Retirement Plan Compliance
Cohen & Grigsby’s Employee Benefits group counsels employers, plan administrators, and others on issues affecting their retirement plans. Our Retirement Plan Compliance practice group works with all types of retirement plans, including traditional defined benefit pension plans, cash balance plans, profit sharing plans, 401(k) and 403(b) plans, employee stock ownership plans (ESOPs), and 457(b) plans sponsored by governmental and non-profit entities. Our role is to guide clients through the complex qualification and compliance rules of the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA) in everything from the initial implementation to the daily administration to the ultimate termination of these plans. Our attorneys:
- Draft plan documentation and IRS determination letter applications
- Handle participant claims and appeals
- Oversee plan conversions
- Assist with day-to-day administrative issues
- Evaluate and resolve complex benefit plan operational and documentary errors
We also advise a variety of church and governmental entities on the documentation and design of their plans, including the unique issues applicable to those plans. Our Executive Compensation and Nonqualified Plans team handles similar issues for nonqualified plans and arrangements.
Our Retirement Plan Compliance practice includes counseling clients regarding their fiduciary duties with respect to their various retirement plan arrangements. We frequently educate and train internal plan investment and administrative committees, managers, and other plan administrators regarding their fiduciary responsibility for plan decisions and investments. We provide advice to help our clients understand their fiduciary duties and alleviate their significant fiduciary liabilities for the investment and administration of these plans.
Many of our clients also contribute to multi-employer (or Taft-Hartley) plans for one or more collectively bargained groups within their workforce. In recent years, these multi-employer pension plans have been a common source of substantial liability for employers, and we regularly assist clients in remediating these liabilities and defending against contribution claims and matters related to potential withdrawal liabilities.
Retirement Plan Compliance
Retirement Plan Compliance
Breaking Benefits News
Watch this page for regular industry updates and insight from the attorneys in our ERISA and Employee Benefits practice group.
IRS Extends Deadline for 2016 Form 1095-C and Form 1095-B to March 2, 2017
On November 18, 2016, the IRS extended the deadline for furnishing to individuals the 2016 Form 1095-B (reporting of minimum essential coverage) and 2016 Form 1095-C (reporting of employer-sponsored coverage), from January 31, 2017 to March 2, 2017. The IRS, however, did not extend the deadline for filing with the IRS Forms 1094-B, 1095-B, 1094-C, or 1095-C. These Forms must be filed with the IRS by February 28, 2017 (March 31, 2017, if filing electronically).
Further, the IRS extended the relief from penalties associated with the Affordable Care Act information reporting requirements for reporting entities that can show that they have made good-faith efforts to comply with the information reporting requirements. This relief applies only for incorrect or incomplete information reported on the return or statement, and does not apply to reporting entities that fail to timely file an information return or furnish a statement.
For further information regarding this extension, please visit IRS Health Care Tax Tip 2016-78.
2017 Plan Limits
The Internal Revenue Service has announced 2017 Pension Plan Limitations; the 401(k) contribution limit remains unchanged at $18,000 for 2017.Category2017
Elective Deferral Limit for 401(k) and 403(b) Plans$18,000 415 Annual Additions Limit for Defined Contribution Plans$54,000 415 Limit on Annual Benefits for Defined Benefit Plans$215,000 Catch-up Contribution Limit$6,000 Annual 401(a)(17) Compensation Limit$270,000 Highly Compensated Employee Limit$120,000 SIMPLE Retirement Plan Contribution Limit$12,500
DOL Increases Penalties for Employee Benefit Plan Violations
The Department of Labor announced on June 30, 2016, that it will be increasing the penalties for various employee benefit plan violations under ERISA, effective August 1, 2016 (for violations occurring after November 2, 2015).
A complete list of the new penalty amounts can be found here, but below are highlights of the changes.
- The maximum penalty for a failure to file Form 5500 will increase from $1,100 to $2,063 per day
- The maximum penalty for a failure to provide a Summary of Benefits Coverage as required under health care reform will increase from $1,000 to $1,087 per failure
- The maximum penalty for a failure to provide a 401(k) plan automatic contribution arrangement notice under ERISA § 514(e) will increase from $1,000 per day to $1,632 per day
- The maximum penalty for a failure to furnish a 401(k) plan blackout notice will increase from $100 per day to $131 per day
- The maximum penalty for a failure to comply with certain ERISA recordkeeping and reporting requirements will increase from $11 per employee to $28 per employee
- The maximum penalty for a failure to file certain reports for multiple employer welfare arrangements as required by ERISA § 101(g) will increase from $1,100 to $1,502
Significant changes also include increases to penalties relating to group health plan failures to meet genetic information requirements. For example, the cap on unintentional failures will increase from $500,000 to $549,000.
