United States: Employee Benefits Update May 2016

Select Compliance Deadlines and Reminders

  1. Forms 1095‑B and 1095‑C. Forms 1095-B and 1095-C must be distributed to participants and filed with the Internal Revenue Service ("IRS").  Self-funded health plan sponsors and Applicable Large Employers ("ALEs") must file Forms 1095‑B and 1095‑C with the IRS by May 31, 2016 (or June 30, 2016, if filing electronically, which is required for entities filing at least 250 information returns).
  2. Forms 1094‑B and 1094‑C. Plan sponsors and ALEs must file the first Forms 1094-B and 1094-C with the IRS no later than May 31, 2016 (or June 30, 2016, if filing electronically).  These forms serve as transmittal forms for the Forms 1095-B and 1095-C.
  3. Summary of Description of Material Modifications for Calendar-Year Plans. Plan administrators of employee pension and welfare benefit plans must provide to each participant covered under the plan and each beneficiary receiving benefits under the plan a summary description of any material modifications ("SMM") to the plan and changes to the summary plan description.  Administrators must generally provide this summary no later than 210 days after the close of the plan year in which the modification or change was adopted, unless otherwise described in a timely summary plan description.  For calendar‑year plans that made design changes in 2015, the deadline for providing an SMM is July 28, 2016.  Please note that this SMM rule is separate from the rules imposed by the Affordable Care Act (the "ACA") for updating a group health plan's summery of benefits and coverage ("SBC").
    If a group health plan is modified during the year in a way that is not reflected in the most recently provided SBC, an updated SBC must be provided 60 days in advance of the effective date of the change.  No advance notice is required for changes to the SBC that are effective in conjunction with benefit renewal.   Plan sponsors that timely comply with the SBC 60-day advance notice requirement do not have to also send an SMM summarizing the changes disclosed in the 60-day advance notice.
  4. FBAR Filing for Certain Foreign Investments. S. persons who have a financial interest in, or signature or other authority over, foreign financial accounts are generally required to report on the Treasury Department Form TD F 90 22.1 (the "FBAR") by June 30 of each year.  While foreign hedge funds and private equity funds are not required to be reported on the FBAR, many other accounts in foreign jurisdictions might be.  Plan sponsors should consult with tax and legal counsel to determine if any FBAR filing is required.

Retirement Plan Developments

DOL Issues Final Fiduciary Rule

On April 6, 2016, the Department of Labor (the "DOL") released the final rule (the "Final Rule") regarding the definition of investment "fiduciaries" for employee benefit plans under the Employee Retirement Income Security Act of 1974 ("ERISA") and for individual retirement accounts ("IRAs") under the Internal Revenue Code of 1986 (the "Code").  The Final Rule expands the definition of "fiduciary" to encompass a wider range of individuals who provide investment advice or recommendations to plans or IRAs for a fee.

The Final Rule applies beginning on April 10, 2017.  The DOL provided a transition period, which runs from April 10, 2017 through January 1, 2018, for certain prohibited transaction exemptions issued with the Final Rule.  The prohibited transaction exemptions will fully apply on January 1, 2018.

Summary of Final Rule

The Final Rule states that a person is a fiduciary if the person receives a fee or compensation for providing certain recommendations regarding investments and investment-related activities and policies.  Investment professionals who provide such recommendations are fiduciaries if they (1) acknowledge their fiduciary status, (2) provide advice pursuant to an agreement or understanding that the advice is customized for the recipient, or (3) provide advice to a specific recipient regarding particular investments.

The Final Rule clarifies what types of "recommendations" fall under the purview of the rule.  For example, a "recommendation" includes communications that suggest the recipient either act or refrain from acting in a certain way based on a reasonable, objective view of the content, context and presentation of the recommendation.  A "recommendation" may also include a series of actions that may be considered a recommendation when considered together.

Under the proposed rule, appraisals also created fiduciary obligations (with exceptions for appraisals for employee stock ownership plans ("ESOPs") and certain other investment funds), but the Final Rule removed appraisals from the list of activities that trigger fiduciary status.  The DOL indicated that it has reserved all appraisal issues for future rulemaking.  The Final Rule also changed the proposed rule to clarify that a financial adviser's recommendation for a customer to hire the adviser will not constitute a fiduciary recommendation.

The DOL is publishing prohibited transaction exemptions that allow investment professionals to receive traditional forms of compensation as long as certain criteria are met.  The Best Interest Contract Exemption (the "BICE") allows advisers and financial institutions to receive otherwise prohibited compensation for providing investment advice.  There are a number of specific requirements to meet this exemption, but in general, it is designed to require that the financial adviser and its firm acknowledge in writing their fiduciary status and agree to give advice in the best interest of the advice recipient.

In addition to the BICE, the DOL has issued the Principal Transactions Exemption, which allows investment professionals to purchase or sell certain investments from their own inventories to plans or IRAs.  Similar to the BICE, this exemption requires that the financial professional comply with certain impartial conduct standards and meet other requirements.

Please see our e-alert dated April 14, 2016 [insert link] for more discussion on the Final Rule.

IRS Finalizes Rules on Multiemployer Plan Benefit Suspensions

On April 26, 2016, the IRS issued final regulations addressing suspensions of benefits for multiemployer defined benefit plans in critical and declining status.  The final regulations generally adopt the proposed regulations published in June 2015 and September 2015, but do not finalize the proposed regulations published in February 2016.

