Benefits Update - July 2012

From the editors of CCH's BENE and BAN products, here are hot topics from recent Employee Benefits Management Directions newsletters as well as recent explanatory updates in Employee Benefits Management. Also included are recent explanatory updates to the Benefits Answers Now product.

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Supreme Court upholds ACA individual mandate in 5-4 vote, Employee Benefits Management Directions newsletter, Issue No. 518, July 3, 2012 — In a 5-4 ruling, the Supreme Court has held the individual mandate provision of the Affordable Care Act to be constitutional, but not as a valid exercise of Congress’s power under the Constitution to regulate interstate commerce. Instead, the mandate, codified as Sec. 5000A of the Internal Revenue Code, is upheld as within Congress’s power under the Taxing Clause. Chief Justice Roberts was joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan to reach this result.

Guidance provided on health insurance premium tax credit under health care reform law, Employee Benefits Management Directions newsletter, Issue No. 517, June 5, 2012 – The IRS and Treasury have provided guidance to individuals who enroll in qualified health plans through health insurance exchanges and claim the health insurance premium tax credit and to exchanges that provide qualified health plans to individuals and employers. The final regulations clarify the proposed regulations issued on August 17, 2011, and contain examples.

Final medical loss ratio rule establishes notice requirements, Employee Benefits Management Directions newsletter, Issue No. 517, June 5, 2012 – The Department of Health and Human Services (HHS) has published a final rule, amending the regulations implementing the medical loss ratio (MLR) standards for health insurance issuers. The final rule establishes notice requirements for issuers in the group and individual markets that meet or exceed the applicable MLR standard in the 2011 MLR reporting year. The MLR notice must be provided with the first plan document (for example, open enrollment materials) that is provided to enrollees on or after July 1, 2012.

IRS issues guidance on salary-reduction contribution limit for health FSAs, Employee Benefits Management Directions newsletter, Issue No. 518, June 19, 2012 — The IRS has issued guidance on the effective date of the $2,500 limit (as indexed for inflation) on salary-reduction contributions to health flexible spending arrangements (health FSAs) under Code Sec. 125(i) and on the deadline for amending plans to comply with that limit. The new guidance also provides relief for certain contributions that mistakenly exceed the $2,500 limit and that are corrected in a timely manner.

Premium tax credit — The final regulations on the health insurance premium tax credit are discussed at ¶10,500.

Medical loss ratio reporting form — The Center for Consumer Information and Insurance Oversight (CCIIO) has provided guidance on the medical loss ratio (MLR) reporting required under the Patient Protection and Affordable Care Act (ACA). The guidance, in the form of 14 (numbered 38 through 51) Questions and Answers Regarding the Medical Loss Ratio Reporting Form, includes information regarding the MLR Reporting Form instructions and the Health Insurance Operating System (HIOS) instructions. The guidance is discussed at ¶10,097.

Summary of Benefits and Coverage — Additional guidance has been issued on the implementation of the Summary of Benefits and Coverage (SBC) requirement of the Patient Protection and Affordable Care Act (ACA). The guidance is discussed at ¶10,240. At the same time, EBSA issued a corrected SBC template (see ¶226,121), a sample SBC (see ¶226,122), and a guide for coverage examples calculations for diabetes cases (see ¶226,127).

FMLA — An employer’s honest belief that an employee committed disability fraud shielded the employer from retaliatory discharge liability in Seeger v. Cincinnati Bell Telephone Company, LLC. The Sixth Circuit’s decision is discussed at ¶68,060.

What's New in Benefits Answers Now (BAN):

Supreme Court: ACA individual mandate is constitutional. In a 5-4 ruling, the Supreme Court has held the individual mandate provision of the Patient Protection and Affordable Care Act to be constitutional, but not as a valid exercise of Congress’s power under the Constitution to regulate interstate commerce. Instead, the mandate, codified as Sec. 5000A of the Internal Revenue Code, is upheld as within Congress’s power under the Taxing Clause. In addition, the provisions expanding Medicaid have been narrowed, but not invalidated. The remainder of the ACA, including all reforms of the individual and group insurance markets, remains intact. See the discussions at ¶20,010, ¶20,020, ¶20,025, ¶20,053, ¶20,055, ¶20,057, and ¶20,060 to read about ACA provisions that have implications for employer-sponsored plans.

IRS issues guidance on salary-reduction contribution limit for health FSAs. The IRS has issued guidance on the effective date of the $2,500 limit (as indexed for inflation) on salary-reduction contributions to health flexible spending arrangements (health FSAs) and on the deadline for amending plans to comply with that limit. The new guidance also provides relief for certain contributions that mistakenly exceed the $2,500 limit and that are corrected in a timely manner. More information about the salary-reduction contribution limit can be found at ¶72,990.

