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Mondress Monaco Parr Lockwood PLLC
Mondress Monaco Parr Lockwood PLLC

October 2011 - Bulletin: Recent Developments in Employee Benefits Law

New Guidance Related To Health Plans & Health Care Reform (PPACA)

Proposed Safe Harbor on Determining "Affordability" for Employer Excise Tax Purposes & Proposed IRS Regulations on the PPACA Premium Tax Credit

Starting in 2014, large employers (generally those with at least 50 full-time employees) will be subject to excise taxes under PPACA if either (a) they fail to offer health coverage to all fulltime employees 1 and their dependents, or (b) they offer health coverage but such coverage fails to meet "minimum value" requirements (the plan's share of total benefit costs is less than 60%) or is considered "unaffordable" (a full-time employee's share of premiums for self-only coverage exceeds 9.5% of their household income). 2 These excise tax rules are interrelated with two other PPACA provisions - state-run health insurance exchanges and premium tax credits for certain low-income individuals - both of which also go into effect in 2014. 3 As discussed below, the government recently issued guidance on PPACA's excise tax provisions and premium tax credits. 4

Proposed Safe Harbor Related to PPACA's Excise Tax Provisions. The IRS recently proposed a safe harbor in Notice 2011-73 (available at http://www.irs.gov/pub/irs-drop/n-11-73.pdf) that would allow employers to use an employee's W-2 income in determining affordability (see (b), above) under PPACA's "pay or play" excise tax provisions, in recognition of the fact that employers will not generally know the household income of their employees. Thus, an employer can ensure it is not subject to excise taxes by offering coverage meeting the minimum value requirement to all full-time employees (and their dependents) 5 and capping the premium for employee-only coverage under the lowest cost option at 9.5% of a given full-time employee's W-2 wages. The IRS Notice acknowledges that open issues remain regarding application of PPACA's excise tax rules and it requests comments on the following: (1) how wages and employee premium amounts should be determined for individuals employed less than the entire year, for employees who move between full-time and part-time during the year, and for plans that operate on a fiscal (non-calendar) year; (2) whether other safe harbor methods for determining affordability are appropriate; and (3) how to coordinate this safe harbor with the IRS's previously proposed safe harbor in Notice 2011-36 permitting the use of a lookback/stability period for determining full-time employees (available at http://www.irs.gov/pub/irs-drop/n-11-36.pdf).

Proposed Regulations on PPACA's Premium Tax Credit. The IRS has also issued proposed regulations implementing PPACA's premium tax credit for individuals. Premium tax credits will generally be available to individuals purchasing health insurance through an exchange if their household income is between 100% and 400% of the federal poverty level and they lack access to other qualifying health coverage (for example, employer provided coverage meeting the minimum value and affordability requirements). The proposed regulations provide details on the eligibility requirements for premium tax credits and how the credit amount is determined. Under the proposed regulations, exchanges will determine an individual's eligibility for premium tax credits and the estimated amount of their credit. For eligible individuals, the government will pay an estimated credit amount to the insurer on a monthly basis, with the individual responsible for paying the remaining monthly premium amount. After the end of the year, an individual must reconcile their actual credit amount (computed on their federal income tax return) with the amount of advance payments made on their behalf. If their credit amount exceeds their advance payments, they will receive the excess as a tax refund; if their credit amount is less than their advance payments, they will owe part or all of the excess as additional tax liability. The proposed regulations are available at http://www.gpo.gov/fdsys/pkg/FR-2011-08-17/pdf/2011-20728.pdf.

Exemption from PPACA's Dollar Limit Restrictions for HRAs & New MSP Reporting Guidance Related to HRAs

Exemption from PPACA's dollar limit restrictions for HRAs. CMS has confirmed that certain Health Reimbursement Arrangements (HRAs) are permanently exempt from PPACA's restriction on annual benefit limits for essential health benefits, and certain other HRAs are temporarily exempt. HRAs are employer-paid plans that reimburse medical expenses. They are often used to reimburse copays, deductibles, and medical expenses otherwise not paid by major medical coverage. By their nature, HRAs limit reimbursements - sometimes according to an amount promised by the employer each year and sometimes tied to a formula related to hours of work or another standard. They can be funded or unfunded and can be designed to allow carryover of unused amounts year-to-year.

