February 5, 2016

ERISA-Fourth Circuit Rules That Plaintiffs' Suit Under ERISA Is Time Barred, Since The Plaintiffs Knew Of The ERISA Issue More Than Three Years Before They Filed Suit

In Bond v. Marriott International, Inc., Nos. 15-1160, 15-1199 (4th Cir. 2016) (Unpublished Opinion), Dennis Bond and Michael Steigman (the "Plaintiffs"), filed this action against their former employer, Marriott International, Inc., alleging that Marriott's Deferred Stock Incentive Plan (the "Plan"), a tax-deferred Retirement Award program, violates the vesting requirements of ERISA. After targeted discovery on the statute of limitations, the district court found that the claims were timely and granted summary judgment to the Plaintiffs on that issue. Marriot appeals. Upon reviewing the case, the Fourth Circuit Court of Appeals (the "Court") concluded that the Plaintiff's claims were time barred, and granted judgment to Marriot.

In reaching this decision, the Court said that, except for breach of fiduciary duty claims, ERISA contains no specific statute of limitations, and we therefore look to state law to find the most analogous limitations period. Here, Maryland's three year statute of limitations for contract actions applies. However, while we apply this three-year state limitations period, the question of when the statute begins to run is a matter of federal law. In most cases an ERISA cause of action does not accrue until a claim of benefits has been made and formally denied.

However, the Court continued, while the "formal denial" rule is generally applied in ERISA cases, we recognized that in limited circumstances the rule is impractical to use, such as cases-like the present one- which do not involve an internal review process and a formal claim denial. In such cases, the Court will look at the time at which some other event, other than a denial of a claim, should have alerted the plaintiff to his entitlement to the benefits he did not receive. Under this approach, a formal denial is not required if there has already been a repudiation of the benefits by the fiduciary which was clear and made known to the beneficiary.

Applying this alternative approach here, the Court concluded that the Plaintiffs' claims are untimely. A 1978 Prospectus--in a section entitled "ERISA"--plainly stated that the Retirement Awards offered by the Plan did not need to comply with ERISA's vesting requirements. The Prospectus explained that inasmuch as the Plan is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a selected group of management or highly compensated employees, the Plan was a top hat plan exempt from the participation and vesting, funding and fiduciary responsibility provisions of ERISA. (J.A. 298). This language clearly informed plan participants that the Retirement Awards were not subject to ERISA's vesting requirements, the very claim made by the Plaintiffs here. This Prospectus was distributed in 1980, 1986, and 1991, well more than three years before the Plaintiffs filed this suit. Thus the suit is time-barred.

February 2, 2016

ERISA-Supreme Court Holds That Participants' Complaint Against Plan Fiduciaries, For Continuing To Allow Investment In Employer Stock When The Value Has Dropped, Does Not State A Claim Under ERISA

In Amgen v. Steve Harris, 577 U. S. ____ (2016), the U.S. Supreme Court reversed the Ninth Circuit's determination that a participants'/stockholders' complaint states a claim under ERISA against plan fiduciaries for breaching the duty of prudence, when the fiduciaries failed to stop offering employer stock as an investment alternative under the plan. The Supreme Court discussed the facts and allegations supporting the claim of breach that should appear in the participants'/stockholders' complaint, in order to state a claim under ERISA. The case is here.

January 27, 2016

Employee Benefits-IRS Allows An LLC To Adopt An ESOP

In PLR 201538021, the IRS provided a private ruling which allowed an LLC to adopt an ESOP. The letter was issued in response to a request for a ruling, concerning whether the unit shares of Company A, a limited liability company or LLC, constitute employer securities within the meaning of section 409(l)(2) of the Internal Revenue Code ("Code"). If they do, the LLC could adopt an ESOP which holds the unit shares.

Here is what the IRS said in the PLR.

For federal tax purposes, Company A represented that it is classified as an association and has a valid S corporation election. Ownership interest in Company A is represented by unit shares ("Unit Shares"). Under its operating agreement (the "Operating Agreement"), all profits and losses of Company A, and any dividends to be paid by Company A, are to be allocated among the shareholders in proportion to the number of Unit Shares owned by them. The Operating Agreement further provides that all Unit Shares confer identical rights to voting distributions, dividends and liquidation proceeds, and otherwise meet the requirements of Code section 409(l)(2). In addition Company has no authorized, issued, or outstanding employer securities that are readily tradable on an established securities market within the meaning of Code section 409(l)(1).

