Employee Benefits Blog

Notice of Coverage Options Available Through the Exchanges

McDermott Will & Emery — Thu, 23 May 2013 14:52:30 -0500

On May 8, 2013, the U.S. Department of Labor (DOL) published Technical Release No. 2013-02, which provides temporary guidance addressing the Patient Protection and Affordable Care Act's (ACA) required notice to employees regarding their coverage options under state and federally facilitated health insurance exchanges (Exchanges).

As part of the ACA, an applicable employer was required to provide each employee at the time of hiring (or with respect to current employees, not later than October 1, 2013), a written notice:

Informing the employee of the existence of the Exchanges, including a description of the services provided by the Exchanges and the manner in which the employee may contact the Exchanges to request assistance
If the employer’s plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange
If the employee purchases a qualified health plan through an Exchange, that the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes

FAQs about ACA Implementation Part XI published in January of this year pushed back the timing for distribution of these notices until late summer or fall of 2013. This new technical release provides guidance on the notice requirement, but more importantly model notices.

The following are links to the DOL model notices:

Model notice for employers who offer a health plan to some or all employees
Model notice for employers who do not offer a health plan
COBRA model election notice (Adobe PDF format)
COBRA model election notice redline version (Adobe PDF format)

Favorable Temporary ACA Exemption for Expatriate Health Plans

McDermott Will & Emery — Tue, 21 May 2013 13:01:47 -0500

by Amy M. Gordon, Megan Mardy and Todd A. Solomon

Recently issued guidance addresses the unique compliance issues surrounding expatriate health plans under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (ACA).

To read the full article, click here.

Additional Guidance Issued on Summary of Benefits and Coverage Disclosure Requirements

McDermott Will & Emery — Thu, 16 May 2013 15:02:51 -0500

by Amy M. Gordon and Joanna C. Kerpen

The U.S. Departments of Labor, Health and Human Services, and the Treasury recently issued new guidance and templates regarding the summary of benefits and coverage requirement under the Patient Protection and Affordable Care Act.

To read the full article, click here.

Employers Should Review How Plan Documents Define Spouse in Light of Recent Benefits Litigation

McDermott Will & Emery — Tue, 14 May 2013 10:04:59 -0500

by Lisa K. Loesel, Todd A. Solomon, Jacob Mattinson and Brian J. Tiemann

Two recent cases challenging benefit eligibility for same-sex spouses highlight the need for employer-sponsored retirement and welfare plans to clearly define "spouse" for eligibility purposes. Employers may want to review their plan documents to determine whether plan amendments are needed to clarify benefit eligibility for same-sex spouses in light of the upcoming ruling by the Supreme Court of the United States on the constitutionality of the federal Defense of Marriage Act.

To read the full article, click here.

Employee Benefits Issues in Spin-Offs

McDermott Will & Emery — Thu, 09 May 2013 13:00:40 -0500

by Joseph S. Adams and Jeffrey M. Holdvogt

In a corporate spin-off, both the existing company and the new company (spinco) must consider the implications for employees, employee benefit plans and executive compensation arrangements. Benefit plans and compensation arrangements can represent significant liabilities and responsibilities, and typically are expressly allocated in an employee matters agreement (EMA). This article provides a brief summary of some of the key employee benefit plans issues to consider in a spin-off.

To read the full article, click here.

DOL Releases Informal Guidance Addressing Fiduciary Responsibilities With Respect to Target Date Funds

McDermott Will & Emery — Tue, 07 May 2013 11:38:04 -0500

by Joseph S. Adams, Anne S. Becker, Karen A. Simonsen and Ashley McCarthy

Recent U.S. Department of Labor (DOL) guidance underscores the need for plan fiduciaries to rigorously examine and monitor target date fund (TDFs), and potentially explore the use of custom or non-proprietary TDFs.

To read the full article, click here.

FTC Updates Guidelines for Making Proper Disclosures in Digital Advertising

McDermott Will & Emery — Thu, 02 May 2013 12:29:44 -0500

by Jorge R. Arciniega, Elisabeth Malis Morgan and Heather Egan Sussman

The U.S. Federal Trade Commission (FTC) released updated guidance on how to make online advertising and marketing disclosures “clear and conspicuous” to avoid consumer deception. The guidelines affect the structure and format of digital advertisements and marketing initiatives such as the use of endorsements and testimonials.

To read the full article, click here.

