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Renew Early? Pay Later?

Renew Early? Pay Later?

May 28, 2013

Authored by: Chris Rylands and Lisa Van Fleet

While we have not heard it first-hand, we have heard through the grapevine that some insurance carriers are out there offering to their clients the ability to “renew early.”  Part of the strategy is, apparently, to delay the application of health care reform provisions.  The following discussion addresses some risks associated with reliance on such a strategy as a means of complying with the employer mandate and the insurance mandates.

EMPLOYER MANDATE:  At the outset, let’s be clear about one fact: this does not get an employer out of play or pay.  The employer mandate rules specifically say that a plan year can only be changed for a valid business purpose and that, in this case, avoiding the shared responsibility tax is not a valid business purpose.  Renewing early is (assuming other legal niceties are satisfied) a change in plan year.  Without a business purpose, the mandate will

Play or Pay: Special Transition Rules For Fiscal Year Plans

Play or Pay: Special Transition Rules For Fiscal Year Plans

May 24, 2013

Authored by: benefitsbclp

Some fiscal year plans may have extra time to comply with the play or pay mandate under either of two special transition rules for fiscal year plans (that is, plans with a plan year other than the calendar year).  There are two transition rules for fiscal year plans.  However, neither is a complete pass and both are highly specific, so employers with fiscal year plans should carefully consider the extent to which they may (or may not) qualify for the relief.

If the employer qualifies for the first transition rule, its compliance obligations will only be delayed for certain of its employees; other employees can trigger penalties.

If the employer qualifies for the second transition rule, transition relief has the potential to apply with respect to a broader spectrum of employees.  The rules are described below.

Relief is available on an entity-by-entity basis.  In other words,  each entity

Model Exchange Notice and Revised COBRA Election Form

As noted in our client alert, the DOL recently released guidance on the Exchange/Marketplace notice required to be issued to existing employees no later than October 1, 2013.  Followers of PPACA developments will recall that this notice was originally scheduled for distribution in March 2013, but was delayed at the last minute.  In connection with this guidance, the DOL also revised the model COBRA election notice.  Links to the DOL guidance and model documents are provided below.

The alert describes the requirements of the guidance, but the highlights are summarized below:

  • All employers subject to the Fair Labor Standards Act are required to provide this notice, regardless of whether they provide health coverage or not.  Generally, you’re subject if (i)  you employ one or more employees who are engaged in, or produce goods for, interstate commerce or (ii) you are a hospital; a resident care

Supreme Court Rules that Equitable “Common Fund Doctrine” May Fill Gap in Plan Language

On April 16, 2013, the Supreme Court handed down its 5-4 decision in US Airways Inc. v. McCutchen, U.S., No. 11-1285, 4/16/13) ruling that while equitable principles cannot trump a plan’s unambiguous terms regarding reimbursement, such principles may aid in properly construing ambiguous or absent plan terms.  The majority opinion held that since the employer plan at issue was silent as to the allocation of attorneys’ fees following a participant’s third-party recovery, it was appropriate to use the equitable “common fund” doctrine (i.e., the doctrine which provides that a litigant (or a lawyer) who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney’s fee from the fund as a whole) to fill that gap.  As discussed more fully below, this decision reminds plan sponsors to carefully craft their reimbursement language to help ensure the desired result.  It’s not

DOL Seeks Input on Guidance Regarding Lifetime Income Illustrations

The DOL’s Employee Benefits Security Administration (“EBSA”) recently released an advance notice of proposed rulemaking  (“ANPR”) focusing on lifetime income illustrations that may be required to be provided to participants in defined contribution retirement plans (including 401(k) and 403(b) plans).  The impetus for the ANPR is the shift from the historical defined benefit (i.e., pension) structure to the defined contribution structure provided over the last several decades, and the corresponding need of employees to focus on the income they need to save to secure their retirement. The ANPR provides an opportunity for early input into the development of proposed regulations; comments will be accepted through July 8th. As described by Assistant Secretary of Labor Phyllis C. Borzi in the DOL’s news release,  EBSA hopes that providing defined contribution plan participants with “a lifetime income illustration might spur better planning for the future.”  EBSA’s goal is to illustrate for workers

Collective Bargaining Agreements: Creating Vested Retiree Medical Benefits

Following its December 22, 2011, ruling we discussed previously that retired Kelsey-Hayes (“Company”) union members must arbitrate their claims for fully-paid lifetime retiree medical benefits, the Eastern District of Michigan handed a victory to different class of union retirees facing similar changes to their healthcare coverages.  United Steelworkers of America v. Kelsey-Hayes Co.

Plaintiffs worked at the now closed automobile parts manufacturing plant in Jackson, Michigan. Under the collective bargaining agreements (“CBAs”) with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, the Company was required to establish healthcare coverage for retirees and their dependents and surviving spouses and to contribute the full premium for such coverages.  Before and after the plant closing in 2006, the Company paid all retirees’ healthcare coverage costs.  In September 2011, the Company announced plans to replace the retiree medical plan with individual health

Play or Pay: The Penalties

Play or Pay: The Penalties

May 6, 2013

Authored by: Lisa Van Fleet

Effective January 1, 2014, the Affordable Care Act “play or pay” rules become effective for employers subject to the rules.  These “play or pay” requirements are also referred to as the employer mandate or the shared responsibility requirements of the Affordable Care Act.  Whatever label is applied to the requirements, the law requires that covered employers offer affordable coverage to full-time employees. View a brief description of these requirements provided by Lisa A. Van Fleet, a partner in the Employee Benefits and Executive Compensation Group at Bryan Cave LLP.

Affordability Calculation Undermines Wellness Programs Beginning in 2015

The Affordable Care Act requires that employers offer affordable health care coverage to full-time employee beginning January 1, 2014 (or pay a penalty).  Coverage is affordable if the employee’s contribution toward self-only coverage does not exceed 9.5% of his or her household income.  Until now, it was not clear how wellness plan surcharges would impact the affordability calculations.

Based on the pre-release of guidance that is expected to be published today (May 3), wellness plan surcharges must be included in the premium for purposes of the affordability calculation.  Two exceptions are provided for arrangements that satisfy the wellness plan rules:  (1) surcharges based on tobacco use; and (2) for any plan year beginning prior to January 1, 2015, surcharges for any wellness arrangement, but only to the extent the terms of the wellness arrangement were in effect on May 3, 2013.  Under this guidance, the premium that applies to non-tobacco users is used

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