Spencer Fane LLP Logo
Latest Posts

IRS Again Grants ACA-Reporting Relief (Plus a Limited Bonus)

In Notice 2019-63, the IRS has granted health insurers and large employers 30 more days to issue the appropriate 2019 ACA-reporting forms to their insureds and full-time employees.  Rather than January 31, 2020, these Forms 1095-B and 1095-C will now be due by March 2, 2020.  The IRS has also extended the “good-faith” standard for compliance with these reporting rules.  Finally, in view of the zeroing out of the penalty for failing to comply with the ACA’s individual mandate, insurers and large employers will now have an additional compliance option.

2020 Inflation Adjustments

Following announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need in order to administer their benefit plans for 2020.  The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2020 limits card.

The reverse side of the card shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as health plans that are not grandfathered under the Affordable Care Act.

A laminated version of our 2020 limits card is available upon request.  To obtain one or more copies, please contact any member of our Employee Benefits Group.  You also can contact the Spencer Fane Marketing Department at 816-474-8100 or marketing@spencerfane.com.

Department of Labor Proposes New Safe Harbor for Electronic Disclosures

The U.S. Department of Labor (DOL) has proposed a  new “safe harbor” rule to allow retirement plan disclosures to be posted online (assuming certain notice requirements are satisfied) to reduce printing and mailing expenses for plan sponsors and to make the disclosures more readily accessible and useful for plan participants.

IRS Finalizes Hardship Distribution Rules

The IRS has issued final regulations modifying and clarifying the rules for in-service hardship distributions from 401(k) and 403(b) plans.  The final regulations are substantially similar to the proposed regulations issued in November of 2018, but they contain a few changes of which plan sponsors should be aware.

An Uncashed Check is Taxable

The IRS issued Revenue Ruling 2019-19 to describe the tax and reporting treatment of uncashed distribution checks from tax-qualified retirement plans.  The ruling describes a situation in which a plan is required to make a distribution and the participant receives the distribution check, but does not cash it.  The ruling makes clear that, regardless of why the participant does not cash the check (or even if the participant cashes the check in a later year), the distribution is subject to applicable tax withholding and reporting in the year in which the distribution is made.  In addition, the participant must include the distribution in his or her gross income for that same year.

SEC Adopts Rulemaking Package – “Solely Incidental” Broker-Dealer Exclusion

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.

This is the fourth in a series of articles describing the SEC’s rulemaking package.  This article addresses the SEC’s Interpretation of the “Solely Incidental” Broker-Dealer Exclusion.  That exclusion allows broker-dealers to provide certain advisory services without becoming subject to regulation as investment advisers under the Advisers Act, as long as those services are “solely incidental” to the broker-dealers’ core business.  The SEC’s new interpretation of this exclusion provides some helpful guidance for broker-dealers and dually-registered firms.

SEC Adopts Rulemaking Package – Form CRS

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.  These rules include a new set of disclosure requirements to address retail investor confusion over brokerage and investment advisory services.

This is the third in a series of articles describing the SEC’s rulemaking package.  This article provides an overview of the Form CRS – Relationship Summary portion of the package.

SEC Adopts Rulemaking Package – Investment Adviser Standard of Conduct

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.  In a series of four articles, Spencer Fane LLP outlines the SEC’s rulemaking package.  Our first article summarized “Regulation Best Interest” a new standard of conduct governing broker-dealers.  In this second article, we describe the SEC’s interpretation of the standard of conduct that applies to investment advisers when they engage with their clients.

SEC Adopts Rulemaking Package – Regulation Best Interest

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that is applicable to investment advisers and broker-dealers.  The package includes two final rules and two interpretations – Regulation Best Interest, Investment Adviser Standard of Conduct Interpretation, Form CRS – Relationship Summary, and Solely Incidental Broker-Dealer Exclusion Interpretation.  The Regulation Best Interest and Form CRS requirements are effective 60 days after they are published in the Federal Register, with a transition period for compliance that ends on June 30, 2020.  The SEC’s interpretations are effective immediately upon publication in the Federal Register.  In a series of four articles, Spencer Fane LLP outlines the SEC’s rulemaking package.  This first article describes the Regulation Best Interest portion of the SEC’s package.

2017 Tax Cuts and Jobs Act Breathes New Life Into Old Trick For Dealing With Participant Loans in Corporate Transactions

One of the more difficult issues in corporate transactions that are structured as asset purchases is how to deal with outstanding participant loans.  In the typical asset purchase scenario – where the purchaser does not assume sponsorship of, or accept a transfer of assets from, the seller’s retirement plan – employees of the seller who become employed by the asset purchaser generally incur a termination of employment with the seller, and therefore a distributable event under the seller’s 401(k) plan.  If a participant has an outstanding loan at the time of the asset sale, then unless the distribution is paid in a direct rollover to another employer plan that is willing to accept a rollover of a participant loan, the participant must either (i) pay off the loan before taking the distribution, or (ii) incur a potentially taxable “plan-loan offset” (where the participant’s account balance is reduced, or offset, by the outstanding loan balance).