Company A intends to adopt an employee stock ownership plan as described in Code section 4975(e)(7) ("ESOP"), in which its employees may participate. Section 4975(e)(7) defines an ESOP as a defined contribution plan which, among other things, is designed to invest primarily in qualifying employer securities. Code section 4975(e)(8) defines the term "qualifying employer security" as any employer security within the meaning of Code section 409(l). As applicable here, Code section 409(l)(2) states that the term "employer securities" means common stock issued by the employer-corporation having a combination of voting power and dividend rights equal to or in excess of:

(A) that class of common stock of the employer-corporation having the greatest voting power, and
(B) that class of common stock of the employer-corporation having the greatest dividend rights.

Further, under the Code, Company A is treated as a corporation, and the Unit Shares as shares of stock.

Based on the foregoing, the IRS concludes that the Unit Shares of Company A are employer securities as described in section 409(l)(2) for the purposes of section 4975(e)(7), so that Company A may maintain an ESOP which invests in the Unit Shares.

January 21, 2016

ERISA-Supreme Court Rules That When An Injured Health Plan Participant Dissipates The Proceeds Collected From A Third Party In Settlement For The Injury, The Health Plan May Not Apply Its Subrogation Clause To Bring Suit Under ERISA To Attach The Particip

In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, No. 14-723 (U.S. Supreme Court 2016), the Court faced the issue of subrogation rights of a health plan subject to ERISA. The Court noted that health plans often contain subrogation clauses requiring a plan participant to reimburse the plan for medical expenses, if the participant later recovers money from a third party for his injuries. In this case, the plan in question had a subrogation clause, and petitioner Montanile has signed a reimbursement agreement reaffirming his obligation to reimburse the plan from any recovery he obtained (the "Agreement").

Montanile has been seriously injured by a drunk driver, and his ERISA health plan paid more than $120,000 for his medical expenses. Montanile later sued the drunk driver, obtaining a $500,000 settlement. Pursuant to the health plan's subrogation clause and the Agreement, respondent plan administrator (the Board of Trustees of the National Elevator Industry Health Benefit Plan, or the "Board"), sought reimbursement from the settlement. However, Montanile's attorney refused that request and subsequently informed the Board that the fund would be transferred from a client trust account to Montanile unless the Board objected. The Board did not respond, and Montanile received the settlement.

Six months later, the Board sued Montanile in Federal District Court under §502(a)(3) of ERISA, which authorizes plan fiduciaries to file suit "to obtain . . . appropriate equitable relief . . . to enforce . . . the terms of the plan." 29 U. S. C. §1132(a)(3). The Board sought an equitable lien -which arises from the plan's subrogation clause and the Agreement-on any settlement funds or property in Montanile's possession and an order enjoining Montanile from dissipating any such funds. Montanile argued that because he had already spent almost all of the settlement, no identifiable fund existed against which to enforce the lien. The District Court rejected Montanile's argument, and the Eleventh Circuit affirmed, holding that even if Montanile had completely dissipated the fund, the health plan was entitled to reimbursement from Montanile's general assets.

The Court held that, when an ERISA health plan participant wholly dissipates a third-party settlement on nontraceable items, the plan fiduciary may not bring suit under §502(a)(3) to attach the participant's separate assets (what is left is a personal claim by the Board against those assets). The ERISA suit would have been allowed if the Board immediately sued to enforce its equitable lien-provided, again, from the plan's subrogation clause and the Agreement -against a specifically identifiable fund attributable to the settlement. This ERISA suit is permitted against only: (1) specifically identified funds (so attributable) that remained in the participant's possession or (2) traceable items that the participant purchased with the funds. But that result does not obtain-and the ERISA suit is not permitted- when the defendant has dissipated all of a separate settlement fund, and the plan then seeks to recover out of the defendant's general assets.

Note: The Supreme Court's decision could cause health plans to begin to intervene in a participant's legal action or other proceedings against the third party causing the injury, and otherwise take accelerated actions, in order for the health plan to protect its interests.