Beginning in January 2017, the DOL will make annual inflation adjustments to ERISA penalty amounts.
IRS Announces that the AIR System Will Continue to Accept 2015 Form 1094-C/1095-C Filings Past June 30, 2016.
The IRS announced that the Affordable Care Act Information Return (AIR) System will continue to accept 2015 Form 1094-C and Form 1095-C filings past the June 30, 2016 deadline. Generally, the IRS will not assess late filing penalties against applicable large employers subject to the 2015 Form 1094-C and Form 1095-C filing requirements who have made legitimate efforts to register with the AIR System and file their returns by the June 30, 2016 deadline, provided that such employers try to file the returns as soon as possible.
IRS and DOL Announce that Plan Sponsors Should Not Complete Optional Compliance Questions on the 2015 Form 5500
The IRS and DOL have announced that plan sponsors should not answer several new compliance questions on the 2015 Form 5500, Form 5500-SF, and Schedule H, I, and R, because the questions were not timely approved by the Office of Management and Budget (OMB). The IRS had previously encouraged plan sponsors to answer the questions for the 2015 plan year, even though the questions were optional. However, without OMB approval, the questions should no longer be completed. A list of the questions that plan sponsors are not required to complete can be found at https://www.irs.gov/Retirement-Plans/IRS-Compliance-Questions-on-the-2015-Form-5500-Series-Returns.
IRS Clarifies Permissibility Of Mid-Year Changes To Safe Harbor Plans
The IRS clarified in Notice 2016-16 that mid-year changes to safe harbor plans and safe harbor notices are permissible under Code Sections 401(k) and 401(m), provided that the applicable notice and election opportunity conditions are satisfied and the mid-year change is not specifically prohibited by the Notice. The Notice prohibits the following mid-year changes:
- Increasing the number of completed years of service required for an employee to have a nonforfeitable right to the employee’s account balance attributable to safe harbor contributions under a QACA
- Reducing the number or otherwise narrow the group of employees eligible to receive safe harbor contributions
- Changing the type of safe harbor plan
- Modifying (or adding) a formula used to determine matching contributions if the change increases the amount of matching contributions, or to permit discretionary matching contributions
Additionally, the following mid-year changes are not subject to the Notice and would violate the safe harbor regulations, unless the applicable regulatory conditions corresponding to each specified change are satisfied:
- Adoption of a short plan year or any change to the plan year (permitted only as described in §§ 1.401(k)-3(e)(2), (3), and (4) and 1.401(m)-3(f)(2), (3) and (4)
- Adoption of safe harbor plan status on or after the beginning of the plan year (permitted only as described in §§ 1.401(k)-3(f) and 1.401(m)-3(g))
- Reduction or suspension of safe harbor contributions or changes from safe harbor plan status to non-safe harbor plan status (permitted only as described in §§ 1.401(k)-3(g) and 1.401(m)-3(h))
This announcement alleviates concerns of a blanket prohibition on mid-year changes to safe harbor plans. The Notice is effective for mid-year changes made on or after January 29, 2016.
IRS Extends Upcoming Deadlines for 2015 ACA Information Reporting
The IRS has extended the due dates for the Patient Protection and Affordable Care Act (“ACA”) reporting requirements to be filed in 2016 with respect to calendar year 2015 information. The deadline for furnishing to individuals Form 1095-B (“Health Coverage”) and Form 1095-C (“Employer-Provided Health Insurance Offer and Coverage”) have been extended from February 1, 2016, to March 31, 2016. The deadline for filing with the IRS Form 1095-B, Form 1095-C, Form 1094-B (“Transmittal of Health Coverage Information Returns”), and Form 1094-C (“Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns”), have been extended from February, 29, 2016 to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016, if filing electronically. These extensions apply to all filers effective immediately. Previous provisions regarding automatic and permissive extensions will not apply to the extended due dates and the IRS will not grant any requests for extensions that filers have already submitted. More information about the filing deadline extensions can be found in IRS Notice 2016-4.
