“the benefits news you need in 60 minutes or less” tuesday ...€¦ · 11 remedy remand to plan...

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©2012 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

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For audio participation, dial 866.837.9782 and follow the prompt.

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“The Benefits News You Need in 60 Minutes or Less”

Tuesday, October 23, 201212:00 p.m. – 1:00 p.m. CST

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Housekeeping IssuesCall 866.493.2825 for technology assistanceDial *0 (star/zero) for audio assistanceTo ask questions, use the pull down Q&A menuWe encourage you to Maximize the PowerPoint to Full Screen Usage:– Hit F5 on your keyboard

To print a copy of this presentation:– Click on the printer icon in the lower right hand corner. Convert the

presentation to PDF and print as usual.Foley will apply for HRCI and CLE credit after the Web conference. To qualify, please log-in to both the audio and web portions of the program.

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In The Spotlight: The ERISA Benefit Claim Denial Letter: Shortcut the Process at Your Own Risk

Risky Business: 2014 Approaches — The Health Care Reform Requirement to Offer Health Benefits to Full-Time Employees and How to Use 2013 Data to Identify Full-Time Employees

Headline News: Year-End Reminders and Action Items

Today’s Topics

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The ERISA Benefit Claim Denial Letter: Shortcut the Process at Your Own Risk

Erik D. Vogt

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Overview of Claims ProcessClaim for BenefitsBenefit Determination Appeal of Adverse Benefit DeterminationDetermination on ReviewExternal Review/Lawsuit under ERISA

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ERISA Claims ProcedureDOL Regulations– Timing/Content Requirements

Health Care Reform (PPACA)– Enhanced Claims and Appeals Process– External Review

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Consequences of NoncomplianceDeemed ExhaustionHeightened Standard of ReviewAward of Substantive BenefitsTolling of Statute of LimitationsExcise Tax

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Deemed ExhaustionGeneral Rule: Claimants Must Exhaust Claims and Appeals ProcessException: Deemed Exhaustion– Old Standard: Substantial Compliance– New Standard (PPACA): Modified Strict

Compliance

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Heightened Standard of ReviewGeneral Rule: Arbitrary and Capricious Standard– Uphold Decision if Reasonable

BUT Deemed Exhaustion May Result in De Novo Review

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RemedyRemand to Plan AdministratorBUT Some Courts have Awarded Substantive Benefits– Wenner v. Sun Life Assurance Co. (Retroactively

Reinstating Disability Benefits)– Rasenack v. AIG Life Ins. Co. (Declining to Remand Case to

Plan Administrator)

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Deadline to Appeal (and File Suit) May be Tolled

Statute of Limitations/Plan Imposed DeadlinesInadequate Notice Won’t Trigger Running of Period

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Excise Tax$100/Day Penalty for Failure to Comply with PPACAExceptions– No Knowledge of Compliance Failure– Failure due to Reasonable Cause and Corrected

within 30 DaysSelf-Report on Form 8928

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2014 Approaches — The Health Care Reform Requirement to Offer Health Benefits to Full-Time Employees and How to Use 2013 Data to Identify Full-Time Employees

Katherine L. Aizawa

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Shared Responsibility RequirementsBeginning in 2014 large employers will be subject to a nondeductible excise tax if:

They do not offer any health benefits to all full-time employees and their dependents, or

Their health plan is either not affordable or it fails to meet certain minimum standards.

–Affordability safe harbor: employee premium for employee only coverage is not more than 9.5% of W-2 wages.–Minimum standards: Plan must provide minimum essential benefits and provide minimum value, i.e., plan expected to cover at least 60% of the cost of benefits.

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Large EmployersControlled group rules apply. Employers connected

through 80% or more ownership are treated as a single employer.

Employed 50 or more full-time employees (and equivalents) in prior calendar year.

“Full time” employee averages 30 or more hours per week. Can rely on scheduled work times.

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Exempt if:

More than 50 FTEs (plus equivalents) for 120 days or less, andAbove 50 FTEs due to seasonal workers

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Hours of ServiceNot the same as 401(k) hours of service, which favors

employees.

Days Worked Equivalency: Credit 8 hours for each day an employee is credited with 1 hour.

Weeks Worked Equivalency: Credit 40 hours per week for each week an employee is credited with 1 hour.

Non-hourly employees: can use different methods for different classifications and can change methods each calendar year.

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Amount of Excise Tax Due Each MonthIf no plan is offered: 1/12 times $2,000 (indexed) times

the total number of FTEs reduced by 30.

If a plan is offered but it is unaffordable or does not meet minimum standards: 1/12 times $3,000 (indexed) times number of FTEs during month that enrolls in Exchange and receives premium tax credits or cost sharing assistance. This is not reduced by 30.

