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Updated: 18 weeks 16 hours ago

Anticipatory resignation not constructive discharge; FMLA claims fail

Thu, 03/29/2018 - 17:30

Affirming summary judgment for a school board, the Sixth Circuit agreed that a superintendent who resigned after the board first criticized her time away from work (some of it for FMLA-protected leave) and then audited the school district’s business office records to see if it was properly tracking time off could not show that she suffered a constructive discharge or other adverse employment action. As a result, her FMLA retaliation and interference claims failed.

Time away from work.

After taking six weeks of FMLA leave for a hip replacement, the superintendent’s elderly mother became ill, and the superintendent took intermittent FMLA leave for “the rest of the year.” At least one board member became critical of her time away from work, saying she was disappointed that the superintendent would not be present for another meeting and that the board had spent too much time working around her schedule. The board president even told one of his colleagues that the superintendent’s time away would be “subject to accountability on her annual evaluation.” In addition to FMLA leave, the superintendent had also been away on vacation and for business trips.

Retirement.

When the board suggested it would not approve her upcoming business travel plans, she said she would retire at the end of the following school year and accused the board of retaliating against her. And when the board responded to that by voting to audit the district’s business office—among other things to determine if it was accurately tracking administrators’ time off—the superintendent resigned effective the day before the auditors sent their report to the board. She then sued for FMLA retaliation and interference.

Constructive discharge?

Conceding that the board did not fire, demote, or discipline her for taking leave, the superintendent claimed she was constructively discharged. The doctrine does not protect employees who leave their job “in apprehension that conditions may deteriorate later.” To show that her working conditions were objectively intolerable, the superintendent argued that the board subjected her to months of hostility because it believed her leave was holding up the school district’s business. She recounted the board member and president’s comments, and she suggested the board-ordered audit was designed to find evidence of wrongdoing. Board members continued to complain about her, so much so that she said she had no choice but to resign.

Working conditions not intolerable.

Even viewed in the light most favorable to the superintendent, these conditions were not intolerable, said the court. First, the superintendent did not learn of the board president’s comment or the complaints about her performance until after she resigned; she learned of them in private emails produced during discovery. Since the superintendent was unaware of them during her employment, they can hardly be said to have created intolerable working conditions. Nor could the board’s criticism of her amount to constructive discharge when it was limited to a few isolated incidents, as it was here. “The fact that the board’s criticism was directed at the superintendent’s use of FMLA leave does not somehow flip a switch, suddenly making her working conditions intolerable,” said the Sixth Circuit.

Audit not intolerable.

Employers are permitted to investigate their employees for wrongdoing, including wrongdoing related to protected FMLA leave. And although there is an inherent tension resulting from an investigation by an employer of an employee, that tension does not rise to the level of intolerableness necessary to show constructive discharge. Because the superintendent could not show that she was constructively discharged, the appeals court affirmed summary judgment on her retaliation claim.

Interference.

As for the superintendent’s FMLA interference claim, she first contended that the board interfered with her leave when it conducted an audit and planned to give her a negative performance evaluation—essentially repackaging her retaliation argument. And there is Sixth Circuit precedent, in 2007’s Wysong v. Dow Chemical Co., holding that an employee could recover for retaliatory discharge under the FMLA’s interference theory—not just under the retaliation theory. When an employer takes an employment action based on an employee’s FMLA leave, the employer effectively denies the employee a benefit to which she is entitled, explained the appeals court. In the superintendent’s view, just like the retaliatory discharge in Wysong, the board’s audit and planned performance evaluation were based on the fact that she took leave, and thus constituted the denial of a benefit.

“Retaliation-lite.”

But that argument only goes so far, said the Sixth Circuit. Wysong did not alter the Circuit’s well-established rule that employees can only recover for an employer’s retaliatory actions under the FMLA if they show an adverse employment action. Wysong and all of the cases it relied upon involved retaliatory discharge; it “did not create a category of ‘retaliation-lite’ claims.” Regardless of what the superintendent called her claim, she had to identify an adverse employment action, and she failed to do so, because the board’s decision to conduct an audit was not an adverse employment action.

Not required to work following surgery.

Nor could the superintendent show the board interfered with her FMLA rights by requiring her to work while she was recovering from surgery. The board hired an interim superintendent to fill in for her; it did not require her to attend any board meetings during her recovery. But she voluntarily attended a board meeting and occasionally contacted the board and interim superintendent about work-related matters. “She cannot now claim that the board interfered with her rights by responding to discussions she initiated,” reasoned the appeals court. As for the one instance where the board actually initiated contact with her (when it requested a breakdown of her time away from work), it was a de minimis request that did not rise to the level of actionable interference. Accordingly, the board was entitled to summary judgment on her interference claim as well.

SOURCE: Groening v. Glen Lake Community Schools, (CA-6), No. 17-1848, March 12, 2018.
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AG coalition opposes DOL’s AHP expansion proposal, but would it increase health care access?

Wed, 03/28/2018 - 18:43

A coalition of 17 Attorneys General have registered their opposition to the Department of Labor’s proposed rule that would expand the criteria for forming association health plans (AHPs), in what they see as a move to evade the consumer protections enshrined in the Patient Protection and Affordable Care Act (ACA) and sabotage the health care reform law. AHPs have a long history of fraud, mismanagement, and abuse, with millions in unpaid claims for policyholders and providers, often leading to consumer bankruptcies, AG coalition leaders New York Attorney General Eric T. Schneiderman and Massachusetts Attorney General Maura Healey observed in a press release. The AGs echoed these and other concerns in comments they submitted about the proposed rule.

But not everyone sees the potential expansion of AHPs as a bad idea. These plans could provide better access to health care for small businesses, the self-employed, and gig workers, who often find themselves priced out of good options, according to proponents. AHPs could also provide nationwide industry-driven health insurance plans that may be more attractive than current options.

The DOL’s Employee Benefits Security Association said that the goal of the proposed rule is to expand access to affordable health coverage, particularly among small employers and self-employed persons, by “removing undue restrictions on the establishment and maintenance of association health plans under ERISA.” The proposal would impact association health plans, health coverage under these health plans, groups and associations of employers sponsoring such plans, participants and beneficiaries with health coverage under these plans, health insurance issuers, and also purchasers of health insurance not purchased through association health plans.

Associations as employer sponsors.

The proposed rule would broaden the criteria under ERISA Section 3(5) for determining when employers are permitted to join together in an employer group or association that is treated as the “employer” sponsor of a single multiple-employer “employee welfare benefit plan” and “group health plan” as defined in Title I of ERISA. By treating the association itself as the employer sponsor of a single plan, the proposed rule is expected to facilitate the adoption and administration of such arrangements.

Definition of ’employer’ modified.

The proposal would also modify the definition of “employer,” in part, by creating what EBSA said is a more flexible “commonality of interest” test for the employer members than the DOL has adopted in subregulatory interpretive rulings under ERISA section 3(5). The proposed rule would continue to distinguish employment-based plans-the focal point of Title I of ERISA-from mere commercial insurance programs and administrative service arrangements marketed to employers.

Working owners as employers and employees.

In addition, under the proposal, the working owners of an incorporated or unincorporated trade or business, including partners in a partnership, would be able to elect to act as employers for purposes of participating in an employer group or association sponsoring a health plan, and also to be treated as employees with respect to a trade, business, or partnership for purposes of being covered by the employer group’s or association’s health plan.

Should the proposal be withdrawn?

The DOL’s proposal would reverse decades of agency and judicial interpretation of ERISA’s key terms, with the primary purpose of undermining the ACA, according to the AGs. Because the DOL’s proposed changes would increase the risk of fraud and harm to consumers, undermine the current small-group and individual health insurance markets, and are also inconsistent with the text of ERISA and the ACA, the AGs say the proposed rule should be withdrawn.

ACA sabotage.

According to the AGs, the motivation for the proposed rule is to undermine the ACA. President Trump himself cited the sabotage of the ACA as the clear purpose of the proposal, stating while signing the order that he was “taking crucial steps towards saving the American people from the nightmare of Obamacare,” and tweeting the following day that “ObamaCare is a broken mess. Piece by piece we will now begin the process of giving America the great HealthCare it deserves!”

Critical protections undone.

