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DOMA – Round 2 (The First Decisions After Windsor)

DOMA – Round 2 (The First Decisions After Windsor)

July 31, 2013

Authored by: benefitsbclp

Windsor was decided just over a month ago and we’re already starting to see how courts are interpreting the ruling. Windsor left unanswered the question of whether Part 2 of DOMA, which allows states to bypass the Full Faith and Credit Clause of the Constitution for same-sex marriages validly performed out-of-state, can stand now that Section 3 of DOMA has been deemed unconstitutional.  [Click here or here for additional information.]

Last week, a federal district court in Ohio ignored an Ohio law that refuses to recognize same-sex marriages, even if validly performed in another state (sometimes referred to as a mini-DOMA). In Obergefell v. Kasich, the plaintiffs, both Ohio residents, briefly traveled to Maryland earlier this month to get married, not even getting off the plane before returning home to Ohio. One spouse was dying of ALS and the other wanted to be recorded as the surviving spouse on the death certificate so they were trying to get married as quickly as possible. Now, for purposes of federal and Maryland law (as well as a handful of other states), the couple is validly married. While this case did not overturn the Ohio law (since it only requested a preliminary injunction and not a judgment on the merits), in evaluating the likelihood of success on the merits, the judge granted the couple’s request. The judge stated that by treating lawful same-sex marriages differently than opposite-sex marriages, Ohio law likely violates the Equal Protection Clause of the Constitution. The judge noted

Hit the Reset Button: Complying with Annual Investment Fee Disclosures

Regulations under ERISA Section 404(a) require plan administrators to disclose to plan participants and beneficiaries certain fee and investment performance information about each designated investment alternative made available under a participant-directed defined contribution plan.  For calendar year plans, this information, which includes a comparative chart of all investment alternatives,  was initially required to be provided to participants and beneficiaries no later than August 30, 2012.  In addition, the regulations require that such information also be provided “annually” ( defined to mean at least once in any 12-month period, regardless of whether the plan operates on a calendar year or fiscal year basis).

Re-set Option Offered by Department of Labor

Many plans send required notifications closer to the end of the plan year.  Acknowledging this practice and concerns raised over the cost of a separate distribution covering just this investment information, the Employee Benefits Security Administration (“EBSA”) issued Field Assistance Bulletin No. 2013-02, which grants a one-time “reset” option for the 12-month period.

This “reset” option permits an employer to provide the “2013 comparative chart” after the original 12-month period required by the 404(a) regulations.  However, the chart may not be delayed later than 18 months after the initial comparative chart was provided.

Example 1 from EBSA Guidance:

If a plan administrator furnished the first comparative chart on August 25, 2012, the “2013 comparative chart” would be due no later than August 25, 2013.  In accordance with this Bulletin, however, the Department will take no enforcement action

Final Essential Health Benefits Regulations Affect Self-Funded & Large Group Insured Plans

HHS published final regulations defining essential health benefits (EHB) earlier this year. The final regulations are little changed from the proposed regulations issued in 2012, mainly for clarification. EHB must be available from State exchanges and small group and individual insurance products effective January 1, 2014.

Even though self-funded and large group insured plans are not required to provide EHB, the definition of EHB may affect their plan design. While the employer “play or pay” shared responsibility penalty has been delayed until to 2015 as noted in our prior post, the plan design requirements have not been extended, so the following information applies to self-funded and large group insured employer plan design in 2014. Separate penalties apply to violations of these rules beginning in 2014. 

The definition of EHB affects self-funded and large group insured plans as follows:

  • A self-funded or large group insured employer plan cannot impose annual or lifetime dollar limits on EHB, but it can impose dollar limits on other benefits and it can also apply non-dollar limits on EHB. These plans must use an authorized definition of EHB to determine which benefits they provide can be made subject to annual or lifetime dollar limits.
  • A self-funded or large group insured employer plan must satisfy the out-of-pocket cost-sharing limitations with respect to the EHB they provide. . These plans must use an authorized definition of EHB to identify which benefits they provide are subject to the out-of-pocket

Reminder: PCORI Fee Due by 7/31

July 19, 2013

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Reminder: PCORI Fee Due by 7/31

July 19, 2013

Authored by: Chris Rylands

Don’t forget to prepare to report and pay your Patient-Centered Outcomes Research Institute fee! The first annual payment is due July 31, 2013. The fee is based on the number of participants in your plan during the prior year.

