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W-2 Reporting of Health Coverage and EAPs, Wellness Programs, and On-Site Clinics

On Tuesday, the IRS released additional interim guidance on the health reform requirement to include the cost of health coverage on an employee’s Form W-2.  Employers are permitted, but not required, to report these amounts on 2011 W-2s issued by the end of this month, but reporting will be required for 2012 W-2s issued in January 2013.

Of particular interest in the guidance is the following Q&A:

Q-32: Is the cost of coverage provided under an employee assistance program (EAP), wellness program, or on-site medical clinic required to be included in the aggregate reportable cost reported on Form W-2?

A-32: Coverage provided under an EAP, wellness program, or on-site medical clinic is only includible in the aggregate reportable cost to the extent that the coverage is provided under a program that is a group health plan for purposes of § 5000(b)(1). An employer is not required to include the cost of coverage provided under an EAP, wellness program, or on-site medical clinic that otherwise would be required to be included in the aggregate reportable cost reported on Form W-2 because it constitutes applicable employer-sponsored coverage, if that employer does not charge a premium with respect to that type of coverage provided to a beneficiary qualifying for coverage in accordance with any applicable federal continuation coverage requirements. If an employer charges a premium with respect to that type of coverage provided to a beneficiary qualifying for coverage in accordance with any applicable federal continuation coverage requirements,

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

Have You Inadvertently Amended Your Benefit Plans in an Acquisition?

November 29, 2011

Authored by: benefitsbclp

Has your company recently acquired another company or its assets? Did the purchase agreement require continuation of any particular level of benefit for acquired employees or retirees? If so, the Fifth Circuit appears to believe that the purchase agreement may have amended your company’s employee benefit plans to provide those benefits described in the purchase agreement. What does this mean? That acquired employees and retirees can potentially sue your company for benefits described in a contract to which the employees and retirees were neither a party nor a third party beneficiary.

Evans v. Sterling, 2011 WL 4837847 (5th Cir. 2011).

In December of 1996, Sterling Chemicals acquired American Cyanamid’s (“Cytec”) acrylic fibers business in an asset purchase transaction. In connection with the acquisition, Sterling offered employment to certain Cytec employees. The asset purchase agreement included a provision requiring Sterling to provide certain levels of retiree medical coverage for the acquired Cytec employees unless Cytec agreed to changes. Sterling provided these retiree benefits to Cytec employees under its own retiree plans following consummation of the acquisition.

A few years following its acquisition of the Cytec business, Sterling increased retiree medical premiums for the acquired Cytec employees. The acquired Cytec employees sued, and the Fifth Circuit held that Sterling could not increase retiree premiums for the acquired Cytec employees without Cytec’s consent.

The court reasoned that the asset purchase agreement between Sterling and Cytec amended Sterling’s existing retiree medical programs. Following earlier precedent in Halliburton Co. Benefits Committee v. Graves,

New EBSA Consumer Assistance Website

New EBSA Consumer Assistance Website

November 23, 2011

Authored by: benefitsbclp

The Department of Labor’s Employee Benefit Security Administration (EBSA) is making it easier for consumers to submit questions and complaints regarding their health and retirement plans. EBSA has created a new consumer assistance website which allows users to submit inquiries electronically.  If you hablo Espanol, it’s also available in Spanish.

The DOL claims the new website provides easy access to useful information through links for resources/tools, hot topics, and publications. It also provides links to electronic forms where a user may “Ask a Question”, “Submit a Complaint”, or “Report a Problem.” EBSA seems to be serious about wanting to hear from consumers and give them assistance by promising to respond to all inquiries within three business days.

What does this mean for employers? The increased ease in which employees can submit complaints regarding their health and retirement plans to the DOL may lead in increased government scrutiny. Employers should now, more than ever, make it a point to respond to employee inquires quickly and adequately. If an employee is not satisfied with their employer’s response, they now have a quick means to complain to the government. Employers should also be sure to thoroughly document their responses to employee questions and complaints, including the rationale, just in case the DOL comes knocking.

Special Action Items for October

Special Action Items for October

October 13, 2011

Authored by: benefitsbclp

This is a brief reminder on common time-sensitive matters. We distribute these by email every month. If you would like to be added to the list, please comment below or email one of us. If you have questions, please call one of us. Thanks very much.

DEADLINES

Only a few days left to comply with these deadlines:

  • October 15, 2011 is the last day that a calendar-year plan can be corrected by amendment and in operation to address failure of the minimum coverage requirements of Code Section 410(b) and the general nondiscrimination requirements of Code Section 401(a)(4) in 2010. Has your plan received these tests from the plan’s recordkeeper?
  • 2011 third-quarter contributions to defined benefit plans must be made by October 15, 2011.
  • Calendar-year defined benefit plans with 100 or more participants are required to submit online premium filings to the PBGC by October 17, 2011. Special rules apply for new plans and plans with changed plan years. Click here for instructions.
  • For calendar-year plans that filed for an extension through Form 5558 by August 1, 2011, the 2010 Form 5500 must be filed by October 17, 2011.
  • The due date for the Form 5500 of a direct filing entity, such as a master trust, is 9? months after the end of the DFE’s fiscal year. For a direct filing entity with a calendar fiscal year, the filing deadline for the 2010 Form 5500 is October 17, 2011.

Other upcoming filing deadlines:

Getting Ready for Open Enrollment

Getting Ready for Open Enrollment

September 16, 2011

Authored by: Serena Yee

The fall is the time many employers with calendar year group health plans begin to prepare for open enrollment.  Below is a list of required notices that employers should consider including in their enrollment materials.   

