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Employment Benefits

Tuesday, May 9, 2017

Wellness Plan Benefits May Be Taxable to Employees


Employers may offer their employees various types of benefit arrangements that are designed to reduce their employees’ tax obligations by using a combination of wellness programs, voluntary benefits and cafeteria plans. However, the Internal Revenue Service (IRS) has provided guidance that points out that many of these arrangements are treated as taxable benefits by the IRS.

In May 2016, the IRS issued IRS Chief Council Advice Memorandum 201622031, which addressed the tax treatment of three different situations in which wellness benefits result in taxable income to employees. It provides as follows:

Situation 1: The employer provides health coverage with a separate no-cost wellness program that provides health screenings and other services that generally qualify as a tax-favored accident and health plan under Internal Revenue Code section 106. Employees that participate in the wellness program may also earn cash rewards and other benefits that do not qualify as Code section 213(d) medical expenses, such as gym memberships.
Read more . . .


Friday, April 28, 2017

An Ounce of Prevention is Worth the Avoidance of a Data Breach Health and Welfare Plan Fiduciaries Must Prepare for Battle


The data that health and welfare plans may store or exchange with service providers electronically often includes participants’ names, addresses, dates of birth and pertinent health information or even social security numbers.  Technology experts claim that health plan breaches are much more valuable to hackers than credit card breaches because health records and plan eligibility data have a longer “shelf life” than credit card data, which can be changed or eliminated when the credit card company is notified to shut the card down.  Health care plan information therefore has a higher “resale” value than other data obtained after a technology breach. 

Rather than wait to be a victimized health plan, plan sponsors and fiduciaries must take precautionary measures to prevent data breaches within their own organizations and between their plan and the service providers that support their plan’s operations.  By implementing several simple processes and educating employees and participants regarding these processes, plan trustees can block the efforts of not only hackers but can also prevent the unauthorized release of private health information and pertinent identity-revealing data of plan participants and their dependents.
Read more . . .


Tuesday, April 25, 2017

DOL Extends Fiduciary Rule Applicability Date


The Department of Labor (DOL) has issued a final rule delaying the applicability date defining who is a fiduciary and related prohibited transaction exemptions for 60 days.

The rule also extends for 60 days the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs. It requires that fiduciaries relying on these exemptions for covered transactions adhere only to the Impartial Conduct Standards (including the “best interest” standard), as conditions of the exemptions during the transition period from June 9, 2017, through January 1, 2018.

The April 4, 2017 News Release from the Department of Labor states as follows:

US LABOR DEPARTMENT EXTENDS FIDUCIARY RULE APPLICABILITY DATE

The U.S.
Read more . . .


Wednesday, April 5, 2017

United States Appellate Court Reinstates COBRA Rights for Employee Who Was Dismissed for Allegedly Stealing Stale Cake


A recent federal appellate court decision highlights the distinction between firing an employee for cause and firing an employee for gross misconduct for purposes of determining a terminated employee’s eligibility to continue employer-provided health insurance under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”).

Background.  In Mayes v. Winco Holdings, Inc., 2017 WL 461484 (9th Cir.
Read more . . .


Tuesday, March 28, 2017

WILL AMENDMENTS TO ERISA CLAIMS AND APPEALS’ PROCEDURES FOR DISABILITY BENEFITS STICK FOR 2018?


The Department of Labor (“DOL”) recently finalized amendments to the ERISA (Employee Retirement Income Security Act) claims and appeals procedures for disability benefit plans. The final rule released December 16, 2016, took effect on January 18, 2017, but will only apply to claims for disability benefits filed on or after January 1, 2018. 

But don’t stop reading because you don’t sponsor a stand-alone disability plan. While many retirement and health plan sponsors may not think this amendment applies to their plans, they should re-examine the specific details contained within its provisions. On the contrary, the implications of this amendment are likely to apply to any ERISA plans that provide benefits conditioned upon a finding of disability, including pension and 401(k) plans.
Read more . . .


Thursday, March 16, 2017

Use of Target Date Funds in Defined Contribution Plans


Target date funds first came to market in 1994. The enactment of the Pension Protection Act of 2006 (PPA) greatly expanded the growth of target date funds.

A target date fund, also known as a lifecycle, dynamic-risk or age-based fund, is a collective investment scheme( often a mutual fund or a collective trust fund) designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date (usually retirement) approaches.

