Internal Revenue Code § 119 allows employers to deduct 100% of the value of meals provided to employees when they are for the convenience of the employer, and they are furnished on the business premises of the employer. Meals provided for “the convenience of the employer” are also excludable from the employee’s taxable income. However, last month, the IRS announced that it plans to change that interpretation, which will have significant implications for both tax and wage and hour liability. The IRS announced as part of its Priorities Guidance Plan that it plans to issue new guidance regarding employer-provided meals, which we can assume is not a positive development for employers. The Wall Street Journal reported that IRS auditors have already started “flagging the issue and demanding back taxes from companies amounting to 30% of the meals’ fair market value.”
Articles about the Employee Retirement Income Security Act (ERISA) and other issues relating to employee benefit topics
IRS Issues Final and Proposed Regulations on Hybrid Pension Plans
The IRS recently issued long-awaited final regulations on hybrid pension plans, along with proposed transitional relief for hybrid pension plans that are not in compliance with the final rules. The newly issued final rules provide guidance on issues not covered in the final hybrid plan regulations that were issued in 2010, and clarify certain issues in the 2010 final regulations. The final rules are generally effective for plan years beginning on or after January 1, 2016, except that provisions in the final rules clarifying provisions in the 2010 final rules are effective for plan years beginning on or after January 1, 2011.
Ninth Circuit Joins First Circuit in Finding that the Elimination of a Pension Transfer Option does not Violate ERISA’s Anti-Cutback Rule
In Anderson v. DHL Retirement Pension Plan,1 the Ninth Circuit followed the First Circuit in finding that the elimination of the right to transfer an account balance from a defined contribution plan to a defined benefit plan does not violate the Employee Retirement Income Security Act of 1974’s (ERISA) “anti-cutback” rule. However, the Ninth Circuit reached its conclusion on a different basis than did the First Circuit.
Federal District Court Holds That Plan’s One-Year Limitations Period Is Unenforceable Under State Law
On the heels of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Acc. Ins. Co, a federal district court in New York has held in Halpern v. Blue Cross/Blue Shield of Western New York, 12-CV-407S (W.D.N.Y., Sept. 4, 2014) that a group health benefit plan’s shorter one-year limitations period is unenforceable because section 3221(a) of New York Insurance Law allowed for a two-year limitations period. Despite the fact that the New York’s Superintendent of Insurance approved the plan and had discretion to approve policies with provisions deviating from section 3221’s requirements, the court determined that a policy provision approved by the Superintendent could not run counter to the existing law.
HATFA Extends MAP-21 Pension Funding Stabilization
President Obama recently signed into law the Highway and Transportation Funding Act of 2014 (“HATFA”), which extends the pension smoothing provisions included in the 2012 Moving Ahead for Progress Act for the 21st Century (“MAP-21”). MAP-21 amended Section 430 of the Internal Revenue Code (the “Code”) to set interest rates for pension plan funding valuations at a range around the 25-year average of historical interest rates. Under MAP-21, the range was between 90% and 110% of the 25-year average for 2012, and would gradually expand to be between 70% and 130% in 2016. Under HATFA, the 90% and 110% range is extended for five years through 2017, after which the range expands to be between 70% and 130% in 2021.
Business Associate Agreements May Require Amendment
The Omnibus Final Rule (the “Omnibus Rule”) under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), was issued in January, 2013 effective March 26, 2013, but with a general compliance deadline of September 23, 2013. Compliance with the Omnibus Rule required changes to many HIPAA compliance practices and related documents, including business associate agreements, the HIPAA notice of privacy practices and breach assessment policies and procedures.
IRS Releases Draft ACA Reporting Form Instructions
On August 28, the Internal Revenue Service (IRS) released draft instructions for completing health insurance reporting forms required under the Affordable Care Act (ACA). The release of the instructions comes a month after the IRS released the draft forms employers and insurers must use to report information regarding health care coverage.
Agencies Issue New Regulations Governing ACAs Contraception Mandate
On August 27, 2014, new interim final regulations were published by several administrative agencies entitled “Coverage of Certain Preventive Services Under the Affordable Care Act.” On the same day, the agencies released a Notice of Proposed Rulemaking with the same title. As we have previously written, the Patient Protection and Affordable Care Act (ACA) imposes insurance coverage obligations on both non-profit and for-profit religious organizations. These coverage mandates have been the subject of extensive litigation.
