The Centers for Medicare & Medicaid Services (CMS) Creditable/Non-Creditable Coverage Medicare Part D Notification must be provided to Medicare eligible participants no later than Nov. 14, 2010.

The relevant notice is important for individuals eligible to participate in the plan to receive in order to assist the individual in deciding whether to enroll in Medicare Part D prescription drug coverage. Because an individual can be eligible for Medicare due to age or disability, or an employee's spouse or dependent could be eligible for Medicare, this makes it difficult for an employer to identify individuals who are eligible for Medicare. Therefore, it is recommended that the notice be distributed to all employees who are eligible to participate in the plan. The preferred method of delivery is first class mail, although it is possible to distribute the notice electronically as long as certain conditions are met.

Guidance for completing the creditable/non-creditable coverage notices is available at the CMS website. The most recent version of the notices available is to be used after Jan. 1, 2009. In addition to guidance, both English and Spanish versions of both the creditable and non-creditable coverage model notices are available.

In response to the recent IRS Notice 2010-59 issued pursuant to changes made by the Patient Protection and Affordable Care Act, the Special Interest Group for IIAS Standards (SIGIS) is making significant changes to the list of over-the-counter (OTC) drugs and medicines considered eligible for reimbursement using a debit card at a point of sale merchant.

Based on the SIGIS press release (see link below), over 15,000 items will be removed from the Eligible Products List. Over 27,000 items will remain on the list for purchase without a prescription or the need for further substantiation. These include: insulin, medical devices (including crutches, blood sugar monitors, etc.), bandages, contact lens solution and denture bond. The updated Eligible Products List will be published on Dec. 15, 2010, and merchants will have until Jan. 15, 2011, to be compliant with the new guidance.

To help with preparation for this significant change, SIGIS released a summary of the upcoming edits. The following categories are going to be removed from the Eligible Products List to prevent them from being purchased using a debit card without a prescription:

• Acid Controllers
• Allergy & Sinus
• Antibiotic Products
• Anti-diarrheals
• Anti-gas
• Anti-itch & Insect Bite
• Antiparasitic Treatments
• Baby Rash Ointments/Creams
• Cold Sore Remedies
• Cough, Cold & Flu
• Digestive Aids
• Feminine Anti-fungal/Anti-itch
• Hemorrhoidal Preps
• Laxatives
• Motion Sickness
• Pain Relief
• Respiratory Treatments
• Sleep Aids & Sedatives
• Stomach Remedies

As a reminder, without a prescription, OTC drugs and medicines will no longer be available for pre-tax reimbursement from health plan and tax-advantaged health care accounts such as health Flexible Spending Accounts, Health Savings Accounts or Health Reimbursement Arrangements, effective Jan. 1, 2011, regardless of plan year.

• SIGIS Press Release on Eligible Products List
• SIGIS Press Release on IRS Guidance
• SIGIS Website

FAQ

Q: What is the Special Interest Group for IIAS Standards?

On Oct. 12, 2010, the Internal Revenue Service (IRS) published Notice 2010-69, providing interim relief to employers by initiating a one-year delay of the new requirement that employers report the cost of coverage under an employer-sponsored group health plan on Form W-2. The notice makes the new reporting requirement optional for employers in 2011.

Under the new reporting and disclosure requirements created by this year's health reform legislation, employers were previously required to include the value of employer-provided coverage on their forms. The IRS indicated that the delay was prompted in an effort to give employers additional time to update payroll systems and administrative procedures in preparation for compliance with the new reporting requirement. The IRS also emphasized that the W-2 reporting requirement is for informational purposes only, and that the amounts reported on the forms will not be taxable.

Although relieved from the reporting requirement in 2011, employers should be ready to report an employee's employer-sponsored coverage for 2012 on the W-2 statements issued in Jan. 2013. Simultaneous with the announcement, the IRS issued draft Form W-2 for 2011, which employers use to report wages and employee tax withholding. The draft Form W-2 includes the codes that employers can use to report the cost of coverage under an employer-sponsored group health plan.

Additional guidance on the W-2 health cost coverage reporting requirement is anticipated to be published by the IRS later this year.

IRS announcement

Notice 2010-69

Two new FAQs have been issued regarding the implementation of the Patient Protection and Affordable Care Act (PPACA). The first question reinforces that retiree-only plans are exempt from certain health care reform mandates. The second question addresses whether a plan that covers both active employees and retirees, as well as individuals on long-term disability, would fit within this exemption. The agencies intend to issue guidance on this in 2011, and until such guidance is issued, the agencies will treat these plans as satisfying the exemption. Any agency changes will be on a prospective basis.

The Department of Health and Human Services (HHS) has added new information and tools to the HHS consumer web portal. The upgrade of the web portal, required under health care reform law, is stage two of the anticipated enhancements with stage one being the initial launch of the website by the July 1, 2010 deadline. The stated goal for the website is to "make the health insurance market more transparent, increase competition and help lower costs for individuals."

On Sept. 30, 2010, HHS issued a statement that suggests flexibility in the application of medical loss ratio (MLR) standards to certain health plans, including "min-med" plans. The MLR is the cost of claims plus amounts expended on health care quality improvement, expressed as a percentage of total premiums (excluding certain taxes, fees, and adjustments). Beginning in 2011, health insurance issuers are required to provide rebates to policyholders if their MLR is less than 85 percent in the large group market or less than 80 percent in the small group and individual markets. Although no formal guidance has yet been issued, HHS indicated that it intends to exercise its discretion to address the special circumstances relating to mini-med plan MLR calculations. HHS also noted that it currently has in place an expedited process for plans applying for a waiver from the PPACA annual limit requirements, and that it has already approved many such waiver requests.

Click here to view the news release.

On Oct. 14, 2010, a federal judge in Florida ruled that a lawsuit challenging the constitutionality of portions of the federal health care reform legislation, including the individual mandate (the requirement that every American purchase health insurance) as well as the requirement that states significantly expand Medicaid, may proceed. The suit was brought by 20 state attorneys general, led by the attorney general of Florida. While the federal court in Florida ruled that the health reform challenge may proceed, a week earlier, on Oct. 7, 2010, a federal judge in Michigan ruled that Congress was acting within its power in enacting the individual mandate. At this stage of the Michigan lawsuit, the judge has only ruled on the individual mandate issue, the lawsuit also raises other constitutional issues regarding the legislation that remain pending. Stay tuned for additional developments.

Click here to the Florida opinion.

Click here to the Michigan opinion.

The Social Security Administration announced there will be no cost-of-living adjustment (COLA) in 2011. As a result, most limitations that are adjusted for cost-of-living increases will remain unchanged for 2011 - the second consecutive year this has occurred since the automatic adjustment was implemented in 1975. The HHS has not yet announced if there will be any Medicare premium changes for 2011.

Click here to view the Social Security press release.

Click here to view the Social Security fact sheet.

On Oct. 20, 2010, the DOL's Employee Benefits Security Administration (EBSA) published the final regulations that require disclosure of certain investment-related information. The disclosure criteria includes certain fees and expenses paid by participants and beneficiaries in participant-directed individual accounts, including 401(k) and 403(b) plans. The objective of the rule is to ensure that workers have access to the information they need to make informed decisions about their investment choices. This includes requirements to include information about fees and expenses; the delivery of investment-related information in a format that enables workers to compare the investment options under their pension plans; that plan fiduciaries use standard methodologies when calculating and disclosing expense and return information so as to achieve uniformity across the spectrum of investments that exist among and within plans; and a new level of fee and expense transparency. The new regulations are effective for plan years beginning on or after Nov. 1, 2011. Thus, calendar year plans will need to comply beginning in 2012.

