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Education or Advice: The DOL Final Definition of Fiduciary; Conflict of Interest Rule

Changes AheadEarlier this month, the Department of Labor finally released the long-awaited “Definition of Fiduciary; Conflict of Interest Rule.”

This blog post is intended to do two things:

  1. Provide a brief history of the proposal, and
  2. Provide an overview of the key points of the final rule and how it differs from the 2015 proposal.

For additional materials and information on the Final Rule, visit the DOL webpage. In addition, you can access all 200 plus pages of the final rule here.

I.  The “Conflict of Interest” Rule’s History

Since the adoption of ERISA, the governing regulations have mandated use of a five-part test that dictates whether an individual will be considered an investment advice fiduciary. In order to rise to the level of an investment advice fiduciary, the five-part test required that a person give investment advice: (1) about the value or advisability of investing in securities or other property; (2) on a regular basis; (3) pursuant to an agreement with the plan; (4) individualized to the specific plan; and (5) with the mutual understanding that such advice will serve as a primary basis for investment decisions.

The DOL initially proposed rulemaking to change the definition of an investment advice fiduciary back in October of 2010. The 2010 proposal generally did the following:

  • suggested eliminating the five-part test and, more specifically, the

Tired of the Health Care Hullabaloo?

April 1, 2016

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Tired of the Health Care Hullabaloo?

April 1, 2016

Authored by: benefitsbclp

Hullabaloo: noun: a commotion, a fuss.

In recent years, almost every change to health care has caused a hullabaloo. Today, we thought you might enjoy reading about a few recent and proposed changes that, although important, have not caused quite the uproar to which we have become accustomed.

The Department of Health and Human Services has finalized the annual in-network out-of-pocket maximums for non-grandfathered health plans for 2017:

An enrollee in self-only coverage may not pay more than $6,850 for essential health benefits in 2016; for 2017, that number has increased to $7,150.

An enrollee in any coverage other than self-only may not pay more than $13,700 for essential health benefits in 2016; for 2017, that number has increased to $14,300.

Section 1411 of the Patient Protection and Affordable Care Act requires federally facilitated marketplaces (but not state facilitated marketplaces) to provide notice to employers when it is determined that an employee is eligible to receive a subsidy. The final rule, however, only requires these marketplaces to provide notice to employers when an employee actually enrolls in coverage.

And, the Departments of Labor, Health and Human Services, and the Treasury will be working together to finalize the updated requirements of the Summary of Benefits and Coverage (SBC) after the comment period closes March 28, 2016. The proposed changes to the SBC include a revised template, instructions, and an updated uniform glossary (see here). The new SBC requirements must be satisfied by the

Undermining the Goal of Expanding Coverage for Nonhighly Compensated Employees

Piggy Bank in CrosshairsOne might be led to believe that the current administration is in favor of expanding retirement savings opportunities. After all, the DOL has somewhat apologetically subverted ERISA to allow the States to sponsor employer-based savings plans.  And the President’s recently proposed budget endeavors to provide a national retirement savings program. (See page 135 of the General Explanations of the Administration’s Fiscal Year 2017 Revenue Proposals) So why then would the IRS reverse two decades of regulation that favors cross-tested plans in small businesses, an action that might cause many small employers to terminate their qualified plans or amend them to reduce the employer contribution to employee’s accounts?

Some background may be in order. Cross-tested defined contribution plans are allowed to test equivalent benefit accrual rate (EBAR) groups separately using the ratio percentage test or the average benefits test. Unlike testing for coverage, application of the average benefits test here does not include testing for a reasonable business classification. This has permitted cross-tested plans to create small rate groups each of which meets the modified average benefits test and permits greater relative nonelective contribution (NEC) amounts for HCEs. Typically, the average benefits test for cross-testing finds that the EBARs for HCEs are the same or less than the EBARs for NHCEs.

