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409A – Is Your Compensation Arrangement Subject to These Rules?

The 409A rules do not provide a clear roadmap to determine what compensation arrangements are subject to their regime of requirements and restrictions.  In this brief video, Brian Berglund provides a description of the approach you should take to evaluate whether your compensation arrangement should be structured to comply with the 409A rules regarding deferral elections, timing of payments and other requirements.

(You can also view the video by going here.)

CMS Integrity Standards Offer Further Details on State-Based Health Insurance Marketplaces

On Friday, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule addressing various issues relating to exchanges, small business health options program (“SHOP”) and qualified health plan (“QHP”) issuers.  Most of the 250+ pages detail proposed standards intended to ensure the oversight and financial integrity of such entities.  This post focuses on the provisions addressing consumer protections, applications for individual coverage, and administration of premium tax credits and cost-sharing reductions.

Qualified Health Plan Issuers

Beginning October 1, individuals will be able to shop for QHPs offered by issuers through state-based marketplaces (“Exchange”).  QHP  issuers that seek to directly enroll individuals through an Exchange will be required to meet certain minimum consumer protection requirements, including ensuring that their websites provide standardized comparative information on each available QHP offered and premium and cost-sharing information, providing summaries of benefits and coverages, identifying whether a plan is a bronze, silver, gold or platinum metal level or a catastrophic plan, disclosing the results of any enrollee satisfaction survey, notifying applicants of the availability of other QHP products through the Exchange, etc.  The issuer’s website must clearly distinguish between the QHPs for which the individual is eligible and non-QHPs that the issuer may offer and display a link to or describe how to access the Exchange website.  A QHP issuer seeking to directly enroll applicants must also enter into an agreement with the Exchange before its customer service representatives may assist individuals in the individual market with applying for an eligibility determination

Reminder: Hurry! Opportunity for Possible Refund of FICA Taxes Ends Soon!

As noted in our blog entry on October 16, 2012, under the Sixth Circuit’s discussion in U.S. v. Quality Stores, severance payments made because of an employee’s involuntary separation resulting from a reduction-in-force or discontinuance of a plant or operation are not subject to FICA taxes.  This holding is contrary to a prior decision of the Federal Circuit Court of Appeals and published IRS guidance.  The government has until May 3 to appeal the case to the Supreme Court.  Until a final decision in this case has been rendered, taxpayers that have made severance payments in 2009 should file a protective claim for a FICA tax refund no later than April 15, 2013.  This protective claim will preserve the taxpayer’s right to a refund should the IRS not appeal the decision or should the decision be upheld on appeal.


The Top 6 Facts You Need to Know About the IRS’s Proposed Play or Pay Regulations

Frequent readers of this blog will recall that the IRS previously issued some initial guidance on the employer “shared responsibility” (aka play or pay) rules under health reform.  (A summary of the shared responsibility provisions and the taxes is described in our post on the prior guidance.)

Well, the New Year’s resolution of the federal agencies overseeing health reform implementation is (or should be, if it isn’t) to provide more guidance on health reform. In keeping with that resolution, the IRS recently issued proposed regulations and a set of Q&As on play or pay.  The guidance covers several points and an exhaustive explanation is too long for a single post, so we will cover more details in future posts.   However, there were some key features to note from the proposed guidance:

  1. The controlled group rules apply for purposes of determining if you are subject to the taxes (i.e. you are an applicable large employer, generally one with more than 50 employees in the prior year, under the guidance).  Because the IRS has not issued final controlled group rules for tax-exempt and governmental employers, they should apply a good faith interpretation of the existing rules.
  2. However, the tax is assessed on a per-entity basis, without regard to the controlled group rules.  This means different members of the controlled group can offer different levels and types of coverage (assuming they can satisfy any applicable nondiscrimination rules), or choose not to

Proposed Changes to ISS Proxy Voting Policies

On October 16, 2012, Institutional Shareholder Services (ISS) issued for comment several proposed proxy voting policy changes.  The following would affect U.S. public companies:

Board Matters

Current Policy: Recommend vote against or withhold votes from the entire board (except new nominees, who are considered case-by-case) if the board failed to act on a shareholder proposal that received the support of either (i) a majority of shares outstanding in the previous year; or (ii) a majority of shares cast in the last year and one of the two previous years.

Proposed Policy: Recommend votes against or withhold votes from the entire board (with new nominees considered case-by-case) if it fails to act on any proposal that received the support of a majority of shares cast in the previous year.

The proposed change is intended to increase board accountability. ISS is specifically seeking feedback as to whether there are specific circumstances where a board should not implement a majority-supported proposal that receives support from a majority of votes cast for one year.

Say-on-Pay Peer Group

Current Policy: ISS’s pay-for-performance analysis includes an initial quantitative screening of a company’s pay and performance relative to a group of companies reasonably similar in industry profile, size and market capitalization selected by ISS based on the company’s Standard & Poor’s Global Industry Classification (GICS).

Proposed Policy: For purposes of the quantitative portion of the pay-for-performance analysis the peer group will continue to be selected from the company’s GICS industry group but will also incorporate

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