Over the last few decades, Congress has legislated, including via the ACA, to protect health care consumers from AHPs’ fraudulent conduct, the AGs asserted in their comments. The proposed rule would undo critical consumer protections and unduly expand access to AHPs without sufficient justification or consideration of the consequences.

Projections forecast that the proposal, if finalized, would lead to several million enrollees shifting out of the ACA’s individual and small group markets into AHPs with far fewer health benefits, the AGs cautioned. Similar predictions indicate that proposed rule would increase premiums for those remaining in the individual ACA market.

Fraudulent and deceptive practices.

State Attorneys General have extensive experience protecting individuals and small employers from predatory entities that seek to defraud or deceive customers through the use of AHPs. They contend that the proposed rule is unlawful and would invite fraud and wrongdoing in the health insurance market that will threaten the health and financial security of consumers nationwide. And the AGs backed up their concerns with a series of examples:

  • In 2007, the operators of an association that deceptively marketed its discount health plan products to Massachusetts residents as “Affordable Healthcare Plans” and “Top Rated Insurance” were ordered to pay restitution to the defrauded consumers, a substantial civil penalty and attorney’s fees, and were permanently enjoined from engaging in various conduct in Massachusetts.
  • In 2009, pursuant to a consent judgment following Massachusetts’ consumer protection lawsuit, HealthMarkets, Inc., and its subsidiaries were ordered to pay $17 million resulting from unfair and deceptive practices through the sale of insurance products packaged with memberships in three different associations.
  • In 2011, the United States Life Insurance Company in the City of New York agreed to pay full restitution to consumers whom it required to join associations and to whom it misrepresented the terms, benefits, and (very limited) coverage provided by its plans, as well as the fact that the policies had not been approved for sale in Massachusetts.
  • In 2015, Unified Life Insurance Co. agreed to pay $2.8 million in restitution and civil penalties as a result of its deceptive and unlawful selling of short-term health insurance that was not authorized for sale in Massachusetts, but which it deceptively marketed through a third-party association.
  • In 2001, the Maryland Insurance Administration fined and revoked the registration of a MEWA administrator that engaged in “illegal and dishonest practices” such as failing to register as an insurer as required by state law, failing to pay premiums for stop-loss insurance contrary to representations made to employer members (and thereby exposing these employers to unexpected losses), and failing to pay claims for insured employees. Md. Ins. Admin. v. SAI Med Health Plan, LLC, No. MIA-6-1/01 (Md. Ins. Admin. Jan. 16, 2001.)
  • In 2005, the Maryland Insurance Administration fined and revoked the licenses of a MEWA’s administrator for failing to register with the state as required by law and making material misrepresentations regarding the relationship of the MEWA to the insured employees and, overall, engaging in conduct that was “dishonest and lacked … trustworthiness and competence.” Md. Ins. Admin. v. Dennis Kelly, et al., No. MIA-2005-07-004 (Md. Ins. Admin. Mar. 30, 2007).
  • From the 1980s through the early 2000s in California, AHP failures hurt employees across many different industries. For example, thousands of California farmworkers suffered when a plan created by Sunkist Growers collapsed, leaving nearly 5,000 medical providers with an estimated $10 million in unpaid claims. Similarly, when Rubell-Helms Insurance Services went out of business, it reportedly left $10 million in legitimate medical claims unpaid.

“The Trump administration’s rule is nothing more than an unlawful end run around the consumer protections enshrined in the Affordable Care Act, part of President Trump’s continued efforts to sabotage the ACA,” said Attorney General Schneiderman. “These so-called association health plans have a long history of fraud and abuse-leaving consumers holding the bag when an unforeseen medical issue arises.”

The comments on the proposed rule were submitted by the Attorneys General of New York, Massachusetts, California, Connecticut, Delaware, District of Columbia, Hawaii, Iowa, Illinois, Maryland, Maine, New Jersey, New Mexico, Oregon, Pennsylvania, Virginia, and Vermont.

Don’t we need more access?

Not everyone is focused on the potential downside of the proposed rule, looking instead at the additional access to health care that, if finalized, the proposal is said to provide. Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-Tenn.) has said that the proposal “could lower the cost of health insurance premiums and finally make affordable health insurance available to the 11 million American small business men and women and their employees or those who work for themselves-like farmers, or songwriters-who today are priced out of our health insurance system.”

Lowering costs.

Alexander contends that the proposed rule, by taking down barriers to allow more self-employed Americans and small businesses to band together in an AHP, would permit employers to reduce the cost of providing health insurance to their employees by “spreading the administrative costs, bargaining for better deals from insurers, and creating a way to bring in more healthy people, which brings down costs for everyone.”

“This proposed rule would mean access to lower-cost health insurance opportunities for small businesses,” according Alexander. He cited the example of small local restaurants or retailers in a rural area participating in a single AHP to be able to offer insurance to their employees.

“For the first time, self-employed Americans would have the ability to band together and obtain health insurance on similar terms to large businesses,” Alexander said. “That presents a new opportunity for hardworking farmers, gig economy workers like Uber and Lyft drivers, songwriters, and artisans who today are priced out of our health insurance system.”

Nationwide industry plans.

Alexander also pointed out the proposed rule would permit the formation of a new nationwide plan for all workers in an industry. He suggested that all of the local bakery owners from Nashville to Phoenix would be able to band together and offer health insurance coverage to their bakery employees

SOURCE: https://ag.ny.gov/sites/default/files/multi_state_ag_comment_letter.pdf
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Employee may have been fired for increased use of leave, not spending too much time in bathroom

Tue, 03/27/2018 - 17:34

Although an employee could not show she was fired—purportedly for spending too long in a bathroom—because of her age (53) or a disability, and thus those claims were dismissed on summary judgment by a federal district court in Louisiana, her FMLA claim survived her employer’s motion. A general manager’s declaration that the employee was observed spending excessive time cleaning a restroom did not explain who observed her, how she was observed, or how this was reported to the GM, and thus the court could not determine if the GM had the requisite personal knowledge. Further, the employee produced sufficient evidence of pretext, including doubt that she actually engaged in the underlying infraction; a decade long history of satisfactory performance; and close temporal proximity between her use of FMLA leave and her termination.

The employee began working as a casino housekeeper in 1997 and continued working as a custodian when the property was acquired by Sam’s Town Hotel and Casino in 2004. Assigned to the graveyard shift, she typically worked from 11 p.m. to 7 a.m. In July 2013, she began taking approximately one day of intermittent FMLA leave per month but by the time she was fired in March 2015, she was using four to six days per month.

Anonymous complaints.

In February 2015, Sam’s Town began an investigation into its graveyard shift after it received two anonymous complaints detailing employee misconduct. As a result, nine workers, including the employee, were fired.

Age discrimination.

The employee first argued that her termination at the age of 53 was based on unlawful age discrimination in violation of the ADEA. Sam’s Town argued, however, that while several custodians were hired in the six-month period after she was fired, none were hired to specifically replace her. Observing that of the five custodians hired during that period of time, four were within the protected class and two were older than the employee, and that she admitted she had no evidence she was discharged because of her age, the court found she failed to make her prima facie case of age discrimination.

Disability discrimination.

Nor could the employee establish a causal nexus between her termination and her claimed disability, said the court, noting she admitted in her deposition that until the time she was terminated, she experienced nothing she considered to be discriminatory at her workplace.

FMLA.

As to her FMLA claim, she alleged she was certified by her doctor to take intermittent leave in 2013 and that over time, she increased the amount she was using. She was fired, she suggested, because she continued to have health problems, continued to require medical leave, and her doctor would likely have extended her FMLA certification for another year.

To establish a causal connection, she relied on the “very close” proximity between her use of leave and her termination. She claimed she took FMLA leave on March 7, was suspended due to the investigation three days later, took an additional three days of leave during her suspension, and was terminated on March 14.

Too much time in the bathroom.

For its part, Sam’s Town argued that during the investigation into the two complaints, it discovered that the employee had spent over two and a half hours in a restroom during her shift, which constituted wasting time, loitering, and unsatisfactory job performance. In support of this assertion, Sam’s Town relied solely on the GM’s declaration, which the employee challenged in a motion to strike, arguing that the GM did not provide the date of any observation and never averred that she actually a film of the employee committing the violation or witnessed the employee committing the violation. Thus, the employee argued, it was not based on personal knowledge.