DOJ Demonstrates Continued Focus on FCA Claims against Healthcare Entities
In 2009, Attorney General Eric Holder and Former U.S. Department of Health and Human Services Secretary Kathleen Sebelius created an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. According to the U.S. Department of Justice, the task force yielded historic results resulting in the recovery of $12.1 billion from January 2009 through September 2013. Of that amount, the DOJ claims it recovered more than $2 billion each year for healthcare fraud, reaching $2.6 billion in 2013. In 2014, this trend has continued with two Florida hospitals settling FCA claims with the DOJ last spring for $85 million and $7 million and another two healthcare entities recently settling with the DOJ for $2.2 million and $35 million.
Need Help Finding Your Plan’s Missing Participants?
The Department of Labor (DOL) recently issued a new Field Assistance Bulletin (FAB 2014-01) that provides guidance regarding the steps a plan administrator should take to fulfill his or her fiduciary duty to locate and distribute account balances to missing participants in terminated defined contribution plans. FAB 2014-01 replaces the 10-year-old Field Assistance Bulletin 2004-02 (FAB 2004-02). Since FAB 2004-02, many changes have occurred that warranted updated guidance. These changes include the discontinuance of the letter-forwarding services by the Internal Revenue Service (IRS) and the Social Security Administration, and the expansion in internet search technologies.
Federal Contractors See Hike in SCA Health & Welfare Rates
Executive Summary: On July 22, 2014, the U.S. Department of Labor (DOL) issued its annual memorandum announcing that, pursuant to 29 C.F.R. Section 4.52, the prevailing hourly health and welfare fringe benefit rates under the McNamara-O’Hara Service Contract Act (SCA) were increasing from $3.81 per hour to $4.02 per hour. The increase took effect immediately, and the new rate is posted on the DOL’s Wage Determinations (www.wdol.gov) and Wage and Hour Division (www.dol.gov/whd) websites. A special reduced rate of $1.66 per hour will apply to Hawaii because, under state law, most Hawaii employers are already obligated to provide their employees with health insurance. The new benefit rate was derived from the latest Bureau of Labor Statistics Employment Cost Index, summary of Employer Cost for Employee Compensation.
The Department of Health & Human Services Clarifies Applicability of Certain Provisions of the Affordable Care Act to Health Insurance Issuers in Puerto Rico
The Affordable Care Act (“ACA”) and its regulations have been incorporated into the Puerto Rico Health Insurance Code, as amended, and guidance has been issued by the Office of the Insurance Commissioner to such effect. The Department of Health & Human Services (“HHS”), however, has recently clarified that the following requirements imposed under the ACA, will not apply to individual or group health insurance in the U.S. territories, including Puerto Rico: (i) guaranteed availability; (ii) community rating; (iii) single risk pool; (iv) rate review; (v) medical loss ratio; and (vii) essential health benefits.
IRS Issues Draft ACA Reporting Forms
On July 24, 2014, the Internal Revenue Service (IRS) released draft forms that employers will use to report on health coverage that they offer to their employees. In March, the IRS issued final rules implementing the health coverage reporting requirements under the Affordable Care Act (ACA). The information reporting requirements become effective for the 2015 tax year.
Circuits Split Regarding Validity of Federal Subsidies of Health Insurance Purchased on Federally-Established Exchanges
Two federal appeals courts have issued opposing decisions regarding whether the IRS has the authority under the Affordable Care Act (“ACA”) to extend federal tax subsidies to individuals who obtain health insurance coverage through a federal Marketplace (also known as an Exchange).
Senate Committee Approves Bill Making ERISA Clarifications
On July 23, 2014, the Senate Committee on Health, Education, Labor and Pensions unanimously approved S. 2511, a measure that aims to clarify the definition of “substantial cessation of operations” under Section 4062(e) of ERISA. According to a statement issued by the committee, “this legislation will bring clarity to the pension downsizing liability rules and will ensure that there is a workable mechanism to protect pension benefits when employers show symptoms of financial distress.”
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