2016 Retirement Plan Limits
The Internal Revenue Service has announced 2016 Pension Plan Limitations, which largely remain unchanged from 2015.Category2016
Elective Deferral Limit for 401(k) and 403(b) Plans$18,000 415 Annual Additions Limit for Defined Contribution Plans$53,000 415 Limit on Annual Benefits for Defined Benefit Plans$210,000 Catch-up Contribution Limit$6,000 Annual 401(a)(17) Compensation Limit$265,000 Highly Compensated Employee Limit$120,000 SIMPLE Retirement Plan Contribution Limit$12,500
“Small Group Health Plan” Redefined Under the ACA.
On October 7, 2015, President Obama signed The Protecting Affordable Coverage for Employees Act (H.R. 1624), which amends the Patient Protection and Affordable Care Act (the “ACA”) to include employers with 51 to 100 employees as “large employers” in the group health insurance market, with states having the option of treating employers with 51 to 100 employees as small employers. Before this amendment, employers with 1 to 100 employees were generally subject to the heightened ACA market reform rules applicable to small group health plans; however, states had the option to treat these employers as large employers for insurance coverage purposes through December 31, 2015. Commentators suggest that this change to the definition of a small group health plan could reduce premium costs for mid-sized businesses.
New Law Increases Information Return and Payee Statement Penalties.
As employers prepare to comply with the information reporting requirements relating to minimum essential coverage (Code Section 6055) and employer-sponsored coverage (Code Section 6056) under the Affordable Care Act (the “ACA”), a new law increases the penalties for failing to file correct information returns and to provide payee statements. Among other changes to the penalty structure, the Trade Preferences Extension Act of 2015 increases the maximum penalty for failing to file a correct information return from $100 per return to $250 per return as well as the maximum annual penalty from $1.5 million to $3 million. The increased penalties are effective for filings due after December 31, 2015 and apply to all information returns and payee statements subject to Code Section 6721, including, but not limited to, the ACA Code Sections 6055 and 6056 information returns, Forms W-2, and Forms 1099-R.
U.S. Supreme Court Rules Same-Sex Partners Have a Constitutional Right to Marry.
The U.S. Supreme Court ruled on June 26, 2015 in Obergefell v. Hodges that the right to marry is a fundamental right extended to same-sex couples under the due process and equal protection clauses of the 14th Amendment. The Court’s 5-4 decision requires each state to license same-sex marriages and recognize lawful same-sex marriages performed out of state. The ruling follows the Court’s 2013 Windsor decision that invalidated the Defense of Marriage Act (“DOMA”) and required recognition of same-sex marriage under federal law. While retirement plans were required to be amended by December 31, 2014 to comply with Windsor and related IRS guidance, this ruling could have far reaching effects for insured benefit plans, which are generally subject to state law. Employers are encouraged to review their plan documents and internal administrative procedures in light of the Supreme Court’s most recent ruling as we await further guidance from regulatory agencies.
U.S. Supreme Court Upholds Tax Subsidies for Federal Healthcare Exchanges.
On June 25, 2015, in King v. Burwell, the U.S. Supreme Court held that tax credits under the Affordable Care Act (ACA) are available to individuals who sign up for health insurance coverage on either state exchanges or on the federal exchange. The plaintiffs in the case argued that language in the ACA only made tax credits available to individuals who bought health insurance on an exchange “established by the State,” and therefore excluded anyone who bought health insurance on the federal exchange. However, in a 6-3 decision, the Court ruled that the ACA provisions describing the two types of exchanges were unclear and did not prohibit tax subsidies for people who bought coverage on the federal exchange. The Court also noted its interpretation that Congress did not intend for the viability of the ACA to turn on language in an ancillary provision.
IRS Announces Permanent Form 5500-EZ Relief Program.
On May 29, 2015, the IRS announced a permanent Form 5500-EZ relief program citing the success of the pilot relief program that ended June 2, 2015. Under the permanent relief program, “one-participant” plans and certain foreign plans that are not subject to Title I of ERISA (and, as a result, are ineligible for the DOL’s Delinquent Filer Voluntary Compliance Program) may file delinquent Form 5500-EZ returns with the IRS without submitting a statement of reasonable cause. A submission under the permanent relief program is subject to a $500 payment for each delinquent return, up to a maximum payment of $1,500 per plan. This new program is described further in Revenue Procedure 2015-32.