January 20, 2016

ERISA-Eighth Circuit Denies Request For Preliminary Injunction That Would Have Required A Pharmacy Benefits Manager To Honor Its Contracts And Pay The Pharmacies For Medicines Dispensed

In Grasso Enterprises, LLC v. Express Scripts, Inc., No. 15-1578 (8th Cir. 2016), the plaintiffs (the "Plaintiffs") are compounding pharmacies that prepare and sell customized compound drugs in accordance with doctors' prescriptions. The defendant, Express Scripts ("ESI"), is a pharmacy benefits manager that contracts with health plan sponsors and administrators to administer the pharmacy benefits provided in their group health plans, many of which are subject to ERISA. Plaintiffs have entered into separate Provider Agreements with ESI, under which, as members of ESI's pharmacy provider network, Plaintiffs "look solely to ESI for payment of Covered Medications" provided to health plan participants and beneficiaries. ESI pays Plaintiffs pursuant to the Provider Agreements for the medicines Plaintiffs dispense; the health plans reimburse ESI.

In June 2014, ESI announced a program to reduce the increasing costs being incurred by health plans for compound drugs, and consequently began denying Plaintiffs' claims for payment for medicines they dispensed. Plaintiffs commenced this action on November 18, 2014, alleging that ESI is systematically denying payment of compound drug claims without adhering to the procedural requirements of ERISA's "Claims Regulation," 29 C.F.R. § 2560.503-1. Plaintiffs asserted claims for relief under two ERISA remedial provisions, §§ 502(a)(1)(B) and (a)(3), codified at 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3).

Plaintiffs amended their complaint and moved for a preliminary injunction declaring that ESI must pay all claims for compound medications until it is in compliance with the Claims Regulation. After hearing oral arguments, the district court denied the requested preliminary injunction on numerous grounds. Plaintiffs appeal. Concluding that Plaintiffs failed to meet the well-established standards for preliminary injunctive relief, the Eighth Circuit Court of Appeals (the "Court") affirmed the district courts holding. Court's primary finding was that there is no precedent for upholding a private plaintiff's claim for injunctive relief mandating the future procedures an ERISA plan must follow to comply with the Claims Regulation.

January 19, 2016

Employee Benefits-IRS Provides Eight Facts For ALEs About New Information Statements to be Filed in 2016

IRS Health Care Tax Tip 2015-85, December 29, 2015 says the following:

The Affordable Care Act requires applicable large employers to file:

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Here are eight basic facts for employers:

• The due date for furnishing these forms is extended.

o The due date for furnishing the 2015 Form 1095-B and the 2015 Form 1095-C to the insured and employees is extended from February 1, 2016, to March 31, 2016.
o The due date for health coverage providers and employers furnishing the 2015 Form 1094-B and the 2015 Form 1094-C to the IRS is extended from February 29, 2016, to May 31, 2016 if not filing electronically.
o The due date for health coverage providers and employers electronically filing the 2015 Form 1094-B and the 2015 Form 1094-C with the IRS is extended from March 31, 2016, to June 30, 2016.

While the IRS is prepared to accept information reporting returns beginning in January 2016 and employers and other coverage providers are encouraged to furnish statements and file the information returns as soon as they are ready.

• An ALE is required to file Form 1094-C with the IRS; however, an ALE is not required to furnish a copy of Form 1094-C to its full-time employees.
• Generally, an ALE must file Form 1095-C or a substitute form for each employee who was a full-time employee for any month of the calendar year.
• In addition, an ALE that sponsors a self-insured plan must file Form 1095-C for each employee who enrolls in the self-insured health coverage or enrolls a family member in the coverage, regardless of whether the employee is a full-time employee for any month of the calendar year.
• Form 1095-C is not required for the following employees, unless the employee or the employee's family member was enrolled in a self-insured plan sponsored by an ALE member:

o An employee who was not a full-time employee in any month of the year
o An employee who was in a limited non-assessment period for all 12 months of the year.

• If an ALE member sponsors a health plan that includes self-insured options and insured options, the ALE member should complete Part III of Form 1095-C only for employees and family members who enroll a self-insured option.
• An ALE member that offers coverage through an employer-sponsored insured health plan and does not sponsor a self-insured health plan should NOT complete Part III.
• An ALE may provide a substitute Form 1095-C; however, the substitute form must include the information on Form 1095-C and must comply with generally applicable requirements for substitute forms.

