February 2013 Archives

February 28, 2013

ERISA-Seventh Circuit Rules That Owners Of An Employer Withdrawing From A Multiemployer Pension Plan Are Responsible For The Employer's Withdrawal Liability

In Central States Southeast and Southwest Areas Pension Fund v. Messina Products, LLC, Nos. 11-3513 & 12-1333 (7th Cir. 2013), the Court faced the question of whether it should pierce corporate veils, and impose on the individual owners and related businesses withdrawal liability to the plaintiff, Central States Southeast and Southwest Areas Pension Fund (the "Fund"), a multiemployer pension plan.

In this case, a defendant, Messina Trucking, Inc. ("Messina Trucking"), was a closely-held corporation owned, along with several other closely held entities, by Stephen and Florence Messina. For several years, Messina Trucking was subject to a collective bargaining agreement that required it to contribute to the Fund for its employees' retirement benefits. In October 2007, however, Messina Trucking permanently ceased to have an obligation to contribute to the Fund, triggering a "complete withdrawal" from the Fund, and incurring nearly $3.1 million in potential withdrawal liability. The Fund sued Stephen and Florence Messina (the "Messinas"), Messina Trucking, and the other closely held entities seeking a declaratory judgment that the named defendants were jointly and severally liable for the withdrawal liability. One question for the Court was whether the Messinas are responsible for the withdrawal liability.

On this question, the Court noted that all "trades or businesses" under "common control" with a withdrawing employer are treated as a single entity for purposes of assessing and collecting withdrawal liability. The Court determined that the Messinas, who owned and leased several residential properties as well as the property from which MessinaTrucking operated, were engaged in a "trade or business", and thus could be held responsible for Messina Trucking's withdrawal liability. To be considered a "trade or business", an activity must be performed: (1) for the primary purpose of income or profit and (2) with continuity and regularity. The Court determined that the Messina's activities met prong (1) and (2), and therefore constituted a "trade or business". The Court said that ERISA does not impose liability for a withdrawing employer on purely passive investment entities, including those that invest in real estate. But where-as here- the real estate is rented to or used by the withdrawing employer and there is common ownership, it is improbable that the rental activity could be deemed a truly passive investment.

February 26, 2013

ERISA-DOL Provides Guidance On Health Plan Cost- Sharing Limitations Under The Affordable Care Act

As noted in my blog on February 22, in FAQs about Affordable Care Act Implementation Part XII, the Department of Labor provides guidance on health plan cost-sharing limitations under the Affordable Care Act. The FAQs say the following:

Limitations On Cost-Sharing Under the Affordable Care Act. Public Health Service ("PHS") Act section 2707(b), as added by the Affordable Care Act, provides that a group health plan shall ensure that any annual cost-sharing imposed under the plan does not exceed the limitations provided for under section 1302(c)(1) and (c)(2) of the Affordable Care Act. Section 1302(c)(1) limits out-of-pocket maximums and section 1302(c)(2) limits deductibles for employer-sponsored plans.

Who Must Comply With The Deductible Limitations? These limitations apply to "non- grandfathered" insured group health plans in the small group market. However, the coverage under such a plan may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit. A self-insured or "non- grandfathered" large group health plan is not subject to the deductible limitations, unless future governmental guidance provides otherwise.

Who Must Comply With The Out-of-Pocket Maximums? All "non-grandfathered" group health plans must comply with the annual limitation on out-of-pocket maximums described in section 1302(c)(1) of the Affordable Care Act. Many of these plans may utilize multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants' expenses against any out-of-pocket maximums. These processes will need to be coordinated under section 1302(c)(1), which may require new regular communications between service providers.

For the first plan year beginning on or after January 1, 2014, where a group health plan utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums, the annual limitation on these maximums will be deemed to be satisfied if both of the following conditions are satisfied:

(1) The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and

(2) To the extent the plan includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1).

The FAQs note that plans are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.