Granting the motion to strike as to the challenged part of the declaration, the court found it did not provide the necessary factual support for it to determine that the GM had the requisite personal knowledge. The GM did not explain who observed the employee, by what means she was observed, or how this information was reported to her. Because this was the only evidence proffered by Sam’s Town to explain why it terminated the employee, it failed to provide a legitimate, nondiscriminatory reason for the adverse action.

Pretext evidence.

Even if it were to consider the declaration, Sam’s Town would still not be entitled to summary judgment, said the court, noting that the employee presented sufficient evidence of pretext. In addition to denying that she committed the act for which she was fired, she asserted that she was never allowed to see any surveillance video showing her spending two and a half hours in the restroom. Nor was she was named in either of the two anonymous complaints although at least nine other employees were and, she alleged, she was the only one who was fired after the investigation who was not named in the complaints. She also asserted that throughout her entire employment, she never received any disciplinary action or warning for poor work performance and her performance evaluations were always satisfactory. This, said the court, was difficult to reconcile with the listed reason in her separation notice that she was fired due to “repeated performance related breakdowns.”

Reasonable belief.

As to the employer’s argument that it reasonably believed she spent that time in the restroom and acted on that basis, the court noted the two complaints, neither of which named the employee, and the GM’s declaration, which simply stated that the employee “was observed” spending two and a half hours in the restroom. Confronted with such “scant evidence,” the court could not say Sam’s Town reasonably believed the employee spent that time in the restroom and acted on that basis.

SOURCE: Miller v. Red River Entertainment of Shreveport, LLC (W.D. La.), No. 16-1256, February 7, 2018.
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Self-insurance health plan enrollment drops

Mon, 03/26/2018 - 18:37

Research from the Employee Benefit Research Institute (EBRI) finds very different trends in coverage by self-insured health plans for small versus larger private-sector establishments: While the percentages of smaller establishments with at least one self-insured plan increased between 2015 and 2016, self-insurance in larger establishments declined over that same period of time.

“Since the passage of the Patient Protection and Affordable Care Act, there has been speculation that an increasing number of small and midsized employers would convert their health plans from fully insured to self-insured plans,” said Paul Fronstin, director of the Health Education and Research Program at EBRI. “The rationale has been that several of the key ACA components-creditable coverage, affordability, essential benefits, and various taxes and fees-would drive up the cost of health coverage, making self-insurance a more attractive alternative for many cost-conscious employers.” Yet, EBRI’s research finds, overall enrollment in self-insured plans fell from 60 percent to 57.8 percent between 2015 and 2016.

EBRI’s Issue Brief, Self-Insured Health Plans: Recent Trends by Firm Size, 1996?2016, noted that the percentage of small establishments (less than 100 employees) that report offering self-insured plans actually did rise materially from 14.2 percent in 2015 to 17.4 percent in 2016. However, in 2016, the percentage of midsize establishments offering a self-insured plan fell from 30.1 percent to 29.2 percent. And, for large establishments (500 or more employees), the percentage offering self-insured options declined from 80.4 percent to 78.5 percent over the same time period.

Because large establishments employ so many more workers, the increase in self-insurance among small establishments was not large enough to offset the decline among large establishments, resulting in a decrease in the percentage of covered workers enrolled in self-insured plans.

The research confirmed that more small employers adopted self-insured plans; however, it raised questions about why the recent movement to self-insured plans in the midsized market may be reversing itself.

SOURCE: www.ebri.org
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Spencer’s Benefits NetNews – March 23, 2018

Fri, 03/23/2018 - 18:28
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Fifth Circuit vacates DOL fiduciary rule

A final rule promulgated by the Department of Labor in April 2016 expanding the definition of “investment advice fiduciary” conflicts with the text of ERISA and the Internal Revenue Code and is unreasonable under Chevron and the APA, the Fifth Circuit has held. Known as the “fiduciary rule,” the rule not only departs from the common law definition without good reason, it also breaks with 40 years of established regulatory interpretation. Because its provisions are not severable, the rule was vacated in its entirety. Chief Judge Stewart dissented.

        (Read Intelliconnect) »

Federal interest rates announced for pensions

The following interest rates have been announced for use in the operation and administration of qualified pension plans.

        (Read Intelliconnect) »

Massachusetts lacked standing to sue HHS over religious exemption

The Commonwealth of Massachusetts lacked standing to sue HHS over two interim final rules (IFRs) which expanded the religious exemption to the contraceptive mandate of the Patient Protection and Affordable Care Act (ACA), a federal district court in Massachusetts has ruled. Because the Commonwealth failed to set forth specific facts establishing that it would likely suffer future injury from HHS’ conduct, it lacked standing to prosecute the action and therefore their motion for summary judgment was denied, while that of HHS was granted.

        (Read Intelliconnect) »

Bipartisan retirement savings bill would encourage employee savings

Senate Finance Committee (SFC) Chairman Orrin G. Hatch, R-Utah and ranking member Ron Wyden (D-Ore.) on March 8 introduced the bipartisan Retirement Enhancement and Savings Bill of 2018 (RESA) (S. 2526). The measure aims to increase employer incentives to encourage employee retirement savings.

        (Read Intelliconnect) »

Confirm states’ authority to regulate MEWAs, NAIC says to DOL

In comments to the Department of Labor’s proposed rule on association health plans (AHP), the National Association of Insurance Commissioners (NAIC) recommends the DOL confirm the authority of states to regulate MEWAs. The NAIC, noting the “colorful and troubling history” of MEWAs, said it is important the final rule “not threaten the states’ ability to enforce existing laws or enact laws in the future that regulate insurance.”

        (Read Intelliconnect) »

Organizational leadership support makes a big difference for wellness plan success

While every organization is unique, certain initiatives are more prevalent in successful wellness programs when compared to initiatives offered by programs finding less success, according to recent research from the International Foundation of Employee Benefit Plans (IFEBP). The study, A Closer Look: 2018 Workplace Wellness Trends, found that companies that have involvement and support from organizational leadership and offer stress management programs yielded more successful results across the board. Some of those successful results were a positive impact on health care costs or higher employee participation rates.

        (Read Intelliconnect) »

HSA assets up 22 percent in 2017

Fri, 03/23/2018 - 17:55

The number of health savings accounts rose to 22 million at the end of 2017, holding over $45 billion in assets, according to recent research from Devenir. The 2017 Year-End HSA Survey noted that this is a year-over-year increase of 22 percent for HSA assets and 11 percent for accounts for the year ended December 31, 2017.
The survey also found the following:

  • HSA investments accelerate asset growth. A strong market helped propel HSA investment assets to an estimated $8.3 billion at the end of December, up 53 percent from 2016. The average investment account holder has a $16,457 average total balance.
  • Seasonally low unfunded accounts. Less HSAs (20 percent) were unfunded at the end of 2017 compared to 24 percent at the end of 2016.
  • Employer relationships become the largest driver of account growth. Direct employer relationships became the leading driver of new account growth, accounting for 41 percent of new accounts opened in 2017.

“A strong stock market and increased awareness of the role HSAs can have in planning for retirement health care costs propelled HSA investment assets higher, with HSA investments seeing the highest growth rate in over five years,” said Jon Robb, senior vice president of research and technology at Devenir.
According to Devenir, by the end of 2019, the HSA market will likely exceed $60 billion in HSA assets covering roughly 27.5 million accounts.

SOURCE: www.devenir.com

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Confirm states’ authority to regulate MEWAs, NAIC says to DOL

Thu, 03/22/2018 - 18:06

In comments to the Department of Labor’s proposed rule on association health plans (AHP), the National Association of Insurance Commissioners (NAIC) recommends the DOL confirm the authority of states to regulate MEWAs. The NAIC, noting the “colorful and troubling history” of MEWAs, said it is important the final rule “not threaten the states’ ability to enforce existing laws or enact laws in the future that regulate insurance.”
The DOL’s proposed rule, published in the Federal Register on January 5, 2018, would allow employers to join together as a single group to purchase insurance in the large group health insurance market. Employers could offer this employment-based health insurance via an AHP. ERISA generally classifies AHPs as MEWAs. Historically, a number of MEWAs have suffered from financial mismanagement or abuse, often leaving participants and providers with unpaid benefits and bills.
“The AHP Proposed Rule clearly and rightly confirms that Association Plans created under the new rules are still MEWAs and are fully regulated by the states (largely indirectly in the case of fully-insured MEWAs; directly in the case of non-fully-insured MEWAs). The provisions in ERISA that preserve state regulatory authority over the MEWA and the plans it may purchase are not modified in this proposed rule and, therefore, existing state authority is not changed,” the NAIC’s letter states.
In addition to concerns about state regulation, the NAIC commented that coordination between DOL and state insurance departments is critical and cautioned against an exception from state law for certain not fully-insured MEWAs. The NAIC also suggested the DOL postpone the effective date of the rule to 2020 to give states time to review their rules and regulations and facilitate a smooth transition.

SOURCE: www.naic.org
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Massachusetts lacked standing to sue HHS over religious exemption

Wed, 03/21/2018 - 18:36

The Commonwealth of Massachusetts lacked standing to sue HHS over two interim final rules (IFRs) which expanded the religious exemption to the contraceptive mandate of the Patient Protection and Affordable Care Act (ACA), a federal district court in Massachusetts has ruled. Because the Commonwealth failed to set forth specific facts establishing that it would likely suffer future injury from HHS’ conduct, it lacked standing to prosecute the action and therefore their motion for summary judgment was denied, while that of HHS was granted.

Background.

The ACA generally requires that employer-sponsored healthcare plans include a range of preventive care services on a no-cost basis. That requirement also mandates no-cost coverage with respect to women as provided for in comprehensive guidelines supported by the Health Resources and Services Administration (HRSA), an agency within HHS. HRSA enlisted the Institute of Medicine (IOM), which recommended that the services include all FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for women with reproductive capacity. Therefore, when the HRSA promulgated its Women’s Preventive Services Guidelines in August 2011, non-exempt employers were required to provide coverage, without cost sharing, for all FDA-approved contraceptive methods.

The ‘Church Exemption.’

In 2011 and 2012, HHS issued regulations automatically exempting churches from the contraceptive mandate under what became known as the “Church Exemption”. And, in 2013, they issued regulations providing an accommodation for objecting religious, non-profit organizations and institutions of higher education. That process was expanded to cover closely held, for-profit companies in response to Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), in which the Supreme Court held that the contraceptive mandate violated the Religious Freedom Restoration Act (RFRA) for certain for-profit employers.

Executive order regarding new regulations.

On May 4, 2017, the President issued an “Executive Order Promoting Free Speech and Religious Liberty,” that instructed agencies to consider issuing amended regulations to address conscience-based objections to the preventive-care mandate promulgated under section 300gg-13(a)(4). In accordance with the executive order, on October 6, 2017, HHS issued the two IFRs.

Expanded religious exemption.

The IFRs created an expanded religious exemption, exempting objecting entities “from any guidelines’ requirements that relate to the provision of contraceptive services.” The Religious Exemption Rule expanded objecting entities to include any non-governmental plan sponsor that objects to establishing, maintaining, providing, offering, or arranging (as applicable) coverage, payments, or a plan that provides coverage or payments for some or all contraceptive services, based on its sincerely held religious beliefs. The religious exemption also applied to institutions of higher education in their arrangement of student health insurance coverage to the extent of that institution’s sincerely held religious beliefs.
The Moral Exemption Rule provided an exemption for nonprofit organizations and for-profit entities with no publicly traded ownership interests that object to establishing, maintaining, providing, offering, or arranging coverage or payments for some or all contraceptive services, or for a plan, issuer, or third party administrator that provides or arranges such coverage or payments, based on its sincerely held moral convictions.

Impact on MassHealth.

In Massachusetts, almost two million residents are enrolled in their MassHealth program, and in addition, MassHealth serves as a secondary payer for approximately 150,000 residents who have commercial coverage, including employer-sponsored insurance and student health insurance, i.e. the MassHealth ‘wrap-around’ coverage for certain services not provided by the resident’s commercial insurance.

States are ‘not normal litigants.’

The court noted that the standing inquiry at issue was affected by the fact that the plaintiff was the Commonwealth of Massachusetts, and that “States are not normal litigants for the purposes of invoking federal jurisdiction.” (Massachusetts v. E.P.A., 549 U.S. 497, 518 (2007)). The U.S. Supreme Court previously articulated a variety of theories by which a state may attempt to invoke federal jurisdiction, such as to vindicate its sovereign interests, its quasi-sovereign interests or its non-sovereign interests. Sovereign interests and certain non-sovereign interests, such as proprietary interests, reflect a direct injury to the state itself. Massachusetts proffered three injuries to establish standing: an injury to the state fiscal interests, an injury to the health and well-being of its residents and a procedural injury under the Administrative Procedures Act (APA).

Proportional theory.

Massachusetts asserted that in the short and long term, the IFRs would inflict significant financial harm on the Commonwealth, which would be legally obligated to assume the costs of contraceptive, prenatal and postnatal care for many women who would lose coverage. Specifically, the IFRs would result in thousands of Massachusetts women losing coverage for contraceptive care and services. HHS on the other hand argued that such a “proportional theory” must fail as a matter of law because a state cannot establish standing based on a claim of injury from such alleged indirect effects. The court noted that even assuming that the Commonwealth’s theory were to succeed as a matter of law, they had not made the requisite demonstration of specific facts: general and hypothetical allegations of injury cannot succeed at the summary judgment stage where the Commonwealth needed to do more than merely allege legal injury.

Intervening ‘ACCESS Act.’

The court further found the Commonwealth’s assumption that it would be proportionally affected by the IFRs to be tenuous. The Commonwealth did not address the “ACCESS Act,” which was enacted after the filing of their lawsuit. That state statute was reported one month after the IFRs were promulgated and was signed into law two weeks later, and the court noted that enactment of the ACCESS Act rendered suspect the Commonwealth’s assumption that the IFRs would affect women proportionally throughout the country. Furthermore, the Commonwealth failed to establish that it was likely that any Massachusetts employers would avail themselves of the IFRs’ expanded exemptions.

No injury to quasi-sovereign interests.

Massachusetts also argued that the IFRs would inflict an injury to its quasi-sovereign interests in the health and wellbeing of its residents and in securing its residents from the harmful effects of discrimination. However, the court found that they also failed to set forth facts demonstrating such a claim. Quasi-sovereign interests are distinct from sovereign, proprietary and sovereign interests, and consist of a set of interests that a state has in the well-being of its populace.
Based on the foregoing reasons, the court found that the Commonwealth failed to demonstrate that it was likely to suffer an injury due to the IFRs, and that they therefore lacked standing to sue. HHS’ motion for summary judgment was granted.

SOURCE: Commonwealth of Massachusetts v. HHS, (D. Mass.), No. 1:17-cv-11930-NMG, March 12, 2018.
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Pension & Benefits NetNews – March 20, 2018

Tue, 03/20/2018 - 17:45
 

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Featured This Week

 

Employee Benefits Management News

 

  • Some benefits-related 2018 inflation adjustment amounts modified
  • Male sterilization or male contraceptives not allowable preventive care under HDHP rules
  • Number of paid sick days directly impacts how Americans use preventive care
  • Massachusetts lacked standing to sue HHS over religious exemption

Pension Plan Guide News

 

  • PBGC proposes conforming changes to guaranteed benefits and asset allocation regs concerning owner-participants
  • PBGC releases state-by-state pension payout information for 2017
  • EBSA announces OMB approval of retirement plan-related information collections

 

Employee Benefits Management News

 

Some benefits-related 2018 inflation adjustment amounts modified

The IRS has modified certain previously released inflation-adjusted amounts. Generally, these new inflation-adjusted figures apply to tax years beginning in 2018 or transactions or events occurring in calendar year 2018. The benefits-related modified items include the adoption credit, employee health insurance expense of small employers, and medical savings accounts (MSA). For more information, see ¶2113W.

        (Read Intelliconnect) »

Male sterilization or male contraceptives not allowable preventive care under HDHP rules

In Notice 2018-12, the IRS has clarified that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for a high deductible health plan (HDHP), is not an HDHP. For more information, see ¶2113Y.

