Plan Disqualification Happens If You Don't Follow Basic Rules!
A recent Tax Court case, Hollen v. Commissioner (2011, T.C. Memo 2011-2), offers a stark reminder that the IRS can and will seek to disqualify a tax-qualified retirement plan if the plan sponsor fails to comply with key legal requirements and fails to correct the failure. In Hollen a...
Update Regarding Expanded Definition of "Fiduciary"
The Employee Benefits Security Administration (EBSA) will hold a hearing to consider issues regarding the adoption of a new regulation defining when a person is considered a "fiduciary" by reason of giving investment advice to a benefit plan or to a plan's participants. The hearing will be held on...
IRS Issues Important New Guidance on Health FSA and HRA Debit Cards
Today the IRS issued new guidance allowing the continued use of health FSA and HRA debit cards for the purchase of prescribed over-the-counter (OTC) medicines and drugs. This new guidance modifies prior guidance, discussed here , which generally prohibited the use of health FSA and HRA debit cards to...
Agencies Delay Enforcement of Nondiscrimination Rules for Insured Health Plans
Recognizing that further guidance is needed to help health plan sponsors comply with certain health care reform rules, today the IRS released Notice 2011-1 , which delays new health care reform nondiscrimination rules until such time as regulatory guidance may be issued. Absent this Notice, the new nondiscrimination rules...
Agencies Finally Amend Grandfather Regulations Under Health Care Reform
Treasury, Labor, and HHS have finally released an amendment to the grandfathered health interim final regulations . The amended regulation revises earlier guidance, discussed here , here , and here , by allowing group health plans to switch insurance contracts and issuers and still retain grandfather status. Specifically, group...
HHS Revises Early Retiree Reinsurance Program Application and Instructions
HHS has published a revised ERRP application, instructions, and "Dos and Don'ts" for completing and submitting an ERRP application. All plan sponsors submitting an application after Tuesday, November 9, 2010 must use the revised version of the application, instructions, and "Dos and Don'ts." For more information on the Early...
Hybrid (Cash Balance/Pension Equity) Plan Regulations: Market Rate Amendments
In October the IRS released regulations, in final and proposed form, intended to provide clarity in the utterly complicated area of hybrid pension plans, the two most common of which are cash balance plans and pension equity plans. These new regulations address: "market rate" of return limits for interest...
Proposed DOL Regulations Expand Meaning of "Fiduciary"
Proposed regulations published last week by the Employee Benefits Security Administration (EBSA), part of the DOL, would modify the definition of "fiduciary" under ERISA by expanding the meaning of the term "investment advice." The DOL explained that the definition of "investment advice" – which has remained unchanged since it...
409A and Linked Elections Following 401(k) Hardship Suspension
Many tax-qualified Section 401(k) plans provide that a participant who takes a hardship distribution pursuant to Treasury Regulation Section 1.401(k)-1(d)(3) is suspended from participating in any qualified or nonqualified deferred compensation plans of the Company for a period of six months. After the suspension period elective deferrals under some...
IRS Delays Form W-2 Reporting of Health Benefit Plan Value
Although we have devoted a great many inches in this blog to Health Care Reform, one thing we have not yet discussed is the legislation's new requirements related to Form W-2 reporting. The Affordable Care Act requires employers to report the cost of group health plan coverage on Forms...
409A Corrections Guidance: Which Year Is Correction Completed?
Relief for nonqualified deferred compensation plan operational failures made pursuant to Internal Revenue Service guidance under Section 409A requires certain information reporting by affected employers and participants. It is important to promptly correct any discovered errors, as fewer requirements apply with respect to corrections of failures completed during the...
Implementing Required Health Plan Coverage of Adult Children
Under the Patient Protection and Affordable Care Act , group health plans must extend coverage to employees' dependents up to age 26. Grandfathered plans enjoy a limited exception to this requirement in cases where the dependent is eligible to enroll in another employer-sponsored group health plan. This post focuses...
Using Retirement Plan Assets to Pay Plan Administrative Expenses
We are sometimes asked: when is it okay to use retirement plan assets to pay for plan administrative expenses? The question often comes up in the context of a restatement of the plan document, the preparation of a new SPD or some other project where the costs may be...