February 22, 2013

ERISA-DOL Issues Additional FAQs On Affordable Care Act Implementation

The Department of Labor (the "DOL"), in conjunction with the Departments of Health and Human Services ("HHS") and the Treasury (the "Department"), have issued FAQs about Affordable Care Act Implementation Part XII. The FAQs are here. They discuss:

-- the plans which are subject to the requirements of Public Health Service ("PHS") Act section 2707(b), as added by the Affordable Care Act, pertaining to the limit on out-of-pocket maximums and deductibles under sections 1302(c)(1) and (2) of the Affordable Care Act; and

--the coverage of certain preventive services under PHS Act section 2713.

February 21, 2013

ERISA-Eighth Circuit Affirms Summary Judgment Against Plaintiff Since She Failed To Exhaust Her Administrative Remedies

In Reindl v. Hartford Life and Accident Insurance Company, No. 12-1975 (8th Cir. 2013), the plaintiff, Susan Reindl ("Reindl"), had brought this suit under ERISA, claiming that the defendant, Hartford Life and Accident Insurance Company ("Hartford"), had wrongfully terminated her long-term disability ("LTD") benefits under an employer-sponsored plan (the "Plan"). Hartford was the administrator of the Plan. The district court granted summary judgment in favor of Hartford, concluding Reindl failed to exhaust her administrative remedies because she did not file a timely administrative appeal.

In this case, Reindl had stopped working in April 2005 due to physical impairments. She successfully applied for LTD benefits under the Plan and began receiving those benefits. Hartford later reassessed Reindl's physical condition, however, and decided she was not totally disabled and could perform sedentary work. As a result, Hartford terminated Reindl's disability benefits on November 25, 2008. The letter Hartford sent to Reindl informed her she had 180 days to file an administrative appeal, and further informed her an appeal was to be addressed to Hartford's Claim Appeal Unit in Hartford, Connecticut. Reindl sought the services of a lawyer to challenge the termination of her benefits. On December 12, 2008, Reindl's lawyer sent a letter to Hartford's Benefits Management Services in Bloomington, Minnesota, which essentially requested medical records. Hartford forwarded Reindl's medical records to the lawyer in February 2009. On July 8, 2009, more than 180 days after Reindl's benefits had been terminated, the lawyer sent a letter to Hartford's Claim Appeal Unit, which among other things requested a reversal of the decision to terminate the LTD benefits. On August 6, 2009, Hartford sent a letter to the lawyer stating the appeal had not been received within the "180 days from the date you received your claim denial." and further said the case was closed. This suit ensued.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") noted that a timely administrative appeal is a prerequisite to filing an action under ERISA in federal court challenging the denial of Plan benefits. It further noted that, based on the Plan's language, Hartford's decision to deny LTD benefits in the case is entitled to a deferential review. Here, Hartford ultimately denied benefits by concluding Reindl failed to file a timely administrative appeal. As such, the issue becomes whether Hartford's determination that the December 2008 letter did not constitute an appeal was reasonable. The Court concluded that the determination was reasonable . Hartford's termination letter instructed Reindl to file an appeal with Hartford's Claim Appeal Unit in Hartford, Connecticut. The December 2008 letter was sent instead to Hartford's Benefit Management Services in Bloomington, Minnesota. In addition, Hartford's termination letter stated any appeal of the termination "should clearly outline your position and any issues or comments you have in connection with your claim and our decision to deny your request for benefits under the Policy," which the December 2008 letter did not do. Instead, the December 2008 letter merely stated its purpose was "to request a copy of any and all medical records you may have in your file on my client." Under these circumstances, Hartford reasonably could have construed the December 2008 letter to be merely a request for documents Reindl's lawyer sought to review before determining whether to file an appeal in the future, not an administrative appeal itself. As such, the Court affirmed the district court's summary judgment for Hartford.

February 20, 2013

Employee Benefits-Eighth Circuit Declines To Impose Penalty For Failure To Send COBRA Notice

In Deckard v. Interstate Bakeries Corporation, No. 11-1595 (8th Cir. 2013), Sean Deckard ("Deckard") was appealing the order of the district court affirming the grant of summary judgment by the bankruptcy court in favor of Interstate Bakeries Corporation ("Hostess"). Deckard had filed a claim for civil penalties with the bankruptcy court for Hostess's failure to give notices required by COBRA.

