Purveyors of preapproved defined contribution plan documents are now in the process of distributing document restatement packages to employers. The restated documents reflect updates required by changes in law, including the Pension Protection Act of 2006, which previously had been reflected in a series of addenda and amendments to plan documents. Restatement packages will certainly include a new adoption agreement (describing the design and features of the employer’s plan) and the “base” or “basic” plan document (containing all legally required provisions and permitted alternatives, which are activated by the adoption agreement). They may also include an updated trust agreement, a new summary plan description (assembled based on the provisions of the new adoption agreement), and possibly an overview of material changes made to the last version of the preapproved document. All of these materials will come with the admonition that the employer should review the documents carefully with legal counsel before executing the new adoption agreement. And employers would do well to heed that advice, because the restatement of a preapproved plan document presents opportunities both to identify existing administrative problems and avoid future problems. With this review process in mind, we share these thoughts.
Where There’s Smoke There’s Questions: Designing Compliant Wellness Programs That Target Tobacco Use
The final regulations concerning wellness programs under the Health Insurance Portability and Accountability Act, as amended (HIPAA) continue to generate a number of questions and concerns for employers whose programs seek to promote employee health by curbing tobacco use. The compliance status of some programs is further complicated by the recent release of Equal Employment Opportunity Commission (EEOC) proposed rules, which depart from the 2013 HIPAA regulations in important ways when it comes to tobacco-related wellness programs. Here is a sampling of questions we have received from clients, with brief responses that include observations about the proposed rules recently published by the EEOC.
For nearly a year the U.S. Equal Employment Opportunity Commission (EEOC) has endured harsh criticism from employers, members of the United States Senate, and the benefits community at large for commencing legal actions challenging employer-sponsored wellness programs before issuing guidance regarding the compliance status of those programs under the Americans with Disabilities Act (ADA). At long last the EEOC has released a Notice of Proposed Rulemaking (the “Notice”) addressing how Title I of the ADA applies to employer wellness programs. The good news is that the proposed regulations contained in the Notice hew fairly close to existing regulations published by other federal agencies and are generally limited to programs that involve disability-related inquiries and medical examinations. There are significant differences, however, regarding maximum rewards for programs that target tobacco use, the application of reward limits to certain participatory wellness programs, and the notice requirements that apply to wellness programs. Perhaps most importantly, the Notice attempts to address what makes participation in a wellness program “voluntary” and, thus, compliant with one of the safe harbor exceptions to the prohibition on employer-sponsored medical examinations under the ADA. Nevertheless, several questions affecting the legal compliance status of wellness programs remain.
For the second time in under a week the Internal Revenue Service released a series of updates to its most recent restatement of the Employee Plans Compliance Resolution System (EPCRS). Revenue Procedure 2015-28 modifies EPCRS by outlining new safe harbor correction methods for plans with automatic contribution features and shorter term elective deferral failures. The changes provide helpful relief to employers who maintain 401(k) and 403(b) plans by expanding the correction options for errors involving the implementation of elective deferrals or the improper exclusion of eligible employees from the plan. Employers whose plans provide for automatic enrollment and automatic escalation of elective deferrals will find the new guidance especially advantageous.
The IRS has clarified the correction of certain retirement plan operational failures under its Employer Plan Compliance Resolution System (EPCRS) and expanded certain elements of the program in ways that are helpful to retirement plan sponsors. The clarifications, contained in Rev. Proc. 2015-27, address what the IRS believes is an overly narrow or strict interpretation by plan sponsors of the requirements for the correction of overpayments and modify the correction program in other ways.