IRS Provides Guidance on OTC Drug Change Under Health Care Reform
As we discussed in a previous post , Health Care Reform makes a few important changes to health FSAs, HRAs, HSAs, and Archer MSAs, two of which become effective in the coming months. Beginning January 1, 2011, the cost of over-the-counter (OTC) medicines and drugs will no longer be...
HHS Launches New Early Retiree Reinsurance Program Website, Publishes List of Applicants Approved Thus Far
HHS has launched a new ERRP website, http://errp.gov . This new website appears to be central source of information about ERRP, but perhaps more importantly it will be the mechanism through which approved applicants will submit reimbursement requests. A plan sponsor whose application has been approved will be able...
The Universal Availability Rule Under Code Section 403(b)
One of the most well known, yet commonly flouted, requirements in the world of 403(b) plans is the "universal availability" requirement. Section 403(b) plans operate free of the nondiscrimination rules that apply to elective deferrals under 401(k) plans – namely the ADP test and minimum coverage rule – on...
HHS Begins Accepting Applications for the Early Retiree Reinsurance Program
HHS has just published the official ERRP application and instructions, along with application Dos and Don'ts, Frequently Asked Questions, a slide show, and the address for submitting applications. We discussed the ERRP in previous posts, here and here . In short, the ERRP provides reimbursement to sponsors of participating...
Health Care Reform Grandfather Regulations Issued [Part 2] – Other Rules
In our last post we suggested that the grandfather regulations provide one particularly bright spot for employers, and indeed they do: the regulations clarify that Health Care Reform generally does not apply to certain retiree-only plans and benefit plans that are exempt from compliance with HIPAA (such as dental-only...
Health Care Reform Grandfather Regulations Issued – Ways to Lose Status
Treasury, DOL, and HHS have issued joint interim final regulations addressing grandfathered health plan status under Health Care Reform. These rules are effective immediately but are subject to future revision. The grandfather regulations are long, complex, and better handled over two posts. Today we will discuss the ways a...
Health Care Reform Grandfather Regulations – Costs Associated with Loss of Status
An unofficial draft version of the highly-anticipated, much-needed regulations on grandfather status under Health Care Reform ( see our earlier post ) has been circulating this week. The White House has said this document should not be relied upon, and we will wait to comment until the regulations are...
HHS Releases Draft of Early Retiree Reinsurance Program Application and Instructions
Yesterday HHS posted a draft version of the ERRP application and instructions . We discussed the ERRP a previous post . In sum, the ERRP will reimburse employers for a portion of the health care claims incurred by retirees who are at least 55 but not eligible for Medicare...
Early Retiree Reinsurance Program Under Health Care Reform Begins Today
The Early Retiree Reinsurance Program (ERRP) is a limited-time program through which employers sponsoring employment-based early retiree medical plans may receive reimbursements towards the cost of providing benefits to retirees aged 55 to 65, their spouses, surviving spouses, and dependents. Created under the Patient Protection and Affordable Care Act...
IRS Launches 401(k) Plan Compliance Project
This month the IRS is launching a new compliance initiative aimed at the retirement plan community, the 401(k) Compliance Check Questionnaire Project . As part of this project the IRS is asking a random sampling of 1,200 401(k) plan sponsors to fill out a 45-page compliance questionnaire. Although the...
National Health Care Reform Legislation Signed Into Law
On March 30, 2010, President Obama signed the Health Care and Education Reconciliation Act of 2010 (H.R. 4872) , which modified the Patient Protection and Affordable Care Act (Public Law 111-148) passed by Congress and signed by the president last week. Together, these two new laws make national health...
Some Basic Advice to Plan Investment Fiduciaries
Capital markets worldwide have recovered from their 2009 lows, but remain in a protracted period of extreme volatility and we continue to experience wide swings in market sentiment that seem to defy explanation. Though market fluctuations affect all retirement plans with assets to invest, the unstable investment environment is...
HIPAA Breach Notification – Part II (Determining Whether a Breach Has Occurred)
In a previous post we provided a brief overview of the new privacy breach notification requirements under HIPAA (as amended by the HITECH Act), as they relate to employer-sponsored group health plans. This post will focus on determining whether a privacy breach has occurred, including the exceptions and the...
HIPAA Breach Notification – Part I (Overview)
The privacy provisions of the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act) are designed to close a gap in the health information privacy and security framework first established under HIPAA back in 2003. The original statute and the resulting U.S. Department of Health...
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