The Latest in ACA Reporting

February 2, 2016

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The Latest in ACA Reporting

February 2, 2016

Authored by: benefitsbclp

photo77Well, we’ve toyed with your emotions enough on this subject…. the deadlines for ACA reporting have not changed. Truth be told, unless this law is repealed by a Republican President taking office next term, we’re likely stuck with the ACA reporting rules as they stand (as modified by further informal guidance). So, what if you encounter this situation under the current legal landscape? You’ve made it through information compilation and data entry processes, you’ve poured over the instructions on the Forms 1094 and 1095s (or better yet, hired a consultant to do that) and you’re now ready to submit your returns electronically to the IRS – maybe even “on time” under the initial deadlines before they were extended. Congratulations! But, what happens when you receive a dreaded “error” message in connection with that submission?

First and foremost, please stay calm!

We know you’re at your wits end with this whole endeavor, but that IRS is actually poised to help (we hope). Last week, the IRS held a webinar concerning how to deal with rejection. And while they cannot help you with rejection in the dating world (sorry us ERISA nerds are left to search the galaxy for someone who loves us for who we are and our “humor”), they may be able to assist with submission rejection errors. Slides from the presentation entitled “Things to Know, Overview

California Court Recognizes Same-Sex Marriage a Week Prior to Windsor

Earlier this month, the U.S. District Court for the Northern District of California recognized the retroactive application of United States v. Windsor.

In Schuett v. FedEx Corporation, plaintiff and her long-time same-sex partner, Lesly Taboada-Hall were married in a civil ceremony on June 19, 2013. Taboada-Hall, a fully-vested participant in the FedEx Pension Plan, passed away the following day from cancer. As of the date of Taboada-Hall’s death, marriage licenses for same-sex couples were not available in California due to enforcement of Proposition 8, a voter-enacted ban on same-sex marriage. Six days later, the U.S. Supreme Court issued its landmark Windsor decision declaring Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.

Here’s where this gets interesting. On August 6, 2013, plaintiff filed a Petition to Establish the Fact, Date, and Place of Marriage, as permitted by California Health & Safety Code Section 103450. The Sonoma County Superior Court issued a delayed certificate of marriage that showed the marriage occurred June 19, 2013 — yes, June 19, 2013, a week before the Windsor decision. So, according to the Superior Court, the plaintiff actually became Taboada-Hall’s spouse on June 19, 2013, a day before Taboada-Hall’s death, rather than June 26, 2013, a week after her death.

Plaintiff then sought a qualified pre-retirement survivor annuity under the FedEx Pension Plan as a surviving spouse. Defendant denied the claim, asserting that at the time of Taboada-Hall’s death the plan had defined “spouse” in accordance

PEOs: A remedy for ACA reporting requirements?

PEOs: A remedy for ACA reporting requirements?

January 21, 2016

Authored by: benefitsbclp

IRS AheadSigned into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.

In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.

In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year

Changes to User Fees for Voluntary Correction Program (VCP) Submissions

On January 4, 2016, the Internal Revenue Service published its annual update of user fees Rev. Proc. 2016-8 for various letter ruling and determination letter requests. The 2016 update now includes user fees and guidance for Voluntary Correction Program (VCP) submissions under the Employee Plans Compliance Resolution System. In many cases the user fee for VCP submissions is reduced under Revenue Procedure 2016-8. The revised fee schedule for employee plan user fees (including VCP submissions) is effective February 1, 2016.

Below are the current user fees for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 12.02 of Revenue Procedure 2013-12.*

Participants Revenue Procedure 2013-12 Fee 20 or fewer participants $750 21 to 50 participants $1,000 51 to 100 participants $2,500 101 to 500 participants $5,000 501 to 1,000 participants $8,000 1,001 to 5,000 participants $15,000 5,001 to 10,000 participants $20,000 Over 10,000 participants $25,000

* User fees for VCP filings relating to certain minimum distribution or plan loan failures were revised in Revenue Procedure 2015-27.

Below are the user fees, effective February 1, 2016, for regular VCP submissions for qualified plans and 403(b) plans as set forth in Section 6.08 of Revenue Procedure 2016-8.

