Med Law Blog

As they do every year, the Internal Revenue Service released the dollar limits that apply to qualified retirement plans. There are three separate charts below that list the limits for 2010. The three charts are separated to identify the limits for: (1) defined contribution plans, (2) defined benefit plans, and (3) both defined contribution and defined benefit plans. 

If you have any questions regarding these limits or any other employee benefit questions or concerns, please contact David Sawyer at dsawyer@tuckerlaw.com or Jonathan Grossman at jgrossman@tuckerlaw.com.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

"Summary Prospectus" Now May Be Used

Under ERISA Section 404(c) in Lieu of Statutory Prospectus 

On September 8, 2009, the U.S. Department of Labor (the “DOL”) issued Field Assistance Bulletin 2009-03. This guidance states that a fiduciary may continue to satisfy ERISA Section 404(c)’s requirements by providing a mutual fund’s “summary prospectus” rather than the fund’s statutory prospectus. 

ERISA §404(c) protects fiduciaries from any loss that is the direct result of a participant’s investment decision. To receive protection, however, a fiduciary must meet several requirements. One broad requirement is that a participant or beneficiary must have access to sufficient information to make informed decisions with regard to the plan’s investment options. Prior to the DOL’s recent Field Assistance Bulletin, a mutual fund’s statutory prospectus had to be provided to participants in order to meet part of this requirement. 

However, in January of 2009, the Securities and Exchange Commission (the “SEC”) published a rule allowing a mutual fund to use a “summary prospectus” as an optional way of satisfying of it’s obligation to issue a statutory prospectus. In general, a summary prospectus is more streamlined and shorter than a statutory prospectus. In response to the SEC rule, the DOL issued guidance on September 8, 2009, in the form of the Field Assistance Bulletin 2009-03. The DOL made clear that a mutual fund’s summary prospectus may now be used to meet ERISA Section 404(c)’s requirements.  

If you have any questions, please contact David M. Sawyer at 412.594.5642 or dsawyer@tuckerlaw.com or Jonathan I. Grossman at 412.594.5574 or jgrossman@tuckerlaw.com.

******

Employee Benefits Law Group: The  Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

TAX ADVICE DISCLAIMER: Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like such advice, please contact us.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

In addition to the COBRA subsidy, the American Recovery and Reinvestment Act of 2009 (“ARRA”), enacted on February 17, 2009, made significant changes to HIPAA privacy and security obligations. Those changes affect covered entities, including group health plans, and also affect business associates.  Although most of the HIPAA changes are effective February 17, 2010, one change (regarding breach notifications) will become effective earlier.  A summary of the key provisions affecting group health plan covered entities and business associates is below.   

• Requirement to Notify Individuals of HIPAA Breaches. The law changes now require covered entities to notify eachindividual whose unsecured protected health information (“PHI”) has been breached. For a breach of PHI under the control of a business associate, the business associate is required to notify the covered entity. Notice of the breach has to be provided to the Secretary of the US Department of Health and Human Services (“HHS”) and in the case of a mass breach involving more than 500 individuals, to a prominent media outlet.  Unsecured PHI means PHI that is not secured through the use of a technology or methodology specified by the Secretary of the US Department of Health and Human Services. 
  The Secretary of HHS is required to issue guidance about acceptable technology within 60 days of February 17, 2009. The law contains a default description of acceptable technology in the event that HHS does not timely issue guidance. The ARRA directs the HHS to issue regulations within 180 days of February 17, 2009. Then, the new notification requirements will apply to breaches discovered on or after the date that is 30 days after the date the regulations are published.

• Additional Individual Rights. 

    - Accounting of Disclosures for Treatment, Payment and Health Care Operations.Under current law, individuals have the right to an accounting of disclosures of their PHI made in the previous six (6) years requiring covered entities to track the disclosures. There are certain exceptions to the accounting requirement such as disclosures that are made for treatment, payment, or health care operations. Now, a covered entity that uses or maintains an “electronic health record” with respect to PHI must account for disclosures for treatment, payment, and heath care operations. This accounting is limited to disclosures made in the previous three (3) years. HHS is required to promulgate regulations implementing this new requirement. 

There are two general effective dates: (1) with respect to electronic health records acquired by a covered entity on January 1, 2009, the effective date is January 1, 2014 and (2) with respect to electronic records acquired by a covered entity after January 1, 2009, the effective date is January 1, 2011 or, if later, the date the electronic record is acquired. 

-          Access to PHI in Electronic Form.  If a covered entity uses or maintains an electronic health record for PHI, the new law gives individuals the right to obtain a copy of the PHI in electronic format. The individual can also direct the covered entity to transmit an electronic copy directly to an entity or person designated by the individual. 
This requirement is effective as of February 17, 2010.   

-          Right to Restrict Disclosures for Payment & Health Care Operations. Under current law, individuals have the right to request that a covered entity not disclose their PHI for purposes of routine treatment, payment, or health care operations, although the covered entity is not required to agree to the restriction. Now, the covered entity must agree to the restriction for purposes of payment and health care operations (but not for purposes of treatment)  if the PHI pertains solely to a health care item or service for which the health care provider involved has been paid out of pocket in full. This requirement is effective as of February 17, 2010.

| Posted By Joni Landy In Employee Benefits | 0 Comments | Permalink

Today, the U.S. Department of Labor (“DOL”) issued model notices reflecting the recently enacted COBRA subsidy requirements and also issued updated FAQs on how the COBRA subsidy provisions are to work. View the model notices and FAQs. A summary of the different model notices (taken from the DOL’s descriptions) is below.