In this case, Deckard began employment with Hostess in May 2004 and commenced participation in its healthcare plan (the "Plan") in December 2004. Hostess was the Plan's administrator. COBRA requires an administrator to give each participant a notice of certain health insurance coverage rights upon the commencement of coverage. However, Hostess failed to provide this notice to Deckard. Hostess notified Deckard that his employment was terminated on September 11, 2006. COBRA also requires an administrator to give each participant a notice of certain health insurance coverage rights upon a "qualifying event," such as the termination of the participant's employment. Again, Hostess failed to provide this notice to Deckard. Due to an apparent clerical oversight, Hostess did not process certain aspects of Deckard's termination for almost two years. During this post-termination period, Deckard continued to enjoy health care coverage under the Plan, paying no premiums but receiving about $19,000 in benefits through the Plan. In April 2009, Deckard filed an administrative claim in Hostess's long-running bankruptcy proceeding, requesting penalties for Hostess's failure to provide the required COBRA notices.

In analyzing the case, the Eighth Court of Appeals (the "Court") noted that ERISA provides that a plan administrator who fails to meet the COBRA notice requirements may in the court's discretion be personally liable to the participant in the amount of up to $110 a day from the date of such failure. The purpose of this statutory penalty is to provide plan administrators with an incentive to comply with the requirements of ERISA and to punish noncompliance. In exercising its discretion to impose the statutory damages, a court primarily should consider the prejudice to the plaintiff and the nature of the plan administrator's conduct. Although relevant, a defendant's good faith and the absence of harm do not preclude the imposition of the damages. The Court said that Deckard's free, ongoing coverage under the Plan, despite the lack of COBRA notices, indicates a lack of prejudice. For that and other reasons, the Court affirmed the district court's decision to grant summary judgment to Hostess on the penalty issue, that is, the Court affirmed the district court's decision to decline to impose the statutory penalty on Hostess for the failure to provide COBRA notices.

February 19, 2013

Employment-Eighth Circuit Upholds A $735,000 Award To The Employer In Breach Of Contract Claim

In Hallmark Cards, Inc. v. Murley, No. 11-2855 (8th Cir. 2013), the plaintiff, Hallmark Cards, Inc. ("Hallmark"), sued the defendant, former employee Janet Murley ("Murley"), for a breach of the parties' separation agreement. Hallmark won a $860,000 jury verdict on its breach of contract claim. Murley appealed.

In this case, Murley had served as Hallmark's group vice-president of marketing from 1999 to 2002. In this capacity, she was responsible for product and business development, advertising, and research, and had access to confidential information including Hallmark's business plans, market research, and financial information. In 2002, Hallmark eliminated Murley's position as part of a corporate restructuring. Murley and Hallmark entered into a negotiated separation agreement which laid out the terms of Murley's departure. Pursuant to the agreement, Murley agreed not to work in the greeting card or gift industry for a period of eighteen months, solicit Hallmark employees, disclose or use any proprietary or confidential information, or retain any business records or documents relating to Hallmark. She also agreed to release Hallmark from any claims arising from her termination. In exchange, Hallmark offered Murley a $735,000 severance payment, eighteen months of paid COBRA benefits, executive outplacement services, and paid tax preparation for two years.

In 2006, after the expiration of her non-compete agreement, Murley accepted a consulting assignment with Recycled Paper Greetings ("RPG") for $125,000. Murley admits that in the course of that assignment, she disclosed to RPG confidential Hallmark information including slides from Hallmark's business model redesign, information regarding Hallmark consumer buying process, and long-term industry analysis gathered from Hallmark's market research. Hallmark did not discover Murley's disclosures until 2009, when RPG was purchased by American Greetings, and a third-party review of RPG's records revealed the disclosed information. This suit for breach of contract ensued.