Employee-Shareholder Status

McDermott Will & Emery — Tue, 30 Apr 2013 14:09:12 -0500

by Katie Clark and Richard Cook

On October 8, 2012, George Osborne announced that the UK Government was proposing a new type of employment contract, dubbed the “employee-shareholder” contract.

The proposals were designed to allow employers to offer their employees shares in the business, at a minimum value of £2,000. In exchange, the employee would forgo certain statutory rights including, most pertinently, unfair dismissal and the right to a redundancy payment. The employees would receive favourable tax treatment on the disposal of the shares, up to a value of £50,000.

During the consultation process, the Government received little positive feedback on the approach, but confirmed in its consultation response that it intended to implement the proposals in any event.

On 24 April 2013, having twice rejected the Government’s proposals, the UK House of Lords accepted concessions made by the Government and voted to accept employee-shareholder status. The proposals are expected to become law in the autumn of 2013.

Details of The New Regime

Employers will now effectively be able to buy certain of their employees’ statutory rights for as little as £2,000.

For the rights to be effectively waived, however, a number of criteria must be met:

Each individual must be given a written statement of the particulars of their employee-shareholder status. This must specify the employment rights that he/she will forgo and detail the rights, restrictions and other conditions attached to the shares.
The individual must be given independent legal advice as to the terms and effect of entering into the scheme. Unless independent advice is received, and the individual has been given seven days to consider the advice, the employee’s employment rights will not have been waived.
The employer will need to meet the reasonable cost of the legal advice, even if the offer is not taken up.

The right to claim discrimination and claims of automatically unfair dismissal, including whistleblowing, are excluded from the waiver.

What Does This Mean for Employers?

In theory, employee-shareholder status will provide more flexibility for employers in recruitment, and the potential to mitigate legal risk, by offering an up-front payment, in the form of shares, of as little as £2,000.

In practice, however, the intricacies of the offer-acceptance process are likely to mean that employees will be very well informed, making them less likely to “sell” their valuable employment rights for as little as £2,000. There is also scope for technical errors to be made in the new, more complex, process that may result in the employee receiving £2,000 but still retaining his or her statutory rights.

Nonetheless, if implemented properly, employee-shareholder contracts could be a valuable tool for employers who are looking to build flexibility into their workforce. The question is whether employees, given the inherent value of the rights they are being asked to give up, and the risk of a fall in the value of their shares, will find the proposition an attractive one.

For further information, or for assistance in setting up an employee-shareholder arrangement, please contact Katie Clark or your regular McDermott lawyer.

IRS Issues Procedures for Securing Favorable Opinions on Pre-Approved 403(b) Programs

McDermott Will & Emery — Thu, 25 Apr 2013 15:59:40 -0500

by Mary K. Samsa, Todd A. Solomon and Joseph K. Urwitz

The Internal Revenue Service (IRS) recently released a revenue procedure establishing a new program for the pre-approval of 403(b) plans. The program opens June 28, 2013, and the IRS will begin accepting applications for opinion and advisory letters on whether the form of prototype plans and volume submitter plans meet the requirements of Code Section 403(b).

To read the full article, click here.

Company Owners Personally Liable for $3.1 Million Withdrawal Liability Assessment -- Owners' Lease of Commercial Property to Company Constituted "Trade or Business"

McDermott Will & Emery — Mon, 22 Apr 2013 11:32:09 -0500

by Jonathan J. Boyles, Paul J. Compernolle and David Diaz

The U.S. Court of Appeals for the Seventh Circuit ruled that owners can be personally liable for multiemployer withdrawal liability where the owner leases property to its own closely held corporation. The decision highlights the dangers of related-party transactions, failing to observe business formalities and holding property personally.

To read the full article, click here.

ACA Guidance on 90-Day Waiting Periods and Certificates of Creditable Coverage

McDermott Will & Emery — Tue, 16 Apr 2013 14:46:22 -0500

by Amy M. Gordon, Jamie A. Weyeneth and Megan Mardy

Recently issued Affordable Care Act guidance clarifies the prohibition on waiting periods in excess of 90 days and eliminates the requirement to issue HIPAA group health plan certificates of creditable coverage after December 31, 2014.

To read the full article, click here.

Final Rule Implementing FMLA Amendments Expands Protections for Military Families and Airline Flight Crews

McDermott Will & Emery — Thu, 11 Apr 2013 11:10:06 -0500

by Stephen D. Erf, Heather Egan Sussman and Sabrina E. Dunlap

The U.S. Department of Labor recently issued a final rule implementing new expanded rights for families of military members and veterans, and greater access to Family and Medical Leave Act (FMLA) leave for airline flight crews. Companies should review and update their FMLA policies to account for this new rule.

