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This Time With Feeling – Employer Paid Individual Policies Violate ACA

February 24, 2015


Employer payment plans, which include arrangements where an employer pays, or reimburses an employee, for some or all of the premium expenses incurred for an individual health insurance policy, violate market reforms under the Affordable Care Act (“ACA”).

Notice 2015-17 is the latest in a series of IRS guidance on these arrangements (see our earlier post on this topic here). While it reiterates previous conclusions regarding the failure of the arrangements to satisfy the ACA, it also provides excise-tax transition relief for certain small employers.

Limited Transitional Relief for Non-ALEs

Noncompliant group health plans may be liable for a $100/day excise tax for failure to satisfy ACA market reforms. The new Notice, while reiterating that conclusion, provides that the tax will not be asserted under two conditions:

  1. Until June 30, 2015, if the plan is not sponsored by an Applicable Large Employer (“ALE”). An ALE, for a given calendar year, generally had an average of 50 or more full-time employees during the preceding calendar year. If the employer was not an ALE for 2014, no tax will be asserted for 2014. If the employer is not an ALE for 2015, no tax will be asserted for the period January 1 through June 30, 2015.
  2. Until further guidance is issued, where there is any failure to satisfy market reforms by an S corporation 2%+ shareholder-employee healthcare arrangement. The relief does not apply to such plans covering S corporation employees who are not 2%+ shareholders.


Five Years into Health Care Reform – A Quick Look at What’s Still on the Horizon

Time flies when you’re having fun… or something like that?! Next month will mark the fifth year anniversary of the enactment of the Patient Protection and Affordable Care Act (as amended by the Health Care and Education Reconciliation Act). This is a law of many names including the ACA, PPACA, health care reform, Obamacare (amongst others that we can’t in good conscience commit to writing – especially in a professional publication) and a law of many facets. As we approach the five year mark of living with this law, many questions have been answered (at least in part, right?). After all, numerous reports have recounted the staggering number of pages of guidance issued in connection with the ACA – remember Rep. Richard Hudson’s exaggeration that we have 33,000 pages of guidance and Senator Mitch McConnell’s estimate at 22,000 pages? And both these figures were announced in the first half of 2013.

Theatrics and dramatic page-counting aside, there is no doubt that many government agencies having been working on all many cylinders to make sense of this transformative law. Even so, employers are only two months into the official employer mandate and there are countess questions still left unanswered on many ACA fronts.

The Republican-controlled Congress is hard-charging to repeal – or, more accurately, to repeal and replace – the law. If any version of the modification law makes it through the Senate and avoids a veto, that would inevitably undo much of our work (and most swiftly, perhaps, change the

The Anthem Breach – What Next?

The Anthem Breach – What Next?

February 12, 2015

Authored by: David Zetoony and Lisa Van Fleet

The facts surrounding the Anthem breach continue to evolve as does Anthem’s handling of the situation.

Based on the current status of the investigation, and Anthem’s current reactions to the incident, there are steps which group health plan sponsors should consider taking to fulfill their own HIPAA and fiduciary obligations with respect to group health plans affected by the Anthem breach. These steps include the following:

  • Have business associate agreements and other relevant documents reviewed to assess the plan sponsor’s rights and obligations with respect to the breach.
  • Request from Anthem:
    • additional information about the breach;
    • confirmation concerning the steps that will be taken to protect the plan sponsor’s employees and affected individuals;
    • more extensive victim protection, client indemnification, and paid notification than Anthem is currently proposing to offer; and
    • confirmation that any state notification requirements will be satisfied on behalf plans and plan sponsors.

In addition, plan sponsors should continue to monitor ongoing developments so they can modify their own response as appropriate to fulfill their obligations with respect to and protect plan participants.

Another Resolution Broken?—Notice Requirements of California’s New Paid Sick Leave Law

If your 2015 New Year’s Resolution was to fully comply with all aspects of California’s New Paid Sick Leave Law, you may already be in trouble. Although the substantive portions of the law do not kick in until July 1, 2015, the deadline for certain notice requirements was January 1, 2015. So, if you haven’t already posted and provided the required notices, the following guidelines are for you:

Who Must Comply?

All employers who employ one or more employees who work at least 30 days within a year in California, including part-time, per diem, and temporary employees. (The law provides for some specific, limited exceptions including providers of publicly funded In-Home Support Services; employees covered by collective bargaining agreements with certain specific provisions, and individuals employed by an air carrier as a flight deck or cabin crew member, so long as they are already receiving compensated time off at least equivalent to the requirements of the new law.)

What Must Be Done?

Post the required paid sick leave poster in a conspicuous place at the workplace (the required poster can be found at

Provide every employee with an individualized notice to employee (Cal. Labor Code § 2810.5, a form of the notice can be found at

Optional Steps?

Revise company handbooks/policy manuals to include paid sick leave policy (also, revise related policies affected by the new law, including any domestic violence leave policy and possible revisions of FMLA/CFRA policies)


January 1, 2015 (so if it

Don’t Be Confused – 9.56% may still just be 9.5% for you

In prior posts, we have described how coverage has to be “affordable” to avoid the ACA play or pay penalty. We’ve usually used the shorthand that the premium must be no more than 9.5% of an employee’s household income. However, that 9.5% is subject to periodic adjustments designed to approximate the difference between the growth in insurance premium costs and income. For 2015, that percentage has been adjusted to 9.56%.