IRS (Finally) Answers Questions re: 2019 Hardship Distributions

On November 9, 2018, the IRS issued proposed amendments to the regulations under Code Section 401(k) that describe the circumstances under which participants may take an in-service distribution of elective deferrals (and contributions subject to similar withdrawal restrictions, such as QMACs, QNECs and safe-harbor contributions) on account of financial hardship. The proposed amendments to the regulations reflect several statutory changes to 401(k) plans since the Pension Protection Act of 2006, including the recent changes (that are scheduled to apply to hardship distributions in plan years beginning after December 31, 2018) under the Bipartisan Budget Act (“BBA”) of 2018. Most importantly, the amendments answer several questions that plan sponsors and plan administrators have had with respect to both the BBA and the Tax Cuts and Jobs Act (“TCJA”) of 2017, and provide some much-needed transition relief for hardship distributions made in 2019.

2019 Inflation Adjustments

Following announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need to administer their benefit plans for 2019. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2019 limits card.

The reverse side of the card shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as health plans that are not grandfathered under the Affordable Care Act.

A laminated version of the 2019 limits card is available upon request. To obtain one or more copies, please contact any member of our Employee Benefits Group. You also can contact the Spencer Fane Marketing Department at 816-474-8100 or marketing@spencerfane.com.

IRS Updates Required Tax Notice to Address Plan Loan Offsets and Other Law Changes

The IRS has updated the model notice (sometimes referred to as the “402(f) Notice” or “Special Tax Notice”) that is required to be provided to participants before they receive an “eligible rollover distribution” from a qualified 401(a) plan, a 403(b) tax-sheltered annuity, or a governmental 457(b) plan.  Notice 2018-74, which was published on September 18, 2018, modifies the prior safe-harbor explanations (model notices) that were published in 2014. Like the 2014 guidance, the 2018 Notice includes two separate “model” notices that are deemed to satisfy the requirements of Code Section 402(f):  one for distributions that are not from a designated Roth account, and one for distributions from a designated Roth account. The 2018 Notice also includes an appendix that can be used to modify (rather than replace) existing safe-harbor 402(f) notices. 

Cyber Liability Insurance for Employee Benefit Plans: Hackers and Malware and Phishing – Oh My!

Cyberattacks have managed to invade all walks of life, and employee benefit plans are no exception.  When a plan is attacked, the fallout can be overwhelmingly expensive and burdensome to correct.  Many plan sponsors are purchasing cyber liability insurance coverage to supplement their data security measures.  Understanding those policies – and their exclusions – is important for sponsors who are exploring such coverage.

Federal Appellate Court Decision Highlights Importance of “Firestone” Language

In a recent decision, the Sixth U.S. Circuit Court of Appeals resolved an important question in a way that should put administrators of ERISA plans in a far stronger position vis-à-vis claimants who disagree with the administrators’ plan interpretations.  Essentially, the court in Clemons v. Norton Healthcare Retirement Plan held that the contract-interpretation doctrine of “contra proferentum” has no application once a court has determined that a plan document grants the administrator the type of broad discretion approved by the U.S. Supreme Court in its 1989 Firestone decision.

Health Plans’ Anti-Assignment Clauses Upheld by Two More Federal Appellate Courts

Over the past two months, the United States Court of Appeals for both the Ninth Circuit and the Third Circuit have upheld “anti-assignment” clauses in ERISA-governed health plan documents.  These holdings – which adopt the same position previously taken by the First, Second, Fifth, Tenth, and Eleventh circuits – are a blow to healthcare providers that attempt to bring suits against employer-sponsored health plans (or the insurance companies funding benefits under those plans) as “assignees” of individual plan participants. 

The SEC’s Fiduciary Proposal – Form CRS

On April 18, the Securities and Exchange Commission issued a proposal package that includes two new rules and one interpretative release.  The package consists of three components – Regulation Best Interest, Investment Adviser Standard of Conduct Interpretation, and Form CRS – Relationship Summary.   According to the SEC, the proposal is intended to balance investor protections and regulatory requirements with investor access and choice.  Each component of the proposal is available for public comment for 90 days after publication in the Federal Register.

In a series of three articles, Spencer Fane LLP describes the SEC’s proposal and potential impacts on broker-dealers and investment advisers.  This third article describes the Form CRS – Relationship Summary portion of the SEC’s fiduciary proposal.

The SEC’s Fiduciary Proposal – Investment Adviser Standard of Conduct

The Securities and Exchange Commission voted on April 18 to issue a proposal package that includes two new rules and one interpretative release.  According to the SEC, each component of the proposal – Regulation Best Interest, Investment Adviser Standard of Conduct Interpretation, and Form CRS – Relationship Summary – is intended to enhance investor protections and regulatory clarity while maintaining investor access and choice.  Each part of the SEC’s proposal is available for public comment for 90 days after publication in the Federal Register.

In a series of three articles, Spencer Fane LLP describes the SEC’s proposal and potential impacts to broker-dealers and investment advisers.  This second article describes the Investment Adviser Standard of Conduct Interpretation.

