Monthly Archives: December 2015
Tuesday, December 29, 2015

We have been shouting the ACA reporting compliance deadlines from the rooftops for months now.  Well, I guess it is a case of the “boy who cried wolf”.  At the eleventh hour, the IRS has caved to a slew of complaints, concerns and continuing questions about the new (and complex) ACA reporting requirements and given employers a post-holiday present in the form of IRS Notice 2016-4.   But is it too little too late? The Notice relaxes the current deadlines for those who are not ready to file (or still have unanswered questions preventing them from filing).  Specifically, the Notice provides:

  • an automatic 60-day extension for furnishing Forms 1095-C and 1095-B to employees, and
  • an automatic three-month extension for filing the required forms with the IRS.

By “automatic”, we mean that no action is required (and nothing needs to be sent to the IRS) to avail yourself of the extension. The newly extended deadlines (for this year only) are as follows:

  • The 2015 Form 1095-B and Form 1095-C (which were originally required to be provided to the insured and/or employees by February 1, 2016 (paralleling the W-2 timeframe)) are now not due to be furnished until March 31, 2016.
  • The 2015 Forms 1095-B and Form 1095-C (which were originally required to be filed with the IRS by February 29, 2016) are now not due to be filed with the IRS until May 31, 2016 (for filings other than electronic filings).
  • For health coverage providers and employers filing electronically, the filing date with the IRS is extended from March 31, 2016, to June 30, 2016.  As a reminder, groups that file 250 or more returns are required to file electronically.

In the recent guidance, the IRS strongly encouraged those who are ready to meet the deadlines (without availing themselves of the transition relief/extensions of the Notice) to file and furnish the forms on time.  The IRS remains poised to accept filing beginning in January 2016. Note that since this relief provides automatic extensions for those who need it, no further extensions will be granted by the IRS (i.e., no extensions will be granted beyond the extensions described above).  Any previously filed extension will not be formally addressed (or granted).

Those who cannot meet the newly extended deadlines are still encouraged to file and furnish ASAP.  The IRS will consider “reasonable cause” when determining whether to abate any otherwise applicable penalties for late filing or furnishing.

A little breathing room for employers… Phew.  Now back to work.

Friday, December 11, 2015

Puzzle PiecesEver since ERISA was first promulgated, and notwithstanding consequential economic, societal and demographic changes, efforts at improving the nation’s employer-based retirement structure have had fits and starts mostly due to the failure of Congress and the Nation to revisit retirement policy in a meaningful way. A cynic (or maybe a pragmatist) would surely believe that Congress’ part in failing focuses primarily on using the retirement system as a tool to exact revenue for the federal treasury, contrary to policies that enhance tax advantages for retirement saving. The smoke and mirrors of Congressional budgeting lead to intentional ignorance of most of the impact of long-term revenue from the retirement system.(To say nothing of changes to the Social Security system, which is beyond the scope of this piece.)

ERISA was a wonderfully crafted and meaningful law when it passed more than forty years ago. Today, it still provides, in no small measure, the intended benefits and protections that were expected in 1974. But times change and so has the retirement system. When ERISA was passed, it focused on a system designed primarily to address defined benefit pension plans. Over the years, Congress has tweaked ERISA dozens of times, but taken together, the extent of changes and the voluminous regulations needed to give guidance to them do more to choke the system than to improve it.

Worst of all, a piecemeal effort at addressing the retirement system ignores the need to revisit and recreate a comprehensive national retirement policy. Periodic tweaking of nondiscrimination requirements and contribution limits does not portend sound retirement policy. Failing to address the demise of defined benefit plans and to adopt efforts (before it’s too late) to bring multiemployer plans back to solvency illustrates, in part, the failure to effect a comprehensive review and rededication to the retirement system.

When ERISA was promulgated, the Baby Boomers were just entering the workforce in large numbers. Today, they are leaving it in large numbers. The employer-based retirement system has moved from a predominantly defined benefit system to a predominantly 401(k) profit sharing system. For those employers who still maintain defined benefit plans, the common effort is to freeze the plans, terminate them or otherwise reduce the risk of having them. Employees who typically have little or no investment experience are left to invest their retirement savings essentially on their own. Small businesses are frequently shut out of the 401(k) profit sharing world due to cost and complexity. Retirees are living longer requiring a longer income stream. And, of course, complexity is rampant in the qualified plan world that may be more over-regulated than any other aspect of our government controlled structures.

In response to our failure to address sound retirement policy, many states have attempted to step into the breach. These states have adopted laws that would allow for some type of state-sponsored auto-enrollment IRA program so that employers could have their employees save on a tax-advantaged basis without incurring the cost and complexity of our refusal to revisit retirement policy. The current administration, recognizing that Congress will not address retirement policy in a meaningful way, has created the MyRA structure so that individuals can save and invest at least to a small extent. Of course, these piecemeal approaches to trying to do something that Congress won’t do will not reset a solid national retirement policy for the millennials, the Y generation, and for those that follow them.

