The DOL recently hosted a two-part webcast series, emphasizing fiduciary responsibilities for ERISA retirement plans. The webcasts featured discussion of: Section 404(c) of ERISA; guidance on locating missing participants as outlined in FAB 2004-02; direction on understanding the plan and a fiduciary's responsibilities; discussion on fees, expenses, and investment disclosures; dialogue about timely deposits of employer and participant contributions; prohibited transactions; and information on the reporting and disclosure provisions of ERISA and the DOL's voluntary correction program. Parts I and II of the archived webcasts will be available for archived viewing until March 22 and 23, 2012, respectively.

Part I Archived Webcast
Part I Archived Slides
Part II Archived Webcast
Part II Archived Slides
Part I and Part II Speaker Biographies 

On March 23, 2011, the IRS released the Spring 2011 edition of Employee Plans News. The newsletter contains a number of articles, citations and links related to retirement plans including:

• Preparer Tax Identification Number - who needs a PTIN?
• ESOPs - Definition of Readily Tradable Employer Securities
• New 6-Year Cycle for Pre-Approved Defined Contribution Plans
• Review Your Client's Retirement Plan
• Employee Plans Compliance Unit's Funding Deficiency Project
• 403(b) Plans -- Ineligible submissions for the Voluntary Correction Program, new guidance on 403(b) plan terminations, and updated FAQs
• Compliance Checks - I Received a Letter, Now What?
• Latest 401(k) Questionnaire Developments -- Next steps in the project, including consequences for those who declined to complete the Questionnaire
• Multiple phone forum and webinar opportunities, as well as updated publications and recurring columns are also included in this edition

Click here to view the newsletter

In the case of Brooks v. AAA Cooper Transp., 2011 WL 999567 (S.D. Tex. 2011), decided March 18, 2011, a multitude of issues were litigated, including accusations of wrongful termination, insufficient COBRA notice documentation, a slander claim, as well as violations of both the Privacy Act of 1974 and the Department of Transportation's Drug Testing Program. Of specific interest to benefit administrators is the allegation that an employer failed to provide a COBRA election notice after an employee was terminated. The court ruled for the employer, basing its decision on the statement of the company's benefits specialist, who said that she placed the employee's COBRA election notice in the outgoing first-class mail 14 days after his termination date and it had not been returned as undeliverable. A copy of the actual notice that was sent to the employee was made available, and the former employee acknowledged that it reflected his correct mailing address. The court concluded that the employer's processes for furnishing COBRA election notices were reasonably calculated to ensure receipt, as required by COBRA, and that the employer need not prove actual receipt.

This case is another example of the importance of maintaining adequate documentation of the method used to furnish COBRA election notices, and maintaining accurate records, including copies, of notices that have been sent.

Brooks vs. AAA Cooper Transp.

In U.S. v. Eriksen, 2011 WL 801816 (9th Cir. 2011), a chairman and CEO of a company, who also served as the trustees of the company's 401(k) plan, used employees' 401(k) deferrals to pay company operating expenses for more than two years. At the trial court level, the two were convicted of embezzling ERISA plan funds and for making false or misleading statements in an ERISA document, both in violation of federal criminal law, and were sentenced to two years of probation, a $20,000 fine, and 240 hours of community service.

On appeal, the U.S. Court of Appeals for the Ninth Circuit upheld the criminal convictions, rejecting the chairman and CEO's argument that the two lacked criminal intent because they had used the embezzled plan funds to keep the struggling company in business and had deposited the money into the trust account before the initial jury trial began. The court reasoned that the executives, as plan fiduciaries were authorized only to deposit employees' 401(k) deferrals in the plan's trust account, and that any other use of the deferrals was unauthorized and therefore illegal. The court also mentioned that evidence at trial indicated that the executives had been warned repeatedly against such unauthorized use of plan assets by the company's outside advisers. In addition, since certain annual valuation reports distributed to plan participants depicted the contributions of 401(k) deferrals that had not actually been contributed and since the valuation reports were used to complete the plan's Form 5500 (which also contained false information), the court reasoned that the valuation reports constituted a false statement in an ERISA document.

The case serves as a reminder to employers and plan sponsors about ERISA fiduciary obligations, the correct use of plan assets, and the importance of making straightforward statements in ERISA documents.

U.S. v. Erikson

The Arkansas Legislature passed an emergency bill, SB 364, to conform a number of state tax provisions with the federal Internal Revenue Code (IRC) as amended through Jan. 1, 2011. This change should be of particular interest to employers and payroll providers since passage of this provision means that Arkansas conforms to the exclusion from gross income of employer-paid health insurance coverage for dependents under the age of 27 after March 30, 2010. Additionally, because SB 364 brings Arkansas tax law into conformance with the IRC in effect on Jan. 1, 2011,contributions to health flexible spending accounts through a cafeteria plan, contributions to HSAs, and expenses relating to adoption continue to be excluded from gross income SB 364 is effective March 30, 2011.