The SEC’s Fiduciary Proposal – Regulation Best Interest

In an open meeting on April 18, the Securities and Exchange Commission voted four to one to issue two new rules and one interpretative release that are intended to provide investor protections and regulatory clarity, as well as investor access and choice.  Specifically, the SEC issued Regulation Best Interest, Investment Adviser Standard of Conduct Interpretation, and Form CRS – Relationship Summary.  Each component of the SEC’s proposal is available for public comment for 90 days after publication in the Federal Register.  In a series of three articles, Spencer Fane LLP describes the SEC’s proposal and potential impacts on broker-dealers and investment advisers.  This first article describes the Regulation Best Interest portion of the SEC’s fiduciary proposal.

Here We Go Again… Fifth Circuit Strikes Down DOL’s Fiduciary Rule

In a significant blow to the Department of Labor’s controversial regulation re-defining what constitutes an investment-advice fiduciary, a split three-judge panel of the Fifth Circuit Court of Appeals ruled on March 15 that the DOL exceeded its authority when creating the rule.  The 2-1 decision of the appellate court strikes down the regulation and its associated prohibited transaction exemptions in their entirety.  (Chamber of Commerce v. U.S. Dept. of Labor (5th Cir. March 15, 2018)).  In its wake, the court’s decision leaves even more of the confusion that has plagued the DOL’s 2016 rulemaking.

Investment Advisers and Conflicts Of Interest

The Department of Labor and the Securities and Exchange Commission have expressed concerns regarding potential conflicts of interest that investment advisers do not explicitly disclosed.  Thus, plan fiduciaries may not be aware of such conflicts when they engage and monitor their plan’s investment consultant.  These concerns were recently highlighted when the SEC launched an initiative in connection with investment advisers’ selection or recommendation of a higher-cost mutual fund share class for their clients when a lower-cost share class of the same fund is available.  The SEC’s initiative reminds plan fiduciaries of the importance of obtaining appropriate information to fulfill their fiduciary obligations when engaging and monitoring investment advisers.

SEC Launches Share Class Selection Disclosure Initiative

The Securities and Exchange Commission recently announced a temporary program for investment advisers who may have inadequately disclosed potential conflicts of interest related to their selection or recommendation of mutual fund share classes. Participation in the program, however, is not without its drawbacks.

Congress Eases Restrictions on Hardship Withdrawals

Buried in Sections 41113 and 41114 of the recent Bipartisan Budget Act of 2018 are provisions designed to facilitate hardship withdrawals from 401(k) and 403(b) plans.  Because these provisions take effect for plan years beginning after December 31, 2018, sponsors of these plans will want to consider whether to broaden their hardship withdrawal provisions – or even add such provisions.

Tax Cuts and Jobs Act – Modified Rules for UBTI

For many years tax exempt organizations and retirement plan trusts have been permitted to avoid tax on income generated by unrelated trades or businesses they hold by netting the gains, losses, and deductions among those trades or businesses.  The Tax Cuts and Jobs Act modifies those rules, increasing the likelihood that such entities must report, and pay tax on, UBTI.

New Disability Claims and Appeals Procedures Finally Take Effect

When the Department of Labor (“DOL”) delayed by 90 days the date by which ERISA plans were required to comply with a set of disability claims and appeals regulations issued in the waning days of the Obama Administration, we predicted that a further delay – or even a complete withdrawal – of the regulations could be in the works.  As it turns out, we were wrong.  Instead, the DOL announced in early January that the regulations will become fully applicable on April 1st – and without change.

Tax Cuts and Jobs Act – New Rules for Retirement Plans and IRAs

Although the main feature of the Tax Cuts and Jobs Act is a significant reduction in the corporate federal income tax rate, the Act also makes a number of significant changes to the rules governing employer-sponsored retirement plans and individual retirement accounts.  From plan loans to hardship withdrawals and Roth recharacterizations, employers should make sure that they understand how these new rules might affect them.

Tax Cuts and Jobs Act – Affordable Care Act Changes

Although the recent Tax Cuts and Jobs Act eliminates the ACA individual mandate, the employer mandate, ACA benefit mandates, and ACA reporting requirements remain in effect.  Thus, employers should continue to be mindful of and comply with their obligations under the ACA.

Tax Cuts and Jobs Act – New Executive Compensation Rules

This is the second in a series of articles by which the Spencer Fane LLP Employee Benefits Practice Team will explain key changes made in the employee benefits area by the Tax Cuts and Jobs Act (Public Law 115-97), which was signed into law on December 22, 2017.  In addition to establishing new rules for transportation fringe benefits (see our first article in this series), the Act makes a number of changes that may affect how employers structure their executive compensation programs.  This article describes the Act’s impact on for-profit employers, and outlines options that those employers should consider for their compensation arrangements.

Tax Cuts and Jobs Act – New Tax Rules For Transportation Fringe Benefits

Although the recent Tax Cuts and Jobs Act largely retains the favorable tax treatment afforded employees who receive employer-provided transportation assistance, it denies employers any tax deduction for providing these tax-favored benefits. Moreover, tax-exempt employers will now be subject to unrelated business income tax on such benefits. Because the new rules took effect as of January 1, 2018, employers currently sponsoring such programs should promptly evaluate their options.