The PPA allowed plan sponsors to direct participants' retirement contributions to a target date fund if they did not choose otherwise. The Department of Labor (DOL) issued a fiduciary safe harbor for plan sponsors that chose to offer target date funds to their participants as a default investment option, known as a "qualified default investment alternative.
Read more . . .


Tuesday, March 7, 2017

Internal Revenue Service Issues 2016 Required Amendments List for Tax-Qualified Retirement Plans


On June 29, 2016, the Internal Revenue Service (“IRS”) released supplemental guidance detailing anticipated changes to its determination letter program for individually designed retirement plans (“IDPs”) that are tax-qualified under the Internal Revenue Code (“Code”).  The changes are generally effective January 1, 2017.  Although IRS Revenue Procedure 2016-37 covers many changes to the IRS’s determination letter program, most of the changes relate to when an IDP— 

  • must be amended for legally required changes, or
  • may request a determination letter.

Background.  Pursuant to IRS Revenue Procedure 2016-37, an IDP’s Code Section 401(b) remedial amendment period for required amendments is based on a so-called “Required Amendment List” (“RA List”) that is published by the IRS, unless legislation or other guidance provides otherwise.
Read more . . .


Tuesday, February 28, 2017

Properly Soliciting a Participant’s Social Security Number---What Exactly Does that Mean?


Section 6055 of the Affordable Care Act (ACA) requires employers, plan sponsors and insurers to send annual eligibility reports to employees identifying all individuals including dependents, receiving health care coverage.  Such eligibility and coverage reports must also be filed with the IRS by the designated deadlines which were extended. The 2017 reports that are sent to participants and the IRS will reflect entering and exiting of health plan participants and dependents in 2016. Employers and plan sponsors are required to obtain information, including Taxpayer Identification Numbers (TIN), more informally known as Social Security numbers, for employees and dependents who maintained health coverage under a plan during any of the months in 2016 from January through December.

With the newest extension, submissions to the IRS are due on March 31, 2017 for plan sponsors filing electronically and February 28, 2017 for paper forms.
Read more . . .


Tuesday, February 14, 2017

Seventh Circuit Court of Appeals Rules That Decertification of Union Does Not End Employer Contribution Obligations to Multiemployer Funds


The Seventh Circuit Court of appeals has ruled that an employer is still obligated to contribute to benefit funds for the life of the CBA even though the employees decertified the union.  The case is Midwest Operating Engineers Welfare Fund et al. v. Cleveland Quarry et al., Case Nos.
Read more . . .


Monday, February 6, 2017

Lawsuits Filed against Generic Pharmaceutical Companies for Price-Fixing


On December 15, 2016, the attorneys general in 20 states filed an antitrust lawsuit against six generic drug makers.  The lawsuit alleges that the six named companies— Mylan, Teva Pharmaceuticals, Citron Pharma, Heritage Pharmaceuticals, Mayne Pharmaceuticals, and Aurobindo Pharmaceuticals—participated in a scheme to artificially inflate the prices of generic drugs, including an antibiotic drug and a diabetes drug.

The antitrust lawsuit parallels an ongoing federal investigation into price-fixing in the generic drug sector and follows a lawsuit filed on December 14, 2016 in the United States District Court for the Southern District of New York by 1199SEIU National Benefit Fund against two generic drug companies Lannett Company, Inc. (“Lannett”) and Mylan Pharmaceuticals, Inc. (“Mylan”).
Read more . . .


Tuesday, January 24, 2017

ASK YOUR PLAN’S AUDITORS WHEN THEY WERE LAST AUDITED


          We are all acutely aware that defined benefit plans, defined contribution plans and health and welfare plans are extremely complex and that they are becoming even thorny  with tighter regulations, more United States Department of Labor (DOL) and Internal Revenue Service (IRS) investigations, changes proposed by the Pension Benefit Guaranty Corporation and the intricacies of the Affordable Care Act.  One function that plan fiduciaries perform in order to keep track of the transactions and reporting activities of their retirement plans is the annual audit.  Contributing employers may be subjected to payroll audits by multiemployer plan sponsors.  But all employee benefit plans (EBPs) are required by the Employee Retirement Income Security Act of 1974 (ERISA) to have its financial statements independently audited if there are 100 or more plan participants.  This requirement is one of the elements that an EBP sponsor must fulfill as part of their obligation for file a Form 5500 with the IRS.
Read more . . .


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