General Notice (Full version).  Plans subject to the federal COBRA provisions must send the general notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the subsidy as well as information required in a COBRA election notice.

General Notice (Abbreviated version). The abbreviated version of the general notice includes the same information as the full version regarding the availability of the premium reduction and other rights under the recently enacted COBRA changes, but does not include the COBRA election information. The abbreviated notice may be sent in lieu of the full version to individuals who experienced a qualifying event on or after September 1, 2008, have already elected COBRA coverage, and still have it.

Alternative Notice. Insurance issuers that provide group health insurance coverage must send the alternative notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model alternative notice or the abbreviated model general notice appropriate for use in certain situations.

Notice in Connection with Extended Election Periods. Plans subject to the federal COBRA provisions must send this type of notice to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA election were in effect), which means anyone who is eligible for the COBRA subsidy, who:

1.          had a qualifying event at any time from September 1, 2008 through February 16, 2009; and

2.          either did not elect COBRA or who elected it but subsequently discontinued COBRA.

Note that this type of notice includes information on the recently enacted additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

Although group health plan sponsors are busy focusing on the COBRA subsidy enacted this past February, there are a flurry of laws impacting group health plans that have compliance dates ranging from April 2009 to February 2010. One of the laws, “The Children’s Health Insurance Program Reauthorization Act of 2009”, also enacted in February 2009, imposes compliance obligations on group health plans that start as early as April 1, 2009. We will provide you with summaries of the other laws impacting group health plans in a series of Employee Benefits Law ALERTS.

The Children’s Health Insurance Program Reauthorization Act of 2009 extends and expands the state children’s health insurance program (CHIP). The following key provisions affect group health plans and note that some obligations must be complied with by April 1, 2009. 

• Premium Assistance Subsidy for Employer Coverage. States may elect to offer a premium assistance subsidy to help CHIP and Medicaid eligible children obtain “qualified employer-sponsored coverage”. The subsidy may be provided as a reimbursement directly to the employee or as a direct payment to the employer. Employers can opt out of direct payments.
• Notice of Premium Assistance Subsidy. Employer group health plans in states that provide Medicaid or CHIP premium assistance subsidies must give notice to employees of the availability of the subsidy. The Department of Health and Human Services is required to develop model notices by February 4, 2010. The notices can be provided with open enrollment materials or with the SPD. The notice requirement is effective for plan years beginning after the date the model notices are issued.
  
• Disclosure to States. Plan administrators of group health plans are required to disclose information about the plan to states upon request. The Departments of Labor and Health and Human Services are required to develop a model disclosure form for plan administrators. States may not request the disclosure until the first plan year beginning after the date the model disclosure form is issued.
• New Special Enrollment Rights. In addition to existing special enrollment rights, group health plans must now also allow employees and dependents who are eligible but not enrolled for coverage to enroll under the following additional circumstances. 

       - The dependent or employee loses eligibility for CHIP or Medicaid. If the dependent or employee loses eligibility for CHIP or Medicaid, enrollment must be requested within 60 days after the termination of the CHIP or Medicaid coverage. Note that the 60 day period is in contrast to other special enrollment rights which can be limited to 30 days. 

       - The employee or dependent becomes eligible for a premium assistance subsidy through Medicaid or CHIP. If the employee or dependent becomes eligible for premium assistance through Medicaid or CHIP, enrollment must be requested within 60 days after eligibility is determined. 

Plans must comply with the special enrollment right provisions as of April 1, 2009.

What Plans Need to Do. Plans, sponsors, and/or administrators will need to take the following actions:

• comply with the new special enrollment rules by April 1, 2009;
• update plan documents, SPDs, cafeteria plan change in election rules, health plan change in election rules, and special enrollment right notices, as soon as possible, to reflect the expanded special enrollment rights;
• determine whether the subsidy described above is available in states where employees reside;
• provide notice of the subsidy when the government issues the model notices; and
• disclose plan benefit information to states upon request after the government agencies issue model disclosure forms.

| Posted By Michael Cassidy In Employee Benefits | 1 Comments | Permalink

Today, David Sawyer of Tucker Arensberg, P.C. will be leading a call-in seminar for the Pennsylvania Bar Institute (PBI) regarding the recent COBRA changes. Register for the live seminar (which is from 12:30-1:30).

You also may register to listen to the seminar through the internet after its live broadcast by following the same link. Written materials are made available by the PBI for those who register. We hope that you tune in if possible.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

We are sending this Employee Benefits Law Alert to update an alert we distributed on February 18, 2009. Government representatives have explained that although the Act states that insurance companies providing insurance for group health plans will be entitled to reimbursement of the COBRA subsidy, the employer (and not the insurance company) generally will be entitled to the reimbursement. Accordingly, we have updated the alert to reflect those statements and have included the updated alert below. We will continue to provide updates of any significant announcements and/or developments with respect to the COBRA subsidy.   

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On February 16, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Act”). Although a substantial portion of the Act is dedicated to stimulating the economy, there are other provisions designed to assist individuals in making it through these tough economic times. Of particular interest to the employee benefits community is a 65% government-paid subsidy for COBRA premiums (up to 9 months) for eligible individuals. The subsidy provision is temporary and, under the Act, will end on December 31, 2009. 

To comply with the COBRA subsidy provisions of the Act, employers will need to make significant changes immediately. A brief summary of some of the relevant provisions follows. 

Amount of Subsidy: the amount of the subsidy is 65% of the COBRA continuation coverage premiums for eligible individuals for a maximum of 9 months. IRS/Treasury representatives have stated, on an informal basis, that their interpretation of the Act is that the subsidy will be calculated based on the premium the employee is actually charged by the employer – instead of the maximum COBRA premium the employer could charge the employee. 

