Benesch Benefits Blog 2017-01-01T14:04:19+00:00

Topical and timely news and information on Employee Benefits & Compensation issues

The DOL Fiduciary Rule is Currently on Life Support

March 26th, 2018|0 Comments

By: Joseph P. Yonadi, Jr. and Patrick J. Egan

In 2016, during the waning days of the Obama Administration, the U.S. Department of Labor (DOL) issued a regulation expanding the fiduciary definition to cover more individuals and entities that provide financial services to retirement arrangements (the “Fiduciary Rule”). Since day one, the Fiduciary Rule has been engulfed in controversy and litigation. Further, the Trump Administration has shown little affection for the regulation and has deferred and delayed the complete implementation of the Fiduciary Rule on multiple occasions.

Further, during the past two weeks, the validity and future existence of the Fiduciary Rule has been called into serious question. First, in the case of Chamber of Commerce v. U.S. Department of Labor, No. 17-10238 (5th Cir. 2018, March 15, 2018), the Federal Court of Appeals for the Fifth Circuit vacated, in its entirety, the Fiduciary Rule. The Fifth Circuit determined that the DOL had exceeded its regulatory authority in promulgating the Fiduciary Rule. A day after the Fifth Circuit’s decision, the DOL announced that it would not enforce the Fiduciary Rule “pending further review.”

This one-two punch has suddenly placed the Fiduciary Rule on life support. The DOL could petition the U.S. Supreme Court […]

IRS Guidance Requires Immediate Changes to Employer Group Health Plans with Health Savings Accounts

March 12th, 2018|0 Comments

By: Joseph P. Yonadi, Jr. and Patrick J. Egan

2018 Family Coverage Contribution Reduced to $6,850

On March 5, 2018, the Internal Revenue Service (IRS) issued guidance that lowers the 2018 Health Savings Account (HSA) contribution limit for family coverage. Last year the IRS set the 2018 HSA contribution limit at $3,450 for individuals with self-only coverage, and $6,900 for individuals with family coverage. However, the 2018 maximum HSA contribution limit for family coverage has now been reduced by the IRS by $50 to $6,850. This change is set forth under Revenue Procedure 2018-18 and is effective immediately.

It should be noted that the maximum single coverage HSA contribution limit has not been revised, and remains at $3,450.

The recently passed Tax Cuts and Jobs Act (Act) legislation is the culprit behind the reduction to the maximum HSA family coverage contribution limit. As part of the Act, the IRS revised most of the Internal Revenue Code’s (Code) corporate and individual tax rates and changed certain dollar threshold indexing from the consumer price index to something called chained CPI-U. In short, chained CPI-U is a slower growing index rate which triggered the need to adjust the maximum HSA family coverage contribution limit by $50.

The practical […]

Your Affordable Care Act Noncompliance May Result in Delayed Refunds

February 28th, 2018|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

2018 Tax Filing Season May Yield First Taxpayer Casualties For Individual Affordable Care Act Reporting Noncompliance

In an online statement, the IRS has reported that the failure to address the health coverage requirements of the Affordable Care Act (ACA) can result in a taxpayer’s tax return being rejected or suspended from review. For the first time since the ACA was enacted, the IRS will begin to enforce the ACA taxpayer reporting requirements and, as such, taxpayers must report whether they had health coverage, had an exemption or will make a shared responsibility payment in their 2017 tax returns.

The ACA’s individual mandate provision requires individuals to obtain qualifying minimum essential coverage. Individuals may be exempted from this mandate if (1) their household income is below the return filing threshold or (2) they pay a penalty. In order to enforce the individual mandate, IRS requires taxpayers to report health coverage in their returns.

