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Legal Updates in ERISA &
Employee Benefits

 

 

 

ERISA, Employee Benefits, Executive Compensation and Estate Planning Law

June 2011

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The Wagner Law Group News

 

 

 

Television Appearances 

 

Below is a recent television appearance by The Wagner Law Group.

 

Fox Business News, Pension Problems, May 17, 2011

 

 

 

Recent Seminars

Below are links to seminar material that The Wagner Law Group recently presented.

   

"Important Pension Changes: What Do You Need To Know?" Janney Montgomery Scott, LLP: Advanced 401(k) Seminar, June 16, 2011 (Baltimore, Maryland)

-View Marcia Wagner's PowerPoint Presentation here

 

"Evolving Best Practices for 403(b) Plan Fiduciaries," Fiduciary Investment Advisors - 2011 Client Conference, June 15, 2011 (Westbrook, Connecticut)

 

"Overview of ERISA Fiduciary Responsibility and Liability and Best Practices," Seminar for TD AmeriTrade Trust Company sponsored by iShares, June 9, 2011 (San Francisco, California)

-View Marcia Wagner's PowerPoint Presentation here

 

"Washington Update: What Do You Need To Know?" Washington Legal Update for MassMutual sponsored by Eaton Vance, June 7 and 8, 2011 (Stamford, Connecticut; New York, New York; Wayne, Pennsylvania; West Orange, New Jersey)

-View Marcia Wagner's PowerPoint Presentation here

 

"Best Practices: Compliance and Retirement Issues," 2011 NSCP East Coast Regional Meeting, June 6, 2011 (New York, New York)

-View Marcia Wagner's PowerPoint Presentation here

 

"Overview of ERISA Fiduciary Responsibility and Liability and Best Practices," Seminar for TD AmeriTrade Trust Company sponsored by iShares, June 1, 2011 (Philadelphia, Pennsylvania)

-View Marcia Wagner's PowerPoint Presentation here

 

"Guidance on Deferred Compensation: IRS 409A and IRC 457," 2011 FICPA Employee Benefit Plans Conference, May 26, 2011 (Orlando, Florida)

-View Marcia Wagner's PowerPoint Presentation here

 

"DC Plan Participants Attitudes and Behavior," Panel Discussion for BlackRock, Inc., May 18, 2011 (New York, New York)

-View Marcia Wagner's PowerPoint Presentation here

 

 

 

Articles Published

Below are links to recently published articles written by The Wagner Law Group.

 

 "Public Pension Plans and the Retirement Gap: Understanding the Crisis and Possible Solutions," (PDF), Pension & Benefits Daily, June 7, 2011

 

 

 

Quoted Articles

 

Below are links to recently published articles quoting The Wagner Law Group.

 

"Phyllis Borzi: Protecting the Everyman's Benefits," Investment News, June 12, 2011

 

"More Workers Borrowing Against Their Future, Threatening Retirement Security With 401(k) Loans," The Republic, June 7, 2011

 

"How Do I Pay Thee? Let Me Count The Ways," Portico Wealth Advisors, May 17, 2011

 

"Ask an Expert - ERISA," LPL Financial Retirement Partners, May 2011

 

 

 

 

Newsletters

If you would like to read past editions of The Wagner Law Group's newsletter, please visit our website.

 

 

 

 

 

 

The Wagner Law Group Description

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA, employee benefits, executive compensation and estate planning practice. 

Established in 1996, The Wagner Law Group has 18 attorneys engaged exclusively in employee benefits and estate planning law. Five of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 30 states and several foreign countries.

 

 

 

Contact Info

 

The Wagner Law Group

 

Massachusetts Office 

Tel: (617) 357-5200
Fax: (617) 357-5250
99 Summer Street
13th Floor
Boston, MA 02110


Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7121 Fairway Drive
Suite 203
Palm Beach Gardens, FL 33418

 

www.wagnerlawgroup.com 

 

 

 

Current and back issues of this Newsletter are available on our website at:
www.wagnerlawgroup.com.

 

This Newsletter is protected by copyright. Material appearing herein may be reproduced with appropriate credit.

  

Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.

 

This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.

 

 

Marcia Wagner 

For health and welfare plans, the Patient Protection and Affordable Care Act ("PPACA" or "Health Care Reform Act") continues to be the hot topic, with the IRS, the Department of Labor ("DOL") and the Department of Health and Human Services ("HHS") continuing to issue additional guidance on the implementation of the law, even while it is being subject to numerous legal challenges in court.