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Notification to Employer of Excise Tax Liability

State Exchanges determine eligibility for premium tax credits or cost sharing reductions and if employer plan is affordable and adequate.

Exchange notifies employer and identifies employee.

Notice explains how employer can appeal all determinations

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Variable Hour and Seasonal Employees

Safe harbors to identify non-FT employees.

If want to cover all FTEs, need to know who is a FTE.

If want to exclude certain FTEs, then determine possible excise tax liability.

Variable: on hire date cannot reasonably determine if will be a FTE.

Seasonal: works on a seasonal basis, i.e., retail clerk hired for holidays.

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Optional Ongoing FTE Safe HarborIdentify those employees who during the standard measurement

period (3 to 12 months long, as selected by employer) averaged at least 30 hours/week. These are your FTEs.

–An employee who attains FTE status must be treated as a FTE for the following stability period (period of coverage immediately following measurement period; must be at least 6 months long), regardless of the hours of service worked during the stability period.

–Reverse is true: If an employee averages less than 30 hours/week during the measurement period, he will be deemed to be a part time employee for the following stability period, regardless of the hours of service worked during the stability period.

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FTE Safe Harbor Example with Administrative Period/Open Enrollment

Health plan limited to FTEs and their dependents.

12 month standard measurement period begins October 15. Administrative period/open enrollment begins October 15 and endsDecember 31. Stability period is the calendar year.

Adam and Bob have worked continuously for several years. Adam works full time from October 15, 2012 to October 14, 2013. Bob works less than 30 hours/week during same period.

Adam is a FTE so he is eligible for plan for 2014. He goes through open enrollment beginning October 16, 2013 and enrolls in his elected plan effective January 1, 2014.

Bob is part time so he is ineligible for 2014. Plan may, but is not required to offer Bob coverage.

Employer not liable for excise tax.

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New Employees Expected to Work Full Time as of Hire Date

Permissible to apply a waiting period of up to 90 days.

Excise tax will not apply.

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Request for CommentsSafe harbors to determine FTE status of short term assignment

employees, temporary staffing employees, employees hired in high turn over positions?

Additional guidance to easily identify FTEs?

What to do in a merger or acquisition?

How should “seasonal employee” be defined?

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Employer Take AwaysAnalyze plan to determine if it is affordable and adequate.

If corporate structure is fairly simple, with a workforce comprised of full time employees, and all employees are eligible for an affordable and adequate health plan, excise tax not applicable.

Plans can be more generous and cover part time employees.

4980H requires employers to track hours for all employees from hire date.

Plans that exclude certain classes of FTEs risk possibility of excise tax liability.

Until further guidance is issued, denying eligibility to employees based on definitions not based on hours risks excise tax if such employees can average 30 hours/week during a measurement period.

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Definitions for ReferenceEmployee: Common law employees. Workers who are leased

employees as defined by IRC 414(n) are disregarded.

Full time employee (FT): With respect to any month, an employee who is employed on average at least 30 hours per week.

Part time employee (PT): An employee who is employed on average less than 30 hours per week.

Variable hour employee: Is not reasonably expected to work on average at least 30 hours per week based on the facts and circumstances on hire date.

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Definitions ContinuedSeasonal employee: Employee who performs services on a seasonal

basis. Includes, but not limited to, retail workers employed exclusively during the holiday season, and other temporary basis workers. Employers can use a reasonable good faith interpretation until December 31, 2014.

–Retail employee example: A worker is hired to work 40 hours per week for the holiday season, but after the end of the holiday season it is not known how many hours she’ll be employed.

New employee: an employee who has not been employed for at least one standard measurement period.

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Definitions ContinuedStandard measurement period:

–Applied to ongoing employees only and is used to determine the full time status of ongoing employees.–Must be between 3 and 12 consecutive months long.–Must be applied on a uniform and consistent basis to employees in same classification.

Initial measurement period: Same requirements as standard measurement period, but for new variable hour or seasonal employees.

–The combination of the initial measurement period and administrative period cannot extend beyond the last day of the first calendar month beginning on or aFTr the 1 year anniversary of hire date.

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Definitions ContinuedStability period: Period of coverage immediately following

measurement period (or administrative period). –Must be at least 6 consecutive months long.–Cannot be shorter than measurement period.–Must be same length for ongoing and new employees.

Optional Administrative period: Period between end ofmeasurement period and beginning of stability period. Like openenrollment – to allow time to identify FTEs, and enroll them into health plans.

–May last up to 90 days.–Cannot reduce nor lengthen the measurement period or stability period.

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4 Permissible Employment Classifications Can differ measurement and stability periods for different

employment classification.

