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March 19, 2009 |
Schiff Hardin Employee Benefits and Executive Compensation Update Recent Legislation Impacts Employee Benefit and Retirement Plans A number of recently enacted laws pertain directly to employee health and welfare plans and retirement plans, and the benefits payable under these plans. These laws include provisions that may potentially require amendments to the benefit plans you sponsor. This update briefly highlights the relevant provisions of these laws. To assist employers with keeping track of these new provisions, when they become effective and when plans must be amended to comply with them, Schiff Hardin has developed the attached compliance chart that includes all of this information as well as additional details regarding the impact or potential impact of each law discussed below. This update does not include an exhaustive overview of any of these laws. For more information and for guidance regarding how any particular legislation may affect your workplace, contact your Schiff Hardin attorney or any of the individual attorneys listed. Group health insurance plans commonly impose limitations on coverage for the treatment of mental health and substance abuse disorders. MHPAEA generally requires that if a plan offers coverage for such disorders, it must offer coverage that is substantially equal to the coverage offered for injuries and illnesses that are not associated with mental health or substance abuse disorders. Specifically, the Act: (1) requires parity in "financial requirements" (such as co-insurance, co-payments, deductibles and out-of-pocket expense limitations) and treatment limitations (such as those that would limit days of coverage, frequency of treatment and number of visits); (2) prohibits separate cost sharing requirements and treatment limitations applicable only to mental health and substance abuse disorders; (3) applies to out-of-network providers of care for mental health and substance abuse disorders; and (4) imposes additional disclosure requirements. The HEART Act primarily amends the Internal Revenue Code to provide a number of enhanced benefits to military personnel and their beneficiaries. Among the many provisions included under the HEART Act is the requirement that survivors of tax-qualified retirement plan participants who die while on active military duty must be provided the same survivor benefits, if any, offered to the survivors of participants who die while actively employed. Such benefits may include accelerated vesting or ancillary life insurance benefits. The HEART Act also requires certain plan changes for employers who make supplemental income payments known as "differential payments" to employees who are engaged in qualified military service. Furthermore, the HEART Act permits employers to amend their cafeteria plan or flexible spending account arrangement to allow immediate distributions of unused balances to reservists who are ordered or called to active duty for at least 180 days. Michelle's Law provides that a group health plan that offers dependent coverage to college and other post-high school students may not terminate such coverage if the student takes a medically necessary leave of absence from school or otherwise ceases to be a full-time student due to a medical necessity. The student must suffer from a serious illness or injury in order for any such status change to be deemed medically necessary. Coverage under the group health plan must continue until the earlier of the one-year anniversary of the first day of the leave of absence or the date on which coverage would otherwise terminate under the plan's terms. COBRA is then available when the extended coverage ends. CHIPRA expands and extends the State Children's Health Insurance Program (now known as "CHIP") through September 30, 2013. Among other things, CHIPRA also amends the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") special enrollment rules to include a new 60-day special enrollment period for employees and dependents eligible for group health plan coverage in the event the employee or dependent (i) loses coverage under Medicaid or CHIP, or (ii) becomes eligible for premium assistance in the employer's group health plan under a Medicaid or CHIP program. CHIPRA also imposes a number of notice requirements on employers that sponsor group health plans. This new special HIPAA enrollment period must be offered by April 1, 2009. An individual who participates in a tax-qualified retirement plan and retires must take at least minimum withdrawals after age 70½. Significant tax penalties apply if this rule is violated. For 2009 only, the Recovery Act permits such individual to forego the otherwise required minimum distribution from his or her tax-qualified defined contribution retirement plans, including 401(k) plans. Defined benefit plans are not covered by the Act. Suspending the mandatory withdrawal allows individuals to keep the money in their plans if they choose. GINA prohibits discrimination in group health plans (and in a variety of other ways) based on genetic information. Essentially, the ADA Amendments broaden the definition of who is disabled for purposes of the ADA. The precise impact of the ADA Amendments on the terms of employee benefit plans, if any, is not clear because the U.S. Department of Labor has yet to issue the regulations. ABOUT SCHIFF HARDIN LLP Schiff Hardin's Employee Benefits and Executive Compensation Group works with clients to determine which retirement and health/welfare benefits plans best suit their needs, and assists in the design and implementation of all types of stock-based plans, deferred compensation and employment arrangements. Our counseling extends to analyzing benefit formulas, investment alternatives and procedures, and issues of securities law and fiduciary concerns. For more information, contact us.
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