To read the full article, click here.

UK Employment Alert: Increase in Employment Protection Awards

McDermott Will & Emery — Tue, 09 Apr 2013 14:30:19 -0500

by Katie Clark and Paul McGrath

The compensation limits on Tribunal awards will increase as of 1 February 2013. The key changes are set out below.

Statutory Redundancy Pay

The maximum amount permitted for calculation of a week’s pay will rise from £430 to £450; the maximum entitlement to Statutory Redundancy Pay will therefore rise from £12,900 to £13,500.

Basic Award

The current maximum amount for a week’s pay will rise from £430 to £450; the maximum Basic Award will therefore rise from £12,900 to £13,500 (which would be awarded to an employee aged 61+ with 20+ years service).

Minimum Basic Award for Defined Dismissals

The minimum Basic Award a Tribunal can award for certain dismissals, i.e., those relating to certain employee representative, health and safety and working time cases, will rise from £5,300 to £5,500.

Maximum Compensatory Award

The maximum Compensatory Award a Tribunal can award in most cases of unfair dismissal will rise from £72,300 to £74,200.

The maximum total award for unfair dismissal (i.e. maximum unfair dismissal compensation plus maximum basic award) will therefore rise from £85,200 to £87,700.

What Does This Mean for Employers?

The changes will take effect on 1 February 2013 and will be applicable to dismissals taking effect on or after that date.

It is important for employers to note that:

If an employee is given notice prior to 1 February 2013, but the notice period will expire on or after 1 February 2013, the new limits set out above will apply to that dismissal.
If an employee is paid in lieu of notice, the effective date of termination (EDT) is the actual date, plus the amount of statutory notice applicable to the employee, i.e., one week per year of employment, up to a maximum of 12 weeks. If the statutory notice would take the EDT to or beyond 1 February 2013, the new limits will apply (but see also our most recent employment alert How to Terminate Employment and Exercise a Payment in Lieu of Notice Clause).

Employers’ exposure in the event of an unfair dismissal claim will rise and should be factored into decision making regarding litigation or settlement strategies.

New Regulations Pave The Way for Increased Employee Owned Companies

McDermott Will & Emery — Thu, 04 Apr 2013 11:34:17 -0500

by Hugh Nineham and Tara Walsh

The UK Department for Business, Innovation and Skills (BIS) published on 4 July 2012 the final report from the Nuttall Review of Employee Ownership (the Nuttall Review). It identifies a number of barriers to the creation and uptake of employee ownership arrangements. The Nuttall Review identified significant economic and social benefits in employee ownership, which the UK Government has endorsed.

As a result, the UK Government has published new regulations to deregulate the current share buyback regime, which are to take effect later this year and intend to simplify the current overly burdensome rules.

To read the full article, click here.

DOL Issues Guidance on MAP-21 Annual Funding Notice Requirements

McDermott Will & Emery — Tue, 02 Apr 2013 12:49:23 -0500

by Anne S. Becker, Stephen Pavlick and Kary Crassweller

The U.S. Department of Labor (DOL) recently issued guidance on the new disclosure requirements for single-employer defined benefit plans under the Moving Ahead for Progress in the 21st Century Act (MAP-21). Plan administrators of single-employer defined benefit plans that meet certain requirements must disclose the effect of MAP-21 on the plan’s funding and the plan sponsor’s minimum required contribution to the plan. The new guidance sets forth technical questions and answers, and includes a model supplement to the model annual funding notice that may be used to comply with the new disclosure requirements. Because calendar year plans must provide the required disclosures by April 30, 2013, plan sponsors should ensure their plans’ annual funding notices incorporate the most recent guidance from the DOL.

To read the full article, click here.

What You Need to Know About FATCA's Impact on Non-U.S. Retirement Plans

McDermott Will & Emery — Tue, 26 Mar 2013 16:22:20 -0500

by Andrew C. Liazos, Todd A. Solomon and Kary Crassweller

The Internal Revenue Service recently published final regulations under the Foreign Account Tax Compliance Act (FATCA), which are effective immediately. FATCA imposes significant reporting obligations on both non-U.S. foreign financial institutions (FFIs) and U.S. taxpayers holding foreign financial accounts. A non-U.S. retirement plan may be subject to FATCA reporting responsibilities as an FFI unless there is an available exemption. Failure to comply with applicable reporting requirements may trigger substantial withholding taxes and penalties. This On The Subject summarizes what you need to know about FATCA for both plans and participants.