IRS Form 720, a Quarterly Federal Excise Tax Return, is used to report and pay the fee.  Here is a link to the instructions.

See also our prior posts relating to these fees.

Update 7/25/13: Also, the IRS has posted some FAQson the PCORI Fee as well

HIPAA Enforcement: Do as Participants Say, Not as They Do

HHS announced in a recent settlement agreement (with a corrective action plan) a long list of medical centers alleged to have violated HIPAA.  The medical centers, in what appears to be a well-intentioned defense of allegations against them, disclosed information.  Their argument, as detailed in this story from last year, was that the patient implicitly waived her HIPAA protection by disclosing aspects of her treatments publicly.  While that argument has some logical appeal, logic does not always carry the day when it comes to the law, and in particular HIPAA’s privacy protections.

While this settlement involved a health care provider, health plans should take notice of the settlement for two primary reasons:153372237

1.         It serves as yet another indication that HIPAA enforcement is on the rise.

2.         More importantly, it underscores that covered entities and their workforce members should not disclose protected health information unless permitted by HIPAA or pursuant to an express authorization.  (Hint: communicating with a reporter without an authorization is not permitted by HIPAA.)

Given the release of the updates to the HIPAA rules earlier this year, now (or in the next couple of months) is a good time for health plan sponsors to brush up on their policies and procedures and revisit whether any workforce members need training (or a refresher of previous training).

457(b) Plan Update – IRS Compliance Check On the Horizon

457(b) Plan Update – IRS Compliance Check On the Horizon

July 17, 2013

Authored by: benefitsbclp

Tax-exempt entities are permitted to sponsor non-qualified deferred compensation plans for select groups of highly compensated employees, managers, directors or officers (i.e., “top hat” plans) under Code Section 457(b).   Approximately 200 non-governmental organizations sponsoring these plans will receive a “compliance check“ letter by the end of September 2013, and another 200 in the next 12-month rolling period, from the IRS’s Employee Plans Compliance Unit (“EPCU”).  This outreach effort is part of a project recently announced by the IRS designed to:

  • learn more about the operation of these plans,
  • verify that the plans comply with the applicable Code requirements,
  • identify common issues of noncompliance, and
  • recommend ways to remove any “barriers” to compliance.

EPCU is requesting “timely” responses to its request for information (or a response indicating that the compliance request was received in error because the employer does not maintain a 457(b) plan).  While the compliance check letter is not an audit notice (and the EPCU does not necessiarly plan to inspect books and records based on the compliance check), if a targeted employer does not respond to the request for information, the IRS has indicated that it “may need to take other measures to ensure compliance, including an audit of your plan or organization.”

What should an employer with a section 457(b) plan do at this point in time?  An internal compliance check may be in order.   If the EPCU determines that a plan is not established or operated in accordance with Code Section 457(b), EPCU

Ongoing Challenges to PPACA under the Origination Clause

Ongoing Challenges to PPACA under the Origination Clause

July 16, 2013

Authored by: benefitsbclp

As you’re probably well aware, last year the Supreme Court held that Congress has the power to use its “taxation” authority under Article I, Section 8 of the Constitution to impose the individual coverage mandate under the Patient Protection and Affordable Care Act of 2010 (or PPACA). National Federation of Independent Businesses v. Sebelius.  In the wake of that decision, plaintiffs still wishing to challenge the constitutionality of PPACA have looked to new theories on which to challenge the legislation.  A series of recent cases have focused the Constitutionality discussion on the first clause of Article I, Section 7 of the Constitution (more commonly referred to as the “Origination Clause”), which generally requires that “ all revenue raising bills (e.g., tax bills) originate in the House of Representatives”.

The Origination Clause carries two kinds of prohibitions.  First, the Senate may not originate any measure that includes a provision for raising revenue, and second, the Senate may not propose any amendment that would raise revenue to a non-revenue measure.  The Senate, however, may generally amend a House-originated revenue measure as it sees fit.  These prohibitions can be enforced in either the House or the Senate, and there are ample precedents for both.  As with many provisions of the Constitution, the precise meaning and application of these few words has been refined through practice and precedent since it was first ratified.

