ACA Reporting: Subject to certain 2015 transition relief, beginning in 2015, all employers who employ at least 50 full-time employees (or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the ACA Employer Shared Responsibility (the "ESR") provisions under Section 4980H of the Internal Revenue Code (the "Code"). An employer that employs 50 full-time employees is referred to as an "applicable large employer" ("ALE"). It is important to note that companies with a common owner or that are related pursuant to the rules under Section 414 of the Code (the controlled group rules) are generally combined and treated as a single employer for determining ALE status. Therefore, if the combined number of full-time employees and full-time-equivalent employees of a controlled group is large enough to meet the definition of an ALE, then each employer that is part of the group (an "ALE member") is subject to the ESR provisions of the Code, even if the employer would not, on a stand-alone basis, be an ALE.
An ALE member will be liable for an ESR payment if either (a) the ALE member does not offer health care coverage or offers health care coverage to fewer than 95% of its full-time employees and their dependents (70% of full-time employees and their dependents in 2015) and at least one employee receives a premium tax credit to help pay for coverage on a Marketplace, or (b) the ALE member offers health care coverage to 95% of its full-time employees and their dependents (70% of full-time employees and their dependents in 2015) but the coverage offered is considered unaffordable to the employee or it did not provide minimum value and the employee receives a premium tax credit to help pay for coverage on a Marketplace.
Under special transition relief available for 2015, no ESR payment under section 4980H(a) or (b) will apply for any calendar month during 2015. If the employer has a non-calendar-year plan, no ESR payment will apply for the portion of the 2015 plan year that falls in 2016 that the employer is an ALE or is part of a controlled group that had at least 50 to but fewer than 100 (50 to 99) full-time employees, including full-time equivalent employees.
In order to enforce the ESR payment provisions, ALE members are required to provide certain informational reports to the IRS and employees in early 2016. For 2015, if an employer had between 50-99 full-time employees (including full-time equivalent employees), the ESR mandate and penalties do not apply under special one-time 2015 transition relief. However, employers of 50-99 employees must still comply with the reporting requirements under Code Section 6056 summarized above and Code Section 6055 (if the group health plan is self-insured). After 2016, the special transition relief will expire and these employers will be subject to the ESR mandate and penalties, and will continue to be subject to the reporting requirements under Code Section 6056 and Code Section 6055 (if the group health plan is self-insured).
For 2015, if an employer had 100 or more full-time employees (including full-time equivalent employees), the ESR mandate, the reporting requirements under Section 6056 and the reporting requirements under Code Section 6055 (if the group health plan is self-insured), as well as the penalties for failure to comply as mentioned above will all apply to the employer and to each member of the controlled group of corporations (if applicable).
Boeing settles 401(k) fee lawsuit for $57 million: In 2006, plan participants sued Boeing alleging that plan fiduciaries breached their fiduciary duty to participants by causing the plan to pay excessive fees, thereby reducing their potential investment returns. After nine years of litigation, the parties submitted a motion with the court to approve the class settlement for $57 million. As we have discussed many times in this forum and during our annual seminars, all plan sponsors should review their 401(k) plans (administration, investments, fees, and expenses) on a regular basis and document all actions taken regarding the plan. Moreover, because 401(k) plan expenses and fees are often difficult to measure and benchmark, we often recommend that an outside plan consultant be retained by asset plan sponsors to evaluate the plan and to help reduce the risk of any breach of fiduciary duty claims by participants or former participants.
Disability Benefits – DOL Issues Proposed Amendments to Claim Procedures
The DOL issued a Notice of Proposed Rulemaking for plans providing disability benefits under ERISA. Noting the fact that current regulations governing the processing of disability claims and appeals were published 15 years ago, the constant litigation of such claims, and the advancements in claims processing technology, the DOL elected to revisit and revise these regulations to ensure that claimants receive a fair review of any denied claim. Many of the proposed enhancements mirror those claims and appeal guidelines previously adopted for claimants under the ACA which were intended to ensure independence and impartiality of the claims examiners and improve the disclosures made to claimants so that they understand exactly why their claim was denied.