On the appeal, the Eighth Circuit Court of Appeals (the "Court") dealt with the issue of whether the jury's verdict was excessive. The $860,000 verdict consisted of the $735,000 severance payment that Hallmark had made to Hurley under the separation agreement and the $125,000 Murley later received from RPG in exchange for her consulting services. As to the claim for the return of the $735,000 severance payment, the Court said that, in determining if a damage award arising from a state-law claim-as the one made here- is excessive, state case law guides our inquiry. In Missouri (the applicable state), courts generally defer to the jury's decision concerning the amount of damages, and only overturn a jury's verdict when the defendants demonstrate that: (1) some event occurred at trial that incited the bias and prejudice of the jury and (2) the verdict is so grossly excessive so as to shock the conscience of the court. Here, Murley could not demonstrate (1) or (2). As such, the Court upheld the jury verdict against her, to the extent of the $735,000 amount.

As to the claim for the $125,000 consulting fee, the Court said that, in an action for breach of contract, a plaintiff may recover the benefit of his or her bargain as well as damages naturally and proximately caused by the breach and damages that could have been reasonably contemplated by the defendant at the time of the agreement. Here, by awarding Hallmark more than its $735,000 severance payment, the jury award placed Hallmark in a better position than it would find itself had Murley not breached the agreement. Accordingly, the Court overturned the jury verdict, to the extent it included the $125,000 amount.

February 15, 2013

ERISA-DOL Provides Advice On Cleared Swap Transactions Conducted Pursuant To The Dodd-Frank Act

In Advisory Opinion 2013-01A, the Department of Labor (the "DOL") discusses the application of ERISA to certain "cleared swap" transactions conducted pursuant to provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). While the facts and analysis are very complicated, here is what the DOL concluded.

1. A clearing member (a "Clearing Member") is not a fiduciary under section 3(21)(A)(i) of ERISA when, upon default by a pension plan of its obligations under a cleared swap, the Clearing Member exercises various account liquidation rights that were negotiated between the Clearing Member and a plan fiduciary at the outset of a swap transaction.

2. The central clearing party to the swap (called the "CCP") does not provide services to the plan involved in the swap, and will not be deemed to be a party in interest under section 3(14)(B) of ERISA with respect to the plan solely by reason of providing clearing services for the plan's Clearing Member. Furthermore, because the rights and obligations under the swap agreement between the Clearing Member and its customer will be subject to various rules and regulations, any actions taken by the CCP pursuant to those rules and regulations with respect to plan customer accounts upon Clearing Member default would not make the CCP a fiduciary under section 3(21)(A)(i) of ERISA. However, due to a direct contractual agreement with the plan in the procurement of the clearance of swap transactions and other services, such as the collection and transmission, and/or receipt, of margin payments from the plan, the Clearing Member is providing services to the plan and as a result would be a party in interest with respect to the plan, under section 3(14)(B).

3. Since the Clearing Member is a party in interest, the exercise of the default rights by the Clearing Member, when the plan fails to meet its obligations under the swap arrangement, and the provision of other services by the Clearing Member result in certain "prohibited transactions" under section 406 of ERISA unless an exemption applies. Also the guarantee by the Clearing Member of the plan's obligation to the CCP is treated as an "extension of credit", and therefore could be a prohibited transaction under section 406(a)(1)(B) of ERISA. In certain cases, Prohibited Transaction Exemption (PTE) 84-14 (the "QPAM Exemption") could provide exemptive relief for any such credit extension and other services by the Clearing Member.

February 14, 2013

ERISA-Fourth Circuit Rules That Limitations Period For ERISA Breach Of Fiduciary Duty Case Starts To Run When The Defendants Selected the Investments in Question

In David v. Alphin, No. 11-2181 (4th Cir. 2013), the plaintiffs were a class of plan participants in a 401(k) plan (the "Plan"), which was sponsored by the Bank of America Corporation (the "Bank"). The plaintiffs had brought suit under ERISA against the defendants, who were the Bank and individual members of the Bank's Corporate Benefits Committee, the committee being a plan fiduciary. The plaintiffs had alleged, among other things, that the defendants had engaged in prohibited transactions and breached their fiduciary duties by selecting and maintaining Bank-affiliated mutual funds in the Plan's investment menu. The district court granted summary judgment to the defendants, ruling that the plaintiff's claims with respect to the Plan were time-barred. The plaintiffs appealed.