For more information, see the Instructions for Forms 1094-C and 1095-C and these additional Questions and Answers.

January 15, 2016

Employee Benefits-IRS Provides Five ACA Facts for Applicable Large Employers

In IRS Health Care Tax Tip 2016-05, January 13, 2016, the IRS says the following:

Some of the provisions of the Affordable Care Act only affect your organization if it's an applicable large employer. An ALE is generally one with 50 or more full-time employees, including full-time equivalent employees.

The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.
If you are an ALE, here are five things to know:

• Applicable large employers have annual reporting responsibilities. You will need to provide the IRS and employees information returns concerning whether and what health insurance you offered to your full-time employees.
• If you're an applicable large employer that provides self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover.
• ALEs must either offer minimum essential coverage that is affordable and that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Learn more about the employer shared responsibility provision.
• You may be required to report the value of the health insurance coverage you provided to each employee on their Form W-2.
• If you're an applicable large employer with exactly 50 employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP).

For more information, see the Affordable Care Act Tax Provisions for Employers page on IRS.gov/aca.

January 14, 2016

ERISA-Eleventh Circuit Holds That An Assignment By A Patient To A Treating Doctor Of A Claim Against A Health Plan For Medical Benefits Can Be Blocked By An Anti-Assignment Provision In The Health Plan

In W.A. Griffin v. Verizon Communications, No. 15-13525 (11th Cir. 2016) (Unpublished), Dr. W.A. Griffin was appealing the dismissal by the district court of her complaint under ERISA. The Eleventh Circuit Court of Appeals (the "Court") affirmed the district court's decision.

In this case, Dr. Griffin, who operates a dermatology practice in Atlanta, Georgia, treated two patients insured under a Verizon Communications Inc. ("Verizon") health plan (the "Plan"). The patients executed assignments that "assign[ed] and convey[ed]" to Dr. Griffin "all medical benefits and/or insurance reimbursement, if any, otherwise payable to me for services rendered from [Dr. Griffin]." The assignments further stated that they were "valid for all administrative and judicial review under . . . ERISA." However, the Plan never consented to the assignments. Pursuant to these assignments, Dr. Griffin requested that the Plan pay for the services she rendered to the patients. When the Plan refused to pay the full amount requested, this suit ensued.

In explaining its decision, the Court said that Section 502(a) of ERISA provides that only plan participants and plan beneficiaries may bring a private civil action to recover benefits due under the terms of a plan. A health care provider is not a participant or beneficiary, and thus generally does not have to right to sue the plan under Section 502(a). However, this Court has recognized an exception, under which the health care provider can obtain the right to sue by securing a written assignment from a 'beneficiary' or 'participant' of his right to payment of benefits under the plan. However, the Plan, in this case, contained an anti-assignment provision, and this Court has enforced such provisions to block the assignment of a claim, so that the health care provider cannot sue. The Court decided to uphold the Plan's anti-assignment, so that Dr. Griffin cannot sue the Plan.

The Plan's anti-assignment provision stated: "You cannot assign your right to receive payment to anyone else, except as required by a 'Qualified Medical Child Support Order' as defined by ERISA or any applicable state or federal law. . . . The coverage and any benefits under the plan are not assignable by any covered member without the written consent of the plan ...."

January 13, 2016

ERISA-Eighth Circuit Holds That Suit Is Timely Filed, Based On Period For Filing Allowed By State Law

In Mulholland v. Mastercard Worldwide, No. 15-1211 (8th Cir. 2015) (Unpublished), Brenda Mulholland was appealing the district court's adverse grant of summary judgment in her action under ERISA. The district court had determined that Mulholland's lawsuit challenging the termination of her long term disability ("LTD") benefits was time-barred, based on the Supreme Court's decision in Heimeshoff v. Hartford Life & Accident Ins. Co. ("Heimeshoff").