It’s a Three-Peat: ACA-Reporting Deadline Extended Once Again

The Affordable Care Act (“ACA”) imposed reporting requirements on health coverage providers (including self-funded employer plans) and “applicable large employers” (those with 50 or more full-time employees). For health coverage provided during both 2015 and 2016, the IRS extended the deadline for issuing certain of the required reporting forms. In Notice 2018-06, the IRS has now granted a similar extension with respect to reporting health coverage provided during calendar-year 2017.

IRS Issuing Employer Play-or-Pay Notices

Although the GOP tax reform bill reduces to zero the penalty for failing to comply with the Affordable Care Act’s individual coverage mandate, it does nothing to alleviate the employer ACA mandate.  Coincidentally, the IRS has just started issuing notices of potential penalty assessments under that employer mandate (commonly known as the “play-or-pay” provision).

These notices take the form of a “Letter 226J” (this notation appears in the footer of each page), and the Letter makes crystal clear the amount of the potential penalty assessment (which can be substantial).  This dollar amount appears in bold on the second line of the Letter’s text.

Fiduciary Rule – Status Quo until July 1, 2019

On November 29, 2017, the Department of Labor granted an extension of the transition period for the Fiduciary Rule’s Best Interest Contact Exemption and Principal Transaction Exemption, and delayed the applicability date of the amendments to Prohibited Transaction Exemption 84-24. The new transition period will end on July 1, 2019, rather than January 1, 2018. The Department also extended the temporary enforcement policy in Field Assistance Bulletin 2017-02 to July 1, 2019. Thus, financial institutions and advisers impacted by the Fiduciary Rule and related exemptions remain subject to the same requirements as they have been since June 9, 2017, when the Fiduciary Rule and the Impartial Conduct Standards became applicable.

GOP Tax Bill Contains Benefits Surprises

Despite rumors to the contrary, the tax bill introduced into the House of Representatives by the Republican Party leadership would do nothing to restrict employees’ ability to make pre-tax deferrals to 401(k), 403(b), or 457(b) plans. Trial balloons had suggested that pre-tax deferrals might be limited to only half of the overall annual deferral limit (or even less), with any remaining deferrals made only on a “Roth” (after-tax) basis. But at least for now, “Rothification” appears to be dead.

What the House bill would do, however, is perhaps even more surprising. A slew of tax-favored fringe benefits would be eliminated. And nonqualified deferred compensation as we now know it would be entirely transformed. Incredibly enough, most of these changes would take effect as of January 1, 2018 – less than two months after the bill’s introduction.

2018 Inflation Adjustments

Following announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need to administer their benefit plans for 2018. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2018 limits card.

The reverse side of the card shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as health plans that are not grandfathered under the Affordable Care Act.

A laminated version of the 2018 limits card is available upon request. To obtain one or more copies, please contact any member of our Employee Benefits Group. You also can contact the Spencer Fane Marketing Department at 816.474.8100 or marketing@spencerfane.com.

Administration Proposes Delay of Disability Claims and Appeals Procedures

The Department of Labor has proposed a 90-day delay in the applicability of disability claims and appeals regulations that were finalized in the waning days of the Obama Administration. Rather than applying to claims filed on or after January 1, 2018, the regulations would now apply to claims filed on or after April 1, 2018. Moreover, it seems likely that a further delay – or even a complete withdrawal – of the regulations could be in the works.

Bifurcated Distribution Options Made Easier

Earlier this year, the IRS issued Notice 2017-44. This Notice provides model amendments that plan sponsors may use to amend qualified defined benefit plans to offer a bifurcated distribution option. Because the IRS has terminated its determination letter program (except in limited circumstances), plan sponsors may find the model language helpful as they consider design changes to their defined benefit plans for 2018.

Cyber-attacks – A Universal Issue

The Federal Bureau of Investigation has cautioned organizations, regardless of industry, that cyber-attacks continue to increase and evolve. Cyber-attacks often target digital files containing sensitive and proprietary data. Thus, the operational, financial and reputational impact caused by cyber-attacks to an organization, either directly or through its service providers, can be significant.

To illustrate the widespread acknowledgement across industries of the importance of cybersecurity, this article describes: 1) best practices identified by the Securities and Exchange Commission Office of Compliance Inspections and Examinations for designing cybersecurity programs, and 2) guidance issued by the Department of Health and Human Services Office for Civil Rights under the Health Insurance Portability and Accountability Act for responding to cyber-attacks.

The Ins and Outs of Opt-out Incentives

As annual open enrollment season approaches, many employers may be evaluating ways in which to control rising health plan costs. One strategy frequently considered is a financial incentive for employees to waive or opt out of the employer-sponsored group health coverage. Although such “cash-in-lieu” or “opt-out” arrangements have long been common, they raise potential problems under the Affordable Care Act (“ACA”), as well as a number of other federal laws.

