In This Issue:

• Reminder: Medicare Part D Disclosure to CMS due by March 1
• DOL Posts Webcasts Explaining COBRA Premium Extension, 5500 Electronic Filing
• Plan Assessed $86,500 Penalty for Failure to File Complete 5500
• EBSA Releases Form 5500 Datasets
• HEART Act
• Mental Health Parity Guidance Issued
• New Excise Penalty for Group Health Plan Noncompliance
• CMS Revises Guidance for Section 111 Medicare Reporting
• IRS Information Letter Regarding Deductibility of COBRA Premiums
• State Updates: CT, FL, ME, MS, NE, NJ, NY and TN

Reminder: Medicare Part D Disclosure to CMS due by March 1

Employers who sponsor a group health plan that offers prescription drug coverage to Medicare Part D eligible individuals must provide annual notification to the Centers for Medicare and Medicaid Services (CMS) regarding the creditable or non-creditable status of their plan. This notification is due within 60 days of the beginning of the plan year. Calendar year plans must comply by Mar. 1, 2010.

Click here to view the disclosure form.

Click here to view the instructions.

DOL Posts Webcasts Explaining COBRA Premium Extension, 5500 Electronic Filing

The Employee Benefits Security Administration (EBSA), of the Department of Labor (DOL), has posted a webcast on their homepage providing compliance assistance for the COBRA premium reduction extension. Specific examples, including a discussion of how to handle the "transition period" for individuals who changed coverage during an open enrollment period, are provided in the webcast.

A separate four-part series of webcasts is also available which provides training and assistance for the electronic filing required when plan sponsors file their 2009 Form 5500s. To watch the archived presentations, participants may be required to provide identifying information such as name, city, state and a valid e-mail address.

Click here to view the EBSA homepage.

Plan Assessed $86,500 Penalty for Failure to File Complete 5500

A judge with the DOL upheld a civil penalty of $86,500 assessed in the case U.S. Dep't of Labor v. Airport Hospitality, Ltd., 2007-RIS-00048 (ALJ 2009). The penalty is a result of the 401(k) plan's failure to attach an acceptable independent qualified accountant's opinion with the Form 5500 filing for the 2004 plan year. After receiving no response to its repeated requests for the missing information, the DOL issued the plan a "Notice of Intent to Assess a Penalty." Even though the plan argued that the penalty should not be assessed due to filing bankruptcy and losing records after selling various locations, the DOL judge assessed the full penalty. The judge determined that the plan could have used plan assets, which are not affected by bankruptcy proceedings, to pay for an auditor. Additionally, prior to selling its locations, the plan did not comply with the ERISA requirement to preserve essential records for approximately eight years.

Click here for more information.

EBSA Releases Form 5500 Datasets

The EBSA has released online datasets of Form 5500 annual returns for plan years 1999 through 2008 to the public. There are an estimated 800,000 Form 5500s for retirement, health & welfare and other employee benefit plans included as part of this release of information. The datasets consist of the raw data from all of the filings for each year, including the data in the various schedules.

Click here for the Form 5500 datasets.

HEART Act

The Internal Revenue Service (IRS) issued Notice 2010-15 addressing provisions of the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008 which relates to qualified retirement plans, including 401(k), 403(b) and governmental 457(b) plans. The guidance includes 20 questions and answers, and discusses topics such as survivor and disability retirement benefits with respect to military service, differential wage payments, and in-service distributions. Major provisions in the law include:

• A survivor of a deceased service member is allowed tax-free rollover of certain funds to a Roth IRA or Education Savings Account.
• Employers who pay all or some of the compensation that an employee would have normally been paid to those on active duty ("differential pay") must recognize that compensation when calculating pension benefits. These wages paid were previously not treated as wages for federal employment tax purposes, but the HEART Act amended the Code to now treat differential pay as wages for income tax withholding purposes.
• Reservists who request distributions from defined contribution plans (including 401(k) plans) while serving at least six months of active duty on or after Dec. 31, 2007 will not be subject to the 10 percent withdrawal penalty, regardless of the participant's age.
• The HEART Act requires plans to consider an employee who dies while on active duty to be considered a "deemed rehired employee" in order to provide the employee with any additional benefits that would have been provided to an active employee. These benefits may include accelerated vesting, life insurance and other survivor's benefits.