SB 364

On March 22, 2011, HB1425 was signed into law, and is now referred to as Act 566. The legislation's purpose is to remove insurance restrictions on non-covered dental services, meaning that unless certain dental services are considered covered under the contract, plan or policy of insurance, the dentist cannot be required to provide non-covered services at a set fee. The Act includes an emergency clause, which stated that by removing the limitations on fees charged for non-covered services, dentists will have additional treatment options for patients. The Act is effective as of March 22, 2011.

View Act 566

On March 24, 2011, the California Senate passed AB 36, which brings California state taxation laws into conformity with the federal Internal Revenue Code with respect to the taxation of benefits. Importantly, AB 36 provides that the fair market value of employer-provided health coverage for adult dependents up to age 26 is not includible in an employee's income. In addition, according to related guidance issued by the California Employment Development Department (EDD), for 2010, employers who calculated a fair market value benefit amount as imputed income for California personal income tax (PIT) wages for their employees and subsequently withheld PIT on this value should issue Form W-2C to impacted employees that reflect the correct PIT amount. In addition, if employers have withheld applicable PIT in the first quarter and have already filed their quarterly reports, then the employers must file an amended quarterly report. More information on employer reporting, please see the EDD guidance. The bill is effective immediately.

AB 36
EDD Guidance

The San Diego City Council approved an Equal Benefits Ordinance (EBO), San Diego Municipal Code sections 22.4301-4308, which requires employers that contract with the city to provide domestic partners of employees the same benefits that the employer currently provides to spouses of employees. The EBO applies to contractors' employees anywhere in San Diego or on city-owned property and to any employees elsewhere in the United States doing work on San Diego contracts. The EBO applies on all city contracts entered into, awarded, amended, renewed or extended on or after Jan 1, 2011.

EBO
EBO Program Information
Rule Implementing the EBO
EBO FAQs

In 2010, the District of Columbia enacted an expansive and detailed list of regulations relating to the D.C. Family and Medical Leave Act (DCFMLA), completely replacing previous regulations relating to DCFMLA. The new regulations apply to employers that employ 20 or more persons on the payroll in D.C. during 20 or more calendar weeks in either the current or preceding year. The regulations include provisions relating to DCFMLA employee eligibility, benefits, complaint procedures, employee notice requirements, leave certification, and interaction with federal law. The regulations are codified at D.C. Municipal Code, Title 4, sections 1600-1699, and became effective in November 2010.

DCFMLA Regulations

On March 30, 2011, the Illinois Department of Insurance (DOI) issued a memo to all companies writing policies subject to the "Autism Mandate" of the Illinois Insurance Code. The mandate requires all group health insurance policies and HMO contracts to provide autism diagnosis and treatment for children under age 21 to a maximum annual dollar amount. Each year, the maximum is adjusted using the Medical Care Component of the U.S. DOL Consumer Price Index for All Urban Consumers ("CPI-U"). The required annual benefit for 2010 was $37,260. Based on the 3.4% increase in 2010 for the CPI-U, the new maximum annual dollar amount for 2011 will be $38,527. The updated amount applies to insurance policies and HMO contracts that are issued, renewed, or modified on or after Jan. 1, 2011.

Illinois DOI Memo
Illinois Autism Mandate

The Illinois DOI adopted rules implementing Section 359b of the Illinois Insurance Code that provide new standardized health application forms to be used by carriers and their agents for the small group and individual markets. The new rules provide guidance for the use of the standard health applications and specifically establish criteria for the required content, filing, and use of such applications. In addition, the rules establish criteria for the electronic use of the standard health applications and for the translation of such applications into other languages. Appendix A is the Illinois Standard Health Employee Application for Small Employers and should be used by small employer carriers for underwriting and enrolling a new small employer group. The new rules are effective Jan. 21, 2011.

Notice of Adopted Rules, Standard Health Applications and Certification of Compliance

On March 16, 2011, Governor Beshear signed SB 112. Under the new law, an insurer cannot charge a greater copayment or coinsurance amount for services rendered for each date of service by a licensed occupational or physical therapist than would be charged for services provided by a licensed physician or an osteopath per office visit. Insurers must also clearly describe in the plan document the availability of occupational and physical therapy coverage and all related limitations, conditions and exclusions. SB 112 is effective June 8, 2011.

SB 112

On March 16, 2011, Governor Beshear signed SB 114. Under the new law, insurers providing health benefit plans may offer incentives or rewards to members who participate in a voluntary wellness or health improvement program, if otherwise allowed by state or federal law. Examples of possible rewards include gift cards, premium discounts or rebates, and contributions toward a member's HSA. Consistent with federal law, the state allows a physician's statement to be provided if it is medically unadvisable for a member to participate and still be eligible for a reward. SB 114 is effective June 8, 2011-90 days from the date the original legislative session concluded.