–Union vs. nonunion

–Salaried vs. hourly

–Employees of different entities

–Employees located in different states

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Year-End Reminders and Action Items

Samuel F. Hoffman & Andrew D. Gregor

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Affordable Care Act Requirements for Health and Welfare PlansSummary of Benefits and Coverage (“SBC”)

Summary of Benefits and Coverage (“SBC”)

Issue: ACA requires plan sponsors to provide SBCs for their health and welfare plans to current participants and beneficiaries during open enrollment for first plan year beginning on or after 9/23/2012 and to new hires beginning with first day of such plan year.

Action: Prepare and distribute SBCs with open enrollment materials and to new hires.

Deadline: Open enrollment for 2013 plan year.

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W-2 Reporting of Value of Group Health Plan Coverage

Issue: ACA requires plan sponsors to report “aggregate cost” of “applicable sponsored coverage” on w-2s, beginning with W-2s for 2012 (issued in January 2013).

Action: Determine the applicable employer-sponsored coverage that is provided to each employee, calculate the aggregate cost of such coverage for each employee, and report that cost on each employee’s Form W-2 (Box 12, Code DD).

Deadline: January 2013.

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Affordable Care Act Requirements for Health and Welfare Plans (continued)$2,500 Annual Limit on Health Flexible Spending Accounts

Issue: ACA imposes new $2,500 limit on health flexible spending accounts. Plan amendments not due until 12/31/2014.Action: Ensure Health FSA limit in your cafeteria plan for 2013 is no greater than

$2,500. Amend cafeteria plan document.Deadline: Impose new limit during enrollment for 2013 plan year.

First-Dollar Coverage of Women’s Preventive ServicesIssue: ACA requires non-grandfathered group health plans to provide first-dollar

coverage of certain preventive health services, including preventive care and screenings for women. Certain religious employers are exempt from the requirement to provide contraceptive services, and other nonprofit religious employers can utilize temporary safe-harbor from agency enforcement.Action: Work with TPA and insurers to make sure the required women’s preventive

services are covered. Issue summary of material modifications. For employers looking to utilize temporary safe-harbor, complete Certification and issue Notice with open enrollment materials.Deadline: First plan year beginning on or after 8/1/2012.

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Code Section 436 Amendments for 401(a) Defined Benefit Retirement Plans

Issue: In Notice 2011-96, the IRS (i) extended the amendment deadline for Section 436 amendments to the last day of plan years beginning on or after 1/1/2012 (which, for a calendar year plan, means a new deadline of 12/31/2012) and (ii) issued a sample Section 436 amendment. Prior to Notice 2011-96, the IRS had required a Section 436 amendment at an earlier date, and many plans have already been amended for 436.

Action: Amend plans for Section 436. If your plan has already made a Section 436 amendment, then no action is required. However, you may want to consider replacing the language you drafted with the new IRS sample amendment.

Deadline: Last day of first plan year beginning on or after 1/1/2012.

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Fee Disclosure Requirements for 401(a) and 403(b) Defined Contribution Retirement Plans

Issue: On 8/30/2012 (for calendar year plans), the first annual “plan level” and “investment level” investment fee notice to participants for self-directed ERISA plans was due. On 11/14/2012, the first quarterlystatement showing fees and expenses actually deducted from the participant’s or beneficiary’s account is due.

Action: Work with your plan’s funding vendor to make sure fee disclosure requirements are being met, including disclosure of compliant quarterly statement by 11/14/2012.

Deadline: Ongoing.

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Code Section 409A Amendments to Non-Qualified Deferred Compensation Plans and Severance Agreements

Issue: IRS Notice 2010-80 requires that any necessary Code Section 409A correction amendments to severance agreements and non-qualified deferred compensation plans that involve payments that are dependent upon the employee completing certain employment related actions (such as execution of a non-compete agreement, a non-solicitation agreement, or a release) be made by the end of this year.

Action: Review non-qualified deferred compensation plans and severance agreements to ensure compliance with 409A and make anynecessary amendments.

Deadline: 12/31/2012.

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Questions & Answers

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Contact InformationKatherine L. [email protected]

Samuel F. [email protected]

Gregg H. Dooge414.297.5805 [email protected]

Erik D. [email protected]

Andrew D. [email protected]

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Thank YouA copy of the PowerPoint presentation and a multimedia recording will be available on Foley’s website within 24 to 48 hours:http://www.foley.com/employee-benefits-broadcast-october-2012/

We welcome your feedback. Please take a few moments before you leave the web conference today to provide us with your feedback:https://www.research.net/s/XBWD5DF

“the benefits news you need in 60 minutes or less” tuesday ...€¦ · 11 remedy remand to plan...

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