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Older News | July 31, 2015

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Text of IRS Notice 2015-53: Updated Static Mortality Tables for DB Pension Plans for 2016 (PDF)
Internal Revenue Service [IRS]
7/31/2015 [Official Guidance]

8 pages. "This notice provides updated static mortality tables to be used for defined benefit pension plans under Section 430(h)(3)(A) of the Internal Revenue Code and Section 303(h)(3)(A) of [ERISA]. These updated tables, which are being issued using the methodology in the existing final regulations under Section 430(h)(3)(A), apply for purposes of calculating the funding target and other items for valuation dates occurring during calendar year 2016. This notice also includes a modified unisex version of the mortality tables for use in determining minimum present value under Section 417(e)(3) of the Code and Section 205(g)(3) of ERISA for distributions with annuity starting dates that occur during stability periods beginning in the 2016 calendar year....

"After regulations implementing new mortality tables are finalized, as additional data regarding mortality improvement for more recent years becomes available, the Treasury Department and IRS expect to regularly review trends in mortality improvement and will update the projection of mortality improvement as necessary."

Business Roundtable Comment Letter to IRS on ACA's 40 Percent Excise Tax on Health Care Benefits
Business Roundtable [BRT]
7/31/2015 [Opinion]

"The broad application of the 40 percent excise tax means that, over time, the health benefit plans of all major U.S. employers will be subject to the tax. The impact of the eventual tax liability resulting from this provision is staggering and will distort the employer-sponsored health care marketplace, leading to dramatic changes in the benefits offered to employees."
Is It Personnel Shortage, Intrusiveness, or Both, That's Behind New Form 5500-SUP?
Todd Berghuis, for Ascensus
7/31/2015 [Opinion]

"Some feel that a plan that provides data on its methodology for conducting coverage and nondiscrimination testing, its amending history, opinion or advisory letter information, etc., is making itself an all too convenient target for an IRS audit.... There are questions on Form 5500-SUP the answers to which will come from other providers, which the preparer may be in no position to authenticate or verify. Is the preparer potentially on the hook for the work of others over whom it truly had no control? Mandating that the preparer of the Form 5500-SUP be identified will result in a public record disclosure of the client/preparer relationship; something not required of preparers of Form 5500 itself. Is this really necessary?"
Summary of Recent ERISA Court Decisions, July 30, 2015
Springer & Roberts LLP
7/31/2015

Highlighted decisions: [1] Retirement plan's definition of "normal retirement age" as five years of service violated ERISA (2d Cir.); [2] Employer abused its discretion in denying LTD claim by ignoring favorable treating physician evidence, relying heavily on physician consultants, and failing to get an in-person examination (6th Cir.); [3] Notice of contingent withdrawal liability satisfied the successor liability notice requirement (7th Cir.); [4] Plan participant was not entitled to convert previously elected early retirement benefit into a disability claim under the unambiguous terms of defined benefit pension plan (10th Cir.); and summaries of several slip copy and unreported decisions.
Second Circuit Creates Three-Part Test for Determining Whether Severance Policy Falls Under ERISA
Reid and Riege, P.C.
7/31/2015

"The Court established three factors that courts will consider when deciding the ultimate question of whether a particular undertaking is an ERISA 'plan, fund, or program:' '[1] whether the employer's undertaking or obligation requires managerial discretion in its administration; [2] whether a reasonable employee would perceive an ongoing commitment by the employer to provide employee benefits; and [3] whether the employer was required to analyze the circumstances of each employee's termination separately in light of certain criteria.' " [Okun v. Montefiore Medical Center, No. 13-3928 (2d Cir. July 17, 2015)]
IRS Employee Plans News 2015-9, July 31, 2015
Internal Revenue Service [IRS]
7/31/2015 [Guidance Overview]

[Here is the full text of the document:] [1] "The IRS and Treasury intend to amend the minimum distribution regulations for defined benefit plans to generally prohibit the replacement of ongoing annuity payments with a lump sum payment or any other form of accelerated payment. [2] Employee Plans email questions -- Beginning October 1, Employee Plans will no longer accept technical questions through email or from Customer Account Services. [3] Changes to the Employee Plans Determination Letter Program -- Starting in 2017, the IRS will eliminate the staggered remedial amendment cycles and limit the scope of the determination letter program for individually designed plans."
Text of Ninth Circuit Opinion: Unpaid Company Contributions to Multiemployer Plan Were Dischargeable in Personal Bankruptcy of Company Owner (PDF)
U.S. Court of Appeals for the Ninth Circuit
7/31/2015

"Agreeing with the Sixth and Tenth Circuits, the panel held that [Gregory Bos, the owner of a company participating in a multiemployer welfare plan,] was not a 'fiduciary' under 11 U.S.C. Section 523(a)(4) when he failed to make contractually required contributions to an employee benefits trust governed by [ERISA]. The panel declined to recognize an exception to the rule that unpaid contributions by employers to employee benefit plans are not plan assets, even though other courts had recognized an exception when the plan document expressly defines the fund to include future payments." [Bos v. Board of Trustees, No. 13-15604 (9th Cir. July 30, 2015)]
Under Regulatory Pressure, Voya Restricts Sales of More Variable Annuities
Investment News
7/31/2015