EEOC Proposed Wellness Regulations.
Proposed regulations have been issued by the EEOC to assist employers in determining whether or not a wellness program will be considered voluntary for purposes of the ADA. These long-awaited regulations – which are still subject to comment and revision – give employers an initial roadmap for wellness programs by essentially agreeing with the HHS that wellness incentives that are less than 30% of the employee-only health plan costs are voluntary for purposes of the ADA. The regulations also impose certain affirmative obligations on employers including making participation in wellness programs optional, prohibiting retaliation for failure to participate or to reach a health goal and also require the employer to make certain disclosures to employees regarding the privacy, use and confidentiality of their wellness plan information.
New IRS Procedures for Correcting Automatic Enrollment Errors.
Effective April 2, 2015, the IRS has modified its Employee Plans Compliance Resolution System (“EPCRS”) to improve the required correction of errors related to automatic enrollment and automatic escalation provisions. These EPCRS modifications are designed to make it easier for employers to self-correct errors related to the implementation of these automatic provisions, therefore encouraging employers to continue adopting these automatic arrangements for their employees. In addition, the new procedures make it easier for employers to correct failures to implement regular employee deferrals if the correction is completed quickly. More information about the modified correction procedures can be found in Revenue Procedure 2015-28.
New Section 162(m) Regulations.
On March 30, 2015, the IRS released final Code Section 162(m) regulations. The final regulations mirror the proposed regulations with a few small changes. Of particular note, the IRS emphasizes in the final regulations that certain equity compensation cannot be considered performance-based compensation unless the plan document specifically states “the maximum number of shares with respect to which options or rights may be granted during a specified period to any individual employee.” In adopting these final regulations, the IRS specifically notes that simply stating a maximum number of shares for the plan in general is insufficient to comply with the Section 162(m) exception for performance-based compensation. Any publicly held corporation that wishes to rely on the performance-based compensation exception to Section 162(m) should confirm that its equity-based compensation complies with this requirement by setting a limit on individual grants in the plan document.
U.S. Labor Department (“DOL”) Updates Family and Medical Leave Act’s Definition of Spouse.
On February 23, 2015, the DOL announced a rule change to the Family and Medical Leave Act (“FMLA”) in keeping with the Internal Revenue Service’s treatment of same-sex marriage. Under this new FMLA rule, an employer must recognize an employee’s same-sex spouse as his or her legal spouse for FMLA purposes if the marriage was legal in the state where it was performed (the “place of celebration” rule), regardless of whether it is legal in the state where the employee resides. The DOL has issued a helpful Q&A on their website here:http://www.dol.gov/whd/fmla/nprm-spouse/faq.htm.
PA Overturns Same-Sex Marriage Ban.
As a result of the same-sex marriage ban in Pennsylvania being overturned and recent IRS guidance, employers need to be aware of – and immediately implement – significant changes in employee benefit programs and Family and Medical Leave Act (FMLA) leave policies. For more information, see our C&G News Bulletin.
IRS Announces New Benefit Plan Notification Requirement.
Beginning January 1, 2014, a retirement or welfare benefit plan must report a change to the plan’s “responsible party” to the IRS using Form 8822-B within 60 days of the change. Changes that occurred prior to January 1, 2014 that have not yet been reported to the IRS must be reported prior to March 1, 2014.
2015 Plan Limits.
The Internal Revenue Service has announced 2015 Pension Plan Limitations; taxpayers may contribute up to $18,000 to their 401(k) plans in 2015.Category2015
Elective Deferral Limit for 401(k) and 403(b) Plans$18,000 415 Annual Additions Limit for Defined Contribution Plans$53,000 415 Limit on Annual Benefits for Defined Benefit Plans$210,000 Catch-up Contribution Limit$6,000 Annual 401(a)(17) Compensation Limit$265,000 Highly Compensated Employee Limit$120,000 SIMPLE Retirement Plan Contribution Limit$12,500 Social Security Wage Base (Old Age, Survivors)$118,500 Health FSA Salary Reductions$2,550 HSA Maximum Contribution (Self-only)$3,350 HSA Maximum Contribution (Family)$6,650
IRS Determination Letters No Longer Available to Adopters of Pre-Approved Retirement Plan Documents.