  • COBRA Notice.  Plan administrators must provide a written initial COBRA notice to each employee and his or her spouse when group health plan coverage first commences of his or her rights under the Consolidated Omnibus Budget Reconciliation Act of 1986 (“COBRA”).  This notice must contain specific information, and the Department of Labor has issued a model notice.
  • HIPAA Privacy Notice.  If the group health plan is required to maintain a notice of privacy practices under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the notice must be distributed upon an individual’s enrollment in the plan.  Notice of availability to receive another copy must be given every three years.
  • Special Enrollment Rights.  A group health plan must provide each employee who is eligible to enroll with a notice of his or her HIPAA special enrollment rights at or prior to the time of enrollment.  Among other things, this notice must describe the recently enacted rights afforded under the Children’s Health Insurance Program Reauthorization Act.

2012 PPACA Checklist

2012 PPACA Checklist

September 12, 2011

Authored by: Serena Yee

While most of the design changes required for group health plans under the Patient Protection and Affordable Care Act, as amended (“PPACA”), became effective in 2010 or 2011, some additional requirements must be implemented for 2012.

All group health plans subject to PPACA must comply with the following requirements, regardless of its status as a “grandfathered health plan”:

  • Provision of a Summary of Benefits.  The summary must include the information specified in the regulations but cannot exceed four double-sided pages. A summary must be provided to participants and beneficiaries as part of any written enrollment materials and a summary must be included for each benefit package offered for which the participant or beneficiary is eligible. However, upon renewal, only the summary for the benefit package in which the participant is enrolled needs to be furnished, unless the participant or beneficiary requests a summary for another benefit package. Unless an extension is granted, summaries must be issued no later than March 23, 2012.  Instructions and a template of a draft summary of benefits is published in the Federal Register and can be viewed at http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21192.pdf.
  • W-2 Reporting Obligation.  Employers must begin reporting the aggregate cost of applicable employer-sponsored coverage on an employee’s Form W-2 beginning with the Form W-2 issued in January 2013 for the 2012 tax year.  Make sure that you have appropriate systems in place to collect and determine the value that must be reported.  IRS Notice 2011-28, available at http://www.irs.gov/pub/irs-drop/n-11-28.pdf, provides interim guidance

New York Marriage Equality and Benefits – Part 2

New York Marriage Equality and Benefits – Part 2

September 8, 2011

Authored by: benefitsbclp

Last week we looked at the implications of New York’s Marriage Equality Act (“Act”) upon the tax treatment of employer-provided health care benefits for same-sex married couples in New York. Today we’ll consider how the Act affects the administration of family and medical leave, HIPAA special enrollment rights and health care continuation coverage under COBRA and New York’s “mini-COBRA” law.

New York Marriage Equality and Benefits

New York Marriage Equality and Benefits

September 1, 2011

Authored by: benefitsbclp

Now that same-sex marriage is recognized in New York, what steps do employers need to take with respect to employee benefits? The to-do list must consider the federal Income Tax Code, ERISA, insurance law and of course New York’s Marriage Equality Act (“Act”), which took effect July 24, 2011. This is the first in a series of posts that will discuss this topic.

The Act recognizes all legally performed marriages between same- and opposite-sex couples, whether the marriage took place in New York or elsewhere. This means that same-sex marriages, even those entered into under the laws of another state, must be treated equally under the laws of New York.

COBRA and STD/FMLA

COBRA and STD/FMLA

September 1, 2011

Authored by: benefitsbclp

In Clarcor, Inc. v. Madison Nat’l Life Ins Co. (M.D. Tenn. 2011), the District court for the Middle District of Tennessee upheld a denial of stop-loss coverage by Madison National Life for expenses incurred by an employee who was put on short term disability following FMLA leave.  The employee went on FMLA leave and when that leave expired, she did not return to employment.  Instead, the employer put her on short-term disability. Following the expiration of short-term disability, her employment was terminated and she was offered COBRA.

However, under the eligibility provisions of the self-funded health plan, she was required to be either actively working, on FMLA or on COBRA.  Because she was not in any of those classes, she was ineligible. The employer had a policy providing for continued coverage while employees were on short-term disability, but the policy was not part of the formal plan document.  Therefore, the court said, the policy was not sufficient to establish her eligibility and the stop-loss carrier was correct in denying coverage for her medical expenses.

Major League Baseball Pension and Healthcare Benefits

August 30, 2011

Categories

Major League Baseball Pension and Healthcare Benefits

August 30, 2011

Authored by: benefitsbclp

Arguably, Major League Baseball (“MLB”) offers one of the best pension and healthcare programs in all of sports. Players vest in their pensions after 43 days on the active roster and just one day qualifies a player for lifetime healthcare. Playing isn’t even a requirement, benchwarmers may qualify for benefits as well. After 43 days, players qualify for the minimum benefit of $34,000 per year and those with 10 years of service receive a pension of approximately $100,000 annually. In 2010, the MLB Players’ Pension Plan reported assets of over $1.3 billion for approximately 8,200 participants.

However, these generous benefits have not always been available. While baseball players first obtained a pension in 1947, some claim the plan was very poor. Pension plan vesting and lifetime healthcare required four years of service. Over the years the MLB Players’ Association negotiated higher benefits and won more concessions in the ’72 and ’81 strikes, including the reduced 43 day pension vesting requirement. But there are 850 former players who retired between 1947 and 1980 with less than four years of service still without pensions or healthcare benefits. In 2002, three of these former players filed a class action lawsuit against MLB demanding pension benefits, but the suit was dismissed.

According to The New York Times, MLB and the Players’ Association recently agreed to provide payments to these former players. Payments may be up to $10,000 annually and will be based on their length of service. While MLB and the Players’

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