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HIPAA Continues to Apply During Coronavirus Pandemic

As the Coronavirus Disease 2019 (COVID-19) pandemic grows, employers and others may be wondering how the public health emergency created by the outbreak affects information protected under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The short answer: All HIPAA protections continue to apply. Accordingly, employer-sponsored health plans, which are “covered entities” subject to HIPAA, must continue to adhere to HIPAA’s privacy and security rules and may not use or disclosure protected health information (PHI) in a manner not already provided for under HIPAA in the absence of an applicable exception issued by the U.S. Department of Health and Human Services. As a reminder, PHI that an employee obtains when carrying out an administrative function for the plan generally cannot be shared with the employer.  For example, if in the process of performing auditing activities for the employer-sponsored health plan, an employee learns that the plan has provided coverage for the COVID-19 treatment for an employee’s child, that information is PHI and the employee is prohibited from sharing that information with the employer.

The U.S. Department of Health and Human Services Office for Civil Rights recently issued a Bulletin to remind covered entities of their continuing compliance requirements and the circumstances under which PHI may be disclosed without an individual’s authorization, including:

  • Treatment, when necessary to treat the patient or a different patient by one or more health care providers.
  • Public health activities, including disclosure to a public health authority such as the

Fiduciary Responsibilities under ERISA in an Uncertain Market

If you are an ERISA fiduciary charged with management or investment of plan assets, and recent market activity has not tripped any alarm bells — or, if the alarm bells have been tripped, but you are are looking for a bit of guidance on how to respond, then keep reading.  Due to a combination of recent factors, including the spread of the Coronavirus (COVID-19), the stock market suffered its worst drop in over 30 years this past week. Moreover, the market outlook will likely continue to be uncertain for the near future as businesses around the world adjust and take action in response to the COVID-19 outbreak and many consumers are quarantined in their homes.

In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action. As a reminder, those duties under Sections 404 and 406 of ERISA include:

  • The duty to act prudently;
  • The duty to diversify assets of the plan;
  • The duty to comply with provisions of the plan;
  • The duty of loyalty;
  • The duty to pay only reasonable plan expenses; and
  • The duty to avoid prohibited transactions.

The first three of these are particularly relevant when the market is uncertain.

  • The duty to act prudently: It is important to remember that this duty requires the fiduciary to act with the care, skill, prudence, and diligence that a prudent person acting in

IRS Relief for HDHPs Covering COVID-19 Testing and Treatment Costs

Yesterday, the Internal Revenue Service (IRS) issued Notice 2020-15 announcing that a high deductible health plan’s payment of COVID-19 (coronavirus) testing and treatment prior to satisfaction of the plan’s minimum deductible will not affect its status as a high deductible health plan.

Pursuant to Section 223(c)(2) of the Internal Revenue Code, high deductible health plans generally must require covered individuals to satisfy minimum deductibles before the plan can pay for any medical care services and items (subject to certain limited exceptions such as preventive care) in order for the covered individuals to remain “eligible individuals” for health savings account (HSA) purposes.   Under the relief provided in Notice 2020-15, this minimum deductible requirement will not apply to:

  • Medical care services and items related to testing for and treatment of COVID-19. These services and items may, therefore, be provided without a deductible or with a deductible that is less than the otherwise applicable minimum deductible.  For 2020, the minimum deductibles are $1,400 for self-only coverage and $2,800 for family coverage.
  • Any COVID-19 vaccine developed in the coming months. The IRS included a reminder that vaccines will continue to be treated as preventive care to which the minimum deductible requirement does not apply.

This is welcome news for employers sponsoring high deductible health plans who have been exploring ways in which to help alleviate the financial obstacles that may prevent employees from getting tested or seeking treatment for COVID-19 as well as for individuals with fully-insured

Employer Shared Responsibility Payments May Have No Statute of Limitations

In Chief Counsel Memorandum 20200801F, released on February 21, 2020, the IRS established its position that no statute of limitations applies to employer shared responsibility payments that may be assessed under Section 4980H of the Internal Revenue Code (the “Code”).  This IRS internal guidance should serve as a warning for applicable large employers that non-compliance with the Affordable Care Act’s employer shared responsibility rules can result in significant penalties that may be assessed at any time in the future.