Under Mulholland's LTD plan, legal action of any kind could not be brought more than three years after proof of disability was required to be filed "unless the law in the state where [the plan participant] live[s] allows a longer period of time." Upon de novo review, the Eighth Circuit Court of Appeals (the "Court") agreed with Mulholland that the district court overlooked the critical distinction between the contractual limitations provision in this case and the provision addressed in Heimeshoff. Specifically, the provision in Heimeshoff did not contain the additional language allowing a participant to file suit beyond three years if the law of the state provided for a longer period. As such, the Court concluded that the instant suit was not time-barred.

In so holding, the Court noted that it had previously held that in Missouri the applicable limitations period for ERISA actions is the ten-year limitations period in Mo. Rev. Stat. § 516.110(1). See Johnson v. State Mut. Life Assurance Co. of America (because ERISA contains no statute of limitations for actions to recover benefits under an employee benefit plan, looking to state law for most analogous statute of limitations) ("Johnson"). This Court subsequently determined that Johnson was binding, where the ERISA-governed benefit plan contained a contractual limitations period nearly identical to the one here. See Harris v. The Epoch Group, L.C. (applying § 516.110(1)'s longer limitations period where contractual limitations provision prohibited filing suit unless it was brought within three years from expiration of time within which proof of loss was required "or such longer period as required by applicable state laws"). Accordingly, the Court reversed the judgment of the district court and remanded the case back to the district court to consider the case's merits.

January 12, 2016

ERISA-Eighth Circuit Rules That Plaintiffs Did Not Make Out A Case Of Breach Of ERISA Fiduciary Duty By Charging Excessive Fees

In McCaffree Financial Corp. v. Principal Life Insurance Company, No. 15-1007 (8th Cir. 2016), McCaffree Financial Corp. ("McCaffree") was maintaining a retirement plan covered by ERISA. McCaffree brought a class action lawsuit on behalf of those participating employees against Principal Financial Group ("Principal"), the company with whom McCaffree had contracted to provide the plan's investment options. McCaffree alleged that Principal had charged McCaffree's employees excessive fees in breach of a fiduciary duty Principal owed to plan participants under ERISA. The district court granted Principal's motion to dismiss for failure to state a claim. Upon reviewing the case, the Eighth Circuit Court of Appeals (the "Court") affirmed. Why?

In so affirming, the Court said that, in order to state a claim that a service provider to an ERISA-governed plan breached a fiduciary duty by charging plan participants excessive fees, a plaintiff first must plead facts demonstrating that the provider owed a fiduciary duty to those participants. The Court concluded that the plaintiff fails to do this here, since Principal owed no duty to plan participants during its arms-length negotiations with McCaffree under which the fees were set, and McCaffree did not otherwise plead a connection between any fiduciary duty Principal may have owed and the excessive fees Principal allegedly charged.

January 8, 2016

Employee Benefits-IRS Says To Plan Now to Use Health Flexible Spending Arrangements in 2016; Contribute up to $2,550; $500 Carryover Option Available to Many

In IR-2015-126, Nov. 12, 2015, the IRS suggests that now is the time to plan to use health flexible spending arrangement in 2016. Here is what the IRS said.

The Internal Revenue Service ("IRS") today reminded eligible employees that now is the time to begin planning to take full advantage of their employer's health flexible spending arrangement (FSA) during 2016.

FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2016 plan year.

Interested employees wishing to contribute during the new year must make this choice again for 2016, even if they contributed in 2015. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,550 during the 2016 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee's FSA.

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.

Under the use or lose provision, participating employees often must incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year--for example, an employee with $500 of unspent funds at the end of 2016 would still have those funds available to use in 2017. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses--for example, March 15, 2017, for a plan year ending on Dec. 31, 2016. Employers can offer either option, but not both, or none at all.

Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA. More information about FSAs can be found in Publication 969, available on IRS.gov.

January 7, 2016

Employee Benefits-IRS Issues Revenue Procedure To Update Its Procedures For Issuing Determination Letters.