PPACA removed the ability of a health plan to impose lifetime limits on payment of essential health benefits. However, a health plan may still impose certain annual benefit limits (called "restricted annual limits") on essential health benefits, through 2013. After 2013, health plans may impose neither annual nor lifetime limits on essential health benefits. (See our April 2011 Bulletin at http://www.songmondress.com/Articles/ for more on "essential health benefits.")

In the preamble to interim final regulations issued on June 28, 2010, the government stated that an HRA need not lift its limits, so long as the HRA is integrated with health coverage that does comply with PPACA's restriction on payment limits. Unless there is a further change, these integrated HRAs are forever exempt from PPACA's requirement that plans lift payment limits on essential health benefits.

However, not all HRAs are integrated with other health coverage. Rather, some HRAs stand alone, regardless of whether other health coverage is available, elected, or mandated. For these stand-alone HRAs, on August 19, 2011 CMS exempted them under its waiver program from the requirement that plans lift payment limits on essential health benefits. However, the exemption will expire in plan years beginning on or after January 1, 2014. Unless there is another ruling or another exemption from PPACA applies (such as the retiree-only exemption or the HRA qualifies as a "flexible spending arrangement" under Code § 106(c)(2)), it seems stand-alone HRAs may not exist after 2013. For a copy of CMS's exemption ruling (which includes a notice requirement), see http://cciio.cms.gov/resources/files/final_hra_guidance_20110819.pdf.

New MSP Reporting Guidance for HRAs. CMS also recently issued new guidance changing the Medicare Secondary Payer (MSP) reporting requirements for HRAs. The new guidance increases the MSP reporting threshold for HRAs from $1,000 to $5,000, effective for HRA coverage periods beginning on or after October 3, 2011. As a result, HRA coverage with an annual benefit (including carry-over from prior years' coverage) of less than $5,000 is now exempt from MSP reporting requirements. The new guidance also revises reporting requirements related to the exhaustion of HRA coverage, requiring that notice of termination be submitted when a participant's HRA benefits are exhausted and no additional HRA benefits will accrue for the remainder of the coverage period. The CMS notice is available at http://www.cms.gov/MandatoryInsRep/Downloads/HRACoverage.pdf.

New Women's Preventive Care Guidelines Issued

HHS recently issued guidelines setting forth additional types of women's preventive care under PPACA's preventive care requirements for non-grandfathered health plans. These additional types of preventive care must be provided with no cost-sharing, effective as of the first day of the first plan year beginning on or after August 1, 2012. The guidelines are available at http://www.hrsa.gov/womensguidelines/. New types of required preventive care include, for example:

  • FDA-approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity. (Abortifacient drugs - e.g., RU-486 - do not qualify as contraception.) Group health plans sponsored by religious employers, and insurance coverage offered with respect to such plans, are not required to provide this care.
  • Breastfeeding supplies, support and counseling.
  • HPV testing every 3 years, beginning at age 30.
  • Annual HIV counseling and screening for sexually active women.
  • An annual "well-woman visit" to obtain all appropriate preventive services, and additional well-woman visits if the patient and her provider determine the visits are necessary.

As with other types of preventive care, plans may use reasonable medical management techniques in providing the care described in the new guidelines. For example, plans can continue to impose cost-sharing for brand-name drugs if an equally safe and effective generic version is available.