Notable clarifications and changes included in the final regulations are as follows:

  • A retiree representative must be selected for a plan with 10,000 or more participants. (Plans with fewer than 10,000 participants may select a retiree representative but are not required to do so.)  The retiree representative is to advocate for the interests of retired and deferred vested participants throughout the suspension approval process.  The plan must provide the representative with relevant information necessary for the retiree representative to perform his or her role.
  • Any suspension will remain in effect until the plan provides benefit improvements or the suspension expires on its own terms.
  • The final regulations also include limitations on suspensions, requirements for benefit improvements and notice requirements.
  • The final regulations include additional steps required for a participant vote on benefit reductions.

Private Equity Fund Liable for Pension Withdrawal Liability

In its recent decision in Sun Capital Partners v. New England Teamsters, a Massachusetts Federal District Court ruled that a private equity firm is liable for the multiemployer pension withdrawal liability of one of their portfolio companies.

Background

In 2007, two private equity funds managed by Sun Capital (Sun Capital Partners III and Sun Capital Partners IV) invested in a metal producer that contributed to a multiemployer pension plan.  As the metal producer's financial condition deteriorated, it ceased making contributions to the multiemployer plan, and the plan demanded payment of withdrawal liability from both the metal producer and the private equity funds.

The private equity funds brought an action seeking a declaration that they were not liable for withdrawal liability because they were not "trades or businesses," and because they were not under "common control" with the metal producer.  The Massachusetts District Court agreed with the private equity funds, but the decision was overturned on appeal to the U.S. Court of Appeals for the First Circuit.  The First Circuit found that Sun Capital Partners IV was a "trade or business" for the purposes of withdrawal liability because of its active role in management of the portfolio company and the management fee structure of the fund.  The case was remanded to the lower court for further findings of fact on the trade or business issue, and to determine whether the metal producer was under "common control" with the private equity funds.

District Court Decision

On remand, the Massachusetts District Court found that both Sun Capital Partners III and Sun Capital Partners IV were engaged in a trade or business.  The question of "common control" raised a more challenging question.  Generally, a finding of "common control" requires an entity to hold more than an 80% ownership interest.  In this case, the two funds' interests were specifically structured to be less than 80%.  (One fund held a 70% interest and the other held a 30% interest.)  The district court disregarded the formal corporate structure of the funds' investments and found that the two funds created a "partnership-in-fact," which was engaged in a trade or business and, thus, was liable for withdrawal liability.

IRS Withdraws Proposed Nondiscrimination Rules

In Announcement 2016-16, the IRS announced it would withdraw certain provisions contained in proposed regulations that would have changed the nondiscrimination requirements applicable to qualified retirement plans.

In January 2016, the IRS issued proposed regulations modifying nondiscrimination requirements for certain retirement plans.  The IRS indicates it will withdraw its proposed changes intended to address certain retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending the formula to a classification of employees that is reasonable and established under objective business criteria.

Health and Welfare Plan Developments

Departments Issue 31st Set of ACA FAQs

The DOL, Department of Health and Human Services and IRS (collectively, the "Departments") have issued additional informal guidance implementing the ACA.  This 31st set of frequently asked questions ("FAQs") provides guidance on, among other things, preventative health service requirements and compliance issues under the Women's Health and Cancer Rights Act and the Mental Health Parity and Addiction Equity Act.

  • Colonoscopies. The FAQs clarify that bowel preparation medications should be covered by plans without cost sharing.
  • Contraceptives. If a plan uses medical management techniques for a contraception method, it may use a standard exception form with instructions to provide an exception process that is not unduly burdensome on the individual, the individual's personal representative or doctor.
  • Clinical Trials. The FAQs clarify that a plan cannot deny (or limit or impose additional conditions on) routine patient costs associated with participation in an approved clinical trial.
  • Mental Health Parity. The FAQs clarify that plan-specific data, if available, should be used in calculating the tests for financial requirements (such as copays and coinsurance) and quantitative treatment limitations.  The FAQs also provided additional clarification regarding disclosure and medication assisted treatment for opioid use disorder.
  • Mastectomies. The FAQs clarify that coverage of breast reconstruction following a mastectomy must include providing coverage for nipple and areola reconstruction.

New York State and San Francisco Adopt Paid Family Leave

The number of states and cities requiring paid family leave continues to grow, with New York State and the City of San Francisco each adopting paid family leave requirements.

Beginning January 1, 2018, employers in New York State will be required to provide eligible employees with up to 12 weeks of paid, job-protected leave per year to care for a new child or a family member with a serious medical condition.  Paid family leave will be administered and paid for by the state's disability benefits fund, so employers are not responsible for paying employees on family leave.  Rather, the program is funded through employee payroll deductions of approximately $1 per week.

San Francisco also adopted a paid parental leave ordinance, which begins taking effect on January 1, 2017 and is fully phased in by January 1, 2018.  Under the new ordinance, most employers will have to offer supplemental pay to employees who have a newborn child, newly adopted child or new foster child.  The program is intended to supplement the amount already available through California's paid family leave program and is paid for by the employer.

Briggs & Stratton Settles Retiree Suit

Briggs & Stratton Corp. agreed to settle a class action suit brought by union retirees who alleged the company reduced their health benefits in violation of collective bargaining agreements.  The retirees argued that the company cut their health benefits after promising to provide health coverage for retirees with 30 more years of service until age 65.  According to the settlement, Briggs & Stratton agreed to continue retirees' medical, vision and dental benefits according to a 2010 agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions