Welfare Plans

The Department of Labor’s Office of Inspector General recently issued a report detailing concerns with the valuation of alternative investments (such as private equity funds, hedge funds, and real estate) held by ERISA plans.  ERISA requires plan sponsors and fiduciaries to value investments for several purposes, including to determine funding obligations, select investments, monitor investment performance, and file accurate financial statements.  The report notes that many plan fiduciaries rely on valuations provided by managers of alternative investments without analyzing the basis for the valuation or seeking independent review.  The report suggests that this practice poses substantial risks to the retirement system and urges the Labor Department to require more rigorous valuation methodology.
Continue Reading ERISA Plans’ Valuation of Private Equity and Other Alternative Investments Draws Increased Scrutiny

Earlier today, the Supreme Court agreed to review the Sixth Circuit’s decision United States v. Quality Stores.  In that decision, the Sixth Circuit sided with taxpayers and concluded that certain severance payments that qualify as supplemental unemployment benefit payments (or “SUB” payments) for federal income tax purposes are not…
Continue Reading Supreme Court To Resolve Whether Severance Pay for Layoffs Is Subject to FICA Tax

The IRS issued a notice today setting forth special procedures by which employers may claim a refund of FICA taxes that were paid on employee benefits solely because of the application of the Defense of Marriage Act (“DOMA”).  Section 3 of DOMA prohibited the IRS from recognizing same-sex marriages for federal tax purposes and was struck down by the Supreme Court last June in a case called United States v. Windsor.  Prior to the Windsor decision, employers paid the employer’s share of FICA tax, withheld the employee’s share of FICA tax, and withheld income tax with respect to benefits for same-sex spouses of employees when the benefits could be provided tax-free to employees’ opposite-sex spouses.  In large part, the benefits at issue are health benefits, although certain tuition and other benefits also might have been taxed solely on account of DOMA.  Following the Windsor decision, refunds now may be obtained.
Continue Reading IRS Issues Special Administrative Procedures for DOMA Tax Refund Claims by Employers

The Department of Labor issued a technical release today addressing the effect of the Supreme Court’s decision in U.S. v. Windsor on employee benefit plans.  The Windsor decision struck down section 3 of the Defense of Marriage Act, thereby requiring the federal government to recognize same-sex marriages that are recognized…
Continue Reading Not To Miss the Party, Department of Labor Joins the Place Of Celebration Approach Following Windsor

The Affordable Care Act requires employers to provide to employees a written notice about public health exchanges (now called Health Insurance Marketplaces).  The Department of Labor issued a frequently asked question today confirming that employers subject to the Fair Labor Standards Act (FLSA) should provide the notice by October 1,…
Continue Reading Department of Labor Confirms No Penalty For Failing to Provide Exchange Notice

The IRS has released proposed regulations that implement two significant new reporting requirements for employer group health plans.  Employers and insurers that provide minimum essential health coverage must report information to the IRS about the coverage provided to each individual for each month, with a copy of the statement to the individual.  Employers with at least 50 full-time employees must report additional information to the IRS, with a copy to each full-time employee, to indicate whether the coverage they offer (if any) is affordable and provides minimum value.  Both reporting requirements will become effective in 2015.  Reporting entities must develop administrative systems and procedures before the effective date so that they will be able to begin collecting the required information in 2015.

Below is summary of the requirements for private employers sponsoring single-employer plans followed by a discussion of the reporting requirements.

Section 6055 Returns Section 6056 Returns
Who Must File Insurer, for insured plans. Employer, for self-insured plans Employers with 50 or more full-time employees (regardless of whether or how coverage is   provided)
Form 1095-B 1095-C
Content
  • name, address, and EIN of employer
  • name, address, and TIN of insurer (for insured plans)
  • name, address, TIN of each employee or retiree and each covered spouse and/or dependent
  • for each covered individual, the months of the year for which coverage was provided
  • other information required by IRS in later guidance
  • name, address, and EIN of employer
  • name and phone number of employer’s contact person
  • whether the employer offered minimum essential coverage to its full-time employees each month of the year
  • the number of full-time employees each month, and the name, address, and TIN of each employee
  • for each full-time employee, the months when coverage was available and the months when coverage was provided
  • for each full-time employee, the employee’s share of the monthly premium for self-only coverage under the lowest-cost option (if any) that provides minimum value
  • other information required by IRS (see list below for information the IRS expects to require)
Additional   Content for Notice to Individual
  • contact phone number for entity required to file statement
  • policy number (for insured plans)
 none
Due Date for Returns To the IRS: February 28 (or by March 31, if filing electronically).

To the individual: January 31


Continue Reading Health Coverage Reporting Rules Create New Burdens for Employers

The IRS issued guidance today defining same-sex marriage for purposes of federal tax rules.  Following the Supreme Court’s decision in United States v. Windsor last June invalidating section 3 of the Defense of Marriage Act (DOMA), federal law no longer limits the definition of marriage to opposite sex spouses.  However,…
Continue Reading Celebrating the Arrival of Windsor Guidance: Same-Sex Marriages Will Be Recognized For Federal Tax Purposes Based on Place of Celebration

More than a month after the Supreme Court struck down section 3 of the Defense of Marriage Act (“DOMA”) in United States v. Windsor, employers are still waiting for the federal government to answer fundamental questions about the rights of same-sex spouses in the post-DOMA world.  In the meantime, however, lower federal courts have begun to come to grips with these questions in decisions interpreting and applying the Supreme Court’s Windsor decision.

A significant issue for employers is whether they should determine a couple’s marital status based on the law of the state where the marriage was celebrated, even if the couple now resides in a state that does not recognize same-sex marriage.  A number of states have “mini-DOMA” statutes declaring that the state will not recognize same-sex marriages, including marriages performed in other jurisdictions.

Although the Supreme Court held in Windsor that the federal government cannot refuse to recognize a same-sex marriage that is recognized under state law, the Supreme Court did not address section 2 of DOMA, which provides that a state is not required to recognize a same-sex marriage performed in a different state.  As a result, Windsor leaves open the possibility that a same-sex couple’s marriage might be valid in some states and not in others.  A rule that requires plan sponsors to look to a couple’s state of residence rather than to the state of celebration to determine the validity of their marriage would create significant administrative burdens.
Continue Reading Federal Courts Decide Rights of Same-Sex Spouses After DOMA

A federal court of appeals has ruled unanimously that the employer mandate under the Affordable Care Act is a valid exercise of Congress’s constitutional power to regulate commerce.  The employer mandate requires employers with more than 50 full-time employees to provide affordable health coverage or pay a penalty.  The plaintiffs argued that the Commerce Clause of the Constitution does not give Congress the power to force employers to purchase health insurance for their employees.
Continue Reading ACA Employer Mandate Survives Constitutional Challenge