Who is Eligible for COBRA Subsidy: if an employee is involuntarily terminated during the period of September 1, 2008 to December 31, 2009, that individual (and dependents) may be eligible for the COBRA subsidy. However, the amount of the subsidy is reduced if the individual’s modified adjusted gross income exceeds $250,000 (for joint return filers) or $125,000 (for all other filers) and completely eliminated if the individual’s modified gross income exceeds $290,000 (for joint filers) and $145,000 (for all other filers).

Individuals who were involuntarily terminated before the date the Act was signed and who declined COBRA coverage will need to again be given the opportunity to elect COBRA coverage. If that individual now decides to elect coverage, then the maximum COBRA period would be measured from the original date he or she was eligible for COBRA coverage. 

Notices: employers must modify their COBRA election notices or provide separate, supplemental notices to all individuals who become entitled to elect COBRA through December 31, 2009. The new notices must describe the new premium subsidy. The notices also must describe any right to change coverage options. Model notices should be issued by the government within 30 days of February 17, 2009. For those individuals who became entitled to elect COBRA before the Act’s enactment date, the employer must provide new notices within 60 days after February 17, 2009.  Failure to provide these notices could result in monetary penalties under ERISA and the Internal Revenue Code.

How the Subsidy Works: although the text of the Act is not clear, government representatives have stated that the following reimbursement rules will generally apply:

-    for a single employer plan that is subject to COBRA, the employer will be entitled to the COBRA subsidy reimbursement;

-    for a multiemployer plan, the multiemployer plan will be entitled to the COBRA subsidy reimbursement; and

-    for an insured plan not described above (where continuation coverage is provided pursuant to state law, e.g., a state law applicable to employers with fewer than 20 employees), the insurance company providing the insurance will be entitled to the COBRA subsidy reimbursement.

The Act provides that the reimbursement will be accomplished through reducing the amount of payroll taxes that the entity receiving the reimbursement owes. If the reimbursement is greater than the payroll tax due for that period, then the excess reimbursement will be treated in the same manner as a refund or a credit due for overpayment of payroll taxes. The IRS will have to provide additional guidance on how exactly this reimbursement process is to work. Further, with respect to reimbursement of multiemployer plans, the Act also provides that the IRS will have to provide guidance on how the reimbursement process will work.   

Appeal Procedure: if an individual’s request for the subsidy is denied, he or she may generally appeal the decision to the DOL. The DOL must rule on the request within 15 business days.

The COBRA provisions in the Act will require significant and immediate changes by sponsors of group health plans. As mentioned above, additional guidance will need to be issued by the various federal government agencies. However, sponsors do not have the luxury of waiting until that guidance is issued before implementing the new COBRA rules. 

If you have any questions, please contact David Sawyer at 412.594.5642 (or dsawyer@tuckerlaw.com) or Jonathan Grossman at 412.594.5574 (or jgrossman@tuckerlaw.com).

******

Employee Benefits Law Group: The Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

TAX ADVICE DISCLAIMER: Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like such advice, please contact us.

| Posted By Michael Cassidy In Employee Benefits | 4 Comments | Permalink

This article has been revised to reflect recent guidance. It is important that you read the revised article at the following link: 
www.medlawblog.com/uploads/file/Revised Cobra Alert 2_26_09 _2_.pdf

Yesterday, President Obama signed into law the American Recovery and Reinvestment Tax Act of 2009 (the “Act”). Although a substantial portion of the Act is dedicated to stimulating the economy, there are other provisions designed to assist individuals in making it through these tough economic times. Of particular interest to the employee benefits community is a 65% government-paid subsidy for COBRA premiums (up to 9 months) for eligible individuals. The subsidy provision is temporary and, under the Act, will end on December 31, 2009. 

To comply with the COBRA subsidy provisions of the Act, employers will need to make significant changes immediately. A brief summary of some of the relevant provisions follows. 

Amount of Subsidy: the amount of the subsidy is 65% of the COBRA continuation coverage premiums for eligible individuals for a maximum of 9 months.

Who is Eligible for COBRA Subsidy: if an employee is involuntarily terminated during the period of September 1, 2008 to December 31, 2009, that individual (and dependents) may be eligible for the COBRA subsidy. However, the amount of the subsidy is reduced if the individual’s modified adjusted gross income exceeds $250,000 (for joint return filers) or $125,000 (for all other filers) and completely eliminated if the individual’s modified gross income exceeds $290,000 (for joint filers) and $145,000 (for all other filers).

Individuals who were involuntarily terminated before the date the Act was signed and who declined COBRA coverage will need to again be given the opportunity to elect COBRA coverage. If that individual now decides to elect coverage, then the maximum COBRA period would be measured from the original date he or she was eligible for COBRA coverage. 

Notices: employers must modify their COBRA election notices or provide separate, supplemental notices to all individuals who become entitled to elect COBRA through December 31, 2009. The new notices must describe the new premium subsidy. The notices also must describe any right to change coverage options. Model notices should be issued by the government within 30 days of February 17, 2009. For those individuals who became entitled to elect COBRA before the Act’s enactment date, the employer must provide new notices within 60 days after February 17, 2009.  Failure to provide these notices could result in monetary penalties under ERISA and the Internal Revenue Code.

How the Subsidy Works: in general, the Act requires the plan to pay the full cost of the COBRA coverage and then seek reimbursement from the federal government for the subsidy. Specifically, for:

-    a self-insured, single employer plan, the employer will be entitled to reimbursement of the 65% subsidy;

-    an insured, single employer plan, the insurance company providing the insurance will be entitled to reimbursement of the 65% subsidy; and

-    a multiemployer plan, the multiemployer plan will be reimbursed for 65% subsidy.

