Retirement Plans

With the exception of the Internal Revenue Code (the “Code”) Section 436 amendment described below, there are no mandatory amendments that a qualified retirement plan must adopt prior to year-end. However, year-end always brings with it housekeeping items that plan sponsors must comply with.

Annual Notice Requirements
The following notices, where applicable, must be provided at least 30 days, but not more than 90 days, before the first day of the plan year (i.e., no later than December 1 for calendar-year plans).

• Safe Harbor 401(k) Plan – Plan sponsors of safe harbor 401(k) plans need to timely distribute to plan participants the annual notice describing the safe harbor employer contribution and other safe harbor features of the plan.  
• Automatic Enrollment Features – Plans that automatically enroll participants are required to provide an annual notice describing the enrollment features and automatic contributions to the plan.
• Qualified Default Investment – In participant-directed plans, a plan sponsor may provide a “qualified default investment” in which participants’ assets will be invested if no affirmative election is made. The plan sponsor must give notice that describes the qualified default investment. 

Year-End Deadlines
Section 436 Amendment – Code Section 436 requires restrictions on distributions and limitations on benefit accruals if a pension plan does not meet certain funding levels. Plan amendments reflecting these restrictions were originally required back in 2009, but have been extended each year. We believe that the deadline will not be extended another year. Accordingly, plans that have not yet been amended for this change will need to be amended by December 31, 2013. 

IRS Favorable Determination Letters – Cycle C Filers – An employer with an employer identification number (EIN) that ends in 3 or 8, and sponsors an individually designed plan, is considered a “Cycle C filer” and must restate its plan and submit for a favorable determination letter application to the IRS by January 31, 2014. In addition, regardless of EIN, governmental plans are normally Cycle C filers, unless such plan otherwise elected to be a Cycle E filer (no election form or notice to the IRS is required if a governmental plan elects to be a Cycle E filer).

Discretionary Amendments – All discretionary amendments to qualified plans must be adopted no later than the end of the plan year in which they are adopted (i.e., a calendar year plan that has implemented a change to its plan in 2013 will have to adopt such amendment by December 31, 2013).

**The IRS announced the cost-of-living adjustments that affect the 2014 dollar limits for retirement plans (and health and welfare plans). A copy of the limits can be found at the following IRS website: http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions

Health Plans

Summary of Benefits & Coverage (SBC)
Plan sponsors are required to distribute to participants and beneficiaries a summary of benefits & coverage (SBC) with initial enrollment materials and each year thereafter. The Department of Labor’s (DOL’s) template for the SBC was revised in April 2013, thus it may slightly differ from the version that an employer used last year. Upon renewal, only an SBC that is applicable to the specific benefits package of the participant or beneficiary is required, and it needs to be provided 30 days prior to the first day of the plan year, unless written application for renewal is required (in which case, it must be provided no later than when such materials are distributed). 

HIPPA Privacy Notice
Each covered entity (i.e., group health plan) was required to update its “Notice of Privacy Practices” by September 23, 2013, in order to conform to newly issued HIPAA regulations. If the updated notice was posted on a website, it is also required to be sent with the open enrollment materials to participants. If the updated notice is not published on a website, the notice is required to be distributed to participants within 60 days of the effective date of the updated policy. At this time, there is no enforcement action or civil penalties if the notice has not been revised by such date.

Health Flexible Spending Account (FSA) Rules
On October 31, 2013, the IRS announced a change in the “use it or lose it” rules for health flexible spending accounts (FSAs). An employer may now, at its option, permit Health FSA participants to carry over up to $500 of any unused balance at the end of a plan year, to the immediately following plan year, so long as it does not offer a “grace period” under the plan. A plan amendment is required to effect this change. The summary plan description and other employee communications materials will need to be updated, as necessary.

Business Associate Agreements (BAAs)
A business associate agreement (BAA) between the plan and each business associate is intended to provide written satisfactory assurances to the plan that the business associate will appropriately safeguard the protected health information (PHI), just as the plan is required to do. BAAs were required to be updated by September 23, 2013, or, if a BAA was in place with a service provider on January 25, 2013, the deadline is September 23, 2014 or any earlier date when the BAA is amended. 

