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IRC Section 45S Paid Family Leave Tax Credit: What Small Employers Must Do Under IRS Notice 2026-28

August 6, 2026

Employers with fewer than 25 employees interested in qualifying for the paid family and medical leave (“PFML”) under Internal Revenue Code Section 45S should review and respond to (“IRS”) guidance in Notice 2026-28 (the “Notice”).

OVERVIEW

The Notice released August 5, 2026 provides comprehensive guidance on amended requirements for the employer credit for paid family and medical leave (“PFML”) under Internal Revenue Code Section 45S.

Internal Revenue Code Section 45S, enacted as part of the Patient Protection and Affordable Care Act of 2010 (the “ACA”) provides a tax credit to assist small employers in affording health insurance coverage for their employees. The credit applies to employers with 25 or fewer full-time equivalent employees whose average annual wages do not exceed $55,000 (adjusted annually for inflation). For qualifying employers that maintain employee participation and coverage for at least 60% of their workforce, the credit covers up to 50% of qualified health plan premiums paid for employees during tax years 2010–2013, and 35% thereafter. The credit was designed to incentivize small business participation in the health insurance marketplace by offsetting a significant portion of insurance costs.

The credit’s structure reflects a phase-out mechanism: the credit percentage decreases for employers with more employees or higher average wages, meaning it is most generous for businesses meeting the strictest criteria. Originally, the credit was available for 35% of premiums, but Congress increased this to 50% for the first years following the ACA’s enactment to provide immediate relief. While Section 45S has remained relatively stable in its core mechanics, it has been subject to annual inflation adjustments to the wage threshold and remains one of the primary federal tools for promoting insurance coverage among the small-employer population.

The statutory amendments, enacted by the One, Big, Beautiful Bill Act (Public Law 119-21, effective July 4, 2025), modify credit eligibility, rate structure, and substantiation requirements for employers offering qualifying paid leave programs.

WHAT’S NEW: SECTION 45S CREDIT AMENDMENTS

The Notice provides comprehensive guidance about changes to the rules enacted by the Big Beautiful Bill, including the following:

Credit Structure & Eligibility

The Big Beautiful Bill amended Internal Revenue Code Section 45S’ rules on employer qualification for credit for qualified paid family leave.

The Section 45S credit applies to eligible employers who provide qualifying paid family and medical leave to employees. Qualifying leave includes paid family leave, paid sick leave, and paid medical leave as defined under the Family and Medical Leave Act (“FMLA”) and its state-law equivalents. The credit is calculated as a percentage of wages paid or premiums paid or incurred with respect to qualifying employees for periods of qualifying leave.

Notice 2026-28 clarifies the following elements:

Wages paid during qualifying leave periods must be substantiated through contemporaneous time and attendance records, payroll documentation, and employer health and welfare plan records.
Premium costs incurred for continuation of health insurance coverage during leave qualify for credit inclusion.
The credit rate and wage-limitation thresholds established by the amendments apply retroactively to tax years beginning on or after July 4, 2025.

Substantiation & Documentation Requirements

Notice 2026-28 imposes detailed substantiation obligations on employers claiming the credit:

Employees must be identified by SSN in payroll records linking leave periods to wage payments;
Employers must maintain contemporaneous written policies documenting the PFML program, eligibility criteria, and accrual/payout procedures; and
Documentation must demonstrate compliance with applicable FMLA federal requirements and state leave law counterparts.

KEY COMPLIANCE CONSIDERATIONS

Employers desiring to qualify for the credit must negotiate several compliance traps. Key among these are the following:

FMLA & State Leave Law Compliance Nexus

The Section 45S credit is tethered to compliance with federal FMLA regulations. Employers with FMLA violations may face credit disallowance during audit. Counsel should verify that leave-policy definitions (qualifying leave, accrual, payment, continuation of benefits) align with both the FMLA and applicable state counterparts (e.g., Texas paid family leave, New York paid family leave, California paid leave programs).

Audit Risk & Substantiation Exposure

Section 45S is a targeted employment credit and subject to IRS audit scrutiny. Failure to maintain contemporaneous wage documentation, leave-hour records, or written policies will result in credit disallowance. Counsel should establish controls ensuring that payroll systems and HR records remain audit-ready and segregate PFML wages for quick access during examination.

Interaction with Other Credits & Wage Limitations

Employers claiming multiple employment credits (Work Opportunity Tax Credit, Research Credit, etc.) must ensure wage-allocation rules do not result in double-counting under IRC § 280C. Counsel should coordinate with tax planning to confirm that basis reductions and wage allocations are applied consistently across all credits.

ACTION ITEMS

Employers desiring to claim the credit and their FMLA administrators should move promptly to respond to the guidance including the following:

Plan Sponsors & HR Leadership

Among other things, small employers desiring to claim the credit should:

Verify compliance with applicable state family leave requirements.
Conduct immediate audit of existing PFML policies to confirm alignment with amended Section 45S eligibility and credit-rate thresholds. Identify any gaps in documentation (employee eligibility, leave periods, wage substantiation).
Update (or adopt) written policies defining their policies.
Review health insurance eligibility and other policies for compliance with requirements.
Verify that payroll systems capture and link paid leave usage (hours/days) to wage records for each employee.
Ensure retroactive compliance for claims spanning the July 4, 2025 effective date.
Document written PFML policies, accrual schedules, and payout procedures. Confirm compliance with federal FMLA regulations (29 C.F.R. Part 825) and applicable state paid leave statutes (e.g., Tex. Labor Code § 81.001 et seq., Texas Paid Family Leave).
Coordinate with benefits counsel and tax advisors to determine credit-claiming strategy: whether to claim the credit on Form 8994 (“IRS Form”) or amend prior returns if PFML programs were in effect before Notice 2026-28’s release.

Third-Party Administrators & Payroll Processors

Third-Party Administrators (TPAs) & payroll processors working with small employers desiring to claim the credit play an important role. To support their clients, they should:

Update payroll and HRIS reporting modules to segregate and report PFML-related wage activity separately, with clear audit trails linking leave periods to qualifying employee lists.
Provide clients with Notice 2026-28 summaries and substantiation guidance. Offer reporting deliverables (e.g., Section 45S wage schedules) that support credit claims and IRS audit defense.
Develop substantiation checklists for clients to ensure contemporaneous documentation of all leave periods, wage calculations, and premium payments tied to each employee’s Section 45S credit claim.
Update their services agreements.

For Help or More Information

If you need help or have questions about these or other workforce, employee benefits or compensation concerns, contact the author of this update, Cynthia Marcotte Stamer. For more information about these concerns or Ms. Stamer, contact Ms. Stamer via e-mail or via telephone at (214) 452 -8297.

Ms. Stamer is an a Martindale-Hubble “AV-Preeminent” (Top 1%) attorney and advisor Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization and Fellow in the American College of Employee Benefits Counsel. She is peer celebrated as “Top Rated Lawyer” and “LEGAL LEADER™ “Top Rated Lawyer” and “Best Lawyer” for her work in ERISA & Employee Benefits Law, Health Care Law, Labor and Employment Law, and Business and Commercial Law.

Nationally recognized for her decades of leading-edge workforce, health and other employee benefits and insurance, compensation, regulatory affairs and compliance, and other management work, public policy leadership and advocacy, coaching, teachings, and publications, with decades of experience advising and assisting health, insurance, technology and other industry employers and employee benefit plan sponsors, fiduciaries and service providers to design, audit, and defend their employment, employee benefits, compensation and other workforce and performance related risk management,c ompliance and operations practices, including conducting audits and investigations, designing and updating compliance and risk management programs, responding to government investigations, conducting transaction, governance, and other due diligence, and assisting with other legal and operational compliance and risk management and legislative and regulatory affairs. She is available to assist your organization in assessing the impact of these developments and navigating the compliance and strategic steps that follow.

She also is the publisher of Solutions Law Press, Inc.® practitioner-focused compliance publications for employers, plan sponsors, HR professionals, health care, insurance, technology and data industry leaders, and legal counsel and risk management advisors.

Along with these activities, Ms. Stamer also has earned national recognition for her authorship of thousands of highly regarded works, presentations as a knowledgeable speaker, testimony and other input of regulators and legislators, and media interviews on health and other benefits, human resources and other workforce, health care, insurance, data privacy and security and other related concerns.

For more information about Ms. Stamer, engaging her services or to speak, her work, credentials, experience and involvements, or other matters, see the About the Author page, her website at www.cynthiastamer.com, or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press™

Solutions Law Press™ provides health care, insurance, human resources and employee benefit, data and technology, regulatory and operational performance, and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education. These include extensive resources on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press™ resources or training.

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstances at the particular time. No comment or statement in this publication is to be construed as legal advice or admission. Solutions Law Press and its authors reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often evolves, subsequent developments that could change the currency and completeness of this discussion are likely. Solutions Law Press and its authors disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law-specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein.

©2026 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press.™ For information about licensing for republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

HIPAA Privacy Notice Update Deadline: February 16, 2026

February 12, 2026

February 16, 2026, is the deadline for health care providers, group health plans and health insurers to update and redistribute their Health Insurance Portability and Accountability (“HIPAA”) Notice of Privacy Practices (“Privacy Notice”) to comply with recent federal rule changes strengthening protections certain Part 2 substance use disorder (“SUD”) records (the “SUD Rules”). Timely update of Privacy Notices and compliance with these related requirements is particularly critical for the following organizations, who regularly receive and handle SUD records:

Behavioral health providers;
Integrated delivery systems;
Health plans receiving SUD claims data; and
Third party administrators, utilization management, and other health plan service providers involved in the administration of behavioral health or substance abuse benefits.

HIPAA Privacy Notice Generally

The HIPAA regulations require most health care providers, group health plans and health care clearinghouses (“Covered Entities”) to provide a Privacy Notice that meets the content and distribution requirements of the HIPAA rules. See 45 C.F.R. § 164.520. Health plans generally must deliver the Privacy Notice to their members at enrollment. Health care providers generally must present the Privacy Notice to patients at least once a year, try to obtain acknowledgement of receipt, display it at their service locations and “prominently post” it on their websites.

Noncompliance with these and other HIPAA requirements can trigger a wide range of adverse consequences, including:

Complicate the administration and defense of HIPAA compliance;
Fuel HIPAA complaints from PHI subjects or others;
Trigger OCR enforcement and the potential civil monetary penalties and corrective action plans;
Expose noncompliant health plan fiduciaries to fiduciary investigation and liability under the Employee Retirement Income Security Act;
Expose health care providers to licensure, ethical or other professional investigations and sanctions;
Expose health care providers and insurers to licensing or other state regulatory enforcement actions;
Violate stop-loss, liability or other contracts;
Expose health plans, their fiduciaries and other covered entities to added expense to respond to and defend complaints and investigations; and
Create reputational risk.

Privacy Notice Updates Due February 16, 2026

The Privacy Notice updates currently due by February 16, 2026, arise from the 2024 Final Rule aligning 42 CFR Part 2 with HIPAA jointly published by the Substance Abuse and Mental Health Services Administration (“SAMHSA”) and OCR to align the substance abuse privacy rules in 42 CFR Part 2 more closely with HIPAA.

While most of the SUD rules operational provisions already are in effect, Covered Entities that maintain SUD records subject to Part to have until February 16, 2026, to update and timely distribute their Privacy Notices to:

Explain how Part 2 records may be used and disclosed.
Describe patients’ rights to obtain an accounting of disclosures, request restrictions, file complaints and describe potential penalties for misuse.

Along with updating their Privacy Notices content, health plans and other Covered Entities also need to update their Privacy Notice postings and distributions. Health plans generally are encouraged to follow best practices by treating the revisions as material revisions impacting their health plans and err in favor of broad distribution. Health plans generally should distribute the updated notice to plan participants within 60 days of a material revision or include notice of its availability in its next annual mailing and post an updated copy on the plan’s website. In contrast, health care providers must meet slightly broader distribution requirements, that generally require a health care provider:

Ensure the updated notice is provided to new patients at check-in and request a signed acknowledgement of receipt from the patient at least once a year;
Post the revised Privacy Notice in a clear and prominent locations in treatment areas as required by the Privacy Rule;
Make copies available upon request; and
Post electronically on websites

Beyond these specific actions in response to the 2024 Final Rule aligning 42 CFR Part 2, self-insured ERISA plans, their employer or other plan sponsors, fiduciaries, and service providers should take the following steps:

Update the plan’s HIPAA Notice;
Review and update as necessary plan documents and other policies to ensure language complies with the new rule;
Plan fiduciaries and sponsors should coordinate with third party administrators and other service providers, behavioral health and other medical management vendors, stop loss carriers, prescription benefit management organizations, and other service providers to verify their process and practices are updated to comply with the new requirements;
Conduct any necessary training and education for workforce members and business associates; and
Take steps to monitor compliance on an ongoing basis.

Covered Entities Also Should Reconfirm Adequacy of Existing Other Privacy Notice Content Adequacy

Along with implementing the changes necessary to ensure their Privacy Notices comply with the SUD Rules of 42 CFR Part 2 alignment, group health plans and other Covered Entities also should review and update their Privacy Notices to confirm other content continues to meet OCR’s Privacy Notice requirements.

Since OCR has not substantively revised the content requirements for Privacy Notices or its model Notice of Privacy Practices for many years, many group health plans and other covered entities take for granted that the existing content of their Privacy Notices remains compliant. While OCR’s rules have not changed, group health plans and other Covered Entities often have experienced changes in staffing, addresses or other operational details that may make updates to their Privacy Notices required or advisable. Failing to update Privacy Notices to reflect these changes can both violate HIPAA and fuel a wide range of potentially costly miscommunications and disagreements. Consequently, group health plan sponsors, fiduciaries and service providers, as well as other Covered Entities also are encouraged to review their existing Privacy Notices for any updates required in response to these and other changes.

HIPAA Privacy Rule to Support Reproductive Health Care Privacy No Longer Required

Covered Entities currently do not have to change their Privacy Notices to add disclosures about new requirements for the disclosure of protected health information (“PHI”) relating to reproductive rights that OCR sought to require under its HIPAA Privacy Rule to Support Reproductive Health Care Privacy (“Reproductive Rights Rule”), as the U.S. District Court for the Northern District of Texas vacated those requirements in Purl v. United States Department of Health and Human Services, No. 2:24-CV-228-Z, (N.D. Tex. June 18, 2025).

Had the District Court not struck down the Reproductive Rights Rule last June, Covered Entities also would have been required by February 16, 2026, to revise their Privacy Notices to discuss OCR HIPAA rules restricting disclosures of protected health information (“PHI”) related to lawful reproductive health care.

OCR adopted the Reproductive Rights Rule as part of a broader series of actions by the Biden Administration intended to mitigate the effect of the Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization, 597 U.S. 215 (2022). Dobbs restored state power to regulate abortion by reversing the Supreme Court’s decades-old decision in Roe v. Wade, which had recognized a woman’s right to abortion as part of a fundamental right to reproductive privacy.

In furtherance of these broader efforts to limit state efforts to regulate abortion and other reproductive rights, the Reproductive Rights Rule prohibited Covered Entities from using or disclosing PHI:

For criminal, civil, or administrative investigations into lawful reproductive health care
To identify a person for such investigations
For proceedings related to lawful reproductive health care

It also required Covered Entities and their business associates to:

Obtain a signed attestation before disclosing reproductive health information for certain law enforcement or oversight requests
Revise their Privacy Notice to describe these new protections

The federal district court’s ruling makes these updates unnecessary at this time.

If you have questions about these health plan exposures or other health care, workforce employee benefits or other regulatory compliance or investigations concerns, contact the author.

For More Information

We hope this update is helpful. For more information about the or other health or other employee benefits, human resources, or health care developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

Solutions Law Press, Inc. invites you receive future updates by registering on our Solutions Law Press, Inc. Website and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

Cynthia Marcotte Stamer is a Martindale-Hubble AV-Preeminent (highest/top 1%) practicing attorney recognized as a “Top Woman Lawyer,” “Top Rated Lawyer,” and “LEGAL LEADER™” in Health Care Law and Labor and Employment Law; among the “Best Lawyers In Dallas” in “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law recognized for her experience, scholarship, thought leadership and advocacy on health and other employee benefits, insurance, healthcare, workforce, HIPAA and other data and technology and other compliance in connection with her work with health care and life sciences, employee benefits, insurance, education, technology and other highly regulated and performance-dependent clients.

Board certified in labor and employment law by the Texas Board of Legal Specialization and a Fellow in the American College of Employee Benefits Counsel, Ms. Stamer has more than 35 years of experience advising and representing, employers, employee benefit plans and their fiduciaries and administrators, their administrative services, technology and other business associates and other vendors, managed care and insurance, health care and other clients about these and other workforce, employee benefits, internal controls and other operations and compliance concerns.

Ms. Stamer is nationally sought out for her decades of leading-edge experience in the design, sponsorship, administration, and defense of health and other employee benefit, workforce, insurance, healthcare, data and technology, and other operations to promote legal and operational compliance, reduce regulatory and other liability, and advance other operational goals. This experience includes decades of work on HIPAA and other medical and other data and technology privacy, security and other management, including years of service as the Scribe leading the American Bar Association Joint Committee on Employee Benefits Annual Agency Meeting with the Department of Health and Human Services Office of Civil Rights, extensive advice to health plans and insurers, their sponsors, fiduciaries and service providers; managed care organizations, health care organizations, health care clearinghouses and other health data and technology providers; and others about HIPAA and other Federal, state and international privacy and data security; and extensive speaking and publications on these and related concerns.

Along with her decades of legal and strategic consulting experience, Ms. Stamer also contributes her leadership and experience to many professional, civic and community organizations. She currently serves as Co-Chair of the ABA Real Property Trusts and Estates (“RPTE”) Section Welfare Plan Committee, Co-Chair of the ABA International Section International Employment Law Committee and its Annual Meeting Program Planning Committee, Chair Emeritus and Vice Chair of the ABA Tort Trial and Insurance (“TIPS”) Section Medicine and Law Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee. She also has served as Scribe for the Joint Committee on Employee Benefits (“JCEB”) annual agency meetings with the Department of Health and Human Services and JCEB Council Representative, International Section Life Sciences Committee Chair, RPTE Section Employee Benefits Group Chair and a Substantive Groups Committee Member, Health Law Section Managed Care & Insurance Interest Group Chair, as TIPS Section Medicine and Law Committee Chair and Employee Benefits Committee and Workers Compensation Committee Vice Chair, Tax Section Fringe Benefit Committee Chair, and in various other ABA leadership capacities. Ms. Stamer also is a former Southwest Benefits Association Board Member and Continuing Education Chair, SHRM National Consultant Board Chair and Region IV Chair, Dallas Bar Association Employee Benefits Committee Chair, former Texas Association of Business State, Regional and Dallas Chapter Chair, a founding board member and Past President of the Alliance for Healthcare Excellence, as well as in the leadership of many other professional, civic and community organizations. She also is valued and celebrated for her decades of policy advocacy and charitable, pro bono, community and other service and leadership to promote understanding and strengthening health care, workforce, saving, disability, aging and retirement and other key policies and challenges through her PROJECT COPE Coalition For Patient Empowerment initiative and many other pro bono service involvements locally, nationally and internationally.

Ms. Stamer is the author of many highly regarded works published by leading professional and business publishers, the ABA, the American Health Lawyers Association, and others. Ms. Stamer also often speaks and serves on the faculty and steering committee for many ABA and other professional and industry conferences and conducts leadership and industry training for a wide range of organizations.

For more information about Ms. Stamer or her health industry, health and other benefits, workforce and other experience and involvements, see the Cynthia Marcotte Stamer P.C. website or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press™

©2026 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press. ™ For information about licensing for republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

Prepare For Marketplace Rule Change Fallout

June 26, 2025

A new Department of Health and Human Services Final Rule will tighten subsidy eligibility and implement other reforms for the the Heathcare Marketplace insurance plans created under the Patient Protection and (“ACA”). Health plan sponsors and providers should take into account the probable effect of enrollment and coverage pattern changes these changes will cause for groups of workers and other individuals currently relying on subsidies to maintain Marketplace coverage in their planning, budgeting and compliance.

The 2025 Marketplace Integrity and Affordability Final Rule (“Rule”) reverses Biden Administration rules that lowered requirements for individuals to receive subsidies to pay costs for purchasing health coverage and eased other requirements for Exchange coverage.

According to the now Trump Administration-led Centers for Medicare & Medicaid Services (“CMS”), improper ACA enrollments enabled by weakened verification processes and expanded premium subsidies triggered widespread fraud. Research shows that in 2024, an estimated 5 million people may have been improperly enrolled, costing taxpayers as much as $20 billion^[1].

To address these concerns, the new Rule:

Repealing the monthly special enrollment period (SEP) for individuals with projected household incomes at or below 150% of the federal poverty level, a policy used by some agents and brokers to improperly enroll ineligible consumers and perform unauthorized plan switching to gain commissions;
Requiring income verifications to ensure people qualify for the premium subsidies they receive;
Conducting eligibility verifications for the majority of enrollments through SEPs, closing loopholes that allowed people to wait to enroll until they needed care and improving the risk pool, which can lower premiums for middle-class families not receiving subsidies;
Reducing advanced payments of the premium tax credit (APTC) by $5 a month for individuals who are auto re-enrolled in fully-subsidized plans without eligibility verification, ensuring consumers are aware of and engaged in their health coverage; and
Standardizing the Annual Open Enrollment Period starting with the 2027 plan year so that it ends by December 31 for all health insurance exchanges, encouraging people to maintain year-round health coverage rather than waiting until they get sick to enroll, which helps keep insurance affordable for everyone.

CMS says many changes are “temporary” measures set to sunset at the end in 2026 to immediately tamp down on the outflow of funds to ensure that eligibility verification processes work efficiently and allow qualified enrollees to access ACA Exchange coverage without fear of coverage gaps or surprise tax liabilities resulting from the improper actions of third parties.

To ensure federal subsidies for coverage through ACA Exchanges only support the statutory requirements and goals of the ACA, CMS also is:

Prohibiting federal subsidies from being used to help cover the cost of specified sex-trait modification procedures to align an individual’s physical appearance or body with an asserted identity that differs from the individual’s sex; and
Reinstating HHS’ longstanding 2012 interpretation of “lawfully present” to exclude Deferred Action for Childhood Arrivals (DACA) recipients from eligibility and enrollment in ACA Exchange coverage and Basic Health Program (BHP) coverage in States that elect to operate a BHP, including APTC, premium tax credits, and cost-sharing reductions.

CMS says these reforms address “improper enrollments and the improper flow of federal funds implemented during the Biden Administration.

Group health plans, their employer and other sponsors should prepare for potential implications of these changes on their workforce and health plans. These are likely to vary among employers and plans. Possible effects could include:

An increase in the number of uninsured workers or dependents;
Effects on Affordable Care Act and other testing;
New inquiries and requests for special or other enrollment;
Potential new notification and enrollment requirements;
Potential increases in occupational illness, sick or disability leave, absenteeism and presenteeism from uncovered workers; and
More.

Considering these and other effects can help health plans, their sponsors, and employees to prepare for and respond to these effects.

If you have questions or need help with these or other employee benefits concerns, contact the author of this update, Cynthia Marcotte Stamer, who is a Fellow in the American College of Employee Benefits Counsel with decades of employee benefits experience.

More Information Or Help

We hope this update is helpful. For more information about these or other health or other employee benefits, human resources, insurance, or health care legal developments, please contact the author, Cynthia Marcotte Stamer, via e-mail or telephone at (214) 452-8297.

Solutions Law Press, Inc. invites you to receive future updates by registering on our Solutions Law Press, Inc. Website and participating in and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

Board certified in labor and employment law by the Texas Board of Legal Specialization and a Fellow in the American College of Employee Benefits Counsel, Ms. Stamer is nationally recognized for her decades of leading edge experience on the design, sponsorship, administration and defense of health and other employee benefit, workforce, insurance, healthcare , data and technology and other operations to promote legal and operational compliance, reduce regulatory and other liability and promote other operational goals.

Along with her decades of legal and strategic consulting experience, Ms. Stamer also contributes her leadership and experience to many professional, civic and community organizations. She currently serves as Co-Chair of the ABA Real Property Trusts and Estates (“RPTE”) Section Welfare Plan Committee, Co-Chair of the ABA International Section International Employment Law Committee and its Annual Meeting Program Planning Committee, Chair Emeritus and Vice Chair of the ABA Tort Trial and Insurance (“TIPS”) Section Medicine and Law Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee. She also has served as Scribe for the Joint Committee on Employee Benefits (“JCEB”) annual agency meetings with the Department of Health and Human Services and JCEB Council Representative, International Section Life Sciences Committee Chair, RPTE Section Employee Benefits Group Chair and a Substantive Groups Committee Member, Health Law Section Managed Care & Insurance Interest Group Chair, as TIPS Section Medicine and Law Committee Chair and Employee Benefits Committee and Workers Compensation Committee Vice Chair, Tax Section Fringe Benefit Committee Chair, and in various other ABA leadership capacities. Ms. Stamer also is a former Southwest Benefits Association Board Member and Continuing Education Chair, SHRM National Consultant Board Chair and Region IV Chair, Dallas Bar Association Employee Benefits Committee Chair, former Texas Association of Business State, Regional and Dallas Chapter Chair, a founding board member and Past President of the Alliance for Healthcare Excellence, as well as in the leadership of many other professional, civic and community organizations. She also is recognized for her contributions to strengthening health care policy and charitable and community service resolving health care challenges performed under PROJECT COPE Coalition For Patient Empowerment initiative and many other pro bono service involvements locally, nationally and internationally.

Ms. Stamer is the author of many highly regarded works published by leading professional and business publishers, the ABA, the American Health Lawyers Association, and others. Ms. Stamer also frequently speaks and serves on the faculty and steering committee for many ABA and other professional and industry conferences and conducts leadership and industry training for a wide range of organizations.

For more information about Ms. Stamer or her health industry and other experience and involvements, see http://www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press™

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstances at the particular time. No comment or statement in this publication is to be construed as legal advice or admission. Solutions Law Press and its authors reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. Solutions Law Press and its authors disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law-specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

©2025 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press.™ For information about licensing for republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

Share Ideas About Patient Empowering Health Technology With HHS By 6/16

May 14, 2025

Group health plans, their employer and union sponsors, fiduciaries, insurers, administrators, communications and information technology vendors and participants interested in promoting technologies to help patients control their health and wellness have until June 16, 2025 is to share input with the Centers for Medicare & Medicaid Services (“CMS”) and the Office of the National Coordinator for Health Information Technology (“ONC”) in response to their currently open request for information (“RFI”).

Following up on the CMS Interoperability and Patient Access Final Ruleand part of Secretary Kennedy’s effotts to “Make America Healthy Again,” the agencies are inviting public input on designing a seamless, secure, and patient-centered digital health infrastructure that will help seniors and their families use modern technology to control of their health and well-being, manage chronic conditions, and access care more efficiently.

The RFI invites input from patients, caregivers, providers, payers, technology developers, and other stakeholders on how CMS and ONC can:

Drive the development and adoption of digital health management and care navigation applications;
Strengthen interoperability and secure access to health data through open, standards-based technologies;
Identify barriers preventing the seamless exchange of health information across systems; and
Reduce administrative burden while accelerating progress toward value-based, patient-centered care.

Many employee benefit plans, their sponsors and vendors have extensive experience and interest in the use of mobile applications and other technologies by plan members and their caregivers. Interested parties should consider sharing insights to help promote awareness of helpful designs and to deter investments or mandates of unhelpful technologies.

For More Information Or Help

We hope this update is helpful. For more information about these or other health or other employee benefits, human resources, or health care developments, please contact the author, Cynthia Marcotte Stamer, via e-mail or telephone at (214) 452-8297.

About the Author

Cynthia Marcotte Stamer is a Martindale-Hubble AV-Preeminent (highest/top 1%) practicing attorney recognized as a “Top Woman Lawyer,” “Top Rated Lawyer,” and “LEGAL LEADER™” in Health Care Law and Labor and Employment Law; among the “Best Lawyers In Dallas” in “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law recognized for her experience, scholarship, thought leadership and advocacy on HIPAA and other data and technology use, security and compliance in connection with her work with health care and life sciences, employee benefits, insurance, education, technology and other highly regulated and performance-dependent clients.

Board certified in labor and employment law by the Texas Board of Legal Specialization and a Fellow in the American College of Employee Benefits Counsel, Ms. Stamer is nationally recognized for her decades of leading edge experience on the design, sponsorship, administration and defense of health and other employee benefit, workforce, data and technology and other operations to promote legal and operational compliance, reduce regulatory and other liability and promote other operational goals.

Along with her decades of legal and strategic consulting experience, Ms. Stamer also contributes her leadership and experience to many professional, civic and community organizations. She currently serves as Co-Chair of the ABA Real Property Trusts and Estates (“RPTE”) Section Welfare Plan Committee, Co-Chair of the ABA International Section International Employment Law Committee and its Annual Meeting Program Planning Committee, Chair Emeritus and Vice Chair of the ABA Tort Trial and Insurance (“TIPS”) Section Medicine and Law Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee. She also has served as Scribe for the Joint Committee on Employee Benefits (“JCEB”) annual agency meetings with the Department of Health and Human Services and JCEB Council Representative, International Section Life Sciences Committee Chair, RPTE Section Employee Benefits Group Chair and a Substantive Groups Committee Member, Health Law Section Managed Care & Insurance Interest Group Chair, as TIPS Section Medicine and Law Committee Chair and Employee Benefits Committee and Workers Compensation Committee Vice Chair, Tax Section Fringe Benefit Committee Chair, and in various other ABA leadership capacities. Ms. Stamer also is a former Southwest Benefits Association Board Member and Continuing Education Chair, SHRM National Consultant Board Chair and Region IV Chair, Dallas Bar Association Employee Benefits Committee Chair, former Texas Association of Business State, Regional and Dallas Chapter Chair, a founding board member and Past President of the Alliance for Healthcare Excellence, as well as in the leadership of many other professional, civic and community organizations. She also is recognized for her contributions to strengthening health care policy and charitable and community service resolving health care challenges performed under PROJECT COPE Coalition For Patient Empowerment initiative and many other pro bono service involvements locally, nationally and internationally.

Ms. Stamer is the author of many highly regarded works published by leading professional and business publishers, the ABA, the American Health Lawyers Association, and others. Ms. Stamer also frequently speaks and serves on the faculty and steering committee for many ABA and other professional and industry conferences and conducts leadership and industry training for a wide range of organizations.

About Solutions Law Press™

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstances at the particular time. No comment or statement in this publication is to be construed as legal advice or admission. Solutions Law Press and its authors reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. Solutions Law Press and its authors disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law-specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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Posted by Cynthia Marcotte Stamer

2026 HRA Inflation Adjustments Announced

May 4, 2025

The Internal Revenue Service (“IRS”) published advanced notice of the 2026 inflation adjusted amounts for Health Savings Accounts (“HSAs”) § 223 of the Internal Revenue Code (“Code”) and the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided under § 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations.

In calendar year 2026, these amounts are as follows:

The annual limitation on deductions under § 223(b)(2) for an individual with coverage under a high deductible health plan for self-only is $4,400 and for family coverage under a high $8,750.
A “high deductible health plan” under § 223(c)(2)(A) will be defined as a health plan with an annual deductible that is not less than $1,700 for self-only coverage or $3,400 for family coverage, and for which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,500 for self-only coverage or $17,000 for family coverage.
For plan years beginning in 2026, the maximum amount that may be made newly available for the plan year for an excepted benefit HRA under Code § 54.9831-1(c)(3)(viii) is $2,200.

Revenue Procedure 2025-19 will be officially published in the May 19, 2025 Federal Register.

For More Information Or Help

About the Author

Cynthia Marcotte Stamer is a Martindale-Hubble AV-Preeminent (highest/top 1%) practicing attorney recognized as a “Top Woman Lawyer,” “Top Rated Lawyer,” and “LEGAL LEADER™” in Health Care Law and Labor and Employment Law; among the “Best Lawyers In Dallas” in “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law recognized for her experience, scholarship, thought leadership and advocacy on HIPAA and other data and technology use, security and compliance in connection with her work with health care and life sciences, employee benefits, insurance, education, technology and other highly regulated and performance-dependent clients.

Board certified in labor and employment law by the Texas Board of Legal Specialization and a Fellow in the American College of Employee Benefits Counsel, Ms. Stamer is nationally recognized for her decades of leading edge experience on the design, sponsorship, administration and defense of health and other employee benefit, workforce, data and technology and other operations to promote legal and operational compliance, reduce regulatory and other liability and promote other operational goals.

Along with her decades of legal and strategic consulting experience, Ms. Stamer also contributes her leadership and experience to many professional, civic and community organizations. She currently serves as Co-Chair of the ABA Real Property Trusts and Estates (“RPTE”) Section Welfare Plan Committee, Co-Chair of the ABA International Section International Employment Law Committee and its Annual Meeting Program Planning Committee, Chair Emeritus and Vice Chair of the ABA Tort Trial and Insurance (“TIPS”) Section Medicine and Law Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee. She also has served as Scribe for the Joint Committee on Employee Benefits (“JCEB”) annual agency meetings with the Department of Health and Human Services and JCEB Council Representative, International Section Life Sciences Committee Chair, RPTE Section Employee Benefits Group Chair and a Substantive Groups Committee Member, Health Law Section Managed Care & Insurance Interest Group Chair, as TIPS Section Medicine and Law Committee Chair and Employee Benefits Committee and Workers Compensation Committee Vice Chair, Tax Section Fringe Benefit Committee Chair, and in various other ABA leadership capacities. Ms. Stamer also is a former Southwest Benefits Association Board Member and Continuing Education Chair, SHRM National Consultant Board Chair and Region IV Chair, Dallas Bar Association Employee Benefits Committee Chair, former Texas Association of Business State, Regional and Dallas Chapter Chair, a founding board member and Past President of the Alliance for Healthcare Excellence, as well as in the leadership of many other professional, civic and community organizations. She also is recognized for her contributions to strengthening health care policy and charitable and community service resolving health care challenges performed under PROJECT COPE Coalition For Patient Empowerment initiative and many other pro bono service involvements locally, nationally and internationally.

Ms. Stamer is the author of many highly regarded works published by leading professional and business publishers, the ABA, the American Health Lawyers Association, and others. Ms. Stamer also frequently speaks and serves on the faculty and steering committee for many ABA and other professional and industry conferences and conducts leadership and industry training for a wide range of organizations.

About Solutions Law Press™

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstances at the particular time. No comment or statement in this publication is to be construed as legal advice or admission. Solutions Law Press and its authors reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. Solutions Law Press and its authors disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law-specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Comments Off on 2026 HRA Inflation Adjustments Announced | Cafeteria Plans, Corporate Compliance, Employee Benefits, Employer, Employers, health benefit, Health Benefits, health Care, health plan, Health Plans, HR, HSA, Human Resources | Tagged: Employee Benefits, Employer, Employers, ERISA, Health Care Reform, Health Insurance, Health Plan, Health Plans, HRA, Human Resources, Medical Coverage | Permalink
Posted by Cynthia Marcotte Stamer

Trump Executive Order Calls For PBM ERISA Fee Disclosure Rules and Other Prescription Drug Reforms

April 17, 2025

Creating greater transparency of the compensation of prescription benefit management (“PBM”) arrangements used in group health plans covered by the Employee Retirement Income Security Act of 1974 (“ERISA”) is one of many new policy directives President Trump directs federal agencies to pursue to promote lower cost access to prescription drugs under his Executive Order on Lowering Drug Prices By Once Again Putting Americans First (the “Executive Order”) signed April 15, 2025. Employer and union-sponsored health plans, their sponsors, fiduciaries and service providers should carefully track and provide appropriate input to the Department of Labor and other federal agencies charged with implementing the new ERISA transparency requirement and other policy changes directed in the Executive Order.

ERISA PMB Transparency Requirements

To improve the transparency of compensation received by PBMs working with ERISA-covered group health plnas, the Executive Order directs the Department of Labor (“DOL”) to propose regulations to make the fee disclosure requirements of ERISA section 408(b)(2)(B) applicable to PBMs by October 12, 2025.

The Executive Order’s directive to the DOL contemplates that DOL will revise its existing regulations under Section 408(b)(2) to prohibit group health plan fiduciaries from allowing PBMs to directly or indirectly receive compensation for their PBM services unless the PBM discloses its compensation from the arrangement in accordace with the fee disclosure requirements that the Executive Order contemplates DOL will add to ERISA section 408(b)(2).

While DOL regulations have required since 2012 that pension plan service providers to disclose direct or indirect compensation under arrangements with ERISA-covered pension plans in order for the service provider compensation to be allowed “reasonable compensation” under ERISA section 408(b)(2), the fee disclosure requirement currently does not apply to PBMs or other service providers to group health plans or other welfare benefit plan arrangements.

Across the intervening years, concern that the lack of transparency and disclosure allows PBMs to receive excessive compensation and engage in conflicts of interest has led employee benefit industry watchdogs, employer and other plan sponsors, plan members, health care providers and others increasingly to urge the DOL to impose fee disclosure requirements on PBMs and other health and welfare benefit plan service providers. The Executive Order yields to these demands by calling upon the DOL to deem a group health plan’s compensation arrangements with PBMs reasonable only where PBMs disclose direct and indirect compensation, including compensation paid among related parties such as subcontractors, in a manner consistent with current Section 408(b )(2) Regulations.

Other Prescription Drug Reforms

The Executive Order also includes numerous other reform directives beyond calling for DOL to make PBMs subject to ERISA’s fee disclosure rules. These included several directives to HHS and certain other agencies that President Trump intends to lower the cost of prescription drugs within and outside the Medicare program.

Medicare & Other Drug Pricing and Coverage Related Prescription Drug Reforms

Many of the policy directives in the Executive Order seek to reform Medicare and other prescription drug cost and coverage.

By April 15, 2026, for instance, the Executive Order directs HHS to develop a better payment model to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biological products covered by Medicare, including those not subject to the Medicare Drug Price Negotiation Program.

In addition, the Executive Order:

Directs HHS to work with the Congress to modify the Medicare Drug Price Negotiation Program to align the treatment of small molecule prescription drugs with that of biological products so as to end the distortion that undermines relative investment in small molecule prescription drugs, coupled with other reforms to prevent any increase in overall costs to Medicare and its beneficiaries;
By June 14, 2025,
- Requires HHS to propose changes to the Medicare Drug Price Negotiation Program regulations for the initial price applicability year 2028 and manufacturer implementation of maximum fair price under such program in 2026, 2027, and 2028 to improve the transparency of the Medicare Drug Price Negotiation Program, prioritize the selection of prescription drugs with high costs to the Medicare program, and minimize any negative impacts of the maximum fair price on pharmaceutical innovation within the United States; andRequires HHS to require health centers receiving Public Health Service Act Section 330(e) grants to establish practices to make insulin and injectable epinephrine available at or below the discounted price paid by the health center grantee or sub-grantee under the 340B Prescription Drug Program (plus a minimal administration fee) to low income individuals who have a high cost-sharing requirement for either insulin or injectable epinephrine; have a high unmet deductible; or have no healthcare insurance.Requires the Assistant to the President for Domestic Policy (“APDP”) in coordination with the Secretary, the Director of the Office of Management and Budget (“OMB Director”), and the Assistant to the President for Economic Policy (“APECP”), to provide recommendations to the President on how best to stabilize and reduce Medicare Part D premiums;Requires the HHS Secretary to publish a plan to conduct a survey under the Site-of-Service Price Transparency rules of Social Security Act Section 1833(t)(14)(D)(ii) to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments and propose appropriate adjustments to align Medicare payment with the cost of acquisition, consistent with the budget neutrality requirements; and
- Requires HHS to evaluate and propose regulations to ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.

Other Prescription Drug Reforms

In addition to these predominantly Medicare-focused programs, the Executive Order also orders federal agencies to

Requires the Secretary of Labor to propose regulations pursuant to section 408(b)(2)(B) of the Employee Retirement Income Security Act of 1974 to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers by October 12, 2025;
Requires the APDP, in coordination with the HHS Secretary, the OMB Director, and the APECP, to provide recommendations to the President on how best to promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans by June 14, 2025;
Requires the Food and Drug Administration to streamline and improve the Importation Program under the Federal Food, Drug, and Cosmetic Act to make it easier for States to obtain approval without sacrificing safety or quality;
Requires the OMB Director, the APDP, and the Assistant to the President for Economic Policy )”APECP, and HHS Secretary to provide joint recommendations on how best to ensure that manufacturers pay accurate Medicaid drug rebates consistent with section 1927 of the Social Security Act, promote innovation in Medicaid drug payment methodologies, link payments for drugs to the value obtained, and support States in managing drug spending;
Requires the HHS Secretary, through the Commissioner of Food and Drugs, to issue a report providing administrative and legislative recommendations to accelerate approval of generics, biosimilars, combination products, and second-in-class brand name medications; and improve the process through which prescription drugs can be reclassified as over-the-counter medications, including recommendations to optimally identify prescription drugs that can be safely provided to patients over the counter;
Requires HHS, the Department of Justice, the Department of Commerce, and the Federal Trade Commission to conduct listening sessions and issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers.

Health plans, their sponsoring employers or unions, fiduciaries, PBM and other service providers, brokers, insurers, auditors, and others involved in the design or oversight of PBM and other group health plan arrangements should monitor closely the DOL and other agency responses to the Executive Order to anticipate and prepare for required changes, as well as to be prepared to identify and timely provide input about proposed rules or other actions to DOL or the otherwise applicable regulatory agency before finalized.

The author of this update, Cynthia Marcotte Stamer is an American College of Employee Benefits Counsel Fellow and attorney board certified in Labor and Employment Law by the Texas Board of Legal Specialization, with decades of experience advising employers and other health plan sponsors, health plans, health plan fiduciaries and administrators, PBMs, health and other insurers, third party administrators, managed care organizations, health plan technology, and other businesses about health plan design, administration, and other compliance, risk management and operational matters. If you have questions or need advice or help evaluating or addressing these or other compliance, risk management, or other concerns, contact her.

For More Information

Solutions Law Press, Inc. invites you to receive future updates by registering on our Solutions Law Press, Inc. Website and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation; Cynthia Marcotte Stamer is an attorney board certified in labor and employment law by the Texas Board of Legal Specialization, management consultant, author, public policy advocate and lecturer sought out by clients and industry and government leaders for her more than 35 years of health, insurance, employment and employee benefits and other industry management work, thought leadership, public policy and regulatory affairs advocacy, coaching, teaching, and publications on health and other employee benefits, health care, insurance, workforce and other risk management and compliance.

Along with her decades of legal and strategic consulting experience, Ms. Stamer also contributes her leadership and experience to many professional, civic and community organizations. Along with currently serving as Co-Chair of the ABA Real Property Trusts and Estates (“RPTE”) Section Welfare Plan Committee, Co-Chair of the ABA International Section International Employment Law Committee and its Annual Meeting Program Planning Committee, Chair Emeritus and Vice Chair of the ABA Tort Trial and Insurance (“TIPS”) Section Medicine and Law Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, her previous ABA leadership roles include more than a decade of service as a Scribe for the Joint Committee on Employee Benefits (“JCEB”) annual agency meetings with the Department of Health and Human Services and JCEB Council Representative, International Section Life Sciences Committee Chair, RPTE Section Employee Benefits Group Chair and a Substantive Groups Committee Member, Health Law Section Managed Care & Insurance Interest Group Chair, as TIPS Section Medicine and Law Committee Chair and Employee Benefits Committee and Workers Compensation Committee Vice Chair, Tax Section Fringe Benefit Committee Chair, and in various other ABA leadership capacities. Ms. Stamer also is a former Southwest Benefits Association Board Member and Continuing Education Chair, SHRM National Consultant Board Chair and Region IV Chair, Dallas Bar Association Employee Benefits Committee Chair, former Texas Association of Business State, Regional and Dallas Chapter Chair, a founding board member and Past President of the Alliance for Healthcare Excellence, as well as in the leadership of many other professional, civic and community organizations. She also is recognized for her contributions to strengthening health care policy and charitable and community service resolving health care challenges performed under PROJECT COPE Coalition For Patient Empowerment initiative and many other pro bono service involvements locally, nationally and internationally.

Ms. Stamer is the author of many highly regarded works published by leading professional and business publishers, the ABA, the American Health Lawyers Association, and others. Ms. Stamer also frequently speaks and serves on the faculty and steering committee for many ABA and other professional and industry conferences and conducts leadership and industry training for a wide range of organizations.

About Solutions Law Press™

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstances at the particular time. No comment or statement in this publication is to be construed as legal advice or an admission. Solutions Law Press and its authors reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often rapidly evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. Solutions Law Press and its authors disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law-specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Comments Off on Trump Executive Order Calls For PBM ERISA Fee Disclosure Rules and Other Prescription Drug Reforms | Corporate Compliance | Tagged: drug-costs, Drugs, ERISA, Executive Order, Fiduciary Responsibility, Health, Health Insurance, healthcare, healthcare-transparency, Insurance, news, pbm, prescription-drug | Permalink
Posted by Cynthia Marcotte Stamer

$1.19 Million Penalty Warns Health Plans and Other Covered Entities To Ensure HIPAA Compliance Defensibility Including Service Provider Threats

December 6, 2024

The $1.19 million Health Insurance Portability and Accountability Act (“HIPAA”) penalty imposed on a Florida pain clinic this week sends a clear warning to health plans, health care providers, healthcare clearinghouses and their business associates (“Covered Entities”) to take adequate, documented steps to ensure the defensibility of their own safeguards and other compliance with the HIPAA Security Rule including those from their own current and former workers and service providers.

HIPAA Security Rule

The HIPAA Privacy, Security, and Breach Notification Rules require health plans, health car clearinghouses, and most health care providers, and their business associates (“Covered Entities”) to meet requirements to protect the privacy and security of protected health information (“PHI”). The HIPAA Security Rule included in these rules requires Covered Entities to conduct and maintain documented risk assessments to prove their efforts to comply with detailed national administrative, physical and technical safeguards to ensure the confidentiality, integrity, and security of electronic PHI (“ePHI”).

Violation of HIPAA can trigger either civil monetary penalties or criminal penalties under HIPAA. As amended by the the HITECH Act, HIPAA provides for the following civil monetary penalties for HIPAA violations:

A minimum of $100 for each violation where the covered entity or business associate did not know and, by exercising reasonable diligence, would not have known that the covered entity or business associate violated such provision, except that the total amount imposed on the covered entity or business associate for all violations of an identical requirement or prohibition during a calendar year may not exceed $25,000
A minimum of $1,000 for each violation due to reasonable cause and not to willful neglect, except that the total amount imposed on the covered entity or business associate for all violations of an identical requirement or prohibition during a calendar year may not exceed $100,000. Reasonable cause means an act or omission in which a covered entity or business associate knew, or by exercising reasonable diligence would have known, that the act or omission violated an administrative simplification provision, but in which the covered entity or business associate did not act with willful neglect.
A minimum of $10,000 for each violation due to willful neglect and corrected within 30 days, except that the total amount imposed on the covered entity or business associate for all violations of an identical requirement or prohibition during a calendar year may not exceed $250,000.
Aminimum of $50,000 for each violation due to willful neglect and uncorrected within 30 days, except that the total amount imposed on the covered entity or business associate for all violations of an identical requirement or prohibition during a calendar year may not exceed $1,500,000.

As required by law, OCR adjusts the CMP ranges for each penalty tier for inflation³ for violations after November 2, 2015.

Along with these potentially substantial civil penalty exposures, HIPAA’s potential criminal penalties make HIPAA compliance a required element of the Federal Sentencing Guideline Compliance programs Covered Entities and their leaders need to mitigate their exposures to organizational liability under the Guidelines.

Additionally HIPAA breaches also may expose Covered Entities and their leaders to potential liability for breach liability under securities, electronic crimes, and other data breach and security laws; Federal Sentencing Guideline and other liability for misappropriation of funds, health care or other fraud and other crimes enabled by inadequate compliance or response; trigger fiduciary and other duties and liabilities under the Employee Retirement Income Security Act of 1974 (“ERISA”) for those acting as named or functional fiduciaries; I create licensing or ethical sanctions; create shareholder, tort or contractual liabilities; trigger public company disclosure and executive compensation clawback responsibilities; and a host of other legal, operational and business partner and public relations headaches.

New $1.19 Million Settlement

The $1.19 million penalty against Pain Clinic for Gulf Coast Pain Consultants, LLC d/b/a Clearway Pain Solutions Institute (“Gulf Coast Pain Consultants”) announced December 4, 2024 by the U.S. Department of Health and Human Services (“HHS”) Office for Civil Rights (“OCR”) shows how quickly a Covered Entity found in violation of these rules can rack up substantial civil monetary penalties. Although specifically involving a health care provider, health plans are exposed to the same risks.

The Gulf Coast Pain Management civil monetary penalty arose from OCR’s finding of “systematic” HIPAA Security Rule violations while investigating a breach report that a former contractor for the company impermissibly accessed their electronic record system.

OCR initiated the investigation following the receipt of a breach report filed by Gulf Coast Pain Consultants, which reported that a former contractor impermissibly accessed Gulf Coast’s electronic medical record system to retrieve PHI for use in potential fraudulent Medicare claims.

OCR’s investigation revealed the breach was accomplished by a business consultant independent contractor hired to provide business consulting in 2018, whose contract was terminated prematurely a several months later before the end of the contract term.

After the contract terminated, Gulf Coast did not immediately terminate the former contractor’s system access.

Months later on February 20, 2019, Gulf Coast discovered that on three occasions, between September 7, 2018, and February 3, 2019, the Contractor impermissibly used its access to Gulf Coast’s electronic medical record (“EMR”) system to access the ePHI of approximately 34,310 individuals. On February 21, 2019, Gulf Coast terminated the independent contractor’s access to its systems.

It was later discovered that the Contractor generated medical claims for services that were not actually rendered, resulting in approximately 6,500 false Medicare claims. The Contractor was indicted under 18 U.S.C. §1347 and §1028(a)(1) and was ultimately found not guilty.

On April 5, 2019, Gulf Coast filed a breach report with OCR concerning this incident. The report described that the compromised PHI included names, addresses, phone numbers, email addresses, dates of birth, Social Security numbers, chart numbers, insurance information, and primary care information.

OCR’s investigation determined that the impermissible access occurred on three occasions, affecting approximately 34,310 individuals. The compromised PHI included patient names, addresses, phone numbers, email addresses, dates of birth, Social Security numbers, chart numbers, insurance information, and primary care information.

Based on the investigation, OCR found four violations by Gulf Coast Pain Consultant of the HIPAA Security Rule, including failures to:

Conduct an accurate and thorough risk analysis to determine the potential risks and vulnerabilities to ePHI in its systems;
Implement procedures to regularly review records of activity in information systems;
Implement procedures to terminate former workforce members’ access to ePHI; and
Implement procedures for establishing and modifying workforce members’ access to information systems.

As often happens, the investigation and other processes leading to the settlement were protracted and expensive.

More than four years after the breach and its report, OCR issued a Notice of Proposed Determination in August 2024 seeking to impose a civil money penalty. After Gulf Coast waived its right to a hearing and did not contest OCR’s findings, OCR issued its Notice of Final Determination imposing the $1,190,000 civil money penalty.

Take Aways

Aside from demonstrating the significant penalties that Covered Entities can face for failing to satisfy HIPAA, the settlement also highlights the need for health plans, their fiduciaries, service providers and other HiIPAA_regulated entities to manage data security threats from contractors and other current and former service providers with access to ePHI and other Security Rule compliance.

“Current and former workforce can present threats to health care privacy and security—risking continuity of care and trust in our health care system,” said OCR Director Melanie Fontes Rainer in its announcement of the penalty. “Effective cybersecurity and compliance with the HIPAA Security Rule means being proactive in reviewing who has access to health information and responding quickly to suspected security incidents.”

OCR recommends that Covered Entities take a number of steps to mitigate or prevent cyber threats including

Integrate risk analysis and risk management into business processes.
Implement regular review of information system activity.
Implement procedures for terminating access to ePHI when the employment of, or other arrangement with, a workforce member ends.
Implement procedures for modifying a user’s right of access to a workstation, transaction, program or process, or an alternative equivalent measure.
A multitude of other risk assessment and mitigation actions required in response to existing and emerging threats arising from time to time as identified and evaluated pursuant to the ongoing conduct of documented risk assessments required by the Security Rule.

Because the Employee Benefit Security Administration views ensuring proper data security and HIPAA compliance an ERISA fiduciary responsibility and includes cybersecurity in its ERISA compliance audits, health plan fiduciaries also face breach of fiduciary duty and other exposures under ERISA.

The author of this update, Cynthia Marcotte Stamer has worked extensively with health plans and insurers, their sponsors and fiduciaries on covered entities and business associates on HIPAA and other compliance and risk management. If you have questions or need advice or help evaluating or addressing your HIPAA or other compliance, risk management, or other concerns, contact her.

For More Information

About the Authok

Author of numerous highly regarded works on PBM and other health plan contracting and design, Immediate Past Chair of the ABA International Section Life Sciences Committee and the Tort Trial and Insurance Practice Section Medicine and Law Committee, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and past Group Chair and current Welfare Benefit Committee Co-Chair of the ABA RPTE Employee Benefits & Other Compensation Group, Ms. Stamer is most widely recognized for her decades of pragmatic, leading edge work, scholarship and thought leadership on health and other privacy and data security and other health industry legal, public policy and operational concerns.

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with HIPAA and other legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns.

As a part of this work, she has continuously and extensively worked with domestic and international health plans, their sponsors, fiduciaries, administrators, and insurers; managed care and insurance organizations; third party administrators and other health benefit service providers; hospitals, health care systems and other health care providers, accreditation, peer review and quality committees and organizations; billing, utilization management, management services organizations, group purchasing organizations; pharmaceutical, pharmacy, and prescription benefit management and organizations; consultants; investors; EMR, claims, payroll and other technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, self-insured health and other employee benefit plans, their sponsors, fiduciaries, administrators and service providers, insurers and other payers, health industry advocacy and other service providers and groups and other health and managed care industry clients as well as federal and state legislative, regulatory, investigatory and enforcement bodies and agencies.

Author of many highly regarded compliance, training and other resources on HIPAA and other risk management and compliance, Ms. Stamer is widely recognized for her thought leadership on HIPAA and many other health care, health plan and other health industry matters.

In addition, Ms. Stamer serves as a Scribe for the American Bar Association (“ABA”) Joint Committee on Employee Benefits annual agency meetings with OCR and shares her thought leadership as International Section Life Sciences Committee Vice Chair, and a former Council Representative, Past Chair of the ABA Managed Care & Insurance Interest Group, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her extensive publications and thought leadership as well as leadership involvement in a broad range of other professional and civic organizations.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources.

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstance at the particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often rapidly evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. The author and Solutions Law Press, Inc. disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein.

©2024 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

AHIP Survey Shows Workers Value Employer-Provided Health Coverage

November 26, 2024

Public support and appreciation for employer-sponsored healthcare continues to run high, according to the results of a national online survey of 1,000 people with employer-provided coverage conducted by the research firm LSG on AHIPA from July 10-19, 2024. The survey results reflect employer-provided health coverage remains an important tool for employee recruitment and retention and widespread opposition to public policy changes that would replace employer-provided coverage with government-provided benefits or tax employer-provided coverage or benefits.

AHIP commissioned the survey to understand the perceptions, priorities, and expectations of consumers with employer-provided coverage about their current coverage and benefits, employers, and public policy impacting their coverage and compare their attitudes against results of a survey conducted in April 2023. LSG reports the survey has a margin of error of +/- 3% and was balanced to national demographics for gender, age, and region. AHIP announced the results of the survey on November 13, 2024.

According to AHIP, 50% of Americans received their health coverage from employer-provided plans. The survey responses revealed:

A growing majority of consumers (75%,+12% since April 2023) are satisfied with their current employer-provided coverage.
66% (+12%) are satisfied with the current health insurance system overall
Comprehensive coverage, affordability, and choice of providers their plans provide are key factors in creating this satisfaction
71% (+12%) feel the quality of their current health plan is high
74% (+6%) prefer to get their coverage through their employer over a federal or state government program
Costs remain a top consumer concern and a leading source of plan dissatisfaction, 66% (+13%) of respondents reported that what they currently pay for their coverage overall is reasonable and helps to lower their health care costs
While unhappy with coverage costs, 63% of respondents identified the comprehensiveness of coverage as a greater priority than affordability (31%).
Benefits most valued by respondents were emergency care (65%), prescription drugs (63%), and preventive care (57%).
88% of respondents reported their health plan covers preventive
services (88%), provides access to top providers (78%), and gives them financial peace of mind if something bad were to happen (75%).
53% of respondents reported feeling employer-provided coverage is effectively meeting children’s mental health needs and 61% reported believing the need for mental health care for children will increase.
67% of respondents reported considering it important for health insurance plans to cover telehealth services
76% of respondents reported believing it’s important for the federal government to maintain the COVID-19 telehealth flexibilities for patients

The survey also reflects the continued value of employer-provided health coverage in attracting and retaining employees. Sixty-one percent of respondents said health coverage plays an impactful role in employee recruitment and 80% reported health coverage was a reason for staying in their current position. Once informed that the average company pays 70-80% of the cost of coverage, a majority of respondents (71%) reported having a more favorable impression of companies that provide their employees with health insurance benefits.

The satisfaction and support from the study reflect likely opposition by workers to changes proposed by some politicians to change the current tax treatment of employer-provided coverage to tax employee health benefits. The survey found a growing majority oppose taxing employee health benefits (58%, +6%), and an even greater majority would be less likely to vote for a lawmaker who supports taxing them (63%).

Review the complete report of survey results here.

If you have questions about health plan design, administration or defense, contact the author of this update, Cynthia Marcotte Stamer.

More Information

We hope this update is helpful. For more information about the these or other legal, management or regulatory concerns, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

Management attorney and operations consultant Cynthia Marcotte Stamer uses a client objective oriented approach to help businesses, governments, associations and their leaders manage people, performance, risk, legislative and regulatory affairs, data, and other essential elements of their operations.

A Fellow in the American College of Employee Benefit Counsel, Vice Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, Ms. Stamer’s work throughout her 35 year career has focused heavily on working with government contractors, health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. As an ongoing component of this work, she regularly advises, represents and defends businesses on Guideline Program and other compliance, risk management and other internal and external controls in a wide range of areas and has published and spoken extensively on these concerns.

Ms. Stamer also is widely recognized for her decades of pragmatic, leading edge work, scholarship and thought leadership on workforce, compensation, and other operations, risk management, compliance and regulatory and public affairs concerns.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

IMPORTANT NOTICE ABOUT THIS COMMUNICATION

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author and Solutions Law Press, Inc.™ reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving, and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The author and Solutions Law Press, Inc.™ disclaim, and have no responsibility to provide any update or otherwise notify anyone any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication. Readers acknowledge and agree to the conditions of this Notice as a condition of their access of this publication.

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Posted by Cynthia Marcotte Stamer

$2.7 Million FCA Cyber Liability Settlement Shows New Tool In Government’s Strategy To Fight Cyber Insecurity By Holding Businesses & Leaders Accountable

May 4, 2024

The $2.7 million settlement government contractor Insight Global LLC, (“Insight”) is paying to settle a Justice Department (“DOJ”) False Claims Act civil suit for lax cybersecurity shows government contractors now must add possible False Claims Act prosecution to the already substantial and ever-widening potential consequences all organizations and leaders when their organizations experience a cyber incident.

Supplementing the strength and reach of existing cybersecurity laws by using the False Claims Act, federal securities, employee benefit fiduciary responsibility. and other laws as tools to pressure organizations and their leaders to strengthen their cybersecurity compliance and defenses is a key component of the National Cybersecurity Strategy the Administration announced in March, 2023 to battling the ongoing pandemic of cyber incidents. As National Cybersecurity Strategy states, “Continued disruptions of critical infrastructure and thefts of personal data make clear that market forces alone have not been enough to drive broad adoption of best practices in cybersecurity and resilience. … We must hold the stewards of our data accountable for the protection of personal data; drive the development of more secure connected devices; and reshape laws that govern liability for data losses and harm caused by cybersecurity errors, software vulnerabilities, and other risks created by software and digital technologies.

The National Cyber Security Strategy goes on to warn, “We will use Federal purchasing power and grant-making to incentivize security.”

With holding businesses and their leaders accountable a key component of the Federal government’s National Cybersecurity Strategy, government contractors specifically and all businesses and their leaders generally should heed the use of the DOJ’s use of the False Claims Act as another tool in its expanding arsenal for holding businesses experiencing cyber breaches accountable as proof of their own growing imperative to manage their own cyber security and liability in response to exploding strains of cyber threats and liabilities.

Government Contractor False Claims Act Cyber Risk

DOJ’s adoption of the False Claims Act as a tool for imposing liability against government contractors experiencing a cyber breach is part of a broader effort to persuade organizations and their leaders to tighten their cyber security defenses and responses by ratcheting up the liability and other consequences organizations and their leaders face when their organizations experience a cyber incident. The False Claims Act imposes treble damages and penalties on those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States.

A Civil Cyber-Fraud Initiative announced by DOJ on October 6, 2021 adds potential False Claims Act civil lawsuits by DOJ or private whistleblowers to the already significant and expanding consequences government contractors and grant holders can face for failing to fulfill requirements to properly secure protected health information or other sensitive data as required in their government contracts.

According to DOJ’s May 1, 2024 announcement, Insight will pay $2.7 million to resolve DOJ False Claims Act charges for failing to have adequate cybersecurity measures to protect health information obtained during COVID-19 contact tracing under the new of the Settlement shows DOJ is following through on its promise.

$2.7 Million Insight FCA Cyber Settlement

The $2.7 million Settlement settles a whistleblower lawsuit, United States ex rel. Seilkop v. Insight Global LLC, No. 1:21-cv-1335 (M.D. Pa.). Filed under the whistleblower provisions of the False Claims Act that permit private parties to sue on behalf of the government when they believe that defendants submitted false claims for government funds and to receive a share of any recovery, DOJ intervened in the suit. Whistleblower, Terralyn Williams Seilkop, a former Insight Global staff member who worked on the contact tracing at issue, will receive a $499,500 share of the $2.7 million settlement amount.

The lawsuit alleged the Pennsylvania Department of Health hired Insight to provide staffing for COVID-19 contact tracing and paid Insight using federal funds from the U.S. Centers for Disease Control and Prevention. Although keeping personal health information of contact tracing subjects confidential and secure was part on its contractual duties, Insight failed to secure the protected health information. Instead, DOJ claimed, for example, Insight transmitted certain personal health information and/or personally identifiable information of contact tracing subjects in the body of unencrypted emails, stored and transmitted the information using Google files not password protected, making them potentially accessible to the public via internet links and allowed staff to use shared passwords to access that information.

DOJ additionally alleged that from November 2020 through January 2021, Insight managers received complaints from Insight staff that protected health information was unsecure and potentially accessible to the public, but failed to start remediating the issue until April 2021 after deficiencies came to light.

When Insight eventually began remediating these cybersecurity breaches and deficiencies in 2021, the announcement states Insight cooperated with the DOJ investigation of the cause and scope of the incident. It also took steps to remedy cybersecurity deficiencies by strengthening internal controls and procedures, adding more data-security resources and issuing a public notice regarding the scope of the potential exposure and offering free credit monitoring and identity protection services to those affected. FOJ also reports Insight also cooperated with the United States’ investigation.

DOJ’s Insight settlement announcement warns other government contractors of DOJ’s “continuing commitment to ensure that government contractors fulfill their cybersecurity obligations.” Its announcement quotes Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division as stating, “The Justice Department will hold accountable those contractors who knowingly fail to satisfy cybersecurity requirements.”

Meanwhile, Special Agent in Charge Maureen R. Dixon of the Department of Health and Human Services Office of Inspector General (HHS-OIG) is quoted as stating “Contractors for the government who do not follow procedures to safeguard individuals’ personal health information will be held accountable.”

Cyber Risk Implications For Government Contractor & Other Organizations

Potential False Claims Act liability under the DOJ False Claims Act Civil Cyber-Fraud Initiative add additional liability risks for government contractors to already substantial and growing federal and state regulatory, contractual, and civil and criminal liabilities and other consequences that cyber breaches and other cybersecurity weaknesses create for business and other organizations, their health plans and their leaders. Examples of these other exposures that lax privacy, data security, data breach and other cybersecurity practice may create include:

Business operating losses from resulting operational disruptions and damages to customer, business partner, shareholder and public trust;
Federal Sentencing Guidelines organizational criminal liability arising from violations of electronic crime and other federal criminal data privacy and security laws;
Federal Trade Commission Act and state unfair business practices liability for deceiving customers about privacy practices;
Security and Exchange Commission (“SEC”) criminal and civil actions and shareholder lawsuits under the Security and Exchange Act;
Health Insurance Portability & Accountability Act civil monetary penalty and criminal exposures for health plans, health care providers, health care clearinghouses and their business associates;
Employee Benefit Security Act fiduciary liability for health fiduciaries;
Liability for violation of Fair and Accurate Transaction Act, Internal Revenue Code, or other federal privacy or confidentiality laws;
damages and other penalties and judgments arising under state identity theft, data security, privacy and other state statutory, contractual and tort laws; and
More.

These and other constantly emerging exposures show the imperative for government contractors and all other organizations and their leaders to ensure their organizations take adequate, well-documented efforts to protect their systems and data and fulfill all otherwise applicable cybersecurity rules.

With new cyber attacks and strains of cyber liability, emerging constantly, organizations, and their leaders increasingly must change the way they think about and address their own cyber security and other technology, budgets and management. The escalation of cyber incidents and risks necessitates that organizations and their leaders to treat cybersecurity as critical components of their operational and business plans and priorities.

Amid the pandemic of constantly evolving cyber threats, even the most diligent efforts to secure systems and data cannot guarantee the prevention of a breach or other cyber incident. Given this challenge, organizations and their leaders must focus both on taking meaningful steps to adequately secure their systems and data against a cyber breach or incident as well as position their organizations and leaders to defend their actions and mitigate exposures through appropriate strategic planning, documented oversight and risk assessment, monitoring and response of threats and safeguards; preparation and timely response to cyber events using attorney-client privilege and other evidentiary tools to promote the defensibility of pre-breach, breach investigation and post-breach investigation and decision-making.

As the availability of funding can radically impact the effectiveness of these and other risk mitigation efforts when a cyber incident occurs, these preparations also should incorporate insurance and other arrangements to provide for breach investigation funding and response.

For Additional Information

We hope this update is helpful. Solutions Law Press, Inc. invites you to receive future updates by registering on here and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy

If you need have questions or need assistance with this or other cybersecurity, health, benefit, payroll, investment or other data, systems or other privacy or security related risk management, compliance, enforcement or management concerns, to inquire about arranging for compliance audit or training, or need legal representation on other matters, contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 35 plus years of cybersecurity, workforce, technology and other compliance, risk management and mitigation, incident and other investigations,regulatory and government affairs, and other strategic, operational, regulatory and legal and consulting management work for government contractors and other public and private businesses; managed care and other health and life science, insurance, technology, and other performance and data dependent organizations,

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and Vice-Chair Elect of its International Employment Law Committee, Chair-Elect of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer is most widely recognized for her decades of pragmatic, leading-edge work, scholarship and thought leadership with healthcare and life sciences, employment and employee benefits, managed care and insurance, data and technology and other related industries and organizations. Known for her skill combined use of her extensive legal and operational knowledge to help these and other clients develop, operationalize and defend employment, employee benefits, compensation and other staffing and workforce; data, systems and other technology; heath benefit and other healthcare and life science, managed care and insurance; employee benefits, safety, contracting, quality assurance, compliance and risk management, and other legal, public policy and operational actions and practices. She speaks and publishes extensively on these and other related compliance issues.

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, life sciences, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. Author of a multitude of highly regarded publications on HIPAA and other medical record and data privacy and scribe for the ABA JCEB Annual Meeting with the HHS Office of Civil Rights, her experience includes extensive involvement throughout her career in advising health care and life sciences and other clients about preventing, investigating and defending EEOC, DOJ, OFCCP and other Civil Rights Act, Section 1557 and other HHS, HUD, banking, and other federal and state discrimination investigations, audits, lawsuits and other enforcement actions as well as advocacy before Congress and regulators regarding federal and state equal opportunity, equity and other laws.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Laws Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested in reviewing some of our other Solutions Law Press, Inc.™ resources available here.

IMPORTANT NOTICE

NOTICE: These statements and materials are for general informational and educational purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstances at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author and Solutions Law Press, Inc.™ reserve the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules make it highly likely that subsequent developments could impact the currency and completeness of this discussion. The author and Solutions Law Press, Inc.™ disclaim, and have no responsibility to provide any update or otherwise notify anyone of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication. Readers acknowledge and agree to the conditions of this Notice as a condition of their access to this publication.

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Posted by Cynthia Marcotte Stamer

Manage Health Plan HIPAA, ERISA & Other Exposures From Change Healthcare Ransomware Attack

March 17, 2024

What Health Plans, Their Fiduciaries, Vendors & Sponsors Should Be Doing Now

Health plans, their fiduciaries, health plan sponsors and insurers, and their administrative and other service providers should move quickly to understand and act to mitigate the exposures likely to arise under the Health Insurance Portability and Accountability Act (HIPAA) Privacy, Security, and Breach Notification Rules, the claims, notice and fiduciary responsibilities under the Employee Retirement Income Security Act of 1974 (ERISA), state contract, prompt pay and other duties to health care providers or other responsibilities in response to disruptions created by the Blackcat1234 ransomware attack (CH/UHG Attack) experienced by UnitedHealthcare Group (UHG) subsidiary Change Healthcare.

Change Healthcare Ransomware Attack

On February 21, 2024, a ransomware attack executed by the Blackcat1234 ransomware group took control of and shut down the payment, revenue cycle management and related tools and systems of UHG Subsidiary Change Healthcare. Well-known for stealing sensitive data and demanding ransom for not publishing it, and other public and private cybersecurity monitoring and tracking organizations have warned heath care and other system operators to guard against Blackcat1234 and related ransomware attack risks since at least 2022. See, e.g., #StopRansomware: ALPHV Blackcat | CISA.

The Change Health shutdown resulting from the Blackcat1234 ransomware attack has created widespread disruptions to key care authorization, billing and other pharmacy, provider and other plan and provider transactions within health care and health benefit systems nationwide due to the widespread use of the Change Health tools.

Due to the widespread use of the Change Healthcare tools and systems as a financial clearinghouse for connecting pharmacy benefit managers, health care providers, and other key plays and health plans throughout the health care and health benefits industry, the attack has and continues to disrupt key billing, care-authorization, payment and other transactions between health plans, health care payers and pharmacies, physicians and other health care providers and health care payers and their partners across the health care industry.

As UHG has worked to recover from the Change Health attack, the resulting shutdown and disruption to electronic payment and medical claims systems incorporating the compromised Change Healthcare tools create various legal and operational headaches for many health plans and other health care payers by preventing or obstructing the submission and processing of health care claims and other transactions between health care providers and health plans. While UHG works to remediate and restore the operability and security of the Choice Health tools and systems, health plans, and insurers, their fiduciaries, plan sponsors, and fiduciaries should take timely and prudent steps in response to the breach and resulting disruptions to mitigate the exposure of their health plans, and themselves under HIPAA and ERISA.

HIPAA Security & Breach Notification Responsibilities

While most health care providers and health plans expect Change Health and other UHG entities to face potential data breach and breach notification responsibilities and liabilities under HIPAA and other federal and state data privacy and cybersecurity laws, many health plan fiduciaries, sponsors, insurers, and administrative or other service providers have given limited consideration to how the February 21, 2024, cyber event impacted their HIPAA responsibilities and exposures. Guidance published by the U.S. Department of Health and Human Services Office for Civil Rights (OCR) on March 13, 2023, alerts health plans and health insurers, their fiduciaries and plan sponsors, health care providers, health care clearinghouses, and their business associates (covered entities) against overlooking their own potential HIPAA responsibilities arising from the February 21 Choice Health attack or other similar events.

HIPAA requires covered entities and their business associates to protect the privacy and security of protected health information, to have and enforce HIPAA-compliant business associate agreements, to conduct timely documented risk assessments in response to known or foreseeable security threats, and to provide notice of a breach to OCR, affected individuals and for breaches affecting more than 500 individuals.

Under the HIPAA Security Rule, covered entities must conduct documented risk assessments to evaluate and monitor their electronic personal health information (EPHI) and associated systems for potential breaches and other threats that expose EPHA to unauthorized use, access, disclosure, destruction or other compromise.

To fulfill this requirement, the Security Rule requires covered entities and business associates to conduct documented risk assessments impacting their EPHI and to update these risk assessments in response to internal or external events impacting the adequacy of their risk assessments or security safeguards.

While the responsibility of covered entities and business associates to protect EPHI against unauthorized use, access and disclosure from cybercriminals and others receives the most attention, the Security Rule also includes often less discussed responsibility to protect EPHI and related operating systems against destruction or other disruptions from a wide range of threats including ransomware attacks.

OCR guidance makes clear that OCR views safeguarding EPHI against ransomware and other cybersecurity threats as encompassed in this duty. As part of these efforts, OCR and other cybersecurity agencies have recommended among other things that covered entities and business associates:

Routinely take inventory of assets and data to identify authorized and unauthorized devices and software;
Prioritize remediation of known exploited vulnerabilities’
Enable and enforce multifactor authentication with strong passwords;
Close unused ports and remove applications not deemed necessary for day-to-day operations.

See e.g., #StopRansomware: ALPHV Blackcat | CISA.

Furthermore, when a breach of results in an unauthorized use, access, disclosure or destruction of EPHI, the HIPAA Breach Notification Rule requires covered entities and their business associates to provide timely notification of the breach to subjects of the breached EPHI and OCR, and if the breach affects more than 500 subjects, to the media. Concurrently, the HIPAA Security Rule requires health plans and other covered entities to evaluate through documented risk assessments and take appropriate timely action to update their EPHI security as necessary to respond to breaches, potential breaches and other evolving threats to their EPHI and related systems.

On March 13, 2024, the Office of Civil Rights (OCR) released a “Dear Colleague letter” that warns the February 21, 2024 CH/UHG data breach is likely to trigger HIPAA obligations and investigations for Choice Health and UHG as well as other HIPAA-covered health plans, heath care providers, heath care clearinghouses and business associates. While stating the investigation currently focuses on Change Healthcare and UHC, for instance, the Dear Colleague Letter warns that OCR anticipates that its response to the February 21, 2024 CH/UHG Attack eventually also will include “secondary” investigations of other health plans, health care providers, health care clearinghouses and business associates “tied to or impacted by this attack.”

In light of these anticipated secondary investigations, OCR’s Dear Colleague letter warns health plans, health care providers, health care clearinghouses, business associates to ensure they timely and properly handle their own potential HIPAA responsibilities arising from the CH/UHG Attack. The Dear Colleague letter expressly alerts health plans, health care providers and other covered entities and business associates “that have partnered with Change Healthcare and UHG” in anticipation of OCR’s expected secondary investigations to ensure that their own ability to demonstrate their organization meet all required HIPAA responsibilities including that:

All required “business associate agreements are in place;
All required breach notifications are provided to HHS, affected persons and in the event of a large breach affecting more than 500 individuals, to the media; and
All security and other HIPAA responsibilities are met.

The Dear Colleague Letter also directed covered entities and their business associates to the following previously released OCR resources for assistance in understanding their responsibilities for guarding EPHI against ransomware and other cybersecurity threats:

The OCR HIPAA Security Rule Guidance Material webpage;
OCR Video on How the HIPAA Security Rule Protects Against Cyberattacks;
OCR Webinar on HIPAA Security Rule Risk Analysis Requirement;
HHS Security Risk Assessment Tool;
Factsheet: Ransomware and HIPAA; and
Healthcare and Public Health (HPH) Cybersecurity Performance Goals.

Standing alone, the Dear Colleague Letter makes clear that all covered entities partnered with or impacted by disruptions from the CH/UHG attack need to take documented steps to reevaluate and tighten the adequacy of their existing security safeguards as well as their processes for monitoring and responding to evolving ransomware and other cybersecurity threats in anticipation of becoming the target of potential “secondary” OCR investigations arising from the CH/UHG Attack.

While the Dear Colleague Letter specifically references covered entities and business associates “partnered” with Choice Health, OCR’s previously issued guidance warning all covered entities and their business associates to safeguard their EPHI against ransomware and other cybersecurity threats, strongly suggest that all covered entities and business associates should consider the advisability of reevaluating the adequacy of their own EPHI safeguards in light of the heightened ransomware and other cyber threat illustrated by the CH/UHG Attack. Consequently, all covered entities and business associates partnered with or impacted by the CH/UHG Attack or its resulting distributions specifically, as well as covered entities and business associates generally should work with experienced legal counsel to conduct documented risk assessments of their systems, exposures, responsibilities and risks taking into account these developments as soon as possible in anticipation of complaint or audit driven investigations arising from the Choice Health and other malware events and threats.

ERISA-Covered Health Plan Data Security & Breach Related Fiduciary Duties

In addition to any applicable HIPAA responsibilities, fiduciaries and sponsors of employer or union sponsored health plans subject to the Employee Retirement Income Security Act (ERISA) also should consider whether the CH/UHG Attack or the heightened ransomware and other cyber security threats any additional actions are prudently necessary to protect the health plan data, assets or operations.

ERISA generally requires individuals or entities named as fiduciaries or otherwise possessing functional discretionary authority or responsibility or authority over a plan or its assets (fiduciaries) to act prudently to protect and administer the plan and its assets. Department of Labor Employee Benefit Security Administration (EBSA) guidance published in April, 2021 first officially confirmed its interpretation of ERISA’s duty of prudence as including a duty to utilize prudent cybersecurity safeguards. Since EBSA published this cybersecurity guidance EBSA also has also added cybersecurity inquiries to its plan fiduciary audits. As a result, in addition to complying with HIPAA, ERISA-covered health plan fiduciaries and sponsors also should be prepared to demonstrate plan fiduciaries acted prudently to comply with HIPAA as well as the following actions to safeguard health and other employee benefit plan data and systems against cybersecurity threats:

Tips for Hiring a Service Provider: Helps plan sponsors and fiduciaries prudently select a service provider with strong cybersecurity practices and monitor their activities, as ERISA requires.

Cybersecurity Program Best Practices: Assists plan fiduciaries and record-keepers in their responsibilities to manage cybersecurity risks.
Online Security Tips: Offers plan participants and beneficiaries who check their retirement accounts online basic rules to reduce the risk of fraud and loss.

In light of this OCR and EBSA guidance, health plan sponsors, fiduciaries and vendors and other HIPAA covered entities and business associates are urged to take documented steps to audit and strengthen as needed their safeguards against hacking and other cybersecurity threats including:

In the case of any health plan or health plan vendor, taking well documented steps to assess and tighten as necessary their health plan systems and data security to meet or exceed the recommendation outlined in the EBSA cybersecurity guidance or otherwise necessary to prudently guard their plans and plan data and systems against cybersecurity threats.
Reviewing and monitoring on a documented, ongoing basis the adequacy and susceptibilities of existing practices, policies, safeguards of their own organizations, as well as their business associates and their vendors within the scope of attorney-client privilege taking into consideration data available from OCR, data regarding known or potential susceptibilities within their own operations as well as in the media, and other developments to determine if additional steps are necessary or advisable.
Updating policies, privacy and other notices, practices, procedures, training and other practices as needed to promote compliance and defensibility.
Renegotiating and enhancing service provider agreements to detail the specific compliance, audit, oversight and reporting rights, workforce and vendor credentialing and access control, indemnification, insurance, cooperation and other rights and responsibilities of all entities and individuals that use, access or disclose, or provide systems, software or other services or tools that could impact on security; to clarify the respective rights, procedures and responsibilities of each party in regards to compliance audits, investigation, breach reporting, and mitigation; and other relevant matters.
Verifying and tightening technological and other tracking, documentation and safeguards and controls to the use, access and disclosure of protected health information and systems.
Conducting well-documented training as necessary to ensure that members of the workforce of each covered entity and business associate understand and are prepared to comply with the expanded requirements of HIPAA, understand their responsibilities and appropriate procedures for reporting and investigating potential breaches or other compliance concerns, and understand as well as are prepared to follow appropriate procedures for reporting and responding to suspected
violations or other indicia of potential security concerns.
Tracking and reviewing on a systemized, well-documented basis actual and near miss security threats to evaluate, document decision-making and make timely adjustments to policies, practices, training, safeguards and other compliance components as necessary to identify and resolve risks.
Establishing and providing well-documented monitoring of compliance that includes board level oversight and reporting at least quarterly and sooner in response to potential threat indicators.
Establishing and providing well-documented timely investigation and redress of reported
violations or other compliance concerns.
Establishing contingency plans for responding in the event of a breach.
Establishing a well-documented process for monitoring and updating policies, practices and other efforts in response to changes in risks, practices and requirements.
Preparing and maintaining a well-documented record of compliance, risk, investigation and other security activities.
Pursuing other appropriate strategies to enhance the covered entity’s ability to demonstrate its compliance commitment both on paper and in operation.

Because susceptibilities in systems, software and other vendors of business associates, covered entities and their business associates should use care to assess and manage business associate and other vendor associated risks and compliance as well as tighten business associate and other service agreements to promote the improved cooperation, coordination, management and oversight required to comply with the new breach notification and other HIPAA requirements by specifically mapping out these details.

Furthermore, while the preemption provisions of ERISA generally insulate health plans and their sponsors from responsibility or liability for complying with state insurance, data security, breach notification or other state law cybersecurity and cyber breach and breach notification laws and rules, health insurers and other health plan service providers generally remain subject to these state law requirements. Consequently, health insurers, administrative service providers and other health plan vendors also should act promptly to evaluate and ensure their fulfillment of all applicable cybersecurity and data breach mandates under relevant state law.

Leaders of covered entities or their business associates also are cautioned that while HIPAA itself does not generally create any private right of action for victims of breach under HIPAA, breaches may create substantial liability for their organizations or increasingly, organizational leaders under state data privacy and breach, negligence or other statutory or common laws. In addition, physicians and other licensed parties may face professional discipline or other professional liability for breaches violating statutory or ethical standards. Meanwhile, the Securities and Exchange Commission has indicated that it plans to pursue enforcement against leaders of public health care or other companies that fail to use appropriate care to ensure their organizations comply with privacy and data security obligations and the Employee Benefit Security Administration recently has issued guidance recognizing prudent data security practices as part of the fiduciary obligations of health plans and their fiduciaries.

Finally, health plans and other covered entities are reminded that appropriate strategic planning and use of attorney-client privilege and other evidentiary tools can critically impact the defensibility of pre-breach, breach investigation and post-breach investigation and decision-making. Because HIPAA, EBSA and other rules typically require prompt investigation and response to known or suspected hacking or other cybersecurity threats, health plans and other covered entities or business associates should seek the assistance of experienced legal counsel to advise and assist in these activities to understand the potential availability and proper use of these and other evidentiary rules as part of the compliance planning process as well as to prepare for appropriate use in the event of a known or suspected incident to avoid unintentional compromise of these protections.

ERISA & Other Risks From Untimely Timely Acceptance & Processing of Health Plan Eligibility & Benefit Provisions

Since Change Health shut down its tools and systems CH/UHG Attack has created and continues to cause nationwide disruptions in the ability of pharmacy, physician and other health care providers to submit, and health plans and insurers to receive and process a wide range of health care billing, claims and other transactions because of the widespread integration and use of Choice Health tools in systems health care providers and payers use for the submission, receipt, and processing of health care provider eligibility, billing and other health benefits.

Along with the liabilities and headaches that the ransomware attack and resulting disruptions create for Choice Healthcare and UHG, delays and other disruptions in the handling of health benefit eligibility, claims processing, notifications and payment by health plans and their administrative services providers arising from can create a host of additional liability headaches health plans, health insurers, their fiduciaries and administrative services providers in addition to those arising directly from the HIPAA and other cybersecurity breach itself.

For ERISA-covered health plans, ERISA generally holds health plans and their fiduciaries accountable for the prudent, timely administration of health plan eligibility, claims and other administrative functions in accordance with the terms of the plan and within the applicable time frames and other requirements of ERISA’s reasonable claims procedure and adverse benefit determination rules. Health plans and their ERISA plan administrators generally must receive and process claims transactions required by the adverse claim determination regulations and provide participants or beneficiaries with detailed written notifications for any claims not processed and paid within the relevant 72-hour, 15-day or 30-day time period specified by the adverse claim determination rules. Noncompliance with these requirements both undermines the defensibility of the health plan’s denial of coverage and subjects the plan administrator to liability for EBSA penalties and/or discretionary awards of penalties plus attorneys’ fees and other costs of enforcement to plan participants or beneficiaries for failures to deliver timely notification of the denial. To the extent that EBSA or a court determines that the failure to timely and appropriately process and pay benefits resulted from a lack of prudence or other breach of ERISA fiduciary duties, fiduciaries are at risk for incurring personal liability for actual damages to the plan or its participants plus attorneys’ fees and other costs of enforcement; EBSA penalties for engaging in a breach of fiduciary duty under ERISA section 502(l); or both.

Beyond these ERISA-related risks, delays in processing and payment of health care provider claims also create potential additional liability for health insurers, health plans and their administrators to the extent the disruptions prevent the timely payment and processing of health benefit claims in violation of health care provider rights under managed care or other provider contracts, prompt pay and surprise billing or other provider legal rights. Unlike member claims assigned to providers, ERISA generally does not preempt these nonderivative provider rights and claims or the additional state law damages, penalties or other remedies arising under state law against health insurers, health plans and plan administrators found to violate these rules. Consequently, delays in payments to providers also could substantially increase the costs and liabilities that health insurers, health plans, their fiduciaries, administrators, and employers and other sponsors obligated under the plan terms or vendor contracts to pay these costs.

In light of these and other potential risks, health insurers and health plans, their employer, union and other sponsors, fiduciaries, administrative services providers and other vendors should act quickly to investigate and ensure proper management of the fallout from the CH/UHG Attack and the heightened ransomware and other cybersecurity threats it represents.

Along with working with qualified legal counsel to address the potential HIPAA, ERISA and other responsibilities the health plan or insurer, its fiduciaries, service providers and sponsor bear from the CH/UHG Attack and other cyber risks, most parties also will want to evaluate obligations to notify cybersecurity and other liability insurers, seek indemnification from Choice Healthcare, UHG or other potentially culpable parties and evaluate other sensitive data and strategies for mitigation of their health plan and their own resulting liabilities, costs and other consequences.

For Additional Information

About the Author

Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 35 plus years of health industry and other management work, public policy leadership and advocacy, coaching, teachings, and publications.

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and Vice-Chair Elect of its International Employment Law Committee, Chair-Elect of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer is most widely recognized for her decades of pragmatic, leading-edge work, scholarship and thought leadership on heath benefit and other healthcare and life science, managed care and insurance and other workforce and staffing, employee benefits, safety, contracting, quality assurance, compliance and risk management, and other legal, public policy and operational concerns in the healthcare and life sciences, employee benefits, managed care and insurance, technology and other related industries. She speaks and publishes extensively on these and other related compliance issues.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Laws Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested in reviewing some of our other Solutions Law Press, Inc.™ resources available here, such as:

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Posted by Cynthia Marcotte Stamer

$160K HIPAA Penalty Warns Health Plans & Other Covered Entities Deliver Timely Protected Health Information Access

January 8, 2024

Health plans, health care providers and health care clearinghouses (“Covered Entities”) treat the Department of Health and Human Service Office of Civil Right (“OCR”) announcement of its 46^th enforcement action under the Health Insurance Portability & Accountability Act (“HIPAA”) Right of Access Rule as a warning to confirm their own organization’s timely delivery of records and other compliance with the Rule. Coupled with OCR’s Right of Access Rule settlement agreement with United Health Insurance Group last August, the latest settlement agreement sends a strong message to health plans and other Covered Entities about the risks of failing to deliver protected health information as required by the Right of Access Rule.

HIPAA Right of Access Rule

The HIPAA Right of Access Rule guarantees individuals the right to access a broad array of health information about themselves maintained by or for health plans and other Covered Entities. Under the Right of Access Rule, Covered Entities generally must provide individuals or their personal representatives copies or other acceptable access to the individual’s protected health information in a Covered Entity’s “designated record set” for a reasonable cost as soon as possible and within 30 days of receiving a request for a reasonable cost. However, the Right of Access Rule does not grant any right for an individual to access protected health information that is not part of a designated record set because the information is not used to make decisions about individuals.

The request for protected health information triggering the duty for a Covered Entity to provide access to the protected health information may come from the individual who is the subject of the protected health information or from the “personal representative” of that individual. When considering a request for protected health information from an individual other than the subject of the protected health information, health plans and other Covered Entities also must use care to verify that the requesting party, in fact, qualifies as the individual’s “personal representative” as defined for purposes of HIPAA.

Once a health plan or other Covered Entity receives a request protected health information from the individual or his personal representative, the Right of Access Rule requires the Covered Entity to provide access to all requested protected health information within any “designated record set” within 30 days unless the requested information falls within one of two exceptions to the Rule.

For this purpose, a “designated record set” generally is defined at 45 CFR 164.501 as any item, collection, or grouping of information that includes protected health information that is maintained, collected, used, or disseminated by or for a Covered Entity that comprises the:

Medical records and billing records about individuals maintained by or for a covered health care provider;
Enrollment, payment, claims adjudication, and case or medical management record systems maintained by or for a health plan; or
Other records that are used, in whole or in part, by or for the covered entity to make decisions about individuals. This last category includes records that are used to make decisions about any individuals, whether or not the records have been used to make a decision about the particular individual requesting access.

However, the Right of Access Rule only requires the delivery of protected health information that is part of a designated record set. It does not require health plans or other Covered Entities to provide protected health information that the Covered Entity does not use to make decisions about the individual, since this information is not considered part of a designated record set. Examples of such records of protected health information might include protected health information in certain quality assessment or improvement records, patient safety activity records, or business planning, development, and management records the Covered Entity uses for business decisions more generally rather than to make decisions about the subject individual. Before refusing to provide information not part of a designated record set, however, the health plan or other Covered Entity does not also use or possess that information for making decisions about the subject individual or that disclosure is not otherwise required under another law. For example, even if the Right of Access Rule does not require disclosure of protected health information because it is not considered part of a designated record set, a health plan still be required to disclose the record if required by the adverse benefit determination rules of the Patient Protection and Affordable Care Act (“ACA”), claims and appeals rules of the Employee Retirement Income Security Act or other applicable law, regulation or another law.

Even where the information falls within the definition of a designated record set, however, HIPAA expressly excludes two categories of information from the Right of Access right:

Psychotherapy notes, which are the personal notes of a mental health care provider documenting or analyzing the contents of a counseling session maintained separately from the rest of the patient’s medical record as described in 45 CFR 164.524(a)(1)(i) and 164.501.
Information complied in reasonable anticipation of, or for use in, a civil, criminal, or administrative action or proceeding described under 45 CFR 164.524(a)(1)(ii).

However, it is critical that Covered Entities not overestimate the reach of either of these two exceptions. The exception only applies to the narrow range of records meeting the requirements of the exception. The underlying protected health information from the individual’s medical or payment records or other records used to generate the above types of excluded records or information remains part of the designated record set and is subject to access by the individual under the Right of Access Rule. Providers and other Covered Entities should use care to comply with the Right of Access Rule without providing more information than allowed as HIPAA liability can arise from failing to timely deliver access to all protected health information required by the Right of Access Rule or from sharing protected health information with an individual who is not either the individual or personal representative when the disclosure otherwise is not allowed by HIPAA To help negotiate these requirements, Covered Entities should become familiar with and process all requests for protected health information following the latest Right of Access Rule guidance. When in doubt, Covered Entities should seek the advice of experienced legal counsel within the scope of attorney-client privilege about proper fulfillment of their obligations under the Right of Access Rule in coordination with any other applicable responsibilities the Covered Entities has to provide access, disclose, or prevent disclosure of the requested information under otherwise applicable federal or states laws and regulations, ethical or other professional standards, contractual or other medical, insurance, financial, employee benefit or other rules relating to the requested records.

Optum Settlement 46^th Right Of Access Enforcement Settlement

The Optum settlement resulted from OCR’s investigation of six complaints in the Fall of 2021 that Optum violated the Right of Access Rule by failing to provide timely access to medical records when requested by an adult patient or by the parents of minor patients.

In February 2022, OCR initiated investigations of these Right of Access complaints. The investigation revealed that patients received their requested records between 84 and 231 days after submitting their respective requests. Since the Right of Access Rule requires that Covered Entities deliver the records no later than 30 days from receiving the individual’s requests, those timeframes fell well outside of the deadline for delivery required by the HIPAA Right of Access Rule. Accordingly, OCR concluded that Optum’s failure to provide timely access to the requested medical records was a potential violation of HIPAA.

Under the Resolution Agreement reached with Optum, Optum agreed to pay $160,000 to OCR as well as implement a corrective action plan that requires workforce training, reporting records requests to OCR, and reviewing and revising as necessary its right of access policies and procedures to provide timely responses to requests. Under the plan, OCR will monitor Optum Medical Care for one year.

Right Of Access Remains OCR Investigation & Enforcement Priority

The Optum enforcement action and settlement is the latest reminder to all Covered Entities that investigation and enforcement remains a top OCR priority. See e.g. OCR Sanction Of 44th Health Care Provider For Violating HIPAA Right of Access Rules Warning To Other Covered Entities. Because access to medical records empowers patients and their families to make decisions about their health care and improve their health overall, OCR views access to medical records “a fundamental right under HIPAA. For this reason, OCR believes it “critical that providers follow the law.” Accordingly, OCR Director Melanie Fontes Rainer has warned that health care providers “must proactively respond to record requests and ensure timely access” and “make responding to parents’ or patients’ request for access to their medical records in a timely manner a priority.” See e.g., HHS’ Office for Civil Rights Settles Multiple HIPAA Complaints with Optum Medical Care Over Patient Access to Records (January 4, 2024).

While health care providers are the most common target of OCR’s Right Of Access complaints and enforcement, OCR’s August, 2023 Right of Access settlement against United Health Insurance Group (“UHIG”) confirms health plans also are targets. That settlement arose from OCR’s investigation of a March 2021 complaint alleging that UHIC did not respond to an individual’s request for a copy of their medical record. The investigation showed the individual first requested a copy of their records on January 7, 2021, but did not receive the records until July 2021, after OCR initiated its investigation. Movrover, the March, 2021 complaint was the third complaint OCR received from the complainant against UHIC alleging failures to respond to his right of access. These findings led OCR to conclude UHIC’s failure to provide timely access to the requested medical records was a potential violation of the HIPAA right of access provision. In OCR’s announcement of UHIG’s agreement to pay $80,000 to resolve these potential charges, OCR Director, Melanie Fontes Rainer warned, “Health insurers are not exempt from the right of access and must ensure that they are taking steps to train their workforce to ensure that they are doing all they can to help members’ access to health information.” See, UnitedHealthcare Pays $80,000 Settlement to HHS to Resolve HIPAA Matter over Patient Medical Records Request.

Manage Right of Access Rule Exposure

Despite OCR’s warnings about the responsibility to comply with the Right of Access Rule, many health plans and other Covered Entities continue to violate the Rule. OCR has and continues to receive thousands of Right of Access Rule complaints each year. In response to these persistent compliance issues, OCR continues to make enforcement of the Right of Access Rule a key enforcement priority through its Right Of Access Initiative.

In light of OCR’s commitment to continue to investigate and enforce compliance with the Right of Access Rule, health care providers and other Covered Entities and their business associates are urged to review their existing practices for receiving and processing patient record requests to confirm their own organizations’ compliance with the Right of Access Rule and other applicable federal and state statutory regulatory and contractual requirements. To reduce risks of violations, all health care providers and other Covered Entities should seek assistance from experienced legal counsel within the scope of attorney-client privilege to audit their past and current Right of Access Rule compliance for any necessary or advisable steps to prevent future violations and mitigate potential liabilities arising from potential past or future violations of the Right of Access Rule. Aside from confirming documented timely responses to past requests for protected health information, among other things, most Covered Entities will want to consider:

Verifying that their current policies, privacy practices notices, training and other materials are updated to comply with all applicable policies and properly identify and provide current contact information for the Privacy Officer or other party responsible for receiving and responding to protected health information requests;
Appropriate procedures are in place to ensure that the Covered Entity can produce required documentation showing the individuals are appropriately notified of the Right of Access and other HIPAA rules, and that the Covered Entity captures the necessary documentation to show its receipt of all requests, and timely investigation and response to such requests;
Appropriate and documented processes for collecting, investigating, or resolving any potential concerns, complaints, or other issues, their evaluation, and resolution;
Appropriate workforce, business associates, and other policies, training, oversight, and enforcement to require and enforce compliance with applicable laws and policies; and
Appropriate processes, procedures, and training to ensure that staff fully understands and complies with both the specific processes and procedures of the Covered Entity for complying with the Right of Access Rule, as well as related procedures necessary to manage risks and responsibilities arising under verification of identity, personal representative, disclosure, recordkeeping or other HIPAA’ rules; medical, insurance, financial, or other data or privacy; licensure and market conduct; civil rights and nondiscrimination; fiduciary; licensure; marketing or other rules.

When confirming compliance with the Right of Access Rule, health plans and other Covered Entities also should reevaluate their organization’s exposure to other HIPAA associated risks. See, e.g., Health Plans Warned To Prevent Phishing By 1st Phishing-Related HIPAA Settlement; New HIPAA Resolution Agreement Warns Health Plans & Other HIPAA-Covered Entities To Manage Media Relations, Access & Disclosure; $80,000 Penalty Confirms Health Plans Exposure For Violating HIPAA Access Rights; $350K Settlement Highlights Need For Plans & Plan Service Providers To Ensure Security, Business Associate & Other HIPAA Requirements Met. Health plans take documented, prudent steps to reconfirm the adequacy of their own, and their business associates’ policies, processes, training, documentation and other compliance with these and other medical and other plan records and data maintenance, security, use, access and disclosure.

Aside from the direct exposures for these and other HIPAA violations arising under HIPAA, health plans, their fiduciaries, insurers, plan sponsors and administrators should keep in mind that the Employee Benefit Security Administration views potential data breaches and other HIPAA violations as a potential source of fiduciary liability under the Employee Retirement Income Security Act.

While involving outside consultants or other service providers generally is valuable if not required to conduct some of these tasks, Covered Entities are encouraged to use experienced outside legal counsel to help plan, conduct, evaluate and decide, and implement responses to findings from these compliance and risk management activities both to benefit from legal counsel’s substantive legal expertise and experience and to take advantage of the opportunity to conduct sensitive discussions within the protection of attorney-client privilege or other evidentiary rules. Experienced outside legal counsel can guide Covered Entities about the best way to work with consulting and other vendors to maximize these benefits. Where legal advice is provided to health plan fiduciaries, health plans, their fiduciaries, insurers, sponsors, and service providers also should keep in mind that advice and work product performed on behalf of a health plan or plan fiduciary may not enjoy the same protection against discovery under attorney-client privilege and work product rules.

For More Information

We hope this update is helpful. For more information about these or other health or other legal, management, or public policy developments, please get in touch with the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and Vice-Chair Elect of its International Employment Law Committee, Chair-Elect of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer is most widely recognized for her decades of pragmatic, leading-edge work, scholarship and thought leadership on heath benefit and other healthcare and life science, managed care and insurance and other workforce and staffing, employee benefits, safety, contracting, quality assurance, compliance and risk management, and other legal, public policy and operational concerns in the healthcare and life sciences, employee benefits, managed care and insurance, technology and other related industries. She speaks and publishes extensively on these and other related compliance issues.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested in reviewing some of our other Solutions Law Press, Inc.™ resources available here, such as:

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Posted by Cynthia Marcotte Stamer

No Surprises Act Independent Dispute Resolution Portal Fully Reopened, New Fees Announced

December 19, 2023

$115 is the fee that health plans participating in the Independent Dispute Resolution (“IDR”) process required by the No Surprises Act (the “NSA”) to resolve disputes with health care providers, facilities, and providers of air ambulance services (“providers”) over the amount the health plan will pay the provider for out-of-network health care or items for because the health plan and provider cannot reach agreement about the appropriate amount outside the IDR process will be required to pay disputes initiated on or after February 21, 2023 under a new final rule scheduled for publication by the of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (“Treasury”) (collectively the “Departments”) on December 21, 2023.

The Departments establishment of the IDR fee for post-February 20, 2025 disputes and their previous December 15, 2023 announcement of the full reopening of the IDR portal for all dispute categories are part of the Departments’ ongoing response to the August 3, 2023 Federal District court ruling in Texas Medical Association, et al. v. U.S. Department of Health & Human Services, et al., No. 6:23-cv-00059-JDK (TMA IV), which vacated portions of the previous guidance that the Departments previously adopted to establish the IDR process and the administrative fee amount for the Federal IDR process for disputes initiated during the calendar year beginning January 1, 2023.

Post February 22, 2024 IDR Fees

On December 18, 2023, the Departments released an advance copy of the final rule (the “Rule”) setting the fees the NSA requires both the health plan or issuer and a health care provider, facility, or air ambulance services provider (the “parties”) when the parties must use the NSA Federal Independent Dispute Resolution (IDR) process to set the amount a health plan must pay the provider for out-of-network medical care or items because the plan and provider cannot agree on an appropriate payment amount for disputes initiated on or after the date the Rule is published in the Federal Register. Since the Rule is scheduled for publication in the Federal Register on December 21, 2023, the new fee will apply to disputes initiated after February 20, 2023.

In response to the TMA IV ruling, the Rule amends existing regulations to provide that the Departments going forward will determine the administrative fee charged by the Departments to participate in the Federal IDR process, and the ranges for certified IDR entity fees for single and batched determinations, through annual notice and comment rulemaking, rather than in guidance published annually. The preamble to the final rule also sets forth the methodology used to calculate the administrative fee and the considerations used to develop the certified IDR entity fee ranges.

Following this new process, the Rule also finalizes an administrative fee amount of $115 per party and finalizes a certified IDR entity fee range of $200-$840 for single determinations and $268-$1,173 for batched determinations for disputes initiated on or after February 21, 2023.

Interested parties can review the Rule here and the Departments Fact Sheet on the Rule here.

IDR Portal Reopened December 15, 2023

The Rule establishing the IDR fee for disputes initiated after February 20, 2024 follows the Departments’ December 15, 2023 announcement of their reopening of the IDR portal for processing all health benefit disputes covered by the NSA between providers and payers.

As part of its provisions to protect patients from “surprise bills” or out-of-network services covered by the NSA, the NSA establishes rules and procedures for providers and payers to determine the appropriate out-of-network payment rate for out-of-network services received by patients enrolled in covered payer programs. Where payers and providers cannot agree about the appropriate payment rate using other NSA procedures, the IDR portal is the online system established under the NSA for disputing payers and health care providers arrange for a certified IDR entity to resolve disagreements about the appropriate out-of-network payment rate for items and services subject to the surprise billing protections in the NSA through a process in which the certified IDR entity reviews offers made by each disputing party along with supporting information about the dispute. Once established under the NSA, payers are required to pay providers the appropriate payment rate for the covered out-of-network services provided to the member patient and the provider is prohibited from balance billing charges in excess of the appropriate payment rate for those services. The Departments previously suspended the operation of the IDR portal earlier this year after a federal court ruled that rules adopted by the Departments implementing the NSA violated the NSA.

In connection with the reopening of the IDR Portal, the Departments also announced the following extensions of the applicable IDR deadlines for the initiation of new batched disputes and new single disputes involving air ambulance services, resubmission of disputes determined by certified IDR entities to be improperly batched, and selection or reselection of a certified IDR entity.

Parties for whom the IDR initiation deadline under applicable regulations fell on any date between August 3, 2023 and December 15, 2023 will have until the 20th business day after the Federal IDR portal reopens, which is January 16, 2024, to initiate a new batched dispute or a new single dispute involving air ambulance services. Parties for whom the IDR initiation deadline falls between December 16, 2023 and January 15, 2024 will also have until January 16, 2024 to initiate a batched or air ambulance dispute. Parties whose initiation deadline falls on January 16, 2024 or after will have the usual 4 business days after the end of the Open Negotiation Period, or if the dispute is subject to the 90-calendar-day suspension period following a payment determination, the usual 30 business day period, to initiate a batched or air ambulance dispute in the Federal IDR portal.
For batched disputes and single disputes involving air ambulance services initiated under extensions of deadlines after the Federal IDR portal reopens, the deadline for the parties to jointly select a certified IDR entity will be 10 business days after initiation.
For disputing parties that were engaged in certified IDR entity selection for batched disputes when the Federal IDR portal temporarily closed, the deadline for parties to jointly select a certified IDR entity will be 10 business days after the Federal IDR portal reopens, which is December 29, 2023.
An initiating party that has received a notification from a certified IDR entity that a dispute initiated before August 3, 2023 was improperly batched will have one opportunity to resubmit the improperly batched items and services for reconsideration within 10 business days of being notified by the certified IDR entity, provided that the initiating party’s 4-business-day period to resubmit the batched dispute expired between August 3 and August 9, 2023.
The deadline to submit fees and offers will remain 10 business days after certified IDR entity selection.
Disputing parties with batched disputes that were impacted by the temporary suspension of use of the notice of offer form will be granted an additional 10 business days to submit offers, as communicated to impacted disputing parties by email from the Federal IDR Inbox.

The deadline extensions announced December 15, 2023 supplement extensions the Departments previously announced in November, 2023. On November 22, 2023, the Departments used their statutory authority (Internal Revenue Code Section 9816(c)(9), ERISA Section 716(c)(9), and PHS Act Section 2799A-1(c)(9)) to grant extensions in the following circumstances:

Disputing parties may request additional time, beyond the current business day deadline, to respond to the certified IDR entity’s requests for additional information. The Departments instructed certified IDR entities to grant such requests through January 16, 2024.
Certified IDR entities may provide parties, upon request, an additional 10 business days after the original offer deadline to submit an offer. Certified IDR entities may provide parties this additional time, as needed, through January 16, 2024.

On November 29, 2023, the Departments also announced another extension of the timeline for disputing parties to select a certified IDR entity. Under this extension, disputing parties will have 10 business days to select a certified IDR entity for all disputes through January 16, 2024. This extension will be provided automatically and does not require a request by disputing parties.

The Departments already announced the November 22, 2023 and November 29, 2023 extensions until January 16, 2023 for new single and bundled disputes and these extensions will persist for all disputes until January 16, 2023.

In connection with their full reopening of the IDR portal, the Departments renewed prior reminders to parties accessing or using the IDR portal to clear their computer’s cache or open the Federal IDR initiation web forms in a private or incognito window to see all the new features at least once a week to ensure access to the most up-to-date version of the initiation form as the Departments continue to implement Federal IDR web forms to accommodate guidance-related and system enhancements. Users failing to follow this recommendation risk additional follow-up with certified IDR entities or system errors. 

Users also are encouraged to review other previously published guidance, including No Surprises Act (NSA) Independent Dispute Resolution (IDR) Batching and Air Ambulance Policy Frequently Asked Questions (FAQs), FAQs about Affordable Care Act and Consolidated Appropriations Act, 2023 Implementation Part 63 (FAQs Part 63), FAQs about Consolidated Appropriations Act, 2021 Implementation Part 62 (FAQs Part 62), and the August 2023 IDR Administrative Fees FAQs for further information.

Parties can also reference updated IDR system job aids and updated guidance documents for further information

For More Information

We hope this update is helpful. For more information about these or other health or other legal, management or public policy developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and Vice-Chair Elect of its International Employment Law Committee, Chair-Elect of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer is most widely recognized for her decades of pragmatic, leading-edge work, scholarship and thought leadership on heath benefit and other healthcare and life science, managed care and insurance and other workforce and staffing, employee benefits, safety, contracting, quality assurance, compliance and risk management, and other legal, public policy and operational concerns in the healthcare and life sciences, employee benefits, managed care and insurance, technology and other related industries. She speaks and publishes extensively on these and other related compliance issues.

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, life sciences, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. Scribe for the ABA JCEB Annual Meeting with the HHS Office of Civil Rights, her experience includes extensive involvement throughout her career in advising health care and life sciences and other clients about preventing, investigating and defending EEOC, DOJ, OFCCP and other Civil Rights Act, Section 1557 and other HHS, HUD, banking, and other federal and state discrimination investigations, audits, lawsuits and other enforcement actions as well as advocacy before Congress and regulators regarding federal and state equal opportunity, equity and other laws.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

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Posted by Cynthia Marcotte Stamer

New HIPAA Resolution Agreement Warns Health Plans & Other HIPAA-Covered Entities To Manage Media Relations, Access & Disclosure

November 21, 2023

A newly-announced settlement agreement and corrective action plan (the “Settlement”) between a prominent New York academic medical center and the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (“OCR”) arising from disclosures and access allowed a reporter covering the COVID-19 pandemic warns health care providers, health plans, healthcare clearinghouses (“covered entities”), their business associates and workforce members (collectively, “HIPAA entities”) to prevent their organizations and workforce members not to share protected health information (“PHI”) or allow reporters or other media to access patients or PHI without first obtaining the legally required patient authorizations as well as evaluate their own organization’s potential exposure to OCR enforcement from known or suspected unauthorized disclosures of PHI by their own organizations or workforce during the COVID-19 pandemic or other events over the past two years.

While the Settlement involved a health care providers, health plans and other HIPAA entities also are subject to the same HIPAA requirements to prevent unauthorized photography, videos, or other sharing or disclosure of participant or other PHI to media in interviews or other media interactions or by workforce members, business associates or other third parties. Furthermore, since the Employee Benefit Security Administration now views HIPAA compliance and other prudent steps to protect PHI and other sensitive health information as part of fiduciaries and plan administrator’s ERISA compliance obligations, the management of these and other HIPAA obligations also is critical to ERISA compliance. Accordingly, health plans and their fiduciaries, administrators, and sponsors should confirm their continued compliance in light of the insights provided by the Settlement and related OCR guidance.

HIPAA-Compliant Authorization Required Before Media Access To Patients Or Patient Information

The HIPAA Privacy Rule prohibits SJMC and other HIPAA entities from disclosing any patient’s PHI unless::

The individual who is the subject of the information (or the individual’s personal representative) authorizes the disclosure in writing in the form required by the Privacy Rule; or
The Privacy Rule otherwise expressly permits or requires the disclosure.

OCR guidance makes clear that these prohibitions continue to apply when health care providers or other HIPAA entities are dealing with have print, television, or other media reporters.

SJMC Settlement

The Settlement between OCR and St. Joseph’s Medical Center (“SJMC”) resolves potential OCR charges that SJMC violated the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) Privacy Rule by allowing an Associated Press (“AP”) reporter to access, photograph, and review clinical information of three COVID-19 patients without appropriate HIPAA authorization. Although the dated documents governing the Settlement reflect the parties reached the Settlement Agreement in August, OCR only made the Settlement public on November 20, 2023.

The OCR investigation that prompted the settlement began shortly an AP article about SJMC’s response to the COVID-19 public health emergency containing photographs and information about three COVID-19 patients came to OCR’s attention. The nationally distributed article included pictures of the three patients as well as details about the patients’ COVID-19 diagnoses, current medical statuses and medical prognoses, vital signs, treatment plans, and other PHI.

OCR determined from the investigation that SJMC allowed the AP reporter to observe and access clinical information of three patients receiving treatment for COVID on April 20, 2020 without first obtaining the necessary patient authorization required by HIPAA and that the disclosures were not otherwise allowed by any other exception to the Privacy Rule.

To avoid potentially much larger civil monetary penalties authorized by HIPAA, SHMC entered into the Settlement under which it agreed to pay $80,000 to OCR and agreed to develop written policies and procedures and train its workforce to comply with the HIPAA Privacy Rule. Under the Settlement, OCR also will monitor SHMC’s HIPAA compliance for two years.

Prior OCR Enforcement & Guidance Warned HIPAA Entities About Media Disclosures

OCR guidance and enforcement actions alerted SJMC and other HIPAA entities of their HIPAA responsibility not to disclose or allow access by the media or other third parties long before SJMC allowed the media access and disclosures that resulted in the new Settlement.

2013 Shasta Regional Medical Center Enforcement

Shasta Regional Medical Center (“SRMC”) holds the distinction of being the first covered entity punished for wrongfully disclosing PHI to the media. Under a resolution agreement OCR announced on June 14, 2013, OCR required SRMC to pay OCR $275,000 and implement a series of corrective actions for using and disclosing to the media PHI of a patient while trying to perform public relations damage control against accusations reported in the media that SRMC had engaged in fraud or other misconduct when dealing with the patient. That SRMC resolution Agreement followed an OCR investigating a January 4, 2012 Los Angeles Times article report that two SRMC senior leaders had met with media to discuss medical services provided to a patient. OCR’s investigation indicated that SRMC failed to safeguard the patient’s PHI from impermissible disclosure by intentionally disclosing PHI to multiple media outlets on at least three separate occasions, without a valid written authorization. OCR’s review also revealed senior management at SRMC impermissibly shared details about the patient’s medical condition, diagnosis and treatment in an email to the entire workforce. Further, SRMC failed to sanction its workforce members for impermissibly disclosing the patient’s records pursuant to its internal sanctions policy.

2016 NY-Presby Resolution Agreement & OCR Media Guidance

OCR’s next warnings to covered entities about their HIPAA responsibilities when dealing with the media came in 2016, when OCR concurrently announced a $2.2 million settlement with New York-Presbyterian Hospital and published its 2016 Frequently Asked Question (“Media FAQ”) addressing the obligation to comply with HI)PAA when dealing with the media.

According to the NY-Presby Resolution Agreement, OCR’s investigation revealed that NY-Presbyterian “blatantly” violated HIPAA when it allowed ABC film crews and staff virtually unfettered access to its health care facility. OCR says the access NY-Presbyterian allowed ABC effectively created an environment where patients PHI could not be protected from impermissible disclosure to the ABC film crew and staff filming the episode. While the Resolution Agreement reflects allowing the filming and other access to ABC without prior HIPAA-compliant authorization from patients in the facility itself violated HIPAA, OCR also particularly found “egregious” the facility allowing ABC film crews and staff to film a dying patient and another patient in significant distress without first obtaining a HIPAA-compliant authorization from each of those patients and even more so that NY-Presbyterian failed stop the filming even after a medical professional urged the crew to stop.

Based on its investigation, OCR charged NY-Presbyterian with violating 45 C.F.R. §§ 164.502(a) and 164.530(c) by:

Impermissibly disclosing the PHI of two identified patients to the film crew and other staff of “NY Med;”
Failing appropriately and reasonably to safeguard its patients’ PHI from disclosure during the filming of “NY Med” on its premises; and
Failing to implement policies, procedures, and practices to protect the privacy of the filming of the television show.

OCR collected $2.2 million from New York-Presbyterian Hospital as the required settlement payment under that resolution agreement.

2016 Media FAQ Guidance

Coincident with its announcement of the NYPH Settlement, OCR published the 2016 Media FAQ addressing HIPAA entities’ responsibilities when dealing with the media that outlined its interpretation of HIPAA as requiring HIPAA entities to protect patients and their PHI against unauthorized filming, photography, observation, and other access by news or other media or even other staff, patients or visitors.

Among other things, the Media FAQ states that HIPAA prohibits health care providers and other HIPAA entities from inviting or allowing media personnel into treatment or other areas where patients or patient PHI will be accessible in written, electronic, oral, or other visual or audio form, or otherwise making PHI accessible to the media without prior written authorization from each patient or other subject of the PHI who is or will be in the area or whose PHI otherwise will be accessible to the media except in a very limited set of circumstances set forth in the Media FAQ.

The Media FAQ also states, “It is not sufficient for a health care provider to request or require media personnel to mask the identities of patients (using techniques such as blurring, pixelation, or voice alteration software) for whom authorization was not obtained, because the HIPAA Privacy Rule does not allow media access to the patient’s PHI, absent an authorization, in the first place.

In addition, the Media FAQ states that a health care provider also must ensure that reasonable safeguards are in place to protect against impermissible disclosures or to limit incidental disclosures of other PHI that may be in the area but for which authorization has not been obtained.

Concerning the limited circumstances when a health care provider or other HIPAA entity or business associate may disclose to the media or allow unconsented filming, photographing or use of PHI to the media or other film crews, the Media FAQ also clarifies that the HIPAA Privacy Rule does not require health care providers to prevent members of the media from entering areas of their facilities that are otherwise generally accessible to the public like public waiting areas or areas where the public enters or exits the facility.

In addition, the Media FAQ states a health care provider or other HIPAA entity may:

Disclose limited PHI about the incapacitated patient to the media in accordance with the requirements of 45 C.F.R. 164.510(b)(1)(ii) when, in the hospital’s professional judgment, doing so is in the patient’s best interest; or
Disclose a patient’s location in the facility and condition in general terms that do not communicate specific medical information about the individual to any person, including the media, without obtaining a HIPAA authorization where the individual has not objected to his information being included in the facility directory, and the media representative or other person asks for the individual by name as specified in 45 C.F.R. 164.510(a).

The Media FAQ also discusses circumstances where a healthcare provider or other HIPAA entity may use the services of a contract film crew to produce training videos or public relations materials on the provider’s behalf if the provider ensures that the film crew acting as a business associate enters into a HIPAA compliant business associate agreement with the HIPAA entity which among other things ensures that the film crew will safeguard the PHI it obtains, only use or disclose the PHI for the purposes provided in the agreement, and return or destroy any PHI after the work for the health care provider has been completed as required by 45 C.F.R. 164.504(e)(2). The Media FAQ also states that as a business associate, the film crew must comply with the HIPAA Security Rule and a number of provisions in the Privacy Rule, including the Rule’s restrictions on the use and disclosure of PHI. In addition, the Media FAQ reminds HIPAA entities and business associates of the need to obtain prior authorizations from patients whose PHI is included in any materials before any of those materials are posted online, printed in brochures for the public, or otherwise publicly disseminated.

Finally, the Media FAQ states HIPAA entities can continue to inform the media of their treatment services and programs so that the media can better inform the public, provided that, in doing so, the covered entity does not share PHI with the media.

Memorial Herrman Health System Resolution Agreement

OCR’s next media coverage-related enforcement action involved the largest not-for-profit health system in Southeast Texas, Memorial Hermann Health System (MHHS). The 2017 MHHS Resolution Agreement and Corrective Action Plan resulted from HHHS issuing a press release with the name and other PHI about a patient arrested and charged with fraudulently obtaining health care by presenting an allegedly fraudulent identification card to MHHS office staff without first obtaining authorization from the patient. MHHS paid OCR a $2.4 million resolution payment as well as agreed to implement a detailed corrective action plan. See $2.4M HIPAA Settlement Warns Providers About Media Disclosures Of PHI.

Three Resolution Agreements Following Disclosures ForBoston Trauma Reality Series

OCR followed up the next year with a concurrent announcement of resolution agreements against three unrelated hospitals for allowing ABC film crews to film in patient treatment and other areas for the ABC medical documentary “Save My Life: Boston Trauma” series. Under three separate settlement agreements, OCR collected a total of $999,000 from Boston Medical Center, Brigham and Women’s Hospital, and Massachusetts General Hospital for putting publicity before patient privacy by allowing ABC News documentary film crews to film patients and access other patient information for a news documentary without obtaining prior patient authorization under three separate settlement agreements with the hospitals.

The circumstances that resulted in the three resolution agreements announced on September 20, 2018 were strikingly similar to those underlying the NY-Presby Resolution Agreement. Notably, the investigations that resulted in the three settlement agreements all arose out of each of the respective hospital’s permitting an ABC documentary film crew filming a medical documentary to access patient areas of their hospitals.

OCR’s investigation of MGH arose in response to an announcement about the impending filming on its website while OCR’s investigations of BMC and BWH started in response to a January 12, 2015 Boston Globe article that reported the Hospitals each separately had allowed ABC film crews filming a documentary to access PHI and film patients without obtaining patient authorization. See Boston Medical Center Resolution Agreement (BMC Settlement Agreement); Brigham and Women’s Hospital Resolution Agreement (BWH Settlement Agreement); and Massachusetts General Hospital Resolution Agreement (MGH Resolution Agreement)

The MGH Resolution Agreement reflects that OCR’s investigations began with an investigation of MGH on December 17, 2014 based on a news story posted to MGH’s website on October 3, 2014, indicating that ABC News would be filming a medical documentary program at MGH. The MGH Resolution Reports that the investigation revealed that before allowing the filming between October 2014 to January 2015, MGH reviewed and assessed patient privacy issues related to the filming and implemented various protections regarding patient privacy, including providing the ABC film crew with the same HIPAA privacy training received by MGH’s workforce.

Information contained in the respective settlement agreements reflect that OCR’s investigations of BMC and BWH began about a month later on January 25 and 26, 2015 respectively in response to the Boston Globe article. The BWH Settlement Agreement states that the BWH investigation revealed that like MGH, BWH reviewed and assessed patient privacy issues related to the filming and implemented various protections regarding patient privacy, including providing the ABC film crew with the same HIPAA privacy training received by BWH’s workforce before allowing the filming by the ABC film crew that occurred between October 2014 to January 2015. The BMC Settlement Agreement does not state that OCR found BMC engaged in similar deliberations or undertook the same or other efforts to safeguard patients and their PHI.

The BMC Settlement Agreement reports that the OCR concluded based on the BMC investigation showed that BMC impermissibly disclosed PHI of patients to ABC employees during the production and filming of a television program at BMC in violation of HIPAA. Meanwhile, while acknowledging the privacy deliberations and efforts undertaken at MGH and BWH, OCR also concluded that each of those organizations also violated HIPAA because in allowing the film crew access and to film patients and patient areas:

The timing at which they obtained patient authorizations showed MGH and BWH impermissibly disclosed the PHI of patients to ABC employees during the production and filming of a television program at BWH; and
Despite the various patient privacy protections in place, MGH and BWH failed to safeguard its patients’ PHI appropriately and reasonably from disclosure during a filming project conducted by ABC on its premises in 2014 and January 2015.

To resolve potential HIPAA violations, BMC has paid OCR $100,000, BWH has paid OCR $384,000, and MGH has paid OCR $515,000. In addition, each Hospital agreed to provide workforce training as part of a corrective action plan that will include OCR’s guidance on disclosures to film and media in the 2016 Media FAQ.

Allergy Associates of Hartford, P.C. Resolution Agreement

Large institutional health care organizations are not the only HIPAA entities subjected to OCR investigation or enforcement for inappropriate sharing of PHI with the media. In its November 2018

On November 26, 2018, OCR announced that Allergy Associates, the three doctor health care practice Allergy Associates of Hartford, P.C. would pay OCR $125,000 and take corrective action under a Resolution Agreement and Corrective Action Plan resolving charges stemming from comments a physician made to a reporter on a patient dispute with the practice in 2015 violated HIPAA.

According to OCR, the disclosure of patient information that prompted OCR’s HIPAA charges resulted from a physician associated with the practice commenting to a local television station reporter for a story about a disabled patient’s complaint to the station that Allergy Associates turned her away from a scheduled appointment because of her use of a service animal. After the patient contacted the television statement to complain about being turned away by the practice when accompanied by her service animal, the station contacted the doctor for comment about the dispute between the Allergy Associates’ doctor and the patient. Although OCR reports its investigation revealed that Allergy Associates’ Privacy Officer instructed the doctor to either not respond to the media or respond with “no comment,” the doctor nevertheless accepted the television station reporter’s invitation to comment and discussed the dispute with the reporter.

OCR learned of the physician’s unauthorized comments to the reporter when it received a copy of an October 6, 2015, HHS civil rights complaint filed on behalf of the patient with the Department of Justice, Connecticut, U.S. Attorney’s Office (DOJ) by the Connecticut Office of Protection and Advocacy for Persons with Disabilities (OPA). In response to this complaint, OCR initiated a joint investigation with DOJ into the civil rights allegations against Allergy Associates. The complaint also alleged that Allergy Associates impermissibly disclosed the patient’s PHI in violation of HIPAA.

OCR found the physician’s discussion of the patient’s complaint without first obtaining a HIPAA-complaint authorization from the patient both violated HIPAA and demonstrated a reckless disregard for the patient’s HIPAA privacy rights. Additionally, Resolution Agreement also states that OCR’s investigation revealed that Allergy Associates did not take any disciplinary or other corrective action against the doctor after learning of his impermissible disclosure to the media.

To resolve the HIPAA charges, Allergy Associates agrees in the Resolution Agreement and Corrective Action Plan to pay $125,000 as well as to undertake a corrective action plan that includes two years of monitoring their compliance with the HIPAA Rules.

OCR COVID-19 HIPAA Guidance & Warnings About Media-Related HIPAA Responsibilities

With the COVID-19 pandemic fueling a torrent of media inquiries and coverage of patient, workforce and other aspects of the pandemic, OCR reminded health care providers and other HIPAA entities of HIPAA’s requirement of prior authorization before sharing PHI or allowing media to access patients or areas where media could observe patients or their PHI throughout the COVID-19 pandemic.

In its May 5, 2020 Guidance on Covered Health Care Providers and Restrictions on Media Access to Protected Health Information about Individuals in Their Facilities (“5/5 Guidance”), OCR warned covered health care providers and other HIPAA entities that the Privacy Rule prohibits HIPAA entities from giving media or film crews access to PHI including access to facilities where patients’ PHI could be accessible without the patients’ prior authorization and cautioned testing facilities and other health care providers to prevent unauthorized use, access or disclosure of test results and other PHI except as specifically allowed in the applicable HIPAA Law. In this respect, the 5/5 Guidance quoted then OCR Director Roger Severino, as unequivocally stating “Hospitals and health care providers must get authorization from patients before giving the media access to their medical information; obscuring faces after the fact just doesn’t cut it.”

Consistent with this warning, the 5/5 Guidance described reasonable guidelines and safeguards that HIPAA entities should use to protect the privacy of patients whenever the media is granted access to facilities. Additionally, the 5/5 Guidance specifically warned HIPAA entities among other things that:

HIPAA does not permit covered health care providers to give the media, including film crews, access to any areas of their facilities where patients’ PHI will be accessible in any form (e.g., written, electronic, oral, or other visual or audio form), without first obtaining a written HIPAA authorization from each patient whose PHI would be accessible to the media;
Covered health care providers may not require a patient to sign a HIPAA authorization as a condition of receiving treatment; and
Masking or obscuring patients’ faces or identifying information before broadcasting a recording of a patient does not sufficiently deidentify patient information to allow unauthorized disclosure. A valid HIPAA authorization is still required before giving the media such access.

OCR emphasized that it expected health care providers and other HIPAA entities to continue to adhere to these Privacy Rule requirements throughout the COVID-10 pandemic even as it granted temporary enforcement relief from a narrow set of other HIPAA requirements during the COVID-19 health care emergency. See e.g., 5/5 Guidance; OCR Issues Guidance on How Health Care Providers Can Contact Former COVID-19 Patients About Blood and Plasma Donation Opportunities; OCR Announces Notification of Enforcement Discretion for Community-Based Testing Sites During the COVID-19 Nationwide Public Health Emergency; OCR Announces Notification of Enforcement Discretion to Allow Uses and Disclosures of Protected Health Information by Business Associates for Public Health and Health Oversight Activities During The COVID-19 Nationwide Public Health Emergency; OCR Issues Bulletin on Civil Rights Laws and HIPAA Flexibilities That Apply During the COVID-19 Emergency; OCR Issues Guidance to Help Ensure First Responders and Others Receive Protected Health Information about Individuals Exposed to COVID-19; OCR Issues Guidance on Telehealth Remote Communications Following Its Notification of Enforcement Discretion; OCR Announces Notification of Enforcement Discretion for Telehealth Remote Communications During the COVID-19 Nationwide Public Health Emergency. Also see generally HIPAA and COVID-19 | HHS.gov.

Despite these warnings, throughout the COVID-19 health care emergency videos and other media reports often incorporated videos or other images of patients and other descriptions or details about patients containing PHI reporters or media outlets obtained from accessing facilities, interviewing workforce members, or shared with the media or others allowed to access patients or facilities, often without a HIPAA-compliant patient authorization and often by workforce members without authorization or otherwise in violation of their employing HIPAA entity’s policies. See e.g. Ezekiel Elliott COVID-Test Disclosure Highlights Health Care Provider & Plan HIPAA & Other Privacy Risks From Medical Testing & Other Medical Information;, Health care workers express overwhelming fatigue as COVID-19 cases surge across the country; Pandemic takes its toll on health care workers; ABC News Special Coverage: Coronavirus Pandemic. Since the widespread media coverage makes clear SJMC was not the only health care provider or other HIPAA entity where the entity or members of its workforce allowed media access to facilities, shared or allowed the media or other third-parties to take patient photos, videos, or shared or allowed media access to other PHI, additional OCR enforcement actions or settlements arising from COVID-19 related media disclosures against other HIPAA-entities are likely.

To mitigate their own organizational exposure to potential HIPAA and other privacy-related exposures from known or as-of-yet unidentified past or future media-related HIPAA violations, all HIPAA entities should consult qualified legal counsel for advice and assistance within the scope of attorney-client privilege on investigating their organizations potential risks from any past media disclosures and opportunities for mitigating any known or uncovered HIPAA exposures by acting proactively as well as for guidance on best practices to prevent or mitigate liability from future dealings with the media.

To promote their compliance and the defensibility of their practices and efforts when compliance issues arise, HIPAA entities need conduct a well-documented assessment of their current and past compliance, policies, practices and workforce training on allowing media or others to enter, film, photograph or record within their facilities or otherwise disclosing or allowing media access to their facilities as well as their policies about when parties not involved in care of a particular patient can film, photograph, or otherwise record, observe or access areas where patients or patient PHI is or might be present without prior written consent of the patient.

Going forward, all HIPAA entities should ensure their policies clearly prohibit their entities, their business associates and their workforce from allowing film or media to film, photograph or even access areas where patients or their PHI are accessible or otherwise disclosing PHI to members of the media without first obtaining a HIPAA-compliant authorization from each patient whose presence or PHI could be observed, recorded or otherwise accessed. Adopting the policy alone is insufficient, however, HIPAA entities also need to implement and enforce appropriate procedures and training to promote compliance with those policies and processes to monitor and respond to any violations of HIPAA’s requirements.

When considering the adequacy of their current policies, practices and training concerning filming, photography and other access and disclosure to patients, patient treatment areas and other PHI, HIPAA entities should keep in mind that the obligation to prevent unauthorized filming, photography or any other PHI access or disclosure PHI extends to “any third party not involved in patient care,” not merely those to media or film crews. Consequently, HIPAA entities should address potential risks from filming, photographs or other access and disclosure to patients, patient treatment or recordkeeping areas, or PHI by all parties within or with access to their facilities or records including but not limited to staff, business associates, contractors, other patients as well as media or other visitors.

Recognizing that the NY-Presbyterian corrective action plan included a requirement that NY-Presbyterian require “all photography, video recording and audio recording conducted on NY-Presbyterian premises” be reviewed, preapproved and actively monitored for compliance with the Privacy Rule and NY-Presbyterian’s policies, HIPAA entities also should take steps to monitor and properly restrict and protect any filming, photography or other observations, records or other PHI by individuals within their workforce, as well as to regulate the access and activities of unrelated third parties. In this respect, HIPAA entities are cautioned about the need to prohibit and enforce suitable prohibitions against members of their workforce and others using their own personal devices or other equipment to film, photograph, and copy or disseminate photographs, film, recordings or other records or data that qualifies as or contains PHI without authorization in accordance with established protocols.

HIPAA entities also should take steps to ensure their policies and training make clear that these prohibitions apply whether or not the workforce member believes that identity of the patient or patient information is concealed or otherwise not discoverable.

Moreover, even with respect to photographs, films or other recordings or records legitimately created for treatment, payment or operations purposes, HIPAA entities generally need to take steps to restrict use, access and disclosure of the photographs or other recordings to individuals legitimately involved in patient treatment, operations, payment or other activities allowed by the Privacy Rule and to safeguard those materials against use, access or disclosure to others within or outside their workforce except as allowed by HIPAA and other applicable law. .

Since HIPAA entities also are likely to be subject to other statutory, ethical, contractual or other privacy or confidentiality requirements beyond those imposed by the Privacy Rule, most HIPAA entities also will want to consider and take steps to identify and address these other potential legal or ethical responsibilities such as medical confidentiality duties applicable to physicians and other health care providers under medical ethics, professional licensure or other similar rules, contractual responsibilities, as well as common law privacy or other related exposures when conducting this review. Additionally, most HIPAA entities also will want to take into account and manage their potential exposure to privacy, theft of likeness or other intellectual property, or other statutory or common law tort or contractual claims that might attached to the unauthorized filming, photographing, or surveillance of individuals under federal or state common or statutory laws.

Since this analysis and review in most cases will result in the uncovering or discussion of potentially legally or politically sensitive information, HIPAA entities should consider consulting with or engaging experienced legal counsel for assistance in structuring and executing these activities to maximize their ability to claim attorney-client privilege or other evidentiary protections against discovery or disclosure of certain aspects of these activities.

Finally, HIPAA entities should keep in mind that HIPAA compliance and risk management is an ongoing process requiring constant awareness and diligence. Consequently, HIPAA entities should both monitor OCR and other regulatory and enforcement developments as well as exercise ongoing vigilance to monitor and maintain compliance within their organizations.

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About the Author

A Fellow in the American College of Employee Benefit Counsel, Co-Chair of the American Bar Association (“ABA”) International Section Life Sciences and Health Committee and VIce-Chair Elect of its International Employment Law Committee, Chair-Elect of the ABA TIPS Section Medicine & Law Committee, Past Chair of the ABA Managed Care & Insurance Interest Group, Scribe for the ABA JCEB Annual Agency Meeting with HHS-OCR, past chair of the ABA RPTE Employee Benefits & Other Compensation Group and current co-Chair of its Welfare Benefit Committee, and Chair of the ABA Intellectual Property Section Law Practice Management Committee, Ms. Stamer is most widely recognized for her decades of pragmatic, leading-edge work, scholarship and thought leadership on healthcare and life science, managed care and insurance and other workforce and staffing, employee benefits, safety, contracting, quality assurance, compliance and risk management, and other legal, public policy and operational concerns in the healthcare and life sciences, employee benefits, managed care and insurance, technology and other related industries. She speaks and publishes extensively on these and other related compliance issues.

Ms. Stamer’s work throughout her career has focused heavily on working with health care and managed care, life sciences, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. Scribe for the ABA JCEB Annual Meeting with the HHS Office of Civil Rights, her experience includes extensive involvement throughout her career in advising health care and life sciences and other clients about preventing, investigating and defending EEOC, DOJ, OFCCP and other Civil Rights Act, Section 1557 and other HHS, HUD, banking, and other federal and state discrimination investigations, audits, lawsuits and other enforcement actions as well as advocacy before Congress and regulators regarding federal and state equal opportunity, equity and other laws.

For more information about Ms. Stamer or her labor and employment, employee benefit, health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

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Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested in reviewing some of our other Solutions Law Press, Inc.™ resources available here such as:

©2023 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

Proposed Changes To Substance Abuse Confidentiality Rules Could Create New Burdens For Employers & Health Plans

November 28, 2022

January 30 Deadline To Comment On HHS’ Proposed Changes To Substance Use Confidentiality Rules

Employers, their health plans and issuers, substance abuse, mental health and other healthcare providers, health care professional associations, consumer advocates, community organizations, state and local government entities, patients and caregivers and others concerned with mental health and substance abuse treatment and management should review and comment by January 30, 2023 on proposed changes to rules on unauthorized disclosures the Confidentiality of Substance Use Disorder (SUD) Patient Records under 42 CFR part 2 (“Part 2”) proposed by the U.S. Health and Human Services Department Office for Civil Rights (OCR) and the Substance Abuse and Mental Health Services Administration (SAMHSA) in a Notice of Proposed Rulemaking (NPRM) made public November 28, 2022 here and scheduled for publication in the December 2, 2022 Federal Register. In addition to obvious implications for health care providers and health plans, the proposed changes are likely to impact both the confidentiality requirements for employer-sponsored and other health benefit programs, as well as the ability and responsibilities of businesses seeking to access or use information about prior substance use and abuse in their workplaces or for other legitimate purposes.

Proposed Changes To Substance Abuse Confidentiality Rules

On November 28, 2022, OCR and SAMHSA issued the NPRM to revise the Confidentiality of Substance Use Disorder Patient Records regulations at 42 CFR part 2 (“Part 2”), which seek to address concerns that concerns about discrimination or prosecution might deter people from entering treatment for SUD by protecting “records of the identity, diagnosis, prognosis, or treatment of any patient which are maintained in connection with the performance of any program or activity relating to substance abuse education prevention, training, treatment, rehabilitation, or research, which is conducted, regulated, or directly or indirectly assisted by any department or agency of the United States.”(“SUD Records”).

Currently, the Part 2 protections of patient privacy and records concerning treatment related to substance use challenges from unauthorized disclosures differ from the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy, Breach Notification, and Enforcement Rules (“HIPAA”) rules. These distinctions reportedly create barriers to information sharing by patients and among health care providers and create dual obligations and compliance challenges for regulated entities. To address this concern, Congress mandated in Section 3221 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that HHS to bring Part 2 into greater alignment with certain aspects of the HIPAA Privacy rule.

The NPRM seeks to address the CARES Act mandate as Americans and their leaders struggle to continue to provide pathways for victims of substance abuse and other mental health challenges to pursue treatment and maximize their participation and enjoyment in our communities while addressing safety concerns about a growing series of rare but notorious acts of violence committed by certain inadequately diagnosed or managed victims of mental health or substance abuse. See, e.g., Fact Sheet: President Biden To Announce Strategy To Address Our National Mental Health Crisis, As Part Of Unity Agenda In His First State Of The Union; President Biden Releases National Drug Control Strategy to Save Lives, Expand Treatment, and Disrupt Trafficking; Actions Taken by the Biden-⁠Harris Administration to Address Addiction and the Overdose Epidemic; Colorado Springs LGBT Nightclub Shooting Leaves Five Dead and 25 Injured; Virginia Walmart Shooting Gunman “Was Picking People Out,” Witness Says; Opinion: Leaders Blamed the Uvalde Shooting on a Mental Health Crisis. Gun Violence Is Making That Crisis Worse; Nancy Pelosi Husband Attack Suspect David Depape Pleads Not Guilty To Federal Charges.

Amid these challenges, the NPRM proposes to implement this CARES Act mandate through the following changes to Part 2 that HHS says will help safeguard the health and outcomes of individuals with SUD while creating greater flexibility for information sharing envisioned by Congress in its passage of Section 3221 of the CARES Act:

Permit Part 2 programs to use and disclose Part 2 records based on a single prior consent signed by the patient for all future uses and disclosures for treatment, payment, and health care operations;
Permit the redisclosure of Part 2 records as permitted by the HIPAA Privacy Rule by recipients that are Part 2 programs, HIPAA covered entities, and business associates, with certain exceptions;
Expand prohibitions on the use and disclosure of Part 2 records in civil, criminal, administrative, or legislative proceedings conducted by a federal, state, or local authority against a patient, absent a court order or the consent of the patient;
Create two patient rights under Part 2 that align with individual rights under the HIPAA Privacy Rule:
- Right to an accounting of disclosures; and
- Right to request restrictions on disclosures for treatment, payment, and health care operations;
Require disclosures to the Secretary for enforcement;
Apply HIPAA and HITECH Act civil and criminal penalties to Part 2 violations;
Require Part 2 programs to establish a process to receive complaints of Part 2 violations;
Prohibit Part 2 programs from taking adverse action against patients who file complaints;
Prohibit Part 2 programs from requiring patients to waive the right to file a complaint as a condition of providing treatment, enrollment, payment, or eligibility for services;
Apply the standards in the HITECH Act and the HIPAA Breach Notification Rule to breaches of Part 2 records by Part 2 programs;
Modify the Part 2 confidentiality notice requirements (“Patient Notice”) to align with the HIPAA Notice of Privacy Practices;
Modify the HIPAA Notice of Privacy Practices requirements for covered entities who receive or maintain Part 2 records to include a provision limiting redisclosure of Part 2 records for legal proceedings according to the Part 2 standards; and
Permit investigative agencies to apply for a court order to use or disclose Part 2 records after they unknowingly receive Part 2 records while investigating or prosecuting a Part 2 program, when certain preconditions are met.

While the Department is undertaking this rulemaking, the current Part 2 regulations remain in effect. However, once the comment period ends, the Biden Administration-led HHS is expected to finalize the proposed changes quickly. Consequently, in addition to sharing any concerns or other input about the proposed changes during the comment period, health care providers, health plans, health care clearinghouses, employers, community agencies, state and local governments, patients and other caregivers and other concerned parties also should begin planning and preparing to respond to the anticipated changes in the requirements.

