Author: jfortenberry@fortenberrylaw.com

Did you know that the DOL has posted an updated “Reporting and Disclosure Guide for Employee Benefit Plans“? It was updated as of October of last year. With the passage of ARRA and CHIPRA, it will now need to be further updated.

The IRS has issued final regulations (copy via Benefitslink.com) relating to automatic contribution arrangements. The regulations affect 401(k) plans and other eligible plans that include an automatic contribution arrangement.

Effective Dates: The regulations have a general effective date of February 24, 2009. However, except as provided in §§1.401(k)-3(j)(1)(i) and 1.401(m)-2(a)(6)(ii), the final regulations relating to qualified automatic contribution arrangements (“QACAs”) apply to plan years beginning on or after January 1, 2008. The regulations relating to eligible automatic contribution arrangements (“EACAs”) apply for plan years beginning on or after January 1, 2010.

The regulations go on to provide that, for plan years that begin in 2008, a plan must operate in accordance with a good faith interpretation of Internal Revenue Code Section 414(w). The regulations state that , for this purpose, a plan that operates in accordance with the proposed regulations under §1.414(w)-1 or these final regulations will be treated as operating in accordance with a good faith interpretation of Code Section 414(w).

This article here from Vanguard reports on participant behavior in 2008. Despite the extreme volatility of the markets in 2008, the study conducted by the Vanguard Center for Retirement Research indicated that the overwhelming majority of participants “stayed the course.”

On Tuesday, February 24th, the House Education and Labor Committee will begin a series of hearings “to explore the shortcomings of our nation’s retirement system and look at solutions to ensure that Americans can enjoy a safe and secure retirement after a lifetime of hard work.” According to the announcement, the purpose of the first hearing on Tuesday is to “examine how the current economic crisis has highlighted existing weaknesses in the 401(k) retirement savings system.” You can listen to the hearings live via the link on this page.

Plan Adviser has more here.

See also this article from the Washington Post: “Senate Weighing New Rules for Retirement Funds.”

A barber giving $3 haircuts to the unemployed, a doctor giving 50% discounts to patients, and a salon giving discounts for 401(k) losses. From Kare11: The 401(k) Haircut: Uptown Salon Offers Deal for Tough Times. Excerpt:

A Twin Cities hair salon owner has his own economic stimulus plan for building growth.

John Charles, who owns ‘The John Charles Salon‘ in Minneapolis’ Uptown, and his business partner, Craig Weitz, came up with the idea.

Here’s the deal: New customers will get to trim their salon bill by using their 401K statement.

They’ll get to cut the percentage lost in their retirement fund for haircutting or coloring services.

Customers can take off up to 50 percent from their bill.

All you need to do is bring proof of the 401K percentage loss and show it to the Salon’s cashier.

It will be deducted from your bill… no questions asked.

More here.

It is doubtful that folks will want to drag out their 401(k) statements and take them into the salon to get this discount, or that they would even want to divulge this info to their hairdresser (Only my hairdresser knows for sure. . . remember that adage?) However, it does present some wonderful food for thought about how we might all work together to get through this.

And, if perchance, this is a marketing ploy (as salons appear to be hurting in this downturn), what a great one:

(1) It enables the salon to gain a “competitive edge” in this environment.

(2) It will give the salon free marketing for days to come.

(3) And, by offering services at a discount and keeping stylists busy, it will enable the salon to meet its overhead.

(Hat Tip: Plan Sponsor.com)

The DOL has created a webpage for employers and employees providing information about what happens to health and retirement benefits in a job loss.

With the passage of The American Recovery and Reinvestment Act of 2009 (“ARRA”), H.R. 1 (signed today by the President) and The Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”), H.R. 2 (signed February 4, 2009 by the President), employers who are now burdened with keeping their businesses afloat in these difficult economic times, are faced with meeting new obligations under these bills. Both bills together constitute a new complex set of rules governing health plans. The requirements imposed are enough to discourage many small employers from maintaining these plans so that some employers may feel the need to drop their health care programs for employees altogether.