The Act provides that the reimbursement will be accomplished through reducing the amount of payroll taxes that the entity receiving the reimbursement owes. If the reimbursement is greater than the payroll tax due for that period, then the excess reimbursement will be treated in the same manner as a refund or a credit due for overpayment of payroll taxes. The IRS will have to provide additional guidance on how exactly this reimbursement process is to work. Further, with respect to reimbursement of multiemployer plans, the Act also provides that the IRS will have to provide guidance on how the reimbursement process will work.   

Appeal Procedure: if an individual’s request for the subsidy is denied, he or she may generally appeal the decision to the DOL. The DOL must rule on the request within 15 business days.

The COBRA provisions in the Act will require significant and immediate changes by sponsors of group health plans. As mentioned above, additional guidance will need to be issued by the various federal government agencies. However, sponsors do not have the luxury of waiting until that guidance is issued before implementing the new COBRA rules. 

If you have any questions, please contact David Sawyer at 412.594.5642 (or dsawyer@tuckerlaw.com) or Jonathan Grossman at 412.594.557 (or jgrossman@tuckerlaw.com).

******

Employee Benefits Law Group: The Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

TAX ADVICE DISCLAIMER: Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like such advice, please contact us.

| Posted By Michael Cassidy In Employee Benefits | 1 Comments | Permalink

As they do every year, the Internal Revenue Service increased the dollar limits (adjusted for cost-of-living increases) that apply to qualified retirement plans. There are three separate charts below that list the limits that have changed for 2009. The three charts are separated to identify the revised limits for: (1) defined contribution plans, (2) defined benefit plans, and (3) both defined contribution and defined benefit plans. 

If you have any questions regarding these increased limits or any other employee benefit questions or concerns, please contact David Sawyer at dsawyer@tuckerlaw.com or Jonathan Grossman at jgrossman@tuckerlaw.com.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

The January 1, 2009 deadline for bringing health flexible spending accounts (“health FSAs”) into compliance with the IRS's new debit card rules has been extended to July 1, 2009. 

In short, in 2007, the IRS issued guidance stating that, starting on January 1, 2009, participants could use health FSA debit cards to pay for eligible expenses at certain types of stores. Specifically, if a store falls within a pre-determined category code of "drug stores and pharmacies merchant", a health FSA debit card could be used in that store only if (i) the store participates in a type of inventory information approval system described by the IRS in already-issued guidance or (ii) at least 90% of the store’s gross receipts (determined on a store by store basis) during the prior tax year consisted of items which qualify as deductible medical expenses on a personal income tax return (including certain types of nonprescription medications). Participants may now continue using health FSA debit cards under the old rules until June 30, 2009. Then, starting as of July 1, 2009, the IRS’s new debit card rules will apply.

If you have any questions or need assistance in evaluating your company's health FSA or benefit arrangements, please contact  the Tucker Arensberg attorney with whom you regularly work or David Sawyer (412.594.5642 or dsawyer@tuckerlaw.com), who is Co-Chair of Tucker Arensberg's Employee Benefits Law Group.

Employee Benefits Law Group: The  Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

TAX ADVICE DISCLAIMER: Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like such advice, please contact us.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

EMPLOYEE BENEFITS LAW ALERT

June 25, 2008

EFFECTIVE IMMEDIATELY - NEW LAW PROVIDES NEW EMPLOYEE BENEFIT
PLAN RIGHTS TO MEMBERS OF THE MILITARY AND THEIR SURVIVORS

Effective immediately, a new federal law, called the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), requires action to be taken by sponsors of qualified retirement plans and permits action to be taken by sponsors of Cafeteria Plans (or Section 125 Plans) with a health flexible spending arrangement.  Two of the changes made by the HEART Act are summarized below. 

• Qualified Retirement Plans - The HEART Act requires sponsors to amend their qualified retirement plans to provide additional benefits to survivors of participants who die while performing qualified medical service.   For example, if a retirement plan provides that a participant will become fully vested upon his or her death while actively employed by the sponsor, then the retirement plan must now provide that the participant's benefit will become fully vested if he or she dies while performing qualified military service.  The effect is that the participant's survivors will receive a bigger benefit than they would have before the HEART Act was passed.  How the change affects a retirement plan will differ for each retirement plan.  Amendments to the formal retirement plan document and corresponding summary plan description will be required.
  
• Cafeteria Plans / Flexible Spending Arrangements - The HEART Act permits (but does not require) sponsors of Cafeteria Plans with a health flexible spending arrangement to allow participants who are called to active duty to take distributions of the unused balance in their health flexible spending arrangements.  Ordinarily, the use-it or lose-it rule requires participants to forfeit the unused balances of their health flexible spending arrangements if they do not incur eligible medical expenses during the year.  Now, participants called to active duty may take a distribution of their unused balance to avoid forever losing the contributions.     

Since the HEART Act is effective immediately, it is important that you consult with the professional responsible for your qualified retirement plans and flexible spending arrangements. You also may contact David Sawyer (412.594.5642 or dsawyer@tuckerlaw.com) for more information on how the HEART Act impacts your employee benefit plans and for assistance in revising the qualified retirement plans and flexible spending arrangements sponsored by your company. 