Participants Revenue Procedure 2016-8 Fee 20 or fewer participants $500 21 to 50 participants $750 51 to 100 participants $1,500 101 to 1,000 participants $5,000 1,001 to 10,000 participants $10,000 Over 10,000 participants $15,000

Note: Revenue Procedure 2016-8 also includes additional user fee changes

The Force Awakens on 2016

The Force Awakens on 2016

January 4, 2016

Authored by: benefitsbclp

ThinkstockPhotos-101346654The ball dropped on 2016, but don’t drop the ball on your benefit plan compliance.  As part of our annual tradition, we’re pleased to present this year’s Top Ten New Year’s Countdown for the reading pleasure of our fellow ERISA geeks.  You may remember last year’s Top Ten list was set to Pop Culture themes that dominated 2014?  Well, we’ve decided to embrace the Star Wars fever that currently has a firm grip on our society and devote our entire list to Star Wars’-themed tips.  Get your lightsabers ready…

  1. This epic space opera list starts just where you’d expect it:  A long time ago in a galaxy far, far away (called Congress)…there was born a law called the Patient Protection and Affordable Care Act. The law made it through infancy and even toddlerhood…but then it required reporting of a kind never seen before.  If you’re reading this article, you likely have made it through the data collection process and you’re poised and ready to issue/file your first 1094s and 1095s.  If not, hurry hurry as the deadlines are quickly approaching.  While Notice 2016-4 did “automatically” extend the deadlines relating to the 2015 plan year, further extensions are no longer available and penalties could be assessed for failure to timely comply.
  2. The determination letter program dies and the Force Awakens.  Yes, with the determination letter program all but gone, internal document compliance audits

Post-Holiday Gift – ACA Reporting Deadlines Relaxed for 2016

Post-Holiday Gift – ACA Reporting Deadlines Relaxed for 2016

December 29, 2015

Authored by: benefitsbclp

We have been shouting the ACA reporting compliance deadlines from the rooftops for months now.  Well, I guess it is a case of the “boy who cried wolf”.  At the eleventh hour, the IRS has caved to a slew of complaints, concerns and continuing questions about the new (and complex) ACA reporting requirements and given employers a post-holiday present in the form of IRS Notice 2016-4.   But is it too little too late? The Notice relaxes the current deadlines for those who are not ready to file (or still have unanswered questions preventing them from filing).  Specifically, the Notice provides:

  • an automatic 60-day extension for furnishing Forms 1095-C and 1095-B to employees, and
  • an automatic three-month extension for filing the required forms with the IRS.

By “automatic”, we mean that no action is required (and nothing needs to be sent to the IRS) to avail yourself of the extension. The newly extended deadlines (for this year only) are as follows:

  • The 2015 Form 1095-B and Form 1095-C (which were originally required to be provided to the insured and/or employees by February 1, 2016 (paralleling the W-2 timeframe)) are now not due to be furnished until March 31, 2016.
  • The 2015 Forms 1095-B and Form 1095-C (which were originally required to be filed with the IRS by February 29, 2016) are now not due to be filed with the IRS until May 31, 2016 (for filings other than electronic filings).
  • For health coverage providers and employers

Reacting to Our Failure to Effect Sound Retirement Policy

December 11, 2015

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Reacting to Our Failure to Effect Sound Retirement Policy

December 11, 2015

Authored by: benefitsbclp

Puzzle PiecesEver since ERISA was first promulgated, and notwithstanding consequential economic, societal and demographic changes, efforts at improving the nation’s employer-based retirement structure have had fits and starts mostly due to the failure of Congress and the Nation to revisit retirement policy in a meaningful way. A cynic (or maybe a pragmatist) would surely believe that Congress’ part in failing focuses primarily on using the retirement system as a tool to exact revenue for the federal treasury, contrary to policies that enhance tax advantages for retirement saving. The smoke and mirrors of Congressional budgeting lead to intentional ignorance of most of the impact of long-term revenue from the retirement system.(To say nothing of changes to the Social Security system, which is beyond the scope of this piece.)

ERISA was a wonderfully crafted and meaningful law when it passed more than forty years ago. Today, it still provides, in no small measure, the intended benefits and protections that were expected in 1974. But times change and so has the retirement system. When ERISA was passed, it focused on a system designed primarily to address defined benefit pension plans. Over the years, Congress has tweaked ERISA dozens of times, but taken together, the extent of changes and the voluminous regulations needed to give guidance to them do more to choke the system than to improve it.

Worst of all, a piecemeal effort at addressing the retirement

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