The House passed a version of health care reform on November 7, 2009, and sent it to

If the Employer Mandate Only Affects 5% of 4% of Businesses, What’s the Big Deal?

As anyone who made it through grade school knows, rumors that are repeated frequently start to take on the air of truth, regardless of their veracity.  The same could be said of statistics. According to this White House report, 5.8 million of the 6 million businesses in the US (or about 96%) employ fewer than 50 workers and thus would be exempt from the employer “play or pay” mandate.  Of the remaining 4% affected most (some say 95%) already provide insurance, meaning the mandate only impacts 5% of 4% of businesses or a mere 0.2%.  These statistics (or some version of them) have been repeated by senators and others so many times that they have started to take on an air of truth, yet we have not seen a study that anyone has cited showing this is actually the case.

In fairness, 2012 data collected by the Agency for Healthcare Research and Quality does show that 95.9% of firms with more than 50 employees offer insurance.  However, it also shows that the number of firms with more than 50 employees is actually closer to 1.7 million out of a little more than 6.7 million, bringing the estimate of business with more than 50 employees to north of 24.5% of companies with 50 or more employees.  That’s a far cry from 4%, which raises the possibility that those citing these statistics are (perhaps unintentionally) mixing and matching numbers; that’s a statistical no-no.

Additionally, the data

Health Care Reform: Where are We Now that ACA’s Employer Mandate Has Been Delayed for One Year?

The Benefits world was rocked last week when it was announced that enforcement of the ACA employer shared responsibility penalties would be delayed for one-year. IRS Notice 2013-45, released late yesterday, July 9, officially confirmed the delay, but provided no real additional guidance.  Employers are asking, what exactly this means?  Read on for our summary of where things stand.

I.     What ACA requirements are delayed in 2014?

  • Employer Mandate:  Employers must offer coverage to employees who work on average 30+ hours per week.
  • Affordability:  Coverage must be affordable (i.e., the employee’s share of the coverage cost cannot exceed 9.5% of the employee’s household income).
  • Minimum Value:  Coverage must provide minimum value (although this requirement is waived, employer must still report whether a plan provides minimum value on the SBC).
  • Certain Reporting Requirements:  Employers (and insurers) must provide information regarding employees and coverage in order to facilitate enforcement of the employer mandate.

II.    What ACA requirements remain effective in 2014 for employers?

  • SBC:  Summaries of Benefits and Coverage must be distributed during open enrollment for the 2014 coverage period and must indicate whether the plan provides minimum value.
  • Exchange Notices:  Employers must distribute exchange notices to employees by October 1, 2013, and thereafter to new employees upon hire.
  • Application for Advance Premium Credits:  Employers are required to complete a 12 page form entitled, “Application for Health Coverage and Help Paying Costs” when requested by employees who

Congratulations! SCOTUS Said You’re Married! Have You Registered For a Tax Refund?

Since the Supreme Court struck down Section 3 of DOMA, employers and employees face numerous issues, including whether to file claims for tax refunds.  [Additional background information may be found here.]

Background. The Internal Revenue Code permits employers to provide nontaxable group health coverage to their employees’ spouses. However, employers who extended group health coverage to domestic partners and, prior to Windsor, same gender spouses were required to impute, and report on the employee’s W-2, income equal to the fair market value of that coverage. Also, the employer was required to withhold federal income and employment taxes and pay the employer’s share of FICA and FUTA.

Employers. Now that same gender marriages are recognized for federal purposes in certain states, employers who have extended group health coverage to same gender spouses should, on a going forward basis beginning June 26 (the date Windsor was handed down), stop imputing income and withholding and paying employment and income taxes. Employers should also consider filing protective claims for refund of employment taxes paid for prior years.

Employees. Individuals in same gender marriages should also consider filing protective claims for refund for the imputed income. In addition, couples in same gender marriages may wish to explore whether they should file amended returns as married filing jointly. However, the advisability of an amended return depends on whether filing jointly or as a head of household will be advantageous.

Issues to be resolved. Although Edith Windsor will receive a refund with interest of the federal estate

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