        (Read Intelliconnect) »

Number of paid sick days directly impacts how Americans use preventive care

Researchers from Florida Atlantic University and Cleveland State University conducted a study to measure the link between an employee’s number of paid sick leave days and the use of vital preventive health care services like getting a flu shot. Results from this study provide compelling evidence that workers in the United States with paid sick leave are significantly more likely to engage in preventive health care behaviors than those without paid sick leave. For more information, see ¶2114B.

        (Read Intelliconnect) »

Massachusetts lacked standing to sue HHS over religious exemption

The Commonwealth of Massachusetts lacked standing to sue HHS over two interim final rules (IFRs) which expanded the religious exemption to the contraceptive mandate of the Patient Protection and Affordable Care Act (ACA), a federal district court in Massachusetts has ruled. For more information, see ¶2114E.

        (Read Intelliconnect) »

Pension Plan Guide News

 

PBGC proposes conforming changes to guaranteed benefits and asset allocation regs concerning owner-participants

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed rules to conform its guaranteed benefits and asset allocation regulations to changes in the phase-in rules for owner-participants under the Pension Protection Act of 2006 (PPA). ERISA Secs. 4022 and 4044 cover the PBGC’s guarantee of plan benefits and allocation of plan assets, respectively, under terminated single-employer defined benefit plans. Special provisions within these sections apply to owner-participants, who have certain ownership interests in their plan sponsors. PPA made changes to these provisions, which the PBGC has been operating under since they became effective. With these proposed regulations, the PBGC intends to increase transparency into its operations and provide guidance for plan administrators on the impact of the statutory changes. The proposed regulations would amend the PBGC’s benefit payment regulation by replacing the guarantee limitations applicable to substantial owners with a new limitation applicable to majority owners. For more information, see ¶20539m.

        (Read Intelliconnect) »

PBGC releases state-by-state pension payout information for 2017

The Pension Benefit Guaranty Corporation (PBGC) has released information about the amounts it paid out to retirees for 2017. The information is presented state-by-state (including U.S. territories) and, within each state, by congressional district. For more information, see ¶156k.

        (Read Intelliconnect) »

EBSA announces OMB approval of retirement plan-related information collections

The Employee Benefits Security Administration (EBSA) has announced that the Office of Management and Budget (OMB) has approved several collections of information concerning retirement plans. For more information, see ¶156d.

        (Read Intelliconnect) »

 

For more information, visit http://www.wolterskluwerlb.com/rbcs.

Poor performance, not pregnancy or maternity leave, led to termination

Tue, 03/20/2018 - 17:35

An employee who claimed her stronger-performing accounts were replaced with underachievers upon her return from maternity leave, which led to claims of performance deficiency and ultimately her termination, will not move forward with Title VII and FMLA claims, nor their state counterparts, a federal district court in California ruled, granting summary judgment. Her discrimination claims failed because she offered no evidence that the employer treated her differently from other employees—all of whom experienced reassignments—or evidence that the female employee who received her old accounts was a similarly situated employee outside of her protected class. Her FMLA interference claim—based on allegations of demotion and pressure to return early—was likewise unsupported.

Accounts reassigned.

In 2014, after four years of employment during which she was promoted from assistant underwriter to underwriter and developed a strong portfolio of construction industry business (her “book of business”), the plaintiff went out on maternity leave. Her leave began in June. Because of a pregnancy-related medical condition her leave was extended, and she did not return to the office until mid-January 2015. She alleged that, prior to her return, her supervisor “was pestering [her] to return back to work early[,]” although ultimately her return was delayed by several days at the request of that same supervisor. When she returned she learned that her book of business had been reassigned. She was given administrative work for a couple of weeks, during which time she was to receive training on the employer’s new online system, which had been implemented during her absence.

Post-leave performance issues.

Thereafter, she was given a new book of business that she claimed were underperforming accounts, but she was expected to secure quotas from those clients far in excess of what they had previously generated. In the meantime, her old accounts were being handled by a less senior female employee, who she contended had a romantic connection with the supervisor. The employee raised concerns about these changes repeatedly and told her supervisor that she believed she was demoted because of her maternity leave. Within a few months of her return, performance concerns about her had been raised. In May she received an overall “Needs Improvement” rating for her 2014-15 review based on her alleged failure to meet goals and “chronic tardiness.” She received a final written warning in September and was fired later that month.

Exhaustion of claims.

Prior to her termination she had filed complaints with the Department of Fair Employment and Housing and the EEOC. She filed suit in September 2016. Among other arguments made by the employer in its motion for summary judgment, it argued that the employee’s claims based on her termination and retaliation were not administratively exhausted. While the court concluded that the employee had properly exhausted her administrative remedies on her retaliation and unlawful discharge claims to the extent they were based on gender discrimination, it found no evidence of exhaustion as to the employee’s claim of unlawful termination to the extent that it was based on retaliation for her filing an administrative charge.

No prima facie case of discrimination.

Ultimately, the court granted summary judgment against her. With respect to the Title VII and FEHA claims concerning the employee’s termination, for which she identified gender as her protected class, the court concluded that the employee had made “little attempt to make a prima facie case.” Particularly, she failed to offer evidence that the employer had treated her differently than a similarly situated employee outside of her protected class. All employees experienced reassignments, the court noted, regardless of whether they took maternity leave. Also, the employee did not provide evidence that the employer had not imposed similarly heightened expectations on other underwriters. Indeed, she failed to offer evidence that other underwriters had been assigned higher-performing clients. The only individual she identified as having been treated more favorably was a female employee who had also taken maternity leave under the same supervisor in late 2013. A reasonable jury could not determine that she had established a prima facie case, the court concluded.

No evidence of pressure.

With regard to the employee’s FMLA and related state law claim, which was based on allegations that she was not returned to the same or comparable position upon her return from leave and that her supervisor had pressured her to return early, the court likewise granted the employer’s motion. The evidence the employee alleged supported her claims of pressure to return, showed only that the supervisor and HR department were trying to clarify when she intended to return. There was no evidence that the supervisor wanted her to return on a specific date or earlier than expected or that the employer’s communications with the employee were harassing.

No evidence of demotion.

In addition to providing very few details regarding her pre-maternity work, other than stating that she had a different book of business, the employee also failed to provide evidence that the change was a demotion. She did not provide evidence supporting her claim that she was given fewer responsibilities. Her work schedule and pay did not change. The administrative work she was given for the first two weeks was temporary, which the employee testified that she understood, and some of that time was used for training on the new online system. And, even if the court were to assume that the reassignment constituted a demotion, it was undisputed that reassignments had been made across the board. With regards to the employee’s new accounts, the target goals were adjusted based on their performance levels and while the employee was only able to generate relatively small numbers for them in 2015, subsequent underwriters were able to produce significantly higher numbers in the following years.

SOURCE: Clark v. Amtrust North America (N.D. Cal.), No. 16-cv-00561-MEJ, February 13, 2018.
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Organizational leadership support makes a big difference for wellness plan success

Mon, 03/19/2018 - 17:50

While every organization is unique, certain initiatives are more popular in successful wellness programs when compared to initiatives offered by programs finding less success, according to recent research from the International Foundation of Employee Benefit Plans (IFEBP). The study, A Closer Look: 2018 Workplace Wellness Trends, found that organizations that have involvement and support from organizational leadership and offer stress management programs yielded more successful results across the board. Some of those successful results were a positive impact on health care costs or higher employee participation rates.

Support from organizational leadership.

The IFEBP survey noted the importance of senior leadership involvement in wellness initiatives. The survey found that 57 percent of organizations experiencing a positive impact on health care costs involve organizational leadership in their programs, and 54 percent have company leaders communicate wellness information to employees. In addition, 53 percent of employers experiencing a positive impact on health screening data have organizational leadership communicate support for wellness efforts to employees.

“Whether a workplace wellness program is taking a more holistic approach or focusing on cost savings, this report distinctly revealed that it’s not only leadership support but, more specifically, leadership’s communication of the program to staff that is critical for program success,” said Julie Stich, associate vice president of content at IFEBP.

Stress management.