The IRS bases its position on the fact that the information returns on Forms 1094-C and 1095-C do not provide sufficient information to calculate the tax liability due by an employer under Section 4980H of the Code.  In Beard v. Commissioner, 82 T.C. 766 (1984), aff’d 793 F.2d 139 (6th Cir. 1986), the tax court set forth a four-part test for determining whether a document is sufficient to start a statute of limitations under Section 6501 of the Code, with the first test requiring that the document include sufficient data to calculate the taxpayer’s tax liability.  In the IRS’s view, since neither Form 1094-C nor the Form 1095-C includes information with respect to an employee’s eligibility for a premium tax credit – which is necessary data for determining whether a Section 4980H penalty applies – an employer cannot know whether it has potential liability under Section 4980H at the time those forms are filed.  As a result, the IRS concluded that the statute of limitations

[UPDATED] New Year’s Resolution for 403(b) Plan Sponsors

[UPDATED] New Year’s Resolution for 403(b) Plan Sponsors

January 14, 2020

Authored by: Denise Erwin and Sarah Bhagwandin

UPDATE:

The IRS has posted the following information regarding extension of the deadlines for 403(b) plans a(see complete posting here).   The IRS is extending the last day of the initial remedial amendment period for Section 403(b) plans from March 31, 2020, to June 30, 2020. Plan sponsors now have until June 30, 2020, to update their pre-approved and individually designed 403(b) plan documents.

ORIGINAL POST:

Previously we posted on our blog about a deadline looming in the distance for 403(b) plan sponsors to adopt a pre-approved plan document.  Now that 2020 has arrived, the deadline is just around the corner and imminent action is required.

As you may know, if a plan sponsor retroactively adopts a pre-approved plan by the last day of the remedial amendment period on (3/31/2020), it will automatically be deemed to have corrected any form defects in the plan document it previously adopted and will be considered to be in compliance with applicable plan document requirements back to January 1, 2010.

This opportunity is important because although an individually designed plan can be amended to correct any form defects prior to the end of the remedial amendment period, the IRS has opted against establishing a determination letter program for 403(b) plans at this time.  As a result, adoption of a pre-approved plan document is the only way to obtain assurance from the IRS that a 403(b) plan document is fully compliant.

For more background and our suggested Action Steps, see our Read More

Highlights from Proposed Section 162(m) Regulations

Section 162(m) of the Internal Revenue Code disallows a deduction by any publicly held corporation for applicable employee remuneration paid with respect to any covered employee to the extent that remuneration for the taxable year exceeds $1 million.   As we’ve previously blogged here, here, and here, the bill popularly referred to as the Tax Cuts and Jobs Act of 2017 significantly amended and expanded the scope of Section 162(m) for taxable years beginning after December 31, 2017, including by eliminating its performance-based compensation exception.  Now, Proposed Regulations on the amended Section 162(m) have been released which expand on the entities, individuals and compensation that are now subject to Section 162(m).

This blog highlights some of the common questions that the Proposed Regulations attempt to clarify. The Proposed Regulations supersede (but largely confirm) the guidance in Notice 2018-68 (released in August 2018) and will generally be effective for taxable years beginning after the publication of the final regulations, except with respect to guidance relating to covered employees and grandfathered arrangements, which will be effective as of September 10, 2018.

  1. What does it mean to be a “publicly held corporation”?

A publicly held corporation includes any corporation whose securities (debt or equity) are required to be registered under Section 12 of the Exchange Act or that is required to file reports under Section 15 of the Exchange Act, in each case, as of the

ISS Updates its U.S. Compensation and Equity Compensation Plan Policies for 2020

In December 2019, Institutional Shareholder Services (“ISS”) published updates to its FAQs for its U.S. Compensation Policies and its policies related to U.S. Equity Compensation Plans with respect to annual meetings occurring on or after February 1, 2020.  While ISS did not make major changes for 2020, reporting companies should be aware of the following key updates.

  • The passing scores for all U.S. Equity Plan Scorecard (“EPSC”) models remain the same as in effect for the 2019 proxy season (55 points for S&P 500 reporting companies, 53 for other reporting companies). However, ISS made the following notable changes and clarifications to EPSC’s scoring model:
    • An evergreen feature (i.e., automatic share replenishment without the need for additional stockholder approval) in an equity plan submitted for stockholder approval will be considered a negative overriding factor which may result in a negative vote recommendation. Sunset provisions applicable to such evergreen features will not be considered as a mitigating factor.
    • While the passing scores for EPSC models remain unchanged, certain factor scores within the models have been adjusted (but not disclosed since they are proprietary).
    • Limited partnership interests, including operating partnership units issued by REITs, will be included in common shares outstanding (CSO) for purposes of shareholder value transfer (SVT) and burn rate calculations if such interests are equivalent to common stock on a 1:1 basis and can be exchanged into common stock at any time at no cost to the holder.
  • ISS confirmed

