Category: Benefits

Mintz Levin has provided a good summary (which you can access here) of the principal features of H.R. 4850, Massachusetts’ Health Care Reform Bill. See previous posts on the legislation here.

Massachusetts Governor Mitt Romney signed into law the health care bill previously reported on here. You can access a press release here and Governor Romney’s comments here. He did veto some items in the bill, one of which calls for employers with 11 or more workers to provide health coverage or pay an annual fee of $295 per worker. The Boston Globe reports that “[t]he vetoes promise to be more symbolic than meaningful, because the House and Senate passed the bill overwhelmingly and are expected to override all the vetoes.”

KaiserNetwork.org reports here.

A couple of articles announcing survey results that I find interesting and want to catalogue here:

From the Wall Street Journal, “Corporate-Governance Concerns Are Spreading, and Companies Should Take Heed.” Excerpt:

A study of more than 300 institutional investors around the globe, to be released next week, finds corporate-governance concerns are still very much on the rise. A surprising 63% of those surveyed believe corporate governance will be even more important to their firms over the next three years than it has been over the past three years.

The study was conducted by Institutional Shareholder Services, an advisory service for big investors, and it included pension funds, mutual funds, hedge funds and other large money managers in North America, Europe and Asia. . .

Dennis Johnson, a senior portfolio manager at Calpers, says his firm has invested $4 billion with activist managers who focus on different corporate-governance measures in different markets with great success. “It’s one of the best-performing strategies in all of equity investing for Calpers,” he says.

From the Captive Daily Wire, Health Savings Accounts fastest growing area of the healthcare market, according to healthcare executive survey. Excerpt:

When asked which areas within the healthcare market they saw growing the fastest over the next year, thirty-six percent (36%) of healthcare insurance executives said they believed health savings accounts/high deductible plans will see the most significant growth, followed by mini-med plans (13%) and Medicare/Medicaid advantage plans (12%). This finding was from a survey conducted at the seventh annual American Re HealthCare Symposium.

(Access the latter survey here.)

Today’s Wall Street Journal has a commentary by Mitt Romney, governor of Massachusetts, entitled “Health Care for Everyone? We Found a Way.” Excerpt:

Only weeks after I was elected governor, Tom Stemberg, the founder and former CEO of Staples, stopped by my office. He told me that “if you really want to help people, find a way to get everyone health insurance.” I replied that would mean raising taxes and a Clinton-style government takeover of health care. He insisted: “You can find a way.”

I believe that we have. Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced. And we will need no new taxes, no employer mandate and no government takeover to make this happen. . .

My Democratic counterparts have added an annual, $295 per-person fee charged to employers that do not contribute toward insurance premiums for any of their employees. The fee is unnecessary and probably counterproductive, and so I will take corrective action . . .

The U.S. Court of Appeals for the D.C. Circuit issued an opinion last Friday holding that the SEC failed to allow public input on its proposed rules governing mutual fund boards of directors. You can access the opinion here. The rule that was challenged:

The Rule requires that mutual funds relying on the Exemptive Rules adopt certain governance practices, including those set forth in two conditions: a fund must have (1) a board with no less than 75% independent directors and (2) an independent chair.

Holding:

The Commission is in a better position than the court to assess the disruptive effect of vacating the Rule’s two conditions. Therefore, the court will vacate the 75% independent director and independent chair conditions of the Rule but, given the court’s expectation in Chamber I that the Commission could “readily” address costs, 412 F.3d at 144, withhold the issuance of its mandate pursuant to Rule 41(b) for ninety days. Such an approach is not unprecedented. . . This approach will afford the Commission an opportunity to reopen the record for comment on the costs of implementing the two conditions. Within ninety days the Commission shall file a status report with the court, unless the Commission shall have prevailed on a motion to modify, accelerate, or postpone the mandate, and upon further order the mandate will issue.

Another state is making some benefits history. Massachusetts has passed legislation (House No. 4850) that would require most of its citizens to purchase health insurance. The legislation would also require employers with 11 or more employees to contribute towards the cost. I am sure that the legislation will give rise to a lot of discussion over ERISA preemption issues just as the Maryland legislation did when it was passed late last year (discussed here and here).

The Wall Street Journal in an article yesterday provided this summary of the Massachusetts legislation:

Under the plan approved yesterday, uninsured residents who don’t buy new, low-cost plans — some subsidized by the state — would face financial penalties beginning in July 2007. In the first year, those who don’t buy insurance — provided the state makes available one deemed affordable — forfeit their personal state tax exemption, now worth about $150. In the second year, those who don’t buy would have to pay a fine equal to half of the monthly premium cost of an affordable plan. For a full year, the fine could total about $1,200 for a young adult who would be eligible for an individual plan. There are no criminal penalties for not buying insurance.

In another provision that stirred unease among some businesses, the proposed law would require companies with 11 or more employees to provide health coverage or pay a per-employee annual fee of $295. In addition, employers whose uninsured workers make multiple use of emergency room care — “free riders,” in the bill’s parlance — would have to pay between 10% and 100% of the portion of those medical bills exceeding $50,000.

The Wall Street Journal also reports that “Massachusetts faced a July federal deadline to show that it was working to cover more of the uninsured or face losing $385 million in funding for Medicaid, the federal-state insurance plan for the poor and disabled” and that “[o]ther states — schedules vary from state to state — are expected to face similar pressure in coming years.”

