• Benefits artners

December 6, 2011

In This Issue:
• Reminder: Certain Year-end Notices Required for Defined Contribution Retirement Plans • HHS Announces National Healthy Worksite Program, Employer Action Required • Final MLR Regulations Released • Technical Release Describes Fiduciary Obligations Under ERISA for Payment of MLR Rebates • DOL Declines to Answer Questions Regarding Aspects of Health Care Reform • IRS Releases Form 8889 and Instructions for 2011 HSA Reporting • EEOC Reaches ADEA Settlement with Manufacturer Regarding Mandatory Retirement Policy • State Updates: CA, HI, IL, MA, NJ • Frequently Asked Question: We are cleaning out our files for the new year. How long should we keep employeebenefits-related forms, claims, bills and booklets? • Acronyms Glossary

Reminders and Announcements
Certain Year-end Notices Required for Defined Contribution Retirement Plans
Plan sponsors of defined contribution qualified plans may need to issue one or more annual notices to participants before the end of each plan year. For calendar-year plans, this deadline is generally Dec. 1 of the plan year. The most common notices that plan sponsors may need to distribute include: • Traditional safe harbor 401 (k) notice • Qualified automatic contribution arrangements for a safe harbor 401 (k) notice • Eligible automatic contribution arrangement notice • Qualified default investment alternative notice • Non-safe-harbor automatic contribution arrangement notice

Other notices that may need to be distributed include diversification notices and quarterly or annual participant statements.

Health Care Reform Updates
HHS Announces National Healthy Worksite Program, Employer Action Required

Program. The funds for this initiative are made available under the Prevention and Public Health Fund, which was established by PPACA. HHS and the CDC, through this joint initiative, are permitted to make $10 million available to establish and evaluate comprehensive workplace health promotion programs aimed at improving workplace environments so they support healthy lifestyles and reduce risk factors for chronic diseases like heart disease, cancer, stroke and diabetes. The first step for employers interested in participating in the National Healthy Worksite Program is to register for an upcoming webinar. Registration is free, but is limited to the first 1,000 participants. Webinars will be held on the following dates and times: Dec. 20, 2011, 2:00-3:00 p.m. ET

The December webinar will provide a general overview of the National Healthy Worksite Program, including program goals and objectives, program components and employer activities, timelines, and anticipated program outcomes . .Jan. 13,2012, .Jan. 20,2012, .Jan. 20,2012, Noon-1:00 p.m. ET Noon-1:00 p.m. ET 3:00-4:00 p.m. ET

The January 2012 webinars will 1) provide a general overview of the National Healthy Worksite Program, 2) review the process and criteria HHS and the CDC used to identify the seven locations where the program will take place, 3) announce those locations, and 4) discuss the employer certification process and criteria HHS and the CDC will use to identify and select up to 100 employers participating in the National Healthy Worksite Program. The program is designed to recruit groups of up to 15 employers within seven locations across the United States and lead them through the process of building a workplace health program. The seven regions are defined as follows: Region 1: Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia and West Virginia Region Region Region Region 2: 3: 4: 5: Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin Arkansas, Louisiana, New Mexico, Oklahoma and Texas Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah and

Wyoming Region 6: Arizona, California, Hawaii and Nevada Region 7: Alaska, Idaho, Oregon and Washington Each of the seven regions will have one group of up to 15 employers that are located within a small, defined geographic area (e.g., city, county) with high prevalence of chronic disease and sufficient community resources available to maintain a sustainable workplace health program when the National Healthy Worksite Program ends. Each of the seven groups of employers will consist of a mix of employers ranging from those with one to 1,000 employees. The certification process will open Jan. 20, 2012, and close Feb. 3,2012, with final grant determinations to be made on or about April 30, 2012. Interested employers should register for the webinar, and then visit the program's website to be certified as an eligible employer. Please note that there is another, separate small employer wellness grant initiative authorized by PPACA § 10408, which has been eagerly anticipated by small employers. grant program. Federal Register National Healthy Worksite Program Website General FAQs Employer FAQs Email Address At this time, no information has been announced on that particular

HHS released a final rule relating to the medical loss ratio (MLR) requirements enacted as a part of PPACA, § 2718, which does not exempt agent and broker commissions from the final MLR calculation. The final rule does not explicitly address commissions, instead leaving the calculation of administrative costs unchanged from the original draft. Thus, the fundamental structure of the MLR policy is not changing. Beginning in 2011, the law requires insurance companies in the individual and small group markets to spend at least 80 percent of the premium dollars they collect on medical care and quality improvement activities. Insurance companies in the large group market must spend at least 85 percent of premium dollars on medical care and quality improvement activities. Insurance companies that do not meet the MLR standard will be required to provide rebates to their consumers. Insurers will make the first round of rebates to consumers in 2012. Rebates must be paid by Aug. 1 each year. The changes in this final rule largely address technical issues involved in the way issuers calculate and report their MLR and the mechanism for distributing rebates to enrollees in group health plans. The regulations clarify that any MLR rebates paid out to consumers are tax-free. Under an earlier rule, rebates to employers would have been taxable, so the final rule says any rebates given for group policies should be in the form of lower premiums or "in other ways that are not taxable." This process will vary by plan type, but policy holders must ensure that the rebates are used for the benefit of subscribers. Under the final rule, plans must send their customers a notice about the MLR even if they meet the requirements and do not have to offer rebates. The notice will explain how the policy works, what the plan's loss ratio was, and how it changed because of the health care law. Also, HHS agreed to phase out allowances for the administrative expenses of so-called minimed plans that offer limited benefits to individuals or small groups. HHS Fact Sheet Final Rule

