February 2017 Newsletter | Trump on ACA and Fiduciary Rule | New IRS Guidance on Forfeitures | Medicare and Medicaid Disclosure Form Deadlines

February 2017 HR Alert
 President Trump Directs Department of Labor to Review Fiduciary Rule

Last year the Department of Labor (DOL) announced the final Fiduciary Rule (“the Rule”), scheduled to take effect on April 10, 2017.On February 3, 2017, President Trump signed a memorandum requiring the DOL to review the Rule and determine whether to rescind or revise it, delaying its effective date by 6 months.

It is unlikely that the Department of Labor will begin its review any time soon, since Labor Secretary nominee Andrew Pudzer has not been cleared by the Senate.  Additionally, proposed revisions or new policies issued by the DOL will need to submit to a notice and comment period.

It will likely be some time before we have a clear picture on what, if any, changes will be made to the Rule. The uncertainty around the rule leaves plan sponsors and service providers questioning whether to continue to institute operational and system changes to comply with the now delayed Rule or stop such changes altogether. Some service providers have opted to stay the course due to the time and money already spent to become compliant with the Rule, while others have decided to stop making changes and wait for further clarification on the fate of the Rule.

Hall Benefits Law recommends that retirement plan fiduciaries reach out to their service providers to ascertain what impact this latest news will have on the services being provided
to the plan.

IRS Releases New Guidance on Forfeitures

On January 18,  the IRS issued new proposed regulations to amend the definitions of qualified matching contributions (“QMAC”) and qualified non-elective contributions (“QNEC”). In addition, the IRS issued proposed regulations related to the funding of contributions under a safe harbor plan.

Why is this newsworthy? In accordance with the relevant Sections of 401(k) of the Internal Revenue Code (the “Code”), QMAC, QNEC, and safe harbor contributions are required to be fully vested on the date the contributions are made to the plan.  In the past, the IRS took the position that forfeitures could not be used as contributions for QMAC, QNEC or safe harbors because forfeitures are not fully vested on the date the contributions are made to the plan. The IRS’ narrow interpretation of the relevant Code Sections applied even when the plan documents allowed the use of forfeitures for QMAC and QNEC contributions.

Instead of requiring that contributions be fully vested at the time the contribution is made to the Plan, the new IRS regulations require that QMAC and QNEC contributions be fully vested at the time the contributions are allocated to the participants’ accounts.  The new regulation also permits the use of forfeitures to offset safe harbor contributions.

The proposed regulations will become effective after the final regulations are published; however, the IRS issuing these proposed regulations assures us that the regulations may be relied upon presently.

Before taking advantage of the benefits this regulation affords, Hall Benefits Law recommends that you take the time to review your plan documents to ascertain whether the plan permits or prohibits the use of forfeitures for the purposes discussed in this article. If the plan documents prohibit the use of forfeitures for QMAC, QNEC, or safe harbor contributions, you will need to contact the plan document sponsor to see whether it will amend the plan document to permit the use of forfeitures for these purposes. If an amendment is forthcoming, the plan document sponsor can tell you when the relevant amendment will take effect.

Finally, if you are a plan sponsor currently under audit and need to make a QMAC or QNEC contribution, now may be a good time to talk to the auditor and see if he or she will allow you to use forfeitures to make the relevant correction.

Hall Benefits Law can help you with any questions you have regarding this issue.

Contact Hall Benefits Law if you have any questions regarding the issues raised in this alert.

Executive Order Issued  on Affordable Care Act


President Trump made comments during Sunday’s Super Bowl pregame that indicate the process for coming up with a replacement for the Affordable Care Act (ACA) may take longer than initially indicated: “Maybe it’ll take some time into next year, but we are certainly going to be in the process. I would like to say by the end of the year, at least the rudiments, but we should have something within the year and the following year.”

In contrast to his delayed action on the Fiduciary Rule, President Trump acted immediately regarding the ACA.  On January 20, 2017, Trump issued an executive order reinforcing his intent to repeal ACA. The order provided instructions to the Secretary of Health and Human Services (“HHS”) and heads of all other executive agencies to use their authority and discretion to alleviate any provision under ACA that imposes an economic burden on states, consumers, pharmaceutical companies, and other entities affected by or required to comply with the provisions of ACA.

Although the executive order cannot overturn the provisions of ACA, it does allow the HHS and the heads of the other executive agencies the discretion and authority to administratively eliminate certain provisions of ACA. 

Despite these facts, any significant changes made to ACA because of President Trump’s executive order will likely take some time. President Trump needs his nominees for HHS and other executive agencies approved by the Senate. Once approved by the Senate, each needs time to transition into his or her new role. To make any changes to ACA the executive agencies then must follow the rules outlined in the Administrative Procedure Act (“APA”). APA requires a certain process before implementing new policies. As an example, policies must be submitted for public review and comment. It will take some time before we see what effects the executive order has on ACA. 

Deadline Looms for Medicare and Medicaid Services Annual Disclosure Forms

Pursuant to the Medicare Prescription Drug Improvement and Modernization Act (“MMA”) of 2003, health plan sponsors are required to complete and submit an online form to The Centers for Medicare and Medicaid Services (“CMS”) that discloses whether  prescription drug coverage provided under a plan is “creditable” or “not creditable.” Creditable coverage offers drug benefits at least as good as Medicare Part D’s prescription drug coverage.  If a plan sponsor’s prescription drug coverage does not meet that requirement, then it is “not creditable” coverage.

The Creditable Coverage Disclosure Notice must be completed on the occurrence of each of the following:

  • Annually, no later than 60 days from the beginning of the plan year;
  • Within 30 days after the termination of the prescription drug coverage; or
  • Within 30 days from the time the prescription drug coverage goes from creditable to non-creditable.

For plan years beginning January 1, 2017, the online Creditable Coverage Disclosure Notice must be completed by March 1, 2017. 

CMS can’t penalize plan sponsors for failing to complete the Creditable Coverage Disclosure Notice.  However, plan sponsors do not qualify for the Retiree Drug Subsidy if the notice is not completed. 

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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