Fiduciary Duties and Missing Participants in Terminated Defined Contribution Plans

Posted by admin on September 12, 2014  |   No Comments »

On Aug. 14, 2014, the DOL published Field Assistance Bulletin (FAB) No. 2014-01, which replaces FAB 2004-02. As background, under the IRC, a plan administrator must distribute all plan assets as soon as administratively possible following plan termination. Before making distributions, the fiduciary is obligated to contact the plan’s participants to request direction on how to distribute the participants’ account balances. This becomes problematic when plan fiduciaries can’t locate certain plan participants.

ERISA Section 404 requires that plan fiduciaries act prudently and in the best interest of the plan’s participants and beneficiaries. Consistent with those requirements, plan fiduciaries must make reasonable efforts to locate missing participants or beneficiaries so that they may direct the distribution of their plan accounts. The FAB outlines what can be done when a plan fiduciary determines that a participant cannot be located.

In the new guidance, the DOL highlighted some of the changes that have occurred in the 10 years between FAB 2004-02 and FABA 2014-01. Specifically, the IRS and Social Security Administration (SSA) no longer offer letter-forwarding services to help employers locate missing plan participants. The DOL also acknowledged that Internet search technology has advanced tremendously since FAB 2004-02. The FAB takes those changes into account by eliminating the requirement that plan administrators use the discontinued letter-forwarding service and expanding the required search steps to include the use of electronic search tools.

The employer’s first responsibility in terminating the plan is to notify participants that the plan is being terminated and that their benefits will be distributed. This initial notification can continue to be done using certified mail or electronic notification. If the participant does not respond to this notice with instructions on the distribution, or if the plan fiduciary has a reason to believe that the plan does not have the most current address, then the fiduciary should take steps to locate the participant. The DOL laid out four steps that must be taken before abandoning efforts to locate a missing participant:

  • Use Certified Mail – This step is easy and cost-effective. The DOL has even provided a model notice that could be used for such mailings. (Appendix to 29 C.F.R. § 2550.404a-3 (2006) (amended 2008))
  • Check Related Plan and Employer Records – Other employer plans, such as the employer’s group health plan, may have updated address information for the participant.
  • Check with Designated Plan Beneficiary – Beneficiaries of the employee may be a source of updated information and could be located easier.
  • Use Free Electronic Search Tools – Plan fiduciaries must make reasonable use of free Internet search tools to search for a missing participant or beneficiary.

The DOL also identified additional search steps for employers who complete the required search steps and fail to locate a participant. When considering additional search steps, plan fiduciaries should consider the size of the participant’s account and the cost of further search efforts. Additional search steps include the use of paid Internet search tools, commercial locator services, credit reporting agencies, information brokers or investigation services.

The DOL also identified distribution options in the event that a fiduciary has exhausted all steps possible for locating a particular participant. Rolling the participant’s funds into an individual retirement account (IRA) is the DOL’s preferred option. However, other distribution options, such as opening an interest-bearing bank account or transferring the funds to a state unclaimed property fund, may be necessary if the fiduciary can’t find an IRA provider who will take the rollover funds.

In summary, terminating a defined contribution plan involves ERISA fiduciary decisions, and fiduciaries should consider the steps provided in this guidance when making decisions about the account balances of missing participants. Contact your advisor if you have any questions about the necessary steps to take in terminating a defined contribution plan.

Field Assistance Bulletin No. 2014-01

REGTAP Updates Keep Coming on Reinsurance Contributions and FF-SHOP

Posted by admin on September 10, 2014  |   No Comments »

The Registration for Technical Assistance Portal (REGTAP), operated by CMS, has issued additional FAQs and guidance clarifying information for both reinsurance contributions and federally facilitated SHOP (FF-SHOP) information. The selected FAQs and information below are a brief summary of highlights that may be of interest to employers.

On Aug. 13, 2014, REGTAP posted a number of FAQs addressing reinsurance contributions. A few notable questions are below:

FAQ 2644 clarifies that the counting methods for reinsurance contributions and the PCOR Fee are similar, but not the same. The major difference is that the reinsurance contribution is counted using the first nine months of a calendar year, while the PCOR fee uses a full 12 months.

FAQ 2692 clarifies that the reinsurance contribution is based on the calendar year regardless of the plan year.

FAQ 2726 clarifies who the covered lives are for purposes of reinsurance contributions. They include employees, retirees, spouses and dependents.

