OThe IRS, as well as the Departments of Labor and Health and Human Services (collectively, the Departments), have determined that compliance with Health Care Reform nondiscrimination provisions (applicable to insured health plans) should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued under PHS Act  § 2716.

"In order to provide insured group health plan sponsors time to implement any changes required as a result of the regulations or other guidance, the Departments anticipate that the guidance will not apply until plan years beginning a specified period after issuance.  Before the beginning of those plan years, an insured group health plan sponsor will not be required to file IRS Form 8928 with respect to excise taxes resulting from the incorporation of PHS Act § 2716 into § 9815 of the Code."

Notice 2011-1 says this decision was made to delay the effective date "because regulatory guidance is essential to the operation of the statutory provisions."

Click here to read IRS Notice 2011-1.

On Dec. 13, 2010, a federal judge in Virginia held that a key provision of the health reform legislation, the "individual mandate," which requires most Americans to purchase health insurance by 2014 or pay a fine, is unconstitutional. Specifically, the judge's ruling found that the requirement for individuals to purchase health insurance exceeds the power of Congress under the Constitution's Commerce Clause. In the ruling, the judge severed the individual mandate portion of the law, known as Section 1501. In other words, he did not overrule anything but the individual mandate. In addition, he did not grant an injunction against the legislation's continued implementation, meaning that the reform implementation will continue.

The Virginia suit is one of a number of legal challenges to the reform legislation throughout the country. The constitutionality of the mandate is ultimately likely to be determined by further appellate courts and possibly the U.S. Supreme Court. It is expected that the Federal government will appeal the decision to the U.S. Court of Appeals for the Fourth Circuit.

The decision should not affect any of the reform provisions imposing requirements or restrictions on employers and employer plans that take effect for plan years beginning in 2011.

Click here to view the decision.

On Dec. 9, 2010, the Department of Health and Human Services (HHS) Office of Consumer Information and Insurance Oversight released additional guidance on the process for obtaining waivers from the annual limit requirement under health care reform. The new guidance requires that as a condition of receiving a waiver, a group health plan or health insurance issuer must provide a notice informing current and eligible participants and subscribers that the plan does not meet the minimum annual limits for essential benefits and has received a waiver of the requirement.

Most plans and insurers that have already obtained waivers will have 60 days to provide required notices. Plans that receive waivers for plan years that begin on or after Feb. 1, 2010, must provide the notice within any plan materials sent to enrollees, including summary plan descriptions. Both the letter issued by the Secretary of HHS, Kathleen Sebelius, and the supplemental guidance contained a model notice in bold, 14 point font.

The guidance also provides new rules on when mini-med plans can be sold after Sept. 23, 2010. Under two limited circumstances, insurers that have obtained waivers of the annual limit requirement can sell new policies to employers and individuals. Unless these two circumstances are met, HHS will not grant waivers for new policies issued after Sept. 23, 2010. The two limited circumstances are:

1. State-mandated Policies - Policies that are issued with annual limits in order to comply with state law.
2. Group Policies - In light of the recently published amendment that permits changing issuers without losing grandfathered status, HHS created an exception for group health plan sponsors that already had a policy with a waiver of the annual limit requirements to purchase a new policy from a different issuer that has also obtained a waiver. The annual limits of the new policy cannot be lower than the previous policy limits, unless the issuer is no longer offering such coverage.

• Guidance on Notice Requirement
   
• Guidance on Sale of New Policies
   
• Application Form
   
• Application Instructions
   
• Fact Sheet
   
• News Release
   
• Secretary Correspondence
   

HHS released an updated version of its Early Retiree Reinsurance Program (ERRP) application form in early November 2010. ERRP provides temporary financial help for employer health plans that continue to provide health coverage to early retirees. The majority of plan sponsors that have already submitted their ERRP applications need not reapply with the new application. However, for applications submitted after Nov. 9, 2010, they should use the most recent version of the application and follow the newest version of instructions contained in the HHS "Application Dos and Don'ts" document.

Click here to view the updated application.

Source: Littler Mendelson

The U.S. Congressional Research Service released a document that provides a side-by-side comparison of four tax-advantaged accounts: flexible spending accounts (FSAs), health reimbursement accounts (HRAs), health savings accounts (HSAs) and medical savings accounts (MSAs). The document provides comparisons with respect to eligibility, contribution limits, use of funds and other characteristics for tax year 2010. The document also discusses changes to the accounts as a result of the Patient Protection and Affordable Care Act (PPACA).

