(2) service provider fee disclosures at this time.  They talked with many service providers and felt that, in general, where there was ambiguity, the providers made reasonable interpretations.
  • Regarding the reproposal of the definition of “fiduciary,” they are looking to draw a bright-line distinction between investment education (non-fiduciary) and investment advice (fiduciary).  They may also include a prohibited transaction exemption for individuals who accidentally cross the line.
  • On lifetime income options in DC plans, there are three areas of focus:
    • Showing the income stream the participant’s account balance could generate (this will likely be the first area on which guidance will be issued).
    • Including education about retirement planning (e.g., whether
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