Articles Posted in Employee Benefits

In  Rabinek v. United Bhd. Of Carpenters Pension Fund, No. 15-1717 (7th Cir. 2016), the situation was as follows. William Rabinak had worked full-time as a business representative for the Chicago Regional Council of Carpenters. By virtue of his position, he also served on the Council’s Executive Board. Rabinak received quarterly payments of $2,500 for his service on the Board. The Council made these quarterly payments in checks separate from those for Rabinak’s weekly salary.

When he retired, Rabinak qualified for a pension benefit from the United Brotherhood of Carpenters Pension Fund (the “Fund”). However, when he received the calculation of his pension benefit, he thought something was off. The annual salaries listed did not appear to take into account the $2,500 quarterly payments for serving on the Executive Board. Rabinak appealed and maintained that those payments should have been taken into account in the calculation. The Fund’s appeals committee denied his appeal.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) said the following. Controlled as we are by a standard of review that asks only whether the defendant’s decision was arbitrary and capricious, we affirm the denial by the Fund’s appeals committee. The Fund’s definition of compensation includes only “salary,” and the $2,500 quarterly payments for Board service were paid separately from Rabinak’s weekly salary payments and coded differently as well. The conclusion that the payments at issue were not salary payments under this particular Fund was not arbitrary and capricious.

IRS Health Care Tax Tip 2016-65, August 17, 2016  says the following:

In general, under the employer shared responsibility provisions of the Affordable Care Act, an applicable large employer may either offer affordable minimum essential coverage that provides minimum value to its full-time employees and their dependents or potentially owe an employer shared responsibility payment to the IRS.

Here is information to help you understand affordable coverage and minimum value coverage.

In a note provided by the IRS, the IRS provides guidance on correcting required minimum distribution failures. Here is what the IRS says.

Plan sponsors can use the Employee Plans Compliance Resolution System (Rev. Proc. 2013-12, as modified) to voluntarily correct the mistake of not making required minimum distributions (RMDs) under Internal Revenue Code Section 401(a)(9) to affected participants and beneficiaries.

Self Correction Program (SCP) – Depending on the specific plan circumstances, you can use SCP to correct a RMD failure even if the plan is under an Employee Plans examination. However, the participant-owed excise tax under IRC section 4974 can’t be waived under the SCP.

An annual fee to help pay for the Patient-Centered Outcomes Research Institute (“PCORI”) is imposed by the Affordable Care Act (the “ACA”) on issuers of specified health insurance policies and sponsors of self-insured health plans. In the case of a self-insured multiemployer plan, the sponsor is normally the Board of Trustees which administers the plan and manages its assets.

The payment of the fee must be accompanied by a tax return, Form 720, Quarterly Excise Tax Return (Second Quarter). This form and its instructions are here and here.  The payment may, but need not, be made electronically, through the Electronic Federal Tax Payment System. Similarly, the Form 720 may, but need not, be filed electronically.

This year, the fee and return are due by August 1, 2016. The fee generally applies to major medical coverage. It does not apply to dental and vision coverage which are excepted benefits. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this Chart.

The New Rev. Proc. The IRS has issued Rev. Proc. 2016-37, its periodic update on the determination letter program for qualified retirement plans. But this year there is a twist-as announced last year, in IRS Announcement 2015-19, the IRS is curtailing the program for individually designed plans. Rev. Proc. 2016-37 summarizes the new rules for individually designed plans as follows.

The New Rules.

–Consistent with IRS Announcement 2015-19, this revenue procedure eliminates, as of January 1, 2017, the staggered five-year remedial amendment cycle system for individually designed plans, currently set forth in Rev. Proc. 2007-44. However, sponsors of Cycle A plans (that is, generally, plan sponsors with employer identification numbers ending in 1 or 6) will continue to be permitted to submit determination letter applications during the period beginning February 1, 2016, and ending January 31, 2017.

The U.S. Department of Labor (the “DOL”) has issued a new FAQ (Part 32), to provide guidance on the Notice of Coverage Options required in accordance with COBRA and the Affordable Care Act (the “ACA”). Here is what the FAQ says:

Notice of Coverage Options – COBRA and Health Insurance Marketplace Coverage

The ACA Health Insurance Marketplaces (the “Marketplaces”) are designed to ensure that individuals and small businesses have access to affordable coverage through a competitive private health insurance market. The Marketplaces offer “one-stop shopping” to assist individuals in finding, comparing and enrolling in private health insurance options. In general, under the COBRA continuation coverage provisions, an individual who was covered by a group health plan on the day before a qualifying event (such as termination of the covered employee’s employment, divorce, or a dependent aging out of a plan, if the event causes a loss of coverage) may be able to elect COBRA continuation coverage upon experiencing the qualifying event. Individuals with such a right are called qualified beneficiaries. A group health plan must provide qualified beneficiaries with a COBRA election notice that, among other things, describes their rights to COBRA continuation coverage and how to make a COBRA coverage election.

In IRS Health Care Tax Tip 2016-57, June 22, 2016, self-insured employers, applicable large employers and health coverage providers are reminded that the June 30 deadline to electronically file information returns with the IRS is approaching. The Tax Tip and the helpful information therein is here.

In IRS Health Care Tax Tip 2016-56, June 15, 2016, the IRS advises as follows:

If you filed for an extension of time to file your 2015 federal tax return – and you benefit from advance payments of the premium tax credit being made to your coverage provider – it’s important you file your return sooner rather than later.

You must file your 2015 tax return and reconcile your advance payments to ensure you can continue having advance credit payments paid on your behalf in future years. Advance payments of the premium tax credit are reviewed in the fall by the Health Insurance Marketplace for the next calendar year as part of their annual re-enrollment and income verification process. If you do not file and reconcile, you will not be eligible for advance payments of the premium tax credit in 2017. Use Form 8962, Premium Tax Credit, to reconcile any advance credit payments made on your behalf and to maintain your eligibility for future premium assistance.

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS cautions against the use of certain discriminatory plan designs. Here is what the IRS says:

Qualified retirement plans must ensure “the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees.” (Internal Revenue Code Section 401(a)(4)). A plan that meets statutory or regulatory checklists, but primarily or exclusively benefits highly compensated employees (HCEs) with little to no benefits for nonhighly compensated employees (NHCEs), may still discriminate and violate IRC Section 401(a)(4).

Discriminatory plan designs

To continue my blogs of the two previous days, the VCP Submission Kit, according to the IRS, is for plan sponsors that maintain a pre-approved defined contribution plan but failed to adopt a new plan document by April 30, 2016, and are correcting the failure by adopting a pre-approved defined contribution retirement plan that reflects the provisions of the Pension Protection Act (the “PPA”). The discussion about the VCP Submission Kit is here.