Technical Release Describes Fiduciary Obligations Under ERISA for Payment of MLR Rebates
In conjunction with the release of the final rule on MLRs discussed above, the DOL issued Technical Release No. 2011-04 on Dec. 2, 2011. The technical release was issued to provide clarity when a rebate is issued to a policy holder who is also the employer. When MLR rebates are issued to employers, issues may arise concerning the status of such funds under ERISA and how such funds must be handled. Under the technical release, the DOL clarified that rebates paid pursuant to the MLR requirements and in connection with group health plans covered by ERISA may constitute plan assets. If the plan or its trust is the policy holder, in the absence of specific plan or policy language to the contrary, the entire rebate would constitute plan assets, and the policy holder would be required to comply with ERISA's fiduciary provisions in the handling of rebates that it receives. However, if the plan sponsor is the policy holder, determining the plan's portion, if any, may depend on provisions in the plan or the policy or on the manner in which the plan sponsor and the plan participants have shared in the cost of the policy. Any portion of a rebate constituting plan assets must be handled in accordance with the fiduciary responsibility provisions of Title I of ERISA. Technical Release No. 2011-04

DOL Declines to Answer Questions Regarding Aspects of Health Care Reform
On May 6, 2011, the Joint Committee on Employee Benefits (JCEB) of the American Bar Association held a question and answer session with DOL staff members. The DOL declined to respond to half of the questions, which related to health care reform, opting instead to defer to forthcoming guidance. The DOL did respond to questions relating to Form 5500 record retention, delivery of updated investment fund prospectuses and qualified default investment alternative annual notices. The summary of questions, proposed answers and DOL responses was released on Dec. 1, 2011.

Federal Updates
IRS Releases Form 8889 and Instructions for 2011 HSA Reporting
The IRS released the 2011 version of Form 8889 and corresponding instructions, which are similar to the 2010 versions. Form 8889 is used by HSA holders (and beneficiaries of deceased HSA holders) to report their HSA activity, including contributions, distributions and calculating HSA deductions, as well as any reportable income and additional tax triggered by failing to remain HSA-eligible throughout the applicable testing period. While the 2010 and 2011 versions of Form 8889 and the instructions were similar, the 2011 version has been updated as a result of two important health care reform changes for HSAs: the increase in the additional tax for non-medical distributions (20 percent starting in 2011) and the prescription requirement for OTC drug reimbursements (other than insulin). Form 8889 Form 8889 Instructions

EEOC Reaches ADEA Settlement with Manufacturer Regarding Mandatory Retirement Policy
A Houston manufacturer has agreed to pay $60,000 and provide other relief to settle a lawsuit brought by the EEOC under the Age Discrimination in Employment Act of 1967 (ADEA). According to the EEOC's suit, filed in November 2010, the company had an unlawful mandatory retirement policy that required employees to retire upon reaching age 70. The lawsuit was filed when the company terminated an employee who failed to retire upon reaching age 70. In addition to the monetary payments required under the terms of the settlement, the agreement requires the company to rescind the mandatory retirement policy and to notify all current employees and former employees who may have been affected by the policy about this settlement. Additionally, the company must rewrite all company policies and employee manuals and eliminate any mention, reference or description of the former mandatory retirement policy. The company must also provide annual ADEA and anti-discrimination training to its board of directors as well as all management and other personnel making employment decisions. This settlement should alert employers that the EEOC is taking action in this area. Therefore, employers with mandatory retirement policies should be aware that, according to the EEOC, with rare exceptions, such policies violate the ADEA, which prohibits forcing an employee to retire at any particular age. EEOC Press Release

State Updates
California On Nov. 28, 2011, San Francisco Mayor Edwin Lee signed Ordinance No. 232-11. The new ordinance amends San Francisco's Health Care Security Ordinance (HCSO) to require employers in San Francisco to make available certain HRA funds to employees for two years after the contribution date (rather than one year, which was previously required). As background, HCSO requires employers that employ individuals in the city or county of San Francisco to meet a certain spending requirement on employees' health care. One way in which employers can satisfy the HCSO spending requirement is to make certain HRA contributions on behalf of the employees. Previously, in the instance of HRA contributions, unused funds in HRAs could not be carried over at the end of the coverage period. Under Ordinance No. 232-11, however, such unused funds must be available to employees for two years. This amendment takes effect on Jan. 1, 2012. In addition to amending the HRA requirement, Ordinance No. 232-11 includes other guidance for employers on the HCSO, including:

• Employers must provide written account summaries to employees 15 days after a quarterly contribution is made; • Employers must provide written notices about account balances to employees who leave their jobs, within three days of termination; • Employers must allow reimbursements from the account for at least 90 days after termination of employment; • Employers must annually report account terms to the city (including which expenses are eligible for reimbursement under the account); and • Employers must post notifications from the city about the law. San Francisco Ordinance No. 232-11 HCSO Web Page

On July 11, 2011, Gov. Abercrombie signed into law S8 229. The new law prohibits employers from discriminating against individuals who are victims of domestic or sexual violence if the victim notifies the employer of such status or the employer has actual knowledge of such status. According to the new law, employers may not refuse to hire or employ, terminate or otherwise discriminate against such individuals in compensation (including benefits) or in terms, conditions or privileges of employment. Further, S8 229 requires employers to make a reasonable accommodation for an employee who is a victim of domestic or sexual violence, provided that the accommodation does not cause undue hardship to the operations of the employer. S8 229 is effective Jan. 1, 2012. 58229

On Nov. 18, 2011, the Illinois Department of Employment Security revised the filing forms that Illinois employers use to report new hires within 20 days of the employee's first day on the payroll. The revised forms now require that employers include the date on which each new employee first performed paid services for the employer. Reporting Overview New Hire Reporting Form

On Nov. 23, 2011, Gov. Patrick signed into law H. 3810. The new law prohibits employment discrimination on the basis of "gender identity," which is defined as a person's gender-related identity, appearance or behavior, whether or not it is traditionally associated with the person's physiology or assigned gender at birth. Gender identity may be shown by providing evidence of medical history, care or treatment of the gender-related identity, or consistent and uniform assertion of the gender-related identity. H. 3810 is effective July 1,2012. H.3810

On Nov. 7, 2011, the New Jersey Department of Labor (NJDOL) issued administrative regulations that require employers in New Jersey to post a new notice summarizing employer reporting and record keeping obligations under New Jersey wage, benefit and tax laws. The regulations also require employers to distribute the notice to employees. The posting and distribution requirement applies to each employer required to maintain and report records regarding wages, benefits, taxes and other contributions and assessments under a 2009 New Jersey statute.

assist employers in complying with the new employer obligations. Employers must provide the new notice to all new hires, effective as of Nov. 7, 2011. Employers must also post the new notice in a conspicuous location, including on its Internet or intranet site, as well as distribute it to current employees by Dec. 7, 2011. Administrative Regulations 2009 New Jersey Statute Form MW-400 (11-11)

Frequently Asked Question
We are cleaning out our files for the new year. How long should we keep employee-benefits-related forms, claims, bills and booklets? ERISA provides guidelines for certain record retention requirements for plan sponsors and employers. ERISA § § 107 and 209 impose the time frames that must be maintained for employee benefits plan records. In the event an employer or sponsor is unable to furnish such records during that time frame, applicable fines and penalties may be levied. ERISA has conveniently determined that an electronic copy of a form is as good as a paper one as long as certain requirements are met. The electronic record keeping system must maintain the integrity of the original document, be properly backed up, and be able to print legible copies. Generally, ERISA requires that plan records must be kept "for a period of not less than six years after the filing date of the [related reporting] document." Since the Form 5500 is not due until seven months after the end of the plan year and many plans file a 2 1/2 month extension, it is generally recommended that such records be kept for eight years. Records that fall in this category include: plan documents; summary plan descriptions; certificates of coverage; Form 5500s; COBRA notices; claim approvals, denials and appeals; election materials, forms and changes; participant contributions; and administrative expenses. Records regarding selection, monitoring correspondence and contracts of service providers, as well as most HIPM-related documents, must be maintained for a period of at least six years. Additionally, IRC § 6039D presents different record retention time frames, as it mostly affects records relating to eligibility rules, discrimination testing and election records for cafeteria plan components, such as dependent care FSAs and HSAs. These records must be maintained for at least five years. Cafeteria plan components that are subject to ERISA, such as health plans or health FSAs, would continue to follow the eight-year retention rule. Finally, some states may have longer retention periods, not included within the time frames above, which may require longer retention periods of plan-related documents and enrollment materials.

Acronyms Glossary
ADA Americans with Disabilities Act


Centers for Medicare & Medicaid Services


Consolidated Omnibus Budget Reconciliation Act


u.S. Department of Labor


Employee Benefits Security Administration


Equal Employment Opportunity Commission


Employee Retirement Income Security Act


Fair Labor Standards Act


Family and Medical Leave Act


Flexible Spending Arrangement


U.S. Department of Health and Human Services


Health Insurance Portability and Accountability Act


Health Information Technology for Economic and Clinical Health Act


Health Reimbursement Arrangement


Health Savings Account


Internal Revenue Code


Internal Revenue Service



Item or Drug


Patient Protection and Affordable Care Act (aka health care reform)

Collaborate, I~nn,ovate.[Elevate:
National Financial Partners (NFP) and its subsidiaries do not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application

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