New COBRA Notices
The Federal COBRA requires group health plans to provide qualified beneficiaries with an election notice that describes their rights to continuation coverage and how to make an election. Earlier this year, the DOL issued new model COBRA notices that reference the “Marketplace” set up under the Affordable Care Act (i.e., the Exchanges). 

Pre-existing Condition Exclusion (PCE) Notice
Prior to 2014, group health plans were required to provide a notice to individuals detailing any pre-existing condition exclusions (PCEs) under the plan. Starting in 2014, PCEs are no longer allowed. Therefore, the requirement for notices regarding PCEs will become obsolete. However, group health plan sponsors should review their plan design and assess compliance with the requirement to eliminate all PCEs in advance of the effective date of this requirement – i.e., plan years beginning on or after January 1, 2014. The plan sponsor should ensure that the plan document is amended and that the summary plan description and other employee communications materials are updated, as necessary. 

Special Enrollment Rights
A group health plan must provide to each employee who is eligible to enroll in the plan a notice of his or her special enrollment rights at or prior to the time the individual is enrolling. This notice describes the rights of certain individuals to enroll in a group health plan upon the happening of certain events (e.g., the loss of other coverage; gaining a new dependent through marriage, birth, adoption, or placement for adoption; or becoming eligible for premium assistance under Medicaid or a Children’s Health Insurance Program Reauthorization Act). The model DOL Notice has been recently updated. 

Affordable Care Act (ACA)

Plan sponsors of health plans should also be aware of the changes to plan design brought about by the full implementation of the Affordable Care Act (ACA). The following is a brief summary of some of the changes:

• Grandfathered plans will no longer be permitted to exclude adult children who have health care coverage under their own employer’s plan. 
• Waiting periods greater than 90 days will no longer be permitted. 
• Annual limits on the dollar amount of “essential health benefits” for any individual are prohibited. 
• “Limited benefit” or “mini-med” plans and stand-alone health reimbursement accounts (HRAs) cannot be maintained after the 2013 plan year. 
• Non-grandfathered plans must provide coverage for certain clinical trials and cannot deny or limit coverage of routine patient costs for items and services furnished in connection with the trial, or discriminate against an individual based on participation in the trial. 
• Non-grandfathered, fully-insured plans offering coverage in the individual or small-group market must provide “essential health benefits.” 
• Maximum out-of-pocket limits (for 2014, these maximums are $6,350 for self-only coverage and $12,700 for family coverage). 
• Annual deductible may not exceed $2,000/$4,000 (as adjusted). 

Marketplace Notice. Employers should have already provided notice to employees informing them of the availability of health insurance through the “Marketplace” and employer-offered health coverage. The deadline for this Marketplace Notice was October 1, 2013.

Massachusetts Employers – Cafeteria Plans. Recent guidance under the ACA provides that employers cannot offer cafeteria plans to employees to purchase non-group health insurance without an employer contribution. As a result, there is a conflict between the Commonwealth’s cafeteria plan rules and the ACA guidance. Effective January 1, 2014, Massachusetts employees will not be permitted to use pre-tax cafeteria plan money to purchase coverage from the Health Connector. The Commonwealth plans to pursue legislation to repeal the state’s cafeteria plan, HIRD, free rider surcharge, and cafeteria plan notification requirements. Pending repeal, the Health Connector plans to pursue a policy of “non-enforcement” with respect to the free rider surcharge, the HIRD filing, and the cafeteria plan notification requirements.

Repeal of Defense of Marriage Act (DOMA)

The repeal of DOMA means that a same-sex spouse is now recognized for federal purposes. This affects retirement plans, health plans (including COBRA and HIPAA applications), deferred compensation arrangements, and cafeteria plans. Employers need to identify all legally married participants and review employee benefit plan documentation (formal plan document, summary plan description, election forms, notices, etc.) to identify how “spouse” is defined and whether revisions are required. Qualified retirement plans require operational compliance since September 16, 2013. Finally, domestic partners are not recognized under federal law – there may be potential discrimination issues if benefits differ between opposite-sex couples and same-sex couples. 

Our benefits team is available to assist you with bringing your plans into compliance or identifying any potential issues with respect to your employer-sponsored employee benefit plans. If you have any questions or would like to discuss further, please do not hesitate to contact any member of our employee benefits team.