FAQ 2753 clarifies how the count for reinsurance contributions should be performed when a plan changes from self-insured to fully insured mid-calendar-year (and vice versa). The FAQ clarifies that each entity is responsible for paying the portion of the fee beginning on the date the reinsurance contribution applies to that entity, through the date during the year when the change was made using one of the allowable counting methods. Further guidance on this point was issued in a webinar and slides on Aug. 18, 2014 (described in more detail in the previous article). For example, using the actual count method, an employer would add the number of covered lives for each day (using zeros for the days that the party was not the contributing entity), then divide by the total number of days from January through September.
CMS Presentation »

FAQ 2657 clarifies that the health plan identifier (HPID) number is a separate requirement (still required by CMS) and is not used in the reinsurance contribution submission process.

FAQ 2524 clarifies that the second remittance for the reinsurance fee will be due by Nov. 15, 2015 (for the 2014 benefit year). However, the entire 2014 contribution may be paid by Jan. 15, 2015, if a contributing entity would prefer not to make two payments (reflecting $63 per covered life). In the alternative, a contributing entity may choose to break this up into two payments (with the $52.50 portion due Jan. 15 and the $10.50 portion due Nov. 15, 2015).

FAQ 2659 is a related question and emphasizes this point as well.

On Aug. 15, 2014, an update provided guidance on how to lay out upload files for submitting reinsurance contributions. The document outlines information that is relevant for both insurers and self-insured employers responsible for submitting their own reinsurance contributions by the Nov. 15, 2014, deadline.

Additional guidance relating to the FF-SHOP provided on Aug. 15, 2014, includes the following FAQs:

FAQ 3780 clarifies that employers in the FF-SHOP will not be able to have a 90-day waiting period. Instead, the FF-SHOP will only accommodate either immediate entry or first of the month following 15-, 30-, 45- and 60-day waiting periods.

A related question, FAQ 3769, clarifies that the FF-SHOP will enforce new hire waiting periods and send the applicable effective dates for new hire coverage directly to issuers.

FAQ 3765 clarifies that the FF-SHOP will provide both group-level and member-level termination notices.

FAQ 3766 clarifies that employers with locations in more than one state may enroll in one SHOP by using either a multi-state or national plan network. Or, they may enroll separately in each state SHOP.

FAQ 3778 clarifies that employees will be able to directly change and update certain fields, including dependent name, mailing address and phone numbers. However, other fields, such as date of birth and Social Security numbers, may only be updated by an employer.

FAQ 3781 clarifies that employees will have the ability to change plan selections multiple times up until the employer submits the final enrollment application. Once that has been submitted, an employee will be required to have a special enrollment period in order to change plans before renewal.

The summarized information provided above is not intended to be a comprehensive resource. It only highlights a few FAQs that may be relevant to employers. To ensure the most up-to-date and exhaustive information available, please register for REGTAP updates.

CMS Presentation Provides Clarification on Reinsurance Contribution Questions

Posted by admin on September 8, 2014  |   No Comments »

On Aug. 18, 2014, CMS continued its educational efforts related to the reinsurance contribution submission process. During the webinar, representatives reminded contributing entities that the enrollment counts are based on January through September of the calendar year, not a group’s specific plan year. The only exception to this rule is a self-insured group health plan that chooses to use the Form 5500 counting method to calculate its enrollment. The group must have filed a Form 5500 in the prior plan year. The group would be reporting the enrollment based on the prior plan year rather than the calendar year.

CMS representatives also addressed the question of how contributions would be calculated for a plan that switched funding methods midyear (for example, from fully to self-insured). In the example provided, both the insurer and employer plan sponsor would submit an enrollment count report, use the actual count method and be responsible for a partial payment.

Contributions are not required for covered lives under a plan that is supplemental or secondary to the group health plan coverage when contributions for the same covered life have been made under the group health plan. This is an important clarification for employers who may sponsor multiple arrangements covering the same lives.

As a reminder, an insurance carrier will generally be responsible for the filing and payment of the reinsurance contributions for a fully insured plan while an employer plan sponsor will generally be responsible for a self-insured plan. NFP Benefits Compliance has many resources related to reinsurance contributions. Please ask your advisor for additional information.

CMS Presentation

CMS Announces Two Additional Special Enrollment Periods for the Marketplace

Posted by admin on September 5, 2014  |   No Comments »

Enrollment in the marketplace is currently closed unless an individual is eligible for a special enrollment period (SEP). On Aug. 4, 2014, CMS announced two SEPs related to Medicaid:

  • An individual who attempted to apply for individual coverage in the marketplace by March 31, 2014, but because of system issues did not complete the application until April 1, 2014, through April 15, 2014. The individual was transferred to his/her state Medicaid or CHIP agency and was later denied coverage by that agency.
  • An individual who applied at either the state Medicaid agency or marketplace and was denied Medicaid coverage, and the denial was due to the individual’s income being below 100 percent of the federal poverty level and the state not expanding Medicaid eligibility and programs. The individual’s income has since increased, making him or her eligible for an advance payment of the premium tax credit or cost-sharing reduction.

