Plan sponsors of defined contribution qualified plans may need to issue one or more annual notices to participants before the end of each plan year. The most common notices that plan sponsors may need to distribute include:

• Traditional Safe Harbor 401(k) Notice
• Qualified Automatic Contribution Arrangements for a Safe Harbor 401(k) Notice
• Eligible Automatic Contribution Arrangement Notice
• Qualified Default Investment Alternative Notice
• Non-Safe Harbor Automatic Contribution Arrangement Notice

Other notices that may need to be distributed include diversification notices and quarterly or annual participant statements.

On Nov. 22, the Department of Health and Human Services (HHS) issued interim final rules, effective as of Jan. 1, 2011, on the medical loss ratio (MLR) calculation, adopting most of the recommendations previously endorsed by the National Association of Insurance Commissioners. The MLR requirement is part of the Patient Protection and Affordable Care Act (PPACA) that requires health insurers to meet an MLR of 80 percent for insurance sold in the individual and small-group markets and a minimum of 85 percent in the large-group market. The MLR regulation outlines, among other issues, disclosure and reporting requirements, how insurance companies will calculate their MLR as well as provide required rebates. The rule allows "mini-med" plans to follow a different calculation formula than other plans in 2011.

• Interim final rule
   
• Fact sheet
   
• Press release
   

On Nov. 8, 2010, the United States Supreme Court declined to review without comment the first case challenging health reform to reach the Supreme Court. In the case, Baldwin v. Sebelius, 2010 WL 3617248 (2010), the plaintiffs challenged the individual mandate under health reform that requires the maintenance of "minimum essential" health care coverage starting in 2014. A federal judge in California previously held that the plaintiffs did not have standing to challenge the individual mandate, mainly because the mandate has not yet taken effect. That decision was then appealed to the Ninth Circuit, a decision that is still pending, and then to the Supreme Court. Despite this ruling, there are still multiple lawsuits pending challenging the constitutionality of the reform legislation.

Click here to view the Petition Denial.

Previously, one of the ways an employer group health plan could lose its grandfathered status was if the employer changed issuers, i.e., switching from one insurance company to another. The original regulation only allowed self-funded plans to change third-party administrators without losing their grandfathered plan status. An amendment released on Nov. 15, 2010, allows all group health plans to switch insurance companies, shop for the same coverage at a lower cost and maintain their grandfather status, so long as the structure of the coverage does not violate one of the other rules for maintaining grandfathered plan status, such as significant cost increases or a reduction in benefits.

The amendment also provides that, to maintain status as a grandfathered health plan, a group health plan that enters into a new policy, certificate or contract of insurance must provide to the new health insurance issuer documentation of plan terms (including benefits, cost sharing, employer contributions and annual limits) under the prior health coverage. This documentation must be sufficient to determine whether any change is being made, other than a change in carriers, that would cause the plan to lose grandfathered status. The amendment applies to changes to group health insurance coverage that are effective on or after Nov. 15, 2010. The amendment does not apply retroactively to changes to group health insurance coverage that were effective before Nov. 15, 2010.

This amendment affects insured group health plans. A change of issuers in the individual market would still result in the loss of grandfathered status.

Click here to view the rule.

Click here to view the fact sheet.

On Sept. 24, 2010, the Internal Revenue Service (IRS) released an information letter that explains when gym fees will qualify as medical care expenses under Code Section 213(d). The letter notes that medical care expenses are amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting a structure or function of the body. A taxpayer may be able to deduct the gym fees as a medical expense if the taxpayer can establish that: 1) A physician diagnosed the taxpayer with a specific disease; 2) the taxpayer uses the gym to treat the specific disease; and 3) the taxpayer would not incur the gym fees but for the specific disease.

Click here to view IRS Information Letter 2010-0175.

On Nov. 9, 2010, the U.S. Equal Employment Opportunity Commission (EEOC) issued final regulations implementing the employment provisions (Title II) of the Genetic Information Nondiscrimination Act of 2008 (GINA).

Title II, under the authority of the EEOC, applies to all employers. Title II prohibits employment discrimination based on genetic information and restricts employers from requesting, requiring or purchasing genetic information. Title II also strictly limits such entities from disclosing genetic information.

The final regulations provide examples of genetic tests; more fully explain GINA's prohibition against requesting, requiring or purchasing genetic information; provide model language employers can use when requesting medical information from employees to avoid acquiring genetic information; and describe how GINA applies to genetic information obtained via electronic media, including websites and social networking sites.

The final regulations also expanded on the exception to offer health or genetic services as part of a wellness program. An employer may not offer a financial inducement for individuals to provide genetic information. However, they can offer financial inducements for completion of health risk assessments that include questions about family medical history or other genetic information, provided the assessment clearly states that the inducement is available whether or not the individual answers the questions regarding genetic information. Also, a wellness program must provide reasonable accommodations to the extent required by the Americans with Disabilities Act, and a wellness program that is a group health plan must also satisfy HIPAA's requirements, including providing a "reasonable alternative" for a reward. The final regulations are effective Jan. 10, 2011.

• Regulations
   
• Background Information
   
• Q&As
   

On Oct. 15, 2010, the Department of Labor (DOL) issued a five-year strategic plan for the fiscal years 2011-2016. The plan offers employers valuable insight as to where the DOL will likely focus its regulatory and enforcement efforts in the future. There are five strategic goals outlined in the plan:

• Strategic Goal 1: Prepare workers for good jobs and ensure fair compensation
• Strategic Goal 2: Ensure workplaces are safe and healthy
• Strategic Goal 3: Assure fair and high quality work-life environments
• Strategic Goal 4: Secure health benefits and, for those not working, provide income security
• Strategic Goal 5: Provide timely and accurate data on the economic conditions of workers and their families

The first goal is of particular interest, as the goal of the DOL is to ensure fair compensation by achieving outcomes such as secured wages and overtime through enforcement activities, litigation strategies and penalty assessments. As such, the DOL and the Department of the Treasury will be engaging in a joint initiative to detect and deter the misclassifications of employees as independent contractors and to strengthen and coordinate federal and state efforts to enforce labor law violations arising from misclassifications.

The fourth goal is also of interest to employers for benefit purposes, as the DOL's Wage & Hour Division has committed to: provide timely and responsive service to workers who allege Family Medical Leave Act (FMLA) violations; continue regulatory activities to review the implementation of recent amendments to the FMLA; and promote flexible workplaces for people with disabilities.

Click here to view the five-year strategic plan.

On Nov. 8, 2010, the Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) announced that C&K Market Inc., an Oregon supermarket chain, has agreed to restore $3 million in cash plus interest and to sell property owned by the C&K Market Inc. 401(k) plan, among other steps, in order to make restitution for a series of imprudent loans made with plan assets in violation of ERISA. The DOL's Office of the Solicitor filed a lawsuit against C&K Market Inc., together with a consent judgment agreed to by the company, in the U.S. District Court for the District of Oregon in Eugene.

On Nov. 9, 2010, EBSA announced that Kim Ghi Martin was sentenced to three months in prison, followed by three years of supervised release, and was ordered to pay nearly $57,000 in restitution to 401(k) plan participants. Martin was sentenced after pleading guilty to stealing employee benefit assets from the 401(k) plan of Leading Technology Services Corp.

• Nov. 8, 2010 Press Release
   
• Nov. 9, 2010 Press Release
   

On Nov. 8, 2010, the New Jersey Department of Labor and Workforce Development issued a news release relating to the state's Family Leave Insurance (FLI) program. According to the press release, beginning Jan. 1, 2011, the employee payroll tax rate for the FLI program will be adjusted downward to .06 percent (.12 percent in 2010). The 2011 maximum withholding for FLI will be $17.76 ($35.64 in 2010). In addition to an increase in worker's take-home pay, the state's economy should see a $57 million boost as a result of the tax rate adjustment.

Click here to the news release.

On Oct. 26, 2010, the New York State Insurance Department issued a news release reminding New York employers and employees that New Yorkers are entitled to up to 36 months of seamless COBRA/New York State continuation coverage even though the federal stimulus subsidy that helps them pay for insurance expires sooner.

Click here to the news release.

The Nov. 1, 2010, edition of the Utah State Bulletin announced amendment No. 33874, which concerns changes that have been promulgated with respect to individuals, small employers and group health benefit plan rules. The changes that were made restrict the number of classes an insurer can use for rating insurance pools, adopt age bands for rating purposes and disallow insurers from rating employers based on the number of employees they have. As a result of these changes, small employers may see a change in their health insurance premium rates based on the average age of their employees and the group's size. The amendment is effective Oct. 4, 2010, and will be enforced beginning Jan. 1, 2011.

Click here to learn more.