• Regulation
• Fact sheet
• Model chart
• News release

The IRS recently released the 2010-09 edition of the Employee Plans Newsletter. The newsletter contains a number of pertinent articles, citations and links related to retirement plans including:

• 2010 Rollovers and Conversions to a Roth IRA
• Self-employed? How to Calculate Plan Contributions for Yourself
• FAQs on Waivers of the 60-Day Rollover Requirement
• Form 5500 Filing Tips
• 401(k) Compliance Check Phone Forum
• National Save For Retirement Week Resources

Click here to view the document.

On Oct. 19, 2010, the Pension Benefit Guaranty Corporation (PBGC) announced that the per-participant flat-rate premium for 2011 plan years is $35 for single-employer plans and $9 for multi-employer plans. Like many limits that will remain constant in 2010, this amount is unchanged from 2009 due to no change in the contribution and benefit base in Social Security law.

Click here to learn more.

On Sept. 27, 2010, in Agosto v. Academia Sagrado Corazon, 2010 WL 3733989 (D. Puerto Rico, 2010), the United States District Court for the District of Puerto Rico ruled that a Puerto Rico private school failed in its duty to inform four former employees of their continuing health coverage rights under COBRA. According to the Court, federal case law indicates that an employer is required to give initial COBRA notices to new employees, and that the school (as the employer) had failed to give such notices. Further, the Court held that the plan administrator was required to give COBRA notification to terminated employees, but that the plan administrator could not be legally determined, since neither party could procure proper plan documentation. Without being able to determine the plan administrator and whether such administrator had acted in bad faith, the Court could not impose the legally provided fines for not giving out the proper COBRA notifications.

The DOL recently issued Fact Sheet #28C, which provides guidance on an employee's entitlement to leave under the Family Medical Leave Act (FMLA) to care for an individual who stood in loco parentis to the employee when the employee was a child. This is significant because the FMLA entitles eligible employees to take FMLA-protected leave to care for a parent with a serious health condition. FMLA defines the term "parent" as a biological, adoptive, step, or foster parent, or an individual who stood in loco parentis to an employee when the employee was a child. Regulations did not previously define the term in loco parentis.

The Fact Sheet clarifies that in loco parentis refers to a relationship in which a person has put himself or herself in the situation of a parent to a child with whom he or she has no legal or biological connection. Individuals who are in loco parentis include those with either day-to-day responsibility to care for or financially support a child.

Ultimately, the Fact Sheet provides that whether an employee stands in loco parentis depends on factors such as, the child's age, the degree to which the child is dependent on the person claiming in loco parentis status, the amount of support provided, and, among other factors, the extent to which the duties of parenthood are exercised. The Fact Sheet also provides three helpful examples of situations in which FMLA leave to care for a parent may be based on an in loco parentis relationship. Employers should review their FMLA policies to take into account this guidance.

Click here to view Fact Sheet #28C.

To assist small business owners in determining whether the Internal Revenue Service (IRS) will classify a worker as an employee or an independent contractor for federal tax purposes, the agency has offered seven tips that every business owner should know about hiring and classification. They are:

• The agency examines three characteristics to determine the work relationship - behavioral control (control of work processes), financial control (control over workers' finances and business), and relationship type (how the parties view their relationship).
• Workers will be deemed employees if businesses have the right to control or direct what and how work is performed.
• If only the result is controlled by the employer, but not the means and methods, then workers are probably independent contractors.
• Employers can face steep tax obligations and penalties for misclassification.
• Workers can avoid high tax bills and lost benefits by knowing their proper status.
• Employers and workers may ask the IRS to determine the proper classification by filing a Form SS-8 with the agency.
• Employers and individuals can learn more by visiting the IRS website or reading previously released IRS publications.

Click here to view IRS Tax Tips 2010-20.