CHIPRA

The first set of new obligations flow from the H.R. 2 Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”). Under these new rules, employers with health plans will have the following additional responsibilities:

(1) To provide employees with notice of enrollment rights for their eligible participants and beneficiaries under CHIPRA.

(2) To decide whether they will “opt out” of the premium assistance program whereby the states may make direct payments to the employer for eligible employees and their children. If they opt out, the premium assistance subsidy will be paid directly to the employee.

(3) To provide special enrollment rights in their health plans for employees that lose Medicaid or CHIPRA coverage.

Also, group health plan administrators are required to disclose to states, upon request, information about their group health plans that will enable the state to make a determination about the cost-effectiveness of providing premium assistance for the purchase of coverage under the plan for plan participants and beneficiaries eligible for the program.

There are civil penalties of up to $100 a day for failure to comply with the new notice and disclosure requirements. The effective date for the premium assistance and special enrollment provision is April 1, 2009.

ARRA

There is a second set of new obligations for employers in maintaining their health plans pertaining to the COBRA subsidy instituted by ARRA (HR 1). Under ARRA, individuals who incur an “involuntarily termination from employment” between September 1, 2008 and December 31, 2009 will be entitled to a government subsidy of 65% of the premium, if the individual wants to elect COBRA. These new rules are effective for coverage periods following the date of enactment.

Under these rules, employers will have to identify which former employees are required to receive notice about the subsidy and the new special enrollment right. Only “assistance eligible individuals” (“AEIs”) are entitled to the subsidy. AEIs are those individuals who are eligible for COBRA continuation coverage between September 1, 2008 and December 31, 2009 resulting from their involuntary termination of employment. There are subsidy “phase outs” for AEIs whose federal modified adjusted gross income exceeds $125,000 ($250,000 for joint filers).

Employers will have new notice requirements under the rules as well as reporting requirements. Employers will need to work with vendors and payroll systems to make sure they are able to comply with the new rules. And, of course, to add to this burden, all health plan documents, SPDs, and cafeteria plan documents will have to be amended to comply with the requirements.

Finally, there will also likely be a whole truckload of guidance and regulations needed to interpret and answer questions that practitioners have regarding the implementation of all of the above.

In the days to come, there will likely be a lot of commentary on the Deere case issued last week by the Seventh Circuit and noted in a previous post here. A couple of commentaries posted already:

From Nevin Adams: “Winning” Ways?

“. . . [M]y reading of last week’s decision by Judge Diane P. Wood of the 7th U.S. Circuit Court of Appeals (see “Appellate Court Backs Deere Case Dismissal”), suggests that we’re still making the “right” decision—but for the wrong reasons, IMHO.“

McDermott Will & Emery: “Seventh Circuit Rules Against Plaintiffs in Deere ERISA “Excessive Fees” Case”

“More than a dozen cases against large corporations with virtually identical allegations will be affected by the Deere decision. In some instances, those cases were placed on hold pending the resolution of Deere. This decision is especially important because the Seventh Circuit provides a clear answer rejecting many of the general allegations and theories advanced in the other excessive fees cases. At its core, Deere expressly rejects the alleged need to disclose revenue sharing, finding it not material to participants nor required under then existing law, and provides a complete defense to a claim of “excessive” investment fees where the plan offers a wide range of investments with a wide range of fees in line with those subject to market competition. Although not binding outside the Seventh Circuit (Wisconsin, Illinois and Indiana), this opinion will be highly persuasive in other jurisdictions.”

From Read the Stimulus:

Yesterday, both the House and Senate passed the stimulus package. The White House is now soliciting comments on the bill, and we encourage everyone to — politely — share their feedback.

Access the final bill here. It is still full of hand-written annotations and markups.

“It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.” The Federalist no. 62 (1788)