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IRS Fires Shot Across the Bow on Health Reform Minimum Value and Reporting Guidance – Part 1

On April 26, the IRS released three “requests for comment” on various provisions under the Patient Protection and Affordable Care Act (“PPACA” or “health reform”). While the IRS is soliciting comment, it also gave some indication of how it was leaning on each of the issues it addressed. This first post (of three) discusses the comments on the determination of “minimum value.”

Under PPACA, if an employer plan does not provide “minimum value,” then an employee may be eligible for a premium tax credit through the state-based insurance exchanges, if he or she meets the other applicable requirements. If an employee takes advantage of that tax credit, the employer will be subject to “pay or play” penalties under health reform. Therefore, “minimum value” matters. (It is worth noting that HHS previously found that about 98% of individuals covered by employer-sponsored plans were enrolled in plans providing minimum value as described in the IRS guidance.)

In Notice 2012-31, the IRS basically outlined three approaches it may use to determine minimum value:

  • The use of an actuarial value or minimum value calculator that will be provided by HHS and the IRS. Using either calculator, employers would enter certain plan information into the calculator (such as benefits, cost-sharing, etc.) and the calculator would determine if the plan provides minimum value.
  • Self-funded plans and insured large group plans would be allowed to use the minimum value calculator, which is expected to use claims data reflecting typical self-insured employer plans.

Multiemployer Withdrawal Liability “Insurance”

Multiemployer Withdrawal Liability “Insurance”

April 11, 2012

Authored by: benefitsbclp

In a recent decision, the Sixth Circuit Court of Appeals upheld an indemnification of multiemployer plan withdrawal liability in an collective bargaining agreement.

In the case, the employer and labor union had bargained that the union would indemnify the employer for any withdrawal liability from the multiemployer plan. The union, however, subsequently disclaimed its representation of the employees. As a result of that disclaimer, the union was no longer the exclusive bargaining representative of the affected employees and the collective bargaining agreement terminated. As a result, the employer effected a withdrawal from the multiemployer pension to which it had been obligated to contribute and incurred a substantial withdrawal liability.

It so happened that the pension fund in question was the Central States Southeast and Southwest Areas Pension Fund, which is known to have had funding problems for some time. When the pension fund assessed withdrawal liability on the employer, the employer sought indemnification from the union. Upon a challenge on the enforceability of that indemnification provision, the court upheld the provision reasoning that it was analogous to purchasing fiduciary liability insurance, which is expressly permitted under ERISA Section 410.

While this case may be unique on its facts, it may prove helpful to contributing employers to multiemployer pension plans who wish to have the labor union they are negotiating with share some or all of the pain of a withdrawal liability from a multiemployer plan. The holding could also potentially be used to support passing along surcharges or

E.D. of Michigan Retirees Must Arbitrate Claim for Medical Benefits, Despite Anti-Arbitration Provision in CBA

January 13, 2012

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An Eastern District of Michigan court recently ruled that retired union members must arbitrate their claims seeking a lifetime of fully-paid retiree medical benefits under a CBA (UAW v. Kelsey-Hayes Co., E.D. Mich., No. 2:11-cv-14434-JAC-RSW, 12/22/11).

Prior to the plaintiffs’ retirement in the late 1990s, their collective bargaining unit and their employer entered into a CBA which required that the employer would pay the full cost of medical coverage for eligible retirees and their spouses. However, in September 2011, the employer’s successor announced that, effective January 1, 2012, it would discontinue its current healthcare plan for Medicare-eligible retirees and surviving spouses.

The union, on behalf of the retirees, filed this lawsuit alleging that they were entitled to a lifetime of fully-paid medical benefits and that the defendant employers’ conduct breached the terms of the parties’ CBA as well as their fiduciary duties under ERISA. In response, the defendants filed a motion seeking to compel arbitration of the plaintiffs’ claims pursuant to a “plant closing agreement” which was entered into in 2001 and contained a broad arbitration clause.

In granting the defendants’ motion to compel arbitration of the plaintiffs’ claims, the court rejected the plaintiffs’ contentions that (1) Sixth Circuit precedent clearly states that retirees cannot be forced to arbitrate their claims; (2) the plant closing agreement excludes retiree benefits from the general arbitration clause; (3) the terms of the CBA should govern since plaintiffs rely primarily upon the CBA and not the plant closing agreement for their claims; and (4)

State Taxation of Former Residents’ Retirement Income

State Taxation of Former Residents’ Retirement Income

December 28, 2011

Authored by: benefitsbclp

Recently, the New York State Department of Taxation and Finance issued an Advisory Opinion regarding whether New York State may impose income tax on distributions from a nonqualified deferred compensation plan made to a former resident.  Under federal law, states may not impose income tax on these retirement payments. Plan sponsors that participate in nonqualified deferred compensation plans should be aware of the tax implications of this law.

Click here to view the Alert.

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:

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