The IRS announced key changes to the determination letter program intended to streamline the determination letter process and eliminate under-utilized procedures. Effective May 1, 2012, adopters of pre-approved plan documents, except volume submitter adopters that have made changes to the pre-approved document, may no longer apply for individual determination letters on Form 5307. Instead, such sponsors should rely on the opinion letter issued to the document provider. The IRS also eliminated the elective nondiscrimination demonstrations to Form 5300 effective February 1, 2012 for individually designed plans and May 1, 2012 for adopters of pre-approved plans.
Final Regulations on Excepted Vision, Dental, and Employee Assistance Program Benefits.
On October 1, 2014, the Treasury Department, DOL, and HHS issued final regulations on “excepted benefit” requirements for vision, dental, and employee assistance programs under the Patient Protection and Affordable Care Act. The final regulations simplified requirements for exception of limited-scope vision and dental benefits from group health plan rules, as well as clarified the four conditions for exception of employee assistance programs from group health plan rules. The final regulations will be effective for plan years beginning on or after January 1, 2015 and are available at: http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=27833.
Treasury and IRS Will Recognize All Legal Same-Sex Marriages for Federal Tax Purposes.
The IRS announced on August 29, 2013, that same-sex couples who are married legally in a state, territory, or foreign country that permits same-sex marriage will be considered married for all federal tax purposes, regardless of where the couple lives. The IRS also ruled that the terms “spouse,” “husband and wife,” “husband,” and “wife” include individuals married to others of the same sex, and the term “marriage” includes marriage between individuals of the same sex. The updated definitions do not apply to registered domestic partnerships, civil unions, or similar relationships recognized under state law, regardless of the genders of the individuals entering into such formal relationships. These rulings will take effect on September 16, 2013. The Treasury and IRS plan to issue more guidance for employers concerning retroactive claims under employee benefit plans, as well as procedures for employers to request tax refunds for payroll taxes paid previously on health insurance and fringe benefits for same-sex spouses.
U.S. Supreme Court’s Hobby Lobby Decision Released.
On June 30, 2014, in Burwell v. Hobby Lobby Stores, Inc., the Supreme Court held that the contraceptive mandate under the Affordable Care Act (ACA) violates the Religious Freedom Restoration Act of 1993 (RFRA) with respect to closely held corporations. The owners of Hobby Lobby, a closely held corporation, challenged the contraceptive mandate on the grounds that 4 of the 20 contraceptive methods for which the Department of Health and Human Services (HHS) mandated coverage violated their religious beliefs. HHS had previously implemented an exception to the contraceptive mandate for religious nonprofit corporations, and the Supreme Court found it persuasive that the religious beliefs of the owners of Hobby Lobby and other closely held companies could be equally protected by a similar exception. We expect updated regulations to be forthcoming from HHS, the Department of Labor, and the Treasury Department in order to incorporate an exception for closely held corporations whose owners object to one or more of the ACA-required contraceptive methods on religious grounds.
Determination Letter Cycle D Ends January 31, 2015.
The second Cycle D submission period for determination letter applications for individually designed plans began on February 1, 2014. Cycle D, which ends January 31, 2015, is for employers with an EIN that has a last digit of 4 or 9. This does not apply to employers who use a prototype or volume submitter plan document.
DOL Revises COBRA Model Notices.
The DOL has updated the model language in its COBRA general notice and election notice to include more information about the health care coverage options available to employees through the exchanges established under the Affordable Care Act. The updated model notices include revised language explaining coverage choices for participants and information about the federal exchange website (the “Marketplace”). The new COBRA model general notice is available at http://www.dol.gov/ebsa/modelgeneralnotice.doc and the model election notice is available at http://www.dol.gov/ebsa/modelelectionnotice.doc.
New Pre-Approved Plan Documents Forthcoming.
The IRS has announced that it will soon be issuing opinion and advisory letters for pre-approved (master & prototype or volume submitter) defined contribution plan documents. Employers using pre-approved plan documents for profit sharing, money purchase, 401(k), or other defined contribution plans must restate their plans using one of these newly approved documents by April 30, 2016. If an employer adopts one of these pre-approved plan documents but with modifications, the employer can apply for its own IRS determination letter beginning on May 1, 2014.
IRS Issues Windsor Guidance for Employee Retirement Plans.