The Fiduciary Rule is Alive

According to U.S. Labor Secretary Alexander Acosta, the Department of Labor’s Fiduciary Rule will become effective on June 9th. As discussed in our May 9th article, the Rule’s expanded definition of “fiduciary” will apply, and advisers and financial institutions providing investment advice as fiduciaries must comply with the Rule’s “impartial conduct” standards, beginning on June 9, 2017. At this time, the full scope of the Fiduciary Rule and its related prohibited transaction exemptions will be applicable on January 1, 2018.

Treatment of “Collateral” Employees Under Retirement Plans

It is common for employers to contract with one or more third parties (sometimes referred to as “leasing companies”) to provide individuals to perform services for the employer. Various issues may arise regarding the treatment of such individuals under a retirement plan maintained by the employer.

DOL’s Fiduciary Rule Countdown

For investment advisers and financial institutions, the countdown to compliance with the Department of Labor’s new “conflict of interest” rule ends on June 9, 2017. The Department of Labor (“DOL”) issued a final rule on April 7, 2017, that delays the original applicability date of its conflict of interest regulation (the “Fiduciary Rule”) and its related prohibited transaction exemptions for 60 days, creating a “Transition Period” that starts on June 9, 2017, and ends on December 31, 2017.

DOL Fiduciary Rule Enforcement – Confusion and Disruption Relief

The Department of Labor (“DOL”) has proposed to delay for 60 days the “applicability date” of the Fiduciary Rule (“Rule”), and the new and revised prohibited transaction exemptions related to the Rule. The proposed delay has created confusion within the financial services industry because it is not certain that a final rule implementing the delay can be published (and become effective) before the Rule’s April 10th applicability date. In response to the confusion, the DOL issued Field Assistance Bulletin 2017-01 (“Bulletin”) announcing a temporary enforcement policy that assures advisers and financial institutions that the DOL will not seek to enforce the Rule or the related prohibited transaction exemptions in the event the Rule becomes applicable before it is officially delayed.

IRS Clarifies Permissible Substantiation Procedures for Hardship Withdrawals

In recent years, sponsors and administrators of 401(k) and 403(b) plans have received conflicting advice on the steps they should take to substantiate an employee’s entitlement to an in-service withdrawal on account of financial hardship. For instance, an April 2015 IRS newsletter seemed to require that plan sponsors obtain and retain documentary proof of an employee’s entitlement to a hardship withdrawal. However, two recent internal IRS memos outline a permissible approach to this substantiation requirement that need not involve conditioning a hardship withdrawal on an employee’s provision of supporting documents. Plan sponsors should thus consider this new alternative.

SEC Issues Robo-Adviser Guidance

The increased popularity of automated digital investment advisory programs (often called “robo-advisers”) has drawn the attention of the Securities and Exchange Commission (“SEC”). On February 23, 2017, the SEC’s Division of Investment Management issued Guidance Update No. 2017-02 (the “Update”). That Update provides guidance to robo-advisers as they seek to satisfy their disclosure, suitability, and compliance obligations under the Investment Advisers Act of 1940 (“Advisers Act”). On the same day, the SEC’s Office of Investor Education and Advocacy issued an Investor Bulletin to educate investors about robo-adviser programs.

DOL Proposes 60-Day Delay for Fiduciary Rule

After nearly a month of regulatory machinations and behind-the-scenes lobbying, the Department of Labor has released a proposed rule that would delay the “applicability date” of its recently enacted “conflict of interest” (or “fiduciary”) regulation (the “Fiduciary Rule”). The 60-day delay in the applicability of the Fiduciary Rule would have only an indirect effect on employers, but is of great interest to investment advisors and other service providers.

IRS Extends Deadline for Providing Small-Employer HRA Notices

As explained in our December 19, 2016, article, the 21st Century Cures Act allows small employers (those that are not subject to the Affordable Care Act’s “play-or-pay” requirements because they have fewer than 50 full-time employees, including full-time equivalents) to offer their employees a premium reimbursement arrangement that would otherwise violate the ACA. By establishing a “qualified small employer health reimbursement arrangement” (or “QSEHRA”), such an employer may subsidize its employees’ purchase of individual health insurance coverage. In its recent Notice 2017-20, the IRS has granted these employers additional time to comply with the QSEHRA notification requirement.

IRS: No More Closing Agreements Under FICA “Special Timing Rule”

A recent IRS Chief Counsel Memorandum (AM 2017-01) raises the stakes for employers that fail to apply the proper FICA taxation rules to nonqualified deferred compensation. An option previously available to those employers has been taken off the table. Under this option – which required a formal “Closing Agreement” with the IRS – both employer and employee FICA taxes could be minimized by voluntarily paying those taxes for years as to which IRS assessments were otherwise barred under the Tax Code’s three-year statute of limitations. Without this correction option, employers have an even greater incentive to apply the proper FICA taxation rules to their deferred compensation arrangements.

Trump Orders DOL to “Reconsider” Fiduciary Rule

On Friday, February, 3, 2017, President Trump issued a Memorandum directing the Secretary of Labor to “re-examine” the Department of Labor’s final regulation defining “fiduciary” investment advice (sometimes referred to as the “Fiduciary Rule” or the “Conflict of Interest Rule”), and to consider whether the Rule should be revised or rescinded. The Rule, which significantly expands the circumstances under which an individual becomes a “fiduciary” by reason of providing investment advice for a fee, was finalized in April of 2016, and technically became effective last July, but was drafted such that its provisions generally do not become “applicable” to financial advisers until April 10, 2017.

