Employee Benefits

Continuously "Naughty" Employees Could be a Liability

This installment of the Informed Employer is brought to you because of that one employee who, despite your best efforts to insulate your business from any number of employment law liabilities, will inevitably go off and do something so colossally stupid that you could not have possibly prepared for it.  Yes, just when you think you have drafted every policy and trained your employees accordingly, one of your supervisors takes his sales team to the top of a hill and…

…waterboards a team member.
 
Read the entire article about problematic employees.
 

On November 15, 2010, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) issued an Amendment to the interim final rule relating to a group health plan's status as a "grandfathered" plan under the Patient Protection and Affordable Care Act (PPACA).  The interim final rule, which was published by the Departments on June 17, 2010, provides that if an employer or employee organization enters into a new policy, certificate or contract of insurance after March 23, 2010, the policy, certificate or contract of insurance would cease to be a grandfathered plan, and thereby, lose the plan's exemption from several coverage mandates under the PPACA (although an exception applied to collectively bargained insured plans).  The Amendment to the interim final rule reverses this position and permits an insured group health plan to change health insurance coverage without ceasing to be a grandfathered plan.  The change provides parity with self-insured group health plans, which are permitted under the interim final rule to change third-party administrators without losing grandfathered status.

Read the entire alert.

 

The Internal Revenue Service has announced its annual cost of living adjustments (COLA) for 2011.  For qualified retirement plans, most plan limits have not changed from the 2009 and 2010 limits.  For example, elective deferrals are still generally limited to $16,500, and the catch-up contribution limit of $5,500 continues through 2011.  The overall defined contribution annual limitation also remains at $49,000.

To assist plan sponsors, Ice Miller's 2011 COLA chart lists the cost of living adjustments to retirement plan limitations for the years 1998 through 2011.  We have included the adjusted limits, as well as Pension Benefit Guaranty Corporation numbers, federal income tax amounts and Social Security and Medicare amounts for the past 14 years as a reference tool.  If you would like a laminated copy of the chart, please e-mail your name and address to joella.short@icemiller.com.

Fee transparency in retirement plans, particularly participant directed plans such as 401(k) and 403(b) plans, has been the subject of heated debate for the past several years.  The Department of Labor recently issued several sets of regulations designed to facilitate fee transparency by requiring various forms of disclosure by service providers and plan administrators.  The most recent of these regulations was issued on Oct. 14, 2010, and requires plan administrators to disclose information about plan fees, expenses and investment options to participants and beneficiaries in 401(k), 403(b) and other types of defined contribution plans if investments are participant-directed.  These regulations are effective for plan years beginning on or after Nov. 1, 2011 (Jan. 1, 2012, for calendar year plans).

Section 404(a) of ERISA requires plan administrators and other fiduciaries to discharge their duties prudently and solely in the interest of plan participants and beneficiaries.  The investment of plan assets is a fiduciary act subject to these fiduciary standards.  The Oct. 14, 2010, final regulations are intended to assist plan administrators of 401(k) and 403(b) and other participant-directed individual account plans in satisfying this obligation by requiring that participants and beneficiaries be provided on a regular and periodic basis with sufficient information regarding fees, expenses and investment options to allow them to make informed decisions regarding the investment and management of their accounts.  These new disclosure rules apply regardless of whether the plan already meets the fiduciary standards set forth in Section 404(c) of ERISA.  Although the regulations apply only to retirement plans that are governed by the Employee Retirement Income Security Act of 1974 (ERISA), governmental and church plans will likely be affected by these new requirements as well, to the extent that the disclosure rules become standard or best practices in the industry.

Read the full article on new fee disclosure requirements for retirement plans.

Ice Miller LLP is pleased to announce that Best Lawyers has named three Firm attorneys as “Indianapolis Best Lawyers Lawyer of the Year” for 2011.

Preparing for the Future

Ice Miller is reissuing an updated summary of the provisions under the Patient Protection and Affordable Care Act (PPACA) that impact employers.  Ice Miller originally issued this summary on March 30, 2010.  Since that date, the Departments of Health and Human Services, Labor, and the Treasury have issued several rounds of interim final rules and other guidance regarding the PPACA provisions that apply to Group Health Plans.  As of the date of this reissue, guidance has been published with respect to:

• a tax credit available to small employers that offer health coverage to their employees;
• the extension of dependent coverage mandate and related tax relief;
• the Early Retiree Reinsurance Program;
• rules for maintaining grandfathered plan status;
• application of the PPACA coverage reforms on retiree-only health plans and HIPAA excepted benefits;
• the prohibition on lifetime and annual dollar limits and procedures for a temporary waiver;
• the prohibition on pre-existing condition exclusions;
• the prohibition on rescissions in health plans;
• patient protections afforded under the PPACA;
• coverage for preventive health services with no cost-sharing requirements;
• requirements for internal claims and appeals processes and external reviews; and
• the HIPAA opt-out for self-funded nonfederal governmental health plans.

While there is still more expected, a critical mass of guidance has now been issued that allows employers sponsoring group health plans to move toward finalizing plan design changes for next plan year.  As employers begin preparing for open enrollment season in the coming weeks and months, the PPACA provisions discussed in this summary require a fresh look.  Ice Miller has, therefore, revised its original summary to include discussion of relevant guidance and the obligations such guidance places on employers sponsoring group health plans to timely amend plan materials, make required disclosures to employees, and offer special enrollment opportunities to their employees.

View and print the updated summary.

View and print Ice Miller's list of steps that plan sponsors should be taking now to comply.

The recently enacted Small Business Jobs Act of 2010 (H.R. 5297) includes two important retirement plan provisions.  The bill was signed into law by President Obama on Sept. 27, 2010.