Implications For Businesses & Their Health Plans

Businesses should carefully assess the potential implications of the proposed changes on their worker and vendor credentialing and workplace safety practices as well as their health and other benefit programs. Assuming the changes are adopted in their current form, businesses sponsoring health benefit programs generally, and health care organizations and providers specifically should prepare to modify their HIPAA required notices of privacy practices and associated practices to comply with the proposed updates.

Businesses required to comply with Department of Transportation Drug Free Workplace or other alcohol and substance abuse requirements also should consider the potential implications of the proposed changes on their ability to secure relevant substance abuse treatment and related history. In assessing these implications, businesses also should be cognizant of a new proactivity on behalf of certain uses of drugs by workers in the workplace under the Americans With Disabilities Act (“ADA”). For instance, the EEOC recently has sued Eagle Marine Services Electrical & Refrigeration, LLC for allegedly violating the ADA by refusing to hire or accommodate a worker because he used medication prescribed by his doctor to treat attention deficit hyperactivity disorder (“ADHD”) without making any individual assessment of the worker’s medication use or whether it would affect his ability to safely perform the marine electrician position, and instead relied on general stereotypes about disability and medication use to justify its decision not to hire him. Businesses seeking to investigate or deny employment opportunities to workers based on the worker’s past or current medication use will want to use care to ensure that their practices are tailored to defend against similar challenges.

Health plan sponsors and insurers also should assure their mental health and substance abuse treatment coverage documents and practices are defensible under the latest mental health and substance abuse parity mandates of the Mental Health Parity and Addiction Equity Act (MHPAEA) and coverage requirements of the Patient Protection and Affordable Care Act (“ACA”). Along with a host of statutory changes since the original parity mandates took effect, implementing regulations and guidance about non-qualitative limitations and exclusions and heightened agency enforcement are ramping up enforcement and liability risks. In addition to exposing the health plan administrators and other fiduciaries to potential claims denial or fiduciary responsibility claims brought by participants or beneficiaries, the Department of Labor or both, administrative penalties by the EBSA, or both, the MHPAEA mental health and substance abuse parity rules are among 40 federal mandates that when violated can trigger the automatic $100 per violation per day employer excise tax penalty under Internal Revenue Code Section 6039D. As a consequence, violations of the MHPAEA are particularly risky and potentially expensive for private employers, their health plans and the plan administrators and fiduciaries that administer it.

For Help With Comments, Investigations Or Other Needs

If your organization would like to learn more about the concerns discussed in this update or seeks assistance auditing, updating, administering or defending its human resources, compensation, benefits, corporate ethics and compliance practices, or other performance related concerns, please contact management attorney and consultant Cynthia Marcotte Stamer.

An attorney Board Certified in Labor & Employment Law by Texas Board of Legal Specialization, Ms. Stamer is recognized for work helping organizations management people, operations and risk as a Fellow in the American College of Employee Benefit Counsel, a “Top Woman Lawyer,” “Top Rated Lawyer,” and “LEGAL LEADER™” in Labor and Employment Law and Health Care Law; a “Best Lawyers” in “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law.”

For 35 years, Ms. Stamer’s work has focused on advising and assisting businesses and business leaders with these and other employment and other staffing, employee benefit, compensation, risk, performance and compliance management and other operational solutions and concerns. Her experience includes helping management both manage performance and manage legal risk and compliance. While helping businesses define and manage the conduct and performance of their employees, contractors and vendors, she also assists employers and others about compliance with federal and state equal employment opportunity, compensation, health and other employee benefit, workplace safety, leave, and other labor and employment laws, advises and defends businesses against labor and employment, employee benefit, compensation, fraud and other regulatory compliance and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor, Department of Justice, SEC, Federal Trade Commission, HUD, HHS, DOD, Departments of Insurance, and other federal and state regulators. Ms. Stamer also speaks, coaches management and publishes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see hereor contact Ms. Stamer directly.

Other Helpful Resources & Information

If you found this article of interest, you also may be interested in reviewing other Breaking News, articles and other resources available including:

NOTICE: These materials are for general informational and educational purposes only. They do not establish an attorney-client relationship, are not legal advice, a substitute for legal advice, an offer or commitment to provide legal advice or an admission. The information and statements in these materials may not address all relevant issues or apply to any situation or circumstances. The author reserves the right to qualify or retract any of these statements at any time. and does not necessarily address all relevant issues. Because the law evolves and in ways that subsequent developments could impact the currency and completeness of this discussion. The author disclaims and has no responsibility to provide any update or otherwise notify anyone any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstance at any time. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication. Readers acknowledge and agree to the conditions of this Notice as a condition of their access of this publication. Circular 230 Compliance. The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. Any statements contained herein are not intended or written by the writer to be used, and nothing contained herein can be used by you or any other person, for the purpose of (1) avoiding penalties that may be imposed under federal tax law, or (2) promoting, marketing or recommending to another party any tax-related transaction or matter addressed herein. ©2022 Cynthia Marcotte Stamer. Nonexclusive right to republish granted to Solutions Law Press, Inc. All rights reserved.

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Posted by Cynthia Marcotte Stamer

IRS Shares Initial CARES Act Plan Loan & Distribution Relief Guidance

May 5, 2020

Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, provides for special distribution options and rollover rules for retirement plans and IRAs and expands permissible loans from certain retirement plans.

While it anticipates issuing further guidance, the Internal Revenue Service (“IRS”) on May 4 provided preliminary guidance in question and answer format titled Coronavirus-related relief for retirement plans and IRAs questions and answers.

More Information

We hope this update is helpful. For more information about the these or other health or other legal, management or public policy developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years legal and operational management work, coaching, public policy and regulatory affairs leadership and advocacy, training and public speaking and publications. As a significant part of her work, Ms. Stamer has worked extensively domestically and internationally on an demand, special project and ongoing basis with business, government and community organizations and their leaders, spoken and published extensively on human resources, employee benefits and other workforce and services, tax, health care and health benefits, insurance, workers’ compensation and occupational disease, business disaster and distress and many other management topics, As a key focus of this work, Ms. Stamer has worked with public and private employers of all sizes, employee benefit plans, insurance and financial services, health industry and a broad range of public and private domestic and international business, community and government organizations and leaders on pandemic and other health and safety, workforce and performance preparedness, risks and change management, disaster preparedness and response and other operational and tactical concerns throughout her adult life. A former lead advisor to the Government of Bolivia on its pension project, Ms. Stamer also has worked internationally as an advisor to business, community and government leaders on crisis preparedness and response, workforce, health care and other reform, as well as regularly advises and defends organizations about the design, administration and defense of their organizations workforce, employee benefit and compensation, safety, discipline and other management practices and actions.

Board Certified in Labor and Employment Law By the Texas Board of Legal Specialization, Scribe for the ABA JCEB Annual Agency Meeting with OCR, Vice Chair of the ABA International Section Life Sciences Committee, and the ABA RPTE Employee Benefits & Other Compensation Group and a former Council Representative, Past Chair of the ABA Managed Care & Insurance Interest Group, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also serves in leadership of a broad range of professional and civic organizations and shares insights and thought leadership through her extensive publications and public speaking. For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here. ©2020 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.

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Posted by Cynthia Marcotte Stamer

DOJ Omnicare/CVS Suit Highlights Potential Pharmacy Benefit Claims Abuse Exposure For Health Plans, Member Safety Risk

December 18, 2019

A civil health care fraud lawsuit filed by the Department of Justice (“DOJ”) in the U.S. District Court for the Southern District of New York today (December 17, 2019) against the nation’s largest long term care pharmacy provider, Omnicare, and its parent, CVS Healthcare Corporation may signal the advisability for insurers, fiduciaries, administrators and sponsors of insured and self-insured health and other benefit plans providing pharmacy benefits to tighten claims and audit past claims payments for prescription drug claims submitted by Omnicare and other CVS pharmacy providers as well as other pharmacy claims to the pharmacy possessed a valid, current prescription to dispense the drug.

Omnicare Complaint Highlights Potential Prescription Drug Fraud By Billing For Filling Expired Prescriptions

In its U.S. ex rel Bassan complaint in intervention (Omnicare and CVS) complaint DOJ joined by 29 states and the District of Colombia filed suit against Omnicare, and its parent company, CVS Healthcare Corporation for damages and civil penalties under the False Claims Act for fraudulently billing federal healthcare programs for hundreds of thousands of non-controlled prescription drugs that DOJ claims Omnicare illegally dispensed to elderly and disabled individuals in assisted living facilities, group homes, independent living communities, and other non-skilled residential long-term care facilities (“LTC facilities”) without a valid, current prescription.. The States of California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas, Vermont, Virginia, Washington, Wisconsin, and the District Of Columbia are joining the DOJ in the complaint as co-plaintiffs.

Omnicare is the country’s largest provider of pharmacy services to LTC facilities. It currently operates approximately 160 pharmacies in 47 states across the United States, which dispense tens of millions of prescription drugs to LTC facilities that serve elderly and disabled individuals. CVS acquired Omnicare in May 2015, and shortly thereafter assumed an active role in overseeing Omnicare’s operations, including pharmacy dispensing practices and systems.

The DOJ complaint in the Federal District Court in Manhattan, New York charges that Omnicare illegally dispensed and billed the federal government and patients for antipsychotics, anticonvulsants, and antidepressants Omnicare dispensed to elderly and disabled residents in LTC facilities without proper prescriptions. According to the DOJ complaint from 2010 until 2018, Omnicare and CVS allowed Omnicare pharmacies to dispense non-controlled prescription drugs to tens of thousands of elderly and disabled individuals living in LTC facilities based on prescriptions that had expired, were out of refills, or were otherwise invalid. Omnicare repeatedly disregarded prescription refill limitations and expiration dates that required doctor visits to reevaluate whether the drug should be renewed. Instead of requesting new prescriptions when old ones expired, Omnicare allowed prescriptions to “roll over.” At Omnicare, “rolling over” a prescription meant that when a prescription expired, Omnicare’s computer systems would assign the old prescription a new number and the pharmacy would continue to dispense the drug indefinitely without the need for a prescription renewal. Depending on the computer system used, DOJ claims Omnicare also sometimes assigned a fake number of authorized refills to a prescription – usually 99 allowable refills for Medicare patients – to allow for continuous refilling. DOJ claims that Omnicare pharmacies “rolled over” prescriptions for elderly and disabled individuals living in more than 3,000 residential long-term care facilities, including assisted living facilities operated by the largest long-term care providers in the country, such as Brookdale Senior Living, Atria Senior Living, Sunrise Senior Living Services, and Five Star Senior Living. DOJ charges that Omnicare used these practices to refill prescriptions for patients after the required prescription for refill expired for months, and sometimes years, after the prescriptions expired. The complaint alleged that Omnicare internally referred to these renumbered expired prescriptions as “rollover” prescriptions.

Many of the prescription drugs dispensed by Omnicare without valid prescriptions treat serious, chronic conditions, such as dementia, depression, and heart disease. They include antipsychotics, anticonvulsants, cardiovascular medications, anti-depressants, and other drugs that can have dangerous side effects and need to be closely monitored by doctors, particularly when taken in combination with other drugs by elderly patients.

DOJ says these Omnicare practices of illegally dispensing drugs to elderly and disabled individuals living in LTC facilities exposed these vulnerable individuals to a significant risk of harm. In contrast to traditional skilled nursing homes, where residents have access to 24-hour medical care supervised by doctors, assisted living and other non-skilled residential facilities offer more limited medical care, or none at all. In particular, these LTC facilities generally do not have doctors on staff to oversee and monitor residents’ drug therapy. By repeatedly dispensing potent drugs without current and valid prescriptions, Omnicare jeopardized the health and safety of tens of thousands of individuals who continued to take the same drugs for months, and sometimes years, without consulting their doctors to determine whether the medications were still clinically appropriate.

A large percentage of the long-term care residents served by Omnicare are beneficiaries of federal healthcare programs. The complaint charges that along with illegally filling the expired prescriptions, Omnicare knowingly transmitted false information to these federal healthcare programs that made it appear that drug dispensations were supported by current, valid prescriptions from physicians when in fact they were not. By dispensing drugs without valid prescriptions, Omnicare presented, or caused to be presented, hundreds of thousands of false claims to Medicare, Medicaid, and TRICARE that were ineligible for payment in violation of the False Claims Act. In fact, the complaint charges that Omnicare managers exerted pressure on overwhelmed pharmacy staff to fill prescriptions quickly so that Omnicare could submit claims and collect payments on these rollover claims.

Moreover, DOJ says that it possesses evidence that senior management at Omnicare and CVS knew of the practices. The DOJ complaint charges among other things that the Omnicare’s Compliance Department succinctly acknowledged the problem in an internal April 2015 email in which one Regional Compliance Officer stated: “An issue that I am running into more and more in multiple states concerns the ability of our systems to allow prescriptions to continue to roll after a year to a new prescription number without any documentation or pharmacist intervention.” A compliance officer then forwarded the email to the head of Omnicare’s Third Party Audit group, who responded that she had a “potential solution (programmed last year) but no one is rolling it out now.”

In today’s announcement of the lawsuit, Manhattan U.S. Attorney Geoffrey S. Berman said: “As alleged, Omnicare put at risk the health of tens of thousands of elderly and disabled individuals living in assisted living and other residential long-term care facilities by dispensing drugs for months, and sometimes years, without obtaining current, valid prescriptions from doctors. A pharmacy’s fundamental obligation is to ensure that drugs are dispensed only under the supervision of treating doctors who monitor patients’ drug therapies. Omnicare blatantly ignored this obligation in favor of pushing drugs out the door as quickly as possible to make more money. This Office will continue to hold accountable those who put at risk people’s health and safety just to turn a profit.”

Meanwhile, HHS-OIG Special Agent in Charge Scott J. Lampert said: “Failing to consult doctors as to whether prescriptions should be refilled places patients’ health and medical care at serious risk. These automatic rollover refills could have significant consequences for vulnerable people in long term-care facilities. We will continue working with law enforcement partners to protect people depending on these taxpayer-funded government health programs.”

Charges Suggest Potential Advisability For Plan Audit of Prescription Drug Charges To Confirm Supported By Valid Prescription For Dispensed Drugs

The charges made in the complaint filed against Omnicare highlight an area of claims payment eligibility not regularly verified by many pharmacy benefit and other health claims administrators when administering pharmacy benefit claims- the existence of a current valid prescription to support the dispensation of the billed prescription medication. Except for pain management and certain other medications flagged by regulators or benefit systems as subject to heightened abuse risks, many plan administrators regularly take for granted existence of a current, valid script for many common, frequently issued and renewed, low cost prescriptions issued within frequency and other guidelines based upon the assumption that legal and ethical obligations of pharmacists and pharmacies under licensing, Drug Enforcement Agency and other rules generally provides adequate deterrence against abuses like those the DOJ accuses Omnicare of engaging in its complaint. However, growing corporate or other nonprofessional ownership or management of pharmacies and their management coupled with very limited, virtually all complaint driven oversight of federal and state regulatory and ethical agencies is diminishing the frequency and effectiveness of such oversight. As evidenced by the Omnicare complaint, scrupulous pharmacies may leverage opportunities allowed by this limited oversight to dispense and bill for commonly renewed prescription medication without proper orders in a manner that potentially places patients at risk at the expense of plans and their participants, beneficiaries, sponsors and insurers. Plans, insurers, fiduciaries, plan sponsors and administrators concerned about these risks may want to use the Omnicare lawsuit announcement as an opportunity to educate plan members and their caregivers about the importance of monitoring prescriptions, their refills and claims for abuse; audit and encourage plan members and their caregivers of members with claims paid with respect to Omnicare and other pharmacy claims’ and take other steps to assess the adequacy and tighten as appropriate their existing pharmacy benefit review procedures for verification of the existence of a current, valid prescription to mitigate these exposures. These exposures are further heightened by the widespread practice of outsourcing of pharmacy claims to prescription benefit management or other speciality pharmacy claims providers in many health plan designs including vendoirsand service providers owned or managed by parents or related companies of the pharmacy filling and billing for the scripts.

Health plan fiduciaries, administrators and sponsors that discover potential deficiencies in the validity of a prescription or other elements of a received or previously paid prescription benefit or other claim are cautioned to review and follow the applicable ERISA and for insured plans, state insurance, Patient Protection and Affordable Care Act (“ACA”) and contractual claims and appeals timelines and processes. Failure to follow these requirements can undermine the enforceability of plan remedies as well as expose the plan, its insurer or fiduciary to administrative penalties and other liabilities. Additionally, violations of the ACA mandated procedures also in the case of employment based plans also could expose the sponsoring employer or ubnion to liability for self reporting, self-assessment and payment of penalties under Internal Revenue Code Section 6039D. Where relevant regulatory or contractual time periods for denial have already expired either because the claim already was paid or the analysis otherwise was not timely completed in time to meet the deadline, plans may need to rely upon filing health care fraud or other avenues of relief in lieu of attempting to retroactively deny and recoup the questioned amounts in order to avoid violating the ACA and other rules. Plan fiduciaries and administrators also may need to consider the applicability of offering review by an independent medical review organization to fulfill ACA or other similar mandatesfor medical judgement based determinations.

More Information

We hope this update is helpful. For more information about this or other labor and employment developments, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452 -8297.

About the Author

Scribe for the ABA JCEB Annual Agency Meeting with OCR, Vice Chair of the ABA International Section Life Sciences Committee, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and the ABA RPTE Employee Benefits & Other Compensation Group, Ms. Stamer’s work throughout her 30 plus year career has focused heavily on working with health care and managed care, health and other employee benefit plan, insurance and financial services and other public and private organizations and their technology, data, and other service providers and advisors domestically and internationally with legal and operational compliance and risk management, performance and workforce management, regulatory and public policy and other legal and operational concerns. As a part of this work, she has continuously and extensively worked with domestic and international hospitals, health care systems, clinics, skilled nursing, long term care, rehabilitation and other health care providers and facilities; medical staff, accreditation, peer review and quality committees and organizations; billing, utilization management, management services organizations, group purchasing organizations; pharmaceutical, pharmacy, and prescription benefit management and organizations; consultants; investors; EMR, claims, payroll and other technology, billing and reimbursement and other services and product vendors; products and solutions consultants and developers; investors; managed care organizations, self-insured health and other employee benefit plans, their sponsors, fiduciaries, administrators and service providers, insurers and other payers, health industry advocacy and other service providers and groups and other health and managed care industry clients as well as federal and state legislative, regulatory, investigatory and enforcement bodies and agencies.

Ms. Stamer is most widely recognized for her decades-long leading edge work, scholarship and thought leadership on health and other privacy and data security and other health industry legal, public policy and operational concerns. This involvement encompasses helping health care systems and organizations, group and individual health care providers, health plans and insurers, health IT, life sciences and other health industry clients prevent, investigate, manage and resolve sexual assault, abuse, harassment and other organizational, provider and employee misconduct and other performance and behavior; manage Section 1557, Civil Rights Act and other discrimination and accommodation, and other regulatory, contractual and other compliance; vendors and suppliers; contracting and other terms of participation, medical billing, reimbursement, claims administration and coordination, Medicare, Medicaid, CHIP, Medicare/Medicaid Advantage, ERISA and other payers and other provider-payer relations, contracting, compliance and enforcement; Form 990 and other nonprofit and tax-exemption; fundraising, investors, joint venture, and other business partners; quality and other performance measurement, management, discipline and reporting; physician and other workforce recruiting, performance management, peer review and other investigations and discipline, wage and hour, payroll, gain-sharing and other pay-for performance and other compensation, training, outsourcing and other human resources and workforce matters; board, medical staff and other governance; strategic planning, process and quality improvement; meaningful use, EMR, HIPAA and other technology, data security and breach and other health IT and data; STARK, ant kickback, insurance, and other fraud prevention, investigation, defense and enforcement; audits, investigations, and enforcement actions; trade secrets and other intellectual property; crisis preparedness and response; internal, government and third-party licensure, credentialing, accreditation, HCQIA and other peer review and quality reporting, audits, investigations, enforcement and defense; patient relations and care; internal controls and regulatory compliance; payer-provider, provider-provider, vendor, patient, governmental and community relations; facilities, practice, products and other sales, mergers, acquisitions and other business and commercial transactions; government procurement and contracting; grants; tax-exemption and not-for-profit; privacy and data security; training; risk and change management; regulatory affairs and public policy; process, product and service improvement, development and innovation, and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns. to establish, administer and defend workforce and staffing, quality, and other compliance, risk management and operational practices, policies and actions; comply with requirements; investigate and respond to Board of Medicine, Health, Nursing, Pharmacy, Chiropractic, and other licensing agencies, Department of Aging & Disability, FDA, Drug Enforcement Agency, OCR Privacy and Civil Rights, Department of Labor, IRS, HHS, DOD, FTC, SEC, CDC and other public health, Department of Justice and state attorneys’ general and other federal and state agencies; JCHO and other accreditation and quality organizations; private litigation and other federal and state health care industry actions: regulatory and public policy advocacy; training and discipline; enforcement; and other strategic and operational concerns.

Author of leading works on HIPAA and a multitude of other health care, health plan and other health industry matters, the American Bar Association (ABA) International Section Life Sciences Committee Vice Chair, a Scribe for the ABA Joint Committee on Employee Benefits (JCEB) Annual OCR Agency Meeting and a former Council Representative, Past Chair of the ABA Managed Care & Insurance Interest Group, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her extensive publications and thought leadership as well as leadership involvement in a broad range of other professional and civic organizations. For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advice or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The author and Solutions Law Press, Inc. disclaim, and have no responsibility to provide any update or otherwise notify anyone any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

©2019 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication, please contact the author directly. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

PBGC Clarifies Multiemployer Plan Merger & Transfer Guidance

July 16, 2019

The Pension Benefit Guarantee Corporation on July 15, 2019 corrected an example in the Preamble to its September 14, 2018,final rule on mergers of multiemployer pension plans which a significantly lowerprobability of insolvancy than originally indicated could support merger .The clarification addresses a second example in the Preamble about how a plan can demonstrate that financial assistance is necessary to mitigate the adverse effects of the merger on the merged plan’s ability to remain solvent. This example in the preamble states that, “while not a threshold, a possible demonstration may be based on stochastic modeling showing that the merged plan’s probability of insolvency within 30 years of the merger exceeds 65% without the requested financial assistance.” (See 83 FR 46642, at 46647 column 3). The new clarification states the percentage in this example should be 35% (not 65%).

The new clarification is one of a multitude of steps the PBGC has taken to adjust its rules and enforcement practices to allow PBGC to work with distressed multiemployer and other pension plans and their sponsors. For additional information about these evolving rules, contact the author or go to PBGC.gov.

About the Author

Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors; domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations; and other private and government organizations and their management leaders.

Throughout her 30 plus year career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; manage labor-management relations, comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline; handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.

Past Chair of the ABA Managed Care & Insurance Interest Group and, a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, heavily involved in health benefit, health care, health, financial and other information technology, data and related process and systems development, policy and operations throughout her career, and scribe of the ABA JCEB annual Office of Civil Rights agency meeting, Ms. Stamer also is widely recognized for her extensive work and leadership on leading edge health care and benefit policy and operational issues. She regularly helps employer and other health benefit plan sponsors and vendors, health industry, insurers, health IT, life sciences and other health and insurance industry clients design, document and enforce plans, practices, policies, systems and solutions; manage regulatory, contractual and other legal and operational compliance; vendors and suppliers; deal with Medicare, Medicaid, CHIP, Medicare/Medicaid Advantage, ERISA, state insurance law and other private payer rules and requirements; contracting; licensing; terms of participation; medical billing, reimbursement, claims administration and coordination, and other provider-payer relations; reporting and disclosure, government investigations and enforcement, privacy and data security; and other compliance and enforcement; Form 990 and other nonprofit and tax-exemption; fundraising, investors, joint venture, and other business partners; quality and other performance measurement, management, discipline and reporting; physician and other workforce recruiting, performance management, peer review and other investigations and discipline, wage and hour, payroll, gain-sharing and other pay-for performance and other compensation, training, outsourcing and other human resources and workforce matters; board, medical staff and other governance; strategic planning, process and quality improvement; HIPAA administrative simplification, meaningful use, EMR, HIPAA and other technology, data security and breach and other health IT and data; STARK, antikickback, insurance, and other fraud prevention, investigation, defense and enforcement; audits, investigations, and enforcement actions; trade secrets and other intellectual property; crisis preparedness and response; internal, government and third-party licensure, credentialing, accreditation, HCQIA, HEDIS and other peer review and quality reporting, audits, investigations, enforcement and defense; patient relations and care; internal controls and regulatory compliance; payer-provider, provider-provider, vendor, patient, governmental and community relations; facilities, practice, products and other sales, mergers, acquisitions and other business and commercial transactions; government procurement and contracting; grants; tax-exemption and not-for-profit; 1557 and other Civil Rights; privacy and data security; training; risk and change management; regulatory affairs and public policy; process, product and service improvement, development and innovation, and other legal and operational compliance and risk management, government and regulatory affairs and operations concerns.

A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.

Author of leading works on a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press, Inc.™

PBGC Simplifies Coverage Determination Process

Government Contractors Must Update NLRB Posters

$3.1M HIPAA Settlements in 1 Month Shows Risk Assessments Critical, But Often Inadequately Done

Health Plans Should Prepare For Plan Fallout Of HHS Rule Requiring Manufacturers Disclose Drug Prices

Congress Moves To Enact Federal Paid Leave Rules

$3 Million OCR Touchstone Settlement Warns Health Plans of Perils of HIPAA Violations

Employer Faces 5 Years Imprisonment For Not Paying Employment & Income Tax Withholding To IRS

Health Plans Must Share PHI To Apps When Members Request, Responsible For Security On Plan-Sponsored Apps

NLRA Not Violated By Employers Termination of Union Dues Withholding In Response To Wisconsin Right To Work Law

Tell Employees, Plan Members About April 27 National Prescription Drug Take Back Day

Proposed FLSA Joint Employer Rule Would Reduce Business’ Joint Employer Wage & Hour Liability

Proposed FLSA Base Pay Rule Clarifies Overtime Treatment Of Perks

Federal Veterans Hiring Benchmark Resets 3/31 To 5.9%; Prepare For Audits & Other Enforcement

Consider Employee Recess In Your Employee Wellness Programi

Use 3/26 Diabetes Alert Day Resources To Jumpstart Your Diabetes Management & Cost Containment Efforts

Plan Ahead to Celebrate National Apprenticeship Week 11/12-18

CMS Hosts 11/6 Health Plan EDGE Server Webinar for Insurers & TPAs

Businesses Urged To Comment Positively On Proposed NLRB Joint Employment Rule By 12/13/18

Maintaining Current Enterprise Wide Security Risk Assessment Critical To Managing HIPAA Security Rule & Other Breach Risks

Record $16M Anthem HIPAA Settlement Signals Need to Tighten Your Health Plan HIPAA Compliance & Risk Management

Senate Confirms Charles Rettig As Next IRS Commissioner

House W&M Committee To Markup Retirement and Other “Tax Reform 2.0” Bills Thursday

Markup Tomorrow On Retirement & Other Republican‘s TCJA Tax Reform 2.0 Bills

Free Poster for Upcoming October National Disability Employment Awareness Month 2018 Available

Employer’s Employment Tax Fraud Indictment Warns Employers To Properly Pay Withheld Employment Taxes

Flurry of Reform Activity Sign Employers, Health Plans Should Prepare To Respond To Last Minute Health Reforms This Fall

Relationships Matter

OFCCP Extends TRICARE Affirmative Action Moratorium

Trump Blue Print To Reduce Drug Costs Announced

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating your profile here. We also invite you to join the discussion of these and other human resources, health and other employee benefit and patient empowerment concerns by participating and contributing to the discussions in our Health Plan Compliance Group or COPE: Coalition On Patient Empowerment Groupon LinkedIn or Project COPE: Coalition on Patient Empowerment Facebook Page.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as legal advise or an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

Comments Off on PBGC Clarifies Multiemployer Plan Merger & Transfer Guidance | Uncategorized | Tagged: ERISA, mergers, PBGC, retirement plans; multiemployer plan | Permalink
Posted by Cynthia Marcotte Stamer

Confirm Your Benefit Plans Ready For New Disability Determination Rules on 1/1/18

December 14, 2017

Employer and other sponsors, fiduciaries, administrators and insurers of the Employee Retirement Income Security Act (ERISA)-covered employee benefit plans making disability-based benefit determinations should confirm that their plan documents, summary plan descriptions, procedures and claims and appeals notices are updated and ready to meet tightened new federal rules on disability-based benefit determinations applicable to all post December 31, 2017 claims under the restated Final Rule on Claims Procedure for Plans Providing Disability Benefits (“Disability Claims Rule”). Given the nature and scope of these new requirements, most covered plans will require specific action be taken before the new rules take effect to update plan documents, summary plan descriptions, notices, contracts, processes and procedures to meet the January 1, 2018 deadline.

The Disability Claims Rule published by the Department of Labor Employee Benefit Security Administration (“EBSA”) on December 19, 2016 generally require all ERISA-covered employee benefit plans making any disability benefit or other determination conditioned upon a finding of disability to comply with the new Disability Claims Rule for any claim received after December 31, 2017.

The new Final Disability Claims Rule will apply to all disability determinations made under any ERISA-covered plan after December 31, 2017, regardless of how the plan characterizes the benefit or whether the plan is a health or other welfare, pension, 401(k) plan or other savings plan.

Significant affirmative action is likely required to prepare covered plans to meet these requirements since most plans historically have not followed the detailed claims and appeals notification, independent and impartial decision-making, rescission, deemed exhaustion, “culturally and linguistically appropriate” and other procedural protections and safeguards based on EBSA’s previously adopted Patient Protection and Affordable Care Act (“ACA”) group health plan claims and appeals rules, which the Disability Claims Rules extend and make applicable to all ERISA-covered plans making benefit determinations based on disability. Covered plans making disability-based benefit or other covered determinations are likely to require updates to plan documents, insurance or administrative services contracts, summary plan descriptions and other plan communications, claims and appeals notices, and other related processes, procedures and documentation to meet these new requirements. Since certain requirements of the Disability Claims Rules like the summary plan description advance disclosure requirements are required to be provided before the claim is received, plans and their sponsors risk being accused of violating these requirements by waiting to update plans, their processes and materials until after claim involving a disability based determination arises.

Ensuring that impacted plans are updated before the January 1, 2018 deadline is important because the Disability Claims Rule, like the group health plan claims and appeals rules upon which it is based, also states that noncompliance with any of its requirements empowers a participant to immediately sue the plan for enforcement if his rights without further complying the the plan’s administrative procedures. Moreover, failing to comply with summary plan disclosure or claims or appeal adverse benefit determination notification requirements also may subject the plan administrator to administrative penalties under ERISA section 514(c). Consequently, employers and other plan sponsors, fiduciaries, administrators and insurers will want to act quickly to ensure that their plans, their summary plan descriptions and other communications, notices, processes, contracts and procedures are updated appropriately before January 1, 2018.

About The Author

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. Her day-to-day work encompasses both labor and employment issues, as well as independent contractor, outsourcing, employee leasing, management services and other nontraditional service relationships. She supports her clients both on a real-time, “on demand” basis and with longer term basis to deal with all aspects for workforce and human resources management, including, recruitment, hiring, firing, compensation and benefits, promotion, discipline, compliance, trade secret and confidentiality, noncompetition, privacy and data security, safety, daily performance and operations management, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant, business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediatepast RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, BenefitsMagazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

About Solutions Law Press, Inc.™

If you or someone else you know would like to receive future updates about developments on these and other concerns, please provide your current contact information and preferences including your preferred e-mail by creating or updating your profile here.

NOTICE: These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as an admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

©2017 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication, please contact the author directly. All other rights reserved.

Comments Off on Confirm Your Benefit Plans Ready For New Disability Determination Rules on 1/1/18 | 401(k), ACA, ADA, Affordable Care Act, Appeals, board of directors, Brokers, Cafeteria Plans, Claims, Claims Administration, compensation, compliance, Construction, Corporate Compliance, defined benefit plan, Defined Benefit Plans, defined contribution plan, Defined Contribution Plans, directors, Disability, Disability, Disability Plans, Drug & Alcohol, EBSA, employee, Employee Benefits, Employee Handbook, Employer, Employers, Employment, Employment Policies, ERISA, Executive Compensation, family leave, Fiduciary Responsibility, health benefit, Health Benefits, health insurance, Leave, Management, medical leave, Mental Health, Mental Health Parity, Obamacare, Patient Protection & Affordable Care Act, Pay, pension plan, Plan Admistrator, Professional Liability, third party administrators, Uncategorized, Union, Worker | Tagged: Appeals, Claims, defined benefit plan, Disability, Disability Insurance, Disability Plan, EBSA, Employee Retirement Income Security act, ERISA, Fiduciary Responsibility, pension plan | Permalink
Posted by Cynthia Marcotte Stamer

Read Trump Health Care Executive Order

October 12, 2017

President Trump today (October 12, 2017) issued the following that he promised to be the first in a series of executive orders and other administrative actions that his administration will roll out to provide Obamacare relief for consumers, employers and others by promoting healthcare choice and competition given the continued difficulty by the Republican-led Congress to pass legislation repealing or replacing the health care law.

What actually will result remains to be seen. Like the January 20, 2017 Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal that President Trump signed as his first executive order, the new Executive Order doesn’t actually change anything; it merely directs the agencies to review and propose for implementation changes to regulations and other guidance allowed by law.

On the heels of his announcement of the Executive Order, President Trump moved forward on his promise to take other action on Obamacare by announcing that the Administration will not continue funding for individual subsidies that currently are continued under an Obama Administration action in the absence of Congressional action funding those subsidies.

Concerned parties should monitor and inform themselves about proposed changes in the Executive Order and other actions as they are proposed and develop, and provide timely comments and other input to help influence the shape and content of any changes proposed or adopted in response to the Executive Order. Solutions Law Press, Inc. will be monitoring developments. Stay tuned for updates.

Language of Executive Order

By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:

Section 1. Policy.

(a) It shall be the policy of the executive branch, to the extent consistent with law, to facilitate the purchase of insurance across State lines and the development and operation of a healthcare system that provides high-quality care at affordable prices for the American people. The Patient Protection and Affordable Care Act (PPACA), however, has severely limited the choice of healthcare options available to many Americans and has produced large premium increases in many State individual markets for health insurance. The average exchange premium in the 39 States that are using http://www.healthcare.gov in 2017 is more than double the average overall individual market premium recorded in 2013. The PPACA has also largely failed to provide meaningful choice or competition between insurers, resulting in one-third of America’s counties having only one insurer offering coverage on their applicable government-run exchange in 2017.

(b) Among the myriad areas where current regulations limit choice and competition, my Administration will prioritize three areas for improvement in the near term: association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements (HRAs).

(i) Large employers often are able to obtain better terms on health insurance for their employees than small employers because of their larger pools of insurable individuals across which they can spread risk and administrative costs. Expanding access to AHPs can help small businesses overcome this competitive disadvantage by allowing them to group together to self-insure or purchase large group health insurance. Expanding access to AHPs will also allow more small businesses to avoid many of the PPACA’s costly requirements. Expanding access to AHPs would provide more affordable health insurance options to many Americans, including hourly wage earners, farmers, and the employees of small businesses and entrepreneurs that fuel economic growth.

(ii) STLDI is exempt from the onerous and expensive insurance mandates and regulations included in title I of the PPACA. This can make it an appealing and affordable alternative to government-run exchanges for many people without coverage available to them through their workplaces. The previous administration took steps to restrict access to this market by reducing the allowable coverage period from less than 12 months to less than 3 months and by preventing any extensions selected by the policyholder beyond 3 months of total coverage.

(iii) HRAs are tax-advantaged, account-based arrangements that employers can establish for employees to give employees more flexibility and choices regarding their healthcare. Expanding the flexibility and use of HRAs would provide many Americans, including employees who work at small businesses, with more options for financing their healthcare.

(c) My Administration will also continue to focus on promoting competition in healthcare markets and limiting excessive consolidation throughout the healthcare system. To the extent consistent with law, government rules and guidelines affecting the United States healthcare system should:

(i) expand the availability of and access to alternatives to expensive, mandate-laden PPACA insurance, including AHPs, STLDI, and HRAs;

(ii) re-inject competition into healthcare markets by lowering barriers to entry, limiting excessive consolidation, and preventing abuses of market power; and

(iii) improve access to and the quality of information that Americans need to make informed healthcare decisions, including data about healthcare prices and outcomes, while minimizing reporting burdens on affected plans, providers, or payers.

Sec. 2. Expanded Access to Association Health Plans.

Within 60 days of the date of this order, the Secretary of Labor shall consider proposing regulations or revising guidance, consistent with law, to expand access to health coverage by allowing more employers to form AHPs. To the extent permitted by law and supported by sound policy, the Secretary should consider expanding the conditions that satisfy the commonality‑of-interest requirements under current Department of Labor advisory opinions interpreting the definition of an “employer” under section 3(5) of the Employee Retirement Income Security Act of 1974. The Secretary of Labor should also consider ways to promote AHP formation on the basis of common geography or industry.

Sec. 3. Expanded Availability of Short-Term, Limited‑Duration Insurance.

Within 60 days of the date of this order, the Secretaries of the Treasury, Labor, and Health and Human Services shall consider proposing regulations or revising guidance, consistent with law, to expand the availability of STLDI. To the extent permitted by law and supported by sound policy, the Secretaries should consider allowing such insurance to cover longer periods and be renewed by the consumer.

Sec. 4. Expanded Availability and Permitted Use of Health Reimbursement Arrangements.

Within 120 days of the date of this order, the Secretaries of the Treasury, Labor, and Health and Human Services shall consider proposing regulations or revising guidance, to the extent permitted by law and supported by sound policy, to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup coverage.

Sec. 5. Public Comment.

The Secretaries shall consider and evaluate public comments on any regulations proposed under sections 2 through 4 of this order.

Within 180 days of the date of this order, and every 2 years thereafter, the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor and the Federal Trade Commission, shall provide a report to the President that:

(a) details the extent to which existing State and Federal laws, regulations, guidance, requirements, and policies fail to conform to the policies set forth in section 1 of this order; and

(b) identifies actions that States or the Federal Government could take in furtherance of the policies set forth in section 1 of this order.

Sec. 7. General Provisions.

(a) Nothing in this order shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

DONALD J. TRUMP

THE WHITE HOUSE,

October 12, 2017

Implications & Actions

The impact of this and other Executive Orders and other Presidential actions depend upon what actions, if any, the agencies determine they are allowed by law to take and how those changes are implemented. Concerned persons and organizations should begin preparing input to the agencies and monitoring and commenting on proposals and other guidance to help shape the outcome.

Solutions Law Press, Inc. is preparing initial analysis of this Executive Order and will be closely monitoring and updating this analysis. Follow up to learn more and stay abreast of new developments.

About The Author

Well-known for her extensive work with health, insurance, financial services, technology, energy, manufacturing, retail, hospitality, governmental and other highly regulated employers, her nearly 30 years’ of experience encompasses domestic and international businesses of all types and sizes. Author of numerous works on privacy and data security, Ms. Stamer‘s experience includes involvement in cyber security and other data privacy and security matters for more than 20 years.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant, business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

About Solutions Law Press, Inc.™

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Posted by Cynthia Marcotte Stamer

Dealing With HR, Benefits & Other Headaches From Equifax and Other Data Breach

October 6, 2017

As businesses continue to struggle to comply with the growing plethora of federal and state laws mandating data security, the identity theft and cyber security epidemic keeps growing.

As human resources and other business leaders work to guard their own data and respond to employee demands for assistance in responding to breaches of their personal financial and other data, this weeks’ announcement that embattled credit monitoring giant Equifax has been awarded the exclusive contract to provide taxpayer identification and fraud prevention services to the Internal Revenue Service has many questioning whether these investments are futile.

The IRS’ announcement comes despite the September 7, 2017 announcement by Equifax of a data breach of its records impacting sensitive personal information of millions of consumers including:

The names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers of an estimated 143 million U.S. consumers;
Credit card numbers for approximately 209,000 U.S. consumers,
Certain dispute documents with personal identifying information for approximately 182,000 U.S. consumers,and
Personal information for certain U.K. and Canadian consumers.

The huge breach already was creating many headaches for many businesses and their human resources departments before the IRS announced the award of the contract to Equifax. Due to the massive size of the breach, mist companies have been required to respond to concerns of workers impacted directly by the breach as well as requests of employees and identity theft protection companies that the business consider offering cybersecurity protection for employees or customers.

Beyond helping their workforce understand and cope with the news, many businesses and employee benefit plans also face the added headache of needing to investigate and respond to concerns about their own potential responsibilities to provide breach notification or take other actions. This added headache arises due to their or their plans’ use of Equifax or vendors utilizing Equifax to run employee or vendor background checks or carry out internal employee or employee benefit plan, customer or other business activities. These involvements often give rise to duties to conduct investigations and potentially provide notification or other responses to employees, applicants, benefit plan members, contractors or customers whose data may have been impacted under the Fair and Accurate Credit Transactions Act (FACTA), the Health Insurance Portability and Accountability Act (HIPAA), the Employee Retirement Income Security Act (ERISA) Fiduciary Responsibility rules or various other federal and state laws and regulations, vendor contracts or their own data privacy or security policies.

When notification is recommended or required, human resources and other business leaders also have to consider if modifications should be considered to standard protocols recommended to data breach victims. Notification and registration as an identity theft victim with Equifax long has been a standard part of the federal and state government recommended protocol for recommended to consumers impacted by identity theft or other data breaches. See,e.g., IRS Taxpayer Guide To Identity Theft. Although government agencies as of yet have not changed this recommendation to remove Equifax reporting, many consumers and others view reporting to Equifax as akin to the fox watching the hen house. Consequently, employers and other parties helping consumers respond to the breach often receive push back or questions from consumers about the appropriateness and security reporting to Equifax in light of its breach.

Beyond evaluating and handling their own legal responsibilities to investigate and deal with any breach impacting their data, employers and other business leaders also likely are or should consider what claims against Equifax, other vendors and business partners involved with Equifax and their own liability insurers are available and warranted to help cover the costs and potential liabilities for the business arising from the breach and it’s fall out.

As employers and other businesses work through these issues, They should keep in mind that the fallout is likely to continue for years and be further complicated by past and subsequent breaches impacting other governmental and private organizations. Human resources, employee benefits and other businesses and their leaders can expect to experience challenges dealing with fraudulent uses of misappropriated information as well as demands that they tighten up their background check, data security and usage and other practices and documentation to mitigate risks from the compromised data.

Human resources, employee benefits and other business leaders need to secure the assistance of counsel experienced in guiding their organizations through these and other challenges.

About The Author

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other concerns by her service as a management consultant, business coach and consultant and policy strategist as well through her leadership participation in professional and civic organizations such her involvement as the Vice Chair of the North Texas Healthcare Compliance Association; Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Gulf Coast TEGE Council Exempt Organization Coordinator; a founding Board Member and past President of the Alliance for Healthcare Excellence; former board member and Vice President of the Managed Care Association; past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; a member and policy adviser to the National Physicians’ Council for Healthcare Policy; current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee; current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section; Past Chair of the ABA Health Law Section Managed Care & Insurance Section; ABA Real Property Probate and Trust (RPTE) Section former Employee Benefits Group Chair, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative, and Defined Contribution Committee Co-Chair, past Welfare Benefit Committee Chair and current Employee Benefits Group Fiduciary Responsibility Committee Co-Chair, Substantive and Group Committee member, Membership Committee member and RPTE Representative to the ABA Health Law Coordinating Council; past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former member of the Board of Directors, Treasurer, Member and Continuing Education Chair of the Southwest Benefits Association and others.

Ms. Stamer also is a widely published author, highly popular lecturer, and serial symposia chair, who publishes and speaks extensively on human resources, labor and employment, employee benefits, compensation, occupational safety and health, and other leadership, performance, regulatory and operational risk management, public policy and community service concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clients on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications.

Want to know more? See here for details about the author of this update, attorney Cynthia Marcotte Stamer, e-mail her here or telephone Ms. Stamer at (469) 767-8872.

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Posted by Cynthia Marcotte Stamer

Health Plans, Other Covered Entities Have Continuing Duty To Reevaluate HIPAA Enterprise Risk To PHI & Address Security Risks & Other Compliance Concern On Ongoing Basis

October 27, 2016

Compliance with the Privacy and Security Rules of the Health Insurance Portability & Accountability Act (HIPAA) is a living process that requires employer and other health plans, health insurers, health care providers and healthcare clearinghouses to recurrently reevaluate their HIPAA enterprise risk and timely act to mitigate security threats to electronic (ePHI) and other protected health information and other HIPAA compliance concerns on an ongoing basis. That’s the clear take away applicable to all HIPAA-Covered Entities and business associates from the St. Joseph Health Resolution Agreement and Corrective Action Plan (SJH Settlement) and the Oregon Health & Science University Resolution Agreement and Corrective Action Plan (OHSU Settlement) announced by the Department of Health & Human Services Office of Civil Rights (OCR) in the past 30 days. Health plans, their sponsors, fiduciaries and vendors, health care providers and health care clearinghouses should carefully heed this message and in response take documented steps to ensure

Their existing policies, practices and procedures properly are updated in response to changing guidance and events;
They in place the current, comprehensive enterprise risk assessment along with a mitigation plan documenting actions taken to address these risks;
Ensure that the organization has and is administering appropriate, documented processes and procedures to ensure that the organization reassesses its enterprise risk assessment and compliance on a timely basis as warranted by changes or other events that could impact ePHI, regulatory developments or other events that might impact its compliance; and
Have an appropriate, documented process for oversight by C-level management.

OHSU Charges & Settlement

The OHSU Settlement Agreement announced by OCR on September 23, 2016 requires OHSU to pay a $2.7 million settlement payment and adopt and implement a comprehensive three-year corrective action plan to address “widespread and diverse” HIPAA compliance problems OCR reports uncovering while investigating multiple HIPAA breach reports the large public academic health center and research university centered in Portland, Oregon.

OCR began investigating OHSU after the large public academic health center and research university centered in Portland, Oregon, submitted three HIPAA breach reports affecting thousands of individuals, including two reports involving unencrypted laptops and another large breach involving a stolen unencrypted thumb drive:

On March 23, 2013, HHS received notification from OHSU regarding a breach of its unsecured electronic protected health information (“ePHI”) resulting from a stolen laptop computer;
On July 28, 2013, HHS received notification from OHSU regarding a breach of its ePHI resulting from storing ePHI at an internet-based service provider without a business associate agreement; and.

These incidents each garnered significant local and national press coverage. OCR’s investigation uncovered evidence of widespread vulnerabilities within OHSU’s HIPAA compliance program, including the storage of the ePHI of more than 3,000 individuals on a cloud-based server without a business associate agreement. OCR found significant risk of harm to 1,361 of these individuals due to the sensitive nature of their diagnoses.