In analyzing the case, the Fourth Circuit Court of Appeals (the "Court") noted that, under ERISA § 413, a plaintiff is limited by a general six-year limitations period. The six-year limitations period is shortened to three years in instances where the plaintiff had actual knowledge of the breach. The Court said that § 413's limitations period begins immediately upon the last action which constituted a part of the breach or violation. Accordingly, the limitations period begins running when a specific event occurs, regardless of whether a cause of action has accrued or whether any injury has resulted. Here, the plaintiffs' claims of prohibited transactions and breach of fiduciary duty challenge the initial selection of the Bank-affiliated funds, which undisputedly occurred no later than 1999, as opposed to the repeated failure of the defendants to remove the funds from the Plan's investment menu. The initial section started the running of the limitations period. Accordingly-since the suit was brought in 2006-the plaintiffs' claims are time-barred under the 6-year limitations period of § 413. Therefore, the Court affirmed the district court's summary judgment in the defendants' favor.

In the case, the district court had also dismissed the plaintiffs' claims of ERISA violations by the defendants in selecting and maintaining Bank-affiliated mutual funds in the investment menu of the Bank's pension plan, on the grounds that the plaintiffs lacked standing to bring such claims. The Court affirmed the district court's dismissal of these claims.

February 13, 2013

Employment-DOL Provides Guidance On The Definition Of "Son or Daughter" For purposes of FMLA

In Administrator's Interpretation No. 2013-1, the Department of Labor (the "DOL") clarifies the definition of "son or daughter" under Section 101(12) of the Family and Medical Leave Act (the "FMLA"), as it applies to an individual 18 years of age or older and incapable of self-care because of a mental or physical disability. Here is what the Administrator's Interpretation says:

Background. The FMLA entitles an eligible employee to take up to 12 workweeks of unpaid, job-protected leave during a 12-month period to care for a son or daughter with a serious health condition. The FMLA defines a "son or daughter" as a biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis (i.e., a person with day-to-day responsibility) who is--(A) under 18 years of age or (B) 18 years of age or older and incapable of self-care because of a mental or physical disability. A child under 18 years of age is a "son or daughter" under the FMLA without regard to whether or not the child has a disability. An eligible employee requesting FMLA leave to care for a son or daughter under 18 years of age must only show a need to care for the child due to a serious health condition.

In order to meet the FMLA's definition of a "son or daughter," an adult child (i.e., one who is 18 years of age or older) must have a mental or physical disability and be incapable of self-care because of that disability. The FMLA regulations adopt the ADA's definition of "disability" as a physical or mental impairment that substantially limits a major life activity (as interpreted by the EEOC) to define "physical or mental disability." The FMLA regulations define "incapable of self-care because of that disability" as when an adult son or daughter requires active assistance or supervision to provide daily self-care in three or more of the activities of daily living or instrumental activities of daily living. A parent will be entitled to take FMLA leave to care for a son or daughter 18 years of age or older, if the adult son or daughter: (1) has a disability as defined by the ADA; (2) is incapable of self-care due to that disability; (3) has a serious health condition; and (4) is in need of care due to the serious health condition.

Impact of Age of Onset of Disability on FMLA Definition of Son or Daughter. The FMLA regulations define a "son or daughter" 18 years of age or older as one who is incapable of self-care because of a mental or physical disability at the time that FMLA leave is to commence. It does not matter if the disability occurs before the son's or daughter's 18th birthday.

Impact of the ADAAA on the FMLA Definition of Son or Daughter. The DOL has adopted the Americans with Disability Act (the "ADA") definition of "disability", to define "mental or physical disability" for purposes of identifying a son or daughter 18 years of age or older under the FMLA. Under that definition, a "mental or physical disability" is defined, for FMLA purposes, as a mental or physical impairment that substantially limits one or more of the major life activities of an individual, as those terms are defined by the ADA's implementing regulations. The term "mental and physical disability" should now be defined, for FMLA purposes, in accordance with the amendments to the definition of disability made by the Americans with Disabilities Act Amendments Act of 2008 ("ADAAA"), and the regulations which implement those amendments.