After the Supreme Court invalidated the Defense of Marriage Act (“DOMA”) in United States v. Windsor, there were several questions left open for retirement plan sponsors and employers. On April 4, the IRS issued some much-awaited guidance regarding these Windsor questions. If you are an employer who sponsors a retirement plan, your plan and your internal administrative procedures may need to be amended in order to comply with Windsor and with the new guidance. If an amendment is required, this amendment is required no later than December 31, 2014.
Supreme Court Holds That Severance Pay is Subject to FICA.
The U.S. Supreme Court recently held, in United States v. Quality Stores, that severance payments are taxable wages for purposes of the Federal Insurance Contributions Act (FICA), except in very limited circumstances not present in that case. The Supreme Court’s decision overturned an earlier ruling by the Sixth Circuit Court of Appeals that held that supplemental unemployment compensation benefits were not subject to FICA. This Supreme Court decision effectively disallowed an estimated $1 billion of potential employer refund claims that were pending based on the Sixth Circuit court’s earlier ruling.
Another Affordable Care Act Delay.
On February 10, 2014, the IRS and the Treasury Department issued their final play-or-pay regulations for employers. These regulations contained a few additional delays that will affect employers for 2015:
- For employers with 100 or more employees, these regulations contain a phase-in of the play-or-pay requirements. During 2015, these large employers will only be required to provide coverage to 70% of employees, and the 95% requirement won’t apply until 2016.
- For employers with 50 to 99 employees, the penalties are again suspended for 2015, and these employers have until 2016 to offer any coverage in order to avoid the penalties. In order to qualify for this relief, employers cannot reduce their workforce below 100 solely in order to qualify, and they cannot eliminate or materially reduce any existing coverage. Additionally, they will still be required to report on their workers and coverage during 2015.
- For employers with fewer than 50 employees, they continue to be exempt from the requirement to provide coverage and from the requirement to report coverage in any year.
In addition, many of the transitional reliefs offered in the original proposed regulations have been renewed for 2015 (such as the additional delay for non-calendar year plans, shortened measurement periods for the initial year, and a hiatus on the dependent coverage requirement for plans that are taking steps for such coverage to be effective in 2016). The IRS has also announced that they intend to issue additional regulations regarding the employer reporting requirements, and these regulations are expected to substantially streamline the reporting requirements for 2015 and beyond.
2014 Plan Limits.
The Internal Revenue Service has announced 2014 Pension Plan Limitations; taxpayers may contribute up to $17,500 to their 401(k) plans in 2014.
Category 2014 Elective Deferral Limit for 401(k) and 403(b) Plans IRC 402(g) $17,500 Annual Additions Limit for Defined Contribution Plans IRC 415(c) $52,000 Limit on Annual Benefits for Defined Benefit Plans IRC 415(b) $210,000 Catch-up Contribution Limit IRC 414(v) $5,500 Annual Compensation Limit
$260,000 Highly Compensated Employee Limit IRC 414(q) $115,000 Key Employee Determination Limit
$170,000 SIMPLE Retirement Plan Contribution Limit IRC 408(p) $12,000 Social Security Wage Base (Old Age, Survivors) $117,000
IRS Allows Annual Carryover of Unused Health Flexible Spending Account Balances.
The IRS has revised its “use it or lose it” rule for health flexible spending accounts (FSAs) to allow employees to carryover up to $500 of their unused account balances instead of forfeiting those funds at the end of the plan year. Plans that allow carryovers cannot also provide a grace period. To use the new carryover option, plan sponsors must amend their health FSAs to allow carryovers before the last day of the plan year in which the new rule will take effect. Special rules apply to amendments for plan years that begin in 2013.
Tussey Case is a Warning for Retirement Plan Fiduciaries.
A federal district judge recently ruled (in Tussey v. ABB, Inc.) that an employer violated its fiduciary duties to its 401(k) plan, and the court ordered the employer to pay the plan $35.2 million in damages. The fiduciary violations found by the court were: (1) replacing an existing fund option with a fund option that had significantly higher fees despite a history of underperformance, and (2) allowing Fidelity to charge the plan higher, nondiscounted recordkeeping fees while receiving discounted fees from Fidelity for other corporate services. Fidelity Investments, also named in the suit, was ordered to pay an additional $1.7 million to the plan for failing to transfer float income to the plan. Other named defendants included the company’s director of plan management, its employee benefits committee, and its pension review committee.
Self-Compliance Checklists (Health Plans).