 

This Newsletter is intended to provide you with an overview of the recent Health Care Reform litigation and regulation, and other events affecting welfare benefit plans and employment law.  If you have any questions or seek our counsel, please contact any of The Wagner Law Group attorneys, specialists in ERISA, employee benefits, executive compensation and estate planning.

 

 

As always, if you have any questions or comments, please call us at (617) 357-5200 or email a member of our team

 

 

 

Best Regards, 

 

View my profile on LinkedIn 
Marcia Wagner

 

 

 

 

A.  Federal Court Strikes Down Entire Health Care Reform Act

 

A federal judge in Florida has struck down the entire PPACA which, in part, requires most Americans to obtain health insurance or face a monetary penalty.  The case originated when Florida's attorney general filed a lawsuit in federal district court and was immediately joined by attorneys general from 13 other states.  The lawsuit directly challenged the PPACA's constitutionality.  By the time of the decision, 26 states had joined the lawsuit.

 

In his opinion, Judge Roger Vinson held that PPACA's individual insurance mandate exceeded Congressional power to regulate commerce under the U.S. Constitution's Commerce Clause.  Vinson further ruled that because the individual insurance mandate is "not severable" from PPACA, the entire legislation "must be declared void."

 

This decision represents a more robust repudiation of PPACA than a Virginia federal judge's ruling last December, which also held the individual mandate to be unconstitutional.  In the present case, Judge Vinson compared PPACA to a "finely crafted watch" in which "one essential piece is defective and must be removed," and that "there are simply too many moving parts...for me to try to dissect out...the able-to-stand-alone from the unable-to-stand-alone."

 

In reaching his decision, Judge Vinson focused on the question of whether an individual's passive decision to not purchase health insurance is an "activity" within the meaning of the Commerce Clause and therefore within the scope of Congressional authority.  In all of the Supreme Court's previous decisions upholding laws enacted under the Commerce Clause, the Court has required that some element of activity be present. 

 

The Judge determined that an individual's decision to not purchase health insurance cannot be considered an economic activity.  He further commented that it would be a radical departure from existing case law to hold that Congress can regulate inactivity under its Commerce Clause powers, and that if he were to hold so, "Congress could do almost anything it wanted", such as requiring all citizens to purchase a certain amount of bread each week in order to stabilize wheat prices.

 

The Judge stopped short of granting an injunction against the PPACA, as the plaintiffs requested, to prevent its ongoing rollout while his decision is appealed. 

 

This case is just one of 25 lawsuits challenging the PPACA's constitutionality.  Several of the lawsuits have now been decided in the lower courts, some rulings upholding the PPACA, while others have found all or part of the PPACA to be unconstitutional.  Virtually all legal scholars agree that the U.S. Supreme Court will ultimately decide whether the PPACA is constitutional.  However, the Supreme Court has denied a petition from the Virginia Attorney General to expedite a review of PPACA's constitutionality, so many of these lawsuits will be heard by U.S. Courts of Appeal before the Supreme Court makes its ruling.

 

B.  The Federal Budget & Patient Protection and Affordable Care Act

 

Recent legislative activity has impacted certain provisions of the PPACA.

 

Repeal of Form 1099 Reporting Rule.  President Obama has signed legislation repealing PPACA's Form 1099 reporting provision.   This provision required all purchases or payments for services in excess of $600 annually to be reported on Form 1099.  Both Democrats and Republicans conceded that this particular requirement was overly burdensome and served little purpose.

 

In addition, with the passage of the budget deal to keep the federal government operating, the following changes to PPACA were enacted:

 

Funding Cut to the Consumer Operated and Oriented Plan Program (CO-OP).  Over $2 billion in funding has been cut from the CO-OP program.  The CO-OP program is designed to create new non-profit health insurance cooperatives in each state and the District of Columbia.  The CO-OPs would operate as member-run health insurance issuers that provide qualified health plans ("QHP") in the individual and small group markets.  The CO-OP program had an initial earmark of $6 billion. 

 

Any QHP offered by a CO-OP is required (just like other insurers in the state), to comply with the requirements of PPACA, including pre-existing condition clauses, solvency and licensure requirements and rules on payment to providers.  CO-OPs may form private purchasing councils to enter into collective purchasing arrangements for items and services that increase their administrative efficiency, within the confines of federal antitrust law.  Any CO-OP profits must be used to lower premiums, improve benefits, or provide other programs intended to improve the quality of health care delivered to CO-OP members.