IRS Releases 2020 Adjusted Qualified Plan Limitations

The Internal Revenue Service released the cost-of-living adjusted qualified retirement plan limitations effective January 1, 2020.  For ease of reference and comparison to prior years, we have placed the adjusted limitations in the table below.  For more information, refer to the Internal Revenue Service’s news release and Notice 2019-59 and to the Social Security Administration’s October 10, 2019, fact sheet.

Qualified Plan Limits

Type of Limitation 2020 2019 2018 2017 2016 Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $19,500 $19,000 $18,500 $18,000 $18,000 Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,500 $6,000 $6,000 $6,000 $6,000 SIMPLE Salary Deferral $13,500 $13,000 $12,500 $12,500 $12,500 SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $3,000 $3,000 $3,000 415 limit for Defined Benefit Plans $230,000 $225,000 $220,000 $215,000 $210,000 415 limit for Defined Contribution Plans $57,000 $56,000 $55,000 $54,000 $53,000 Annual Compensation Limit $285,000 $280,000 $275,000 $270,000 $265,000 Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993  

$425,000  

$415,000  

$405,000  

$400,000  

$395,000 Highly Compensated Employee 414(q)(1)(B) $130,000 $125,000 $120,000 $120,000 $120,000 Key employee in top heavy plan (officer) $185,000 $180,000 $175,000 $175,000 $170,000 Tax Credit ESOP Maximum balance $1,150,000 $1,130,000 $1,105,000 $1,080,000 $1,070,000 Amount for Lengthening of 5-Year ESOP Period $230,000 $225,000 $220,000 $215,000 $210,000 Taxable Wage Base $137,700 $132,900 $128,400 $127,200 $118,500

The CCPA: Employee Data Requirements May Be Delayed, But Do Not Appear to be Going Away

July 12, 2019

Categories

Action is currently underway to amend the California Consumer Privacy Act (“CCPA”) to provide employers an additional year to comply with the CCPA with respect to employee data of California-based employees.

The California Senate Judiciary Committee has passed AB-25, an amendment to the CCPA that would delay most of the compliance obligations for employee data until January 1, 2021. Specifically, the amendment provides that employees are not “consumers” for most purposes of the statute until January 1, 2021.

If the legislature passes the bill, the CCPA will still apply to employers with California-based employees in the following ways, effective January 1, 2020:

  • Employees will be able to sue employers for a data breach involving their unencrypted data
  • Employers must provide a notice to employees describing the categories of employee information collected, used and disclosed by the employer.

While there have been many predictions that the CCPA would be amended to remove employee data from the requirements of the statute altogether, if the California state legislature approves the bill amending the CCPA, the effect will be to simply delay the compliance obligations for employers for a year.

For now the bill is with the Senate Appropriations Committee for hearing and another round of voting.  Assuming Appropriations votes to pass the bill, it will go to the Floor for a vote.  The Appropriations Committee has until August 30th to vote on bills.

Employer CCPA FAQs #9: May an employer become subject to the CCPA because of a corporate transaction?

As our series of FAQs regarding the California Consumer Privacy Act (“CCPA”) continues we are examining the scope of the law’s jurisdiction.    These FAQs should help employers determine if they are required to comply with the CCPA and if so, what steps their HR professionals and IT departments should take to be in compliance.

As a reminder, the CCPA is a new privacy law that applies to data collected about California-based employees.   The CCPA will go into effect in early 2020, and employers who must comply should be addressing compliance obligations now.

For US employers who have not had to comply with the GDPR, the requirements of the CCPA will likely require a new analysis of the treatment of employee-data and implementation of updated or new data policies.  For employers with European operations, one key area of interest is the degree to which the CCPA aligns with the European General Data Protection Regulation (“GDPR”).   Employers in compliance with the GDPR will likely already be familiar with many of the requirements of the CCPA – and with some assistance, should be able to bring their operations and policies into compliance with respect to California-based employees.

BCLP offers a complete compliance program to employers that includes a formal gap assessment as well as policies, procedures, and protocols to close identified gaps.  If you or your organization would like information on this compliance program or any other issue, please contact us or one of your other trusted BCLP attorneys.

Question #9: May

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