OCR’s investigation showed the reported breaches resulted from widespread, long-term, systematic and unresolved HIPAA violations by OHSU that OCR attributed to an inadequate commitment to and oversight of HIPAA compliance by OHSU C-level management which resulted in the failure by OHSU to appropriately monitor the adequacy of its ongoing compliance and to assess and address changes in its enterprise-wide risk and compliance obligations on an ongoing basis. OHSU performed risk analyses in 2003, 2005, 2006, 2008, 2010, and 2013, but OCR’s investigation found that these analyses did not cover all ePHI in OHSU’s enterprise, as required by the Security Rule. While the analyses identified vulnerabilities and risks to ePHI located in many areas of the organization, OHSU did not act in a timely manner to implement measures to address these documented risks and vulnerabilities to a reasonable and appropriate level. OHSU also lacked policies and procedures to prevent, detect, contain, and correct security violations and failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for ePHI maintained on its workstations, despite having identified this lack of encryption as a risk.

OCR concluded that the reported breaches were the result of long-standing, systematic deficiences in OHSU’s processes and procedures for HIPAA compliance, including the following:

While OHSU reportedly performed risk analyses in 2003, 2005, 2006, 2008, 2010, and 2013, OCR says its investigation found that these analyses did not cover all ePHI in OHSU’s enterprise, as required by the Security Rule;
While the analyses identified vulnerabilities and risks to ePHI located in many areas of the organization, OHSU did not act in a timely manner to implement measures to address these documented risks and vulnerabilities to a reasonable and appropriate level;
OHSU also lacked policies and procedures to prevent, detect, contain, and correct security violations and failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for ePHI maintained on its workstations, despite having identified this lack of encryption as a risk;
OHSU failed to comply with its duty under HIPAA to enter into a business associate agreement with a vendor before allowing a vendor business associate to store ePHI; and
The absence of meaningful C-suite leadership oversight and commitment to HIPAA compliance.

Based on these investigations, OCR concluded that while OHSU initially adopted HIPAA Policies, the reported breaches were the result of a series of widespread and ongoing breaches of HIPAA resulted including the following:

From January 5, 2011, until July 3, 2013, OHSU disclosed the ePHI of 3,044 individuals in violation of Privacy Rules §§160.103 and 164.502(a) when workforce members disclosed the ePHI to a third party internet-based service provider without obtaining a business associate agreement or other satisfactory assurance that the internet-based service provider would safeguard the ePHI;
From January 5, 2011 until July 3, 2013 OHSU failed to obtain a business associate agreement from an internet-based service provider that was storing ePHI on its behalf as a business associate as required by 45 C.F.R. § 164.308(b);
From January 5, 2011 until July 3, 2013 OHSU failed to implement policies and procedures to prevent, detect, contain, and correct security violations as required under Privacy Rule § 164.308(a)(1)(i);
From July 12, 2010 to present, OHSU failed to implement a mechanism to encrypt and decrypt ePHI or an equivalent alternative measure for all ePHI maintained in OHSU’s enterprise as required by Privacy Rules §§ 164.312(a)(2)(iv) and 164.306(d)(3)); and
From May 29, 2013 until July 3, 2013, OHSU failed to implement policies and procedures to address security incidents in violation of Privacy Rule § 164.308(a)(6)(i).

According to statements made by OCR Director Jocelyn Samuels in OCR’s announcement of the OHSU Settlement, the breaches should not have happened. “From well-publicized large scale breaches and findings in their own risk analyses, OHSU had every opportunity to address security management processes that were insufficient,” said OCR Director Jocelyn Samuels. OCR’s announcement also signals that OCR views inadequate commitment and oversight by OHSU’s senior management to have played a key role in the creation and perpetuation of the OHSU violations. It quotes OCR Director Jocelyn Samuels as stating, “This settlement underscores the importance of leadership engagement and why it is so critical for the C-suite to take HIPAA compliance seriously.”

OCR’s announcement of the OHSU Settlement emphasizes its determination that a lack of commitment and oversight by C-level management resulted in the failure by OHSU to periodically perform a comprehensive enterprise risk analysis and to reevaluate and update that analysis and its policies, practices, procedures and training as warranted by changing events and guidance.

To resolve the HIPAA charges, the OHSU Settlement requires OHSU to pay OCR $2,700,000 as well as take a long series of corrective actions detailed in the Corrective Action Plan incorporated into the Settlement Agreement. The requirements of the Corrective Action Plan both seek to address the specific weaknesses that lead to the breaches of unsecured ePHI reported by OHSU in its breach notifications as well as the broader deficiencies in OHSU’s overall HIPAA compliance practice by requiring among other things that OHSU:

Conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI at all OHSU facilities and on all systems, networks, and devices that create, receive, maintain, or transmit ePHI;.
Develop and present to OCR for approval a comprehensive written risk management plan that explains OHSU’s strategy for implementing security measures sufficient to reduce the risks and vulnerabilities identified in the risk analysis to a reasonable and appropriate level based on OHSU’s circumstances as well as a comprehensive, enterprise-wide plan to implement effective oversight of OHSU workforce members to ensure their adherence to HIPAA Rules and OHSU’s internal privacy and security policies and procedures with specific timelines for their expected completion and compensating controls identified in the interim to safeguard OHSU’s ePHI;
Implement and administer the written risk management plan and other safeguards as approved by OCR;
Provide updates to OCR about OHSU’s implementation of required encryption including a Mobile Device Management (MDM) solution that ensures all OHSU- owned and personally-owned mobile devices (tablets, smart phones, and other mobile devices) that access ePHI on OHSU’s secure network are encrypted other than mobile devices for which OHSU has granted exceptions based on documented evidence of the implementation of alternative reasonable compensating controls to protect the ePHI on such devices;
Report to OCR on OHSU’s efforts to a solution to enforce encryption of ePHI on OHSU-owned and personally- owned devices (laptops, desktops, and medical equipment) connecting to OHSU’s secure wired and wireless networks except for any devices for which OHSU has granted exceptions to the encryption requirement;
Report to OCR about its implementation of policies that prohibit the transfer of data containing ePHI from OHSU-owned and personally-owned devices to unencrypted removable storage devices (USB drives and portable hard drives) and implementation of a technical solution that enforces the policies prohibiting transfers of this type when attached to the OHSU secure network, except for any removable storage devices for which OHSU has granted exceptions based on documented evidence of reasonable compensating controls that have been implemented to protect the ePHI on such devices;
Send a communication to all members of the OHSU community describing its commitment to enterprise encryption;
Prepare to the satisfaction of OCR security awareness training materials needed to implement its security management processing including specific privacy and security awareness related to a) use of internet-based information storage services; b) disclosures to third party entities that require a business associate agreement or other reasonable assurance in place to ensure that the business associate will safeguard the protected health information (PHI) and/or ePHI; c) regarding managers, effective oversight of workforce members’ uses and disclosures of PHI, including ePHI, to ensure the workforce members’ compliance with the Privacy and Security Rules and OHSU’s internal policies and procedures; d) security incident reporting; and e) password management;
Initially train all workforce members with access to PHI and/or ePHI with 120 days of OCR’s approval of the training and thereafter ensure that new workforce members are trained with 15 days of hire and that all workforce members subsequently continue to receive training on an on-going basis;
Review the security awareness training materials annually, and, where appropriate, update the training to reflect changes in Federal law or HHS guidance, any issues discovered during audits or reviews, and any other relevant developments;
Management oversight and supervision of the implementation and administration of the corrective actions required by the Corrective Action Plan and HIPAA compliance; and

Management reporting to OCR on its actions and compliance with the Corrective Action Plan.

SJH Settlement

Similarly, the SJH Settlement OCR announced on October 18, 2016 with St. Joseph Health (SJH) requires SJH to pay a $2.4 million plus settlement payment, conduct an enterprise-wide risk analysis and implement and administer a comprehensive correction plan to settle OCR charges that SJH violated HIPAA by allowing files containing ePHI of 31,800 individuals that SJH created for its participation in the Medicare meaningful use program to be publicly accessible on the internet from February 1, 2011, until February 13, 2012.

A nonprofit integrated Catholic health care delivery system sponsored by the St. Joseph Health Ministry, who through its 24,000 employees and 6,000 physicians provides a range of health care services to more than 137,000 inpatients and 3.6 million outpatients each year at SHS’ 4 acute care hospitals, home health agencies, hospice care, outpatient services, skilled nursing facilities, community clinics and physician organizations located throughout California and in parts of Texas and New Mexico.

OCR’s charges against SJH arose out of OCR’s investigation into a 2012 breach notification report SJS filed with OCR. On February 14, 2012, SJH reported to OCR that files containing electronic protected health information (ePHI) of 31,800 individuals from five of the SJH hospitals-St. Jude Medical Center, Mission Hospital, Queen of the Valley Medical Center, Santa Rosa Memorial Hospital, and Petaluma Valley Hospital that SJH created for its participation in the meaningful use program were publicly accessible on the internet from February 1, 2011, until February 13, 2012, via Google and possibly other internet search engines.

SJH’s report to OCR indicated that this public access resulted from a configuration within its network server in which PDF files containing following patient information were uploaded: patient names; BMI; blood pressure; lab results; smoking status; diagnoses lists; medication allergies; advance directive status and demographic information (language, ethnicity, race, sex, and birth date). The server SJH purchased to store the files included a file sharing application whose default settings allowed anyone with an internet connection to access them. Upon implementation of this server and the file sharing application, SJH did not examine or modify it. As a result, the public had unrestricted access to PDF files containing the ePHI of 31,800 individuals, including patient names, health statuses, diagnoses, and demographic information from February 14, 2012 until SJH blocked external access to the ePHI when it shut down the application February 13, 2012.

OCR’s investigation indicated the following potential violations of the HIPAA Rules:

From February 1, 2011 to February 13, 2012, SJH potentially disclosed the PHI of 31,800 individuals;
Evidence indicated that SJH failed to conduct an evaluation in response to the environmental and operational changes presented by implementation of a new server for its meaningful use project, thereby compromising the security of ePHI;
Although SJH hired a number of contractors to assess the risks and vulnerabilities to the confidentiality, integrity and availability of ePHI held by SJH, evidence indicated that this was conducted in a patchwork fashion and did not result in an enterprise-wide risk analysis, as required by the HIPAA Security Rule.

To resolve charges resulting from these findings, the SJH Resolution Agreement requires SJH to pay OCR a $2,140,500 settlement payment and adopt a comprehensive corrective action plan which among other things, requires SJH to conduct an enterprise-wide risk analysis, develop and implement a risk management plan, revise its policies and procedures, and train its staff on these policies and procedures. SJH’s Chief Executive Officer, Annette M. Walker, is named in the Corrective Action Plan as the SJH authorized representative and contact person responsible for overseeing the CAP implementation.

Among other things, the Corrective Action Plan specifically requires that SJH:

Within 240 days, conduct an enterprise-wide analysis and provide a report to OCR which includes a complete inventory of all electronic equipment, data systems, and applications that contain or store ePHI, and prepare and deliver to OCR for review an enterprise-wide risk analysis that identifies all security risks and vulnerabilities that incorporates all electronic equipment, data systems, and applications controlled, administered, or owned by SJH, its workforce members, and affiliated staff that contains, stores, transmits, or receives electronic protected health information (ePHJ);
Revise this risk analysis plan as directed by OCR based on its review of the presented risk analysis;
Develop and implement to the satisfaction of OCR an organization-wide risk management plan to address and mitigate any security risks and vulnerabilities identified in the risk analysis;
Distribute the risk management plan as finally approved by OCR to to workforce members involved with implementation of the plan within 30 days of OCR approval;
Revise to OCR’s satisfaction, adopt and implement within 30 days of OCR’s approval compliant HIPAA policies and procedures;
Prepare for review of OCR training materials and once approved by OCR, provide initial training to required workforce members, and obtain certification of completion of that training from each required workforce member within 60 days of OCR’s approval of the training and thereafter at least annually as long as the Corrective Action Plan remains in force;
Promptly conduct a documented investigation of any information indicating a potential workforce member violation of the new HIPAA policies in the manner required by OCR and if the investigation confirms a violation (Reportable Event), notify OCR of the relevant facts, findings, corrective actions and sanctions imposed against the violating workforce member in the manner required by the Corrective Action Plan;
Submit annual report to OCR signed and attested to by an SJH officer, which contains the information and attestations of compliance with the requirements of the Corrective Action Plan in accordance with the Corrective Action Plan;
Retain for inspection and copying and provide to OCR upon request all documents and records relating to compliance with this Corrective Action Plan for six (6) years from the Effective Date of the SJH Settlement Agreement.

Take Away For Other Covered Entities & Business Associates

The OHSU and SJH Settlement Agreements send a clear message to all Covered Entities and business associates that they must be prepared to demonstrate not only that their initial adoption and implementation of required HIPAA Privacy and Security policies and safeguards, but also that their organization’s leadership needs to be prepared to demonstrate their commitment to HIPAA compliance by making adequate provision for HIPAA compliance, and appropriately monitoring developments that could impact the adequacy of their existing measures and timely update their systems and security, policies, procedures, training and other relevant safeguards.

The Settlements make clear that Covered Entities and their business associates should ensure that their organization possesses a well-documented current enterprise-wide risk assessment, as well as has in place and is administering as necessary to maintain the currency and adequacy of its risk assessment strong practices for conducting documented evaluations of their own HIPAA security, policies, practices, audits and investigations and other procedures necessary to comply with HIPAA, taking into account recent OCR guidance, its initiation of its Phase II audit program, the insights offered by OCR’s ever growing list of enforcement actions and compliance tools, as well as changes in systems, documentation, software, equipment or other occurrences within the operations of the Covered Entity or business associate’s operations that could impact the currency and adequacy of its risk assessment or otherwise raise compliance risks.

In this respect, Covered Entities and business associates are encouraged to take special note of the advisability of specifically reviewing and updating their HIPAA policies, practices, business associate agreements, training, oversight and documentation to in response to the guidance and insight that OCR provides, including:

A series of recent OCR Resolution Agreements emphasizing the need for Covered Entities and their Business Associates to verify that have in place, and review and update as necessary business associate agreements e.g. HIPAA Settlement Illustrates The Importance Of Reviewing And Updating, As Necessary, Business Associate Agreements (September 23, 2016); Business Associate’s Failure to Safeguard Nursing Home Residents’ PHI Leads to $650,000 HIPAA Settlement (June 29, 2016);
Clarification of Permissible Fees for HIPAA Right of Access – Flat Rate Option Up to $6.50 is Not a Cap on All Fees for Copies of PHI (May 23, 2016)
Guidance On HIPAA & Cloud Computing released October 6, 2016, which provides guidance for Covered Entities and business associates about contracting and other procedures that HIPAA-regulated Covered Entities and their business associates should implement when contracting for and using Cloud Computing Services;
Joint Guidance published October 21, 2016 by the Federal Trade Commission and OCR reminding Covered Entities and their business associates of the need to ensure that in addition to fulfilling the technical content requirements of HIPAA, their HIPAA authorizations, privacy practices notices and other HIPAA notices and communications are written and presented in plan language, include required specific terms and descriptions and in a manner that does not mislead individuals about their rights or about what is happening with their PHI. Furthermore, where Covered Entities and their business associates contemplate that businesses associates may request that individuals sign HIPAA authorizations, Covered Entities and their business associates should the Covered Entity and business associate have in place a current, signed HIPAA-compliant business associate agreement that that expressly authorizes the business associate to request the HIPAA authorization in light of statements in the Joint Guidance indicating that OCR views the Privacy Rules as prohibiting a business associate from asking a consumer to sign a HIPAA authorization unless its business associate contract expressly permits the business associate to do so; and
Other OCR enforcement actions, tools and guidance. See, e.g. All Covered Entities Should Learn Lessons From Mississippi Medical Center’s $2.75 Million HIPAA Resolution Agreement; Providers, Health Plans Should Confirm Copy Charges Comply With New OCR HIPAA Guidance; $2 Million+ HIPAA Settlement, FAQ Warn Providers Protect PHI From Media, Other Recording Or Use; Addressing Gaps in Cybersecurity: OCR Releases Crosswalk Between HIPAA Security Rule and NIST Cybersecurity Framework; HIPAA Security Rule Crosswalk to NIST Cybersecurity Framework.

Employer and other health plan sponsors, health plan fiduciaries and business associates, and their service providers also generally will want to consider their responsibilities to provide and enforce employer certifications, as well as the fiduciary obligations health plan fiduciaries under the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA). Among other things, wrongful disclosure of PHI to a sponsoring employer or others could violate HIPAA or other plan terms. Furthermore, Department of Labor officials have indicated stated that a fiduciary’s general fiduciary responsibilities can apply to the protection and administration of PHI and other health plan information as well as create a duty by a responsible fiduciary to prudently investigate and take steps to address breaches or other potential concerns that place PHI at risk. See, HIPAA Settlement Warns Health Plans, Sponsoring Employers & Business Associates To Manage HIPAA Risks.

Furthermore, as breaches of PHI and other violations of HIPAA also frequently give rise to responsibilities or risks under a broad range of other federal and state laws medical and financial privacy and data security, Medicare and other terms of federal program participation, medical credentialing, licensure and ethics, insurance and Employee Retirement Income Security Act fiduciary responsibilities in the case of health plans, contractual, tort and other exposures, Covered Entities and their business associates also generally are best served to take into account these other responsibilities and exposures in conjunction with the design and administration of their HIPAA compliance and risk management policies and practices.

Covered Entities and their business associates also should seek advice from legal counsel regarding the adequacy of their compliance, investigatory, training, management oversight, training, reporting, documentation, document retention and other processes and procedures that could reduce risks of HIPAA violations and position the organization to effectively and more efficiently respond to a potential breach, audit, investigation or enforcement action and mitigate the costs and potential liability exposures that increasingly attends these events. In addition, given the typically high financial, operational and legal costs typically incurred to conduct investigations, report and redress breaches, and respond to OCR audits or investigations, much less make any payments and implement any corrective actions required to settle OCR changes, most Covered Entities and their business associations will want to consider the advisability and adequacy of insurance and other sources of funding or indemnification for the often substantial costs that often attend a HIPAA breach, audit or enforcement event. Since HIPAA violations under certain circumstances also can give rise to felony criminal liability, boards of directors and other leaders of Covered Entities and business associates also will want to ensure that their HIPAA compliance policies and practices also are incorporated and monitored by management as part of their organization’s overall Federal Sentencing Guideline Compliance programs and practices.

About The Author

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Group Chair and current Defined Contribution Plans Committee Co-Chair, Groups and Substantive Committee and Membership Committee Members, past Welfare Plans Committee Chair and Co-Chair, and former Fiduciary Responsibility Vice Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current ABA International Section Life Sciences Committee Vice Chair, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, former ABA Joint Committee on Employee Benefits Council Representative and Marketing Committee Chair and a prolific author and highly popular speaker and consultant, Ms. Stamer helps management manage.

Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

As a core component of her work, Ms. Stamer has worked extensively throughout her career with health care providers, health plans, health care clearinghouses, their business associates, employers, banks and other financial institutions, their technology and other vendors and service providers, and others on legal and operational risk management and compliance with HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and concerns; prevention, investigation, response, mitigation and resolution of known or suspected data or privacy breaches or other incidents; defending investigations or other actions by plaintiffs, OCR, FTC, state attorneys’ general and other federal or state agencies; reporting and redressing known or suspected breaches or other violations; business associate and other contracting; insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

Beyond her extensive involvement advising and representing clients on privacy and data security concerns and other health industry matters, Ms. Stamer also has served for several years as a scrivener for the ABA JCEB’s meeting with OCR, the Chair of the Southern California ISSA Health Care Privacy & Security Summit, and an editorial advisory board member, author, program chair or steering committee member, and faculties for a multitude of other programs and publications regarding privacy, data security, technology and other compliance, risk management and operational concerns in the health care, health and other insurance, employee benefits and human resources, retail, financial services and other arenas.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on HIPAA and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE: Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Council, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clientson the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Comments Off on Health Plans, Other Covered Entities Have Continuing Duty To Reevaluate HIPAA Enterprise Risk To PHI & Address Security Risks & Other Compliance Concern On Ongoing Basis | ARRA, board of directors, Brokers, Cafeteria Plans, CHIP, Civil Monetary Penalties, Civil Rights, Claims, compliance, Consumer Protection, Corporate Compliance, corporate governance, Cybercrime, Data Breach, Data Security, directors, EBSA, Electronic Medical Record, employee, Employee Benefits, Employer, Employers, Employment, EMR, fiduciary duty, Fiduciary Responsibility, GINA, HIPAA, HR, Human Resources, Identity Theft, Insurance, insurers, Internal Controls, Internal Investigations, Technology, third party administrators, Uncategorized, Union, Workforce | Tagged: Breach Notification, broker, Covered Entity, Data Breach, Data Security, EPHI, ERISA, health care providers, Health Plans, HIPAA, Medical Privach, Medical Privacy, Personal Health Information, Privacy, Technology | Permalink
Posted by Cynthia Marcotte Stamer

Criminal Conviction Of Plan Trustee, Outside Legal Counsel Shows Risks of Retaliating Against Whistleblowers For Reporting ERISA Violations

August 1, 2016

The U.S. Department of Labor’s just announced successful whistleblower prosecution in Perez v. Scott Brain, et al of an employee benefit plan trustee, and an individual lawyer and her law firm that served as the employee benefit plan’s outside legal counsel of violating the fiduciary responsibility and whistleblower rules of the Employee Retirement Income Security Act of 1974 (ERISA) illustrates why employee benefit plan sponsors, trustees or other fiduciaries, their management, legal counsel, auditors and other service providers must both prudently investigate whistleblower allegations or other evidence of potential wrongdoing involving their employee benefit plans and resist the temptation to retaliate against employees or others for reporting or cooperating in the investigation of alleged improprieties involving an employee benefit plan.

The Brain decision highlights the care that employee benefit plan sponsors, fiduciaries, advisors and service providers and their management must use when responding to allegations or other evidence of wrongdoing relating to an employee benefit plan or its administration, investigating and addressing alleged misconduct or other performance or disciplinary concerns involving parties whose report or involvement in investigations of ERISA or other misconduct could form the basis of a potential ERISA 510 or other retaliation complaint.

The decision also makes clear that outside legal counsel advising an employee benefit plan or its fiduciaries in relation to the investigation or response to charges of ERISA misconduct involving an employee benefit plan must use care to avoid actions that could render them liable for participation in acts of illegal retaliation, violating their duty of loyalty to the plan by allowing themselves to become involved in a conflict of interest when investigating or defending potential wrongdoing involving an employee benefit plan, or engaging in other discretionary actions that could constitute a breach of fiduciary duty in violation of ERISA.

In Perez v. Scott Brain, et al., the U.S. District Court for the Central District of California ruled that Cement Masons Southern California Trust Fund’s trustee and Cement Masons Local 600 business manager, Scott Brain (Brain) and outside trust fund legal counsel, Melissa Cook, violated sections 510 and 404 of ERISA by causing the firing a trust fund employee Cheryle Robbins (Robbins) and an employee of the plan’s third party administrator, Cory Rice (Rice), in retaliation for their involvement in filing an internal complaint about and cooperating with the Labor Department’s Employee Benefit Security Administration’s federal criminal investigation of reports of Brain’s wrongful interference as a trustee with collections and contributions from unionized employers.

In 2011, Robbins, director of the trust funds’ audit and collections department, responded to a federal criminal investigation into Brain’s activities with contractors. The same year, she and Rice, who worked for the third-party administrator to the trust fund, American Benefit Plan Administrators, now, Zenith American Solutions (Zenith), participated in an effort to complain about Brain’s interference with efforts to collect delinquent contributions from contractors. Within weeks of this conduct, Robbins was suspended from her employment with the trust fund. Less than six months later, both Robbins and Rice were fired.

The court’s 71-page decision chronicles the coordinated retaliatory campaign orchestrated by Brain and Cook that led to Robbins’ suspension and firing by the employee benefit plan as well as the termination of Cook by his employer, Zenith..

With respect to Robbins’ suspension, the court found that the evidence showed Brain and Cook “were very upset with Robbins due to her contact with the [Department of Labor],” and that Brain and Cook “used their positions and influence to cause the other trustees to vote in favor of” suspending Robbins. To do so, the court explained, Brain and Cook “took the lead at the . . . [b]oard meeting with respect to the discussion of Robbins’ contact with the [Department of Labor]” and “created an environment that was hostile to her,” which “caused the trustees to vote to place her on leave.” The court noted that the two “‘set in motion’ the decision by the Joint Board to put Robbins on leave [.]”

As for Rice’s firing, the court explained how Brain and Cook retaliated against Rice by pressuring his employer, Zenith, into firing Rice and manipulating the Zenith relationship to deter Zenith from rehiring Rice in retaliation for his involvement in efforts to make an internal complaint about Brain.

Based upon evidence introduced during a five-day trial, the District Court ruled that Brain, Cook and Cook’s law firm violated ERISA section 510 by suspending and then discharging Robbins, and causing Zenith to refuse to hire Robbins and to discharge Rice in retaliation for their participation in reporting Brian’s misconduct to the General President of the Operative Plasterers’ and Cement Masons’ International Association and because Robbins participated in a federal criminal investigation of Brain. Specifically, the District Court ruled:

Brain, Cook and Cook’s law firm wrongfully retaliated against Robbins in violation of ERISA 510 for her communications with the DOL by placing her on administrative leave; causing the work performed by the department that Robbins previously managed to be outsourced to Zenith and by causing Zenith not to hire Robbins to participate in its work;
Brain, Cook and Cook’s law firm wrongfully retaliated against Rice in violation of ERISA 510 by causing Zenith to terminate Cook;
Brain breached his fiduciary duty under ERISA 404 by retaliating against Robbins and causing her to be placed on administrative leave and that Cook knowingly participated in that breach.

The court held that Brain and Cook’s retaliatory conduct violated section 510 of ERISA, which prohibits retaliation against whistleblowers for complaining of ERISA violations or cooperating with a governmental investigation of such violations. The court also held that the couple’s retaliation against Robbins breached Brain’s fiduciary duties under ERISA section 404 to the trust funds and that Cook participated knowingly in that breach.

In reaching its decision, the court rejected attorney Cook’s argument that she was somehow immunized from her unlawful conduct because she was an attorney to the trust funds. Among other things, the court noted the “apparent conflict of interest” Cook had in representing the trust funds while being in an undisclosed “romantic relationship” with Brain, which existed as defendants carried out their retaliatory scheme. Reminding lawyers of their ethical duties in California, the court cited California Rule of Professional Conduct 3-310(B), which the court explained “requires that an attorney disclose to a client any personal relationship or interest that he or she knows, or with the exercise of reasonable diligence should know, could substantially affect her his or her professional judgment in advising the client.”

As punishing for these criminal violations of ERISA, the District Court ordered the permanent removal of Brain as a trustee. It also ordered the permanent barring of Brain, Cook and her law firm from serving the Cement Masons Southern California Trust Funds. In addition, the court ordered Cook and her law firm to repay all attorneys’ fees she billed the trust funds for the actions she took in retaliating against whistleblowers Robbins and Rice. These criminal sanctions were in addition to the $630,000 civil damage award that the Labor Department previously secured in lost wages and damages for Robbins, Rice and another worker victimized by Brain and Cook in August 2015.

In addition to its successful prosecution of Brain, Cook and Cook’s law firm on these charges, the DOL also had sought, but failed to convince the District Court based on the evidence presented at trial to find Brain, Cook, Cook’s law firm and Brain’s fellow trust fund trustee Local 600 business agent and Joint Board of Trustees member Jaime Briceno guilty of wrongful retaliation against another alleged whistleblower or Briceno of breaching his fiduciary duties under ERISA by failing to prudently investigate Robbins’ allegations against Brain; or by voting to use assets of the Trust Funds to pay the cost of the settlement of the civil action brought by Robbins. The District Court also refused to consider a newly raised charge that Brain breached his fiduciary duty by failing to collect all monies owed to the Trust Funds on the grounds that the Labor Department had failed to timely raise the charge. While the court refused to convict Briceno, Brain, Cook or Cook’s law firm on the additional charges, the Labor Department’s prosecution of these claims illustrates that along with abstaining from retaliating against ERISA whistleblowers, employee benefit plan fiduciaries also should position themselves to defend against potential breach of fiduciary duty claims based on alleged inadequacies in their investigation or response to reports or other evidence of misconduct involving the plan by prudently investigating and acting to redress allegations or other evidence of potential wrongdoing in the administration of employee benefit plans or their assets.

About The Author

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, the author of this update, attorney Cynthia Marcotte Stamer, is AV-Preeminent (the highest) rated attorney repeatedly recognized as a Martindale-Hubble as a “LEGAL LEADER™” and “Texas Top Rated Lawyer” in Health Care Law, Labor and Employment Law, and Business & Commercial Law and among the “Best Lawyers In Dallas” in ERISA, Labor and Employment and Healthcare Law by D Magazine for her nearly 30 years of experience and knowledge representing and advising employers, employee benefit plans, their sponsors, fiduciaries, service providers and vendors and others on these and other planning, business transaction and contracting, administration, compliance, risk management, audits, investigations, government and private litigation and other enforcement and other related matters.

past Chair and current committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, a former ABA Joint Committee on Employee Benefits Council Representative ,

Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping management manage. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, she de[;pus jer her extensive legal and operational knowledge and experience to help organizations and their management use the law and process to manage people, process, compliance, operations and risk.

As a key part of this work, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, expat and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

A former lead consultant to the Government of Bolivia on its Social Security reform law Ms. Stamer also is well-known for her leadership on U.S. health and pension, wage and hour, tax, workforce, tax, education, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer for many years acted as the scribe responsible for leading the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights annual agency meeting and regularly participates in the OCR and other JCEB annual agency meetings, and participates in the development and submission of comments and other input to the agencies on regulatory, enforcement and other concerns. She also works as a policy advisor and advocate to many business, professional and civic organizations.

Author of the thousands of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer also is a highly sought out speaker and industry thought leader known for empowering audiences and readers. Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications. Ms. Stamer also regularly serves on the faculty and planning committees for symposia of LexisNexis, the American Bar Association, ALIABA, the Society of Employee Benefits Administrators, the American Law Institute, ISSA, HIMMs, and many other prominent educational and training organizations and conducts training and speaks on these and other management, compliance and public policy concerns.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer serves on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and as an editorial advisor and contributing author of many other publications. Her leadership involvements with the American Bar Association (ABA) include year’s serving many years as a Joint Committee on Employee Benefits Council representative; ABA RPTE Section current Practice Management Vice Chair and Substantive Groups & Committees Committee Member, RPTE Employee Benefits & Other Compensation Committee Past Group Chair and Diversity Award Recipient, current Defined Contribution Plans Committee Co-Chair, and past Welfare Benefit Plans Committee Chair Co-Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; International Section Life Sciences Committee Policy Vice Chair; and a speaker, contributing author, comment chair and contributor to numerous Labor, Tax, RPTE, Health Law, TIPS, International and other Section publications, programs and task forces. Other selected service involvements of note include Vice President of the North Texas Healthcare Compliance Professionals Association; past EO Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a former Southwest Benefits Association Board of Directors member, Continuing Education Chair and Treasurer; former Texas Association of Business BACPAC Committee Member, Executive Committee member, Regional Chair and Dallas Chapter Chair; former Society of Human Resources Region 4 Chair and Consultants Forum Board Member and Dallas HR Public Policy Committee Chair; former National Board Member and Dallas Chapter President of Web Network of Benefit Professionals; former Dallas Business League President and others. For additional information about Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

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Comments Off on Criminal Conviction Of Plan Trustee, Outside Legal Counsel Shows Risks of Retaliating Against Whistleblowers For Reporting ERISA Violations | 401(k), Appeals, Attorney-Client Privilege, Banking, Bankruptcy, board of directors, Brokers, Claims Administration, compensation, compliance, Corporate Compliance, corporate governance, Cybercrime, defined benefit plan, defined contribution plan, Disability Plans, EBSA, employee, Employee Benefits, Employer, Employers, ERISA, fiduciary duty, Fiduciary Responsibility, health benefit, Health Benefits, health insurance, health plan, Health Plans, HR, Human Resources, Insurance, insurers, Internal Controls, Internal Investigations, Labor Management Relations, Malpractice, Reporting & Disclosure, Uncategorized | Tagged: defined contribution plan, EBSA, employee benefit plans, Employer, ERISA, ERISA 404, ERISA 510, Fiduciary responsiility, Health Plan, Health Plans, Multiemployer collectively bargained employee benefit plans, Retailiation, Retirement Plans, Union, Whistleblower | Permalink
Posted by Cynthia Marcotte Stamer

Business Associate Rule Violations Behind $750K HIPAA Settlement

April 21, 2016

Health Plans, Sponsors & Business Associates Should Verify Plan’s HIPAA Compliance

Employers and other health plan sponsors and the health plan fiduciaries and business associates providing services involving dealings on behalf of the plan with protected health information just received another reminder to confirm and be prepared to prove all required business associate agreements are in place and that the health plans otherwise properly are administering all policies, practices, safeguards and procedures for handling, using and disclosing electronic and other protected health information from the April 20, 2016 Department of Health & Human Services Office of Civil Rights (OCR) announcement of its latest resolution agreement settling Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rule charges OCR made against a HIPAA-covered entity for violating HIPAA’s business associate agreement rules.

OCR Charges Brought For Business Associate Agreement Violations

HIPAA’s Privacy Rules generally apply to “covered entities,” which under HIPAA are health plans and insurers, health care providers, health care clearinghouses (Covered Entities) and “business associates,” which are individuals or entities that perform services that aid the Covered Entity to perform its duties as a Covered Entity.

The Resolution Agreement and Corrective Action Plan (Resolution Agreement) with Raleigh Orthopaedic Clinic, P.A. of North Carolina (Raleigh Orthopaedic) announced by OCR on April 20th requires Raleigh Orthopaedic to pay $750,000 to settle charges OCR it violated the Privacy Rule by handing over protected health information of approximately 17,300 patients to a potential business partner without first executing a business associate agreement.

Raleigh Orthopaedic is a provider group practice that operates clinics and a surgery center in the Raleigh, North Carolina area. OCR initiated its investigation of Raleigh Orthopaedic after receiving a breach report on April 30, 2013. OCR’s investigation indicated that Raleigh Orthopaedic violated the Privacy Rules by releasing the x-ray films and related protected health information of 17,300 patients to an entity that promised to transfer the images to electronic media in exchange for harvesting the silver from the x-ray films. Raleigh Orthopaedic failed to execute a business associate agreement with this entity before turning over the x-rays and PHI.

OCR says this sharing of the x-ray files and other protected health information by Raleigh Orthopaedic violated the Privacy Rules.

Specifically, the Privacy Rules prohibit Covered Entities and their business associates from using, accessing and disclosing protected health information except as specifically permitted in the Privacy Rules. As part of these rules, the “Business Associate” requirements of the Privacy Rule prohibit Covered Entities from disclosing or allowing business associates to use, and business associates from receiving or using protected health information unless the parties first enter into a written business associate agreement that complies with the requirements of the Privacy Rules.

The Resolution Agreement settles OCR charges that Raleigh Orthopaedic violated this Business Associate Agreement requirement by sharing the x-rays and other protected health information with the service provider without first entering a business associate agreement. Under the Settlement Agreement, Raleigh Orthopaedic must pay a $750,000 payment, as well as revise its policies and procedures to: establish a process for assessing whether entities are business associates; designate a responsible individual to ensure business associate agreements are in place prior to disclosing PHI to a business associate; create a standard template business associate agreement; establish a standard process for maintaining documentation of a business associate agreements for at least six (6) years beyond the date of termination of a business associate relationship; and limit disclosures of PHI to any business associate to the minimum necessary to accomplish the purpose for which the Covered Entity hires the business associate.

Although the Resolution Agreement only addresses charges OCR brought against the Covered Entity, Raleigh Orthopaedic, business associates need to keep in mind that both Covered Entities and business associates now are responsible for ensuring compliance with the business associate agreement requirements of the Privacy Rules since the Stimulus Bill amended HIPAA to make most provisions of the Privacy Rule directly applicable to business associates as well as Covered Entities.

Take Aways For Covered Entities & Their Business Associates

OCR’s announcement of the Resolution Agreement includes a strong message for other Covered Entities and business associates of the importance of taking seriously their responsibility under the Privacy Rule to ensure that the business associate agreement requirements of the Privacy Rule are met before business associates are allowed to receive, access or use protected health information. The announcement quotes Jocelyn Samuels, Director of the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) as stating. “It is critical for entities to know to whom they are handing PHI and to obtain assurances that the information will be protected.” and “HIPAA’s obligation on covered entities to obtain business associate agreements is more than a mere check-the-box paperwork exercise.”

In light of the Business Associate Rule and Director Samuels’ comments, Covered Entities and business associates alike should review the adequacy of their documentation, policies and practices regarding dealings with service providers who are or could collect, receive or use electronic or other protected health information to propose or perform services in the capacity as a business associate. Certainly both Covered Entities and business associates to ensure that they possess and are able to produce if needed signed business associate agreements for each current business associate agreement as well as that appropriate policies, practices and procedures are in place to ensure that all required business associate agreements are implemented before any disclosure or use of protected health information to the business associate in the future. As part of these activities, both Covered Entities and business associates also should ensure their policies and practices appropriately provide for the retention of signed copies of all business associate agreements and other records, and the implementation of all other processes and procedures required to position the entity to be able to demonstrate it not only had policies requiring compliance, but appropriately implemented and administered those policies in accordance with the Privacy Rule.

When conducting this review, Covered Entities and business associates also generally should consider the advisability of also reviewing their business associate agreements and the adequacy of these arrangements in light of any other contractual confidentiality and or contractual rights and commitments, regulatory requirements and other operational and risk management concerns that impact or interrelate with the relationship between the business associate and the Covered Entity. It is important to ensure that appropriate steps are taken to evaluate and properly integrate the confidentiality and other commitments that the Privacy Rules mandate a business associate agreement include with audit, performance assessment, and other data access or disclosure, trade secrets, confidentiality, performance standards and guarantees, indemnity and other contractual obligations of other agreements that could impact or be impacted by the business associate agreements. Steps also should be taken to incorporate appropriate processes and procedures for ensuring that the Covered Entity and members of its workforce understand and consistently administer and document their use of appropriate processes to ensure that the business associate agreement and other requirements of the Privacy Rules are fulfilled. In the case of employer sponsored plans subject to the Employee Retirement Income Security Act of 1974, for instance, the selection and proper oversight of business associates and the management of plan data both are subject to the fiduciary responsibility rules of ERISA. Meanwhile, insurers, business associates and other plan vendors also generally should anticipate that beyond HIPAA, they also may be subject to data security, privacy and other mandates and exposures under state HIPAA-like rules for protected health information, as well as other obligations under insurance, data security, identity theft, breach, privacy and other state laws.

The process of evaluating the adequacy of current arrangement and considering the advisability of changes to tighten existing practices in many cases will result in the discovery and discussion of potentially sensitive information about the adequacy of current or past compliance with the Privacy Rules or other matters. For example, it is possible that in the course of review, parties may be unable to locate a signed business associate agreement governing a relationship that the Privacy Rules require be subject to a business associate agreement or in the course of review, information indicating breaches of protected health information or other Privacy Rule violations may have occurred. For this reason, most Covered Entities and their business associates will want to consider arranging for this review and analysis to be conducted within the scope of attorney-client privilege by or under the direction of qualified legal counsel with HIPAA experience that has entered into a business associate agreement with the Covered Entity or business associate.

About The Author

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Cynthia Marcotte Stamer is a noted Texas-based management lawyer and consultant, author, lecturer and policy advocate, recognized as among the “Top Rated Labor & Employment Lawyers in Texas” by LexisNexis® Martindale-Hubbell® and as among the “Best Lawyers In Dallas” for her work in the field of “Tax: Erisa & Employee Benefits” and “Health Care” by D Magazine who works, writes and speaks extensively about HIPAA and other data privacy and security concerns.

Ms. Stamer’s legal and management consulting work throughout her career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer helps management manage. Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy. Well-known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

Throughout her career, Ms. Stamer has advised these and other clients about health care, health plan, financial information, trade secret, privacy and other related compliance, data breach response and remediation and related compliance, risk management and related concerns. In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others.

Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas, Ms. Stamer annually leads the Joint Committee on Employee Benefits (JCEB) HHS Office of Civil Rights agency meeting and other JCEB agency meetings. She also works as a policy advisor and advocate to many business, professional and civic organizations.

Beyond these involvements, Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see here or contact Ms. Stamer directly by email here or by telephone at (469) 767-8872.

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Posted by Cynthia Marcotte Stamer

Final Investment Advice Fiduciary Rules Mean Work For Employers, Fiduciaries & Advisors

April 12, 2016

Employer and other employee benefit plan sponsors, benefit plan committees and fiduciaries, and the broker-dealers, financial advisors, insurance agents and other plan service providers that provide investment-related platforms, advice, recommendations or other services for employee benefit plans need to reevaluate the fiduciary status of their service providers and begin restructuring as necessary their associated relationships, service provider commission or other compensation, service agreements and arrangements or other services in response to a new Regulatory Guidance Package (Rule) that explicitly classifies parties providing “covered investment advice” as fiduciaries subject to the conflict of interest and other fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA).

Supplementing existing precedent and EBSA’s already existing broad, functional definition of “fiduciary,” the Rule clarifies when individuals and entities that provide “covered investment advice” to plans, plan sponsors, fiduciaries, plan participants, beneficiaries and Individual Retirement Accounts (IRAs) and IRA owners are:

Fiduciaries of the Plan or IRA for purposes of Title I of ERISA;
Required to acknowledge their status and the status of their individual advisers as “fiduciaries” of the plan for purposes of ERISA;
Accountable as fiduciaries for making prudent investment recommendations without regard to their own interests, or the interests of those other than the plan or plan participant or beneficiary that is the customer;
Restricted to charging only “reasonable compensation” for their advice or service;
Prohibited from making misrepresentations to their customers regarding recommended investments; and
Prohibited from providing advice or making payments that involve any conflicts of interest prohibited by ERISA unless the arrangements fully complies with a prohibited transaction exemption issued by EBSA under ERISA Section 408 that otherwise complies with ERISA Section 404.

Concurrent with its adoption of final regulations implementing these new rules concerning investment advisors and their fiduciary responsibilities, the Rule also adopts certain new Prohibited Transaction Exemptions that define requirements that providers of covered investment advice and the plan fiduciaries that engage them generally will be required after April 7, 2017 to ensure are met for investment advisors to receive commission-based compensation for their services, to sell or purchase certain recommended debt securities and other investments out of their own inventories to or from plans and IRAs, or to receive compensation for recommending fixed rate annuity contracts to plans and IRAs.

Investment Advice Covered By The Rule

The final rule applies to “covered investment advice.” For purposes of the rule, “covered investment advice” generally includes:

A recommendation to a plan, plan fiduciary, plan participant and beneficiary and IRA owner for a fee or other compensation, direct or indirect, as to the advisability of buying, holding, selling or exchanging securities or other investment property, including recommendations as to the investment of securities or other property after the securities or other property are rolled over or distributed from a plan or IRA;
A recommendation as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., brokerage versus advisory); or recommendations with respect to rollovers, transfers, or distributions from a plan or IRA, including whether, in what amount, in what form, and to what destination such a rollover, transfer, or distribution should be made.

Under the Rule, the fundamental threshold element in establishing the existence of fiduciary investment advice is whether a “recommendation” occurred. The Department has taken an approach to defining “recommendation” that is consistent with and based upon the approach taken by the Financial Industry Regulatory Authority (FINRA), the independent regulatory authority of the broker-dealer industry, subject to the oversight of the Securities and Exchange Commission (SEC).

The Rule specifies that a “recommendation” is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action. Under the Rule, the more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation.

The types of relationships that must exist for such recommendations to give rise to fiduciary investment advice responsibilities include recommendations made either directly or indirectly (e.g. through or together with any affiliate) by a person who:

Represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the Internal Revenue Code (Code);
Renders advice pursuant to a written or verbal agreement, arrangement or understanding that the advice is based on the particular investment needs of the advice recipient; or
Directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the plan or IRA.

Also, the Rule only applies where a recommendation is provided directly or indirectly in exchange for a “fee or other compensation.” “Fee or other compensation, direct or indirect” means any explicit fee or compensation for the advice received by the person (or by an affiliate) from any source, and any other fee or compensation received from any source in connection with or as a result of the recommended purchase or sale of a security or the provision of investment advice services including, though not limited to, such things as commissions, loads, finder’s fees, and revenue sharing payments. A fee or compensation is paid “in connection with or as a result of” such transaction or service if the fee or compensation would not have been paid but for the transaction or service or if eligibility for or the amount of the fee or compensation is based in whole or in part on the transaction or service.

Investment Advice Not Covered By Rule

While the Rule reaches broadly, not all communications with financial advisers are covered fiduciary investment advice under the Rule. As a threshold issue, if the communications do not meet the definition of “recommendations” as described above, the communications will be considered non-fiduciary. In response to requests from commenters, and for clarification, the final rule includes some specific examples of communications that would not rise to the level of a recommendation and therefore would not constitute a fiduciary investment advice communication under the Rule.

When evaluating the applicability and effect of these exemptions, however, it is important to keep in mind that by adding the new Rule, EBSA seeks to make clear that individuals or organizations that engage in activities described in the Rule as covered investment advice are fiduciaries subject to these requirements. Since the Rule does not revoke existing EBSA fiduciary guidance or judicial precedent, service providers and other parties with discretionary authority or responsibility over employee benefit plans not covered by the Rule still could qualify as fiduciaries if their authority, responsibility or actions functionally causes them to fall within the definition of a fiduciary under these other pre-existing definitions of fiduciary status. Subject to this cautionary proviso, the following are some of the activities that the Rule identifies as activities that might fall outside the Rule’s covered investment activities in the manner required by the Rule:

“Education” as defined and provided in accordance with the Rule;
“General communications that a reasonable person would not view as an investment recommendation;”
Simply making available a platform of investment alternatives without regard to the individualized needs of the plan, its participants, or beneficiaries if a plan fiduciary independent of the platform service provider actually decides what investment options are offered and the platform service provider also represents in writing to the plan fiduciary that they are not undertaking to provide impartial investment advice or to give advice in a fiduciary capacity; and
Transactions with independent plan fiduciaries where the adviser knows or reasonably believes that the independent fiduciary is a licensed and regulated provider of financial services (banks, insurance companies, registered investment advisers, broker-dealers) or those that have responsibility for the management of $50 million in assets, and other conditions set forth in the Rule are met;
Communications and activities made by advisers to ERISA-covered employee benefit plans in swap or security-based swap transactions when the swap transaction meets certain conditions set forth in the Rule, which EBSA designed in coordination with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to avoid conflicts between the Rule and the swap and security-based swap rules promulgated by those agencies under the Dodd–Frank Wall Street Reform and Consumer Protection Act; and
Activities and communications of employees working in the payroll, accounting, human resources, and financial departments of the plan sponsor or its affiliated business who routinely develop reports and recommendations for the company and other named fiduciaries of the sponsors’ plans if the employees receive no fee or other compensation in connection with any such recommendations beyond their normal compensation for work performed for their employer.

New Prohibited Transaction Exemptions Published With Rule

Concurrent with its publication of the Rule, EBSA also is adopting the following new “Prohibited Transaction Exemptions to the otherwise applicable statutory list of prohibited conflict of interest transactions in ERISA Section 406 and the companion rules of the Internal Revenue Code (Code) applicable to qualified retirement plans.

Noncompliance with the Rule, including where necessary to avoid violating ERISA Section 406’s prohibited transaction prohibitions, by parties providing covered investment advice or the engagement or retention of such a service provider by an employer or other party exercising or with responsibility or authority to make that engagement carriers big legal risk. Advisers and financial institutions that don’t meet the BICE standards and other requirements of the Rule expose themselves to liability from breach of fiduciary duty claims under ERISA brought by ERISA plans, participants, and beneficiaries or in the case of IRAs or other non-ERISA plans, state law breach of contract or other state law claims brought by IRAs and other non-ERISA plans or accountholders. Likewise an employer, member of its management or other party responsible for or having authority to choose the service provider risks breaching its own fiduciary duties under ERISA by engaging a party that renders covered investment advice without complying with the Rule. In addition, to the extent that the engagement or activities of the service provider involves commission compensation payments, swaps or other activities that would constitute a prohibited conflict of interest under ERISA Section 406 not structured and conducted with an applicable prohibited transaction exemption, both the service provider and the fiduciary could bear personal liability for involving the plan or its assets in a prohibited transaction in violation of ERISA Section 406. For this reason, to help positions themselves to mitigate or defend against liability for such potential claims, advisors generally should take steps to ensure that the advisor can prove the advisor acted in their clients’ best interest by documenting their use of a reasonable process and adherence to professional standards in deciding to make the recommendation and determining it was in the customer’s best interest, and by documenting their compliance with the financial institution’s policies and procedures required by the Best Interest Contract Exemption.

“Best Interest Contract Exemption” (BICE)

ERISA and the Internal Revenue Code rules for qualified retirement plans generally prohibit individuals or entities providing fiduciary investment advice to plan sponsors, plan participants, and IRA owners to receive payments creating any of the listed statutory conflicts of interest listed in ERISA or the Code without a prohibited transaction exemption (PTE), employee benefit plan sponsors, benefit plan committees and other fiduciaries, and the broker-dealers, financial advisors, insurance agents and other plan service providers providing covered investment services to employee benefit plans also need to ensure that their compensation is structured to ensure that the compensation and other arrangements do not violate these prohibited transaction and conflict of interest prohibitions of the Code and ERISA, ERISA’s reasonable compensation rules, or the other requirements of ERISA.

Concerning ERISA Section 406’s party-in-interest and other conflict of interest requirements, EBSA issued in conjunction with its publication of the Rule a new “Best Interest Contract Exemption” (BICE), which provides a prohibited transaction exception that permits the payment of commission-based compensation to fiduciary investment advisors as long as the conditions specified in the BICE are met. Among other things, the BICE requires as a condition of the applicability of this exception that:

The financial institution to acknowledge in writing fiduciary status for itself and its advisers;
The financial institution and advisers to adhere to ERISA’s basic standards of impartial conduct, including giving prudent advice that is in the customer’s best interest, avoiding making misleading statements, and receiving no more than reasonable compensation;
The financial institution to have policies and procedures designed to mitigate harmful impacts of conflicts of interest; and
The financial institution to disclose specified information about their conflicts of interest and the cost of their advice.

The specified disclosures required to meet the conditions of the BICE include:

Descriptions of material conflicts of interest;
Descriptions of fees or charges paid by the retirement investor
A statement of the types of compensation the firm expects to receive from third parties in connection with recommended investments;
Notification that investors have the right to obtain specific disclosure of costs, fees, and other compensation upon request; and
A requirement that a website must be maintained and updated regularly that includes information about the financial institution’s business model and associated material conflicts of interest, a written description of the financial institution’s policies and procedures that mitigate conflicts of interest, and disclosure of compensation and incentive arrangements with advisers, among other information. However, the BICE currently does not require that the website include individualized information about a particular adviser’s compensation.

Noncompliance with the Rule by parties providing covered investment advice or the engagement or retention of such a service provider by an employer or other party exercising or with responsibility or authority to make that engagement carriers big legal risk. Advisers and financial institutions that don’t meet the BICE standards and other requirements of the Rule expose themselves to liability from breach of fiduciary duty claims under ERISA brought by ERISA plans, participants, and beneficiaries or in the case of IRAs or other non-ERISA plans, state law breach of contract or other state law claims brought by IRAs and other non-ERISA plans or accountholders. Likewise an employer, member of its management or other party responsible for or having authority to choose the service provider risks breaching its own fiduciary duties under ERISA by engaging a party that renders covered investment advice without complying with the Rule. In addition, to the extent that the engagement or activities of the service provider involves commission compensation payments, swaps or other activities that would constitute a prohibited conflict of interest under ERISA Section 406 not structured and conducted with an applicable prohibited transaction exemption, both the service provider and the fiduciary could bear personal liability for involving the plan or its assets in a prohibited transaction in violation of ERISA Section 406. For this reason, to help positions themselves to mitigate or defend against liability for such potential claims, advisors generally should take steps to ensure that the advisor can prove the advisor acted in their clients’ best interest by documenting their use of a reasonable process and adherence to professional standards in deciding to make the recommendation and determining it was in the customer’s best interest, and by documenting their compliance with the financial institution’s policies and procedures required by the Best Interest Contract Exemption.

Principle Transactions Exemption

The “Principal Transactions Exemption” published in connection with the Rule provides an exemption from the prohibitions of ERISA Section 406 to allow investment advice fiduciaries to sell or purchase certain recommended debt securities and other investments out of their own inventories to or from plans and IRAs where the requirements of the Exemption are met. As with the Best Interest Contract Exemption, the Principle Transaction Exemption requires, among other things, that investment advice fiduciaries adhere to certain impartial conduct standards, including obligations to act in the customer’s best interest, avoid misleading statements, and seek to obtain the best execution reasonably available under the circumstances for the transaction.

Existing PTE For Fixed Rate Annuity Contracts

In connection with its adoption of the Rule, EBSA also is amending existing exemption, PTE 84-24, which provides relief for insurance agents and brokers, and insurance companies, to receive compensation for recommending fixed rate annuity contracts to plans and IRAs. As amended in connection with the Rule, the requirements of PTE 84-24 are modified to provide increased safeguards for retirement investors while still providing “more streamlined conditions” than those required to meet the Best Interest Contract Exemption. Consistent with its enthusiasm for encouraging the offering and adoption of life time income products to retirees over the past several years, EBSA says these more streamlined conditions of PTE 84-24 are appropriate to “facilitate access by plans and IRAs to these relatively simple lifetime income products.” More complex products, such as variable annuities and indexed annuities, will be able to be recommended by advisers and financial institutions under the terms of the Best Interest Contract Exemption.

Other PTE Exemptions Modified To Raise Requirements

The Department is amending other existing exemptions, as well, to ensure that plan and IRA investors receiving investment advice are consistently protected by impartial conduct standards, regardless of the particular exemption upon which the adviser and the fiduciary engaging that advisor intend to rely upon to avoid violating of ERISA 406.

While the compliance deadline for the new Rule is not until April 8, 2017, the relief from ERISA Section 406 offered by the new Exemptions announced in connection with the Rule’s publication generally became available when EBSA published them in connection with the Rule on April 8, 2016. As this relief could provide helpful protection against fiduciary challenges or exposures that some service providers might already face under already existing fiduciary precedent or guidance, many service providers involved in dealings with plan or IRA investments may wish to take steps to position themselves to claim protection under one of these new PTE Exemptions even before the Rule takes effect. When evaluating this option, some service providers should be aware of the availability of transitional relief that may make it easier for some service providers to claim relief under the new BICE or Principal Transactions Exemption between April 8, 2017 and January 1, 2018 (Transition Period). In addition, parties that contemplate wishing to take advantage of the relief offered by the new BICE or Principal Transactions Exemption may benefit from taking advantage of reduced requirements for meeting these conditions during the phase in Transition Period. During this Transition Period, EBSA still will require firms and advisers to adhere to the Exemptions’ impartial conduct standards, provide a notice to retirement investors that, among other things, acknowledges their fiduciary status and describes their material conflicts of interest, and to designate a person responsible for addressing material conflicts of interest and monitoring advisers’ adherence to the impartial conduct standards; however compliance with certain other requirements is waived until January 1, 2018. Of course, full compliance with all requirements of the applicable Exemptions will be required as of January 1, 2018.

Rule Requires Action By Plan Sponsors, Fiduciaries & Service Providers

The new Rule creates lots of new work both for advisors and other service providers in, as well as plan sponsors, plan administrative committees or other fiduciaries responsible for selection, retention and oversight of those providing these services. All such parties have much to do to fulfill their ERISA responsibilities by the April 8, 2017 deadline for compliance with the new Rule and to deal with other likely fallout from the new Rule.

Fallout for Covered Investment Advisors & Other Service Providers

Clearly, advisors, financial institutions and other service providers providing covered investment advice and others with involvement with investments or investment platforms have much work to do to prepare for the new rule. However, compliance with the Rule is not merely a service provider problem. Employer or other plan sponsors, plan fiduciaries or other responsible for the credentialing, selection, retention, and oversight of service providers dealing with investments also need to ensure that the party or parties responsible for these vendor dealings fulfills its own fiduciary responsibilities in dealing with vendors and service providers that may be impacted by these requirements.

Advisers and financial institutions that don’t meet the requirements of the new Rule expose themselves to liability from breach of fiduciary duty claims under ERISA brought by ERISA plans, participants, and beneficiaries or in the case of IRAs or other non-ERISA plans, state law breach of contract or other state law claims brought by IRAs and other non-ERISA plans or accountholders. Obviously, advisors, financial institutions and other service providers providing advice or having dealings or involvement with IRA or employee benefit plan investments, their selection or administration will want to review and update their relationships and their associated compensation, contracts, disclosures and other arrangements and processes in light of the new Rule. Clearly, those that could be considered to offer or provide covered investment advice need to start revising contracts, compensation, policies, practices and other arrangements in anticipation of the Rule. At the same time, the Rule also is likely to create work for certain service providers with involvement or dealings with investments that the service provider considers to fall outside of the Rule:

To respond to changes in client requests for proposals, contracts or other due diligence in response to the Rule;
To respond to changes in response to the Rule by covered investment advisors to reconfigure services, relationships and contracts in response to the Rule;
To clarify and institutionalize and document communications by the uncovered service provider to clients and others of limits on the service provider’s services and capacity that are necessary or helpful to avoid or limit exposure of the service provider to coverage by or claims of liability arising out of the Rule; and/or
Otherwise.

Fallout For Plan Sponsors & Plan Fiduciaries Selecting & Overseeing Service Providers

Employer or other plan sponsors, plan fiduciaries or other responsible for the credentialing, selection, retention, and oversight of service providers dealing with investments also need to anticipate and be prepared to deal the effects of adoption of the Rule on their responsibilities and risks as they relate to the selection, retention, contracting, compensation and other dealings with service providers impacted by the Rule.

The Rule’s explicit designation as fiduciaries of certain service providers that previously may have been characterized as providing services as non-fiduciaries, much less its tightening of requirements for the investment advisors that are covered fiduciaries, creates a host of new responsibilities and considerations for employers sponsoring plans and its members of management that select, retain, contract with and oversee these service providers.

Under ERISA, parties designated in writing or function exercising discretionary authority or responsibility for the selection, retention, compensation and oversight of fiduciary or other service providers generally are considered fiduciaries for purposes of carrying out these responsibilities and bear personal liability for prudently selecting, retaining and monitoring the service provider in accordance with ERISA.

To fulfill this fiduciary obligation, those involved in selecting and retaining investment advisors covered by the rules should expect to bear responsibility for ensuring that the covered investment advisor is engaged in compliance with the Rule and the otherwise applicable requirements of ERISA, including that the engagement and compensation of the selected investment advisor will not involve the plan or its assets in a prohibited conflict of interest listed in ERISA Section 406. Furthermore, failing to ensure that the engagement of an investment advisor does not violate these conflict of interest rules also exposes a sponsoring employer of a qualified plan to excise tax liability under the Code’s companion party-in-interest rules applicable to such plans.

Accordingly, whether the employer itself retains and directly exercises the discretionary authority to select and retain a service provider or appoints a committee or member of its staff to perform these responsibilities as a designated fiduciary, an accurate understanding of which service providers, taking into account the rule, now will be considered fiduciaries and the requirements of the Rule flowing from this status is essential to understand and make appropriate provisions to ensure that proper steps are taken to ensure that the Rule and ERISA’s other requirements for prudent credentialing, bonding, contracting, compensation, and other dealings with the service provider and to budget for the proper conduct of the activities needed to fulfill these obligations.

In light of these and other exposures and obligations, employer and other plan sponsors, plan fiduciaries and plan service providers alike all should start preparing to respond to the new Rule.

To help positions themselves to mitigate or defend against liability for such potential claims, each party generally will want to take prudent and well-documented steps to evaluate the fiduciary status of each applicable service provider, as well as its own fiduciary status, capacity, responsibility and other exposures in light of the new Rule. Since ERISA fiduciary status attaches functionally based on the functional facts and circumstances, sponsoring employers, as well as service providers generally will want to consider taking appropriate steps to document this analysis and other compliance and risk management efforts to avoid violations of the Rule, as well as to position themselves to defend against other claims and liabilities.

In all cases, each impacted party should make an effort to apply and retain evidence documenting its efforts including, in the case of all service providers, whether or not covered investment advisors under the Rule, their efforts to act in their clients’ best interest by documenting their use of a reasonable process and adherence to professional standards in deciding to make the recommendation and determining it was in the customer’s best interest, and by documenting their compliance with the financial institution’s policies and procedures and applicable requirements of the law.

About The Author

Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Group Chair, past Welfare Benefit Committee Chair, and Current Defined Contribution Plan Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, a past ABA Joint Committee on Employee Benefits Council Representative Cynthia Marcotte Stamer is a practicing attorney, regulatory and public policy advocate, author, lecturer and industry and public policy thought leader recognized as a “Top” attorney in employee benefits, labor and employment and health care law for her more than 28 years’ of leading edge experience nationally and internationally providing practical and effective advice and representation to management.

Ms. Stamer’s legal and management consulting work throughout her career has focused on helping organizations and their management understand and use the law and process to manage people, performance, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative and pragmatic problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

As a key part of this work, Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements.

She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. In these and other engagements, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

Ms. Stamer also advises and represents clients on OCR and other HHS, Department of Labor, IRS, FTC, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. In the course of this work, Ms. Stamer has accumulated an impressive resume of more than 28 years’ of experience advising and representing clients on Title I and other ERISA fiduciary responsibility concerns including assisting and advising plan sponsors, plan fiduciary and plan service providers to design and administer fiduciary and other compliance and risk management policies and practices, conducting investigations of potential fiduciary or other breaches, and serving as special counsel, advising and representing these and other clients in connection with EBSA, IRS, SEC and other governmental audits, investigations and enforcement actions; in private disputes and litigation regarding plan investments or other fiduciary concerns between plan participant and beneficiaries, plans, plan fiduciaries, plan sponsors and plan service providers; or both.

Ms. Stamer also is deeply involved in helping to influence health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. Deeply involved in both U.S. statutory and regulatory pension and health care reform throughout her career, Ms. Stamer both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc. ™ resources at www.solutionslawpress.com such as:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press. All other rights reserved.

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Posted by Cynthia Marcotte Stamer

Employers, Insurers & TPAS: Budget Time, $ For 2017 Summary of Benefits and Coverage Updates

April 11, 2016

Group health plans and group and individual health insurers (Health Plans) must add updating their 2017 Summary of Benefits and Coverage (SBC) forms to their 2017 to do list in response to the publication by the Departments of Health and Human Services (HHS), Labor (DOL) and Treasury (collectively “Agencies) of enhanced content requirements for the 2017 Summary of Benefits and Coverage (SBC) template and Uniform Glossary that the Patient Protection & Affordable Care Act (ACA) requires Health Plans to provide to Health Plan members. Health Plans must begin using SBCs updated to comply with the 2017 SBC template released by the Agencies on April 6, 2016 beginning on the first day of the first open enrollment period that begins on or after April 1, 2017.

The ACA requires Health Plans to provide covered persons a brief (4 page) summary of what the plan covers and the plan’s cost sharing along with a comprehensive uniform glossary of commonly used health coverage and medical terms with the detailed content and format dictated by the Agencies SBC regulations. Intended to help covered persons understand and compare coverage options by providing standardized information in a standardized format about each plan, the SBC and Glossary must include all required content in the type and format dictated by the SBC regulations. In addition to ensuring that their SBC and Glossary meet these requirements, Health Plans also may need to prepare and offer translations of the SBC and Glossary to comply with the ACA’s “culturally and linguistically appropriate” requirements.

The current and 2017 SBC Template along with instructions for its preparation and completion, model translation documents for certain forms, and other information about the SBC requirements are available here.

Currently, the dictated SBC format includes coverage examples that demonstrate the cost sharing amounts an individual might be responsible for in three common medical situations. In addition to the current coverage examples that address diabetes care and childbirth, the updated template for 2017 also will require a new coverage example that addresses coverage for a foot fracture so that a consumer understands what a plan covers in an emergency scenario.

Beyond dictating the emergency example, the 2017 templates also expand the information about cost sharing that SBCs much contain to include enhanced language to explain deductibles and a requirement that plans address individual and overall out-of-pocket limits in the SBC.

While the Agencies regulations dictate the required content, health insurers and employers or others serving as health plan administrators or sponsors need to use care to ensure that SBCs are prepared appropriately and provided when and how required. Failure to timely deliver the SBC not only can trigger penalties under ERISA against the plan administrator and/or against the insurer under the ACA market reform rules, noncompliance with the SBC requirements also is among the listed ACA compliance defects that can expose the sponsoring employer to excise tax penalties under the Internal Revenue Code.

In order to fulfill this and other important ACA and other federal health plan notice and reporting mandates, employer and other plan sponsors, administrators and fiduciaries generally must finalize their health plan design well in advance of the date the new health plan design is intended to take effect. The Agencies SBC regulations generally require that the SBC be provided before the first day of the enrollment period and that updated SBCs be provided whenever any material change in benefits or coverage is enacted after the delivery of the original SPB. The requirement to prepare and deliver the SBC is in addition to the current federal mandate that plan administrators provide written notice of material changes to a health plan at least 60 days before the effective date of the material change and a host of other health plan notice requirements imposed by federal law. Employers, insurers, third party administrators and health plan fiduciaries need to understand and make appropriate arrangements to ensure that these SBC and other notice and reporting requirements are timely and appropriately completed.

About The Author

A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., Ms. Stamer’s more than 28 years’ of leading edge work as an practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

A Fellow in the American College of Employee Benefit Counsel, Ms. Stamer uses her deep and highly specialized knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions. In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others. Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation, Ms. Stamer also advises and represents clients on OCR and other HHS, Department of Labor, IRS, FTC, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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Posted by Cynthia Marcotte Stamer

Brace For Health Plan OCR HIPAA Audits

March 22, 2016

Employer and union sponsored health plans, their sponsors, fiduciaries, and business associates should brace for audits and enforcement of the Privacy, Security, and Breach Notification rules by the Department of Health & Human Service Office of Civil Rights (OCR) follow OCR’s 2016 audit program on the heels of its announcement last week of two large HIPAA settlements last week.

OCR confirmed today it is sending emails notifying health plans, healthcare providers, healthcare clearing houses (Covered Entities) and their business associates identified as part of the kickoff of its next phase of audits of Covered Entities. In light of the HIPAA verification rules and the notorious spread of opportunistic identity theft and other fraud by opportunistic Cybercriminals following these types of announcements, Covered Entities and business associates should carefully verify the requests validity and manage the response to avoid violating HIPAA in responding and position for defensibility against potential penalties.

Even if health plans or other Covered Entities reviewed their practices in the last 12-months, most will want to update this review in response to new OCR guidance and enforcement actions, including new guidance on obligations to provide plan members or other subjects of protected health information with access to or copies of their records and other guidance, as well as the ever-expanding list of enforcement actions by OCR.

To catch up on this latest guidance, Solutions Law Press, Inc. ™ invites you to register to participate in a special WebEx briefing on “HIPAA Update: The Latest On Security, Patient Access & Other HIPAA Developments” on Wednesday, March 30, 2016 beginning at Noon Central Time on Wednesday, March 30, 2016.

2016 Audit Program

In its 2016 Phase 2 HIPAA Audit Program, OCR will review the policies and procedures adopted and employed by Covered Entities and their business associates to meet selected standards and implementation specifications of the Privacy, Security, and Breach Notification Rules. OCR says it will primarily conduct these audits as desk audits, although some on-site audits will be conducted.

According to today’s announcement, the 2016 audit process begins with verification of an entity’s address and contact information. OCR is sending emails to Covered Entities and business associates requesting that contact information be provided to OCR on time. OCR will then send a pre-audit questionnaire to gather data about the size, type, and operations of potential audit targets. OCR says this data will be used with other information to create potential audit subject pools. Recipients should contact qualified legal counsel immediately for advice and assistance about proper procedures to verify the email is in fact from OCR and for assistance in responding.

If an entity does not respond to OCR’s request to verify its contact information or pre-audit questionnaire, OCR will use publicly available information about the entity to create its audit subject pool. Therefore an entity that does not respond to OCR may still be selected for an audit or subject to a compliance review. Communications from OCR will be sent via email and may be incorrectly classified as spam. If your entity’s spam filtering and virus protection are automatically enabled, OCR expects entities to check their junk or spam email folder for emails from OCR.

The announcement also reflects that OCR is still developing other aspects of the audit program. OCR will post updated audit protocols on its website closer to conducting the 2016 audits. The audit protocol will be updated to reflect the HIPAA Omnibus Rulemaking and can be used as a tool by organizations to conduct their own internal self-audits as part of their HIPAA compliance activities.

OCR says its audits will enhance industry awareness of compliance obligations and enable OCR to better target technical assistance regarding problems identified through the audits. Through the information gleaned from the audits, OCR will develop tools and guidance to aid the industry in compliance self-evaluation and in preventing breaches. OCR plans to use results and procedures used in the phase 2 audits to develop its permanent HIPAA audit program.

OCR Settlements Show Enforcement Risk

The audit program announcement comes less than a week after OCR announced millions of dollars of new penalties under settlements with two Covered Entities:

A $1,555,000 settlement with North Memorial Health Care of Minnesota;
A $3.9 million settlement with Feinstein Institute for Medical Research.

The two settlements drive home again the substantial liability that health care providers, health plans, health care clearinghouses and their business associates risk for violating HIPAA.

Feinstein Settlement

Feinstein is a biomedical research institute organized as a New York not-for-profit corporation sponsored by Northwell Health, Inc., formerly known as North Shore Long Island Jewish Health System, a large health system headquartered in Manhasset, New York comprised of 21 hospitals and over 450 patient facilities and physician practices.

OCR’s investigation began after Feinstein filed a breach report indicating that on September 2, 2012, a laptop computer containing the electronic protected health information (ePHI) of approximately 13,000 patients and research participants was stolen from an employee’s car. The ePHI stored in the laptop included the names of research participants, dates of birth, addresses, social security numbers, diagnoses, laboratory results, medications, and medical information about potential participation in a research study.

OCR’s investigation discovered that Feinstein’s security management process was limited in scope, incomplete, and insufficient to address potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI held by the entity. Further, Feinstein lacked policies and procedures for authorizing access to ePHI by its workforce members, failed to implement safeguards to restrict access to unauthorized users, and lacked policies and procedures to govern the receipt and removal of laptops that contained ePHI into and out of its facilities. For electronic equipment procured outside of Feinstein’s standard acquisition process, Feinstein failed to implement proper mechanisms for safeguarding ePHI as required by the Security Rule.

“Research institutions subject to HIPAA must be held to the same compliance standards as all other HIPAA-covered entities,” said OCR Director Jocelyn Samuels. “For individuals to trust in the research process and for patients to trust in those institutions, they must have some assurance that their information is kept private and secure.”

The resolution agreement and corrective action plan may be found on the OCR website at http://www.hhs.gov/hipaa/for-professionals/compliance-enforcement/agreements/Feinstein/index.html.

North Memorial

The Feinstein settlement announcement follows yesterday’s announcement of a $1.5 million plus settlement with North Memorial to resolve HIPAA charges that it failed to implement a business associate agreement with a major contractor and failed to institute an organization-wide risk analysis to address the risks and vulnerabilities to its patient information. North Memorial is a comprehensive, not-for-profit health care system in Minnesota that serves the Twin Cities and surrounding communities.

The settlement highlights the importance for healthcare providers, health plans, healthcare clearinghouses and their business associates to comply with HIPAA’s business associate agreement and other HIPAA organizational, risk assessment, privacy and security, and other requirements.

OCR’s announcement emphasizes the importance of meeting these requirements. “Two major cornerstones of the HIPAA Rules were overlooked by this entity,” said Director Samuels. “Organizations must have in place compliant business associate agreements as well as an accurate and thorough risk analysis that addresses their enterprise-wide IT infrastructure.”

The settlement comes from charges filed after OCR initiated its investigation of North Memorial following receipt of a breach report on September 27, 2011, which indicated that an unencrypted, password-protected laptop was stolen from a business associate’s workforce member’s locked vehicle, impacting the ePHI of 9,497 individuals.

OCR’s investigation indicated that North Memorial failed to have in place a business associate agreement, as required under the HIPAA Privacy and Security Rules, so that its business associate could perform certain payment and health care operations activities on its behalf. North Memorial gave its business associate, Accretive, access to North Memorial’s hospital database, which stored the ePHI of 289,904 patients. Accretive also received access to non-electronic protected health information as it performed services on-site at North Memorial.

The investigation further determined that North Memorial failed to complete a risk analysis to address all of the potential risks and vulnerabilities to the ePHI that it maintained, accessed, or transmitted across its entire IT infrastructure — including but not limited to all applications, software, databases, servers, workstations, mobile devices and electronic media, network administration and security devices, and associated business processes.

In addition to the $1,550,000 payment, North Memorial is required to develop an organization-wide risk analysis and risk management plan, as required under the Security Rule. North Memorial will also train appropriate workforce members on all policies and procedures newly developed or revised pursuant to this corrective action plan.

The Resolution Agreement and Corrective Action Plan can be found on the HHS website at: http://www.hhs.gov/hipaa/for-professionals/compliance-enforcement/agreements/north-memorial-health-care/index.html.
Settlement Latest Reminder To Manage HIPAA Risks.

Following up on OCR’s imposition of its second-ever HIPAA Civil Monetary Penalty (CMP) and the latest in an ever-growing list of settlements by Covered Entities under HIPAA, these latest settlements illustrate the substantial liability that Covered Entities face for violating HIPAA. To avoid these liabilities, Covered Entities must constantly be diligent to comply with the latest guidance of OCR about their obligations under HIPAA.

As OCR continues to issue additional guidance as well as supplement this guidance through information shared in settlement agreements like the North Memorial settlement, even if Covered Entities reviewed their practices in the last 12-months, most will want to update this review in response to new OCR guidance and enforcement actions, including new guidance on obligations to provide plan members or other subjects of protected health information with access to or copies of their records and other guidance, as well as the ever-expanding list of enforcement actions by OCR.

Since the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH) amended HIPAA, Covered Entities face growing responsibilities and liability for maintaining the security of ePHI.

In response to HITECH, OCR continues to use a carrot and stick approach to encouraging and enforcing compliance. As demonstrated by OCR’s imposition of the second-ever HIPAA Civil Monetary Penalty (CMP) of $239,000 against Lincare and the ever-growing list of Resolution Agreements OCR announces with other Covered Entities, OCR continues to step up enforcement against Covered Entities that breach the Privacy and Security Rules. See OCR’s 2nd-Ever HIPAA CMP Nails Lincare For $239,000.

On the other hand, OCR also continues to encourage voluntary compliance by Covered Entities by sharing guidance and tools to aid Covered Entities to understand fulfill their HIPAA responsibilities such as the HIPAA Security Rule Crosswalk to NIST Cybersecurity Framework (Crosswalk) unveiled by OCR on February 24, 2016.The crosswalk that maps the HIPAA Security Rule to the standards of the National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity (the Cybersecurity Framework) as well as mappings to certain other commonly used security frameworks.

While stating that the HIPAA Security Rule does not require use of the NIST Cybersecurity Framework, OCR says it hopes the Crosswalk will provide “a helpful roadmap” for HIPAA Covered Entities and their business associates to understand the overlap between the NIST Cybersecurity Framework, the HIPAA Security Rule, and other security frameworks that can help Covered Entities safeguard health data in a time of increasing risks and help them to identify potential gaps in their programs.

At the same time, OCR’s announcement of its release of the Crosswalk also cautions users that “use of the Framework does not guarantee HIPAA compliance.” Rather, OCR says “the crosswalk provides an informative tool for entities to use to help them more comprehensively manage security risks in their environments.

With a USA Today report attributing more than 40 percent of data breaches to the healthcare industry over the last three years 91 percent of all health organizations having reporting breaches over the last two years, OCR has made clear that it intends to zealously investigate and enforce the Security Rules against Covered Entities that violate the Security Rules against Covered Entities that fail to take suitable steps to safeguard the security of PHI as required by the HIPAA Security Rule.

To meet these requirements, the HIPAA Security Rule requires that Covered Entities conduct and be prepared to product documentation of their audit and other efforts to comply with the Security Rule Most Covered Entities will want to consider including an assessment of the adequacy of their existing practices under the Crosswalk and other requirements disclosed by OCR in these assessments to help position the Covered Entity to defend or mitigate HIPAA CMP and other liabilities in the event of a HIPAA breech or audit.

Changing Rules Complicate Compliance

In addition to maintaining adequate security, HIPAA also requires Covered Entities to provide individuals with the right to access and receive a copy of their health information from their providers, hospitals, and health insurance plans in accordance with the HIPAA Privacy Rule. In response to recurrent difficulties experienced by individuals in exercising these rights, OCR recently published supplemental guidance to clarify and promote better understanding and compliance with these rules by Covered Entities. OCR started this process in January, 2015 by releasing a comprehensive fact sheet (Access fact sheet) and the first in a series of topical frequently asked questions (FAQs) addressing patients’ right to access their medical records, which set forth requirements providers must follow in sharing medical records with patients, including that they must do so in a timely manner and in a format that works for the patient.

Earlier this month, OCR followed up by publishing on March 1, 2016 a second set of FAQs addresses additional issues, including the fees individuals may be charged for copies of their health information and the right of individuals to have their health information sent directly to a third party if they so choose.

Covered entities and their business associates should expect OCR to ask about use of these tools in audits and investigations. Accordingly, they should move quickly to review and update their business associate agreements and other practices to comply with this new guidance as well as watch for further guidance and enforcement about these practices from OCR.

Other Key HIPAA Regulatory & Enforcement Changes Raise Responsibilities & Risks

OCR’s new guidance on access to PHI follows a host of other regulatory and enforcement activities. While the particulars of each of these new actions and guidance vary, all send a very clear message: OCR expects Covered Entities and their business associates to comply with HIPAA and is offering tools and other guidance to aid them in that process. In the event of a breach or audit, Covered Entities and their business associates need to be prepared to demonstrate their efforts to comply.

Those that cannot show adequate compliance efforts should be prepared for potentially substantial CMP or Resolution Agreement payments and other sanctions.

Register For 3/30 Webex Briefing

Solutions Law Press, Inc.™ invites to catch up on the latest guidance on the Covered Entities’ responsibility under HIPAA to provide access to patients to PHI by registering here to participate in the “HIPAA Update: The Latest On Security, Patient Access & Other HIPAA Developments” Webex briefing by attorney Cynthia Marcotte Stamer that Solutions Law Press, Inc.™ will host beginning at Noon Central Time on Wednesday, March 30, 2016.

About The Author

Cynthia Marcotte Stamer is a practicing attorney and management consultant, author, public policy advocate and lecturer widely recognized for her extensive work and pragmatic thought leadership, experience, publications and training on HIPAA and other privacy, medical records and data and other health care and health plan concerns.
Recognized as “LEGAL LEADER™ Texas Top Rated Lawyer” in both Health Care Law and Labor and Employment Law, a “Texas Top Lawyer,” an “AV-Preeminent” and “Top Rated Lawyer” by Martindale-Hubble and as among the “Best Lawyers In Dallas” in employee benefits 2015 by D Magazine; Ms. Stamer has more than 28 years of extensive proven, pragmatic knowledge and experience representing and advising health industry clients and others on operational, regulatory and other compliance, risk management, product and process development, public policy and other key concerns.

As a core component of her work as the Managing Shareholder of Cynthia Marcotte Stamer, PC, the Co-Managing Member of Stamer Chadwick Soefje PLLC, Ms. Stamer has worked extensively throughout her nearly 30 year career with health care providers, health plans, health care clearinghouses, their business associates, employers, banks and other financial institutions, their technology and other vendors and service providers, and others on legal and operational risk management and compliance with HIPAA, FACTA, PCI, trade secret, physician and other medical confidentiality and privacy, federal and state data security and data breach and other information privacy and data security rules and concerns; prevention, investigation, response, mitigation and resolution of known or suspected data or privacy breaches or other incidents; defending investigations or other actions by plaintiffs, OCR, FTC, state attorneys’ general and other federal or state agencies; reporting and redressing known or suspected breaches or other violations; business associate and other contracting; insurance or other liability management and allocation; process and product development, contracting, deployment and defense; evaluation, commenting or seeking modification of regulatory guidance, and other regulatory and public policy advocacy; training and discipline; enforcement, and a host of other related concerns for public and private health care providers, health insurers, health plans, technology and other vendors, employers, and others.

Beyond her extensive involvement advising and defending clients on these matters, Ms. Stamer also has served for several years as the scrivener for the ABA JCEB’s meeting with OCR for many years. She returns as Chair of the Southern California ISSA Health Care Privacy & Security Summit for the third year in 2016, as well as speaks and serves on the steering committee of a multitude of other programs.

A Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares shared her thought leadership, experience and advocacy on HIPAA and other concerns by her service in the leadership of a broad range of other professional and civic organization including her involvement as the Vice Chair of the North Texas Healthcare Compliance Association, Executive Director of the Coalition on Responsible Health Policy and its PROJECT COPE; Coalition on Patient Empowerment, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children; former Board Compliance Chair and Board member of the National Kidney Foundation of North Texas, current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, immediate past RPTE Representative to ABA Joint Committee on Employee Benefits Council Representative and current RPTE Representative to the ABA Health Law Coordinating Counsel, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.

Ms. Stamer also is a highly popular lecturer, symposia chair and author, who publishes and speaks extensively on health and managed care industry, human resources, employment and other privacy, data security and other technology, regulatory and operational risk management. Examples of her many highly regarded publications on these matters include “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security: Beyond HIPAA,” as well as thousands of other publications, programs and workshops these and other concerns for the American Bar Association, ALI-ABA, American Health Lawyers, Society of Human Resources Professionals, the Southwest Benefits Association, the Society of Employee Benefits Administrators, the American Law Institute, Lexis-Nexis, Atlantic Information Services, The Bureau of National Affairs (BNA), InsuranceThoughtLeaders.com, Benefits Magazine, Employee Benefit News, Texas CEO Magazine, HealthLeaders, the HCCA, ISSA, HIMSS, Modern Healthcare, Managed Healthcare, Institute of Internal Auditors, Society of CPAs, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other symposia and publications. She also has served as an Editorial Advisory Board Member for human resources, employee benefit and other management focused publications of BNA, HR.com, Employee Benefit News, InsuranceThoughtLeadership.com and many other prominent publications and speaks and conducts training for a broad range of professional organizations and for clientson the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. For additional information about Ms. Stamer, see CynthiaStamer.com or the Stamer│Chadwick │Soefje PLLC or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ All other rights reserved.

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Posted by Cynthia Marcotte Stamer

SCOTUS: States Can’t Require Reporting of ERISA Health Plan Data

March 2, 2016

Employer and union sponsored group health plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) and their insurers are not required to comply with a Vermont state law that requires health insurers and certain other parties to report payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database, according to the United States Supreme Court’s March 1, 2016 ruling in Gobeille v. Liberty Mutual Insurance Company.

In a 6-2 opinion authored by Justice Kennedy, the Supreme Court held in Gobeille that ERISA Section 514 preempts Vermont’s requirement that health insurers and other health benefit payers report health care claims and other information relating to health care services to a state agency for inclusion in an all-inclusive health care data base.

The lawsuit stemmed from a lawsuit challenging Vermont’s attempt to enforce the law against Liberty Mutual Insurance Company’s self-insured health plan (Plan). Liberty Mutual provides benefits under the Plan to its thousands of employees which are located in all 50 States of which only approximately 140 of which are located in Vermont. When Vermont sought to require the Plan’s third-party administrator, Blue Cross Blue Shield of Massachusetts, Inc. (Blue Cross) to transmit its files on the Plan’s eligibility, medical claims, and pharmacy claims for the Plan’s Vermont members to the state data base, Liberty Mutual was concerned that the disclosure of such confidential information might violate its fiduciary duties, It instructed Blue Cross not to comply and sued seeking a declaratory judgement that ERISA pre-empts application of Vermont’s statute and regulation to the Plan and an injunction prohibiting Vermont from trying to acquire data about the Plan or its members. After the District Court granted summary judgment to Vermont, the Second Circuit reversed, concluding that Vermont’s reporting scheme is pre-empted by ERISA as applied to the Plan.

When Vermont appealed the Second Circuit’s decision to the Supreme Court, the Supreme Court sided with Liberty Mutual. It upheld the Second Circuit’s ruling, holding that the preemption provisions of ERISA bar Vermont from enforcing the reporting requirement against ERISA-covered health plans or their administrators.

Righting for the Supreme Court Majority, Justice Kennedy explained that ERISA expressly pre-empts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C §1144(a). Commenting that this preemption reaches to any state law that has an impermissible “connection with” ERISA plans, Justice Kennedy took judicial notice that ERISA seeks to make the benefits promised by an employer more secure by mandating certain uniform reporting and other oversight systems and other standard procedures, Justice Kennedy said ERISA’s extensive reporting, disclosure, and recordkeeping requirements are central to, and an essential part of, this uniform plan administration system. He also wrote that ERISA’s uniform rule design also makes clear that it is the Secretary of Labor, not the separate States, that is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans to report data such as that sought by Vermont. Because Vermont’s law and regulation also govern plan reporting, disclosure, and recordkeeping, Justice Kennedy explained that pre-emption is necessary in order to prevent multiple jurisdictions from imposing differing or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability.

Justice Kennedy also found unpersuasive Vermont’s counterargument that respondent has not shown that the State scheme has caused it to suffer economic costs, stating that Liberty Mutual need not wait to bring its pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs. In addition, Justice Kennedy wrote that the fact that ERISA and the state reporting scheme have different objectives does not transform Vermont’s direct regulation of a fundamental ERISA function into an innocuous and peripheral set of additional rules and that Vermont’s regime also cannot be saved by invoking the State’s traditional power to regulate in the area of public health. Furthermore, Justice Kennedy added that ERISA’s pre-existing reporting, disclosure, and recordkeeping provisions maintain their pre-emptive force regardless of whether the new Patient Protection and Affordable Care Act’s reporting obligations also pre-empt state law.

About The Author

Recognized as a “Top” attorney in employee benefits, labor and employment and health care law extensively involved in health and other employee benefit and human resources policy and program design and administration representation and advocacy throughout her career, Cynthia Marcotte Stamer is a practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick│Soefje PLLC, author, pubic speaker, management policy advocate and industry thought leader with more than 27 years’ experience practicing at the forefront of employee benefits and human resources law.

A Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on health and other employee benefit, human resources and insurance matters and policy.

Ms. Stamer helps management manage. Ms. Stamer’s legal and management consulting work throughout her 27 plus year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce management operations and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy. Well known for her extensive work with health care, insurance and other highly regulated entities on corporate compliance, internal controls and risk management, her clients range from highly regulated entities like employers, contractors and their employee benefit plans, their sponsors, management, administrators, insurers, fiduciaries and advisors, technology and data service providers, health care, managed care and insurance, financial services, government contractors and government entities, as well as retail, manufacturing, construction, consulting and a host of other domestic and international businesses of all types and sizes. Common engagements include internal and external workforce hiring, management, training, performance management, compliance and administration, discipline and termination, and other aspects of workforce management including employment and outsourced services contracting and enforcement, sentencing guidelines and other compliance plan, policy and program development, administration, and defense, performance management, wage and hour and other compensation and benefits, reengineering and other change management, internal controls, compliance and risk management, communications and training, worker classification, tax and payroll, investigations, crisis preparedness and response, government relations, safety, government contracting and audits, litigation and other enforcement, and other concerns.

Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see CynthiaStamer.com or the Stamer│Chadwick │Soefje PLLC or contact Ms. Stamer via email to here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

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Comments Off on SCOTUS: States Can’t Require Reporting of ERISA Health Plan Data | ACA, Claims Administration, employee, Employee Benefits, Employer, Employers, ERISA, fiduciary duty, Fiduciary Responsibility, Form 5500, health benefit, Health Benefits, health Care, health insurance, health insurance marketplace, health plan, Health Plans, health reform, HIPAA, HIPAA, Preemption, Uncategorized | Tagged: 10th Amendment, eligibility, Employee Benefits, Employee Retirement Income Security act, enrollment, ERISA, Health Data, Health Data Privacy, Health Data Reporting, Health Insurance, Health Plan, HIPAA, Plan Administration, Privacy, reporting, Supreme Court, third party administrator, Vermont | Permalink
Posted by Cynthia Marcotte Stamer

Health Care Providers’ ERISA Health Plan Benefit Opportunities & Employee Benefits Compliance Obligations Topic of 9/15 Study Group

September 9, 2015

Solutions Law Press, Inc. is happy to share information about this upcoming free health industry study group meeting on 9/15/2015 in Irving, Texas.

NORTH TEXAS HEALTHCARE COMPLIANCE PROFESSIONALS ASSOCIATION

Invites Members and Guests to Our Next Group Luncheon

Employee Benefit Security Administration Insights On Healthcare Organization’s Health & Other Employee Benefit Plan Rights & Responsibilities Under Employee Retirement Income Security Act

Featuring

Kristi Gotcher

U.S. Department of Labor Employee Benefit Security Administration Investigator

Tuesday, September 15, 2015

11:30 a.m. to 1:30 p.m.

DFW Hospital Council Offices

250 Decker Drive

Irving, Texas

RSVP here by Noon on September 14, 2015

Space Limited! Register Early To Reserve Your Spot To Participate!

Please share this invitation with others who might be interested in this topic or other NTHCPA events!

The North Texas Healthcare Compliance Professionals Association (NTHCPA) invites members and other interested health care compliance professionals to join us on Tuesday, September 15, 2015 from 11:30 a.m. to 1:30 p.m. for our Study Group Luncheon featuring a program on “Employee Benefit Security Administration Insights On Healthcare Organization’s Health & Other Employee Benefit Plan Rights & Responsibilities Under Employee Retirement Income Security Act” from U.S. Department of Labor Employee Benefit Security Administration (EBSA) Investigator Kristi Gotcher.

The health and other employee benefit plan rules of the Employee Retirement Income Security Act (ERISA) generally offer important protections and create significant compliance challenges for health care organizations and providers. On one hand, health care providers generally rely heavily on their or their patient’s ability to obtain health benefits promised under employer or union-sponsored health plans covering their patients to help reimbursement provider charges. Meanwhile, health care providers and their leaders also can incur significant liability for failing to comply with ERISA’s rules when establishing and maintaining health or other employee benefit programs for their own employees. Drawing on her involvement as investigator with the Department of Labor agency primarily responsible for both interpreting and enforcing ERISA’s rules, EBSA Ms. Gotcher will share key updates and insights on both how ERISA and the EBSA can help patients and providers enforce benefit rights under ERISA-covered health plans and key health and highlight employee benefit compliance responsibilities that health care organizations and their leaders need to ensure that their own health and other employee benefit programs meet to avoid violating ERISA.

About the Speaker

Kristi A. Gotcher is an Investigator with the United States Department of Labor, Employee Benefits Security Administration (EBSA) in the Dallas Regional Office. Kristi began working for EBSA in the Dallas Regional Office in November 2007 as a Benefits Advisor. She earned her Bachelor of Arts in Social Political Relations from St. Edwards University and a J.D. from Texas Wesleyan University School of Law (now Texas A&M University School of Law). Ms. Gotcher is licensed to practice law in the State of Texas.

Registration & Meeting Details

The meeting scheduled from 11:30 a.m. to 1:30 p.m. on Tuesday, September 15, 2015 at the DFW Hospital Council Offices located at 250 Decker Drive, Irving Texas. Participants who timely R.S.V.P. will enjoy a complimentary luncheon. Networking and lunch service will begin at 11:30. Our program will begin at Noon.

NTHCPA encourages members and other interested health care compliance professionals to register early to reserve their spot to participate and to share this invitation with others in the industry who might benefit from participation.

There is no charge to participate in the meeting. However space is limited and available only on a first come, first serve basis. To ensure your spot and help us to arrange for adequate space and refreshments for this meeting, R.S.V.P. here as soon as possible and no later than Noon on September 14, 2015. Walk in guests will be accommodated on a space-available basis only.

Thanks To Meeting Underwriter Stamer ׀ Chadwick ׀ Soefje, PLLC

NTHCPA and its members extend our thanks to Cynthia Marcotte Stamer, P.C. and the other members of Stamer ׀ Chadwick ׀ Soefje PLLC for underwriting this month’s study group luncheon and other support of NTHCPA.

A boutique firm of exceptionally experienced and skilled “big-firm” lawyers committed to changing the way law firms serve their clients, Stamer │Chadwick │Soefje, PLLC delivers sophisticated legal advice and innovative solutions to the most challenging and complex problems. Simply put, Stamer │Chadwick │Soefje, PLLC attorneys are “Solutions Lawyers™.”

Stamer │Chadwick │Soefje, PLLC attorneys deliver sophisticated legal advice and innovative solutions to the most challenging and complex problems. Stamer │Chadwick │Soefje, PLLC attorneys possess the breadth of experience to respond to the unique legal and operational challenges health industry and other clients face and help guide them toward pragmatic resolutions that make sense for them. “Solutions Lawyers™ possess the breadth of experience to respond to the unique challenges our corporate and individual clients face and help guide them toward pragmatic resolutions that make sense for them.

Founded by nationally-known, healthcare and labor & employment attorney Cynthia Marcotte Stamer; labor & employment attorney Robert G. Chadwick; and professional liability and civil litigation attorney Timothy B. Soefje, Stamer │Chadwick │Soefje, PLLC focuses on advising and representing businesses and professionals nationally in the areas of healthcare, cyber liability, ERISA, employee benefits, labor & employment, corporate and commercial litigation, professional liability, construction litigation, and insurance defense. All three attorneys are rated AV® Preeminent™ by Martindale-Hubbell® Peer Review Ratings™ Ms. Stamer and Mr. Chadwick are both Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, are Fellows in the American Bar Foundation, and recognized as “Top Lawyers” in Labor and Employment Law. Ms. Stamer also has received recognition as a “Top” attorney in health care and employee benefits law and is a Fellow in the American College of Employee Benefit Council.