The notice provides that an amendment regarding the applicable HEART Act provisions should be effective on or before the last day of the first plan year beginning on or after Jan. 1, 2010. For calendar year plans this date is Dec. 31, 2010. Governmental plans need to make the applicable amendments on or before the last day of the first plan year beginning on or after Jan. 1, 2012 (Dec. 31, 2012, for calendar year plans).

Click here for more information.

Mental Health Parity Guidance Issued

The IRS, EBSA and CMS have jointly issued interim final rules implementing the provisions of the Paul Wellstone and Pete Dominici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) which are available in the federal register dated Feb. 2, 2010. Although the law is effective for plan years beginning on or after Oct. 3, 2009, the interim final regulations will become applicable to plans and issuers for plan years beginning on or after July 1, 2010. Benefits provided for mental health benefits and substance use disorder benefits may be no more restrictive than benefits provided for "medical/surgical benefits." The regulations clarify that "medical/surgical benefits" should be defined under the terms of the plan in accordance with applicable state and federal law, and must be generally accepted in the medical community. Under the regulations, the financial requirements applicable to mental health or substance use disorder benefits must be no more restrictive than the predominant financial requirements applied to substantially all medical and surgical benefits covered by the plan. The interim final regulations define the term "predominant" as the level of coverage that applies to more than one-half of "medical/surgical benefits" subject to the financial requirement or quantitative treatment limitation in that classification. Situational examples are provided in the amended sections of the IRS Code, EBSA regulations and CMS regulations, beginning on page 81 of the interim final rule.

Click here to view the news release.

Click here to view the fact sheet.

Click here to view the interim final rule.

New Excise Penalty for Group Health Plan Noncompliance

Effective Jan. 1, 2010, group health plans that fail to comply with the following laws will be subject to an excise penalty tax of $100 per day:

• COBRA
• Mental Health Parity
• HIPAA portability (including pre-existing conditions, creditable coverage certificates, and special enrollment rights)
• Michelle's Law
• Newborns and Mothers Health Protection Act

The employer plan sponsor will self report the violation on Form 8928. The form and the penalty amount would be due by the filing date of the employer's income tax return for that tax year. However, the form and the penalty would not be required for an employer whose violation was not willful, and the violation was corrected within 30 days of having knowledge of the violation. If an insurer or third-party administrator (TPA) is contracted to perform a certain act that leads to noncompliance, the insurer or TPA is responsible for the penalty amount. There are different rules for multiemployer plans and church plans.

There is also an excise penalty applied to an employer who does not make comparable contributions under the HSA. This would only apply to HSAs that are outside of the Section 125 cafeteria plan (meaning that they do not permit employees to contribute to the HSA on a pre-tax basis). The penalty for non-compliance is 35 percent of the employer's contributions for that calendar year. For this type of violation, the Form 8928 is due by Apr. 15 following the calendar year in which the non-comparable contributions were made.

Click here to view Form 8928.

Click here to view Form 8928 instructions.

CMS Revises Guidance for Section 111 Medicare Reporting

CMS has revised the Group Health Plan Manual for Section 111 Medicare Reporting effective Jan. 4, 2010. Health reimbursement arrangements (HRAs) are exempt from the filing if the HRA has an annual maximum benefit of less than $1,000 or if the HRA is integrated with a group health plan. The free standing HRAs will need to begin reporting in fourth quarter 2010. CMS will be hosting three teleconferences to provide further information regarding reporting for group health plans.

Click here to view the Group Health Plan Manual.

Click here to view the teleconference schedule.

IRS Information Letter Regarding Deductibility of COBRA Premiums

In Information Letter 2009-0243, the Internal Revenue Service (IRS) Office of the Chief Counsel explained that COBRA premiums are not deductible to an individual taxpayer unless the premium cost when added with any other qualifying medical expenses exceeds 7.5 percent of the taxpayer's adjusted gross income. Furthermore, if the taxpayer was eligible for the COBRA premium assistance, only the reduced premium amount that the taxpayer actually paid would be used to calculate the deduction. As a reminder, Information Letters only apply to the individual who requested the information; however, they can provide insight into the IRS' view on a certain issue.

Click here for more information.

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