Employers who sponsor health plans can now do self-compliance checks using checklists issued by the Department of Labor. These checklists address compliance with the Patient Protection and Affordable Care Act (PPACA) and with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The PPACA self-compliance checklist can be found at http://www.dol.gov/ebsa/pdf/part7-2.pdf. The HIPAA self-compliance checklist can be found at http://www.dol.gov/ebsa/pdf/part7-1.pdf. If you answer “No” to any question in either checklist, you most likely have a compliance problem that will need to be corrected.
Leased Employee Non-Compliance.
The IRS recently completed a compliance project on employers’ treatment of leased employees, and found that at least 65% of those sampled incorrectly identified or reported leased employees, or were otherwise improperly accounting for them for benefits purposes. This compliance project likely indicates that the IRS will be focusing on leased employee arrangements in future audit activity. Most errors relating to leased employees are correctable under voluntary compliance programs if addressed prior to IRS audit.
HRAs and Health Care Reform.
Employers with HRAs need to take note of Affordable Health Care rules that mandate the integration of HRAs, through specific methodologies, with employer-sponsored group health plans and mandate the inclusion of opt-out provisions for employees from the HRA, to give employees more flexibility in joining exchanges.
New HIPAA Regulations.
The HHS published new regulations that affect every HIPAA Covered Entity (including health plans) and Business Associate. At a minimum, these regulations require revised Business Associate Agreements, Notices of Privacy Practices and Breach policies/assessments. Also, BAAs are now required for subcontractors and the definition of a Breach has been significantly revised to remove the substantial risk of harm threshold.
OCR Publishes Audit Program Protocol for HITECH.
The Office of Civil Rights for the Department of Health and Human Services (“OCR”) issued a HIPAA Privacy, Security and Breach Notification Audit Program & Protocol. This is a searchable tool on the OCR website which lists each compliance obligation and audit protocols that should be addressed or reviewed by Covered Entities, Business Associates and auditors. See: http://www.hhs.gov/ocr/privacy/hipaa/enforcement/audit/index.html.
New EPCRS Expanded to Address 403(b) Plans.
On December 31, 2012, the Internal Revenue Service released a revised revenue procedure for the Employee Plans Compliance Resolution System (“EPCRS”). Churches, public schools, or private tax-exempt organizations sponsoring Code Section 403(b) retirement plans may now use EPCRS to correct plan document and operational failures that occurred on or after the effective date of the final regulations under Code Section 403(b) (generally January 1, 2009). EPCRS is available to correct failures that occurred in years prior to 2009 in violation of Code Section 403(b) with respect to the plan’s operation, other than a failure to operate in accordance with the plan document.
$1.5 Million HIPAA Violation.
Another HIPAA settlement – this time for $1.5 million for the theft of an unencrypted personal laptop with patient information on it. This theft was self-reported as a breach by the covered entity, Massachusetts Eye and Ear, Inc., which spawned an investigation by the Department of Health and Human Services (“HHS”). The HHS ultimately determined that the covered entity had failed to conduct an adequate risk analysis of portable electronic devices and implement appropriate security measures for those devices, violating the HIPAA Security Rule.
$1.7 Million HIPAA Violation.
The OCR reached a $1.7 million settlement with the Alaska Department of Health and Social Services (“DHSS”) for HIPAA violations. The matter had its genesis in a USB drive – which possibly contained electronic protected health information of Medicaid recipients – which was stolen from a DHSS employee’s car. DHSS had reported this stolen USB to OCR as a HIPAA Breach, which lead to an OCR investigation. During the course of this investigation, the OCR discovered that DHSS had not completed a risk analysis, implemented sufficient risk management measures, completed security training for its workforce members, or implemented device and media controls/encryption as required by the HIPAA Security Rule.
$100,000 HIPAA Violation.
A failure to have adequate HIPAA policies, train staff, appoint a security officer or conduct even a rudimentary risk analysis are all factors that led to the Department of Health and Human Services’ Office of Civil Rights (OCR) settlement with a Phoenix Cardiac Surgery group for $100,000 and a corrective action plan. This matter had its genesis in a complaint filed with the OCR because the Cardiac Surgery group posted patient appointments on an on-line publicly accessible calendar. This settlement demonstrates both the vigor with which the OCR is investigating matters, as well as the urgent need for even smaller medical groups to maintain HIPAA compliant policies and procedures that would allow for the defense of an OCR investigation.