 

Repeal of the Free Choice Voucher Program.  The Free Choice Voucher Program has been repealed.  This Program would have required employers who offer group health plan coverage to provide free choice vouchers ("FCVs") to certain employees.  The employees could then use the FCVs to purchase other insurance through a state insurance exchange.  The voucher would have been equal to the amount of the employer's plan contribution for a plan participant.  To qualify for the FCV, the employee's required plan contribution would have had to exceed 8% but be less than 9.5% of the employee's household income for the year.  In addition, the employee's household income could not have been greater than 400% of the Federal Poverty Level. 

 

C.  Sixty-Day Advance Notice Requirement

 

Under a provision of PPACA, group health plans and health insurance carriers will be required to provide at least 60 days' advance notice to participants before the effective date of any material modification to the plan.  However, the effective date of this new requirement was unclear under the law.

 

Now, in Part V of their Frequently Asked Questions ("FAQs") about the implementation of PPACA, IRS, DOL and HHS have clarified the effective date of this 60-day rule.

 

Under another provision of PPACA, the agencies are required to issue regulations establishing standardized language for plans to use to describe plan coverage and benefits. These regulations are required to be effective by March 23, 2012.

 

The agencies have now stated in their FAQs that 60-day advance notice requirement will become effective at the same time that the standardized language requirement takes effect.

 

D.  More Guidance on Grandfathered Plan Status

 

IRS, DOL and HHS have issued Part VI in their series of Frequently Asked Questions ("FAQ").  In particular, Part VI addresses the following matters related to "grandfathered" health plans under the PPACA:

 

Clarification of the Anti-Abuse Rule.  Transferring employees from one grandfathered plan (transferor plan) to another (transferee plan) will generally cause the transferee plan to lose its grandfathered status if amending the transferor plan to match the transferee plan's terms would cause the transferor plan to lose its grandfathered status.  However, if there is a "bona fide employment-based reason" for the transfers, this rule does not apply.  The FAQ provides a non-exhaustive list of "bona fide employment-based reasons" for transfers including:

 

        the elimination of a benefits package due to the issuer exiting the market or no longer offering the product to the employer;

         low or declining participation in a benefit package, making it impractical for the employer to continue offering it; and

         the elimination of a benefit package for any reason where multiple benefit packages covering a significant portion of other employees are available to the employees being transferred.   

 

Moving Brand Name Drugs into a Higher Cost-Sharing Tier.  Grandfathered plans may move brand name drugs into a higher cost-sharing tier once generic alternatives become available without losing their grandfathered status.

 

Employer Contribution Formula and Increase in Cost of Coverage.  Sponsors of grandfathered plans that contribute towards employees' coverage based on a formula are not required to raise their contribution rates to account for increases in the total cost of coverage in order to maintain their plan's grandfathered status. 

 

Amendment to Grandfathered Plan Causing Loss of Grandfathered Status.  A grandfathered plan that adopts an amendment which causes its grandfathered status to be lost will cease to be a grandfathered plan on the effective date of the amendment, rather than the date the amendment is adopted. 

 

E.  Mini-Med Plans

 

Under PPACA, non-grandfathered group health plans are, in general, prohibited from imposing annual limits on essential health benefits.  However, restricted annual limits may be imposed by grandfathered plans until 2014.  These limits are: $750,000 for plan years beginning after September 22, 2010; $1.25 million for plan years beginning after September 22, 2011; and $2 million for plan years beginning after September 22, 2012. 

 

HHS has recognized that mini-med plans, with much smaller annual limits, are frequently the only health care coverage option available to many workers.  It ruled that certain mini-med or limited benefit plans that were in existence before September 23, 2010, may be exempted from the minimum annual benefit rule.  HHS, therefore, issued procedures under which issuers or sponsors of mini-med plans may request a waiver from these minimum annual limits.

 

Now HHS has said that mini-med plans which receive these waivers must provide "current and eligible participants" with a notice containing the following information:

 

          a statement that the health care coverage provided under such plans has lower annual dollar limits than the limits prescribed under PPACA;

          the dollar amount of the annual limit, along with a description of plan benefits to which the limit applies; and

          a statement that the waiver is granted for only one year. 

 

Mini-med plan insurers must also direct consumers to http://www.HealthCare.gov where they can obtain further information about other available coverage options.

 

F.  Community Living Assistance Services and Support Act

 

HHS has released a general overview on the Community Living Assistance Services and Support Act ("CLASS Act").  CLASS is a new federally administered program, created under PPACA, establishing a national, voluntary long term care program to be known as the CLASS Independence Benefit Plan (the "CLASS Plan") under which:

 

          Most individuals, age 18 and over, who are actively at work, can enroll.  Individuals who are actively at work cannot be excluded from enrolling due to pre-existing conditions such as having a physical disability or because of other health issues.