You can access links to the legislation at the website of the The 184th General Court of The Commonwealth of Massachusetts:

• Full text of legislation
• Conference Committee Report, Section-by-Section Summary
• Summary and Fact Sheet

One of the most interesting parts of the legislation is that every employer with 11 or more employees would be required to adopt a 125 plan. Employers who don’t comply would be faced with a fine. Bill section 48 provides as follows:

Section 2. Each employer with more than 10 employees in the commonwealth shall adopt and maintain a cafeteria plan that satisfies 26 U.S.C. 125 and the rules and regulations promulgated by the connector. A copy of such cafeteria plan shall be filed with the connector.

If you are wondering what the term “Connector” means like I did, here’s what the Fact Sheet says about that term:

The bill creates the Commonwealth Health Insurance Connector, to connect individuals and small businesses with health insurance products. The Connector certifies and offers products of high value and good quality. Individuals who are employed are able to purchase insurance using pre-tax dollars. The Connector allows for portability of insurance as individuals move from job to job, and permits more than one employer to contribute to an employee’s health insurance premium. The Connector is to be operated as an authority under the Department of Administration and Finance and overseen by a separate, appointed Board of private and public representatives.

Health savings accounts have also been allowed to play a roll in the legislation. The bill would apparently enable HMOs to offer coverage plans that are linked to health savings accounts.

Some pertinent links:

• Kaisernetwork.org reports here on the legislation.
• Professor Secunda discusses ERISA preemption at the WorkforceProf Blog.
• NCSL is keeping tabs on “Pay or Play” legislation here.
• More links at Affordable Care Today.

Have you discovered the IRS’s EP CPE texts? The Employee Plans Division of IRS annually publishes a series of articles known as the Employee Plans Continuing Professional Education (CPE) Technical Instruction Program, which are apparently written and designed for training of IRS personnel. There are articles for 1998, 1999, 2001, 2002, 2003 and 2004 available online for viewing.

Practitioners may find them useful from time to time. For starters, try this one on Church Plans, another on EGTRRA, or this one on Compensation written in a less formal rhetoric:

Often when the word compensation is spoken, a vision of dollar signs flash inside your head and a smile creeps onto your face. There are not many things that could create this effect with just a simple word. You would think that this word presents a simple idea, but just the opposite is true. The term compensation plays a significant role in retirement plan development.

The definition of compensation in retirement plans could be the difference between getting a hundred dollars more in your employer contribution, allowing you to contribute more to your 401(k) arrangement, or increasing the opportunity for growth with your retirement funds. . . .

Last week SEC Chairman Christopher Cox, in a speech before the Council of Institutional Investors, commented on the new executive pay disclosure requirements issued by the SEC at the end of January. (See previous post here.) Here is an excerpt from his speech pertaining to the proposed disclosure rules for perks and retirement benefits:

We want investors to have better information, including one number — a single bottom line figure — for total annual compensation.

That single figure will include a more accurate representation of perquisites. Currently, companies are required to report a lump sum if an executive’s perks are more than $50,000, or 10 % of his or her salary and bonus.
And under current rules, an individual perk has to be reported only if it represents more than 25% of all the perks that an executive receives.

That sets the bar too high. $50,000 is what many of a company’s shareholders make all year, and it’s far above the median household income of $44,400. So under our proposal, perquisites must be itemized if they total $10,000 or more.

The proposed new rules would also improve the disclosure of retirement benefits. New tables would outline the defined-benefit and defined-contribution retirement plans of top officers. There would also be detailed descriptions of payments that could be made if an executive is terminated. Those disclosures aren’t required under our current rules.

This should ensure that retirement benefits, which under the current disclosure regime can be nearly impossible to understand, will finally become intelligible. We don’t want any more “Aha! moments” when shareholders learn the details of a “Golden Goodbye” only when an executive leaves the company — and it’s too late.

An important part of our job at the SEC is to ensure that investors have available to them all of the compensation information they need, presented in a clear and understandable form that they can use.

(Hat tip: CorporateCounsel.net Blog)

This article here serves as a good reminder for plan sponsors to review their service provider agreements and make sure they include provisions that insure providers are doing everything they can to protect the personal data of participants.

(Hat Tip: TheCorporateCounsel.net Blog)

Kenni Merritt has written an article for the Oklahoma Bar Journal which is a primer on ERISA Section 510 claims: “Interference with ERISA-Protected Rights: Making a Federal Case Out of a Wrongful Discharge Action.” Excerpt:

ERISA does not provide a statute of limitations for suits under Section 510. Therefore, courts select the most analogous state law limitations period. The courts that have considered ERISA Section 510 claims have almost unanimously concluded that the most analogous state law cause of action under Section 510 is wrongful termination or retaliatory discharge, state law causes of action encompassing an employee’s claim that he was discharged in violation of public policy. . . To reduce exposure to liability, some plan sponsors include a limitations period in their benefit plan documents and summary plan descriptions. A number of courts have recognized such plan-imposed limitation periods as being valid and enforceable under ERISA.

The whole March 11th issue of the Oklahoma Bar Journal is devoted to employment discrimination.