On Dec. 17, 2010, President Obama signed into law HR 4853. Included among the many tax-related provisions (the so-called "Bush tax cuts") of HR 4853 is a one-year extension of the $230 per month pre-tax transit subsidy cap for employer-provided transit benefits. The transit subsidy was increased from $120 to $230 per month in February 2009 as part of the American Recovery and Reinvestment Act of 2009 (ARRA), and was set to expire Jan. 1, 2011. HR 4853 extends this benefit until Jan. 1, 2012.

Also included is a two-year extension of the $5,250 a year in employer-provided tuition assistance for graduate and undergraduate courses. HR 4853 extends this benefit until Jan. 1, 2013.

On Dec. 16, 2010, the Internal Revenue Service (IRS) issued Notice 2010-94. The notice delays the effective date of Revenue Ruling 2006-57, which provides guidance to employers on the use of smartcards, debit or credit cards, or other electronic media to provide qualified transportation fringes under sections 132(a)(5) and (f). The notice is intended to provide relief to mass transit providers that have been unable to update their systems in order to comply with the Revenue Ruling guidelines by delaying the effective date from Jan. 1, 2011, to Jan. 1, 2012. The delayed effective date is good news for employers offering qualified transportation fringe benefit plans, particularly where local transit systems are still not in compliance with the technological requirements relating to electronic media cards.

Click here to view IRS Notice 2010-94.

On Dec. 7, 2010, the U.S. Department of Treasury and the IRS released the 2010-2011 Priority Guidance Plan. Guidance priorities relating to benefits include:

• Final regulations on cafeteria plans under section 125
• Guidance on the applicability of section 162(l) to COBRA premiums
• Guidance under section 4980B regarding calculation of the application premium for COBRA continuation coverage
• Regulations under section 4980G on interaction of section 4980G and section 125 with respect to comparable employer contributions to employees' health savings accounts
• Guidance on reporting of aggregate cost of employer-sponsored health coverage under section 6051(a)(14) as added by the PPACA
• Guidance under sections 45R and 162(m) as added by PPACA

Click here to learn more.

On Dec. 14, 2010, the IRS issued the 2011 standard mileage rates within Revenue Procedure 2010-51 and Notice 2010-88, which contain additional details regarding the rates. These rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Effective Jan. 1, 2011, the standard mileage rates for cars, vans, pickups or panel trucks will be:

• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Taxpayers always have the option of calculating actual costs rather than using the standard mileage rates.

Click here to view Revenue Procedure 2010-51.

Click here to view Notice 2010-88.

The IRS has issued Notice 2010-90, which provides a cumulative list of changes in plan qualification requirements. The 2010 Cumulative List identifies the statutory, regulatory, and guidance changes that the IRS will look for when single employer individually-designed defined contribution plans, employee stock ownership plans, and single employer individually-designed defined benefit plans are submitted for determination, opinion, or advisory letter applications during Cycle A. Additionally, this list is used for defined contribution pre-approved master and prototype or volume submitter plans are that submitted for the second submission under Rev. Proc. 2007-44. Plan sponsors and practitioners utilize this list when submitting for plans during the period beginning Feb. 1, 2011 and ending Jan. 31, 2012. Generally, individually designed plans use Cycle A if the last digit of the plan sponsor's EIN is 1 or 6. Sponsors of Cycle A plans, pre-approved plan submitters, and their advisors, should carefully review the 2010 Cumulative List to ensure that their submissions address the issues the IRS has specifically identified for review.

Click here to view IRS Notice 2010-90.

Through informal guidance, the Department of Labor (DOL) recently reaffirmed its position that ERISA plan administrators cannot satisfy their obligation to "furnish" summary plan descriptions (SPDs) simply by making them available to participants. In response to a question posed by the American Bar Association's Joint Committee on Employee Benefits (JCEB) as to whether SPDs could be furnished by mailing a letter or postcard to participants making them aware that they can obtain a free copy of an SPD by calling to request one, the DOL reiterated that ERISA requires that an SPD be sent by a method of delivery likely to result in full distribution.

Further, the DOL stated that it has long held the view that it is not acceptable merely to make the documents available in a location frequented by participants, and that the postcard example is analogous to this situation. Consequently, requiring participants to affirmatively seek out an SPD by placing a phone call is not a method likely to result in actual and full distribution of the SPD.

Click here to learn more.

Source: Littler Mendelson

The JCEB of the American Bar Association reported on its May 2010 Q&A session with officials from the HHS Office for Civil Rights (OCR). The session had several highlights, including informal, nonbinding remarks regarding HIPAA privacy and security issues.