The Commissioner of Insurance has issued Bulletin No. 2010-09 to all insurers issuing group health insurance policies in Alabama. While not directed at employers, the bulletin is important because it confirms that Alabama does not currently have a statutory external review process that meets the requirements imposed by PPACA. Therefore, the bulletin confirms that effective Sept. 23, 2010 all group health plans issued in Alabama must use the external review process outlined by HHS on July 23, 2010 and the subsequent technical guidance published on Sept. 1, 2010. The interim final rule, technical guidance, model notices, and the Notice of Privacy Act Statement for the external review process may be found at: www.hhs.gov/ociio/regulations/consumerappeals.

Click here to view Bulletin No. 2010-09.

SB 1304 requires private employers with 15 or more employees to provide up to 30 days of paid leave per year for an organ donation in any one-year period, and up to five days of paid leave per year for a bone marrow donation. An employee seeking leave under the new law must provide written verification to the employer that he or she is an organ or bone marrow donor and that there is a medical necessity for the organ or bone marrow donation. The new law applies to private employers and is effective on Jan. 1, 2011.

Click here to view SB 1304.

Source: Littler Mendelson

SB 3588 amended the Illinois Personnel Record Review Act to allow an employer that receives a request for records of a disciplinary report, letter of reprimand, or other disciplinary action in relation to an employee under the Freedom of Information Act to provide notification to the employee. Such notice may be in written form or through electronic mail.

On Sept. 28, 2010, the Maryland Insurance Administration (MIA) issued Bulletin 10-30, which relates to external review processes under both PPACA and Maryland law. The Bulletin, directed at insurers, nonprofit health service plans, health maintenance organizations, and employers who self-fund health benefit plans, states that the MIA has expanded access to its external review process to those non-grandfathered self-insured plans which voluntarily choose to comply with Maryland's external review process. The extension acts as a safe harbor from PPACA's federal external review requirements for those non-grandfathered self-insured group health plans that comply with the extension.

Uninsured Michigan citizens who have been unable to obtain health care because of a pre-existing health condition will be offered coverage through Michigan-based HMO Physicians Health Plan of Mid-Michigan (PHP). Michigan residents with pre-existing conditions who have been uninsured for the previous six months will be eligible to enroll. Enrollment began Aug. 31, 2010 and coverage started Oct. 1, 2010.

Click here to learn more.

Click here to view a list of the pool's pre-existing conditions.

In March 2008, the Washington legislature enacted legislation permitting employees who are victims of domestic violence, sexual assault, or stalking, to take reasonable leave from work, intermittent leave, or leave on a reduced leave schedule, under qualifying circumstances. The state labor department was charged with enacting corresponding regulations. The Washington State Department of Labor & Industries proposed and adopted final rules, effective Sept.1, 2010, which generally mirror the state statute, but also:

• expand the number of defined terms;
• provide examples of qualifying leave;
• clarify that, in relation to the statutory requirement that employee notice be provided in accordance with an employer's leave policy, said policy must be in writing;
• provide that, when an employee cannot provide notice ahead of leave due to an emergency or an unforeseen circumstance, the employee or his or her designee may provide oral or written notice to the employer; and
• discuss, in greater detail, the complaint and appeals processes.

Click here to view Chapter 296-135 WAC.

Source: Littler Mendelson

Effective July 23, 2010, an emergency regulation amended the West Virginia Administrative Code, Chapter 114, Section 85. This rule establishes procedures for the licensing and regulation of professional employer organizations, known as PEOs, within West Virginia. The Act defines the relationship between a PEO and an employer, and between a PEO and an employee. The Act requires PEOs to register with the West Virginia Insurance Commissioner and provide required information to the department. PEOs also must maintain a certain level of working capital or post a bond for security. Professional employer agreements must include terms which specify certain obligations and rights of the employer and the PEO. The Act requires that the agreement specify which party has the obligation to purchase workers' compensation insurance and extends the exclusive remedy protection to both. It also addresses penalties and investigations that a PEO may be subject to by the department. The department has released an application and instructions to be used pursuant to these regulations.

Click here to view the application.

Click here to view the instructions.