"Voya Financial Advisors has restricted sales of variable annuities for the second time in two months, as the brokerage firm faces increased pressure from regulators questioning the suitability of the products for retirement savers.... [T]he broker-dealer that serves more than 2,000 registered representatives said it is no longer approving sales of a second type of variable-annuity contract if that contract includes add-ons that come at extra cost[.]"
Nonprofit Health Insurance CO-OPs Are Awash in Red Ink
InsuranceNewsNet.com
7/31/2015

"Only one out of 23 -- the co-op in Maine -- made money last year ... The Massachusetts co-op spent more than six times as much on administrative expenses as it collected in premiums.... One of the 23 co-ops in the report has already gone out business. The Iowa/Nebraska co-op was shut down by state regulators over financial concerns. Another one, the Louisiana Health Cooperative, announced last week it will cease offering coverage next year ... [P]er-enrollee administrative costs for the co-ops in 2014 ... ranged from a high of nearly $10,900 per member in Massachusetts to $430 in Kentucky. The Massachusetts co-op collected $2.9 million in premiums, and spent $18.5 million on administration[.]"
Improving Outcomes with Electronic Delivery of Retirement Plan Documents (PDF)
Quantria Strategies, for The SPARK Institute
7/31/2015

54 pages. "[P]lan participants are aware of the many potential benefits of electronic delivery and they overwhelmingly find it acceptable to make electronic delivery the default method of delivering of plan information. Besides reducing costs (with savings significantly passed through to plan participants), electronic delivery provides an efficient and reliable means of communicating important plan information, which facilitates superior participant outcomes. This White Paper examines the many rationales for allowing plan sponsors to make electronic delivery the default method for communicating with retirement plan participants."
Pension Plan Funded Status Rises Due to Liability Decreases in Q2 2015 (PDF)
Segal Rogerscasey
7/31/2015

"During the second quarter of 2015 (Q2 2015), the funded status of the model pension plan ... increased by 8 percentage points: from 79 percent to 87 percent. This increase was the result of a 10 percent liability decrease and flat investment performance during the quarter."
New ACL Program to Improve Education and Financial Literacy Regarding Rollover of Retirement Accounts
Administration for Community Living
7/31/2015

"ACL's National Resource Center on Women and Retirement Planning -- operated by the Women's Institute for Secure Retirement (WISER) -- is partnering with the Retirement Clearinghouse (RCH) on a pilot to effectively reach and educate low- and moderate-income workers about the importance of rolling over their retirement savings in order to prevent adverse consequences common in today's mobile workforce. RCH has the means and technology to automatically transfer small plan balances from a worker's current plan into their next employer plan.... If fully taken to scale, it is estimated to keep over $1 trillion in retirement accounts for American workers over the next ten years."
CVS and IBM's Watson Health Cloud Pursue Ways to Predict Patient Health
Forbes
7/31/2015

"CVS said IBM's Watson Health technology can work to predict a patient's declining health so doctors, pharmacists and other providers can use that information to be more proactive in coming up with a program to improve care and keep people healthy and engaged. CVS said it would use the platform in aiding patients who use its pharmacies or Minute Clinic brand retail clinics as well as offering it to employer clients of CVS' Caremark pharmacy benefit management business."
Increased Competition Kept Lid on Health Insurance Inflation, HHS Says
The New York Times; subscription may be required
7/31/2015

"Most people who bought insurance through the federal marketplace had a greater choice of health plans this year than in 2014, the administration said, and premiums rose less in counties where more insurers were competing for business. The presence of additional insurers 'played an important role in moderating premium increases,' said Richard G. Frank, an assistant secretary of [HHS].... Federal health officials refused to speculate on how insurance company mergers might affect premiums."
GAO and ASPE Reports Reveal IRS/Marketplace Coordination Difficulties, Impact of Competition on Premiums
Health Affairs
7/31/2015

"The [GAO report] ... is both one of the clearest and most succinct descriptions of how coordination is supposed to work between the [IRS] and the ACA marketplaces in administering the ACA's premium tax credit and individual responsibility penalty, and the best description of how that coordination in fact functioned in the 2014 tax filing season, in 2015.... [On] the whole [the report] shows a program with much room for improvement.... [ASPE reports that the] benchmark plan premium growth between 2014 and 2015 was 8.4 percentage points lower in counties that saw a net gain in insurers than in other counties, with each net gain of one insurer associated with a 2.8 percentage point reduction in the rate of growth of the benchmark premium."
IRS Pulls Determination Letter Program, Puts Premium on Plan Assessments by Sponsors
Orrick
7/31/2015 [Guidance Overview]

"Prior to this change, it was relatively easy to correct errors in plan amendments -- as the IRS allowed sponsors to retroactively fine-tune their amendment language, and even adopt new retroactive amendments in certain cases, during the determination letter review process. This flexibility is now gone under the new system, and it will be more important than ever to adopt carefully drafted legally-required amendments on time. Otherwise, [EPCRS] will be the only alternative for fixing plan document errors retroactively."
Text of PBGC Form 10 Instructions: Post-Event Notice of Reportable Events (PDF)
Pension Benefit Guaranty Corporation [PBGC]
7/31/2015 [Official Guidance]