DOL Disability Regulations and the Impact on ERISA Plans

The Department of Labor has issued final regulations under Section 503 of ERISA that purport to enhance the disability benefit claims and appeals process for plan participants. These regulations amend the DOL’s disability claims procedure regulations issued in 2002. The new regulations generally affect the procedures for filing disability benefit claims, providing notice of adverse benefit determinations, and appealing adverse benefit determinations.

SEC Guidance Update and the DOL’s Fiduciary Rule

In December, the Division of Investment Management of the Securities and Exchange Commission issued Guidance Update No. 2016-06. The Update provides disclosure and procedural guidance to address potential issues for mutual funds responding to the Department of Labor’s adoption of the Conflict of Interest Rule. To address concerns by financial intermediaries that variations in mutual fund sales loads may violate the Rule, Funds are exploring various options, including changing fee structures and creating new share classes. Such changes may impact fiduciary decisions regarding a plan’s investments and compensation arrangements.

Cures Act Allows for Small-Employer HRAs

Before leaving DC for the winter holidays, Congress and President Obama agreed on a provision granting small employers a bit of relief from the Affordable Care Act. Tucked at the very end of the 21st Century Cures Act is a provision allowing certain small employers to offer their employees a health reimbursement arrangement (“HRA”) that need not be “integrated” with a group health plan. Employees may then use their employer’s pre-tax contributions to such an HRA to pay premiums under individual health insurance policies.

ACA-Reporting Deadline Extended by 30 Days

The Affordable Care Act (“ACA”) imposed additional reporting requirements on health coverage providers (including self-funded employer plans) and “applicable large employers” (those with 50 or more full-time employees). In Notice 2016-70, the IRS has granted coverage providers and employers 30 more days to issue the appropriate ACA-reporting forms to their insureds and full-time employees for coverage provided during 2016. Rather than January 31, 2017, these Forms 1095-B and 1095-C will now be due by March 2, 2017. In addition, the IRS has extended by one year the period of “good-faith compliance” with these reporting rules. As of now, however, the IRS has not extended the deadline for coverage providers and employers to transmit these ACA-reporting forms to the IRS.

2017 Inflation Adjustments

Following recent announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need to administer their benefit plans for 2017. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2017 limits card.

IRS Issues Long-Awaited Guidance Regarding (Nonqualified) Deferred Compensation Arrangements of Governmental and Tax-Exempt Employers

Deferred compensation arrangements that are not “tax-favored” retirement plans under Code Sections 401(a), 403(b), or (in the case of a governmental employer) 457(b) are generally referred to as “nonqualified” plans. So long as a nonqualified plan is “unfunded” (meaning the amounts deferred remain the property of the employer, and subject to the employer’s general creditors, until paid), the amounts deferred are generally not taxable until they are “paid or otherwise made available” to the employee.

EEOC Releases Sample ADA Notice for Employee Wellness Programs

In our June 2, 2016, article summarizing final wellness program regulations issued by the EEOC under Title I of the Americans with Disabilities Act (“ADA”), we noted the EEOC’s promise to post on its website a sample notice by which employers could satisfy the ADA’s notification requirements. The EEOC has today posted such a sample notice, along with a series of FAQs shedding further light on the notification requirement. Although employers are not required to use this sample notice, they should make sure that their notice covers all the points addressed in the EEOC sample.

New EEOC Guidance on Employee Wellness Programs

Final regulations issued by the Equal Employment Opportunity Commission (“EEOC”) under both the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”) will require modifications to many employee wellness programs. These modifications may include the deletion of certain questions from health risk assessments, additional employee notification requirements, and a reduction in the incentives used to discourage tobacco usage. Although certain aspects of these regulations will not apply until the first day of the 2017 plan year, others are already in effect.

DOL Releases Final Regulation Defining Investment Fiduciaries

After years of effort, the Department of Labor released final rules on April 6, 2016, that will substantially alter the way investment advice is provided to ERISA plans, their participants, and even non-ERISA IRAs.

You Can Run But You Can’t Hide: HIPAA Audits are Coming

On March 21, 2016, the HHS Office for Civil Rights (OCR) announced that it has begun “Phase 2” of audits of covered entities and their business associates for compliance with the HIPAA Privacy, Security and Breach Notification Rules (“HIPAA Rules”). Phase 1 was limited to a pilot program designed to develop a standard set of audit protocols.

HIPAA Hodgepodge

After more than ten years, HIPAA is still a hot topic. Here is a rundown of recent developments.