Among other attributes that impact workforce measures, a stress management program was another offering producing positive results. The survey found that 45 percent of organizations noticing a positive impact on health care costs encourage stress management programs, but only 21 percent of organizations with less successful programs do so. In addition, 43 percent of organizations experiencing a positive impact on employee engagement and satisfaction offer stress management programs.

SOURCE: www.ifebp.org/wellnesscloserlook
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Short-term plans could be a short-sighted solution

Fri, 03/16/2018 - 18:36

The combined effects of eliminating the individual mandate and expanding the use of short-term, limited-duration insurance policies would increase premiums and the number of individuals without minimum essential coverage, according to a new study from the Urban Institute. Referring to the study, Sen. Patty Murray (D-Wash) said, “this is some of the clearest evidence we have yet that Republicans’ politically-motivated health care sabotage is driving up health care costs for families-and that the Administration’s plan to allow insurance companies to sell ‘junk plans’ will raise costs and undermine protections for women and people with pre-existing conditions.”

Findings.

Repealing the individual mandate, expanding short-term, limited-duration insurance, and cutting federal investments in advertising and enrollment will lead to an additional 6.4 million people uninsured in 2019 compared with rates under prior law. Additionally, the proposed expansion of short-term, limited-duration policies would increase the number of individuals without minimum essential coverage by 2.5 million in 2019. The Urban Institute projects that the combined effects of these policy changes would also increase 2019 ACA-compliant nongroup insurance premiums by 18.2 percent in the 43 states that allow short-term plans. The policy changes would also raise government spending 9.3 percent higher than under current law.

Short-term policies.

Short-term, limited-duration insurance policies are not governed the Patient Protection and Affordable Care Act’s (ACA) guaranteed issue, guaranteed renewal, modified community rating, essential health benefit requirements, prohibitions on preexisting condition exclusions, annual and lifetime limit prohibitions, and other protections. Such policies are also not part of the ACA’s risk-adjustment system. Previously, utilization of short-term, limited duration insurance policies was restricted due to the fact that (1) an individual with only this type of coverage would have violated the individual mandate and (2) HHS prohibited short-term policies sold in April 2016 or later from coverage exceeding three months and required insurance companies to inform consumers that the policies would violate the individual mandate.

Proposed rule.

On February 21, 2018, the Departments of Treasury, Labor, and HHS issued a Proposed rule (83 FR 7437) which, if finalized, would increase the maximum length of short-term, limited-duration insurance policies to one year. Combined with the repeal of the individual mandate, the Urban Institute notes, “these policies could compete as medically underwritten, largely unregulated alternatives to the products sold in the ACA’s private nongroup insurance markets.” This could create a scenario where healthier individuals are pulled away from the ACA-compliant market, leaving that market with an enrollee pool which has higher than average health care needs.

SOURCE: www.urban.org
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Best-performing companies achieve significant health care cost savings

Thu, 03/15/2018 - 18:50

A group of best-performing companies has achieved a $2,251 per employee per year (PEPY) health care cost advantage over the national average in 2017 ($9,950 compared with $12,201), according to global advisory, broking and solutions company Willis Towers Watson’s 22nd annual Best Practices in Health Care Employer Survey.
Willis Towers Watson defines best performers based on their abilities to manage cost trends and efficiency, e.g., a company of 10,000 employees could realize savings of more than $22 million annually by implementing a broad set of effective strategies and practices. Willis Towers Watson classifies high-cost companies as those employers with spend above, and efficiency below, the national average. The financial advantage of best performers over high-cost companies is $3,583 PEPY ($9,950 compared with $13,533).
“Best performers understand there is no single strategy for managing costs and improving the well-being of their workforce,” said Julie Stone, a national health care practice leader at Willis Towers Watson. “They evaluate all aspects of their health and well-being benefit strategies and activities, and implement innovative, integrated practices to improve them.”
One area where best performers excel is with subsidization and plan design.

  • 34 percent of high performers implement spousal coverage surcharges when spouses have other coverage available (versus 20 percent of high-cost companies);
  • 21 percent of high performers review health care subsidies within the context of their Total Rewards programs (versus 8 percent of high-cost companies);
  • 77 percent of high performers offer account-based health plans (ABHPs) with health savings accounts (HSAs) (versus 63 percent of high-cost companies);
  • 30 percent of high performers offer ABHPs as the only plan option (versus 6 percent of high-cost companies); and
  • 45 percent of high performers use ABHP as a default option (versus 6 percent of high-cost companies).

“Best performers lead the way in developing health programs that keep costs down by continuously evolving the financial and plan aspects of health benefits,” said Erin Tatar, a national health management practice leader at Willis Towers Watson. “These companies attain their advantage through effective value-based designs, superior network and provider strategies, and activities that engage employees in healthier lifestyles.”
According to the survey, best performers do more to encourage and improve workforce well-being, using a variety of approaches.

  • 53 percent of high performers align the work environment and well-being programs with company culture (versus 16 percent of high-cost companies);
  • 59 percent of high performers sponsor worksite well-being campaigns and offer nutrition education or seminars (versus 39 percent of high-cost companies);
  • 51 percent of high performers sponsor programs or pilots that target specific conditions or high-cost cases (versus 33 percent of high-cost companies); and
  • 30 percent of high performers use a variety of financial and nonfinancial metrics to measure the impact of their health and well-being programs (versus 15 percent of high-cost companies).

Best performers are far ahead of organizations with higher health care costs when it comes to employee engagement in well-being, especially through company social networks. The survey showed that close to half of best performers (47 percent) engage employees through their company’s social networks (key influencers, testimonials and viral messaging), compared with 21 percent of high-cost companies. Forty-two percent of best performers use social recognition to boost engagement in health and well-being compared with 23 percent of high-cost companies, while 28 percent offer wearable devices for tracking physical activity versus 12 percent of high-cost companies.
Best performers are also ahead of peers in adopting new health care delivery solutions.

  • 85 percent of high performers offer health care delivery via telemedicine for professional consultations (versus 67 percent of high-cost companies);
  • 45 percent of high performers use centers of excellence within health plans (versus 29 percent of high-cost companies); and
  • 32 percent of high performers offer onsite or near-site health clinics (versus 18 percent of high-cost companies).

In addition, 57 percent of best performers formally monitor vendor performance through performance guarantees, compared with 34 percent of high-cost companies. The same percentage have a partnership with a third-party data warehouse, compared with 25 percent of high-cost companies.
The gap narrows between best performers’ pharmacy practices and those of organizations with higher health care costs, which may indicate that all employers are hyper-focused on rising pharmacy costs, especially for specialty medications. Best performers still lead the pack in adopting strategies to manage pharmacy cost. More than half (57 percent) evaluate pharmacy benefit contract terms, compared with 49 percent of high-cost companies. And more than a quarter (28 percent) evaluate their plan design to promote the use of specialty biosimilars, when available, compared with only 18 percent of high-cost companies.
“Best-performing employers take aggressive action in areas that can have the greatest impact in their employees’ health care,” said Jeff Levin-Scherz, M.D., North American co-leader, Health Management practice at Willis Towers Watson. “They put employees at the center of their health care strategy and benefit experience, and develop new ways to engage employees in improving their well-being. Our research shows this diligence can create a healthy, high-performance workforce and a competitive advantage for the company.”