Proposed Regulations on Four-Page Uniform Summaries Issued

On August 22, 2011, the government issued proposed regulations implementing PPACA's fourpage uniform summary of benefits and coverage ("SBC") requirement, and separately published model SBC templates, samples, and instructions developed by the NAIC. 6 The proposed regulations, which are currently scheduled to go into effect on March 23, 2012, set forth when and to whom an SBC must be provided, who must provide the SBC, formatting and content requirements, rules regarding electronic delivery, and penalties for noncompliance. 7 They also provide guidance on PPACA's requirement that plans provide 60 days' advance notice of material modifications to their most recently issued SBC. The key points of the regulations are summarized in a separate MMPL Bulletin. The proposed regulations are available at http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25258, and the SBC templates at http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25259.

The IRS Issues a Notice and HHS Proposes a Rule on Upcoming Government Fees, No News on the Annual Fee on Health Insurance Providers, and Michigan Enacts a Tax on Health Claims Paid

Some taxes are imposed to generate revenue, as a matter of perceived fairness, or to encourage certain behavior. PPACA has several taxes that are imposed only to generate revenue, and Michigan recently enacted its own revenue-generating tax to help fund Medicaid.

$1/$2 Per Covered Life Fee. PPACA provides for a fee on insurers and sponsors of health plans, to fund research and information on the effectiveness, risks, and benefits of various medical treatments, drugs, and the like. Beginning in plan years ending after September 30, 2012 the fee is $1 multiplied by the average number of covered lives in a plan. Beginning the next year the fee increases to $2, and is increased (by an indexed amount) each year thereafter. The fee is paid by insurers in the case of an insured plan, and by the "plan sponsor" in the case of uninsured plans (i.e., the employer in the case of a single employer plan, by the association in the case of a multiple employer welfare arrangement, and by the plan itself in the case of a multiemployer plan). The fee will also apply to most government plans. As noted in our July 2010 Bulletin (available at http://www.songmondress.com/Articles/), the IRS has asked for comments on how the new fee should be calculated and paid, and its applicability to HRAs and FSAs. (The comment period closed September 6, 2011). IRS Notice 2011-35, which proves some insight on what the fee guidance may look like, is available at http://www.irs.gov/pub/irs-drop/n-11-35.pdf. We have no reason to expect delay in the effective date, which is January 1, 2012 for calendar year plans. The fee does not apply to plan years ending after September 30, 2019.

Contributions to State Reinsurance Programs. PPACA also provides that each state must establish a reinsurance program, intended to stabilize premiums for coverage in the individual market in the first 3 years of the PPACA-mandated state insurance exchanges. 8 To fund these reinsurance programs, PPACA requires states to collect a fixed annual contribution from insurers and third party administrators (on behalf of self-funded plans), to total $12 billion for plan years beginning in 2014, $8 billion for 2015 and $5 billion for 2016. 9 In addition, states may add to the contribution to fund administrative expenses. On July 15, 2011, HHS issued proposed regulations under which the contribution would be based on an insurer's/plan's pro rata share of premiums/medical expenses, as compared to premiums/medical expenses of insurers/plans nationwide. In addition, HHS has asked for comment on timing and payment methods, which are generally left to each state's reinsurance program. The proposed rule deals more with allocation of amounts collected to individual insurers, than collection of the contribution. The proposed regulation is available at http://www.gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17609.pdf.

Annual Fee on Covered Entities that Provide Health Insurance. Another of PPACA's revenuegenerating fees to watch is an annual fee on "net premiums written with respect to health insurance." Covered entities with more than $25 million in net premiums written for the health risks of U.S. citizens and residents in any calendar year will have to pay a pro rata share of a fixed annual fee, starting at $8 billion in 2014, gradually increasing to $14.3 billion in 2018, and then increasing by an indexed amount each year after. Certain exceptions apply: for example, the fee does not apply to government entities, to employers self-funding the U.S. health risks of their employees, or to a 501(c)(9) VEBA "which is established by an entity (other than by an employer or employers) for purposes of providing health care benefits." We are hopeful that future guidance will clarify application of the fee.