Ms. Stamer more than 28 years’ experience advising and representing health industry and employee benefit clients on a wide range of legal, public policy, management and operational concerns as well as extensive leadership and management experience serving in on the board of health industry nonprofit organizations. Nationally recognized for her legal work, advocacy, publications, writings and presentations on health industry concerns, Ms. Stamer provides legal and management advice, training and coaching, defense, public policy and regulatory advocacy to health industry and other clients on health and other regulatory and operational compliance, federal and state public policy and enforcement, managed care and other contracting, reimbursement, fraud, quality, employment, staffing and other workforce, benefits, licensing, credentialing and peer review, safety, disaster preparedness and response, HIPAA and other privacy and data security, corporate governance, investigations and internal controls, and a host of other health industry compliance and risk management and other legal and operational concerns. In addition to her legal experience, Ms. Stamer also contributes her experience and talents to serving in a number of health industry and other civil and professional groups. Among other things, Ms. Stamer serves as Vice President of the NTHCPA, the RPTE representative to the American Bar Association (ABA) Joint Committee on Employee Benefits Council and scrivener for its annual agency meeting with the Office of Civil Rights, the ABA International Section Life Sciences and Health Law Committee Vice President of Policy, RPTE Liaison to the ABA Health Care Coordinating Counsel, TIPS Employee Benefit Committee Vice Chair, Founder and Executive Director of the Project COPE: The Coalition on Patient Empowerment, and National Physicians Council for Healthcare Policy. She also previously served as President and Founding Board Member of the Alliance for Health Care Excellence and its Health Care Heroes and Patient Empowerment Programs, as RPTE Employee Benefits & Other Compensation Group Chair and Welfare Benefit Committee Vice Chair, Exempt Organizations Coordinator of the Gulf States Area TEGE Council, Board President and Audit Committee Chair of the Richardson Development Center for Children ECI Agency, National Kidney Foundation of North Texas Board Audit Committee Chair, the United Way of North Texas Long Range Planning Committee. She also has and continues to serve in the leadership of many other civic and professional boards, seminar faculties, editorial advisory boards and publishes and speaks extensively on health industry and employee benefit related concerns.

Mr. Chadwick has extensive experience advising and defending health industry and other clients on OSHA and other occupational health and safety, employee benefits, compensation and other labor and employment concerns as well as defending boards and other management leaders against management liability claims.

Mr. Soefje has extensive experience advising and representing health industry clients and professionals on medical malpractice, officers and directors liability and other professional liability, errors and omissions, construction defect and other litigation and disputes.

For additional information, contact Ms. Stamer cstamer@solutionslawyer.net

About the NTHCPA

NTHCPA exists to champion ethical practice and compliance standards and to provide the necessary resources for ethics and compliance Professionals and others in North Texas who share these principles. The vision of NTHCPA is to be a pre-eminent compliance and ethics group promoting lasting success and integrity of organizations within North Texas.

About Solutions Law Press

Other Helpful Resources & Other Information

We hope that this information is useful to you. If you found these updates of interest, you also be interested in one or more of the following other recent articles published on the Coalition for Responsible Health Care Reform electronic publication available here, our electronic Solutions Law Press Health Care Update publication available here, or our HR & Benefits Update electronic publication available here. You also can get access to information about how you can arrange for training on “Building Your Family’s Health Care Toolkit,” using the “PlayForLife” resources to organize low-cost wellness programs in your workplace, school, church or other communities, and other process improvement, compliance and other training and other resources for health care providers, employers, health plans, community leaders and others here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail by creating or updating your profile here. You can reach other recent updates and other informative publications and resources.

Examples of some of these recent health care related publications include:

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Posted by Cynthia Marcotte Stamer

Legal Review Of Health Plan Documents, Processes Needed To Mitigate Employer’s Excise Tax & Other Health Plan Risks

August 21, 2015

Employers sponsoring health plans and members of their management named as plan fiduciaries or otherwise having input or oversight over health plan concerns should verify their company’s group health plan meets the out-of-pocket maximum rules of the Patient Protection and Affordable Care Act (ACA) § 1302(c)(1) as well as a long list of other federal health benefit rules to minimize the risk that violations will compel the sponsoring employer to self-assess, self-report on IRS Form 8928, and pay a $100 per day per violation excise tax penalty and while expose the plan and its fiduciaries to fiduciary or other liability under the Employee Retirement Income Security Act (ACA). Consequently, sponsoring employers and their management generally will want to ensure that their plan documents are properly updated to comply with the out-of-pocket maximum and other federal requirements, to require contractual commitments to administer the health plan in compliance with and to report, correct, and indemnify for violations of these requirements in vendor contracts with their health plan insurers, administrators and other vendors, and conduct documented audits to verify the health plan’s operational compliance with these requirements as interpreted by the Department of Health & Human Services (HHS), Department of Labor (DOL) and Internal Revenue Service (IRS) in form and operation. The new self-reporting and excise tax self-assessment and payment requirements for employers coupled with already long-standing fiduciary and other liabilities for fiduciaries, plan administrators and others makes it important that employers sponsoring group health plans and their management or other leaders overseeing or participating in plan design or vendor selection, plan administration or other plan related activities seek the advice and help of qualified, experienced legal counsel for assistance with conducting an appropriate compliance review and risk assessment of their health plans, correcting or taking other steps to mitigate risks from any past or existing violations, and steps to take to tighten documents, vendor contracts, and processes to mitigate compliance or other risks going forward.

Employers, Insurers & Plan Fiduciaries Face Big Risks From Federal Health Plan Rule Violations

As amended by ACA, health plan violations of ACA and various other federal health plan mandates carry big risks for health plans, their sponsoring employers, and representatives of sponsoring employers, insurers and third party administrators responsible as fiduciaries for administering a group health plan in accordance with these federal rules. As amended by ACA, federal law imposes significant penalties against plans, their fiduciaries and even the sponsoring employer if the group health plan violates the ACA out-of-pocket limit or a long list of other ACA and other federal group health rules. Group health plans can face lawsuits from covered persons, their health care providers as assignees or the DOL, to enforce rights to benefits, plus attorneys’ fees and other costs of enforcement. Beyond benefit litigation, the employer or representatives of the sponsoring employer, if any, named or acting as fiduciaries, insurer or third party service providers named or acting as fiduciaries, also could face fiduciary lawsuits seeking damages, equitable relief, and attorneys’ fees and costs of court, for failing to prudently administer the plan in accordance with its terms and the law brought by covered persons or their beneficiaries or the DOL as well as fiduciary breach penalties if the fiduciary breach action is brought by the DOL. If the plan fails to comply with claims and appeals procedures or other ERISA notification requirements, parties named or functioning as the plan administrator for this purpose also could face penalties of up to $125 per violation per day in the case of enforcement actions brought by participants and beneficiaries or $1025 per violation per day in the case of actions brought by the DOL, plus attorneys’ fees and other costs of enforcement.

Except in rare circumstances where the sponsoring employer has carefully contracted to transfer fiduciary liability to its insurer or administrator and otherwise does not exercise or have a fiduciary obligation to exercise discretion or control over these responsibilities, employers sponsoring group health plans that violate federal mandates like the out-of-pocket limit often ultimately bear some or all of these liabilities even if the violation actually was committed by a plan vendor hired to administer the program either because the plan documents name the employer as the “named fiduciary” or “plan administrator” under ERISA, the employer bears fiduciary responsibility functionally for selection or oversight of the culpable party, the employer signed a contract, resolution or plan document obligating the employer to indemnify the service provider for the liability, or a combination of these reasons. Even where the employer avoids these direct or indirect ERISA exposures, however, employers now also need to be concerned that out-of-pocket limitation or other federal health plan rule violations will trigger expensive excise tax liability for the sponsoring employer.

As part of ACA, the Internal Revenue Code now generally requires employers sponsoring a group health plan that violates the ACA out-of-pocket limit or a long list of other federal health plan rules after 2013 to self-assess, report and pay stiff new excise tax penalties of $100 per day per violation when filing their annual tax return. See, Businesses Must Confirm & Clean Up Health Plan ACA & Other Compliance Following Supreme Court’s King v. Burwell　Decision;　 More Work For Employers, Benefit Plans Following SCOTUS Same-Sex Marriage　Ruling; 2016 & 2017 Health Plan Budgets, Workplans Should Anticipate Expected Changes To　SBCs. Since prompt self-audit and correction can help mitigate these liabilities, business leaders should act quickly to engage experienced legal counsel for their companies for advice about how to audit their group health plan’s 2014 and 2015 compliance with the out-of-pocket limit and other federal health plan rules within the scope of attorney client privilege while managing fiduciary exposures that could result if the audit is improperly structured or conducted, as well as options for addressing potential 2014, 2015 and future years excise tax and other exposures that compliance deficiencies with these rules could trigger.

While businesses inevitably will need to involve or coordinate with their accounting, broker, and other vendors involved with the plans, businesses generally will want to get legal advice in a manner that preserves their potential to claim attorney-client privilege to protect against discovery in the event of future enforcement or litigation actions sensitive discussions and analysis　about compliance audits, plan design choices, and other risk management and liability planning as well as to get help identifying potential plan design, contracting, procedural or other changes that may be needed to fix compliance deficiencies and mitigate other risks, particularly in light of complexity of the exposures and risks.

The Supreme Court’s recent King v. Burwell decision makes it particularly important that employers and other group health plan sponsors, and those named or serving functionally as the plan administrator or other fiduciary responsible for properly administering the group health plan in accordance with these rules move quickly to manage these risks. With the continued limited Republican majority in the Senate, Republicans lack sufficient votes to override a promised Presidential veto of any legislation that would repeal or substantially modify ACA. Meanwhile, President Obama is moving to help ensure that his Presidential Legacy includes implementation of ACA and to mitigate ACA’s budgetary impacts by collecting excise tax and other penalties from insurers, plan administrators and employers by instructing the Tri-Agencies to move forward on full implementation and enforcement of ACA and other federal health plan rules. As a consequence, employers that sponsored group health coverage in 2014 need to confirm that their plan complied with the out-of-pocket maximum and other specified federal health plan rules or take timely action to self-assess, report on the Internal Revenue Service (IRS) Form 8928, and pay the $100 per day per violation penalty required by the Internal Revenue Code for 2014 when filing their 2014 business tax return.

Adjusted Out-Of-Pocket Limit Amounts

The ACA out-of-pocket maximum limitation is one of many broad health care reforms enacted by ACA. Under its provisions, federal law now limits the amount of the maximum deductible, co-payments or other cost sharing that most employer or union sponsored group health plans can impose on essential health benefits to the out-of-pocket limitation allowed by ACA § 1302(c)(1). See Public Health Service (PHS) Act §2707(b).

The out-of-pocket limitations of $6,350 for individual only coverage and $12,700 for other than self-only coverage that first took effect with the 2014 plan year, are subject to annual adjustment for inflation under ACA §1302(c)(4) by the premium adjustment percentage beginning this plan year. The IRS recently announced the adjusted limitations that will apply to the 2015 and 2016 plan years. The applicable limits for 2014-2016 are as follows based on this guidance:

Plan Year	Individual Coverage Only	Other Than Self-Only
2014	$6,350	$12,700
2015	6,600	13,200
2016	6,850	13,700

Since noncompliance with this limitation is one of a long list of federal health plan mandates that triggers a duty for the sponsoring employer to self-assess, report and pay an excise tax of $100 per day per violation for post-2013 plan years, employers that sponsored health plans in 2014 generally will want to verify that their plan complied with this out-of-pocket rule in 2014 and ensure that its 2015 plan has been updated to reflect the adjusted limit and otherwise comply with its requirements.

In this respect, the final HHS Notice of Benefit and Payment Parameters for 2016 (2016 Payment Notice) clarifies that the self-only maximum annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or in coverage other than self-only.

While employers can design their group health plans to apply higher out-of-pocket limitations on coverages for non-essential benefits and out-of-network care, plans designed to take advantage of this permitted distinction must be carefully administered to ensure that the limits allowed for non-essential benefits are not improperly applied to essential benefit coverages under the plan. Employers are cautioned to use care to avoid this from occurring by drafting the plan terms and requiring fiduciaries to administer the plan to ensure that:

The plan properly essential and non-essential health benefits, both in terms and in operation;
The limit is properly applied and calculated with respect to all benefits considered essential health benefits; and
The application of higher out-of-pocket limitations for non-essential benefits does not violate other federal health plan rules such as special federal health plan rules regarding out-of-network emergency care, mental health coverage parity, coverage for newborns and mothers, or the like.

Ensure Plan Language & Operations Comply With Tri-Agency Out-Of-Pocket Guidance & Other Federal Health Plan Rules

Updating the out-of-pocket maximum rules of a group health plan to comply with the ACA out-of-pocket maximum rule can be more complicated than many employers or plan fiduciaries might realize since the plan terms, and its administration must comply in form and operation with the regulations and other interpretations of the three agencies jointly responsible for administration and enforcement of this and various other federal health plan rules: the Departments of Health & Human Services (HHS), Internal Revenue Service (IRS), and Labor (DOL) (collectively, the “Tri-Agencies”).

In the case of ACA’s out-of-pocket maximum rules, the Tri-Agencies already have supplemented the guidance in their implementing regulations by publishing a FAQ that gives additional clarification and examples that the Tri-Agencies intend to help explain the proper administration of the rule. Group health plans, their insurers or other fiduciaries, as well as sponsoring employers should take into account all of this existing guidance when reviewing and assessing the compliance of their group health plans, as well as stay vigilant for the publication of additional guidance.

Existing guidance on the out-of-pocket maximum rule states that group health plans and insurance policies generally must count toward the out-of-pocket maximum limit all deductibles, coinsurance, copayments, or similar charges and any other expenditure the group health plan requires a covered person to pay for a qualified medical expense that is an “essential health benefit” within the meaning of ACA other than premiums, balance billing amounts for non-network providers and other out-of-network cost-sharing, or spending for non-essential health benefits.

One of the first considerations should be to ensure that the plan document and parties responsible for administer it properly understand and apply the rule to all charges falling within coverage for “essential health benefits.” Technically, the out-of-pocket limitation only applies to coverage of “essential health benefits” within the meaning of ACA, in any group health plan, whether insured or self-insured. What benefits are considered “essential health benefits” is defined by Tri-Agency regulations. The definition of “essential health benefits” in these Tri-Agency regulations is complicated and generally varies by state, even when the group health plan is self-insured. Sponsors of self-insured group health plans and employers sponsoring plans covering individuals in different states generally will want to seek legal advice about the adequacy of their group health plan’s essential health benefit definition to make sure that these rules and their limitations are met.

When applying these limits, employers, insurers, and administrators of group health plans attempting to distinguish non-essential health coverages such as prescription drug, behavior health, or dental coverages provided separately from otherwise applicable major medical coverage should consult with legal counsel to confirm that those arrangements comply with existing guidance on ACA’s out-of-pocket maximum and other federal mandates in form and operation. This analysis generally should both verify that the plan documents and administrative processes incorporate these requirements generally into the plan document as well as include provisions to ensure that these requirements are properly integrated with other federal mandates requiring cost-sharing for emergency care in the case of behavioral health coverage, the applicable federal mental health parity mandates, and other federal health plan rules. Special care and scrutiny should be applied if the group health plan uses multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization).

Special care also is needed if a group health plan uses separate plan service providers to administer the plan or certain of its provisions. Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. Administrators, insurers or other fiduciaries responsible for administration of these coverages must properly coordinate, and sponsoring employers should consult with legal counsel about auditing their plans for proper coordination of these processes across these different service providers.

Along with making specific plan document and process changes to provide for proper implementation and administration of the out-of-pocket and other federal coverage and benefit mandates, all parties also should review the claims and appeals procedures used in connection with the processing and notification of covered persons about claims and appeals determinations made about denials to ensure that they fully comply with both the DOL’s reasonable claims and appeals regulations and, in the case of non-grandfathered health plans, ACA’s special independent review and other heightened requirements for administering and notifying covered persons or their beneficiaries about claim denials or appeals as any of these violations could trigger the obligation for the sponsoring employer to self-report on IRS Form 8928 and pay the $100 per day per violation ERISA liability for the plan and its fiduciaries, as well as other penalties under ERISA §502(c).

Sponsoring Employers, Plan Fiduciaries and Vendors Should Act To Manage Exposures

Since violations trigger substantial excise tax liability for the sponsoring employer, as well as expose the group health plan and its sponsor, members of management or others acting as fiduciaries to judgments, regulatory penalties, and associated investigation, defense settlement and other costs and disruptions, most sponsoring employers and their leaders generally will want to consult with qualified legal counsel knowledgeable about these health plan rules and their management about steps that they should take to prevent or mitigate legal and financial exposures that violations of the out-of-pocket maximum and other federal health plan mandates can trigger. Timely action generally both can help prevent future violations and their expensive redress and mitigate penalties and other exposures incurred for violations, if any, that may have or in the future inadvertently occur.

As a part of these efforts, steps that plan sponsors and fiduciaries generally should take include.

Having plan documents and other plan materials and communications carefully review and drafted to meet mandates and mitigate risks;
Using care in when selecting and contracting with plan insurers or other vendors, by conducting appropriate documented review and credentialing of each vendor and its practices, as well as reviewing and negotiating administrative, insurance or other vendor agreements to appropriately name and allocate fiduciary status as well as include provisions requiring insurers, administrators and other group health plan vendors appropriately designate to provide contractual commitments that the policies and other plan documentation, systems and practices provided by the vendor are and will be administered in accordance with the out-of-pocket and other legal mandates, to provide certification of compliance and notice of violations, correction and indemnification of compliance deficiencies, and other related assurances and taking other documented prudent safeguards to require compliant practices;
Auditing as part of the vendor selection and renewal process and at other times throughout the year the operational compliance of the administration of the group health plan and taking corrective action as needed;
Ensuring that stop-loss, group or other insurance coverages are drafted to include catchall language to help ensure that the employer does not get left unexpectedly self-insuring the cost of funding benefits mandated by law that the carrier asserts fall outside the policy coverage because of gaps between drafting and the law;
Arranging for fiduciary liability, directors and officers or other coverage, indemnification from financially secure vendors, or other backup funding to help protect or mitigate the potential costs or liabilities that the sponsoring employer or its plan fiduciaries can expect to incur in the event of a challenge to the compliance of their group health plan or its practices; and
Learning and using appropriate processes to document prudent efforts to appropriately administer the plan in a compliant, legally defensible manner throughout the year.

For Legal or Consulting Advice, Legal Representation, Training Or More Information

If you need help reviewing your group health plan or responding to these new or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, help updating or defending your workforce or employee benefit policies or practices, or other related assistance, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see http://www.cynthiastamer.com or the Stamer│Chadwick │Soefje PLLC website or contact Ms. Stamer via email to here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

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Posted by Cynthia Marcotte Stamer

Employers, Plan Administrators Confirm All Form 5500s Timely Filed; Valuable Relief Options Available For Non-Filers

July 28, 2015

Businesses sponsoring 401(k) or other defined contribution or defined benefit pension plans, health plans or other employee benefit plans should verify that any required Form 5500s, Annual Returns of Employee Benefit Plans were timely filed and if any were not, should contact legal counsel about whether they can come into compliance and avoid painful penalties by taking advantage of a newly announced Internal Revenue Service (IRS) low-cost penalty relief program for IRS penalties and a Department of Labor (DOL) voluntary compliance resolution program for Employee Retirement Income Security Act (ERISA) penalties.

In most cases, the Internal Revenue Code and ERISA each separately require that a Form 5500, Annual Return of Employee Benefit Plan be filed each year for the plan by the end of the seventh month after the close of the plan year. For plans that work on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015. Businesses sponsoring employee benefit plans and the plan administrator of an employee benefit plan face substantial penalties under the Internal Revenue Code and ERISA if the required Form 5500 is not timely filed. Under the Internal Revenue Code, a business that fails to file a required Form 5500 can incur IRS penalties of up to $15,000 per return per plan year. In addition, the plan administrator (often the sponsoring business or a member of its management) of an employee benefit plan with unfiled Form 5500s separately also can incur DOL penalties of up to $1000 per day per plan per plan year. By simultaneously filing the late returns under both the new IRS penalty relief program and the long-standing DOL voluntary compliance resolution program, however, qualifying employers can resolve these exposures much more cost effectively.

While the DOL for many years has allowed plan administrators of retirement and other employee benefit plans the opportunity to resolve ERISA late or non-filing penalties through late filing under its Delinquent Filer Voluntary Compliance Program (DFVCP), the IRS only recently has established a companion program for small employers to use to resolve Internal Revenue Code penalty exposures of employers failing to file the required Form 5500 for their retirement plans. Based on its positive experience from a one-year pilot program, however, the IRS in May, 2015 now has implemented a new permanent penalty relief program that allows qualifying employers to resolve the Internal Revenue Code penalties for failing to file a Form 5500 required by the Internal Revenue Code.

The DOL DFVCP is available for use by plan administrators of retirement or welfare benefit plans sponsored by employers of all sizes. Plan administrators of employee benefit plans with unfiled required Form 550s can fix the penalty to resolve their ERISA penalty exposures for non- or late-filing of a required Form 5500s for all unfiled years at $1,500 per submission for “small plans” (generally, fewer than 100 participants at the beginning of the plan year) and $4,000 per submission for “large plans” (generally, 100 participants or more at the beginning of the plan year). A single filing for each plan for all plan years for which a required Form 5500 for that plan has not been timely filed can resolve the potential ERISA penalties for all unfiled plan years. Further reduced penalty caps are applicable to submissions for certain 501(c)(3) organizations and for Top Hat and Apprenticeship programs. However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan.

In contrast, the new IRS program is only offers penalty relief from the Internal Revenue Code’s penalties for failure to file a required Form 5500 for plans sponsored by small businesses with plans covering a 100 percent owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. While employers sponsoring employee benefit plans with broader coverage do not qualify for relief under the new IRS penalty relief program, employers sponsoring these employee benefit plans nevertheless should visit with legal counsel about options for resolving their existing penalty exposures for non-filing as legal counsel often can negotiate reductions in penalties with the IRS for employers voluntarily late filing forms. Such relief generally is not available under the new penalty relief from for small employers or otherwise if the IRS already has assessed a penalty for late filing. Accordingly, it is important for employer and plan administrators to evaluate whether there are any unfiled required Form 5500s for any plan year for their employee benefit plans and act promptly to voluntarily resolve these issues through late filing before the IRS or DOL discovers the omission.

For Legal or Consulting Advice, Legal Representation, Training Or More Information

If you need help responding to these new or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, help updating or defending your workforce or employee benefit policies or practices, or other related assistance, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, Ms. Stamer’s more than 27 years’ of leading edge work as a practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

Recognized as a “Top” Employee Benefits, Labor and Employment and Health Care Lawyer, Board Certified in Labor and Employment law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, the State Bar of Texas and the American Bar Association, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, and an ABA Joint Committee on Employee Benefits Council Representative, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on health, pension, severance and other employee benefit, human resources, and related insurance, health care, privacy and data security and tax matters and policy.

Ms. Stamer’s legal and management consulting work throughout her career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk with a special emphasis on employee benefits, compensation and management controls. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, expatriot and medical tourism, on site medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. In these and other engagements, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large-scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

In the course of this work, Ms. Stamer has accumulated an impressive resume of experience advising and representing clients on HIPAA and other privacy and data security concerns. The scribe for the American Bar Association (ABA) Joint Committee on Employee Benefits annual agency meeting with the Department of Health & Human Services Office of Civil Rights for several years, Ms. Stamer has worked extensively with health plans, health care providers, health care clearinghouses, their business associates, employer and other sponsors, banks and other financial institutions, and others on risk management and compliance with HIPAA and other information privacy and data security rules, investigating and responding to known or suspected breaches, defending investigations or other actions by plaintiffs, OCR and other federal or state agencies, reporting known or suspected violations, business associate and other contracting, commenting or obtaining other clarification of guidance, training and enforcement, and a host of other related concerns. Her clients include public and private health plans, health insurers, health care providers, banking, technology and other vendors, and others. Beyond advising these and other clients on privacy and data security compliance, risk management, investigations and data breach response and remediation, Ms. Stamer also advises and represents clients on OCR and other HHS, Department of Labor, IRS, FTC, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She also is the author of numerous highly acclaimed publications, workshops and tools for HIPAA or other compliance including training programs on Privacy & The Pandemic for the Association of State & Territorial Health Plans, as well as HIPAA, FACTA, PCI, medical confidentiality, insurance confidentiality and other privacy and data security compliance and risk management for Los Angeles County Health Department, ISSA, HIMMS, the ABA, SHRM, schools, medical societies, government and private health care and health plan organizations, their business associates, trade associations and others.

Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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Posted by Cynthia Marcotte Stamer

Health Insurer/Vendor’s Claims & Appeals Deficiencies Could Trigger Significant Employer Excise Tax Liability

July 27, 2015

Employers sponsoring group health plan coverage now or in 2014, check the adequacy of your insurer or third party administrator’s claims and appeals processes and notices. Employers that sponsor group health plans that violated certain health care reform mandates for claims and appeals imposed by the Patient Protection and Affordable Care Act (ACA) will face a duty to pay an excise tax of $100 per violation per day under the expanded Form 8928 filing requirements made applicable to employers providing health plan coverage after 2013 under the Internal Revenue Code (Code), as well undermine the enforceability of claims and appeals decisions under Section 502(b) and trigger penalties of $125 per day ($1000 per day in the case of Department of Labor enforcement actions) against the plan administrator under Section 502(c) of the Employee Retirement Income Security Act of 1974 (ERISA).

Insurers and third party administrators providing claims and appeals services also should be concerned. Not only could these vendors face liability under ERISA, employer hit with fees almost certainly will look to the vendors responsible for performing these services for indemnification or other relief. Fixing past problems and preventing new violations is key to mitigating risks for all parties.

Because of the potential legal risks under the Code and ERISA, employers evaluating compliance to determine whether to file a Form 8928 generally should consult with legal counsel about whether and how best to structure and conduct the health plan compliance review to preserve distinctions between their business operations and fiduciary activities performed on behalf of the plan, as well as any opportunities to use attorney-client privilege, work product or other evidentiary rules to mitigate their risks and exposures.

Even before ACA, ERISA already required that group health plans and their plan administrators and fiduciary comply with a long list of highly technical rules when processing and administering claims and appeals and notifying plan members about these activities. The ACA claims and appeals rules covered by the Form 8928 filing and excise tax rules are additional notice and procedural safeguards imposed upon group health plans in addition to these long-standing ERISA claims and appeals procedures. As implemented by current Department of Labor Regulations, these ACA claims and appeals procedures require that group health plans (other than grandfathered plans) both comply with:

All of the pre-existing ERISA claims and appeals rules; and
Notify members or their beneficiaries of their rights to and provide for independent review of coverage rescission decisions and medical judgment-based claims denials in accordance with detailed rules set forth in the Labor Department Regulations; and
Comply with tighter procedural and notice standards for processing claim and appeals imposed by ACA in accordance with the detailed rules set forth in the Labor Department Regulations.

While most employers that sponsor group health plans historically have assumed that the insurers or other health plan vendors hired to administer their programs have designed and administer claims and appeals in compliance with these mandates, the processes and notices of many health plan insurers and self-insured plan claims and appeals vendors typically fall far short of meeting the requirements of even the pre-existing ERISA claims and appeals requirements as implemented by Labor Department Regulations since 2001, much less the additional independent review and other ACA claims and appeals requirements.

Post-2013 deficiencies in the practices of many insurers and other health plan vendors’ claims and appeals processes and notifications now leave many employers exposed to significant excise tax penalties. While under ERISA, group health plans and their responsible plan administrator or other applicable named fiduciary, not the sponsoring employer, generally bear the responsibility and liability for administering the group health plan in accordance with ACA’s claims and appeals and the other group health plan requirements covered by Form 8928, the Code’s extension of the Form 8928 filing requirement and imposition of significant excise taxes against employers that sponsor group health plans that violate these requirements is designed to give businesses sponsoring group health plans meaningful incentives to take steps to ensure that their group health plan is properly designed and administered by its insurers and fiduciaries to comply with the listed requirements.

Under Code Section 6039D, businesses sponsoring group health plans are required to self-assess and pay excise taxes of up to $100 per day for each uncorrected violation of a specified list of federal health plan mandates by filing a Form 8928 when the business files its corporate or partnership tax return for the applicable taxable year. Before 2014, the Form 8928 filing requirement applied to a fairly narrow set of requirements. Beginning with 2014, however, ACA added the ACA claims and appeals rules as well as a long list of other ACA requirements to the health plan violations subject to Form 8928 disclosures and excise taxes. If a business sponsored a health plan that violated the ACA claims and appeals rules or any other health plan rule subject to the Form 8928 filing requirement in 2014 or thereafter, the business should take prompt, well-documented actions to self-correct the violation or timely must file the required Form 8929 and pay the applicable $100 per violation per day excise tax since proof of good faith efforts to maintain compliance, proof of self-correction, or both may mitigate these excise tax and other Form 8928 liability as well as associated ERISA exposures. Likewise, during the current and future years after 2013, businesses offering group health plan coverage to their employees also will want to monitor their health plan’s compliance with the federal group health plan rules covered by Form 8929 reporting to avoid or mitigate these risks going forward.

Since federal group health plan violations that trigger the Form 8928 requirement of a sponsoring employer also generally create potential exposures for the ERISA exposures for the group health plan, parties acting as the “plan administrator” or other “fiduciary” role with respect to the plan or both under ERISA, the group health plan and its plan administrator or other responsible fiduciary (sometimes, but not always the employer or a member of its management), the group health plan, and those parties acting as the plan administrator or fiduciary responsible for administering the plan in compliance with those requirements also will want to be prepared to demonstrate that prudent steps are taken to administer the group health plan in accordance with the applicable mandates, including prudently to investigate and redress any suspected concerns identified in connection with the employer’s Form 8928 filing analysis. Under ERISA, for instance, the group health plan’s failure to strictly comply with any one of the highly technical claims or appeals procedural or notification requirements of ACA can give the affected plan member or its assignee the ability to sue the group health plan without the need to fulfill otherwise applicable appeals or other procedures that otherwise might apply under the group health plan’s claims and appeals procedures as well as have other adverse consequences for the group health plan or its fiduciaries, may heightened the burdens of proof the plan or its fiduciaries must meet to sustain denial determinations, or both. In addition, where the ACA violation included a failure to comply with ACA’s claims or appeals notification requirements, the violation also could provide the basis for the plan member to ask a court to order the plan administrator to pay the plan member up to $125 per day per violation plus attorneys’ fees and enforcement costs, the basis for the Department of Labor to penalize the plan administrator up to $1025 per day per violation per plan member, or both. While technically these ERISA exposures generally run specifically to the plan or the party serving as its plan administrator or responsible fiduciary, the employer frequently ultimately pays for these liabilities either because:

The plan documentation names the sponsoring business as the plan administrator or named fiduciary responsible for these actions;
The vendor agreement between the sponsoring business and the insurer or other service provider that the business hired to perform these duties requires the sponsoring business to indemnify the vendor for these liabilities; or
Both.

While the sponsoring business and parties serving as the plan administrator or other fiduciaries of the plan all have potential legal risk if the plan is not administered in accordance with the ACA claims and appeals procedures or other requirements covered by the Form 8928 filing requirements, all parties need to be mindful of the distinctions between the Form 8928 and other exposures that a sponsoring employer bears under the Code as compared to the ERISA fiduciary responsibility and other duties imposed upon the plan and its fiduciaries under ERISA. Maintenance of proper separation between these roles and appropriate structuring of communications between the sponsoring business with the plan and its fiduciaries and vendors is important to minimize the risk that the sponsoring business unintentionally will create or broaden the fiduciary liability exposures of the business by unnecessarily or inappropriately exercising discretion or control over the administration of plan duties that the plan terms allocate to other parties. Also, plan sponsors engaging in compliance reviews and associated discussions generally have a greater ability to use attorney-client privilege and work product than plan fiduciaries. Accordingly, businesses sponsoring their group health plans and their management generally will want to consult with qualified, experienced legal counsel for advice about whether and how to structure their Form 8928 assessments and associated risk analysis and correction discussions to promote and preserve the ability of the business, as the sponsoring employer, and its management to minimize ERISA fiduciary exposures and claim and use attorney-client privilege and work product evidentiary privileges to contain the scope of ERISA associated risks.

Going forward, businesses also will want to obtain advice of counsel about opportunities to mitigate Form 8928, ERISA and other exposures through more careful credentialing and contracting with health plan insurers and vendors, review and drafting of plan documents, summary plan descriptions and other plan materials, and other risk management and compliance processes and procedures. See Careful Selection & Contracting With Vendors Critical Part of Health Plan Renewals.

While most employers will not be able to negotiate the ideal contractual provisions and all operational violations, careful plan drafting to comply with applicable rules, vendor credentialing and contracting, and monitoring of compliance by an employer can reduce the risk and frequencies of violation and promote timely self-correction. In addition, the documented administration of these and other efforts by the employer can provide invaluable evidence to position the sponsoring employer to minimize or secure a waiver of excise taxes that otherwise might arise under the Code, pursue indemnification for liabilities the employer incurs due to the misfeasance of the insurer or vendor or both.

For Help or More Information

For Legal or Consulting Advice, Legal Representation, Training Or More Information

A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, Ms. Stamer’s more than 27 years’ of leading edge work as an practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

Board certified in labor and employment law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer is recognized nationally and internationally for her practical and creative insights and leadership on HIPAA and other health and other employee benefit, human resources, and related insurance, health care, privacy and data security and tax matters and policy.

Ms. Stamer’s legal and management consulting work throughout her 27 plus year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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Posted by Cynthia Marcotte Stamer

HIPAA Settlement Warns Health Plans, Sponsoring Employers & Business Associates To Manage HIPAA Risks

July 11, 2015

Health plans, insurers and other health plan industry service providers widespread use and reliance on internet applications to access and share protected health information when performing online enrollment, claims administration and payment, reporting, member and provider communications and a host of other key health plan functions makes it particularly important for health plans, their employer or other sponsors, fiduciaries, insurers and other vendors and their management to respond quickly to a warning from Department of Health & Human Services (HHS) Office of Civil Rights (OCR) warning to ensure applications and systems properly safeguard protected health information (PHI) as required by the Health Insurance Portability & Accountability (HIPAA) Privacy, Security & Breach Notification Rules (HIPAA Rules) and other laws made in its July 10, 2015 announcement of its latest HIPAA settlement.

The new Resolution Agreement with the Massachusetts based hospital system, St. Elizabeth’s Medical Center (SEMC) settles charges OCR made that SEMC reached HIPAA by failing to protect the security of PHI when using internet applications to access and share PHI. The Resolution Agreement also shows how complaints filed with OCR by workforce members can create additional compliance headaches for Covered Entities or their business associates while the “robust corrective action plan” imposed under the Resolution Agreement shares examples of ladder reporting and management oversight and documentation Covered Entities and business associates can expect to need to prove their organizations maintains the “culture of compliance” with HIPAA OCR expects in the event of an OCR audit or investigation.

With recent reports on massive health plan HIPAA and other data breaches fueling widespread participant and regulatory concern over identity theft and other data security, Covered Entities and their business associates should prepare to defend the adequacy of their own HIPAA and other data security practices in the event of an OCR breach investigation or audit. Accordingly, health plans and their employer or other sponsors, health plan fiduciaries, health plan vendors acting as business associates and others dealing with health plans and their management should contact legal counsel experienced in these matters for advice within the scope of attorney-client privilege about how to respond to the OCR warning and other developments to manage their HIPAA and other privacy and data security legal and operational risks and liabilities.

SEMC Resolution Agreement Overview

The SEMC Resolution Agreement settles OCR charges that SEMC violated HIPAA stemming from an OCR investigation of a November 16, 2012 complaint by SEMC workforce members and a separate data breach report SEMC separately made to OCR of a breach of unsecured electronic PHI (ePHI) stored on a former SEMC workforce member’s personal laptop and USB flash drive affecting 595 individuals. In their complaint, SEMC workers complained SEMC violated HIPAA by allowing workforce members to use an internet-based document sharing application to share and store documents containing electronic protected health information (ePHI) of at least 498 individuals without adequately analyzing the risks. OCR says its investigation of the complaint and breach report revealed among other things that:

SEMC improperly disclosed the PHI of at least 1,093 individuals;
SEMC failed to implement sufficient security measures regarding the transmission of and storage of ePHI to reduce risks and vulnerabilities to a reasonable and appropriate level; and
SEMC failed to timely identify and respond to a known security incident, mitigate the harmful effects of the security incident, and document the security incident and its outcome.

To resolve OCR’s charges, SMCS agreed to pay $218,400 to OCR and implement a “robust corrective action plan” to correct these alleged HIPAA violations. While the required settlement payment is relatively small, the Resolution Agreement’s focus security requirements for internet application and data use and sharing activities engaged in by virtually every Covered Entity and business associate make the Resolution Agreement merit the immediate attention of all Covered Entities, their business associates and their management.

SEMC HIPAA Specific Compliance Lessons For Health Plans & Business Associates

In announcing the Resolution Agreement, OCR Director Jocelyn Samuels sent a clear warning to all Covered Entities and their business associates “to pay particular attention to HIPAA’s requirements when using internet-based document sharing applications,” stating “In order to reduce potential risks and vulnerabilities, all workforce members must follow all policies and procedures, and entities must ensure that incidents are reported and mitigated in a timely manner.”

The Resolution Agreement makes clear that OCR expects health plans and other Covered Entities and their business associates to be able to show both their timely investigation of reported or suspected HIPAA susceptibilities or violations as well as to self-audit and spot test HIPAA compliance in their operations. The SEMC corrective action plan also indicates Covered Entities and business associates must be able to produce documentation and other evidence needed to show the top to bottom dedication to HIPAA compliance necessary to prove a “culture of compliance” with HIPAA permeates their organizations.

In light of OCR’s warning and expectations, Covered Entities and business associates should start by considering the advisability for their own organization to take one or more of the steps outlined in the “robust corrective action plan” included in the Resolution Agreement, starting with the specific steps the corrective action plan requires SEMC to address its internet application security concerns such as:

Conducting self-audits and spot checks of workforce members’ familiarity and compliance with HIPAA policies and procedures on transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems, including unsecured networks and devices; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; security incident reporting related to ePHI; and
Inspecting laptops, smartphones, storage media and other portable devices, workstations and other devices containing ePHI and other data devices and systems and their use; and
Conducting other tests and audits of security and compliance with policies, processes and procedures; and
Documenting results, findings, and corrective actions including appropriate up the ladder reporting and management oversight of these and other HIPAA compliance expectations, training and other efforts.

Broader HIPAA Compliance & Risk Management Lessons

Beyond the specific internet applications and other security of ePHI lessons in the Resolution Agreement, Covered Entities and their business associates also should be mindful of other more subtle, but equally important broader HIPAA compliance and risk management lessons provided in the Resolution Agreement and other recent OCR guidance about their overall HIPAA compliance responsibilities.

One of the most significant of these lessons is the need for proper workforce training, oversight and management. The Resolution Agreement sends an undeniable message that OCR expects Covered Entities, business associates and their leaders to be able to show their effective oversight and management of the operational compliance of their systems and members of their workforce with HIPAA policies. The SEMC corrective action plan should prompt Covered Entities and business associates to weigh the adequacy of their existing workforce training, reporting, investigation and other management processes and documentation. Meanwhile, OCR’s report that an OCR complaint made by SEMC insiders to OCR prompted its investigation also should sensitize Covered Entities and their business associates of the need to ensure that their workforce training and management processes are appropriate to position their organization both to show their processes encourage proper internal reporting and investigation of compliance concerns, as well as manage the inevitable HIPAA and other human resources retaliation and whistleblower exposures that can arise out of such reports.

The Resolution Agreement also provides insights to the internal corporate processes and documentation of compliance efforts that Covered Entities and business associates may need to show their organization has the required “culture of compliance” needed to mitigate consequences of breaches or other compliance glitches. Particularly notable are Resolution Agreement’s terms on the documentation and up the ladder reporting to management and OCR of SEMC’s self-audit and self-correction activities and management oversight and management of these activities. Like tips shared by HHS in the recently released Practical Guidance for Health Care Governing Boards on Compliance Oversight, these details in the Resolution Agreement provide invaluable tips to Boards and other leaders of Covered Entities and business associates about steps they can take to promote their ability to demonstrate their organizations have the necessary culture of HIPAA compliance OCR expects.

Health Plan HIPAA Compliance Risks & Responsibilities of Employers & Their Leaders

While HIPAA places the primary duty for complying with HIPAA on Covered Entities and business associates, health plan sponsors and their management still need to make HIPAA compliance a priority for many practical and legal reasons.

As employers forced to cope with the deluge of fears and questions of employees and other health plan members impacted by recent massive PHI breach reports shared by Blue Cross association health insurance plan giants, Anthem and Premera can attest, HIPAA data breach or other compliance reports often trigger significant financial, administrative, workforce satisfaction and other operational costs employer health plan sponsors. Inevitable employee concern about health plan data breaches undermines employee value and satisfaction of the health benefit plan as an employee benefit. These concerns also usually require employers to expend significant management and financial resources to respond to these concerns and address other employer fallout from the breach.

The costs of investigation and redress of a known or suspected HIPAA data or other breach typically far exceed the actual damages to participants resulting from the breach. While HIPAA technically does not make sponsoring employers directly responsible for these duties or the costs of their performance, as a practical matter sponsoring employers typically can expect to pay costs and other expenses that its health plan incurs to investigate and redress a HIPAA breach. For one thing, except in the all too rare circumstances where employers as plan sponsors have specifically negotiated more favorable indemnification and liability provisions in their vendor contracts, employer and other health plan sponsors usually agree in their health plan vendor contracts to pay the expenses and to indemnify health plan insurers, third party administrators, and other vendors for costs and liabilities arising from HIPAA breaches or other events arising in the course of the administration of the health plan. Since employers typically are obligated to pay health plan costs in excess of participant contributions, employers also typically would be required to provide the funding their health plan needs to cover these costs even in the absence of such indemnification agreements.

Sponsoring employers and their management also should be aware the employer’s exception from direct liability for HIPAA Rule compliance does not fully insulate the employer or its management from legal risks in the event of a health plan data breach or other HIPAA violation.

While HIPAA generally limits direct responsibility for compliance with the HIPAA Rules to a health plan or other Covered Entity and their business associates, HIPAA hybrid entity and other organizational rules and criminal provisions of HIPAA, as well as various other federal laws arguably could create liability risks for the employer. See, e.g., Cyber Liability, Healthcare: Healthcare Breaches: How to Respond; Restated HIPAA Regulations Require Health Plans to Tighten Privacy Policies and Practices; Cybercrime and Identity Theft: Health Information Security Beyond. For example, hybrid entity and other organizational provisions in the HIPAA Rules generally require employers and their health plan to ensure that health plan operations are appropriately distinguished from other employer operations in order for otherwise non-covered human resources, accounting or other employer activities to avoid subjecting their otherwise non-covered employer operations and data to HIPAA Rules. To achieve this required designation and separation, the HIPAA rules typically also require that the health plan include specific HIPAA language and the employer and health plan take appropriate steps to designate and separate health plan records and data, workforces, and operations from the non-covered business operations and records of the sponsoring employer. Failure to fulfill these requirements could result in the unintended spread of HIPAA restrictions and liabilities to other aspects of the employer’s human resources or other operations. Sponsoring employers will want to confirm that health plan and other operations and workforces are properly designated, distinguished and separated to reduce this risk.

When putting these designations and separations in place, employers also generally will want to make arrangements to ensure that their health plan includes the necessary terms and the employer implements the policies necessary for the employer to provide the certifications to the health plan that HIPAA will require that the health plan receive before HIPAA will allow health plan PHI to disclosed to the employer or its representative for the limited underwriting and other specified plan administration purposes permitted by the HIPAA Rules.

Once these arrangements are in place, employers and their management also generally will want to take steps to minimize the risk that their organization or a member of the employer’s workforce honors these arrangements and does not improperly access or use health plan PHI, systems in violation of these conditions or other HIPAA Rules. This or other wrongful use or access of health plan PHI or systems could violate criminal provisions of HIPAA or other federal laws making it a crime for any person – including the employer or a member of its workforce – from wrongfully accessing health plan PHI, electronic records or systems. Since health plan PHI records also typically include personal tax, social security information that the Internal Revenue Code, the Social Security Act and other federal laws generally would require the employer to keep confidential and to protect against improper use, employers and their management also generally should be concern about potential exposures for their organization that could result from improper use or access of this information in violation of these other federal laws. Since HIPAA and some of these other laws under certain conditions make it a felony crime to violate these rules, employer and their management generally will want to treat compliance with these federal rules as critical elements of the employer’s Federal Sentencing Guideline and other compliance programs.

Beyond the already discussed concerns, employers or members of their management also may have an incentive to promote health plan compliance with HIPAA or other health plan privacy or data security requirements to many the exposure of the employer or management or other staff to statutory, regulatory, contractual or ethical liabilities arising under ERISA, Internal Revenue Code, the Fair & Accurate Credit Transaction Act (FACTA), trade secret, insurance, disability, identity theft, cybersecurity or other federal or state laws.

For instance, health plan sponsors and management involved in health plan decisions, administration or oversight could face personal fiduciary liability risks under ERISA for failing to act prudently to ensure that the health plan compliance with HIPAA and other federal privacy and data security requirements.. ERISA’s broad functional fiduciary definition encompasses both persons and entities appointed as “named” fiduciaries and others who functionally exercise discretion or control over a plan or its administration. Consequently, the sponsoring employer and certain members of its human resources or other executive management team who functionally possess or exercise responsibility or authority over the administration of the employer’s health plan or its data or other assets, the selection or oversight of plan fiduciaries, vendors, or other workforce members its administration, or other key health plan operations risk ERISA fiduciary liability for their own failures to act prudently in carrying out HIPAA compliance or other responsibilities or to take action when they know or should know that another fiduciary is or has breached these duties. This fiduciary status and risk can occur even if the entity or individual does not is not named a named fiduciary, expressly disclaims fiduciary responsibility or does not realize it bears fiduciary status or responsibility. Since fiduciaries generally bear personal liability for their own breaches of fiduciary duty as well as potential co-fiduciary liability for fiduciary breaches committed by others that they knew or prudently should have known, most employers and members of their management will make HIPAA health plan compliance a priority to avoid or minimize these potential ERISA fiduciary exposures.

Furthermore, most employers and their management also will appreciate the desirability of taking reasonable steps to manage potential exposures that the employer or members of its management could face if their health plan or the employer violates the anti-retaliation rules of HIPAA or other laws through the adoption and administration of appropriate human resources, internal investigation and reporting, risk management policies and practices. See Employee & Other Whistleblower Complaints Common Source of HIPAA Privacy & Other Complaints.

