Benefits Update- August 2014

From the editors of Wolters Kluwer’s benefits products, here are hot topics from recent Employee Benefits Management Directions newsletters as well as recent explanatory updates in Employee Benefits Management. Also included are recent explanatory updates to the Benefits Answers Now product and Spencer’s Research Reports.

If you have any comments/suggestions concerning the information provided or the format used, we’d like to hear from you. Please contact me at Tulay.Turan@wolterskluwer.com.

Hot Topics in Employee Benefits Management:

ACA’s contraceptive coverage regulations violate religious rights of closely held corporations, Employee Benefits Management Directions, Issue No. 567, July 15, 2014 — The Department of Health and Human Services (HHS) regulations implementing the Affordable Care Act’s contraceptive mandate, as applied to closely held corporations, violate the Religious Freedom Restoration Act of 1993 (RFRA), the Supreme Court has ruled in a 5-4 opinion.

Bona fide orientation periods finalized after ACA’s 90-day waiting period limitation, Employee Benefits Management Directions, Issue No. 567, July 15, 2014 — The Internal Revenue Service, the Department of Health and Human Services, and the Employee Benefits Security Administration have issued final regulations clarifying the calculation of the maximum allowable length of an employment-based orientation period under the PHSA Sec. 2708’s 90-day waiting period limitation.

Employers should implement cost-cutting strategies now to avoid ACA’s excise tax in 2018, expert says, Employee Benefits Management Directions, Issue No. 568, July 29, 2014 — In 2018, the Patient Protection and Affordable Care Act (ACA) will impose a 40 percent excise tax on high-cost employer-sponsored health plans. This so-called “Cadillac” tax applies to employer-sponsored plans that cost more than $10,200 for employee-only coverage and $27,500 for family coverage in 2018. In an interview with Wolters Kluwer, Tracy Watts, senior partner at Mercer, spoke about how the excise tax will impact employers and what strategies employers can use over the next few years to avoid being subject to the ACA’s excise tax.

Federal appeals court axes subsidies for federally-run health insurance exchanges,Employee Benefits Management Directions, Issue No. 568, July 29, 2014 — Internal Revenue Code Sec. 36B limits the availability of premium tax credit subsidies only to insurance purchased under state-established Exchanges and not to insurance purchased under Exchanges established by the federal government on behalf of the states, according to a three judge panel of the federal appeals court for the District of Columbia circuit.

 

What’s New in Employee Benefits Management:

Proposed FMLA rule — The Department of Labor (DOL) has issued a proposed rule extending the protections of the FMLA to all eligible employees in legal same-sex marriages regardless of where they live. See ¶68,054 for more information.

Hobby Lobby case — The Supreme Court’s decision in Hobby Lobby (see story above) is discussed at ¶10,140.

Contraception mandate opt-out form — In the wake of its decision in the landmark case Hobby Lobby v. Burwell, the Supreme Court has granted Wheaton College an injunction from completing and filing EBSA Form 700. The case is discussed at ¶10,140.

Coordination of benefits — Although an insurer that covered students’ sports injuries was obligated to pay for their medical expenses where its policy and a health insurer’s policies overlapped, it did not have to reimburse the health insurer for payments that had already been made on the students claims, according to the U.S. Court of Appeals for the Sixth Circuit (CA-6). For more about Central States, Southeast and Southwest Areas Health and Welfare Fund v. First Agency, Inc., see ¶10,435.

 

What’s New in Benefits Answers Now (BAN):

ACA’s contraceptive coverage regulations violate religious rights of closely held corporations. The Department of Health and Human Services (HHS) regulations implementing the Affordable Care Act’s contraceptive mandate, as applied to closely held corporations, violate the Religious Freedom Restoration Act of 1993 (RFRA), the Supreme Court has ruled in a 5-4 opinion. The court found that the mandate substantially burdens the exercise of religion and that the HHS regulations failed to satisfy RFRA’s least-restrictive- means standard. To find out more about the ruling, see ¶20,051.

No presumption of prudence for ESOP fiduciaries, Supreme Court rules. ESOP fiduciaries are not entitled to any special presumption of prudence, the U.S. Supreme Court has ruled in a unanimous decision. Rather, such fiduciaries are subject to the same duty of prudence that applies to ERISA fiduciaries in general, except that they need not diversify the fund’s assets. The Supreme Court’s ruling vacates the holding by the Sixth Circuit Court of Appeals and remands the case to CA-6 for further proceedings. Find out more about the responsibilities of being an ESOP fiduciary at ¶14,750.

Bona fide orientation periods finalized under ACA’s 90-day waiting period limitation. The Internal Revenue Service, the Department of Health and Human Services (HHS), and the Employee Benefits Security Administration (EBSA) (the Departments) have issued final regulations clarifying the calculation of the maximum allowable length of an employment-based orientation period under Public Health Service Act (PHSA) Sec. 2708’s 90-day waiting period limitation. An overview of allowable waiting periods under the ACA can be found at ¶20,110.

Small employer health insurance credit final regulations retain uniform percentage rules. The IRS has issued final regulations dealing with the Code Sec. 45R tax credit for certain small employers that provide health coverage to their employees. The final regulations retain the requirement that an eligible small employer must pay premiums for each employee enrolled in health insurance coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the cost of the premium coverage. For tax years beginning on or after January 1, 2014, the insurance must generally be offered through a Small Business Health Options Program (SHOP) Exchange. More information about the small employer health care tax credit can be found at ¶60,310.

Eligible employees in same-sex marriages would get FMLA protections under proposed rule. The Department of Labor (DOL) has issued a proposed rule extending the protections of the FMLA to all eligible employees in legal same-sex marriages regardless of where they live. The proposal is in light of the Supreme Court’s decision in United States v. Windsor in which the court struck down the Defense of Marriage Act provision that interpreted “marriage” and “spouse” to be limited to opposite-sex marriage for the purposes of federal law. See the discussion at ¶31,040 for more information about eligible employees under the FMLA.

 

What’s New in Spencer’s Benefits Reports:

Orientation Periods. Recently, final regulations were issued that clarified the calculation of the maximum allowable length of a bona fide employment-based orientation period, relative to the 90-day waiting period under the ACA. This report analyzes the final regulations (Report 550.1.-1).

Fiduciary Defined. Persons who are considered fiduciaries with respect to employee benefit plans have special responsibilities under ERISA. Failure to meet these responsibilities could lead to fiduciary liability. This report discusses the determination of fiduciary status (Report 605.-41).

Private Exchanges. A hot new trend in employer-provided benefits is the idea of private health insurance exchanges. This report examines the basics of private exchanges and addresses some issues that employers are facing as they consider whether or not to move into this area (Report 543.-1).

Defaulted 401(k) Loans. A defaulted 401(k) loan will be treated as a “deemed distribution” that is taxable to the recipient under the normal tax rules covering plan distributions. This report reviews the rules regarding deemed distributions (Report 225.-11).

ACA State Requirements. States are required to be involved in the implementation of the ACA on many levels. This report provides an overview of some of the state requirements under the ACA (Report 503.-1).