Previously, for the 2016 tax returns, IRS processed tax returns that were silent about individual mandate compliance. However, the IRS has explicitly indicated that it will reject electronically filed 2017 tax returns that are silent on the individual mandate compliance. As for […]

Ninth Circuit Clarifies State Laws Regulating Insurance Do Not Void Discretionary Clauses In Self-Funded ERISA Plans

November 7th, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

The Ninth Circuit recently held discretionary clauses in a self-funded plan were valid and that California Insurance Code § 10110.6, banning discretionary clause relating to insurance, was preempted by ERISA when applied to a self-funded plan. Williby v. Aetna Life Ins. Co., 867 F.3d 1129 (9th Cir. 2017).

The employee benefit at issues was Boeing’s self-funded short-term disability plan (STD Plan), because it contained a discretionary clause. The Court held that the district court erred by applying the de novo standard of review, rather than the abuse of discretion standard when it reviewed Aetna’s denial of benefits decision.

You may recall that this past May, the Ninth Circuit held that discretionary clauses in fully insured ERISA plans were voided by California Insurance Code § 10110.6. Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan 856 F.3d 686 (9th Cir. May 2017). See our Blog “Benefit Plan Discretionary Clauses Dealt A Blow In California” for discussion of the Orzechowski decision. California Insurance Code § 10110.6 provides that:

(a) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed … that provides or funds life insurance or disability insurance coverage for […]

Oregon Retirement Program Faces Court Challenge

October 26th, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

The ERISA Industry Committee (ERIC) has filed a lawsuit challenging the enforceability of the OregonSaves Retirement Program (OregonSaves). The ERISA Industry Committee v. Read, No. 3:17-cv-1605 (D. Or. Oct. 12, 2017).

Background: OregonSaves, a state-run retirement program, was established to help private-sector employees save more money. It mandates employers who do not sponsor a retirement program to participate in the program. Employers who sponsor a retirement program must file a “certificate of exemption” with the state in order to opt-out of the program.

OregonSaves went into effect on July 1, 2017. By November 15, 2017, employers with at least 100 employees, who do not sponsor a retirement program must begin participating in OregonSaves to remain in compliance with the Oregon law and regulations. See our previous OregonSaves blog post for additional information here.

The Lawsuit: On October 12, 2017, ERIC filed a lawsuit against Tobias Read, Oregon State Treasurer and Chair of the OregonSaves Retirement Savings Board. ERIC, a nonprofit trade association, represents large employers with at least 10,000 employees.

According to ERIC, the Employee Retirement Income Security Act of 1974 (ERISA) governs reporting of plan activities, thus, expressly preempting the “Oregon law and regulations […]

DOL Requests Extension of Final Disability Claims Rule To April 1, 2018

October 16th, 2017|0 Comments

By: Joseph P. Yonadi, Jr.

On October 10th the Department of Labor (DOL) proposed to extend by 90 days the applicability date for the Final DOL Claims Procedure Regulations (Rule) from January 1, 2018 to April 1, 2018.

At the beginning of this year, the Final Rule went into effect on January 1, 2017.  However, the applicability was set for January 1, 2018 in order to give enough time to plan sponsors and claims administrators to update their claim procedure processes caused by the Rule.  Please see the Benesch Law Client Bulletin explaining the changes contained within the Rule here.

The key requirements of the Rule include:

  • Benefits denial notices must contain a discussion of why the plan denied a claim, including the basis for disagreeing with the Social Security Administration disability determination, and standards it used in making the decision;
  • Denial notices, not just notice denying benefits on appeal, must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents;
  • Denial notices must include internal rules, guidelines, protocols, standards, or other similar criteria of the plan that were used in denying a claim, or a statement that none were […]

Contraceptive Coverage Mandate Exemptions Expanded Under Interim Final Rules

October 11th, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

Last week the Department of Treasury, U.S. Department of Labor, Department of Health and Human Services (Departments) published rules exempting employers from the contraceptive coverage mandate created under the Affordable Care Act.  As a result, hundreds of thousands of women stand to lose access to contraceptive services.