[Must be used for reports due on or after September 1, 2015.] "The Form 10 instructions and Form 10 have been changed to [1] Remove information requirements that PBGC no longer needs or can gather from public sources. [2] Require that additional supporting information be provided (e.g., event date, notice due date, filing date, and why a filing is late, if applicable). [3] Require more description of the pertinent facts relating to an event (e.g., reason for a late contribution). [4] Provide enhanced instructions on the type of actuarial information required to be submitted. [5] Require a signature and certification on the Form 10 as to the completeness and accuracy of the contents of the filing."
Texas Blue Decision Could Signal Twilight of the Exchange PPO
HealthLeaders-InterStudy
7/31/2015

"Lost in the noise over mega-mergers, one of the biggest carriers anywhere, Blue Cross Blue Shield of Texas, announced plans to stop selling its Blue Choice PPO on and off the exchange in 2016.... This isn't an insurer discarding a poorly performing plan design that failed to sway consumers. The Texas Blue plan has more enrollment in Blue Choice than many insurers have total members."
Text of PBGC Form 10-Advance Instructions: Advance Notice of Reportable Events (PDF)
Pension Benefit Guaranty Corporation [PBGC]
7/31/2015 [Official Guidance]

[Must be used for reports due on or after September 1, 2015.] "The Form 10-Advance instructions and Form 10-Advance have been changed to: [1] Remove information requirements that PBGC no longer needs or can gather from public sources. [2] Require that additional supporting information be provided (e.g., event date, notice due date, filing date, and why a filing is late, if applicable). [3] Require additional information relating certain events (e.g., plan document and determination letter for liquidation events). [4] Provide enhanced instructions on the type of actuarial information required to be submitted. [5] Notify filers that they should expect a request for additional information promptly after filing a Form 10-Advance. Filers may choose to include the additional information with the Form 10-Advance filing. [6] Require a signature and certification on the Form 10 as to the completeness and accuracy of the contents of the filing."
Rhode Island Adopts Standards to Improve Health Care Delivery and Payment Systems (PDF)
State of Rhode Island Office of the Health Insurance Commissioner
7/31/2015 [Guidance Overview]

"The Alternative Payment Methodology Plan establishes payment reform targets for commercial insurers and sets a target for at least 30% of insured medical payments to be made through an alternative payment model by 2016. The payment reform targets will increase the use of payments that emphasize value rather than volume and include efficiency-based global and bundled payment models, as well as payments based on quality performance."
Text of PBGC Form 200 Instructions: Notice of Failure to Make Required Contributions (PDF)
Pension Benefit Guaranty Corporation [PBGC]
7/31/2015 [Official Guidance]

[Must be used for reports due on or after September 1, 2015.] "The Form 200 instructions and Form 200 have been changed to: [1] Streamline the form to two pages and modify the form to look more like the Form 10 and Form 10-Advance. [2] Remove information items PBGC can obtain publicly such as Form 5500s and documents filed with the Securities and Exchange Commission. [3] Add a requirement to state the reason for a late contribution so PBGC can better understand the underlying financial health of the sponsor and reasons for missing payments. [4] Add an Appendix to these instructions that provides an example of how to describe the aggregate outstanding balance of required funding payments, including interest."
Text of IRS Notice 2015-52: Section 4980I -- Excise Tax on High Cost Employer-Sponsored Health Coverage (PDF)
Internal Revenue Service [IRS]
7/30/2015 [Official Guidance]

17 pages. "This notice is intended to supplement IRS Notice 2015-16 by addressing additional issues under Section 4980I, including the identification of the taxpayers who may be liable for the excise tax, employer aggregation, the allocation of the tax among the applicable taxpayers, and the payment of the applicable tax. This notice also addresses further issues regarding the cost of applicable coverage that were not addressed in Notice 2015-16. Treasury and IRS invite comments on these issues and any other issues under Section 4980I."
Checklist: Filing for an ACA Transmitter Control Code
International Foundation of Employee Benefit Plans [IFEBP]
7/30/2015

"In order to e-file ACA information returns with the IRS, you need to obtain a Transmitter Control Code (TCC). Gather and check off the items you need to complete required fields on the ACA Application for TCC.... E-filing is required for providers of minimum essential coverage that file 250 or more information returns during the calendar year. The purpose of the TCC application is to receive a TCC to become authorized to e-file Forms 1094B, 1095-B, 1094-C and 1095-C."
HIPAA Audits Are On the Way
Thompson SmartHR Manager
7/30/2015

"OCR will select about 350 covered entities for desk audits, and at most that number of business associates ... The agency will seek to include a wide variety of entities based on type, location and affiliation with other covered entities.... The major challenge of the upcoming desk audits will be the very short turnaround time -- likely two weeks, with no opportunity to get clarification of OCR's data request[.]"
Competition and Choice in the Health Insurance Marketplaces, 2014-2015: Impact on Premiums (PDF)
Assistant Secretary for Planning and Evaluation [ASPE], U.S. Department of Health and Human Services [HHS]
7/30/2015

"Prior studies found that the Marketplaces offered a variety of affordable plans in 2014. In addition, Marketplaces with a greater number of plans demonstrated significantly enhanced consumer choice and lower premiums. [This report examines] states that used the federal HealthCare.gov platform in both 2014 and 2015 and [provides] a detailed analysis of how the supply of issuers changed from 2014 to 2015, the level of competition achieved in 2015, and how changes in the supply of issuers affected premium growth between 2014 and 2015."
Market Gains Drive Retirement Balances Higher But Too Much Stock Could Put Savings at Risk
Fidelity
7/30/2015

"While a rising stock market is one reason the average 401(k) balance is up 50 percent in the last five years, this has led to an increased percentage of equities within many 401(k) accounts, which can add increased exposure to the negative impact of a market downturn.... 18 percent of people 50-54 had a stock allocation at least 10 percentage points or higher than recommended, and for people ages 55-59, that figure increased to 27 percent. An additional 11 percent of people ages 50-54 had 100 percent of their 401(k) assets in stocks, while 10 percent of people ages 55-59 had all of their 401(k) assets in stocks."
How the EPCRS Changes Might Impact 403(b) and 457(b) Plans
Cammack Retirement Group
7/30/2015 [Guidance Overview]

"EPCRS applies to 403(b) plans in a similar fashion as it does to qualified plans, with some variations.... [T]echnically EPCRS does not apply to 457(b) plans at all.... [T]he last revision of EPCRS prior to the current update opened the door to governmental 457(b) plan submissions to the IRS outside of the EPCRS program. These applied on a provisional basis, utilizing standards that are similar to those of the EPCRS. The door to private tax-exempt 457(b) plans, meanwhile, remains closed, and no such submissions are permitted at all."
Governmental 403(b) and 457(b) Plan Sponsors: Don't Forget the Tax Code Requirements
Cammack Retirement Group
7/30/2015

"[S]ome governmental plan sponsors often misinterpret the fact that their plans are not subject to ERISA and some of the Internal Revenue Code to mean that they are not subject to any rules at all. Conversely, some public school districts and public higher education organizations misconstrue the retirement plan rules, by assuming those of their private school colleagues equally apply to them. This article provides an overview of the important sections of the Code that do and do not apply to governmental plans[.]"
CMS CO-OP Program Guidance Manual (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/30/2015 [Official Guidance]

59 pages; version 1, dated July 29, 2015. "This manual contains guidance on ... [1] Core contract requirements including the review of employment agreements and executive compensation; [2] Risk-based capital (RBC) requirements; [3] Start-up Loan disbursements; and [4] Semi-annual and quarterly reporting requirements."
CMS Webinar: FF-SHOP Issuer Testing for Plan Year 2016
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/30/2015 [Guidance Overview]

32 presentation slides; July 28, 2015. Topics include: [1] Issuer Testing Schedule -- DRAFT (Subject to Change); [2] New Issuer Testing Scope; [3] Alpha Issuer Testing Scope; and [4] All Issuer Testing Scope.
Cash Balance Plans 2015 Update
October Three Consulting
7/30/2015

"If the issue is no longer surplus but risk, why establish (or convert to) a cash balance plan at all? Why not simply freeze the DB plan and establish a DC plan? ... DC plans do not present the preservation of capital, accounting and funding issues that market-return cash balance plans do. And in some respects they are more flexible -- unlike a 401(k) plan, participants in a cash balance plan cannot choose their contribution level or asset allocation. There are, however, still some reasons why some sponsors may prefer a cash balance plan solution."
Oregon Now Requires All Employers to Provide Sick Leave to Employees
Vorys, Sater, Seymour and Pease LLP
7/30/2015 [Guidance Overview]

"Oregon is now the fourth state, after Connecticut, California, and Massachusetts, to mandate that employers provide their employees with sick leave benefits. Oregon's new sick leave law goes into effect on January 1, 2016, applies to all private- and public-sector employees, and, in most cases, requires that the sick leave be paid. The law imposes posting and notification requirements on employers to ensure that employees are aware of their rights under the law and the amount of sick leave that they have accrued."
CO-OP Enrollment and Profitability Lower Than Projected, Might Affect Ability to Repay Loans (PDF)
Office of Inspector General [OIG], U.S. Department of Health and Human Services [HHS]
7/30/2015

"Most of the 23 CO-OPs we reviewed had not met their initial program enrollment and profitability projections as of December 31, 2014 ... [M]ember enrollment for 13 of the 23 CO-OPs that provided health insurance in 2014 was considerably lower than the CO-OPs' initial annual projections, and 21 of the 23 CO-OPs had incurred net losses as of December 31, 2014 ... The low enrollments and net losses might limit the ability of some CO-OPs to repay startup and solvency loans and to remain viable and sustainable."
Retirement Plans Developments, Summer 2015 (PDF)
Buck Consultants at Xerox
7/30/2015

"Highlights include DOL's controversial fiduciary rule, changes to IRS determination letter and correction programs, an abrupt change to retiree cashout rules, an extension of nondiscrimination testing relief for closed defined benefit plans, guidance for multiemployer plans under the new Multiemployer Pension Reform Act, and legal challenges for church and public plans. [The authors] also include some overtime and independent contractor guidance that may indirectly affect retirement programs."
An Actuarial Perspective on the 2015 Social Security Trustees Report (PDF)
American Academy of Actuaries
7/30/2015

"The combined Social Security trust funds are projected to deplete during 2034, one year later than projected in last year's report. If changes are not implemented by that date, only about 79 percent of scheduled benefits would be payable, declining to 73 percent in 2089.... To bring Social Security into actuarial balance for the next 75 years ... changes equivalent to either an immediate increase of 2.62 percentage points in the payroll tax rate, or an immediate decrease of 16.4 percent of benefits for all current and future beneficiaries, or some combination thereof, is required."
The Health Coverage Tax Credit Retroactively Reincarnated (PDF)
Groom Law Group
7/30/2015 [Guidance Overview]

"The Act is not simply a reinstatement of prior law. Instead, it contains several new provisions, including the following: [1] Certified individuals may claim retroactive payments for 'qualified health insurance' from January 1, 2014 through July 6, 2015 on an amended tax return any time before the expiration of the 3-year statute of limitations with respect to the applicable taxable year. [2] By July 6, 2016, the Secretary of Treasury must establish a program for making payments on behalf of certified individuals to providers of qualified health insurance. [3] The term 'qualified health insurance' is revised, effective January 1, 2016, to specifically exclude individual coverage through an exchange established under the [ACA]."
Analyzing the Justification for Expanding the Pioneer ACO Program
John Valiente, for the Healthcare Financial Management Association [HFMA]
7/30/2015

"The $384 million figure is based on an econometric estimate of gross Medicare savings compared with the cost of caring for all Medicare beneficiaries in the markets where the Pioneers operate. But this estimate does not reflect shared savings payments made by CMS to the successful ACOs, or shared loss payments by ACOs to CMS. When these amounts are included, the net program savings is actually $249 million -- still a positive result, but 35 percent lower than claimed."
Global Equity: Are Prospectus Benchmarks the Correct Barometer?
Vanguard
7/30/2015

"When evaluating the performance of an active manager, investors often assume that the benchmark used to compare performance is an accurate reflection of the goals, risk posture, or opportunity set of the strategy. But it isn't always the case that an appropriate benchmark will be selected as active managers may shift their exposure to more risky segments in an attempt to generate better long-term returns for investors.... [This research paper explains] why custom-created benchmarks may be a more reasonable proxy of active performance than a fund's prospectus benchmark."
Medicare Prescription Drug Premiums Projected to Remain Stable
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/30/2015

"[T]he average premium for a basic Medicare Part D prescription drug plan in 2016 will remain stable, at an estimated $32.50 per month ... despite the fact that total Part D costs per capita grew by almost 11 percent in 2014, driven largely by high cost specialty drugs and their effect on spending in the catastrophic benefit phase.... [T]otal Medicare payments to plans for reinsurance have grown by more than three times the pace of premium growth. However, growth in per-Medicare enrollee spending continues to be historically low, averaging 1.3 percent over the last five years."
As Medicare and Medicaid Turn 50, Use of Private Health Plans Surges
The New York Times; subscription may be required
7/30/2015

"More than 30 percent of the 55 million Medicare beneficiaries and well over half of the 66 million Medicaid beneficiaries are now in private health plans run by insurance companies like the UnitedHealth Group, Humana, Anthem and Centene. Enrollment has soared as the government, in an effort to control costs and improve care, pays private insurers to provide and coordinate medical services for more and more beneficiaries."
How Safe from Creditors Is Your 401(k) Money If You Roll It to an IRA?
Slott Report
7/30/2015

"What happens ... if you move those ERISA-protected 401(k) funds to an IRA? Does the protection you had in your 401(k) follow along? Here's where it can start to get a little complicated, because we actually have to split out your creditor protection into two distinct categories: creditor protection in bankruptcy and creditor protection in a non-bankruptcy event."
Would Expanding Medicare Coverage for Telemedicine Increase or Decrease Federal Spending?
Congressional Budget Office [CBO]
7/30/2015

"Considerable uncertainty surrounds estimates of the likely utilization rates for covered telemedicine services themselves and of the downstream effects on other services that might be induced or avoided. In its analysis, CBO examines whether use of telemedicine as proposed would prevent the use of more expensive services, such as emergency room visits or hospital admissions, or would instead increase the use of other services to provide follow-up care."
GAO Report: IRS Needs to Strengthen Oversight of ACA Tax Provisions for Individuals
U.S. Government Accountability Office [GAO]
7/30/2015

"Incomplete and delayed marketplace data limited IRS's ability to match taxpayer PTC claims to marketplace data at the time of return filing.... IRS does not know whether these challenges are a single year or an ongoing problem.... IRS does not know the total amount of advance PTC payments made to insurers for 2014 marketplace policies because marketplace data are incomplete.... [S]everal external stakeholders ... reported challenges with IRS collaboration efforts, such as not receiving certain IRS guidance in time for stakeholders to have complete information at the beginning of the filing season."
401(k) Participants Allowed to Pursue Profit Disgorgement Claim Arising from Transfer of Assets to Pension Plan
Wolters Kluwer Law & Business
7/30/2015

"The court determined that the participants could assert a claim under ERISA Section 502(a)(3) for appropriate equitable relief to redress a violation of ERISA's anti-cutback rule....The bank argued that the participants suffered no 'financial loss,' and thus no injury sufficient to establish standing.... The court then concluded that the participants experienced an invasion of a legally protected interest because they suffered a loss, measured as the spread or difference between the profit the bank earned by investing the retained assets and the amount it paid to the participants." [Pender v. Bank of America Corp., No. 14-1011 (4th Cir. June 8, 2015)]
Massachusetts Pension Commission Urges Legislators to Override Governor's Veto
Pensions & Investments
7/30/2015