SB 114

On March 16, 2011, the governor signed into law HB 84, which amends Montana wage payment statutes to specifically exclude a person who is an independent contractor from the definition of "employee". Prior to HB 84, the definition of "employee" broadly included any individual who works for another individual for hire. HB 84 is codified at Mont. Code Ann. sec. 39-3-201, and is effective immediately.

HB 84

On March 29, 2011, the governor signed into law A3359, which generally prohibits the practice of excluding unemployed individuals in advertisements for job vacancies. Specifically, the new law prohibits employers from posting print or online job advertisements stating or suggesting that only employed applicants will be considered, applicants must be currently employed to qualify for the position, or that unemployed applicants will not be considered. Employers may advertise that only applicants currently employed by the employer will be considered. Employers that violate the new law are subject to monetary penalties imposed by the state labor commission of up to $1,000 for a first violation, $5,000 for a second violation, and $10,000 for each subsequent violation. The new law will be effective June 1, 2011.

A3359

Effective April 9, 2011, the New York State Wage Theft Prevention Act establishes additional notice and recordkeeping requirements for New York employers. Specifically, the Act requires NY employers to provide employees, both at the time of hiring and on or before Feb. 1 each year) a notice containing certain information relating to the employee's regular and overtime rate of pay, the employee's regular payday, the basis of the employee's pay (i.e., hourly, daily, commission, etc.), allowances claimed as part of the minimum wage (i.e., tips, meals, or lodging), and the employer's name, address and telephone number. The notice must be provided in English and the language identified by the employee as his or her primary language, and employers must obtain a signed and dated written acknowledgement from the employee confirming that the employee received and understands the notice.

In addition, every pay period New York employers must also provide a wage statement to employees. The wage statement must include information such as the name of the employee, the dates of the pay period, the rate and basis of pay, deductions and allowances, net wages, and certain information for nonexempt employees and employees paid on a piece rate.

Finally, the Act requires employers to maintain records relating to the above for a minimum of six years. Employers who violate the Act may be subject to hefty fines (up to $2,500 per employee) and legal action from the New York Labor Commissioner. The Act also provides enhanced retaliation provisions.

As a result of the Act, New York employers should review and update wage payment forms, obtain signed and dated acknowledgment forms from each employee, review and update company wage statements, review recordkeeping procedures and review employee handbooks to clarify that the company prohibits retaliation for the reporting of wage violations.

NY DOL FAQs
NY DOL Guidelines
Sample Notice Forms

Governor Dennis Daugaard signed SB 43 into law on March 2, 2011. The Act revised certain health insurance standards for patient protection, in accordance with federal law under PPACA. The law clarifies that certain requirements relating to "low-dose mammography" and coverage for this screening only applies to plans considered grandfathered. Additionally, state law is amended to reflect the increased age limit of 26 years for an adult dependent to receive coverage under a parent's plan, without a requirement to maintain full-time student status. The law also states that if the dependent remains a full-time student between ages 26 and29, the insurer, at the insurer's option, may provide for continuation of coverage for the dependent. Other updates also made changes under the definition of rescissions of coverage due to fraudulent misstatements, rate filings required by health insurers, and updated certain definitions to exclude excepted benefits from the law. The law is effective July 1, 2011.

http://legis.state.sd.us/sessions/2011/Bills/SB43ENR.pdf

On March 28, 2011, the South Dakota state legislature overrode a governmental veto in order to enact HB 1146 into law. The Act limits the copayment or coinsurance amount that a health insurer may impose on an insured for services received from a chiropractor to be no more than the copayment or coinsurance amount that are imposed on the services of a primary care physician. The law is effective July 1, 2011.

http://legis.state.sd.us/sessions/2011/Bills/HB1146ENR.pdf

Under HB 19, along with a variety of other measures, the Insurance Code of Utah was updated with amended definitions and outdated language was removed. Of significant interest for group health plan sponsors is a revision to the requirement that employers must notify former employees, as well as their current, former, and surviving spouses, and former employees' dependents of their right to convert from group to individual policy coverage. Effective May 10, 2011, such notification must be made by insurers, not employers.

Also changed is the requirement for former employees, as well as their current, former, and surviving spouses and employees' dependents to apply for the converted coverage and make initial premium payments within 30 days after the group policy coverage terminates. The deadline for making premium payments previously was 60 days. This provision is also effective May 10, 2011.

HB 19
Summary

Under HB 1649, signed by Governor Chris Gregoire on April 5, 2011, Washington will now recognize same-sex marriages performed in other states as legal domestic partnerships under state law. Previously, Washington recognized domestic partnerships from other states, but excluded recognition of same-sex marriages. Now, the law provides out-of-state same-sex marriages with all of the rights and protections given to registered domestic partnerships in Washington. The law is effective 90 days after adjournment of the regular session.

HB 1649
HB 1649 Bill Summary