SOURCE: www.willistowerwatson.com
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Financial health of large corporate pension plans improved modestly in 2017

Thu, 03/15/2018 - 18:30

The funded status of the nation’s largest corporate pension plans improved modestly at the end of 2017 compared with the end of 2016, according to recent research from Willis Towers Watson. This improvement was due to strong market returns and larger-than-expected employer contributions. According to the Willis Towers Watson analysis, the aggregate pension funded status is estimated to be 83% at the end of 2017, compared with 81% at the end of 2016.
Willis Towers Watson examined pension plan data for the 389 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December fiscal-year-end date. The analysis also found that the pension deficit is projected to have decreased to $292 billion at the end of 2017, compared with a $317 billion deficit at the end of 2016.
“Strong stock market performance throughout the year and robust employer contributions to their pension plans helped to boost funded status to its highest level since 2013 after several stagnant years,” said Matthew Siegel, a senior consultant at Willis Towers Watson. “Several plan sponsors contributed more to their plans last year than originally expected, most likely in response to rising Pension Benefit Guaranty Corporation premiums and growing interest in de-risking strategies, and potentially in anticipation of lower future corporate rates from tax reform. The improved funded position occurred even though pension discount rates finished the year down approximately 50 basis points from the beginning of the year.”
According to the analysis, pension plan assets increased in 2017, from $1.33 trillion at the end of 2016 to an estimated $1.43 trillion at the end of 2017. Overall investment returns are estimated to have averaged 13% in 2017, although returns varied significantly by asset class. Domestic large-capitalization equities returned 22% while domestic small-/mid-capitalization equities earned 17%. Aggregate bonds provided a 4% return; long corporate and long government bonds, typically used in liability-driven investing strategies, earned 12% and 9%, respectively.
The Willis Towers Watson analysis estimates that these companies contributed $51 billion to their pension plans in 2017, nearly double the amount needed to cover benefits accruing during the year. These contributions were higher than the $43 billion employers contributed to their plans in 2016.
Total pension obligations moved from $1.65 trillion to an estimated $1.72 trillion with the biggest changes being the increase for lower discount rates largely offsetting the decrease for benefits paid.
“The uptick in funded status is welcome news for many plan sponsors,” said Beth Ashmore, senior consultant at Willis Towers Watson. “As we look to 2018, we anticipate employers will begin to digest the new tax bill and what it may mean for their benefit plan financing. Employers should consider their broader pension management strategy as they make that evaluation, which may include reviewing their investment strategy or implementation of pension de-risking strategies, such as an annuity purchase.”

Source: Willis Towers Watson press release, January, 2018.
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Bill to improve HSAs would permit pre-deductible coverage of preventive care

Wed, 03/14/2018 - 18:16

The Bipartisan HSA Improvement Act will make HSAs more useful and effective for employers, according to the American Benefits Council. The bill was introduced recently by Representatives Mike Kelly (R-PA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN) and Ron Kind (D-WI).
“Workplace-based health insurance covers more than 178 million people nationwide, compelling employers to be innovative in managing rising health care costs,” Council President James A. Klein said. “Not only will the Bipartisan HSA Improvement Act give employers more flexibility in HSA-based plan design, it will also allow HSAs to take full advantage of cost-saving innovations like chronic care management and onsite and near-site health centers.”
The bill includes provisions that would:

  • Clarify that certain services and prescription drugs that prevent chronic disease progression are preventive care that will not be subject to a deductible;
  • Allow employers to provide primary care, chronic disease prevention, and other high-value services at on-site and near-site medical clinics without imposing a deductible;
  • Permit the use of HSA funds to pay for medical expenses for adult children up to age 26; and
  • Permit HSA contributions if a spouse has a health FSA.

As Klein noted in a letter of support for the legislation, our employer-based health insurance system “is predicated on smart tax incentives and companies’ ability to design and offer plans that best suit the needs of a modern workforce. HSAs are the direct descendants of this sound public policy, allowing employees and their families to take greater control of their health care.”

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Yard-Man inferences can’t create ambiguity in CBA to find lifetime vesting for retiree health benefits

Wed, 03/14/2018 - 17:52

In a per curiam decision concerning vested rights to lifetime health care benefits for retirees, the Supreme Court reversed and remanded a Sixth Circuit decision that had held that the same Yard-Man inferences it once used to presume lifetime vesting could be used “to render a collective bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” That approach was inconsistent with the High Court’s decision in M&G Polymers USA, LLC v. Tackett, which required ordinary principles of contract law to be applied to collective bargaining agreements (CBAs). Because Yard-Man inferences from International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc. (Yard-Man), CA-6 (1983), 716 F2d 1476 are not “ordinary principles of contract law,” stressed the Court in an unsigned opinion, they cannot be used to support more than one “reasonable interpretation” of a contract to create an ambiguity and bring in extrinsic evidence.

1998 CBA

Like Tackett, the case before the Court was a dispute between retirees and their former employer, CNH, about whether an expired CBA created a vested right to lifetime health care benefits. The operative CBA was from 1998 and provided health care benefits under a group benefit plan to certain “employees who retire under the … Pension Plan,” but it said that “all other coverages,” such as life insurance, ceased upon retirement. The group benefit plan was made part of the CBA and ran concurrently with it. The 1998 CBA said it disposed of all bargaining issues, whether or not they were presented during the agreement, and it contained a general durational clause that it would terminate in May 2004.
When the 1998 agreement expired in 2004, a class of retirees and surviving spouses filed suit, seeking a declaration that their health care benefits vested for life and an injunction preventing CNH from changing them. Tackett was decided while their lawsuit was pending. First granting summary judgment to CNH, after reconsideration, the district court awarded summary judgment to the retirees. The Sixth Circuit affirmed, reasoning that while it considered features of the CBA it previously had used to “infer vesting” under Yard-Man, nothing in Tackett precluded its analysis: “There is surely a difference between finding ambiguity from silence and finding vesting from silence.”

Tackett inferences

The Supreme Court rejected the appellate court’s analysis. A contract is not ambiguous unless, after applying established rules of interpretation, it remains reasonably susceptible to at least two reasonable but conflicting meanings, according to the Court. The 1998 CBA was not ambiguous unless it could reasonably be read as vesting health care benefits for life, reasoned the Court, and the Sixth Circuit interpreted it that way only by employing inferences that the Supreme Court rejected in Tackett. There were no explicit terms, implied terms, or industry practice suggesting that the 1998 CBA vested health care benefits for life. Instead, to find ambiguity, the Sixth Circuit applied several Yard-Man inferences. The appellate court declined to apply the general durational clause to the health care benefits, and then it inferred vesting from the presence of specific termination provisions for other benefits and the tying of health care benefits to pensioner status.
But Tackett rejected those inferences precisely because they are not “established rules of interpretation”—not because of the consequences that the Sixth Circuit attached to them (presuming vesting versus finding ambiguity). “They cannot be used to create a reasonable interpretation any more than they can be used to create a presumptive one,” stressed the Court. And no other court of appeals would find ambiguity in these circumstances. When a CBA is merely silent on the question of vesting, other courts would conclude that it does not vest benefits for life; when a CBA does not specify a duration for health care benefits, other courts would simply apply the general durational clause; and other courts would not find ambiguity from the tying of retiree benefits to pensioner status, concluded the Court.

No Yard-Man, no ambiguity, no lifetime vesting

Without those Yard-Man inferences, the case was straightforward. The 1998 CBA contained a general durational clause that applied to all benefits unless the agreement specified otherwise, and there was no provision subjecting health care benefits to a different durational clause. Plus, the CBA said that the health benefits plan “ran concurrently” with the CBA, thus tying the health care benefits to the duration of the rest of the agreement. Had the parties “meant to vest health care benefits for life, they easily could have said so in the text. But they did not.” Because the only reasonable interpretation of the 1998 CBA was that the health care benefits expired when the CBA expired in May 2004, the Court reversed and remanded.

Source: CNH Industrial N.V. v. Reese, U.S. Supreme Court, Dkt. No. 17-515, February 20, 2018.
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Male sterilization or male contraceptives not allowable preventive care under HDHP rules

Tue, 03/13/2018 - 18:17

In Notice 2018-12, the IRS has clarified that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for a high deductible health plan (HDHP), is not an HDHP. The Notice provides transition relief before 2020 to individuals with plans that provided coverage for male sterilization or male contraceptives without a deductible.

Background.

IRC Sec. 223 allows eligible individuals to deduct contributions to health savings accounts if they are covered under an HDHP and have no disqualifying coverage. Under the Patient Protection and Affordable Care Act, HDHPs are required provide preventive care benefits without imposing cost sharing requirements. Health Resources and Service Administration (HRSA) guidelines require that health plans provide coverage for contraceptives and sterilization for women with no cost sharing.

The HRSA guidelines do not provide for coverage of benefits or services relating to a man’s reproductive capacity, such as vasectomies and condoms. However, the IRS notes that several states have recently adopted laws that require certain health insurance policies and arrangements to provide benefits for male sterilization or male contraceptives without cost sharing.

Not preventive care.