You’ve (Still) Got to Be Kidding: Supreme Court Holds ERISA Plan Participants May Ignore Reimbursement Provisions If They Spend the Money Fast Enough

The Supreme Court has handed down its latest in a long line of decisions on enforcing the reimbursement provisions of self-funded ERISA welfare plans. As evidenced by the Court’s lopsided 8-1 decision, the result in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan will not surprise those familiar with the law in this area. But as indicated by Justice Ginsburg’s indignant dissent, plan sponsors may find the decision downright bizarre. After all, it tells participants who double-recover for medical benefits paid by their employer’s health plan that they’re off the hook – if they spend the money fast enough.

Another Court Rejects EEOC Position on ADA and Wellness Programs

Following the lead of Seff v. Broward County, another federal court has disagreed with the EEOC on the scope of an ADA exemption for employee benefit plans. In EEOC v. Flambeau, Inc., the court held that this benefit-plan “safe harbor” could be used to justify a wellness program that included both a health risk assessment and a biometric screening.

IRS Extends ACA-Reporting Deadlines

In a belated Christmas present, the IRS on December 28th extended the deadlines for large employers and health insurers to comply with certain reporting requirements imposed by the Affordable Care Act (“ACA”).  Notice 2016-4 grants an additional two months to provide statements to employees, and an additional three months to transmit those statements to the IRS.

IRS Issues Guidance for Integrated HRAs

In a recent Chief Counsel Advice (CCA 201547006), the IRS has provided guidance for employers wishing to offer health reimbursement arrangements (“HRAs”) that both (1) provide reimbursements on a tax-free basis, and (2) satisfy the “market reform” requirements of the Affordable Care Act (“ACA”). In particular, this CCA focuses on HRAs (and similar “employer payment plans”) that reimburse employees for medical premiums paid for coverage under a health plan maintained by a spouse’s employer.

Prohibited Transactions: Co-investments Involving Qualified Retirement Plans

Under both ERISA and the Internal Revenue Code, certain transactions involving qualified retirement plans and “disqualified persons” or “parties in interest” (such as a plan trustees) are prohibited. One example of a “prohibited transaction” involves a plan fiduciary (e.g., plan trustee) using plan assets to purchase property for his own benefit or as an indirect loan because he cannot afford the purchase without the plan assets (ERISA § 406).

2016 Inflation Adjustments

Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2016. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of this card.

Certain Mid-Sized Employers May Have Even MORE Time to Comply with the ACA’s Play-or-Pay Rules

Thanks to a special transition rule, employers with 50 to 99 full-time employees (including full-time equivalents) are generally shielded from the Affordable Care Act’s “play-or-pay” penalties until January 1, 2016. Moreover, in a wrinkle that is easily overlooked, any such “mid-sized” employer that already sponsors a health plan operating on a non-calendar-year basis has even more time to comply with these rules.

Same-Sex Marriage Ruling Impacts Benefit Plans (Again)

On Friday, June 26, 2015, the Supreme Court published its ruling in Obergefell v. Hodges, holding (by a 5 to 4 margin) that the Fourteenth Amendment requires a state to license marriages between two people of the same sex, and to recognize any such marriage that is lawfully licensed and performed out-of-state. As a result, all (remaining) state laws or constitutional amendments banning same-sex marriage are now invalid.

Supreme Court Upholds Affordable Care Act Subsidies

The Supreme Court announced today that it has upheld Affordable Care Act (“ACA”) subsidies for insurance purchased on federally-facilitated exchanges. By a 6 to 3 vote, the Court concluded that the statute allows for subsidies on any exchange created under the ACA. The decision in King v. Burwell may come as a disappointment to some who hoped that the subsidies would be struck down and that the entire ACA would unravel in the aftermath.

It’s Unanimous: The Fiduciary Duty to Monitor Has Teeth

The United States Supreme Court gave considerable comfort to defined contribution plan participants – and their lawyers – who sue plan fiduciaries for failing to keep track of plan investment options. In a unanimous decision handed down on May 18, 2015, the Court held in Tibble v. Edison International that ERISA fiduciaries have a “continuing duty” to monitor investment options, and that plan participants have six years from the date of an alleged violation of that duty to file a lawsuit against the plan’s fiduciaries. This ruling significantly undercuts the utility of a statute of limitations defense that had been successfully deployed by plan fiduciaries in previous cases, and creates fertile ground for more litigation.

EEOC Proposes ADA Rules on Wellness Program Incentives

The EEOC has issued proposed regulations providing guidance on the extent to which the ADA permits employers to offer incentives to employees to promote participation in wellness programs that are employee health programs. The new guidance is similar, but not identical, to the rules governing incentives for health-contingent wellness programs under HIPAA. Employers should review their wellness programs to ensure compliance with both laws.

IRS Eases Correction Rules for Missed Elective Deferrals

The IRS has just given sponsors of 401(k) and 403(b) plans a number of additional options for correcting a failure to honor an employee’s election to defer a portion of his or her pay. These new options, as announced in Revenue Procedure 2015-28, will be particularly helpful to sponsors of plans that provide for automatic enrollment (including those with an automatic escalation feature).

IRS to Plan Sponsors: You Must Retain Documentation for Loans and Hardship Withdrawals

Most sponsors of defined contribution plans rely on a third-party administrator (a “TPA”) to handle participant loans and hardship withdrawals—typically through the TPA’s website. However, in guidance issued last week, the IRS cautions that the sponsor—not the TPA or the participant—is responsible for maintaining documents proving that those transactions comply with the law.