******

Employee Benefits Law Group: The  Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

TAX ADVICE DISCLAIMER: Any federal tax advice contained in this communication (including attachments) was not intended or written to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein. If you would like such advice, please contact us.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

EMPLOYEE BENEFITS LAW ALERT

June 25, 2008

EFFECTIVE IMMEDIATELY - NEW LAW PROVIDES NEW EMPLOYEE BENEFIT
PLAN RIGHTS TO MEMBERS OF THE MILITARY AND THEIR SURVIVORS

Effective immediately, a new federal law, called the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), requires action to be taken by sponsors of qualified retirement plans and permits action to be taken by sponsors of Cafeteria Plans (or Section 125 Plans) with a health flexible spending arrangement.  Two of the changes made by the HEART Act are summarized below. 

• Qualified Retirement Plans - The HEART Act requires sponsors to amend their qualified retirement plans to provide additional benefits to survivors of participants who die while performing qualified military service.   For example, if a retirement plan provides that a participant will become fully vested upon his or her death while actively employed by the sponsor, then the retirement plan must now provide that the participant's benefit will become fully vested if he or she dies while performing qualified military service.  The effect is that the participant's survivors will receive a bigger benefit than they would have before the HEART Act was passed.  How the change affects a retirement plan will differ for each retirement plan.  Amendments to the formal retirement plan document and corresponding summary plan description will be required.
  
• Cafeteria Plans / Flexible Spending Arrangements - The HEART Act permits (but does not require) sponsors of Cafeteria Plans with a health flexible spending arrangement to allow participants who are called to active duty to take distributions of the unused balance in their health flexible spending arrangements.  Ordinarily, the use-it or lose-it rule requires participants to forfeit the unused balances of their health flexible spending arrangements if they do not incur eligible medical expenses during the year.  Now, participants called to active duty may take a distribution of their unused balance to avoid forever losing the contributions.     

Since the HEART Act is effective immediately, it is important that you consult with the professional responsible for your qualified retirement plans and flexible spending arrangements. You also may contact David Sawyer (412.594.5642 or dsawyer@tuckerlaw.com) or Joni Landy (412.594.3945 or jlandy@tuckerlaw.com) for more information on how the HEART Act impacts your employee benefit plans and for assistance in revising the qualified retirement plans and flexible spending arrangements sponsored by your company. 

******

Employee Benefits Law Group: The  Employee Benefits Law Group at Tucker Arensberg, P.C. has a diverse client base of private and public employers.  We are dedicated to working with our clients to resolve complicated legal issues in a practical, common-sense and cost-efficient manner.  In doing so, we routinely work with our clients to design, establish, implement, administer, and terminate many different types of employee benefit plans. Refer to http://www.tuckerlaw.com/practice/employee.html for more information on the Employee Benefits Law Group.

| Posted By Michael Cassidy In Employee Benefits | 0 Comments | Permalink

Introduction

A properly designed retirement program can increase a physician's retirement plan benefit by more than $80,000 while decreasing the practice's contribution to the non-physician and even non-owner physician employees by $20,000. If this $100,000 plus difference catches your attention, read the rest of the article! Our examples illustrate how similarly situated physicians can have dramatically different retirement plan benefits.

Examples

Dr. John is a 55 year old physician who makes approximately $350,000 and is the sole owner of his practice. Dr. John has one 36 year old physician working for him and has 4 staff employees.   In 2007, Dr. John had a commonly-used profit sharing plan with a 401(k) feature for his practice. He wanted to put as much money away as allowed by law on a pre-tax basis for his retirement. (For 2007, the defined contribution limit was $45,000.) For Dr. John to receive the maximum personal benefit under the profit sharing plan in 2007, Dr. John’s practice had to make a total employer contribution of $55,883. The portion of the employer contribution Dr. John received was $29,500, which was equal to roughly 53% of the total employer contribution. (Dr. John could have contributed another $20,500 as a 401(k) contribution, consisting of a $5,000 catch-up contribution that is permitted because he was over 50 in 2007.) [1]

Dr. Jane is also a 55 year old physician who makes approximately $350,000 and is the sole owner of her practice. Dr. Jane also has one 36 year old physician working for her and 4 staff employees. Like Dr. John, Dr. Jane wanted to put as much money away as allowed by law on a pre-tax basis for her retirement in 2007. However, unlike Dr. John, Dr. Jane’s share of her physician group’s total contribution to the retirement plan was 87.8%! Dr. Jane was able to accomplish this by adopting a special kind of profit sharing plan with a 401(k) feature and by adopting a second kind of retirement plan called a “cash balance plan”.   Contributions to the two plans for all employees totaled $141,168, of which $124,000 was allocated to Dr. Jane’s accounts under the two plans. (Dr. Jane also could have contributed another $20,500 as a 401(k) contribution, consisting of a $5,000 catch-up contribution that is permitted because she was over 50 in 2007). 

Summary of Examples

• In 2007, Dr. John’s practice contributed $55,883 to its retirement plan where Dr. John received a personal benefit of only $29,500, i.e., 53% of the practice’s total contribution.
• In 2007, Dr. Jane’s practice contributed $141,168 to its two retirement plans where Dr. Jane received $124,000, e.g., (87.8% of the practice’s total contribution.
• Dr. Jane’s practice contributed a total of $85,285 more to its two retirement plans, and Dr. Jane received $94,500 more contributions to her retirement plan accounts.

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TUCKER ARENSBERG HEALTH PLAN SUBROGATION SERVICES

Aggressive Subrogation Saves on Health Plan Costs. 
An aggressive subrogation program can save your business money on health plan costs.     Tucker Arensberg has handled subrogation for employer health  plans for many years.  We like to tell the story about how one year, one subrogation recovery alone paid for all the technical employee benefits work for the client for the entire year.   Although this result is not typical, we do our very best to make sure we help our clients control their health plan costs.

