Top 10 Benefits Issues to Watch in 2017

Transcription

1 Top 10 Benefits Issues to Watch in 2017 Presented by Stephanie Smithey and Jessica Kuester. 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C. ogletree.com Topics 1. ACA repeal and replace update 2. Wellness programs 3. Mental Health Parity 4. Benefit plan data security 5. Determination letters 6. Hardship distributions 7. Definition of compensation 8. Fiduciary issues 9. Severance plans 10. Cafeteria plan documents 1

2 #1: ACA Repeal and Replace ACA played large role in campaign, with wide-ranging GOP criticism of law Multiple phases anticipated Reconciliation legislation Substantive legislation Regulatory changes #1: ACA Repeal and Replace ACA Executive Order (1/20/2017) Regulatory Freeze Memo (1/20/2017) ACA Section 1557 (1/1/2017 injunction) ACA Reporting (minor extensions for 2016) Cadillac Tax (delayed until 2020) 2

3 #1: ACA Repeal and Replace American Health Care Act Medicaid restructuring Utilization of state innovation grants HSA enhancements Age-based refundable individual tax credits to buy coverage Elimination of ACA taxes What s next? #2: Wellness Programs HIPAA: no discrimination in premiums for health status factor EXCEPT voluntary wellness programs Applies if reward tied to group health plan OR wellness program is itself a group health plan Participatory = no cap Health contingent (activity-only or outcome-based) = 30% of self-only coverage 30% of coverage level enrolled in if dependents can earn reward as well 50% for programs including tobacco cessation 3

4 #2: Wellness Programs ADA: no disability related inquiries or medical exams EXCEPT voluntary wellness programs Reasonably designed to promote health or prevent disease Voluntary Cap of 30% of self-only coverage, whether participatory or healthcontingent Provide notice #2: Wellness Programs GINA: restricts acquisition and disclosure of genetic information Permits financial incentives for spouse to complete HRA or biometric screening if relevant rules satisfied Cap of 30% of self-only coverage for spouse s participation No incentives for information about manifestation of disease or disorder in employee s child 4

5 #3: Mental Health Parity Requires parity in medical/surgical benefits and mental health/substance abuse disorder benefits in three areas: Annual or lifetime limits Financial requirements and quantitative treatment limitations Nonquantitative treatment limitations #3: Mental Health Parity Annual or lifetime limits Limited relevance since ACA Financial requirements and quantitative treatment limitations Financial requirements: deductibles, copays, coinsurance, out-ofpocket expenses Quantitative treatment limitations: limits on frequency of visits, number of visits, days of coverage, waiting periods Does not include a permanent exclusion of all benefits for a particular condition or disorder Parity in six classifications 5

6 #3: Mental Health Parity Nonquantitative treatment limitations Processes, strategies, evidentiary standards, and other factors for mental health and substance abuse disorder benefits must be comparable to medical/surgical benefits No separate treatment limitations for mental health and substance use disorder benefits DOL list of possibly problematic plan designs #4: Benefit Plan Data Security Common plan-related information Identifying information Employment information Financial information Health information Data security is not just for health plans! 6

7 #4: Benefit Plan Data Security Federal legal requirements HIPAA ERISA FMLA/ADA GLBA Consumer privacy laws State/international legal requirements Breach notification SSN/identity number protection Secure information destruction Data security policies #4: Benefit Plan Data Security Managing the risks Safeguards Administrative Physical Technical Documentation Focus on the problem Focus on compliance 7

8 #5: Determination Letters Benefits of a favorable determination letter Provides assurance that the legal plan document satisfies, in form, the requirements for tax-qualified status Prevents the IRS from later arguing that the plan has a document error #5: Determination Letters Previously, plans were submitted to the IRS every 5 years, based generally on EIN Now, determination letters only available in limited circumstances Initial plan qualification Plan termination Other circumstances as determined by the IRS 8

9 #5: Determination Letters How to stay compliant in the new regime? Use the IRS Required Amendments List Adopt amendments by the end of the second calendar year following the year in which the list is issued (unless otherwise specified) Use the IRS Operational Compliance List Review plan operations annually Use ERISA counsel Review current plan document and any future amendments to ensure compliance #6: Hardship Distributions Immediate and heavy financial need Safe harbor list of expenses that are deemed to be for immediately and heavy financial need Substantiation required for plan administrator to determine that immediate and heavy financial need exists February 23, 2017 Memorandum to EP Exam Employees Relaxed substantiation requirements to permit use of summary information certified by employee if criteria are met 9

10 #6: Hardship Distributions Must provide notice to employee Tax consequences Limit on amount of distribution Permitted sources for distributions Employee must preserve source documents and make available upon request Must collect general information Participant name Total cost of event causing hardship Amount of distribution requested Certification that information is true and accurate #6: Hardship Distributions Must request specific information for certain hardships Example: If hardship is for funeral or burial expenses, must ask for the name of the deceased, relationship to the participant, date of death, and name and address of the service provider If relaxed substantiation guidelines are not followed, it remains the plan s responsibility to retain source documents 10

11 #7: Definition of Compensation Different definitions may be used for different purposes May be very good reasons for different definitions BUT multiple definitions can create confusion Tax code provides required definitions in certain circumstances #7: Definition of Compensation Pay special attention to: Bonuses and other incentive payments Post-severance payments Nonqualified deferred compensation Stock options Compensation earned prior to becoming eligible Annual true-up provisions 11

12 #8: Fiduciary Issues Fiduciary: someone who: Exercises any authority or control over the management or disposition of plan assets Renders investment advice for a fee or other compensation, direct or indirect Revised definition issued on April 6, 2016 Has any discretionary authority or responsibility in the administration of the plan #8: Fiduciary Issues Recent years have seen an increase in ERISA fiduciary litigation Increased transparency with fee disclosures Increased pressure to monitor, anticipate, and manage risks Procedural prudence Litigation avoidance Selection and monitoring of service providers is a fiduciary function 12

13 #8: Fiduciary Issues What expenses can be paid from a plan? Plan assets can be used to pay the reasonable expenses of administering the plan What is reasonable? General best practices Investment and/or benefits committee Investment policy statement Fee benchmarking Periodic RFPs for service providers Monitor service providers consistently and frequently Document everything #9: Severance Plans Common types of offers Severance payments Outplacement services Still a major component of severance plans Post-termination benefits Health (not just COBRA), life, vacation accrual, STD, LTD, company car, use of office 13

14 #9: Severance Plans Does ERISA apply? Plan, fund or program Ongoing administrative scheme Employer discretion ERISA coverage as pension or welfare plan Most severance plans are welfare plans Do you want ERISA to apply? ERISA compliance Written plan document Participant disclosures (e.g., SPDs) Claims procedures Form 5500 filing requirement Fiduciary duties #9: Severance Plans Does 409A apply? Preexisting contractual right? If 409A applies, limited ability to accelerate or delay payment, with severe penalties for noncompliance Does a 409A exemption apply? Short-term deferrals Fully payable within 2 ½ months after termination year Separation pay exception Involuntary Subject to cap Fully payable by end of second year after termination 14

15 #10: Cafeteria Plan Documents Section 125 protection from constructive receipt Written plan document required Eligibility Benefits provided or available Change in status (including leave/fmla) Claims procedures #10: Cafeteria Plan Documents No cafeteria plan = constructive receipt Income tax consequences FICA/FUTA tax consequences Improper reporting penalties 15

16 Questions? Thank you! Top 10 Benefits Issues to Watch in 2017 Presented by Stephanie Smithey and Jessica Kuester. 2017, Ogletree, Deakins, Nash, Smoak & Stewart, P.C. ogletree.com 16