Individuals qualifying under either condition should contact the marketplace if they are interested in purchasing coverage. Individuals who wish to purchase coverage but who are not eligible for a SEP have to wait until the marketplace open enrollment period scheduled for Nov. 15, 2014, through Feb. 15, 2015.

CMS Announcement

Agencies Issue Interim Final Rule, Model Notice and Proposed Rule Addressing Religious Exemptions from Contraceptive Mandate

Posted by admin on September 4, 2014  |   No Comments »

On Aug. 22, 2014, HHS, the DOL and EBSA jointly released much-anticipated key guidance incorporating the U.S. Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), into existing regulations. The guidance includes an interim final rule, a new proposed rule applicable to closely held for-profit entities and a new model notice.

The current regulations already provided for an accommodation process (using a self-certification form, EBSA Form 700) with respect to the requirement to offer contraceptive coverage for non-grandfathered employer-sponsored group health plans at zero cost sharing for those plans established and maintained by certain nonprofit religious employers, as well as those who are religious-based institutions of higher education. However, due to the Hobby Lobby Stores decision, the newly issued interim final regulations expand this accommodation by outlining a second process that nonprofit religious organizations may use to provide notice of their religious objections with respect to providing some, or all, contraceptive coverage. The interim final rule essentially allows for an alternative pathway so that participants may still access coverage for the full range of FDA-approved contraceptives, as prescribed by a health care provider, without cost sharing. The nonprofit religious employer will provide notice to HHS of their religious objection, and then HHS and the DOL will notify insurers and TPAs so that enrollees may receive separate coverage for contraceptive services with no additional cost to the enrollee or employer. The interim final rule solicits comments, but goes into effect immediately upon publication in the Federal Register tomorrow (Aug. 27, 2014).

In conjunction with the interim final rule, HHS provided a model notice to be used by “eligible organizations” to notify the Secretary of HHS of a religious objection to cover: 1) all contraceptive services, or 2) a subset of contraceptive services. The notice may also, but is not required to, be used by an eligible organization to provide updated information to HHS. If the eligible organization establishes or maintains more than one plan, it may submit a separate notice for each plan, or it may modify the model notice accordingly. At their option, an eligible organization may provide alternative notice or may continue to elect to self-certify using the existing EBSA Form 700 and send a copy to each health insurance issuer and TPA.

Finally, the agencies also issued a proposed rule soliciting comments on how they might extend the same accommodations outlined above to closely held, for-profit entities (like Hobby Lobby). Under the proposed rule, the definition of “eligible organization” would be expanded to include closely held for-profit entities that have a religious objection to providing coverage for some or all of the contraceptive services otherwise required to be covered. Such organizations would not have to contract, arrange, pay or refer to contraceptive coverage to which they object on religious grounds.

The proposal outlines and asks for comments on two approaches for how to define a “closely held for-profit” entity:

  • Under the first proposed approach, a qualifying closely held for-profit entity would be an entity where none of the ownership interests in the entity are publicly traded and where the entity has less than a specified number of shareholders or owners.
  • Under the second alternative approach, a qualifying closely held entity would be a for-profit entity in which ownership interests are not publicly traded, and in which a specified fraction of the ownership interest is concentrated in a limited and specified number of owners.

The proposal also seeks comments on whether other steps might be appropriate to implement this proposed rule. In the meantime, such employers can use either EBSA Form 700 or the model notice described above to notify their insurers and TPAs of their intent to decline offering all, or some, contraceptive coverage.

CMS Overview Web Page
Interim Final Rule
Proposed Rule
EBSA Form 700
Model Notice

IRS Confirms Premium Tax Credits Remain Available in Federally Facilitated Exchanges

Posted by admin on September 3, 2014  |   No Comments »

On Aug. 1, 2014, the IRS provided a statement confirming that premium tax credits remain available for the federally run and state-run health insurance exchanges. This statement was issued after two federal appeals court rulings regarding premium tax credits were issued July 22, 2014. Please see the July 29, 2014, Compliance Corner article entitled “Appellate Courts Disagree on IRS Ability to Administer Premium Tax Credits and Cost-sharing Subsidies in Federally Facilitated Exchanges” for more information concerning the two rulings.

NFP Benefits Compliance will continue to monitor the development of this important issue, and will provide additional information on future guidance.