In Revenue Procedure 2016-6, the IRS updates it procedures for issuing determination letters on the qualified and tax exempt status of retirement plans and their trusts. One important topic of discussion is the curtailment of the IRS's practice of providing determination letters. Here is what the Rev. Proc. says on this topic:

Announcement 2015-19, 2015-32 I.R.B. 157, describes changes to the Employee Plans determination letter program for qualified plans. Effective January 1, 2017, the staggered 5-year determination letter remedial amendment cycles for individually designed plans, as described in Rev. Proc. 2007-44, will be eliminated (except that sponsors of Cycle A plans will be permitted to submit applications during the period beginning February 1, 2016, and ending January 31, 2017). The scope of the determination letter program for individually designed plans will be limited to initial plan qualification, qualification upon plan termination, and certain other limited circumstances. As of July 21, 2015, the Service ceased accepting off-cycle determination letter applications (as defined in section 14 of Rev. Proc. 2007-44), except with respect to new and terminating plans.

In anticipation of future changes to the Employee Plans determination letter program eliminating the 5-year remedial amendment cycles, this revenue procedure provides that, effective as of January 4, 2016, determination letters issued to individually designed plans will no longer contain an expiration date (currently required under section 13.02 of Rev. Proc. 2007-44). In response to comments submitted with respect to Ann. 2015-19, the Department of the Treasury and the Service intend to issue guidance with respect to the status of existing expiration dates on determination letters issued prior to January 4, 2016.

January 6, 2016

Employee Benefits-IRS Issues Notice Containing Revisions to the Employee Plans Determination Letter Program Regarding Cycle A Elections And Other Matters

According to Notice 2016-03 (the "Notice"), in anticipation of the elimination, effective January 1, 2017, of the 5-year remedial amendment cycle system for individually designed plans under the Employee Plans determination letter program, the IRS says the following:

Determination Letter Applications. Rev. Proc. 2007-44 will be modified to provide that controlled groups and affiliated service groups that maintain more than one plan are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 31, 2017, provided that a prior Cycle A election with respect to the controlled group or affiliated service group had been made by January 31, 2012 (the last day of the previous Cycle A submission period).

Expiration Date For Determination Letters. Rev. Proc. 2007-44 will be modified to provide that expiration dates included in determination letters issued prior to January 4, 2016, are no longer operative. Future guidance will clarify the extent to which an employer may rely on a determination letter after a subsequent change in law or plan amendment.

Adoption Of Pre-Approved Defined Contribution Plans. Rev. Proc. 2007-44 will be modified to provide that the deadline for an employer to adopt a current defined contribution pre-approved plan and to apply for a determination letter, if otherwise permissible, is extended from April 30, 2016, to April 30, 2017, with respect to any defined contribution pre-approved plan adopted on or after January 1, 2016 (other than a plan that is adopted as a modification and restatement of a defined contribution pre-approved plan that had been maintained by the employer prior to January 1, 2016). This extension will facilitate a plan sponsor's ability to convert an existing individually designed plan into a current defined contribution pre-approved plan.

For these purposes, a "current defined contribution pre-approved plan" is one that was approved based on the 2010 Cumulative List. An employer that had adopted a defined contribution pre-approved plan prior to January 1, 2016, continues to have until April 30, 2016, to adopt a modification and restatement of the defined contribution pre-approved plan within the current 6-year remedial amendment cycle for defined contribution plans and to apply for a determination letter, if permissible.

January 5, 2016

ERISA-Third Circuit Rules That A Plan, Not Established By A Church, Cannot Be Exempt From ERISA As A Church Plan

In Kaplan v. Saint Peter's Healthcare System, No. 15-1172 (3rd Cir. 2015), the Third Circuit Court of Appeals (the "Court") reviewed the exemption from ERISA for church plans, found in section 4(b)(2) of ERISA.

The Court noted that, under this exemption, a church plan need not comply with a host of ERISA provisions, including fiduciary obligations and minimum-funding rules. The Court noted, further, that ERISA section 3(33)(A) defines a church plan as one that is "established and maintained . . . for its employees (or their beneficiaries)" by a tax-exempt church. Also, section 3(33)(C)(i) clarifies that a "plan established and maintained" by a church includes a plan maintained by a qualifying agency of a church (for example, a qualifying organization affiliated with the church).

But the question faced by the Court is whether a church agency can, in addition to maintaining an exempt church plan, also establish such a plan? The district court concluded that it cannot. The Court agreed. It said that, per the plain text of ERISA, only a church can establish a plan that qualifies for an exemption under § 4(b)(2). Because no church established St. Peter's Healthcare System's retirement plan-the plan in question in the case- the Court held that this plan is ineligible for a church plan exemption.