Typically self-insured plans will let the plan's third party administrator (TPA) handle subrogation.   What this means in many cases is that the TPA will hire outside lawyers, unknown to you and your company, to handle subrogation recoveries for the company's plan.  These lawyers typically keep a percentage of the recovery. Sometimes the TPA will also keep a percentage that is in addition to the administrative fee they already receive. The company  may not be aware of  how much of the health plan's recoveries are being retained by these parties.  And  the fiduciaries of the company's health plan have a duty to understand how much is not being returned to the plan.

Why Use Tucker Arensberg?
We think there is no better lawyer to handle subrogation for your company's health plan  than a lawyer who advises employer plans on a routine basis.   Not only do we at Tucker advise on the technical employee benefits laws that govern health plans, but we routinely handle subrogation recoveries for plans.    Our involvement with your company's  health plan assures you that your subrogation rights will be vigorously pursued and protected.    And, we work with you directly in keeping you informed and keeping you in control of the recoveries for the plan. 

 For more information on Tucker's subrogation services  please contact
 Joni Landy at: 412-594-3945;  jlandy@tuckerlaw.com.

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HSA limits for 2008 are as follows:

Annual Contribution Limits:   The maximum HSA contribution is  $2,900 for individual coverage and $5,800 for family coverage.

High Deductible Health Plan Limits:  

·        Deductible:  The minimum deductible for HSA-qualified high deductible health plans is $1,100 for individual coverage and $2,200 for family coverage policies.

·         Out- of-Pocket Maximums:    The out- of-pocket maximums are $5,600 for individual coverage and $11,200 for family coverage policies.

Original Source:   Rev. Proc 2007-36  http://www.irs.gov/irb/2007-22_IRB/ar14.html#d0e3138

For further information on HSAs,  contact 

Joni Landy, Esq.   http://tuckerlaw.com/att/alpha/L/landy_joni.html

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Health Plan Subrogation -   In the News

            By Joni L. Landy, Esq.  http://tuckerlaw.com/att/alpha/L/landy_joni.html

In a nutshell, subrogation is the right of a health plan to recover money it paid out for medical care to treat injuries or conditions caused by another party. For example, subrogation may apply when a participant sustains injuries as a result of a slip and fall on a slippery sidewalk, or may apply if a participant is injured by another driver in a car accident. If the participant sues the party that caused his injuries and recovers, the health plan gets paid back from the recovery. Subrogation rights are typical provisions in health plans.  

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Can Medicare Premiums for the Account Holder's 65 Year Old Spouse be Reimbursed from an HSA?

By: Joni Landy, Esq.  

In general, the law prohibits distributions from an HSA for health insurance premiums. There are several exceptions. The only exception that can apply to Medicare premiums is the exception that allows for payment of health insurance (other than a Medicare supplemental policy) in the case of an account holder who has reached age 65 (the "65 Exception").  

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By: Joni L. Landy, Esq.

About the author: Joni Landy is a shareholder in the Employee Benefits Practice Group at Tucker Arensberg, P.C.   See http://www.tuckerlaw.com/att/alpha/L/landy_joni.html

New proposed cafeteria plan regulations were released on August 6, 2007 that replace prior proposed and temporary regulations, which are withdrawn, and consolidate law changes and guidance issued by the IRS over the past twenty years. The regulations preserve much of the existing guidance but clarify some outstanding issues and include a few new rules. Existing cafeteria plan regulations governing mid-year election changes and FMLA operations remain the same. This alert highlights some of the more notable new or clarifying provisions of the proposed regulations.

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The Internal Revenue Service issued a private letter ruling on April 20, 2007 concluding that captive professional corporations were beneficially owned by the hospital, but that the activities of the professional corporations were conducted on a larger scale then was reasonably necessary for the performance of the hospital’s exempt functions and that the professional corporations’ provision of medical services to their own patients did not have a substantial causal relationship to the achievement of the hospital’s exempt purposes, and that, therefore, income earned from the professional corporations was unrelated taxable business income for the hospital.

PLR 2007160334 has already been criticized by the national commentators as incorrect. An article in BNA’s Health Law Reporter on April 26, 2007 explains some of those comments.

The professional corporations were normally owned by physicians who were employed by the hospitals, because the professional corporation law of the state in question required ownership by license professionals. However, the physician employment agreements with the hospital contained numerous restrictions on the control and disposition of that stock, principal among them being the requirement that the physician must sell the stock to the hospital in the event of the termination of employment. The IRS concluded that the hospital was the beneficial owner of the stock.

It is difficult to justify the conclusion that a hospital could directly employ these physicians to engage in the practice of treating health patients but that the same practice is outside of the hospital’s mission if it is conducted in the captive PC model. Expect further scrutiny and criticism of this decision.  

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The Internal Revenue Service has issued guidance regarding rollovers from Flexible Spending Arrangements (FSAs) and Health Reimbursement Arrangements (RHAs) to Health Savings Accounts (HSAs). The guidance is necessary because Health Savings Accounts are typically not available to individuals who are covered by standard FSAs and HRAs. The Tax Relief and Health Care Act of 2006 allowed rollovers from FSAs and HRAs into Health Savings Accounts. The purpose of the guidance is to allow the establishment of an HSA and the rollover of the qualified distributions for 2007 when the employee could potentially be covered by both types of plans.

The new rules provide for certain amounts in the FSA or the HRA to be rolled into the HSA. Generally, under the new rules, all of the following conditions must be satisfied in order to achieve the favorable tax treatment of the rollover:

A.        By plan year-end, the plan must have been amended, though the employee must have elected the rollover, and the year-end balance must have been frozen.