IRS Statement

Second Circuit: Terms of Collective Bargaining Agreement Do Not Constitute a Plan Document

Posted by admin on September 2, 2014  |   No Comments »

On Aug. 1, 2014, the U.S. Court of Appeals for the Second Circuit held that the terms of a collective bargaining agreement (CBA) are not governing plan documents for purposes of ERISA. In Silverman v. Teamsters Local 210 Affiliated Health and Insurance Fund, No. 13-392-cv(L) (2nd Cir. 2014), the Union Mutual Medical Fund (UMMF) asserted three claims against the Teamsters Local 210 Affiliated Health and Insurance Fund (210 Fund), one of which was that the 210 Fund had violated the terms of an ERISA plan by failing to comply with terms in the CBA previously negotiated between the two parties. Specifically, the 210 Fund failed to forward contributions to the UMMF in the manner set forth in the CBA.

In deciding whether this failure to follow the CBA terms constituted a violation of the plan terms, the court relied on previous case law, determining that the terms of an ERISA plan are generally set out in the governing trust document and SPD. The court further reasoned that neither UMMF nor the district court provided any case law to support the idea that a CBA is in fact a governing plan document. Additionally, the court found that where the plan document did not require the contributions set forth in the CBA, the CBA could not “transmute” that requirement into the plan document. As a result, the court determined that CBAs do not constitute plan documents, and failure to follow CBA terms does not constitute the failure to follow plan terms.

For employers and funds that are parties to CBAs, this case is a reminder to carefully draft plan documents and SPDs to include any mutually agreed upon requirements placed in related CBAs.

Silverman v. Teamsters Local 210 Affiliated Health and Insurance Fund

IRS to Host Webinar for Large Employers Regarding Section 6056 Reporting

Posted by admin on August 29, 2014  |   No Comments »

In 2016, applicable large employers with 50 or more full‑time‑equivalent employees must file new reporting forms with the IRS, as required by IRC Section 6056. Employers will need to report employer‑sponsored coverage that was offered to full‑time employees during 2015. The purpose of the reporting is to administer and enforce the employer mandate, also known as employer shared responsibility. While employers with 50 to 99 full‑time‑equivalent employees may be eligible for relief delaying compliance until 2016, they will still be required to report certain information for 2015. On Aug. 14, 2014, the IRS will host a webinar summarizing employer requirements under Section 6056.

Registration for Upcoming Presentation

REGTAP Continues Educational Efforts Related to Reinsurance Contributions

Posted by admin on August 28, 2014  |   No Comments »

As reported in the last edition of Compliance Corner, CMS recently issued guidance related to the reinsurance contributions that are first payable Jan. 15, 2015. Plan sponsors of self-insured plans must report the average enrollment count by Nov. 15, 2014, unless they have an agreement with a TPA or administrative services carrier to do so on their behalf.

REGTAP is hosting a series of webinars to educate contributing entities, including plan sponsors of self-insured plans. The recently issued guidance was also presented in a webinar entitled “The Transitional Reinsurance Program: Submission of Annual Enrollment and Contributions Through” The slide deck for that webinar is now available online at The next webinar in the series, “The Transitional Reinsurance Program: Submission of Supporting Documentation Through,” will be presented Aug. 11–13 and Aug. 15. The same material will be presented all four days, and attendees may register for the date of their choice. Individuals who are new to REGTAP will need to first register for a website ID and password before registering for the presentation.

Archived Slide Presentation
Registration for Upcoming Presentation

CMS Issues FAQs Relating to Medicare and the Marketplace

Posted by admin on August 27, 2014  |   No Comments »

On Aug. 1, 2014, CMS published a document containing several FAQs relating to the interaction of Medicare and marketplace coverage. The FAQs do not contain additional requirements for employers, but may be of general interest, particularly for employers with Medicare‑eligible employees and employers that are purchasing coverage through SHOPs.

The FAQs clarify that individuals who are covered by Medicare cannot enroll in individual market coverage, since the Social Security Act prohibits the sale or issuance of individual coverage to a Medicare beneficiary. However, if the individual was first covered under the individual plan and later enrolls in Medicare, the individual can remain on the individual plan, although he or she may lose any premium tax credits or cost-sharing subsidies for which they were eligible. Also, and importantly for employers, Medicare beneficiaries whose employers purchase SHOP coverage are treated the same as any other person with employer group health plan coverage.

The FAQs also clarify that coverage under Medicare Part B alone does not constitute minimum essential coverage for purposes of PPACA’s individual mandate. The FAQs address many other issues as well, including the interaction between marketplace coverage and Medicare late enrollment penalties and coordination of benefits between Medicare and marketplace coverage.