Michigan Fee. In other fee-related news, the state of Michigan recently enacted a 1% tax on certain health care claims paid by insured and self-insured health plans for medical services provided to residents within the state. The tax will apply for two years (2012 and 2013) before sunsetting. Taxes collected are to be used to fund the state's Medicaid obligations. Under the legislation, the tax is assessed against the insurance carrier in the case of an insured plan and the third party administrator in the case of an uninsured plan, and must be paid quarterly. The Michigan Department of Treasury is expected to provide information and details about the new tax on its website ( http://www.michigan.gov/taxes) soon. It is possible there will be litigation challenging Michigan's tax on ERISA preemption grounds, although a Supreme Court precedent based on a New York tax will likely foil a preemption challenge.

HHS Rules Regarding Use of Early Retiree Reinsurance Program Reimbursements

Under PPACA's Early Retiree Reinsurance Program (ERRP), qualifying plan sponsors can receive reimbursements for a percentage of early retirees' health benefit costs paid by the plan, but (among other program requirements) any such reimbursements may not be used as "general revenue." Instead, any reimbursements can only be used for the following purposes (a) to reduce the plan sponsor's health benefit premiums or costs, (b) to reduce plan participants' premiums, copayments, deductibles, coinsurance, or other out of pocket costs, or (c) to reduce a combination of those sponsor or participant expenses. In general, these rules require plan sponsors receiving ERRP reimbursements to continue to maintain at least the same level of contributions to support the plan before and after participating in the ERRP.

On August 19, 2011, HHS provided detailed guidance intended to provide "flexibility" in administering the requirements for use of ERRP reimbursements. The HHS guidance establishes possible "baseline" years to compare with plan years for which ERRP funds are received, or in which ERRP reimbursements are received or retained. A baseline year can be (a) the most recent 12-month plan year ending before submission of the plan's ERRP application, (b) an average of up to five plan years, including the most recent 12-month plan year that ended before the plan's ERRP application, or (c) where the prior methods do not allow the plan to comply, a plan year ending after June 1, 2010 for which a budget or collective bargaining agreement finalized before June 1, 2010 mandated a health benefit spending level for the sponsor. In each plan year in which (or for which) ERRP funds are received or held, a plan sponsor must meet one of the following four tests (calculated without regard to any ERRP funds spent in any year, and based on the PPACA definition of "health benefit" spending):

  • Health benefit spending by the sponsor for the plan as a whole must be at least as great as the amount spent for the plan for the baseline year.
  • Health benefit spending by the sponsor, on average per plan participant, must be at least as great as the amount spent, on average per plan participant, in the baseline year.
  • The percentage of overall health benefit spending for the plan by the sponsor, out of the total of sponsor payments and costs or premiums paid by participants, must equal or exceed the corresponding percentage for the baseline year.
  • The percentage of health benefit spending by the sponsor on average, per participant, out of the per-participant total of sponsor payments and costs or premiums paid by participants, must equal or exceed the corresponding percentage for the baseline year.

Where a plan is exclusively self-funded for all health benefits for the baseline year and each year in which or for which ERRP payments are received or retained, the sponsor may compare spending in the baseline year with either the amount of spending in the later plan year, or the amount allocated for health benefit spending in the later plan year. For this method to apply, any such allocations must be held, for the entire plan year(s) involved, in a fund or trust exclusively for payment of plan benefits. 10 A copy of the HHS guidance is available at http://www.errp.gov/download/Ban_on_Using_ERRP_Funds_as_General_Revenue.pdf.

Status of the CLASS Program

PPACA included provisions establishing a voluntary public long-term care insurance program, called the Community Living Assistance Services and Supports (CLASS) Program. By law, the CLASS Program must be funded entirely from participant premiums and earnings, causing many to question its actuarial viability. Although HHS previously issued preliminary guidance on the program and indicated it would be up and running by 2013 (see our April 2011 Bulletin at http://www.songmondress.com/Articles/), skepticism remained, and according to recent press reports there has been a significant cut in staff at the HHS office charged with carrying out this program. HHS is expected to issue a comprehensive report by mid-October regarding the program and its recommendations about how to proceed, which will hopefully provide some clarity regarding the program's future. An HHS blog post regarding these developments is available at http://www.healthcare.gov/blog/2011/09/class09282011a.html.

