In the first decision issued since the passing of Justice Scalia, the Supreme Court of the United States held that ERISA preempts a Vermont statute requiring third party administrators of self-insured group health plans to report claims information to state health care databases. Gobeille v. Liberty Mut. Ins. Co. addresses two important issues for benefit plans: (1) the scope of ERISA preemption; and (2) mandated reporting to state maintained “all-payer claims databases” (APCDs), which an increasing number of states are attempting to create in an effort to assess the cost, quality, and utilization of health services. Employers should benefit from the broad ERISA preemption standard re-affirmed in the majority opinion authored by Justice Kennedy. Plan sponsors, insurance carriers, and third party administrators should also take comfort in avoiding a patchwork of state APCD reporting requirements that may create foot faults for these entities.
Entries in Plan Administration (49)
Late last month the IRS released, in the form of 26 Q/As in Notice 2015-87, guidance on the application of various provisions of the Affordable Care Act to employer-sponsored health coverage. The Notice covers a number of important issues, including the effect of health reimbursement account contributions, cafeteria plan flex credits, and employer opt-out payments on an employee’s cost of coverage for purposes of determining affordability under Code § 4980H(b). The Notice also addresses the application to government entities of the employer shared responsibility rules, information reporting for applicable large employers, health savings account matters for persons eligible for benefits through the Department of Veterans Affairs, COBRA continuation coverage for carried over health flexible spending account balances, and penalty relief for employers that make a good faith effort to comply with the ACA reporting rules.
Regarding employer opt-out arrangements, for months the IRS has stated, informally in various settings, that an employer should include the value of an opt-out payment in determining and reporting an employee’s cost of coverage. (An opt-out payment is taxable income provided to an employee for waiving coverage under the employer’s health plan.) Under this rule an opt-out payment might cause an employee’s cost of coverage to become unaffordable, thereby potentially subjecting the employer to an assessable payment. Though the statutory and regulatory basis for this position is somewhat thin, a senior official at the IRS confirmed this view to us last summer.
Oddly enough, Notice 2015-87 both confirms and retreats from this position. Specifically, it provides that until the issuance of further guidance a payment under any opt-out payment arrangement in place prior to December 17, 2015 need not be reported on Form 1095-C and will not, on its own, cause an employer to be subject to a shared responsibility penalty. Further (as confirmed by communication with the principal author of the Notice) and again until IRS guidance states otherwise, a payment under a conditional opt-out arrangement (for example, one requiring an employee to show proof of coverage under the spouse’s plan in order to receive the payment) adopted at any time need not be reported on Form 1095-C and will not, on its own, cause an employer to be subject to a shared responsibility penalty.
Though the Notice provides that, for the time being, opt-out payments under certain arrangements need not be added to an employee’s cost of coverage for purposes of reporting and determining affordability, such payments will be added to an employee’s cost of coverage for purposes of determining (i) the employee’s eligibility for a subsidy on the Exchange, and (ii) whether the employee might be exemption from a penalty under the individual mandate.
This Client Advisory highlights certain developments regarding the Affordable Care Act (most significantly, the delay of the ACA reporting requirements and the “Cadillac” tax), discusses the EEOC’s proposed rules for wellness programs and the outcome of recent EEOC wellness program litigation, reviews important cases recently decided by and pending before the U.S. Supreme Court, and provides updates regarding church plan litigation and the Department of Labor’s proposed fiduciary rule. We also offer thoughts about what employers can expect to see in 2016 in the way of agency enforcement activities. Since 2016 is a presidential election year, few observers expect to see much, if any, significant legislation enacted by Congress. But regulatory agencies, entering the final year of the Obama administration, may be more active and productive in 2016.
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.
The 2014 end-of-year rush seems somewhat less frantic than in years past. Nevertheless, with a month left in the year many employers may find themselves scrambling to meet plan amendment and notice deadlines, and planning for 2015 may still be in process for some. This summary discusses a few key developments regarding employee benefit plans – especially group health plans – for employers to consider as they finish 2014 and move into 2015, including developments in:
- Retirement Plans,
- Health Plans and Health Care Reform, and
- EEOC Challenges to Wellness Programs.