HHS issues proposed rule on data collection to support standards related to essential health benefits. The Department of Health and Human Services (HHS) has issued a proposed rule that would establish data collection standards necessary to implement aspects of the Patient Protection and Affordable Care Act (ACA), which directs the Secretary of Health and Human Services to define essential health benefits. The proposed rule outlines the data on applicable plans to be collected from certain issuers to support the definition of essential health benefits. The proposed rule also would establish a process for the recognition of accrediting entities for purposes of certification of qualified health plans (QHP). See the discussion at ¶20,052 for more information about essential health benefits.

Plan amendment that changed calculation of Social Security offset did not violate ERISA’s anti-cutback rule. A pension plan amendment did not violate the ERISA Sec. 204(g) anti-cutback rule when it changed the calculation of a Social Security offset for participants who had not yet reached age 52, the plan’s earliest retirement date, at the time of the amendment, the U.S. Court of Appeals in Atlanta (CA-11) has ruled. Where a participant had not reached age 52 on the effective date of the plan amendment, the retirement formula using that particular offset was not part of her accrued benefit. The anti-cutback rule protects only an accrued benefit from being reduced by a plan amendment. Find out more about the ERISA anti-cutback rules at ¶10,150.

Departments issue additional guidance on Summary of Benefits and Coverage, add safe harbors. The Department of Labor’s Employee Benefits Security Administration, together with the Departments of Health and Human Services and the Treasury (the Departments), have issued additional guidance in the form of 14 frequently asked questions (FAQs) for implementation of the Summary of Benefits and Coverage (SBC) requirement of the Patient Protection and Affordable Care Act (ACA). Starting on Sept. 23, 2012, health insurers and group health plans will be required to provide the SBC and the uniform glossary to consumers. To learn more about this SBC guidance, see the discussion at ¶20,060.

Many small employers ineligible for health tax credit because they don’t offer insurance. Fewer small employers claimed the Small Employer Health Insurance Tax Credit in tax year 2010 than were estimated to be eligible, according to a recent report from the Government Accountability Office (GAO). The report, Small Employer Health Tax Credit: Factors Contributing to Low Use and Complexity, noted that one factor limiting the credit’s use is that most small employers — up to 83 percent — do not offer health insurance. Another factor limiting the credit’s use is the complexity of filing a claim for the credit. To find out more about the small employer health tax credit, see ¶60,310.

What's New in Spencer’s Benefits Reports:

Health Reform: Summary Of Benefits And Coverage. Final rules and the latest guidance from the DOL, IRS, and HHS steer plan administrators and insurers to correctly implement health reform’s summary of benefits and coverage requirement (Report 522.1.-1).

Retirement Plans: Tax Withholding On Distributions. Sec. 3405 sets forth the tax withholding calculations for three different types of distributions from qualified retirement plans: (1) periodic payments, (2) nonperiodic payments, and (3) eligible rollover distributions. This report reviews the tax withholding rates that apply for each type of distribution (Report 184.-1).

Sec. 125 Flexible Benefits. This report details the specific written plan requirements of Sec. 125, provides a sample document for a simple plan, and reproduces a sample annual enrollment form (Report 352.-5).

HSA Comparable Contributions. If an employer contributes to its employees’ health savings accounts (HSAs), the employer must do so on a nondiscriminatory basis by making comparable contributions for all employees with comparable coverage. The applicable IRS regulations are reviewed in this report (Report 356.-41).

401(k) Hardship Withdrawals. Although a 401(k) plan may permit employees access to their money via hardship distributions, the hardship must meet a two-part test which requires that the employee: (1) have an immediate and heavy financial need, and (2) lack available resources, making the withdrawal necessary to satisfy the need. This report covers Sec. 401(k) hardship withdrawals (Report 225.-1).

Pensions: Fee Disclosures. This report reviews guidance from the Department of Labor’s Employee Benefits Security Administration (EBSA) clarifies application of the participant level fee disclosure regulations under ERISA Secs. 404(a) and 408(b)(2) (Report 605.1.-11).

New Pension/Benefits Titles Added:
Coverage and Nondiscrimination Answer Book (2012 Cumulative Supplement to the 4th Edition)
Employee Benefit Plan Review (July 2012)
401(k) Advisor (July 2012)
403(b) Answer Book (2012 Supplement to the 8th Edition)
Health Savings Account Answer Book (8th Edition)
Medical Benefits (July 2012: two issues: Vol. 29, Nos. 13 and 14)
Pension Benefits (July 2012)
Qualified Domestic Relations Order Answer Book (2012 Supplement to the 5th Edition)