Update on Guidance Regarding the Definition of "Essential Health Benefits"

As indicated in prior Bulletins, HHS requested that the Institute of Medicine (IOM) undertake a study and make recommendations on the criteria it should use for determining "essential health benefits" (EHBs) 11 under PPACA. The IOM released its report on EHBs on October 7, 2011. Rather than providing recommendations on specific benefits that should be covered, the IOM report focuses on policy criteria and methods that should guide HHS in defining EHBs. The IOM's recommendations place particular importance on cost, reasoning that PPACA's health care coverage objectives will be frustrated if benefits are not affordable. For example, the report suggests that PPACA's "typical employer plan" benchmark be interpreted to mean a typical small employer plan. The report also suggests that state-mandated benefits be subject to review like any other benefits, and that new and alternative treatments meet certain standards related to cost and effectiveness. For more information and to review the report, visit http://www.iom.edu/Reports/2011/Essential-Health-Benefits-Balancing-Coverage-and-Cost.aspx.

Update on Litigation Challenging the Constitutionality of PPACA

On August 12, 2011, a three-judge panel of the Eleventh Circuit Court of Appeals issued a decision finding the individual mandate portion of PPACA unconstitutional, but finding the rest of the health care reform law to be a constitutional exercise of Congress's power ( State of Florida ex rel. Atty. Gen. v. HHS, 2011 WL 3519178 (11 th Cir. 2011). The Eleventh Circuit now joins the Sixth Circuit ( Thomas More Law Center v. Obama, 2011 WL 2556039 (6th Cir. 2011)) as the only two Circuit Courts to have ruled directly on the constitutionality of the individual mandate. Unlike the Eleventh Circuit, the Sixth Circuit upheld the individual mandate as a valid exercise of Congress's power under the Commerce Clause. The split of opinion among these Circuits may pave the way for a decision by the U.S. Supreme Court. Chances for a speedier decision by the Supreme Court increased last month, when the Justice Department decided to forgo an appeal to the full eleven-member Eleventh Circuit Court of Appeals. The Justice Department may now appeal directly to the U.S. Supreme Court, with a possible decision as early as next fall.

Retirement Plan Developments

New Guidance on Electronic Disclosure of Fee Information

Last year, the DOL issued regulations requiring periodic disclosure of fee information to participants in defined contribution plans who may direct their own investments. See our July 2011 Bulletin at http://www.songmondress.com/Articles/. This new disclosure requirement applies to plan years beginning on or after November 1, 2011. Several commentators asked the DOL to provide a less onerous method for electronic disclosure of this information than the DOL's current safe harbor method. The DOL declined to provide such guidance as part of the fee disclosure regulations issued last October, but indicated it anticipated updating the safe harbor before the regulations' compliance deadline in 2012. 12

However, in new Technical Release 2011-03, the DOL stated it may not be able issue final guidance on electronic fee disclosure methods before the compliance deadline. The DOL therefore announced it would not enforce current disclosure rules against plan administrators who provide fee information outside of the safe harbor as follows:

  1. Certain fee information can be included in online participant benefit statements, so long as the statements are provided in accordance with previously issued relief. 13 The fee disclosure regulations specify the types of disclosures that can be provided in benefit statements.
  2. Fee disclosures that cannot be included in benefit statements may be emailed to a participant if the participant voluntarily provides an email address, the plan administrator issues proper initial and annual notices, the electronic system reasonably keeps personal information confidential, and the notices are "calculated to be understood." There are also special rules with respect to email addresses already on file.

The non-enforcement policy applies only until the DOL issues further guidance. For a copy of the Technical Release, visit http://www.dol.gov/EBSA/pdf/tr11-03.pdf.