B.         The funds must have been transferred by the employer within 2-1/2 months after the end of the plan year resulting in a “zero” balance in the FSA or the HRA.

Under the special transition relief provided in Notice 2007 - 22, available at  (  www.irs.gov/pub/irs-drop/n-07-22.pdf ),  the amounts remaining at the end of the year for 2006 can be rolled over without the freezing of the year-end balance in either the FSA or the HRA and the amendment, election and transfer may be completed on or before March 15, 2007.

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The Tax Relief and  Health Care Act of 2006 contains provisions to improve health savings accounts (HSAs):

1.         HSA Funding Contributions: The Act allows rollover contributions from flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) into HSAs as long as the contributions are no more than the balance of those accounts as of September 21, 2006 and are made on or before January 1, 2012. 

2.         Increase in Deductible Limits of HSA Contributions: The contribution limitation which previously limited contributions to the lesser of the deductible of the high deductible health plan or the statutory limitations i.e. $2,250 for individuals and $4,500 for families (as adjusted for cost of living), have been revised to delete the plan deductible as a limitation.

3.         IRA Rollovers: The revision allows one time rollovers from IRAs into HSAs. This revision is a one time opportunity and the rollover, which is effected by excluding the transfer from gross income, is limited to the annual limitation for contributions to NSA less any prior HSA funding distribution from a FSA or HRA. 

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The release of the August 2006 inflation figures has allowed calculation of the 2007 financial limits for health savings accounts (HSAs), according to a press release from HSA Clearing Corporation.

§      The maximum HSA contribution (excluding catch-up contributions) will be $2,850 for individual coverage and $5,650 for family coverage.

§      The minimum deductible for HSA-qualified high deductible health plans (HDHPs) will be $1,100 for individual coverage and $2,200 for family coverage policies.

§      The out- of-pocket maximums will be $5,500 for individual coverage and $11,000 for family coverage policies.

More information is available at http://www.hsaclearing.com.

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Health Savings Accounts (HSAs) offer a unique and perhaps unintended opportunity to create tax-favored savings vehicles similar to IRAs.  HSAs were established by the Medicare Modernization Act of 2003 with the intention of encouraging consumer-directed healthcare and providing an alternative source for health insurance coverage. The concept pairs HSAs with High Deductible Health Plans (HDHPs). Individuals and families who are covered by HDHPs and are not covered by other health insurance plans are permitted to fund HSAs as a means of financing the deductible portion of the HDHP. 

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The Pennsylvania Legislature enacted the Health Savings Account Act (the "HSA Act") 72 P.S. §§3402b.1-3402b.6, on July 14, 2005, to be effective sixty days thereafter. As enacted, Section 4 of the HSA Act did not provide an exclusion from Pennsylvania tax for contributions by employers and employees to health savings account plans. Accordingly, there were not deductions allowed from taxable income for contributions to health savings accounts for Pennsylvania purposes under the HSA Act. Under Section 4 of the HSA Act, the following items were excluded from Pennsylvania tax:

            (1)        any income of a health savings account;

(2)        any amount paid or distributed out of a health savings account that is used exclusively to pay the qualified medical expenses of the account beneficiary; and

(3)        any amount paid or distributed out of a health savings account that is used exclusively to reimburse an account beneficiary for qualified medical expenses.

                                    72 P.S. §3402b.4(a)

The following items were included in the income of the account beneficiary and subject to Pennsylvania tax:

(1)        any amount paid or distributed out of a health savings account that is used for any purpose other than to pay the qualified medical expenses of the account beneficiary;

(2)        any excess contribution distribution that has not previously been included in the account beneficiary's income; and

(3)        any amount of the account beneficiary's income attributable to an excess contribution distribution

                                    72 P.S. §3402b.4(b)

On February 14, 2005, an amendment to the HSA Act was proposed in House Bill 2125, so that the Pennsylvania Act could follow the health savings account provisions set forth in Section 223 of the Internal Revenue Code. In addition, although the HSA Act contained no tax exclusion or deduction for contributions made to a health savings account, the Pennsylvania Department of Revenue issued a tax bulletin (PIT-06-005) on April 12, 2006, in which it indicated that: (1) payments made by an employer for a nondiscriminatory health plan are excluded from compensation and accordingly, not subject to withholding tax and (2) payments directed by an employee to a health savings account under the employer's federally qualified cafeteria plan and maintained as a qualified benefit of that plan are excluded from compensation and therefore not subject to withholding tax.

By amendment dated June 21, 2006, for tax years beginning after December 31, 2005 and effective immediately, the entirety of Section 4 of the HSA Act has been repealed, and Pennsylvania has adopted law that conforms to the federal tax treatment of health savings accounts so that the definition of income now includes the following language of Section 303(a)(6) of the Pennsylvania Tax Reform Code of 1971 (72 P.S. §7303(a)(6)), as amended:

Interest derived from obligations which are not statutorily free from state or local taxation under any other act of the General Assembly of the Commonwealth of Pennsylvania or under the laws of the United States and any amount paid under contract of life insurance of endowment or annuity contract, which is includible in gross income for federal income tax purposes and any amount paid out of the Archer Medical Savings Account or Health Savings Account that is includible in the gross income of an account beneficiary for federal income tax purposes.

Accordingly, effective immediately an applying to tax years beginning after December 31, 2005, where contributions to and income and distributions from qualified health savings accounts are deductible for purposes of Section 223 of the Internal Revenue Code, they shall, under 72 P.S. §303(a)(6), above, not be included in taxable income for Pennsylvania purposes. Under both federal and Pennsylvania law, distributions that are not used for qualified medical expenses will be taxable as interest income.

