Reassigning Section 1557: Trump Administration Proposes Reversal of Transgender Benefits Rule

In 2016, the Department of Health and Human Services (“HHS”) Office of Civil Rights issued final regulations implementing the nondiscrimination provisions of the Affordable Care Act (“Section 1557”), which prohibit the categorical refusal of health coverage to transgender participants and require that individuals be treated consistent with their self-selected gender identity. These regulations drew sustained legal challenges and prompted HHS to withdraw, revise and reissue the Section 1557 regulations (the “Proposed Regulations”).

In short, the Proposed Regulations would repeal large portions of the original nondiscrimination rules and would redefine the scope of various protections under Section 1557. Specifically, the Proposed Regulations negate the provisions of Section 1557 covering nondiscrimination based on sex and gender identity. Read More ›

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The SECURE Act – A Primer on the Top Six SECURE Act Changes that could be coming to Retirement Plans Next Year

The SECURE Act (the “Act”) passed the House with bipartisan support and is on its way to the Senate with predictions that it could end up on the President’s desk by the end of the year. Here are some highlights of this potential legislation.

1. Longer Life means Later Mandatory Distributions. To account for increases in life expectancy, the Act would increase the age for required minimum distributions from 70 ½ to 72. The Act will also repeal the maximum age for traditional IRA contributions.

2. Auto-Enrollment Incentives. Automatic enrollment has been shown to increase both participation and higher savings, so to incentivize this plan design, the Act will provide a tax credit for small employers adopting plans with this design and increases the cap from 10% to 15% for automatic escalation in an automatic enrollment safe harbor plan. Read More ›

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A Quick Reminder: Three Best Practices for Beneficiary Designations

Three best practices for plan administration that often fall by the wayside include: (1) regularly reminding participants to review and update their beneficiary designations; (2) checking recordkeeping practices to avoid loss of beneficiary designation information; and (3) acquiring identifying information for designated beneficiaries.  Implementing these three best practices could save plan administrators significant costs and headache.

1. Periodic Beneficiary Designation Reminder

Problems arise when plan participants fail to update their beneficiary designations after a change in circumstances (such as marriage, divorce, childbirth, or adoption).  Plan administrators should be cautious when dealing with non-plan documents arising from such events that purport to waive or establish a right to benefits under the plan.  Read More ›

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To Err is Human – To Forgive is Up to the IRS in Rev Proc 2019-19

The IRS recently issued its latest version of the Employee Plans Compliance Resolution System (“EPCRS”) in Rev. Proc. 2019-19.  The EPCRS is the IRS program that assists employers in correcting both operational and document failures with respect to qualified retirement plans.  There are several welcome changes to the new EPCRS, including:

  • Certain plan loan failures can now be self-corrected:
    • If a participant defaults on a loan, the participant can pay a single sum corrective payment equal to the amount (plus interest) that would have paid to the plan  absent the failure and re-amortize the outstanding balance either over the remaining payment schedule or over the maximum allowed period.
Read More ›
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Reopening the Floodgates: IRS Announces Expanded Determination Letter Program

As we previously reported, the Internal Revenue Service (the “Service”) scaled back its determination letter program for individually designed retirement plans effective as of January 1, 2017. In the intervening years, the Service received a multitude of comments requesting the reopening of the program.

Now, the Service has decided to offer a limited expansion of the determination letter program as outlined in Revenue Procedure 2019-20 (the “Revenue Procedure”). In particular, the Revenue Procedure provides that the Service will accept determination letter applications for both individually designed statutory hybrid plans and individually designed merged plans.

Hybrid Plans

The Revenue Procedure indicates that plan sponsors may submit determination letter applications for individually designed statutory hybrid plans during the twelve-month period beginning September 1, 2019 and ending August 31, 2020. Read More ›

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IRS Letters 226J: Having the Right Section 4980H Records Can Be Worth a Small Fortune

As reported in our 2018 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare, the Section 4980H penalties are still in effect and the IRS is enforcing them.  Employers continue to receive Letters 226J, which the IRS uses to propose employer shared responsibility payments. During the Letter 226J process, the IRS has been allowing employers to challenge proposed penalties and to correct reporting errors. However, the IRS will not necessarily accept an employer’s word at face value.

Recordkeeping is key

One of the biggest problems employers may face is finding records to prove they satisfied the 95% offer of coverage test (to avoid the subsection (a) penalty) or that they offered a specified employee minimum value affordable coverage (to avoid the subsection (b) penalty).  Read More ›

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HHS to Start Randomly Selecting Health Plans for HIPAA Compliance – Are You Ready?

The CMS Division of National Standards, on behalf of HHS, is launching the Compliance Review Program (the “Program”) to ensure compliance among covered entities with HIPAA Administrative Simplification rules for electronic health care transactions.  HHS will randomly select health plans and clearinghouses to assess compliance with: (1) transaction formats; (2) code sets; and (3) unique identifiers.  Participants in the Program will also have to attest whether they comply with the operating rules, which are required by the ACA and are defined as “the necessary business rules and guidelines for the electronic exchange of information that are not defined by a standard or its implementation specifications.”

If HHS finds that a health plan or clearinghouse is not compliant, HHS has indicated that it will give the covered entity the opportunity to correct issues and achieve compliance, but may impose penalties on covered entities that do not achieve compliance.  Read More ›

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Director Compensation Update

I’ve written a number of articles and blogs about some sticky issues that can surface in the context of setting pay for public company non-employee directors (here, here, here, and here).

On March 6th the parties to the In re Investors Bancorp, Inc. Stockholder Litigation, filed a settlement agreement with the Delaware Chancery Court.  By way of background, the Investors Bancorp decision limited the shareholder ratification defense for non-employee director equity awards that were granted on a discretionary basis. The equity plan at issue in In re Investors Bancorp, which had been approved by the company’s shareholders, provided that the maximum number of shares that could be delivered to all non-employee directors, in the aggregate, would be capped at 30% of all option or restricted stock unit or restricted stock awards available for grant under the plan.  Read More ›

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IRS Changes Course on Lump Sums to Retirees

In Notice 2019-18, the Internal Revenue Service (the “IRS”) changed its position and now will permit employers to offer lump sum payments to retirees who are currently receiving annuity payments from a defined benefit plan.  This is a reversal from its position in Notice 2015-49, in which the Treasury Department and the IRS stated that they intended to propose amendments to the required minimum distribution regulations to address the payment of lump sums to replace ongoing annuity payments under a defined benefit plan.  Prior to the issuance of Notice 2015-49, a number of defined benefit plans started offering retirees who were receiving annuities an opportunity to elect to convert their annuities into lump sum benefits during a limited period of time in what became known as “de-risking” transactions.  Read More ›

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Arizona’s New Mini-COBRA Statute Has Arrived, but Is Preemption a Concern?

The Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) requires employers who have 20 or more employees and who offer a group health insurance plan to provide enrollees with a right to continue coverage after the occurrence of certain qualifying events.  Effective January 1, 2019, Section 20-2330 of the Arizona Revised Statutes (“A.R.S.”) seeks to extend a similar right to Arizona employees of “small employers” who have at least 1 but not more than 20 employees.  The new rule applies to insured health benefit plans issued or renewed after December 31, 2018.  Self-insured health benefit plans are exempt from Section 20-2330.  Read More ›

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