Another Court Enforces DOL’s Electronic SPD Rules

At some point, as electronic communication becomes the norm – and as paper virtually disappears from the workplace – we will surely see a softening of the conditions imposed by the Department of Labor (“DOL”) on the electronic distribution of summary plan descriptions (“SPDs”). But a recent decision by a New York federal court confirms that we are not yet at that point.

Davidson v. Henkel: A Rather Taxing Decision

A recent decision by a Michigan federal trial court serves as a warning to employers that their failure to shield participants in nonqualified deferred compensation plans from adverse tax consequences may subject the employers to unanticipated liability. Although this decision (in Davidson v. Henkel Corporation) involved FICA taxation, the court’s reasoning would seem to apply equally to the 20% penalty tax and interest assessments triggered by a violation of Code Section 409A.

Anthem Security Breach May Require Plan Sponsor Action

The well-publicized cyber-attack on Anthem, Inc.’s information technology system may require employers to take prompt action to protect the rights of their health plan participants. Although neither the scope nor the cause of the security breach has yet been determined, the attack has been described as both “massive” and “sophisticated.”

IRS Grants Limited Transition Relief to Small-Employer Premium Reimbursement Arrangements

In a series of notices and FAQs, the IRS has clearly enunciated its view that an employer’s reimbursement of an employee’s premiums for individual health insurance violates certain provisions of the Affordable Care Act (“ACA”). While reiterating this key point, Notice 2015-17 does grant a limited period of relief for smaller employers. Nonetheless, even those employers should be working toward a June 30 deadline to comply with these ACA constraints.

IRS Now Accepting “Cycle E” Determination-Letter Applications

The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle E” of the determination-letter program. These include plans sponsored by employers having either a “5” or “0” as the last digit of their employer identification number, as well as governmental plans that elected not to file during Cycle C.

Don’t Forget About HIPAA When Addressing Data Security

Among the many data security and breach laws that exist, covered health care providers and health plans must also contend with the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

No Good Deed…: Allowing Part-Time Employees to Make Health FSA Contributions May Trigger ACA Penalties

When it comes to health coverage, many employers draw a distinction between full-time and part-time employees. To be eligible to enroll in the employer’s health plan, an employee must work a minimum number of hours per pay period. But many of those same employers then allow even part-time employees to contribute to a health flexible spending account (“health FSA”). After all, doing so costs the employer nothing (and even saves a modest amount in employment taxes), and why not at least give those employees an opportunity to pay some of their medical expenses on a pre-tax basis? Unfortunately, this paternalistic approach may now subject an employer to substantial daily penalties under the Affordable Care Act (“ACA”).

Agencies Plug Several Holes in the ACA Dike

In the years since the 2010 enactment of the Affordable Care Act (“ACA”), the agencies charged with enforcing the ACA have worried that certain responses to the law’s requirements could negatively affect the overall health insurance system. For instance, because the ACA requires insurers to issue individual health insurance coverage without regard to health status, sponsors of self-funded employer plans may be tempted to shift their high-risk employees into the individual market. But by leaving only healthier employees in the self-funded plans, this approach could result in “adverse selection” – leading to an erosion of the individual insurance market.

Same-sex Marriage and its Effect on Health Plans Offering Spousal Coverage

The United States Supreme Court’s decision on October 6, 2014, to deny review of various appellate court rulings (including the Tenth Circuit, the federal appeals court covering Colorado), which had struck down bans on same-sex marriage as unconstitutional, effectively legalized same-sex marriage in the state of Colorado.

Employee Benefits Plans – 2015 Inflation Adjustments

Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2015.

HIPAA Compliance Update – Business Associate Agreements and Unique Health Plan Identifiers

On January 25 2013, the Department of Health and Human Services (HHS) issued its final Omnibus Rule, mandating, among other things, that covered entities update their Business Associate Agreements (“BAAs”) with service providers who maintain, utilize, or come into contact with protected health information (“PHI”). Group health plans are considered covered entities and the Omnibus Rule’s expansion of the definition Business Associate meant that several plans entered into BAAs with a variety of service providers by or before last September.

When Does 9.5% Equal 9.56%?

Although 9.5% has been a key threshold in determining the “affordability” of employer health coverage, the IRS has just announced (in Revenue Procedure 2014-37) that this threshold will be adjusted to 9.56% for 2015. This adjustment reflects the fact that health insurance premiums have risen more rapidly than incomes. Similar adjustments have also been announced for related percentage thresholds.

National Health Plan Identifiers Required by November

The HIPAA Electronic Transactions and Code Sets rule requires most group health plans to obtain new health plan identifier numbers (HPIDs) by November 5, 2014.  While insurers will likely obtain the HPID on behalf of fully insured plans, the task of obtaining the HPID for a self-funded plan will fall upon the plan sponsor.  While the process is relatively simple, plan sponsors should begin identifying which group health plan arrangements are subject to the HPID requirement and communicating with plan vendors regarding the requirements.

85 results View Less