However, there’s a catch here: the percentage applies to actual household income, which is something an employer is very unlikely to know. Recognizing this, the IRS has provided some safe harbors based on information more readily available to an employer. Those are the W-2, rate of pay, and Federal Poverty Line safe harbors.   Without describing all the details, the general rule is that if the premium for an employer’s coverage is less than 9.5% of the employee’s W-2 income, rate of pay, or the Federal Poverty Line, it will be deemed to be affordable.

Here’s the subtle point: that 9.5% for the safe harbors is not adjusted. So even though “pure” affordability is increasing, the safe harbors do not. For now, the difference is a modest .06% of household income, but it will only grow in future years, unless the IRS revises the rules. Further, since all of the safe harbors are, in cases of two-earner families, almost assuredly going to be less than an employee’s household income, that makes the distinction between “pure”

The President’s Budget and the ACA-ization of Retirement Plans

Federal BudgetWhile we can’t profess to have read through all of the President’s recently released budget proposal (we are practicing lawyers, after all), much of the discussion on its retirement policies focuses on only a few select provisions. While many of them are unlikely to see the legislative light of day in a Republican-controlled Congress, it is interesting to note the parallels in some of these proposals to the Affordable Care Act and their perhaps unintended effects.

Below, we have set out a chart that lists a few of the items from the budget, compares them to similar provisions in the ACA, and gives a brief note on the likely effect

Anthem Data Breach Implications for Employers

Security ThreatAs has now been widely reported, Anthem, Inc. was the unfortunate target of a cyber-attack potentially impacting 80 million current and former customers. Some reports have indicated that the HIPAA breach notification rules will not apply to this breach. However, the information stolen appears to include individually identifiable information, potentially including health plan enrollment information. Enrollment information, in the hands of a health plan, is protected health information (PHI), so it is possible that the HIPAA data breach notification rules are applicable. As such, both insured and self-funded customers utilizing Anthem as their TPA should review information concerning the Anthem breach carefully before concluding that the HIPAA breach notification rules do not apply.

Additionally, given that claims for other Blue Cross Blue Shield customers may have been submitted through Anthem for employees and dependents in an Anthem service area, it is possible that Anthem has information on individuals who are not Anthem customers, but are customers of other Blue plans. Therefore, customers of any Blue Cross Blue Shield insurer should reach out to their contacts to ensure they are not affected.

If the HIPAA breach rules do apply, then Anthem and other Blue customers should also carefully review their applicable business associate agreements. Those agreements should outline the obligations of the Blue Cross entity and the plan administrator (which is often the company) in providing notification to affected individuals.

Check and Double-Check! Errors on Your Form 5500 Can Lead to an IRS Audit

ReviewMistakes on your plan’s Form 5500 create a nice target for the Internal Revenue Service’s auditors. In its February 2, 2015 edition of Employee Plans News, the Internal Revenue Service explains that entering incorrect information or leaving a blank in a required field increases the likelihood you’re your plan will be selected for a compliance check.

The IRS provides a helpful list of common mistakes on the Form 5500:

  • Number of Participants – Sponsors leave this field blank or enter zero when there are in fact assets and participants in the plan.
  • Plan Terminations – Sponsors mark the 5500 to show they terminated the plan or adopted a resolution to terminate it, but the plan is still in existence. While the resolution starts the termination process, the plan is not terminated for 5500 purposes until the plan has a zero balance. Many plans that checked the box showing they were terminated did not reflect zero assets on the last day of the year of termination.
  • Fraud – On the line requesting whether the plan lost money due to fraud, many plan sponsors enter the amount of the fidelity bond held by the plan, when this line should (hopefully) be blank.
  • Frozen Plans – Sponsors listed pension code 1l, which applies to frozen defined benefit plans, when the plan wasn’t

The Yard-Man Inference is No Longer an Inference

The Yard-Man Inference is No Longer an Inference

February 3, 2015

Authored by: benefitsbclp


The death knell for the so-called “Yard-Man Inference” has sounded. If you think we’re being a little dramatic – OK, maybe you’re right – we have a tendency to get a little too worked up about employee benefits cases that make it to the Supreme Court. But, in any event, last week the Supreme Court resolved a circuit split and overturned the Yard-Man Inference with its decision in M&G Polymers USA, LLC v. Tackett.


The Yard-Man Inference is named for the important retiree benefits decision handed down in 1983 in International Union et. al. v. Yard-Man, Inc., 716 F.2d 1476. In that case, the Sixth Circuit applied a presumption of vesting of retiree medical benefits in the absence of a termination provision in a collective bargaining agreement. You can read more about the original Yard-Man case in our earlier post on the case.

In M&G Polymers, the Supreme Court found that Yard-Man improperly “plac[es] a thumb on the scale in favor of vested retiree benefits” and “distorts the intent to ascertain the intention of the parties” with respect to the collective bargaining agreement. The unanimous opinion authored by Justice Thomas held that the Sixth Circuit’s reliance on Yard-Man is “incompatible with ordinary principles of contract law.”

The collective bargaining agreement at issue provided for retiree health care benefits and provided that retirees with a certain level of service would receive a full

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