• Enforcement and audit. According to the JCEB report, OCR is "gearing up to exercise its new audit authority" under the Health Information Technology for Economic and Clinical Health (HITECH) Act, with an audit program that will be more structured than OCR's existing compliance reviews and targeted to specific issues or types of covered entities.
• Business associate agreements. The officials indicated that OCR expects to issue updated sample language for business associate agreements when final HITECH regulations are issued. They acknowledged that the breach notification rule may necessitate changes to business associate agreements, and that the parties should work out related compliance issues between themselves.
• Meaning of "self-administered." JCEB members asked whether an employer group health plan that is insured could ever avail itself of the HIPAA privacy rule exclusion for plans that have fewer than 50 participants and are self-administered. The officials said that small fully insured plans would generally not be self-administered.
• Breach due to third-party theft. The officials confirmed that an impermissible disclosure of protected health information that results solely from theft by a third party despite adequate safeguards by the covered entity is still a violation of the privacy rule and subject to breach notification; the fact that the covered entity is not at fault does not relieve it of the notification obligation.

Click here to learn more.

On Dec. 8, 2010, the U.S. Court of Appeals for the Sixth Circuit ruled in favor of Blue Cross Blue Shield of Michigan in a case involving the scope of ERISA's fiduciary conduct rules. The primary question in the case was whether an employer acts as a fiduciary and is subject to ERISA's fiduciary rules when such employer negotiates hospital reimbursement rates that apply to its self-insured book of business. The court held that such a negotiation of reimbursement rates constitutes a business practice. The court therefore concluded that because ERISA fiduciary duty principles do not regulate the setting of hospital reimbursement rates, Blue Cross did not violate ERISA when it took its own business interests into account, as well as those of its insured customers, in setting such hospital reimbursement rates.

Click here to learn more.

The Arkansas Supreme Court ruled Nov. 11, 2010, in the case of Calaway v. Practice Mgmt. Servs. Inc., 2010 Ark. 432 (Ark. 2010). In the ruling, the court stated that an individual supervisor can be held personally liable under Arkansas Code Annotated section 16-123-108(a) for workplace retaliation, even though he or she cannot be held personally responsible under state law for other types of employment discrimination. Only employers, not individuals, can be held liable under federal anti-discrimination laws.

Click here to learn more.

In November 2010, the Illinois Department of Insurance revised its Illinois Young Adult Dependent Coverage Insurance Facts Web page. The PPACA contains a section similar to Illinois' Young Adult Dependent Coverage Law. According to guidance issued by federal agencies, the requirements of the PPACA exceed those of the Young Adult Dependent Coverage Law in some respects. This combination fact sheet and frequently asked questions Web page has been updated to account for changes made by the PPACA.

Click here to view the Illinois Young Adult Dependent Coverage: Revised Webpage.

The Texas Workforce Commission recently amended its regulations to clarify the types of compensation that must be paid to employees upon the termination of the employment relationship. The new rules state that vacation, sick pay, paid time off and paid days off accrue and must be paid to separated employees only if required by a written agreement or policy. In addition, accrued leave time does not carry over from year to year unless a written agreement or policy provides for such carry over.

Under the new rules, employers must pay terminated employees commissions or bonuses already earned, based on routine, practice or special agreement, but there are changes to other bonus requirements. The regulations provide guidance regarding loans to employees. They also state that expense reimbursements paid to employees are not wages for purposes of the Texas Labor Code. Other changes to these items are explained in the new rules.

·  Texas Payday Rules

·  Texas Labor Code §61.018

Source: Littler Mendelson

Effective Feb. 1, 2011, for some types of disability insurance, and June 1, 2011, for other health, life and disability policies, the Texas Department of Insurance adopted new rules that prevent insurance carriers from using discretionary clauses to deny benefits. Discretionary clauses are contract provisions that provide insurers with discretion in deciding the benefits, if any, that are due under an insurance policy.

The adoption order for rules adding new Subchapter M, Sections 3.1201 - 3.1203, concerning discretionary clauses in insurance policy forms and health maintenance organization evidence of coverage forms, was filed with the Office of the Secretary of State on Dec. 3, 2010, for publication in the Texas Register on Dec. 17, 2010.

Click here to view the adoption order.

Effective Nov. 9, 2010, Utah repealed the mini-COBRA notification rule found under ADC R590-253. As a result, insurers are no longer required to provide the Utah mini-COBRA Continuation Coverage Election Notice containing the COBRA subsidy language under the ARRA.

Click here to learn more.