Other Points. The Administrator's Interpretation also discusses the meaning of being "incapable of self-care due to a disability", "serious health condition", and "in need of care", and the availability of FMLA Leave to care for adult children wounded in military service.

February 7, 2013

ERISA-EBSA Provides Guidance On Fixed Indemnity Insurance

In FAQs about Affordable Care Act Implementation Part XI, the Employee Benefits Security Administration (the "EBSA") provides guidance on whether fixed indemnity insurance is an "excepted benefit" under health care law.

The FAQs say that fixed indemnity coverage under a group health plan, which meets the conditions outlined in the Department of Labors' regulations at 26 CFR 54.9831-1(c)(4), 29 CFR 732(c)(4), 45 CFR 146.145(c)(4), is an "excepted benefit" under PHS Act section 2791(c)(3)(B), ERISA section 733(c)(3)(B), and Code section 9832(c)(3)(B). As such, it is exempt from the health coverage requirements of title XXVII of the PHS Act, part 7 of ERISA, and chapter 100 of the Code. These requirements include: provision of health care coverage for dependents up to age 26; no pre-existing conditions on enrollment for care health coverage; no lifetime or annual limits on essential health care benefits; no rescission of health care coverage except for fraud; mandatory independent (external) review of benefit claims; and requirements pertaining to preventive care services.

The FAQs say further that, under the Department of Labor's regulations cited above, a hospital indemnity or other fixed indemnity insurance policy under a group health plan provides excepted benefits only if:

--the benefits are provided under a separate policy, certificate, or contract of insurance;

--there is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and

--the benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor.

The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.

The FAQs indicate that, in some cases, a health insurance policy is advertised as fixed indemnity coverage, but then covers doctors' visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per procedure, and/or prescription drugs at $15 per prescription. In such circumstances, for doctors' visits, surgery, and prescription drugs, payment is made not on a per-period basis, but instead is based on the type of procedure or item, such as the surgery or doctor visit actually performed or the prescribed drug, and the amount of payment varies widely based on the type of surgery or the cost of the drug. Because office visits and surgery are not paid based on "a fixed dollar amount per day (or per other period)," a policy such as this is not hospital indemnity or other fixed indemnity insurance, and is therefore not provide excepted benefits. When a policy pays on a per-service basis as opposed to on a per-period basis, it is in practice a form of health coverage instead of an income replacement policy. Accordingly, it does not meet the conditions for excepted benefits.

February 6, 2013

Employee Benefits-IRS Issues Questions and Answers on the Individual Shared Responsibility Provision Of The Affordable Care Act

Not strictly employee benefits, but on January 30, 2013, the Internal Revenue Service ("IRS") issued guidance, in the form of Questions and Answers ("Q &As"), on the Individual Shared Responsibility Provision Of The Affordable Care Act. In sum, here is what the IRS said.

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting on January 1, 2014, the individual shared responsibility provision (the "Provision") calls for each individual to either: (1) have minimum essential healthcare coverage (known as "minimum essential coverage" or "MEC") for each month, (2) qualify for an exemption, or (3) make a payment when filing his or her federal income tax return. The Provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.

MEC includes, at a minimum, all of the following:

• Employer‐sponsored healthcare coverage (including COBRA coverage and retiree coverage) for an employee and spouse;

• Healthcare coverage purchased in the individual market;

• Medicare coverage (including Medicare Advantage);

• Medicaid coverage;

• Children's Health Insurance Program (CHIP) coverage;

• Certain types of Veterans health coverage; and


MEC does not include specialized coverage, such as coverage only for vision care or dental care, workers' compensation, disability policies, or coverage only
for a specific disease or condition.