"The Massachusetts Public Employee Retirement Administration Commission [PERAC] is requesting the state House and Senate not override Gov. Charlie Baker's veto of a provision added to the fiscal year 2016 budget that would roll back part of a state pension reform law. Under the provision, retirement systems could make follow-on investments with venture capital, private equity and real estate funds where they had already invested in the prior 10 years, without putting the matter through a rigorous proposal process."
Should Exchanges Require, Recommend, or Nudge Enrollees to Claim Less Than the Full Advance Premium Tax Credit?
Health Affairs
7/30/2015

"[R]oughly half of those who enrolled in the ACA's exchanges and received [Advance Premium Tax Credits (APTC)] ended up owing money to the federal government, because their income ended up higher than they had anticipated.... One solution is for enrollees to wait until tax filing to receive their credit as a lump sum. For most people, however, that would diminish their ability to afford monthly premiums. Another is to claim a partial amount of what they are eligible for at the time of application. This would build in a financial cushion[.] ... All [but one of the] exchanges set the default amount of tax credits that applicants receive at 100 percent of what the exchange determines them qualified for, based on previous tax data and the applicant's prediction for the coming year.... DC opted to take a different approach, lowering the default to 85 percent."
Will Trial Lawyers Be the Sole Beneficiaries of a Watered-Down Fiduciary Rule?
Employee Fiduciary
7/29/2015 [Opinion]

"When hiring a financial advisor, 401k plan sponsors have a fiduciary duty to assess 'the reasonableness of the compensation (direct and indirect), and determine any conflicts of interest that may impact the service provider's performance.' A [Best Interest Contract Exemption (BICE)] will almost certainly make these assessments more difficult.... [T]he BICE will also be a bad deal for the financial advisors fighting to keep their variable compensation. The complex BICE requirements will make compliance expensive and give fodder to trial lawyers looking to prove excessive 401k fees due to conflicted investment advice.... [T]hese advisors will have a tougher time competing with fee-only advisors that won't need to have their clients sign a complicated BICE disclosure document."
Is CalPERS California Dreamin'?
Pension Pulse
7/29/2015 [Opinion]

"CalPERS' investment results are all about beta. As long as the U.S. and global stock markets surge higher, they're fine, but if a long bear market develops, their beneficiaries and contributors are pretty much screwed. The same goes on all over the United States which why the trillion dollar state funding gap keeps getting bigger and risks toppling many state plans over if another financial crisis hits global markets."
Equities: A Sinking Allocation for Corporate DB Plans
Pensions & Investments
7/29/2015

"Corporate pension plan allocations to equity have declined to a new low ... And the fixed-income allocation has risen to a new high. At the end of 2014, the equity allocation stood at 44.45%, the lowest since S&P began tracking it in 1999, with the exception of 2008 when, in the midst of the financial crisis, it was slightly lower at 43.71%. Fixed-income allocation was 43.88%, a record high in the S&P reporting.... Not all of the reallocation out of equity has flowed to fixed income, ... Real estate and hedge funds strategies also have captured some of the reallocation to diversify growth assets."
IBM Pays for Women to Ship Breast Milk, Pushes Ahead in Race to Attract Female Tech Talent
TechRepublic
7/29/2015

"In September, IBM will launch a delivery program for nursing moms who are away on business, which is the first of its kind because it is a service moms can use to ship their expressed milk back home overnight in temperature-controlled packages -- and IBM will pay for it.... Many other companies cover the cost of shipping breast milk of working mothers, but most leave it up to the woman to figure out ... IBM is the first to handle the mechanics and technology of it."
Cadillac Tax Bringing Unprecedented Changes to Benefits Enrollment and Coverage
Benefitfocus
7/29/2015

"Purchasing 'rich' plans based on the assumption that 'the more they pay, the better the plan,' can result in a financial disservice to employees as it excludes HSA tax benefits and subsequent future retiree medical funding. While these employees are over-insured in medical coverage, they are under-insured regarding income protection coverage and life insurance.... [T]he Cadillac Tax will significantly impact employer involvement in the way employees view their overall benefit offering."
Risk-Shifting and the Demise of the Determination Letter Program
Benefits Bryan Cave
7/29/2015

"[T]he demise of the determination letter program results from a cost/benefit analysis where the Service has determined that it is best to shift the risk of having a compliant plan document to the plan sponsor. To lessen the risk for the plan sponsor ... Auditors will now likely spend significant time reviewing a document for legal compliance since they can no longer rely on their colleagues in the determination letter division to have done that for them. The debates that used to happen on determination letter reviews will now occur on audit, which will only increase the potential stakes of the audit itself.... Without the benefit of a determination letter, the law firms that draft plans are likely litigation targets should the IRS penalize a plan sponsor or, worse yet, disqualify a plan that is not properly drafted."
American Benefits Council Comment Letter to CMS on Requirements for the Health Plan Identifier (PDF)
American Benefits Council
7/29/2015 [Opinion]