December 31, 2015

Employee Benefits-IRS Extends The Due Dates For 2015 Information Reporting Under Sections 6055 And 6056 Of the Code-More Discussion and Transition Rules


As reported in yesterday's blog, in Notice 2016-4 (the "Notice"), the Internal Revenue Service (the "IRS") extends the due dates for the 2015 information reporting requirements under sections 6055 and 6056 of the Internal Revenue Code (the "Code").

Specifically, the Notice extends the due date for 2015 Forms as follows:

(1) for furnishing to individuals the Forms 1095-B and 1095-C, from February 1, 2016, to March 31, 2016; and

(2) for filing with the IRS the Forms 1094-B, 1095-B, 1094-C, and 1095-C, from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

In so extending the due dates, the IRS discussed the reporting rules, and provided some transition rules. Here is what the IRS said.


Sections 6055 and 6056 were added to the Code by the Affordable Care Act (the "ACA") (section 6056 was later amended). Section 6055 requires health insurance issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding coverage provided. Section 6056 requires applicable large employers (generally those with 50 or more full-time employees, including full-time equivalents, in the previous year) to file and furnish annual information returns and statements relating to the health insurance that the employer offers (or does not offer) to its full-time employees.

The IRS has designated Form 1094-B and Form 1095-B to meet the requirements of section 6055. The IRS has designated Form 1094-C and Form 1095-C to meet the requirements of the section 6056.


No Automatic or Permissive Extensions of Time. In view of these due date extensions, there is no need for any automatic or permissive extensions of the due dates for filing or providing the required forms.

Penalties For Failures To File. Employers or other coverage providers that do not comply with these extended due dates for the required forms are subject to penalties under section 6722 or 6721 of the Code, for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the IRS will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The IRS will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the IRS and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS, or testing its ability to transmit information to the IRS. In addition, the IRS will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

The Premium Tax Credit. Some individual taxpayers may be affected by the extension of the due date for employers to furnish information under section 6056 on Form 1095-C. Under section 36B(c)(2)(C) of the Code, an employee is not eligible for the section 36B premium tax credit for any month for which the employee is eligible for (e.g., offered) coverage under an eligible employer sponsored plan that provides minimum value and is affordable (or for any month for which the employee enrolls in an eligible employer-sponsored plan, regardless of whether the plan is affordable or provides minimum value). The Form 1095-C generally includes information on the coverage (if any) offered by the applicable large employer to the full-time employee. The information reported will assist the employee in determining eligibility for the premium tax credit.

Most individuals offered employer provided coverage will not be affected by the due date extensions. This is partly because section 1.36B-2(c)(3)(v)(A)(3)) of the Income Tax Regulations provides that an offer of employer-sponsored coverage is generally treated as unaffordable for section 36B purposes if the individual enrolls in coverage through the Marketplace and receives the benefit of advance payments of the premium tax credit based on a determination from the Marketplace that the offer of employer-sponsored coverage is unaffordable. The Notice details individuals who would not be affected by the extended due dates.

Nonetheless, some employees (and related individuals) who enrolled in coverage through the Marketplace but did not receive a determination from the Marketplace that the offer of employer-sponsored coverage was not affordable could be affected by the extension if they do not receive their Forms 1095-C before they file their income tax returns. As a result, for 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns need not amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C. Individuals need not send this information to the IRS when filing their returns but should keep it with their tax records.

Shared Responsibility Payment. Section 5000A of the Code, which was added to the Code by the ACA, generally provides that individuals must have minimum essential coverage, qualify for an exemption from the minimum essential coverage requirement, or make an individual shared responsibility payment when they file their federal income tax return.

Similar to the above, some individual taxpayers may be affected by the extension of the due date for providers of minimum essential coverage to furnish information under section 6055 on either Form 1095-B or Form 1095-C. Individuals generally use this information to confirm that they had minimum essential coverage for purposes of sections 36B and 5000A. Because, as a result of the extension, individuals may not have received this information before they file their income tax returns, for 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns need not amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections. Individuals need not send this information to the IRS when filing their returns but should keep it with their tax records.