To read the full article, click here.

IRS Provides Additional Favorable Guidance on Recently Modified Voluntary Classification Settlement Program

McDermott Will & Emery — Thu, 21 Mar 2013 13:14:16 -0500

by Jeffrey M. Holdvogt, Ruth Wimer and David Diaz

On February 27, 2013, the Internal Revenue Service (IRS) issued News Release IR-2013-23 to provide additional favorable guidance regarding modifications to the Voluntary Classification Settlement Program (VCSP) issued in Announcements 2012-45 and 2012-46 addressing worker classification issues. The VCSP allows eligible employers to voluntarily reclassify their workers for federal employment tax purposes and obtain considerable "forgiveness" for previous non-employee treatment. The IRS describes the program as a "low-cost option" for achieving certainty under the law by reclassifying workers as employees for future tax periods.

To read the full article, click here.

New HIPAA Regulations Require Action by Group Health Plans

McDermott Will & Emery — Tue, 19 Mar 2013 11:03:38 -0500

by Amy M. Gordon and Jamie A. Weyeneth

Final HIPAA privacy and security regulations issued by the U.S. Department of Health and Human services will require action by group health plan sponsors by September 2013.

To read the full article, click here.

IRS Issues 403(b) Plan Fix-It Guide

McDermott Will & Emery — Thu, 14 Mar 2013 12:58:59 -0500

by Mary K. Samsa, Todd A. Solomon and Joseph K. Urwitz

On February 21, 2013, the Internal Revenue Service (IRS) added to its “self-help” resources a new “403(b) Plan Fix-It Guide” to provide guidance more specifically directed at 403(b) plan sponsors that identify qualification or operational plan failures under their 403(b) plans. Additionally, the IRS issued as a companion piece a booklet entitled “Voluntary Correction Program Submission Kit,” which provides more detailed directions to 403(b) plan sponsors on how to complete and file a correction filing with the IRS specifically relating to the failure to adopt a written 403(b) plan document.

This new “fix-it” tool addresses 10 potential errors (likely the most common 403(b) plan errors), including, but not limited to, ineligible organizations offering 403(b) plans, failure to adopt a written plan document as required by the final 403(b) regulations, violation of the universal availability rule, failure to appropriately limit elective deferrals and failure to follow the underlying terms of the plan document. Although these types of failures are not necessarily new (i.e., they could have occurred in prior years), the IRS is slowly bringing 403(b) plans under more scrutiny as the dollars being contributed to these types of plans continue to increase. The IRS is developing more expertise in this area and is training more agents to be able to identify the particular differences between 401(k) plans and 403(b) plans, and the specific nuances and legal requirements of operating 403(b) plans. Since the 403(b) regulations were issued in 2007, this is the first step in which the IRS is taking a more active role to ensure compliance under these types of plans.

Revenue Procedures 2013-12 (Employee Plans Compliance Resolution System, or EPCRS) may be used with respect to any 403(b) plan corrections going forward. It incorporates in greater detail the “403(b) Plan Fix-It Guide.” Although prior EPCRS guidance such as Revenue Procedure 2008-50 was often applied to 403(b) plans by analogy for correcting errors, new Revenue Procedure 2013-12 is drafted to be directly applicable to 403(b) plans. Consequently, given the IRS movement toward greater scrutiny of 403(b) plans, tax-exempt organizations that have not recently conducted any type of internal compliance review are encouraged to review, at a minimum, the mistakes highlighted in the “403(b) Plan Fix-It Guide” to determine whether greater analysis is required with respect the compliance and operation of their 403(b) plans.

Finalized ACA Regulations on Transitional Reinsurance Program Premiums and Potential Effects for Employer-Sponsored Group Health Plans

McDermott Will & Emery — Tue, 12 Mar 2013 12:45:45 -0500

by Amy M. Gordon, Susan M. Nash and Jacob Mattinson

As part of the Patient Protection and Affordable Care Act, the U.S. Department of Health and Human Services (HHS) recently released final regulations regarding the transitional reinsurance program fee effective in CY 2014. Effective May 10, 2013, the regulations address the estimated amount of annual contributions that will be paid to HHS from employer-sponsored group health plans, the types of welfare plans that are subject to the fee, the applicability of the fee to COBRA coverage and the treatment of certain retiree benefits.

To read the full article, click here.