An individual is exempt from the requirements of the Provision if:

(1) the individual's household income is below the minimum threshold
for filing a tax return;

(2) the individual went without coverage for less than three consecutive
months during the year;

(3) an Affordable Insurance Exchange has certified that the individual has suffered a hardship that makes him or her unable to obtain coverage;

(4) the individual cannot afford coverage because the minimum amount that must be paid for the premiums is more than eight percent of his or her household income;

(5) the individual is a member of (a) a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits, (b) a recognized health care sharing ministry, or (c) a federally recognized Indian tribe; or

(6) the individual is (a) in a jail, prison, or similar penal institution or correctional
facility after the disposition of charges, or (b) neither a U.S. citizen, a U.S.national, nor an alien lawfully present in the U.S.

February 5, 2013

ERISA- Department of Labor Updates Delinquent Filer Voluntary Compliance Program

In a News Release of January 28, 2013, the U.S. Department of Labor's Employee Benefits Security Administration announced technical updates to its Delinquent Filer Voluntary Compliance ("DFVC") Program.

The News Release says that ERISA requires most private-sector employee benefit plans to file an annual return/report. This is usually the Form 5500 or, for certain small plans, Form 5500-SF. Plan administrators who fail or refuse to comply with ERISA's annual filing requirement may incur significant monetary penalties. The DFVC Program was established in April 1995 to encourage plan administrators to file overdue, incomplete or incorrect Form 5500 annual reports with reduced civil penalties. The DFVC Program was last updated and expanded in March 2002.

The News Release says further that the technical updates announced today incorporate an existing voluntary online penalty calculator and web payment system into the DFVC Program. The updates also fully integrate the DFVC Program into the EFAST2 electronic filing system, including a Form 5500 Version Selection Tool, available here, which helps filers determine which forms they need to use when filing electronically for past years.

The updated DFVC Program may be found here. DFVC Program updated Frequently Asked Questions may be found here. U.S. Department of Labor news materials are accessible at www.dol.gov.

February 1, 2013

ERISA-EBSA Provides Guidance On Payment Of Self-Insured Health Plan Fees By Multiemployer Plans And Others

In FAQs about Affordable Care Act Implementation Part XI, the Employee Benefits Security Administration (the "EBSA") provides guidance on the payment of self-insured health plan fees by multiemployer plans.

The FAQs say that section 4376 of the Internal Revenue Code (the "Code"), as added by the Affordable Care Act, imposes a temporary annual fee on the sponsor of an applicable self-insured health plan for plan years ending on or after October 1, 2012, and before October 1, 2019. The fee is equal to the applicable dollar amount in effect for the plan year ($1 for plan years ending on or after October 1, 2012, and before October 1, 2013) multiplied by the average number of lives covered under the applicable self-insured health plan during the plan year. In the case of (i) a plan established or maintained by 2 or more employers or jointly by 1 or more employers and 1 or more employee organizations, (ii) a multiple employer welfare arrangement, or (iii) a voluntary employees' beneficiary association (a "VEBA") described in Code section 501(c)(9), the plan sponsor is defined in Code section 4376(b)(2)(C) as the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.

In the case of a multiemployer plan defined in ERISA section 3(37), the plan sponsor liable for the fee would generally be the independent joint board of trustees appointed by the participating employers and employee organization, and directed pursuant to a collective bargaining agreement to establish the employee benefit plan. This board exists solely for the purpose of sponsoring and administering the plan and has no source of funding independent of plan assets. It would be unreasonable to construe the fiduciary provisions of ERISA as prohibiting the use of plan assets to pay the fee imposed by section 4376 to the Federal government. Thus, unless the plan document specifies a source other than plan assets for payment of this fee, such a payment from plan assets would be permissible under ERISA.

There may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the Code section 4376 fee, such as a VEBA that provides retiree-only health benefits where the sponsor is a trustee or board of trustees that exists solely for the purpose of sponsoring and administering the plan and has no source of funding independent of plan assets. The same conclusion would not necessarily apply, however, to other plan sponsors required to pay the fee under Code section 4376. For example, a group or association of employers that act as a plan sponsor but that also exist for reasons other than solely to sponsor and administer a plan may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan. The Department of Labor would expect that such an entity or association, like employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the Code section 4376 fee.