IRS Announces New Determination Letter Procedure for Employee Stock Ownership Plans (ESOPs), Issues Revised Determination Letter Application Form, and Issues New Guidance on Prototype and Volume Submitter Plans

On August 19, 2011 the IRS announced that it has taken steps to improve and expedite the Determination Letter process for ESOPs - which, the IRS admits, has been rather slow. First, the IRS has dedicated a "cadre" of determination letter specialists to review ESOP Determination Letter applications, beginning with Cycles C-E for Form 5300. Second, a practitioner may sometimes apply the IRS' request for amendments to a particular ESOP, to the other ESOPs submitted by the practitioner. And finally, the IRS has developed a new worksheet for itself when reviewing ESOPs - which also may be used as a checksheet for practitioners when designing an ESOP. (The worksheet relates only to whether the plan, by its terms, complies with Tax Code requirements specific to ESOPs - including Sections 409 and 4975. The worksheet does not address non-ESOP requirements of tax-qualified plans, such as Code Section 401(a).) For the IRS announcement see http://www.irs.gov/retirement/article/0,,id=240716,00.html and for the worksheet see http://www.irs.gov/pub/irs-tege/esop_worksheet_0811.pdf.

The IRS also recently published a revised Determination Letter Application Form and Instructions (IRS Form 5300). The new Form 5300 and Instructions are available at http://www.irs.gov/pub/irs-pdf/f5300.pdf and http://www.irs.gov/pub/irs-pdf/i5300.pdf.

Finally, on October 5, 2011, the IRS issued new guidance (Revenue Procedure 2011-49) on the opinion and advisory letter process for volume submitter and prototype plans. It also issued new defined benefit and defined contribution plan LRMs, which provide sample plan provisions related to Tax Code qualification requirements. A copy of Rev. Proc. 2011-49 is available at http://www.irs.gov/pub/irs-drop/rp-11-49.pdf, and a copy of the LRMs are available at http://www.irs.gov/retirement/article/0,,id=97182,00.html.

DOL Regulations on the Definition of "Fiduciary"

On September 19th, the DOL announced that it will re-propose new regulations defining when one becomes a fiduciary under ERISA by reason of giving investment advice to an employee benefit plan or plan participants. The proposed regulations were initially issued in October 2010, but triggered controversy, including calls by some members of Congress and interested parties that the agency provide an opportunity for more input on the rule. The DOL's announcement indicates that the agency anticipates revising various provisions of the proposed regulations in response to comments received, that it is engaging in further research and soliciting additional comments, and that it expects to issue the new proposed regulations in early 2012. For a copy of the announcement, visit http://www.dol.gov/ebsa/newsroom/2011/11-1382-NAT.html.

Stable Value Funds and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank)

Under Dodd-Frank, swaps are regulated. Swaps are defined several ways and, some believe, in a manner that would include stable value investment contracts held by stable value funds offered through retirement plans. A stable value investment contract guarantees that retirement plan participants will receive "book value" should the market value of the stable value fund be worth less than the amount needed to pay that book value-that is, the contract "wraps" around some of the underlying investments in the fund.

For now, stable value investment contracts are under study to determine whether The DoddFrank definition of swaps includes stable value investment contracts, and whether stable value investment contracts should be exempt from Dodd-Frank regulation. If they are subject to Dodd-Frank additional rules would apply, including registration, reporting, recordkeeping, and minimum capital requirements. The stable value fund industry notes that additional regulation might impact the nature of stable value investment contracts, and will increase compliance burden and expenses.

On August 25, 2011, the government asked for comments on 29 questions related to stable value investment contracts. Several of the questions focus on the impact of current laws and proposed regulations on stable value funds offered by 401(k) plans. In the end, a special government Commission must determine whether stable value investment contracts are swaps, and then if they are swaps, whether they should be exempted from Dodd-Frank. Comments were due by September 26, 2011. To see all of the comment requests, go to http://federalregister.gov/a/2011-21645.