The President directed the Department of Labor to figure out some way for the state-sponsored plans to avoid ERISA preemption, which the DOL has done. How’s that for a thoughtful, national effort to set retirement policy? Does it mean that the system, to get something done where Congress won’t, must turn to a place where participants and their savings are less protected than what a thoughtful Congress did in 1974? Probably so, unfortunately so. The states deserve a lot of credit for attempting to assist American workers, but it is not enough and points out the need to revisit national retirement policy. These additional programs will only contribute to a confusing and highly-regulated landscape making it even more difficult for employers and employees to properly decide on the best option for saving for retirement.

It’s time to convene a meaningful effort to re-establish a well-reasoned and beneficial retirement policy that will enhance and grow the employer-based system, protect the interests of employers and employees, incentivize savings, encourage employers to sponsor plans for their employees ( maybe even some sort of traditional defined benefit plan but where risk is shared), provide financial education to young Americans, limit the regulatory environment that undermines retirement savings, protect the treasuries of federal and state governments, and put our children and grandchildren on solid ground for their retirement futures. This would be a large undertaking, but so was the development of ERISA more than forty years ago. We have learned a lot about retirement in the intervening years, and surely the bright minds that work in this field every day can conjure up the foundation needed to establish a new and better national retirement policy for our children and grandchildren.

This post reflects the views of the authors and not necessarily Bryan Cave LLP.

Tuesday, December 8, 2015

Recently, the DOL released proposed amendments to the current procedural rules for employees claiming disability benefits under an ERISA plan. The proposed rules enhance existing procedures, mirror the procedural protections for claimants contained in the PHS 2719 Final Rule, and update the ERISA claims procedures (set forth in ERISA Section 503) to align with these standards.

Summaries of the major provisions follow:

  • Independence and Impartiality – avoiding conflicts of interest. All claims must be adjudicated in a manner which ensures that the persons making the decision are independent and impartial. The proposed rules specify that this independence and impartiality requirement mandates that decisions involving the hiring, compensation, termination, promotion, or similar matters of individuals making claims-related decisions, such as a claims adjudicator or medical experts, cannot be made based on the likelihood that the individual will support the denial of disability benefits.
  •  Enhanced Basic Disclosure Requirements. To assist claimants with fully evaluating whether an appeal is worth pursuing and to alleviate confusion, the proposal suggests that each adverse benefit determination notice should contain:
    1. A discussion of the decision, including the basis for disagreeing with a disability determination by the Social Security Administration, a treating physician, or other third party disability payor if the plan did not follow those determinations.
    2. The internal rules, guidelines, protocols, standards, or other criteria which were used to deny the claim, or a statement that these do not exist.
    3. A statement that the claimant is entitled to receive, upon request, relevant documents. Under the current ERISA claims procedures, this statement is only required to be provided when an appeal has been denied.
  •  Right to Review and Respond to New Information Before Final Decision. Claimants will have a right to review (free of charge) and respond to new evidence or rationales developed by the plan during the appeal process – instead of only after the appeal has been denied.
  •  Deemed Exhaustion of Claims and Appeals Processes. These proposed amendments strengthen the “deemed exhaustion” provisions in the current ERISA claims procedures as follows:
    1. Existing standards will be replaced by the more stringent 2719 Final Rules standards which require plans to follow all the requirements of the ERISA claims procedures, with an exception only for certain minor deficiencies, in order for a claimant not to have been deemed to have exhausted his/her administrative remedies under the plan.
    2. If the minor errors exception does not apply, the reviewing tribunal cannot give the plan’s decision special deference and must review the dispute de novo.
    3. Protection will be given to claimants whose attempts to pursue remedies in court under Section 502(a) of ERISA (based on deemed exhaustion) have been rejected by a reviewing tribunal.
    4. There is also a proposed safeguard provision for claimants who prematurely pursued a claim before exhausting the plan’s administrative remedies. Under this safeguard, if a court rejects a claimant’s request for review, the claim will be considered re-filed on appeal once the plan receives the court’s decision. The plan must inform the claimant of the resubmission and allow the claimant to pursue the claim.
  •  Coverage Rescissions – Adverse Benefit Determinations. This proposal adds a new provision to address coverage rescissions not already covered under the ERISA claims procedures. The proposed rule would amend the definition of an adverse benefit determination to include a rescission of disability benefit coverage that has a retroactive effect, whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time. This definition is modeled after the definition of rescission in the 2719 Final Rule but is much broader than the 2719 Final Rule’s definition as it is not limited to rescissions based on fraud or intentional misrepresentation of material fact. The proposed rule does not prohibit rescissions; instead, it equates them to adverse benefit determinations subject to the applicable ERISA claims procedures procedural rights.
  • Culturally and Linguistically Appropriate Notices. This proposal adds a new “safeguard” requirement that adverse benefit determinations must be provided in a culturally and linguistically appropriate manner in certain situations. Specifically, if a claimant is from a county where 10 percent or more of the population is only literate in the same non-English language, any notice to the claimant must include a one-sentence statement in the relevant non-English language about the availability of language services. If the proposed amendment is adopted as is, the plan will also be required to provide oral language services (such as a telephone hotline) in the non-English language and, upon request, provide written notices in the non-English language.

The proposed amendments are subject to a 60-day public comment period following publication in the Federal Register. Watch this space for further updates.