"The Council shares the significant concerns expressed in the [National Committee on Vital and Health Statistics (NCVHS)] letter and strongly support s its recommendation to eliminate the HPID in administrative transactions. We urge that the Department not proceed with implementation. There is ongoing confusion among employer plan sponsors as to why the HPID is needed and, if required, how the HPID would or should be used."
EHB Prescription Drug Standard: United States Pharmacopeia Classification System (PDF)
National Health Law Program [NHeLP]
7/29/2015 [Guidance Overview]

"In the Essential Health Benefits Final Rule from February 2013 (Final Rule 2013), HHS chose the USP Medicare Model Guidelines classification system (version 5.0) as the comparison tool to determine EHB prescription drug coverage.... [H]ealth plans must cover at least the greater of [1] one drug in every USP therapeutic category and class or [2] the same number of drugs in each USP category and class as the state's EHB base-benchmark plan.... The Final Rule 2016 adopts an approach that combines: [1] the use of a [Pharmacy and Therapeutic (P&T)] committee and [2] the existing USP standard. This change will go into effect beginning with plan years on or after January 1, 2017."
EHB Prescription Drug Standard: Pharmacy and Therapeutics Committees
National Health Law Program [NHeLP]
7/29/2015 [Guidance Overview]

"[B]eginning in 2017 HHS will require [qualified health plans (QHPs)] to establish Pharmacy and Therapeutics (P&T) Committees to review and update plan formularies in conjunction with the USP Medicare Model Guidelines. Although new to QHPs, all Medicare Part D plans and some state Medicaid programs operate P&T Committees.... Even though QHPs are not required to have P&T Committees until 2017 (or sooner in some states), health advocates and consumers have a new tool to ensure that [essential health benefit (EHB)] formularies meet the needs of enrollees P&T Committees demonstrate the importance of advocacy efforts and lay the groundwork for future improvements in EHB prescription drug standards."
Is the California ACA Exchange a Model for the Nation?
Physicians for a National Health Program [PNHP]
7/29/2015 [Opinion]

"The last half century has confirmed that free markets in health insurance are highly dysfunctional. The reason that Covered California is working is that it is very highly regulated, dictating which insurers can participate, what benefits their plans must offer beyond those mandated by ACA, while aggressively negotiating with insurers on prices, rejecting those that are too high."
National Health Expenditure Projections 2014-2024 (PDF)
Office of the Actuary, Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/29/2015

"For 2014-24, health spending is projected to grow at an average rate of 5.8 percent per year (4.9 percent on a per capita basis). Health spending is projected to grow 1.1 percent faster than Gross Domestic Product (GDP) per year over this period; as a result, the health share of GDP is expected to rise from 17.4 percent in 2013 to 19.6 percent by 2024. Given the ACA's coverage expansions and premium subsidies together with population aging, federal, state and local governments are projected to finance 47 percent of national health spending by 2024 (from 43 percent in 2013)." [Also available: NHE Projections 2014-2024 -- Tables; NHE Historical and Projections 1960-2024; and Projections Methodology.]
Healthcare Spending Expected to Accelerate
InsuranceNewsNet.com
7/29/2015

"The nation's respite from accelerating health care costs appears to be over. Spending on health care will outpace the nation's overall economic growth over the next decade ... Things changed in 2014, the [CMS] report says ... [as] 8.4 million gained coverage that year, and people with health insurance use more medical services and prescriptions than do the uninsured.... Spending on Medicaid, the federal-state health insurance program for low-income people, also has jumped.... Government will become a more dominant player as the federal, state, and local government share of health care rises to 47 percent in 2024, from 43 percent in 2013."
Text of CMS FAQs on State-Based Marketplace Options for Implementing Exemptions from the Shared Responsibility Payment (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
7/29/2015 [Official Guidance]

"[CMS has] determined that the HHS exemption option is an efficient process for [state-based marketplaces (SBMs)] that has minimized confusion for consumers. We, therefore, intend to propose regulations that would authorize this option on a permanent basis, and, in the interim, will not take any enforcement action against SBMs that continue to use the HHS service for exemptions beyond the start of open enrollment for 2016.... States that did not establish SBMs or use their own eligibility platforms do not have the option to process their own exemptions.... As a condition of using the HHS exemption option, the SBM must furnish HHS with 'any information available through the Exchange that is necessary for an applicant to utilize the process administered by HHS' ... Electronic exemption application capabilities are not a requirement."
Access to Retirement and Medical Benefits by Occupation, March 2015
U.S. Bureau of Labor Statistics [BLS]
7/29/2015

"Retirement benefits were available to 66 percent of private industry workers in the United States in March 2015.... Among workers in management, professional, and related occupations in private industry, 80 percent had access to retirement benefits -- compared with 39 percent in service occupations.... Medical care benefits were available to 69 percent of private industry workers in March 2015. Within private industry, 87 percent of workers in management, professional, and related occupations had access to medical care, compared with 41 percent in service occupations."
2014 Annual Survey of Public Pensions
U.S. Census Bureau
7/29/2015