Background: One feature of the 2010 Affordable Care Act was the contraceptive coverage mandate. The mandate paved the way for women to receive access to birth control benefits at no cost through their employers’ health plans. Several employers, including Hobby Lobby, opposed the mandate on religious grounds. In 2014, the Supreme Court ruled that a “closely held” company could invoke religious objections to avoid covering contraception. Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751 (2014). Despite the Hobby Lobby decision, the mandate has made contraceptive services widely accessible to women who otherwise could not afford them.

Exemptions: The Departments created two exemptions to the mandate. One exemption would allow employers to object contraceptive coverage “based on [their] sincerely held religious beliefs.” Another exemption would allow employers to object contraceptive coverage based on their sincerely held “moral convictions.”

All employers, including family-owned companies and publicly traded companies, will […]

New OregonSaves Retirement Program Impacts Employers With Oregon Employees

August 18th, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

OregonSaves Retirement Program

On July 1, 2017, OregonSaves Retirement Program (“OregonSaves”) went into effect. OregonsSaves is sponsored by the State of Oregon, and is a state-run automatic Roth Individual Retirement Account (“IRA”) for private-sector employees.

OregonSaves will operate such that employers who do not sponsor a qualified retirement plan will be required to automatically enroll employees into the OregonSaves program, and employees will be required to contribute 5% of their compensation to a Roth IRA account. However, employees will be able to opt-out, or choose a different savings rate. After the employer completes the initial employee registration to set up its employees’ Roth IRA accounts, its ongoing obligations are limited to providing OregonSaves update information to its employees, and to make ongoing payroll deductions. Employers are not required to make contributions under OregonSaves.

All employers in the State of Oregon will have to take an action, whether to enroll employees or file a Certificate of Exemption.[1] The following schedule has been established for employers to register with OregonSaves.

 

 

Employers that are not exempted from the OregonSaves program will have to take the following steps:

1.              Register for […]

Benefit Plan Discretionary Clauses Dealt A Blow In California

July 21st, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Nancy R. Chawla

Last month, the Ninth Circuit dealt a blow to discretionary clauses contained within ERISA plans when it held that a California statutory provision that banned discretionary clauses was not preempted by ERISA. Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan (9th Cir. May 11, 2017).

Almost three decades ago, the U.S. Supreme Court created the rule that a de novo standard of review should apply to a denial of benefits claim unless the ERISA plan provides discretionary authority to the plan administrator. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). If discretionary authority is provided in a plan document, summary plan description, or insurance contract, courts can review the claims denial under an arbitrary and capricious or abuse of discretion standard of review. Both standard of reviews are more favorable than a de novo standard of review.

Boeing’s Plan and Aetna’s Policy

The facts in Orzechowski were that Boeing sponsored a long term disability plan for its employees (the “Plan”). The Aetna long term disability policy granted discretionary authority to Aetna to “review all denied claims, determine whether and to what extent employees and beneficiaries are entitled to benefits, and construe any […]

Olay! Olay! Olay! Olay!…No Fiduciary Rule DELAAAAY! No Fiduciary Rule DELAAAAY!

June 1st, 2017|0 Comments

By: Joseph P. Yonadi, Jr. and Shaylor R. Steele

The delays are over, the Fiduciary Rule’s applicability date will not be delayed past June 9, 2017. Accordingly, plan sponsors, and the financial services industry, should be prepared to comply with the rule beginning on June 9, 2017.

However, Secretary Acosta also indicated that the DOL will continue to seek industry and public input on how to revise the bill and eliminate its negative effects on the industry. As of now, it is unclear as to what the Fiduciary Rule will entail with its full implementation date of January 1, 2018; however, based on prior public comments from Secretary Acosta, it may still be likely that substantial revisions are on their way.

On May 22, 2017, the DOL released two pieces of guidance: 1) a Temporary Enforcement Policy, and 2) a Conflict of Interest FAQs. This new guidance comes in the form of transitional guidance and is primarily aimed at the financial services industry relating to its compliance with the rule from June 9, 2017 through January 1, 2018. Noteworthy, is the DOL made it clear that they will not pursue claims against fiduciaries who are acting […]