Benefits for male sterilization or male contraceptives are not preventive care, and no applicable guidance provides for the treatment of these benefits as preventive care within the meaning of Sec. 223(c)(2(C). Accordingly, under current guidance, the IRS has found that a health plan that provides benefits for male sterilization or male contraceptives before satisfying the minimum deductible for an HDHP does not constitute an HDHP, regardless of whether the coverage of such benefits is required by state law.

Transition relief.

The IRS has provided transition relief for periods before 2020 during which coverage has been provided for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP. For these periods, an individual will not be treated as failing to qualify as an eligible individual under Code Sec. 223(c)(1) merely because the individual is covered by a health insurance policy or arrangement that fails to qualify as an HDHP solely because it provides (or provided) coverage for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP.

Comments requested.

Comments on Notice 2018-12 should include a reference to Notice 2018-12, and can be emailed to Notice.comments@irscounsel.treas.gov, or mailed to CC:PA:LPD:PR (Notice 2018-12), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

SOURCE: Notice 2018-12, I.R.B. 2018-12, March 5, 2018.
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Democratic staff of Joint Economic Committee warns Americans’ retirement security is headed for disaster

Tue, 03/13/2018 - 17:47

Americans’ retirement future is shaky and Congress must immediately enact policies to secure it, according to a February 2018 report from the Democratic staff of the Joint Economic Committee. Challenges to planning and saving for retirement include inadequate savings, stagnant wages, and limited access to low-cost and high return accounts, according to the recently-released “Retirement Security in Peril.”

Fewer DB plans

One cause of the lack of retirement security, says the committee, is the shift from employer-provided defined benefit (DB) plans, such as traditional pension plans guaranteeing lifetime income during retirement, to defined contribution (DC) plans, such as 401(k) plans and individual retirement accounts (IRAs). For those close to retirement, a financial crisis or economic downturn can profoundly diminish savings in DC plans, so that workers assume investment risks that, under DB plans, would have been borne by their employers.
DB plans now also often have a down side for employees, says the committee, since local and state pension plans, representing a majority of DB plans, have recently experienced benefit cuts, partly in response to the decline of state and local pension fund assets following the market crash of 2008. In addition, the committee estimates that there are about a million participants in underfunded multiemployer DB plans.

Gig economy

Many Americans have no access to an employer-provided plan and the committee partly blames the gig economy for this, with its accompanying increase in remote location independent contractors. The number of independent contractor workers is up over 50% since 2005, according to the report, and independent contractors now make up approximately 16% of the American labor force. These so-called contingent workers are two-thirds less likely to have access to employer-provided retirement plans than their traditional employee counterparts. By comparison, however, well over 30% of even full-time private-sector workers lack access to either a DB or DC plan through their employers.
The report cites 2013 statistics from the Economic Policy Institute which show that retirement savings accounts for families at the bottom 50% of the earning scale have declined by 17% since 1998. A median family’s retirement account in 2013 had only $5,000.
Another contributing factor to the increasing lack of retirement security, says the committee, is the rising cost of education. Older Americans, many of whom are parents who financed their Millennial children’s education, have an estimated $247 billion in outstanding student loan debt. Many DC plans do not allow participants to withdraw savings penalty-free in order to supplement a child’s tuition, and participants with student loan debt are more likely to have low retirement account balances and to neglect important health needs. Those who default on their loans often have to surrender about 15% of their Social Security benefits.

Recommendations

The committee points to various policy proposals that it says could help address the retirement crisis. First is a proposal that Congress modernize Social Security by raising the current payroll tax cap of $128,400. This would ensure, the committee says, that a larger share of wealthier Americans’ earnings would go into the Social Security trust fund.
The committee is also recommending that workers be given better access to employer-based retirement plans, perhaps by establishing “startup” tax credits for small businesses that offer retirement plans for the first time, or allowing businesses to pool their DC plans.
Coming up with a long-term solution to ensure the stability of the Pension Benefit Guaranty Corporation (PBGC) is also critical, says the committee, and it pointed to both the Joint Select Committee to Solve the Multiemployer Pension Crisis and the Butch Lewis Act of 2017 as ways to strengthen multiemployer plans. Numerous underfunded plans and the decreasing number of DB plans are putting the PBGC financial future at risk, according to the report.

Source: Joint Economic Committee “Retirement Security in Peril,” February 2018.
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IRS modifies some benefits-related 2018 inflation adjustment amounts

Mon, 03/12/2018 - 19:02

The IRS has modified certain previously released inflation-adjusted amounts. Generally, these new inflation-adjusted figures apply to tax years beginning in 2018 or transactions or events occurring in calendar year 2018. The benefits-related modified items include the adoption credit, employee health insurance expense of small employers, medical savings accounts (MSA), and health savings accounts (HSA).

Adoption credit.

The adoption credit is $13,810. The credit begins to phase out for taxpayers with modified adjusted gross income in excess of $207,140 and is completely phased out for taxpayers with modified adjusted gross income of $247,140 or more. The amounts of adoption assistance that can be excluded from an employee’s gross income is also $13,810, with the same phaseout as the adoption credit.

Employee health insurance expense of small employers.

For calendar year 2018, the dollar amount in effect under Code Sec. 45R(d)(3)(B) is $26,600.

Medical savings accounts.

For tax years beginning in 2018, the term “high deductible health plan” as defined in Code Sec. 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,300 and not more than $3,450, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,550. For family coverage, the term means a health plan that has an annual deductible that is not less than $4,550 and not more than $6,850, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,400.

Health savings accounts.

For calendar year 2018, the annual limitation on deductions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,450. For calendar year 2018, the annual limitation on deductions under Code Sec. 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,850.
For calendar year 2018, a “high deductible health plan” is defined under Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

SOURCE: Rev. Proc. 2018-18, I.R.B. 2018-10, March 5, 2018.
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IRS proposal to remove 298 unnecessary, obsolete regs affects retirement plan regs

Mon, 03/12/2018 - 19:01

The IRS has proposed removing 298 regulations, which are considered unnecessary, duplicative or obsolete. In addition, the Treasury proposes to amend another 79 regulations to reflect the proposed removal of the regulations. The regulations affected by this proposed rulemaking include retirement plan regulations.

Background

The Treasury began reviewing IRS regulations in response to two Executive Orders (EOs) issued in 2017. The first EO directed each agency to establish a Regulatory Reform Task Force (E.O. 13777, see Pension Plan Guide Newsletter, Issue No. 2248, March 14, 2017). In addition, each Regulatory Reform Task Force was directed to review existing regulations to determine which, among other things, were outdated, unnecessary or ineffective.
The second EO directed the Treasury to review all significant tax regulations issued on or after January 1, 2016 (E.O. 13789, see Pension Plan Guide Newsletter, Issue No. 2256, May 9, 2017). Accordingly, on June 22, 2017, the Treasury issued an interim report identifying eight regulations to be revised or withdrawn. On October 2, 2017, the Treasury issued a second report, noting that the IRS Office of Chief Counsel had identified over 200 regulations for potential repeal.

Unnecessary, obsolete regs

The regulations to be repealed fall into three categories:

  • Regulations interpreting Code provisions that have been repealed;
  • Regulations interpreting significantly revised Code provisions that do not reflect the revisions; and
  • Regulations that are no longer applicable.

These regulations’ removal is unrelated to the substance of rules they contain. Therefore, there is no negative inference regarding the stated rules, according to the IRS. The IRS proposes to remove these regulations from the Code of Federal Regulations solely because they have no current or future applicability. In addition, the IRS’s repeal of these regulations is not intended to alter any nonregulatory guidance that cites to or relies upon them.
The IRS also proposes to amend 79 existing regulations to remove cross-references to the 298 removed regulations. According to the IRS, these amendments will streamline and reduce the volume of regulations taxpayers need to review and increase clarity of the tax law.
Retirement-related regulations affected by these changes include regulations under Code Secs. 401, 402, 403, 404, 405, 410, 411, 412, 414, and 416. These regulations will be removed as of the date the Treasury decision adopting these proposals is published in the Federal Register.

Comments requested

Written or electronic comments and requests for a public hearing must be received by May 14, 2018. Comments should be mailed to: CC:PA:LPD:PR (REG-132197-17), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Also, submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-132197-17), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC, or sent via the Federal eRulemaking Portal at www.regulations.gov (REG-132197-17).

Source: 83 FR 6806
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