For more information , contact Jamie Aul at 412.594.3923.

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Health Savings Accounts (HSAs) offer a unique and perhaps unintended opportunity to create tax-favored savings vehicles similar to IRAs. HSAs were established by the Medicare Modernization Act of 2003 with the intention of encouraging consumer-directed healthcare and providing an alternative source for health insurance coverage. The concept pairs HSAs with High Deductible Health Plans (HDHPs). Individuals and families who are covered by HDHPs and are not covered by other health insurance plans are permitted to fund HSAs as a means of financing the deductible portion of the HDHP. 

            Congress provided significant tax incentives to support HSAs. Contributions to HSAs are essentially "tax free" and the earnings of the account are "tax free", as explained in more detail below. Individuals who can preserve the HSA, either or through efficient management of the deductible or through the ability to pay the required health care deductible from other sources, are presented with a unique opportunity to create an additional retirement savings plan similar to our IRA. The purpose of this article is to expand both the basic HSA concepts and describe this financial opportunity.

HSA Basics

            HSHs and HDHPs are a package deal. The HDHP is an otherwise standard health insurance plan but with a "high deductible". HDFPs are defined by statute as plans with minimum deductibles of $1,000 for individuals and $2,000 for families and maximum deductibles of $5,000 for individuals and $10,000 for families. The limits were indexed for inflation when established, so the maximum deductibles for 2006 are $5,250 and $10,500 respectively. 

            HSAs also have maximum contribution limitations, which were originally established at $2,000 per individual and $5,000 per family. These limits are also indexed for inflation and are $2,700 and $5,450 respectively for 2006. In addition, HSA contribution limitations have catch-up provisions for individuals who are between ages of 55 and 65 which allow an additional $700 contribution for individuals in 2006, $800 in 2007, $900 in 2008 and $1,000 in 2009 and thereafter.   Therefore, an individual can contribute up to $3,400 ($2,700 maximum plus $700 catch-up) for an individual HSA in 2006. Since the HDHP maximum deductibles and the HSA maximum contribution do not match, it is possible to have the required deductible exceed the HSA fund. 

            1.         Contributions to HSA are tax favored transactions. They can be accomplished through a combination of:

·        Salary reduction contributions by employee,

·        Flexible spending account contributions, and/or

·        Employer contributions to HSA on behalf of employee.

Employer contributions are deductible when paid by the employer and are not taxable to the employee when made by employer. Employee contributions through salary reduction agreements operate to reduce the employee compensation, i.e. they are pre-tax contributions.

2.         Non-Taxable Distributions. HSA funds can be withdrawn from the HSA account and used to pay eligible medical expenses on a tax-free basis at any time.

3.         Taxation of Other Distributions. HSA funds withdrawn for reasons other than eligible medical expenses are taxable as income to the employee and are subject to the a 10% penalty to an extent they are withdrawn prior to the employee reaching age 59-1/2.

4.         Tax-Free Growth. HSA funds accumulate tax free during the existence of the HSA account. If the funds are withdrawn for permissible benefits, the growth is never taxed. If withdrawn for impermissible benefits, taxation is deferred until withdrawal, with   the additional 10% penalty for withdrawal prior to age 59-1/2.

5.         Permissible Benefits. HSA funds can be used for medical and dental expenses, preventive care, prescription drug plans provided the deductible has been spent, COBRA coverage and long-term care insurance.

II.          SAVINGS OPPORTUNITY. 

            Although the tax laws require the purchase of a HDHP as a condition to creating an HSA and the HDHP requires the exhaustion of the deductible in order to qualify for the health insurance coverage, there is no requirement that the HSA fund be used to pay the deductible. One of the touted benefits of HSHs has been the possibility that individuals who judiciously managed their healthcare utilization might be left with HSA funds to carryover to future years, which funds could be used for future medical expenses, including post-retirement expenses.

            However, since the use of the HSA is not mandatory, individuals who can afford to pay the deductible expenses from other sources, i.e. essentially out-of-pocket, may then retain the entire HSA fund for future needs.

1.         The funds can be used for future permissible benefits, including long term care insurance.

2.         If the funds are not needed for healthcare costs, they can simply be withdrawn from the account on the same basis as IRA funds, i.e. ordinary income taxation plus the 10% premature withdrawal penalty.

The significant opportunity is that the funds can be used as a savings opportunity similar to IRAs.

III.         HSA TOOL KIT

            USI Colburn and the Allegheny County Medical Society have prepared an HSA Tool Kit which:

                        1.         Provides a comparison of HDHPs to standard health insurance plans;

                        2.         Contrasts the premiums for typically available health insurance plans to the combination of the premium for the HDHP and the deductible; and

                        3.         Provides a forecast of what could be saved in and HSA over time for a family with typical healthcare needs.

The ability to build retirement savings in an HSA is a significant opportunity for physicians and their employees; one that can help them cover their healthcare expenses or supplement their retirement income. For more information about HSA’s and a copy of the HSA Tool Kit call USI Colburn Insurance Service at (800)-327-1550   or go to their web site at www.colburn.com.

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Under Medicare Part D Regulations, employers who sponsor health plans must: (1) determine whether the plan's prescription drug coverage is equivalent to Medicare Part D ("Creditable"); (2) send notice of the status at least to Medicare-eligible participants and dependents' and; (3) must report the status to CMS. These reporting requirements help Medicare-eligible individuals decide whether to enroll in or to delay enrollment in Medicare Part D.

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President Bush has included two tax measures in his fiscal 2007 budget proposal intended to encourage the development of health savings accounts (HSAs).

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