"Statistics are available at the national level and for individual states.... Total assets increased 12.8 percent, from $3.3 trillion in 2013 to $3.7 trillion in 2014. Earnings on investments grew 40.6 percent, from $382.2 billion in 2013 to $537.5 billion in 2014. Contributions grew 8.4 percent, from $153.7 billion in 2013 to $166.6 billion in 2014.... Total payments grew 5.6 percent, from $258.3 billion in 2013 to $272.9 billion in 2014. The total number of beneficiaries increased 3.2 percent, from 9,263,846 people in 2013 to 9,561,562 in 2014."
Some Group Health Plans Must Pay PCORI Fees by July 31
Warner Norcross & Judd LLP
7/29/2015

"The fee due depends on the date your most recent plan year ended.... For plan years that ended between January 1, 2014, and September 30, 2014, the fee is $2.00 per covered life and is due by July 31, 2015. For plan years that ended between October 1, 2014, and December 31, 2014, the fee is $2.08 per covered life and is due by July 31, 2015. The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan."
SEC Faces Its Own Debate on Fiduciary Advice Standards
PLANSPONSOR
7/29/2015

"Transcripts from a tough SEC hearing called earlier this month show it's not just the Department of Labor considering changes to the application of the fiduciary standard.... Like the DOL, the SEC says its rulemaking is meant to tamp down on a variety of investor abuses and service provider conflicts of interest believed to be harming millions of investors inside and out of retirement plans."
Looking Past Due Diligence for Benefit Plans in Mergers and Acquisitions (PDF)
Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS]
7/29/2015

"Corporate transactions involving the sale or purchase of another company or division are complex events. While employee benefit plans generally are considered in these transactions, the time and attention devoted to these plans are often minimal. This exposes the parties to additional risks, both in terms of direct costs and in long term administrative complexities. This article will review the various risks that often are undiscovered during the standard due diligence process. Health plans and retirement plans, including multiemployer plans, and executive compensation plans are all considered."
States Begin to Issue Guidance on Marriage Benefits
Wolters Kluwer Law & Business
7/29/2015

"Some states mention the payroll issues in their guidance and some states do not. All the states that issue guidance generally focus on income tax issues and sometimes other issues, such as pensions." [Article includes a summary of guidance issued by Alabama, Kentucky, Louisiana, Michigan, Nebraska, North Dakota, and Ohio.]
Multiemployer Pension Plans: Withdrawal Liability Is Mounting
Ford & Harrison LLP
7/29/2015

"At least four plans, through their actuaries, have dramatically reduced the interest rate assumption to calculate withdrawal liability. Rather than using the plan's assumed rate of return, typically 7-8 percent, they have adopted the PBGC long term interest rate of slightly more than 3 percent to calculate the unfunded vested benefit liabilities and, hence, withdrawal liability. These interest rate changes are increasing the amount of withdrawal liability by 200-400 percent depending on the methodology used ... Employers in critical plans need to understand and manage this mounting withdrawal liability before it becomes so great that it exceeds the net worth of a company."
IRS Deepens Focus on Lifetime Income with Lump-Sum Ban
Pensions & Investments
7/29/2015

"While the policy change is not expected to have a major impact on plan sponsor behavior, it does have a symbolic one, and it is viewed as a broader effort by Washington regulators to encourage lifetime income.... 'The real story is probably what this says on the part of the regulators,' said Bob Collie [of] Russell Investments. 'They are trying to get ways to get people to turn lump sums into annuities, and to close leakage within defined contribution plans.' "
Investment Review Checklist for 401(k) Plan Committees
Practical Law Company
7/29/2015

"This Checklist provides a list of issues that an investment or administrative committee of a 401(k) plan governed by [ERISA] should consider, including those raised by the US Supreme Court's recent decision in Tibble v. Edison Int'l."
Healthy Caution Advisable in Designing Wellness Plans Due to New Scrutiny of Medical Exams and Inquiries (PDF)
Alston & Bird LLP, via Bloomberg BNA Daily Labor Report
7/29/2015 [Guidance Overview]

"This article explores the history of enforcement of the ADA's medical examination and inquiry provisions related to wellness programs, the EEOC's proposed ADA wellness program regulations and the intersection between the ADA, HIPAA and ACA in relation to the proposed regulations."
PBGC Issues Proposed Regs Increasing Number of Employers Subject to Section 4010 Reporting
Practical Law Company
7/29/2015 [Guidance Overview]

"The proposed regulations: [1] Limit the reporting waiver for employers with aggregate minimum plan funding shortfalls of $15 million to controlled groups with fewer than 500 participants. [2] Provide two new reporting waivers, to eliminate duplicative reporting obligations. [3] Codify the plan reporting provisions of [MAP-21], as modified by [HATFA] and PBGC Technical Updates 12-2 and 14-2. [4] Make several technical corrections, including eliminating one form of payment assumption for minimum funding purposes."
IRS Determination Letters After 2016: What Are the Options?
Calhoun Law Group, P.C.
7/29/2015 [Guidance Overview]

"When substantial changes are to be made to the plan (typically, for new employees), consideration should be given to adopting a whole new plan (on which a determination letter could be obtained), rather than amending the existing plan to create a new benefit structure. Plans adopting novel benefit structures may seek private letter rulings dealing with the new benefit structure.... In the event of a corporate acquisition or merger, it will become critical to obtain ironclad assurances from the seller that all retirement plans are qualified.... In some instances, it may make sense to have old plans terminated before the merger or acquisition."

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