FASB Disclosures for Employers that Contribute to Multiemployer Plans

In September 2010 the Financial Accounting Standards Board (FASB) issued an exposure draft that called for employers to report extensive information regarding multiemployer plans to which the employer contributes, including an estimate of the withdrawal liability that would be owed if the employer withdrew - whether or not withdrawal was probable. Following strenuous objection, in September 2011 the FASB issued a "final standard" with several important changes from the September 2010 draft, most notably that withdrawal liability of the employer need not be disclosed unless the employer's withdrawal is probable or reasonably possible. For public entities, 14 the new standard applies for fiscal years ending after December 15, 2011. For more information, visit http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175822963911&blobheader=application%2Fpdf.

1 For PPACA excise tax purposes, full-time employees are generally defined as those working an average of at least 30 hours per week. Full-time employee equivalents are counted in determining "large employer" status, but are disregarded in calculating excise taxes.

2 The excise tax for failing to provide any coverage equals $2,000 times the employer's number of full-time employees (excluding the first 30). The excise tax for providing inadequate or unaffordable coverage equals $3,000 for each full-time employee who purchases health insurance coverage through an exchange and qualifies for premium tax credits.

3 Employer excise taxes are triggered when an employee qualifies for premium tax credits for coverage purchased through an exchange. However, an employee who is offered employer health coverage cannot qualify for premium tax credits regardless of their income unless their employer-provided coverage is unaffordable or fails to meet the minimum value requirements.

4 As indicated in our July Bulletin, proposed regulations implementing and establishing the framework for state health insurance exchanges were issued earlier this summer. Those regulations are available at http://gpo.gov/fdsys/pkg/FR-2011-07-15/pdf/2011-17610.pdf.

5 The dependent coverage requirement under the excise tax rules is unclear and has not yet been addressed in guidance.

6 The NAIC's model documents have been proposed by the governmental agencies (IRS, DOL and HHS) without change. However, the agencies recognize that the NAIC's model documents were developed primarily with insurers, rather than group health plans, in mind, and they have therefore solicited comments on how these documents can be changed to best suit self-insured plans. The agencies intend to regularly update these documents to reflect public comments, and it's possible their final form will differ greatly from the original proposal.

7 As these are proposed regulations, the agencies have requested comments on a wide range of issues, and the final regulations may differ significantly. However, as the effective date of the SBC requirement (March 23, 2012) has not yet been extended, plans should review these regulations and the sample SBC templates, and be prepared to begin providing SBCs in March 2012.

8 If a state does not establish a reinsurance program, HHS will do so on the state's behalf.

9 The total is the sum of two amounts in separate parts of the law: $10 billion plus $2 billion for 2014, $6 billion plus $2 billion for 2015, and $4 billion plus $1 billion for 2016. See PPACA § 1341(b)(3)(B)(iii) and (iv).

10 This allocated-funds method is not available for either of the percentage-based methods of determining compliance with the ERRP spending rules.

11 The definition of EHBs impacts PPACA's prohibition on annual and lifetime dollar limits for employer-sponsored health plans, as benefits that aren't EHBs are generally disregarded for purposes of these rules. The definition of EHBs will also dictate the scope of benefits that must be covered by insurance offered through state exchanges starting in 2014.

12 The participant fee disclosure regulations require furnishing initial annual disclosures up to 60 days after the later of: (1) April 1, 2012, or (2) the first day of the first plan year beginning on or after November 1, 2011. For a calendar year plan, the deadline would be May 31, 2012 (60 days after April 1, 2012). The first required quarterly disclosures are due 45 days after the end of the quarter in which the initial annual disclosures are due (this would be August 14, 2012 for a calendar year plan).

13 The previously issued relief for electronic disclosure of benefit statements is set forth in Field Assistance Bulletin 2006-03, available at http://www.dol.gov/ebsa/regs/fab_2006-3.html. FAB 2006-3 allows plans to provide statements online if participants have continuous web access to online statements and receive initial and annual notices. Plans may also provide statements in accordance with the Treasury Department's electronic disclosure rules (Treas. Reg. 1.401(a)-21), which are generally less burdensome than the DOL's safe harbor.

14 Public entities generally include any entities required to file with the SEC.


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