          Employers who make the CLASS Plan available to their employees may have automatic enrollment as long as they provide an opt-out provision.  Employees may use payroll deduction to pay their monthly premiums, but employers need not contribute to the CLASS Plan.

          The premiums are intended to remain level, with a minimum premium of $5.00 per month for poverty-line individuals and students. The maximum premium is to be determined in the future. 

          Benefits are payable to persons who have paid CLASS Plan premiums for at least 5 years and who have earned enough to qualify for at least one quarter's Social Security credit in each of 3 out of the last 5 years.  In addition, to be eligible for benefits, an individual must be unable to perform at least two "Activities of Daily Living" ("ADL") for a period of at least 90 days or must require substantial supervision due to cognitive impairment (e.g., dementia, Alzheimer's).  ADLs include bathing, dressing, using the toilet, moving (e.g., from bed to chair), caring for incontinence and eating.

          A benefit payment scale, to be developed by HHS, will be based on an assessment of the individual's need for help due to the physical or cognitive limitation, but will not be less than $50 per day.

 

HHS, along with a "CLASS Independence Advisory Council", will determine the final details of the CLASS Plan.  HHS is required to issue regulations by October 1, 2012.

 

G.  Student Health Plan Regulations 

 

HHS has issued proposed regulations on the application of PPACA to student health plans. 

 

PPACA provides that: "nothing in this title...shall be construed to prohibit an institution of higher education...from offering a student health insurance plan."  HHS's proposal tackles the problem by classifying student health plans as individual health insurance.  It then creates a special subcategory for the student plans that exempts them from certain provisions of PPACA that would "prohibit an institution of higher education...from offering a student health insurance plan".

 

The proposal defines "a student health plan" as "individual health insurance coverage that is provided pursuant to a written agreement between an institution of higher education and a health insurance issuer, and provided to...[its] students and their dependents", which:

 

          does not make health insurance coverage available other than in connection with enrollment as a student in the institution of higher education;

          does not condition eligibility for coverage on any health status-related factor; and

          meets any additional state law requirements.

 

However, the regulations specifically exempt self-insured student plans, stating that they are not subject to HHS regulations.

 

The proposal exempts or modifies the following PPACA requirements:

 

          Guaranteed availability and guaranteed renewability rules do not apply to student health plans because they are, by definition, only available to students and their dependents.

          Permitted annual limits for student health plans are reduced to $100,000 for policy years beginning before September 23, 2012.  For policy years beginning on or after September 23, 2012, student health plans must meet same $2 million annual limit that applies to grandfathered group health plans.  As with other plans, beginning in 2014, no annual dollar benefit limit is permitted.

          Student administrative health fees charged to students for certain health services are not considered a cost sharing fee and therefore do not violate the PPACA requirement that cost sharing cannot apply to preventive care services.

 

Student health plans would have to comply with the other requirements of PPACA, including the prohibition on lifetime benefit limits and the pre-existing condition rule. 

 

In addition, student health plans must provide a notice to students stating that the plan may not comply with all of the PPACA requirements.  A sample notice is provided in the proposed regulations.

 

H.  Nursing Mothers at Work

 

In addition to the rules pertaining to group health plans, PPACA contains a rule requiring break times for nursing mothers.  The Wage and Hour Division of the Department of Labor ("WHD") has now released interpretive guidance on this new requirement.

 

Under the Nursing Mothers at Work provisions of PPACA, employers are required to provide: a) "reasonable breaks for an employee to express breast milk for her nursing child for 1 year after the child's birth, each time such employee has need to express the milk"; and, b) a location, other than a bathroom, that may be used by employees to express breast milk, which is shielded from view and free from intrusion from coworkers and the public.  An employer that employs fewer than 50 employees is not subject to these rules, if the rules would impose an undue hardship on the employer.

 

Under the guidance:

 

          All employees who work for the covered employer, regardless of work site, must be counted when determining whether the employer has fewer than 50 employees;

          Only employees who are not exempt from Section 7 (e.g., overtime requirements) of the Fair Labor Standards Act are covered under these Nursing Mothers at Work provisions;

          Break time for expressing milk does not have to be paid, but where an employer already provides for paid breaks, an employee who uses that break time to express milk must be paid in the same manner as other employees;

          No fixed rule will be made for the reasonableness of the break time, rather, it will depend on many facts and circumstances; and

          The space provided to express milk need not permanently designated for this purpose.

 

Finally, it is important to note that PPACA does not preempt any existing state laws that exceed the requirements of the Nursing Mothers at Work provisions.