The first provision allows governmental 457(b) plans to be amended to allow participants to treat elective deferrals as Roth contributions.  Roth contributions are currently permitted under 401(k) plans and 403(b) plans. This provision is effective for tax years beginning after Dec. 31, 2010.

The second provision allows an employer sponsoring a 401(k), 403(b) and/or governmental 457(b) plan that permits Roth contributions to be amended to allow participants to roll their pre-tax account balances to a Roth account under the plan.  The rolled over amount can be included in taxable income.  However, the 10 percent tax penalty under Internal Revenue Code Section 72(t) generally imposed on early distributions would not apply.  Further, rolled over amounts consisting of after-tax contributions would not be included in taxable income.  A participant electing a rollover to a Roth account can spread the tax burden by paying the tax in 2011 and 2012.
 

Agencies Issue PPACA Implementation Guidance

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA).  Six months later, the PPACA's "first round" of coverage mandates are set to go into effect.  Group health plans must comply with the following coverage mandates beginning with their next plan year (Jan. 1, 2011, for calendar year plans):

• Extension of dependent coverage to age 26;
• Elimination of pre-existing condition exclusions for enrollees under age 19;
• Prohibition on lifetime and annual dollar limits;
• Prohibition on rescissions;
• Provision of first dollar coverage for preventive health services (non-grandfathered plans only);
• Internal claims and appeals procedures and external review process (non-grandfathered plans only);
• Mandated patient protections (non-grandfathered plans only);
• Non-discrimination rules extended to insured plans (non-grandfathered plans only); and
• No discrimination based on health status (non-grandfathered plans only).

Since the enactment of the PPACA, the Departments of Labor (DOL), Health and Human Services, and the Treasury have jointly published several phases of interim final regulations, issued sub-regulatory guidance, and invited comments concerning many of the changes that will impact employers and retirement systems that sponsor group health plans.

Read the entire article.
 

This blog was posted by Terry Mumford and Albert Lee.

NCPERS Annual Legislative Conference was held February 3, 2009 and the NAPPA Tax Section Meeting was held February 4, 2009.  Both were in Washington, D.C. and included speakers from Congress, the U. S. Treasury and the IRS. 

National Conference on Public Employee Retirement Systems (NCPERS)

The NCPERS conference is designed to educate attendees about hot topics on Capitol Hill so that they can be well informed in making calls on their U.S. representatives and senators.  I was particularly interested in the comments made by Mildeen Worrell, tax counsel to the Ways and Means Committee because she focused on issues that she believes governmental plans will face in the future.  In particular she talked about the following issues that "cross-over" from the private sector to affect governmental plans:

• Funding.  Worrell observed that articles about the funding levels of public plans can have a negative effect unless governmental plans make their voices heard. 
• Benefit Design.  If Congress allows the private sector retirement plans to be increasingly based on individual plans, that will also threaten traditional DB governmental plans.  In her personal opinion, hybrid plans (cash balance plans) are the future of defined benefit plans.  However, political forces prevent Congress and regulators from doing what should be done on cash balance plans.  Leaving the situation to the courts does not make sense.
• Fee Disclosure.  According to Worrell, the fee disclosure issue will likely expand outside of the 401(k) context – at least to 403(b) and 457(b) plans.
• Other issues on the horizon include providing for independent investment advice and the "auto IRA."

Many Ice Miller governmental clients will be challenged in 2009 and beyond to address these issues at the state and local level.

Read a discussion of regulatory topics at the NCPERS conference.

National Association of Public Pension Attorneys (NAPPA) Tax Section
Terry Mumford is the lead chair of the NAPPA Tax Section.

The NAPPA Tax Section meeting is intended to educate public pension attorneys on statutory and regulatory developments that affect the qualified status of public pension plans and the taxation of member benefits. Martin "Marty" Pippins, IRS EP technical guidance and quality assurance, has addressed this group for many years with regard to IRS guidance projects.
 
Pippins discussed a governmental plan questionnaire (Form 14035) that at the time of the conference had not yet been released.  As stated by Pippins the survey went to 25 governmental plans that were randomly selected to answer the survey.  At the same time the survey was posted on the Web site for a 90 day comment period.  Based upon the comments, the questionnaire will be revised and then sent to additional plans (100-200) for completion.

Read a question and answer session with Marty Pippins that contains more information.

The IRS issued Publication 15-T, regarding the new withholding tables designed to accelerate the benefit of the "Making Work Pay" tax credit passed under the American Recovery and Reinvestment Act of 2009, effective February 17, 2009.  The Publication formalized the IRS position that the new withholding tables are to apply to pensions in addition to wages.  Governmental plans should be aware of the impact of the new tables on two separate groups: (1) employees receiving wages under the plan's payroll, and (2) retirees and/or their beneficiaries receiving monthly benefit payments from the plan.  The IRS asks that the new tables be implemented as soon as possible but no later than April 1, 2009.

On December 23, 2008, President Bush signed into law the "Worker, Retiree, and Employer Recovery Act of 2008" (Act).

The Act provides numerous technical corrections to the Pension Protection Act of 2006 (PPA) and provides pension funding relief in light of the current economic crisis.  

Read a summary of some of the Act's provisions of interest to single employer plans.

The House and the Senate passed H.R. 7327, also known as the "Worker, Retiree, and Employer Recovery Act of 2008" (Act), with unanimous consent.

H.R. 7327 provides numerous technical corrections to the Pension Protection Act of 2006 and other relief applicable to governmental plans. 

Read the summary of some of the Act's provisions of interest to governmental plans.