Act To Manage HIPAA & Other Related Risks

OCR’s release of the Resolution Agreement on the heels of widespread publicity about massive health plan and other data breaches at Blue Cross health care giants, Anthem and Premera and other U.S. businesses and the potential legal and financial exposures that a HIPAA data breach or other violation could create, health plans and their sponsors, insurers, business associates, and leaders should appreciate the advisability of acting promptly to ensure that their health plans and business associates are taking appropriate steps to comply with the HIPAA Rules and manage other associated risks and liabilities. At minimum, health plans and their business associates should move quickly to conduct a documented assessment of the adequacy of their health plan internet applications and other HIPAA compliance in in light of the Resolution Agreement and other developments. Given the scope and diversity of the legal responsibilities, risks and exposures associated with this analysis, most health plan sponsors, fiduciaries, business associates and their management also will want to consider taking other steps to mitigate various other legal and operational risks that lax protection or use of health plan PHI or systems could create for their health plan, its sponsors, fiduciaries, business associates and their management. Health plan fiduciaries, sponsors and business associates and their leaders also generally will want to explore options to use indemnification agreements, liability insurance or other risk management tools as a stop gap against the costs of investigation or defense of a HIPAA security or other data breach.

For Legal or Consulting Advice, Legal Representation, Training Or More Information

A practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, Ms. Stamer’s more than 27 years’ of leading edge work as an practicing attorney, author, lecturer and industry and policy thought leader have resulted in her recognition as a “Top” attorney in employee benefits, labor and employment and health care law.

Ms. Stamer also is deeply involved in helping to influence the Affordable Care Act and other health care, pension, social security, workforce, insurance and other policies critical to the workforce, benefits, and compensation practices and other key aspects of a broad range of businesses and their operations. She both helps her clients respond to and resolve emerging regulations and laws, government investigations and enforcement actions and helps them shape the rules through dealings with Congress and other legislatures, regulators and government officials domestically and internationally. A former lead consultant to the Government of Bolivia on its Social Security reform law and most recognized for her leadership on U.S. health and pension, wage and hour, tax, education and immigration policy reform, Ms. Stamer works with U.S. and foreign businesses, governments, trade associations, and others on workforce, social security and severance, health care, immigration, privacy and data security, tax, ethics and other laws and regulations. Founder and Executive Director of the Coalition for Responsible Healthcare Policy and its PROJECT COPE: the Coalition on Patient Empowerment and a Fellow in the American Bar Foundation and State Bar of Texas. She also works as a policy advisor and advocate to health plans, their sponsors, administrators, insurers and many other business, professional and civic organizations.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or http://www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also may be interested reviewing other Solutions Law Press, Inc.™ resources at www.solutionslawpress.com such as:

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Posted by Cynthia Marcotte Stamer

Prompt Business Action Needed To Mitigate Post-King Employer Health Benefit Costs & Liabilities

June 30, 2015

With the Obama Administration construing the United States Supreme Court’s King v. Burwell decision as a green light for its full implementation and enforcement of the Patient Protection & Affordable Care Act (ACA), U.S. businesses should brace for both increases in health benefit costs and liabilities over the next year as well as take prompt action to identify and mitigate potential excise tax and other exposures from any unaddressed compliance deficiencies in their 2014 or 2015 health plans as soon as possible and no later than the due date for filing their 2014 business tax return.

As health benefit costs continue their upward trend, many businesses and their leaders plan to look for new options to manage costs and liabilities following the King decision. In most cases, businesses assume they can delay these actions until the beginning of their upcoming health plan year, not realizing their company’s potential liability exposures from existing and past defects. Businesses and their leaders who have held off updating their health plan compliance and expect to delay completion of these activities until the beginning of their upcoming health plan year are likely to be in for a rude awakening, however, particularly since a much underappreciated Sarbanes-Oxley style provision of the Internal Revenue Code will require employer or other group health plan sponsors to self-report, self-assess and pay stiff excise tax penalties when filing their company’s 2014 business tax return unless their group health plan complied with a long list of ACA and other federal health plan rules in 2014.

Employer Health Benefit & Other Compensation Up, Costs Exposures Projected To Continue To Rise

While many businesses delayed making tough choices about their health plan design and compliance over the past several years in hopes of some judicial or Congressional relief from the mandates and costs of ACA, businesses generally have continued to struggle with ever-rising compensation and benefit costs, with health benefit costs the biggest challenge. Recent U.S. Bureau of Labor Statistics (BLS) data confirms what business leaders already know. Compensation and benefit costs rose over the past year, with health benefit costs remaining a big factor in these increased costs. According to BLS, employer compensation costs rose slightly and health benefit costs remained the largest individual benefit cost for employers during the 12-month period ending March 31, 2015, according to the U.S. Bureau of Labor Statistics (BLS). See BLS Employment Cost Index News Release (April 30, 2015).

The BLS Employer Costs For Employee Compensation Report, March 2015 released June 10, 2015 Report) shows private employers spent an average of $31.65 per hour worked for compensation in March 2015 with health benefits accounting averaging 7.7 percent of this average employer total compensation cost per employee. This compares to BLS showing that in March 2014, In March 2014, total employer compensation costs for private industry workers averaged $29.99 per hour worked, with wages and salaries averaging $20.96 per hour (69.9 percent) and benefits averaging $9.03 per hour (30.1 percent). See BLS Employer Costs For Employee Compensation, March 2014 (June 12, 2014)(2014 Report).

BLS data on health benefit and other compensation and benefit costs and trends provides many interesting insights for business as well as government leaders and the role health benefit cost increases play in these increased expenditures. For instance, BLS statistics show for private employers on average during the 12-month period ending March 31, 2015:

Compensation costs for private industry workers increased 2.8 percent over the year, higher than the March 2014 increase of 1.7 percent;
Wages and salaries increased 2.8 percent, also higher than the March 2014 increase of 1.7 percent;
Benefits costs rose 2.6 percent, which was higher than March 2014, when the increase was 1.8 percent; and
Health benefits on average increased 2.5 percent over during the 12-month period that ended on March 31, 2015, rising from the March 2014 increase in compensation costs of 1.8 percent.

Businesses Must Prepare For Impending ACA Enforcement While Dealing With Upsurge In Health Benefit Costs

While the continued rise in the average hourly cost of health benefits for employers is significant in its own right, the reported health benefit cost and employer health cost data in the Report does not include additional reporting and other compliance and risk management costs, which in light of the explosion in employer group health plan mandates since the passage of the Patient Protection and Affordable Care Act (ACA). Research indicates that the employer plan design changes slowed the upward trend in employer health benefit expenditures that otherwise would have occurred in 2015. This upward trend is projected to continue if not accelerate in 2016, however.

The 2015 Report shows these upward increases in employer costs for health benefits and other compensation continued in the first quarter of 2015. Concerning health benefits, for instance, the 2015 Report shows health benefit costs paid by employers averaged $2.43 per hour worked (7.7 percent of total compensation)in private industry in March 2015, compared to the average health benefit costs BLS reported. In comparison, the 2014 Report indicated in March, 2014, the average cost for health insurance benefits in private industry was $2.36 per hour worked in March 2014 (7.9 percent of total compensation).

Overall health benefit costs and associated compliance expenses of employers that elect to continue to offer health benefits for employees are projected to rise throughout 2015 and 2016 as ACA driven mandates and market changes drive up employer’s direct health benefit costs. See, e.g. Employers’ Health Costs Projected to Rise 6.5% for 2016.

The trend data and judicial and political developments indicate that business leaders can look for these trends not only to continue, but accelerate. With an impending responsibility to self-report violations of ACA and various of federal health plan mandates imminent, business leaders should brace to deal with any deficiencies in compliance in their 2014 and 2015 health plans much sooner than they might have expected following the Supreme Court’s King v. Burwell decision last week. President Obama made clear last week he views the King ruling as giving the Internal Revenue Service, Department of Labor and Department of Health & Human Services the all clear for full implementation and enforcement of ACA and other federal health plan rules. While these overall enforcement exposures will play out over the next several years, many employers are poised to experience the first bite of these new enforcement exposures over the next few months, when the Internal Revenue Code will require that employers that offered health coverage for employees in 2014 self-assess, report and pay stiff new excise tax penalties of $100 per day per violation when filing their 2014 tax return unless their program complied with all of a long list of ACA or other federal law mandates in addition to otherwise applicable exposures under the Employee Retirement Income Security Act (ERISA) and other laws. See, Businesses Must Confirm & Clean Up Health Plan ACA & Other Compliance Following Supreme Court’s King v. Burwell Decision. Since prompt self-audit and correction can help mitigate these liabilities, business leaders should act quickly to engage experienced legal counsel for their companies for help in evaluating, within the scope of attorney client privilege, the adequacy of their 2014 and 2015 health plan compliance, options for addressing potential exposures from any compliance deficiencies, and for advice and assistance to decide whether to offer health benefits going forward and if so, aid in designing and implementing their future health benefit program to enhance its defensibility. While businesses inevitably will need to involve or coordinate with their accounting, broker, and other vendors involved with the plans, businesses generally will want to get legal advice in a manner that preserves their potential to claim attorney-client privilege to protect against discovery in the event of future enforcement or litigation actions sensitive discussions and analysis about compliance audits, plan design choices, and other risk management and liability planning as well as to get help evaluating potential future plan design changes or proposed solutions to known or suspected liability exposures, particularly in light of complexity of the exposures and risks.

For Legal or Consulting Advice, Legal Representation, Training Or More Information

Recognized as a “Top” attorney in employee benefits, labor and employment and health care law extensively involved in health and other employee benefit and human resources policy and program design and administration representation and advocacy throughout her career, Cynthia Marcotte Stamer is a practicing attorney and Managing Shareholder of Cynthia Marcotte Stamer, P.C., a member of Stamer│Chadwick │Soefje PLLC, author, pubic speaker, management policy advocate and industry thought leader with more than 27 years’ experience practicing at the forefront of employee benefits and human resources law.

A Fellow in the American College of Employee Benefit Counsel, past Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, an ABA Joint Committee on Employee Benefits Council Representative and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms.Stamer is recognized nationally and internationally for her practical and creative insights and leadership on health and other employee benefit, human resources and insurance matters and policy.

Ms. Stamer uses her deep and highly specialized health, insurance, labor and employment and other knowledge and experience to help employers and other employee benefit plan sponsors; health, pension and other employee benefit plans, their fiduciaries, administrators and service providers, insurers, and others design legally compliant, effective compensation, health and other welfare benefit and insurance, severance, pension and deferred compensation, private exchanges, cafeteria plan and other employee benefit, fringe benefit, salary and hourly compensation, bonus and other incentive compensation and related programs, products and arrangements. She is particularly recognized for her leading edge work, thought leadership and knowledgeable advice and representation on the design, documentation, administration, regulation and defense of a diverse range of self-insured and insured health and welfare benefit plans including private exchange and other health benefit choices, health care reimbursement and other “defined contribution” limited benefit, 24-hour and other occupational and non-occupational injury and accident, ex-patriate and medical tourism, onsite medical, wellness and other medical plans and insurance benefit programs as well as a diverse range of other qualified and nonqualified retirement and deferred compensation, severance and other employee benefits and compensation, insurance and savings plans, programs, products, services and activities. As a key element of this work, Ms. Stamer works closely with employer and other plan sponsors, insurance and financial services companies, plan fiduciaries, administrators, and vendors and others to design, administer and defend effective legally defensible employee benefits and compensation practices, programs, products and technology. She also continuously helps employers, insurers, administrative and other service providers, their officers, directors and others to manage fiduciary and other risks of sponsorship or involvement with these and other benefit and compensation arrangements and to defend and mitigate liability and other risks from benefit and liability claims including fiduciary, benefit and other claims, audits, and litigation brought by the Labor Department, IRS, HHS, participants and beneficiaries, service providers, and others. She also assists debtors, creditors, bankruptcy trustees and others assess, manage and resolve labor and employment, employee benefits and insurance, payroll and other compensation related concerns arising from reductions in force or other terminations, mergers, acquisitions, bankruptcies and other business transactions including extensive experience with multiple, high-profile large scale bankruptcies resulting in ERISA, tax, corporate and securities and other litigation or enforcement actions.

Ms. Stamer also is active in the leadership of a broad range of other professional and civic organizations. For instance, Ms. Stamer presently serves on an American Bar Association (ABA) Joint Committee on Employee Benefits Council representative; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the ABA RPTE Employee Benefits & Other Compensation Committee, its current Welfare Benefit Plans Committee Co-Chair, on its Substantive Groups & Committee and its incoming Defined Contribution Plan Committee Chair and Practice Management Vice Chair; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; current Vice Chair of the ABA TIPS Employee Benefit Committee; the former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division; on the Advisory Boards of InsuranceThoughtLeadership.com, HR.com, Employee Benefit News, and many other publications. She also previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early childhood development intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association. For additional information about Ms. Stamer, see www.cynthiastamer.com, or www.stamerchadwicksoefje.com the member of contact Ms. Stamer via email here or via telephone to (469) 767-8872.

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Posted by Cynthia Marcotte Stamer

New Excepted Benefits Final Rule May Allow Some Employers Limited Opportunity To Offer Individually Insured Wraparound Coverage

March 20, 2015

Employers Urged Not Overestimate When Plan Qualifies As Excepted Or Overlook Other Applicable Federal Mandates

Changes to the definition of “excepted benefits” in Final Excepted Benefit Rules (Rules) published March 18, 2015 by the Departments of Labor, Health and Human Services, and Treasury (Tri-Agencies) might allow some employer and union group health plan sponsors, in limited circumstances, to offer wraparound coverage to certain employees purchasing individual health insurance in the private market, including in the Health Insurance Marketplace without violating the Patient Protection & Affordable Care Act (ACA) if the arrangements are carefully crafted to meet the specific requirements of one of two pilot programs set forth in the Rules.

Employers contemplating or maintaining arrangements that they or their service providers consider excepted benefits should use care to ensure that their arrangements are vetted in light of the latest guidance by experienced, qualified employee benefits counsel knowledgeable in these and other applicable group health plan rules and products because it is important to meet all of the requirements for qualifying the arrangement as an excepted benefit arrangement under the Rules and other applicable requirements of law to minimize the likelihood that the arrangement does not produce undesirable unanticipated consequences.

Beyond the new Rules, the Tri-Agencies have published a host of other guidance regarding the arrangements that qualify as excepted benefit arrangements and those that the Tri-Agencies view as not meeting this definition, as well as the implications of these distinctions. This includes guidance that reflects the Tri-Agencies concerns that many arrangements prompted by certain brokers or other advisors as qualifying as excepted benefits, alone or in conjunction with other arrangements sponsored or offered by the employer, do not qualify as excepted benefit arrangements as well as guidance about potential consequences of these arrangements that the promoter or an employer considering these arrangements should fully understand before moving forward, For this reason, employers that already provide, or are interested in providing health coverage under an employer sponsored arrangement to employees or their dependents enrolled in individual health coverage through the Health Insurance Marketplace or other privately provided individual insurance arrangement are urged to carefully review the proposed arrangement in light of the Rules, as well as to understand the treatment and implication of their proposed arrangement under other applicable Federal group health plan mandates and rules.

As interpreted by the Tri-Agencies, except for excepted benefit arrangements as defined in the Rules, employers generally cannot pay for individual health coverage or offer or provide wrap around or other group health coverage to employees that enroll in individual coverage The Rules amend the definition of excepted benefits to include under very narrow specified conditions an employer to offer specified limited coverage that wraps around individual health insurance when the employer provided coverage is specifically designed to provide “meaningful benefits” such as coverage for expanded in-network medical clinics or providers, reimbursement for the full cost of primary care, or coverage of the cost of prescription drugs not on the formulary of the primary plan and otherwise fulfills the requirements of the Rules.

The final rules permit group health plan sponsors, only in the limited circumstances identified in the Rules, to offer wraparound coverage to employees who are purchasing individual health insurance in the private market, including in the Health Insurance Marketplace.

The Rules establish two pilot programs where the Rules treat wraparound coverage as an excepted benefit that an employers can offer to individuals enrolled in health coverage through the Health Insurance Marketplace:

One allows wraparound benefits only for multi-state plans in the Health Insurance Marketplace; and
One that allows wraparound benefits for part-time workers who enroll in an individual health insurance policy or in Basic Health Plan coverage for low-income individuals established under the Affordable Care Act. These workers could, under existing excepted benefit rules, qualify for a flexible spending arrangement alternative to this wraparound coverage.

When the requirements of the Rules are met, the Rules allow employers a narrow opportunity to offer certain employees enrolled in individual coverage wrap around health coverage from the employer to enhance that individual coverage.

Because the arrangement must qualify as an excepted benefit arrangement under the Rules, employers also need to fully understand the implications of the excepted health benefit status of the anticipated arrangement under related rules like the Portability Rules of the Health Insurance Portability & Accountability Act (HIPAA), the ACA rules and other relevant laws and arrangements.

Because of the necessity to ensure that any arrangement an employer contemplates offering as an excepted benefit meet all of the required conditions to qualify for that status under the Rules and otherwise meet all other requirements of applicable law, it is important to carefully review any such proposed arrangement with qualified legal counsel.

Most employers contemplating moving forward to implement such arrangements also should consider seeking written opinions of qualified counsel that meets the Internal Revenue Service’s requirements to be a “tax reliance opinion” as well as the written opinion of the broker, insurer or other vendor promoting or endorsing the arrangement.

Employers also should keep in mind that with excepted benefit status may excuse the arrangement from the obligation to comply with certain mandates of ACA, the Portability Rules of the Health Insurance Portability & Accountability Act or certain other rules, these arrangements generally remain subject to the requirements of the Employee Retirement Income Security Act, various Code rules, and a host of other federal rules. As a result, employers should consult with qualified legal counsel about the implications and compliance of these and other health coverage arrangements to ensure that they properly understand all responsibilities and consequences of these arrangements and manage potential responsibilities and liabilities.

Employers and their health plan fiduciaries, administrators, and vendors are reminded that the excepted benefit distinction has implications on other compliance obligations and health plan treatment of the arrangement in question. For instance, excepted benefit coverage typically does not qualify as minimum excepted coverage that an employer can count as providing minimum essential coverage for purposes of the Code Section 4980H employer shared responsibility payment rules or as enrollment by the individual in minimum individual coverage for purposes of the employee avoiding liability for the individual shared responsibility payment.

Beyond ensuring that the proposed wrap around arrangement meets the requirements to qualify as an excepted benefit under the Rules, employers and those working with them on the design or use of these arrangements need to verify that the arrangements and other arrangements of the employer by their terms and in operation comply with other health plan rules and guidance. With regard to dealings with employees who are enrolled in individual policies, employers must keep in mind the Tri-Agencies rules prohibiting employer payment or subsidization of the costs of those policies. The Tri-Agencies have made clear that they construe ACA as prohibiting employer payment or reimbursement of the cost of individual health insurance policies (other than excepted benefit only arrangements) p covering employees or dependents whether purchased from a Health Insurance Marketplace or otherwise. This prohibition extends to any employer payment or reimbursement arrangement, whether pre-tax or after-tax or on a group or individual basis. See Notice 2015-17 (affirming employer payment plans or other arrangements that reimburse or pay employees for costs of individual health coverage purchased through Health Insurance Marketplaces or private insurance markets are prohibited as previously announced in Notice 2013-54). See also ACA Prohibits Employer Paying Individual Health Premiums For Employees, IRS Says Again.

About the Author

If your business need legal advice about the your health or other employee benefit or human resources practices, assistance assessing or resolving potential past or existing compliance exposures, or monitoring and responding to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to receive these and other updates here. Recent examples of these updates include:

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies. Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others. She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

About Solutions Law Press

NOTE: This article is provided for educational purposes. It is does not establish any attorney-client relationship nor provide or serve as a substitute for legal advice to any individual or organization. Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

Comments Off on New Excepted Benefits Final Rule May Allow Some Employers Limited Opportunity To Offer Individually Insured Wraparound Coverage | ACA, Excepted Benefits, Health Plans, HIPAA | Tagged: 4980H, ACA, Administrative Simplification, Affordable Care Act, cafeteria plan, Corporate Compliance, Employee Benefits, Employer, Employers, ERISA, Excepted Benefits, Fiduciary, Health Plans, HIPAA, Miniimum Essential Coverage | Permalink
Posted by Cynthia Marcotte Stamer

OIG Report Pressures EBSA To Finalize ERISA Fiduciary Investment Advice Rule & Repeal or Restrict Small Scope Audit Rule

December 3, 2014

Employee benefit plan sponsors, administrators, fiduciaries and the banks, insurers and other service providers involved in the investment or management of plan assets that currently rely upon existing Employee Benefit Security Administration (EBSA) limited scope audit regulations to avoid the expense and other burdens of conducting full scale audits of certain employee benefit plan assets held by banks, insurers and certain other regulated entities should watch for EBSA proposals to repeal or tighten these regulations in response to recommendations in a new report published by the U.S. Department of Labor Office of Inspector General (OIG) . If adopted by the EBSA, plans sponsors, administrators and fiduciaries could expect to incur significant increases in the annual audit expenses of their employee benefit plans, banks, insurers and other organizations currently covered by the small scope audit exception could expect greater scrutiny and expenses when dealing with employee benefit plan accounts, and all of these parties could expect greater fiduciary risk and other compliance obligations.

Repealing or tightening the EBSA limited scope audit regulations and finalizing proposed conflict of interest rules are two key recommendations that OIG urges EBSA to adopt to strengthen its ability to fulfill its mission to protect the security of retirement, health, and other private‐sector employer‐sponsored benefit plans for America’s workers, retirees, and their families in the Top Management Challenges Facing the Department of Labor report (Report) just released by the OIG.

While ERISA generally requires plan asset audits on most employee benefit plan assets, the small scope audit rule of the Employee Retirement Income Security Act (ERISA) currently authorizes so‐called “limited scope audits” for plan assets held in certain banks, insurance companies and certain other qualifying entities under the presumption that these organizations and their actions with respect to the assets are being audited by other entities for other purposes. As a result, the independent public accountants that conduct their audits express “no opinion” on the financial statements of the assets they hold on behalf of plans.

According to the OIG Report, this small scope audit rule inappropriately challenges EBSA’s oversight efforts by allowing as much as $3.3 billion in pension assets held in otherwise regulated entities, such as banks to “escape audit scrutiny.” The Report states, “These limited scope audits weaken assurances to stakeholders and may put retirement plan assets at risk because they provide little or no confirmation regarding the existence or value of plan assets.

In addition to attacking the small scope audit rule, OIG also urges EBSA to finalize its long awaited rules defining prohibited conflicts of interest for parties and individuals providing investment advice to employee benefit plans that EBSA has been working on since 2010. The so‐called “conflict of interest ‐‐ fiduciary investment advice rule” would broaden the definition of investment advice fiduciary for ERISA plans and individual retirement accounts to try to reduce the opportunities for financial conflicts of interest to compromise the impartiality of investment advice in the retirement savings marketplace.

Accordingly, the OIG Report concludes that EBSA should “concentrate on issuing final regulations on the so‐called “conflict of interest rule” and continue its work to obtain legislative changes repealing the limited‐scope audit exemption. In the interim, EBSA should continue to expand upon its existing authority to clarify and strengthen limited scope audit regulations and evaluate the ERISA Council’s recommendations on the issue.”

The OIG recommendations in the Report are likely to refuel pressure on EBSA to finalize the fiduciary investment advice rule and tighten or eliminate the small scope audit rule. Since either or both of these actions would likely increase the expense and other responsibilities and risks associated with the investment and maintenance of employee benefit plan assets, plan sponsors, fiduciaries, administrators, banks, insurers, investment advisors and others involved in the investment or administration of employee benefit plans and their assets should both carefully monitor the response of the EBSA to the OIG recommendations and react promptly to provide feedback to help shape any changes to manage these costs and expenses.

About Author Cynthia Marcotte Stamer

If you need help evaluating or monitoring the implications of these developments or reviewing or updating your health benefit program for compliance or with any other employment, employee benefit, compensation or internal controls matter, please contact the author of this article, attorney Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefits Council, immediate past-Chair and current Welfare Benefit Committee Co-Chair of the American Bar Association (ABA) RPPT Employee Benefits & Other Compensation Arrangements, an ABA Joint Committee on Employee Benefits Council Representative, the ABA TIPS Employee Benefit Plan Committee Vice Chair, former ABA Health Law Section Managed Care & Insurance Interest Group Chair, past Southwest Benefits Association Board Member, Employee Benefit News Editorial Advisory Board Member, and a widely published speaker and author, Ms. Stamer has more than 24 years experience advising businesses, plans, fiduciaries, insurers. plan administrators and other services providers, and governments on health care, retirement, employment, insurance, and tax program design, administration, defense and policy. Nationally and internationally known for her creative and highly pragmatic knowledge and work on health benefit and insurance programs, Ms. Stamer’s experience includes extensive involvement in advising and representing these and other clients on ACA and other health care legislation, regulation, enforcement and administration.

Widely published on health benefit and other related matters, Ms. Stamer’s insights and articles have been published by the HealthLeaders, Modern Health Care, Managed Care Executive, the Bureau of National Affairs, Aspen Publishers, Business Insurance, Employee Benefit News, the Wall Street Journal, the American Bar Association, Aspen Publishers, World At Work, Spencer Publications, SHRM, the International Foundation, Solutions Law Press and many others.

For additional information about Ms. Stamer and her experience, see www.CynthiaStamer.com.

For Added Information and Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

For Help Or More Information

If you need assistance in auditing or assessing, updating or defending your organization’s compliance, risk manage or other internal controls practices or actions, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 24 years of work helping employers and other management; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend union-management relations, wage and hour, discrimination and other labor and employment laws, privacy and data security, internal investigation and discipline and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on management, re-engineering, investigations, human resources and workforce, employee benefits, compensation, internal controls and risk management, federal sentencing guideline and other enforcement resolution actions, and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters.Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to get access to other publications by Ms. Stamer see hereor contact Ms. Stamer directly.

About Solutions Law Press

Comments Off on OIG Report Pressures EBSA To Finalize ERISA Fiduciary Investment Advice Rule & Repeal or Restrict Small Scope Audit Rule | 105(h), ACA, Affordable Care Act, Cafeteria Plans, CHIP, Claims Administration, Employee Benefits, Employers, Employment Tax, ERISA, Fiduciary Responsibility, FMLA, H.R. 4872, Health Care Reform, Health Plans, HIPAA, Human Resources, Insurance, Internal Controls, Leave, Patient Empowerment, Patient Protection and Affordable Care Act, Preemption, Reporting & Disclosure, USERRA, VEVRRA, Wellness Programs | Tagged: audit, conflict of interest, Employee Plans, ERISA, Exempt Organizations, fiduciary investment rule, Fiduciary Responsibility, IRA, IRS, plan audit, Qualification, Retirement Plans, small scope audit, Tax | Permalink
Posted by Cynthia Marcotte Stamer

Plan’s Purchase of Company Stock Triggers $6.48 Million Award Against ESOP Sponsor, Shareholder, Board Members & Trustees

November 2, 2014

A $6.48 million judgment against Direct TV satellite television installer, Bruister and Associates Inc.(BAI) its sole owner, Herbert Bruister, and other trustees of two BAI-sponsored employee stock ownership plans shows plan sponsors and trustees involved in stock purchase transactions where employee stock ownership plans commonly referred to as “ESOPs” and other employee benefit plan buy or hold investments in the stock of plan sponsors or other related businesses the risks of failing to conduct the transactions to ensure that the transactions are prudently performed and otherwise conducted in compliance with the Employee Retirement Income Security Act (ERISA) fiduciary responsibility requirements.

BAI Lawsuit & Judgment Highlights

The BAI judgment stems from a Department of Labor lawsuit that charged BAI, along with BAI board members and plan trustees Bruister and Amy Smith, and plan trustee Jonda Henry engaged in prohibited transactions and breached other fiduciary duties under ERISA by causing the plans to purchase 100 percent of BAI’s shares for $24 million in three sales transactions conducted between December 2002 to December 2005.

According to court documents, Bruister, Smith and Henry, as plan fiduciaries, engaged in prohibited transactions by causing the plans to pay excessive prices for BAI stock purchased from Bruister. For each purchase, the Labor Department charged the fiduciaries used flawed valuations prepared by Matthew Donnelly and his firm, Business Appraisal Institute.

The court also found that the three fiduciaries breached their duty of loyalty from start to finish. Additionally, Bruister and his attorney David Johanson went so far as to fire the initial attorney representing the plans because that attorney was too thorough. Moreover, the court found that Bruister and Johanson exercised undue influence over Donnelly’s valuations, and that as a result, Donnelly was not sufficiently independent to provide valuations for the plans.

The court concluded that Bruister, Henry and Smith, in their role as plan fiduciaries, failed to properly represent plan participants’ interests, and that they unreasonably relied on an appraiser who so obviously lacked independence. The court reasoned, “An informed trustee would not have remained idle while the seller communicated directly with the employee stock ownership trust’s independent appraiser and financial advisor to elevate the price at the participants’ expense.”

Although Johanson was not a fiduciary, the court found his conduct worthy of comment because he both was the attorney for the seller and structured each sale. The court noted that Johanson attempted to influence the valuations in Bruister’s favor, and the testimony Johanson gave at trial did not support his denials. The court even noted that Johanson coached Donnelly during a break in his deposition to retract his testimony that Johanson represented Bruister individually. “History rebuts Johanson’s suggestion that he did not interfere with Donnelly’s valuations and raises doubts as to each of the subject transactions,” the court said.

The order requires Bruister, Smith and Henry to jointly pay $4.5 million in restitution to the plans and requires Bruister to pay an additional $1.98 million in prejudgment interest. The order also held Bruister Family LLC liable with all defendants for $885,065 and jointly liable with Bruister for $390,604.

Company Stock Investments Carry Special ERISA Risks

Purchases of company stock by an ESOP or other employee benefit plan can create a wide range of risks under ERISA’s fiduciary responsibility rules. When making investment or other decisions under an employee benefit plan, the general fiduciary duty standards of ERISA § 404 generally require plan fiduciaries to act prudently and solely in the interest of participants and beneficiaries. Meanwhile, except in certain narrow circumstances and subject to fulfillment of ERISA § 404, the prohibited transaction rules of ERISA § 406 among other things prohibits plan fiduciaries from causing the plan to engage in a transaction, if he knows or should know that such transaction is a direct or indirect:

Sale or exchange, or leasing, of any property between the plan and a party in interest;
Furnishing of goods, services, or facilities between the plan and a party in interest;
Transfer to, or use by or for the benefit of a party in interest, of any assets of the plan; or
Acquisition, on behalf of the plan, of any employer security or employer real property in violation of section 1107 (a) of this title.

As for all plan investment transactions, detailed, unbiased valuation documentation showing the prudence of any decision to invest or hold the investments of the plan in company stock is critical when determining the initial purchase or sale prices for plan transactions involving company stock. Since the sponsoring company is a party-in-interest of the plan, holding, must less using plan assets to purchase company stock or other activities resulting in the inclusion of company stock among the plan assets held by the plan creates presumptions of impropriety that impose higher than usual burdens upon the plan, its sponsor and fiduciaries to prove the appropriateness of the transaction. See e.g., Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012). As ESOP transactions to purchase company stock inherently require a host of complicated party-in-interest and other conflict of interest concerns, these risks are particularly heightened. Employee benefit plans, their fiduciaries and sponsors the need to continuously and prudently conduct documented monitoring and evaluations evaluate and monitor the investment of plan assets in company stock,the analysis and decisions about whether to continue to keep and offer this stock under the plan, as well as the qualifications, credentials and conduct of the fiduciaries and others empowered to influence these decisions. The Labor Department’s statement in announcing the Parrot litigation sums up the messages from these cases. “Plan officials are required by law to manage the ESOP in a careful, prudent manner and to act solely to benefit the plan’s participants,” said Jean Ackerman, director of the Employee Benefit Security Administration’s (EBSA’s) San Francisco Regional Office, which. “This action underscores the department’s commitment to protect the benefits that employers promise to their employees.”

In light of these exposures, plan fiduciaries, sponsors and their management, service providers and consultants participating in these activities need to both act with care and carefully document their actions to position to defend potential challenges.

Plans, their sponsors and fiduciaries also should ensure that appropriate steps are taken in selecting the fiduciaries, management and service providers responsible for administering or overseeing the administration of their plans, the selection of vendors, and other critical details. Appropriate background checks and other credentialing should be done both at commencement and periodically. Bonding and fiduciary liability insurance should be arranged and reviewed periodically along with their activities. Documentation of these and other steps should be carefully created and preserved.

When and if a change in stock value or other event that could compromise the investment occurs, consideration should be given as to the responsibilities that such events create under ERISA. As company leaders often have dual responsibilities to both the company and the plan, it is important that the company sponsoring the plan, its management and owners learn in advance how these responsibilities impact each other so that they are aware of the issues and have a good understanding of responsibilities and options as situations evolve.

Businesses and business leaders that fail to conduct and maintain the necessary evidence that these requirements are met when involving the plan in these transactions risk significant liability.

“Plan fiduciaries have an obligation to work solely in the interest of plan participants,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi.in the Labor Department’s October 31, 2014 announcement of the judgment. “When they fail to do so, the retirement security of workers is put in jeopardy, and we will take action to make plan participants whole.”

For Help or More Information

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices to monitor or respond to evolving laws and regulations, drafting or administering programs, resolving or defending audits, investigations or disputes or other employee benefit, human resources, safety, compliance or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

About Ms. Stamer

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to cstamer@solutionslawyer.net.

About Solutions Law Press

Comments Off on Plan’s Purchase of Company Stock Triggers $6.48 Million Award Against ESOP Sponsor, Shareholder, Board Members & Trustees | ADA, Bankruptcy, Corporate Compliance, Defined Contribution Plans, Employee Benefits, Employers, ERISA, ESOP, Excise Tax, Fiduciary Responsibility, Human Resources, Internal Controls, Internal Investigations, Retirement Plans, Tax, Tax Qualification | Tagged: 404, 406, defined benefit plan, Employer, ERISA, ESOP, exclusive benefit, Fiduciary Responsibility, Human Resources, pension plan, plan qualification, profit sharing plan, prohibited transaction, Prudence, Retirement Plans, Tax | Permalink
Posted by Cynthia Marcotte Stamer

EBSA Invites Input By November 19 On Need for More Regulation Of Investment Windows

August 20, 2014

November 19, 2014 is the deadline for commenting on a request for information on the use of brokerage windows, self-directed brokerage accounts and similar features in 401(k)-type plans schedule for publication by the Department of Labor in tomorrow’s (August 21, 2014) Federal Register. An advanced copy of the RFI can be viewed here.

Some 401(k)-type plans offer participants access to brokerage windows in addition to, or in place of, specific investment options chosen by the employer or another plan fiduciary. These “window” arrangements can enable or require individual participants to choose for themselves from a broad range of investments. The department received a number of questions about brokerage windows after the publication of a final regulation on participant-level fee disclosure.

According to Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi, the Labor Department’s goal in issuing this RFI is to determine whether, and to what extent, regulatory standards or other guidance about the use of brokerage windows may be necessary to adequately protect participants’ retirement savings. To this end, the RFI asks questions on brokerage windows, including: the scope of investment options typically available through a window; demographic and other information about participants who commonly use brokerage windows; the process of selecting a brokerage window and provider for a plan; the costs of brokerage windows; and what kind of information about brokerage windows and underlying investment options typically is available and disclosed to participants.

Plan fiduciaries, sponsors, and service providers with plans offering these brokerage windows should act promptly to submit their input by the November 19, 2014 deadline.

For Advice, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information about this communication click here.

The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. The Regulations now require that either we (1) include the following disclaimer in most written Federal tax correspondence or (2) undertake significant due diligence that we have not performed (but can perform on request).

ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

Comments Off on EBSA Invites Input By November 19 On Need for More Regulation Of Investment Windows | Employee Benefits, Employers, ERISA, Health Plans, Human Resources, Insurance, MEWA, Reporting & Disclosure, Uncategorized | Tagged: 401(k), brokerage accounts, ERISA, fee disclosure, investment window, plan investments | Permalink
Posted by Cynthia Marcotte Stamer

OFCCP Posts Additional FAQs on the Implementation of the VEVRAA and Section 503 Final Rules

December 26, 2013

The Office of FCCP posted a third round of Frequently Asked Questions (FAQs) answering questions from contractors and the general public about provisions in the recently published Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act (Section 503) Final Rules. These FAQs address implementation issues, such as the schedule for contractors to come into compliance with the affirmative action requirements of Subpart C of the new regulations. These latest FAQs, published on the OFCCP Web site and marked with a “NEW” banner, are part of a series of FAQs, guidance materials, and resources that OFCCP is providing to contractors and the public between now and the March 24, 2014, effective date of the new rules.

The VEVRAA FAQs are available here. The Section 503 FAQs are available here.

For Assistance or More Information

If you have questions or need help with these or employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. Her widely respected publications and programs include more than 25 years of publications on health plan contracting, design, administration and risk management including a “Managed Care Contracting Guide” published by the American Health Lawyers Association and numerous other works on vendor contracting. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Helpful Resources & Other Information

We hope that this information is useful to you. If you found these updates of interest, you also be interested in one or more of the following other recent articles published on the Coalition for Responsible Health Care Reform electronic publication available here, our electronic Solutions Law Press Health Care Update publication available here, or our HR & Benefits Update electronic publication available here . You also can get access to information about how you can arrange for training on “Building Your Family’s Health Care Toolkit,” using the “PlayForLife” resources to organize low-cost wellness programs in your workplace, school, church or other communities, and other process improvement, compliance and other training and other resources for health care providers, employers, health plans, community leaders and others here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail by creating or updating your profile here. You can reach other recent updates and other informative publications and resources.

Recent examples of these publications include:

For important information about this communication click here.

Comments Off on OFCCP Posts Additional FAQs on the Implementation of the VEVRAA and Section 503 Final Rules | 105(h), ADA, Affordable Care Act, Corporate Compliance, Disability, E-Verify, EEOC, EEOC, Employee Benefits, Employers, Employment Tax, ERISA, Health Plans, HIPAA, Human Resources, Insurance, Labor Management Relations, OFCCP, Rehabilitation Act, Retaliation, Safety, Unemployment Benefits, Unemployment Insurance | Tagged: Employer, employment law, ERISA, Grants, Job Corps, Labor Department, OSHA, Workforce Investment | Permalink
Posted by Cynthia Marcotte Stamer

OIG 2013 Top Management Challenges List Signals Tightening of Labor Department Enforcement

December 26, 2013

Employers should expect heighten scrutiny and enforcement in the labor law areas identified in the “2013 Top Management Challenges Facing the Department List” recently published by the U.S. Department of Labor Office of Inspector General. Employers can expect to see the Labor Department and its component agencies acting to tighten oversight and enforcement in these areas in response to the OIG list.

For 2013, the OIG identified the following as the most serious management and performance challenges facing the Department:

Protecting the Safety and Health of Workers
Protecting the Safety and Health of Miners
Improving Performance Accountability of Workforce Investment Act Grants
Ensuring the Effectiveness of the Job Corps Program
Reducing Improper Payments
Ensuring the Security of Employee Benefit Plan Assets
Securing and Protecting Information Management Systems
Ensuring the Effectiveness of Veterans’ Employment and Training Service Programs

In the report accompanying the OIG list, the OIG presents the challenge, the OIG’s assessment of the Department’s progress in addressing the challenge, and what remains to be done. These top management challenges are intended to identify and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. Typically, the identification of an area of concern by the OIG prompts tightening of processes and enforcement.

For Assistance or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. Her widely respected publications and programs include more than 25 years of publications on health plan contracting, design, administration and risk management including a “Managed Care Contracting Guide” published by the American Health Lawyers Association and numerous other works on vendor contracting. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Helpful Resources & Other Information

We hope that this information is useful to you. If you found these updates of interest, you also be interested in one or more of the following other recent articles published on the Coalition for Responsible Health Care Reform electronic publication available here, our electronic Solutions Law Press Health Care Update publication available here, or our HR & Benefits Update electronic publication available here . You also can get access to information about how you can arrange for training on “Building Your Family’s Health Care Toolkit,” using the “PlayForLife” resources to organize low-cost wellness programs in your workplace, school, church or other communities, and other process improvement, compliance and other training and other resources for health care providers, employers, health plans, community leaders and others here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail by creating or updating your profile here. You can reach other recent updates and other informative publications and resources.

Recent examples of these publications include:

For important information about this communication click here.

Comments Off on OIG 2013 Top Management Challenges List Signals Tightening of Labor Department Enforcement | 105(h), ADA, Affordable Care Act, Corporate Compliance, Disability, E-Verify, EEOC, EEOC, Employee Benefits, Employers, Employment Tax, ERISA, Health Plans, HIPAA, Human Resources, Insurance, Labor Management Relations, OFCCP, Rehabilitation Act, Retaliation, Safety, Unemployment Benefits, Unemployment Insurance | Tagged: Employer, employment law, ERISA, Grants, Job Corps, Labor Department, OSHA, Workforce Investment | Permalink
Posted by Cynthia Marcotte Stamer

Affordable Care Act Requires Proper Integration of HRAs, HFSAs, & Certain Other Health Premium Reimbursement Arrangements

September 24, 2013

Employers using health reimbursement arrangements (HRAs), health flexible spending plans (HFSAs) or other employer payment plan arrangements under which the employer provides a fixed defined contribution from the employer to employees to use to purchase individual or group health insurance should have those arrangements reviewed for compliance with the Patient Protection & Affordable Care Act (ACA) annual limit and preventive care rules as interpreted by the Departments of Labor, Treasury and Health & Human Service.

The Internal Revenue Service and the Employee Benefit Security Administration construe ACA as requiring that these arrangements be properly integrated with health insurance coverage that otherwise complies with the Affordable Care Act’s annual limit and preventive care rules to avoid violating ACA in recent guidance published in IRS Notice 2013-54 and EBSA Technical Release No. 2013-04.

Employers that use HRAs, HFSAs, or other employer defined contribution style arrangements to reimburse employees for individual or group insurance coverage should review their arrangements to ensure that they are properly designed to comply with ACA’s annual limit, preventive care and other mandates.

For Help or More Information

If you need help understanding or dealing with these impending notification requirements, with other 2014 health plan decision-making or preparation, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

For important information about this communication see here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

Comments Off on Affordable Care Act Requires Proper Integration of HRAs, HFSAs, & Certain Other Health Premium Reimbursement Arrangements | Employee Benefits, Employers, ERISA, family leave, Fiduciary Responsibility, Health Plans, Human Resources, Insurance, Leave, Patient Protection and Affordable Care Act, Uncategorized, Wage & Hour | Tagged: Affordable Care Act, DOMA, Employee Benefits, ERISA, Exchange Notice, FMLA, Health Plans, Model NOtices, same-sex marriage, Section 18B, Windsor | Permalink
Posted by Cynthia Marcotte Stamer

Review Benefit Plan, FLMA & Other Family-Related Policies In Light Of Labor Department Same-Sex Marriage Guidance

September 24, 2013

Employers and other employee benefit plan sponsors, benefit plan fiduciaries, and their advisors and service providers should review and update their health and employee benefit plan’s definitions of “spouse,” “marriage” and “dependent” in light of new guidance from the Department of Labor Wage & Hour Division (WHD) guidance under the Family & Medical Leave Act and the Employee Benefit Security Administration (EBSA) guidance under the under the Employee Retirement Income Security Act (ERISA) on the effect of the Supreme Court’s finding of the Defense of Marriage Act unconstitutional in United States v. Windsor on their family leave and employee benefit plan obligations to employees involved in same-sex domestic partnership relationships. When doing so, employers and employee benefit plan sponsors, fiduciaries and administrators also should keep in mind that the Defense of Marriage Act ruling is only one of a number of recent developments fueling an evolution in the traditional concepts of marriage, dependent and family and their effect on employment and employee benefit policies and practices. Accordingly, when reviewing these arrangements, employers and their benefit plans need to be reviewed and updated to keep abreast of and comply with these evolving practices and standards.

On June 26, 2013, the Windsor decision struck down the provisions of the Defense of Marriage Act that denied federal benefits to legally married, same-sex couples.

In Technical Release No. 2013-04 published on September 18, 2013, the EBSA states the Department plans to issue additional guidance in the coming months as it consults with the Department of Justice and other federal agencies to implement the Winsor decision. In the meanwhile, however, EBSA says that in general, the terms “spouse” and “marriage” in Title I of ERISA and in related department regulations should be read to include same-sex couples legally married in any state or foreign jurisdiction that recognizes such marriages, regardless of where they currently live.

The EBSA guidance follows the publication by the WHD of guidance on the effect of the Windsor decision on the family leave responsibilities of employers covered by the FMLA to employees involved in same-sex domestic partnership relationships in Fact Sheet #28F: Qualifying Reasons for Leave under the Family and Medical Leave Act published by the WHD earlier in August. In that guidance, WHD updated its definition of “spouse” for purposes of the FMLA to mean “husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including “common law” marriage and same-sex marriage.”

The Windsor decision and these new pieces of related guidance reflect the evolving nature of marriage and family increasingly incorporated into federal and state employment and employee benefit law. While the Labor Department promises that additional guidance on the Defense of Marriage Act will be forthcoming the future, the new guidance makes clear that employers should review their existing employment and employee benefit plans in light of the Windsor decision and evolving precedent. Employers, employee benefit plans, their sponsors, fiduciaries and administrators should not assume that existing definitions will have the intended effect or be compliant. Rather, they should assess the existing language in light of the decision and the evolving guidance and make appropriate adjustments as necessary to ensure that their plans properly document the desired treatment in accordance with the evolving guidance and precedent. In doing so, employers also should review other definitions of dependent, kin, family and related concepts to ensure they are up to date with the FMLA, the Patient Protection & Affordable Care Act, the Defense of Marriage Act-related guidance and other current regulations.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

Comments Off on Review Benefit Plan, FLMA & Other Family-Related Policies In Light Of Labor Department Same-Sex Marriage Guidance | Employee Benefits, Employers, ERISA, family leave, Fiduciary Responsibility, Health Plans, Human Resources, Insurance, Leave, Patient Protection and Affordable Care Act, Uncategorized, Wage & Hour | Tagged: Affordable Care Act, DOMA, Employee Benefits, ERISA, Exchange Notice, FMLA, Health Plans, Model NOtices, same-sex marriage, Section 18B, Windsor | Permalink
Posted by Cynthia Marcotte Stamer

CMS Hosts Webinar Celebrating National Health IT Week 9/16-20

September 13, 2013

In celebration of the third annual National Health IT Week is September 16-20, the Centers for Medicare & Medicaid Services (CMS) will host several webinars and launching new eHealth tools and resources that it intends to help providers participate in eHealth programs. These programs may be of interest to providers as well as payers who are interested in what providers are doing to use eHealth tools.

The eHealth Provider Webinar will be held on Thursday, September 19^th from 12:00 p.m. to 1:30 p.m. ET. CMS plans to present an overview of the eHealth programs and its eHealth initiative—an initiative that aligns health IT and electronic standards programs on:

Administrative Simplification
eRx Incentive Program
ICD-10
Quality Measurement

A portion of the webinar will also be dedicated to Q&A.

Registration Information

Space is limited. Register now to secure your spot for the eHealth Provider Webinar. Once registration is complete, you will receive a follow-up email with step-by-step instructions on how to log-in to the webinar. Listserv messages are sent prior to each webinar session with registration information.

If you’d like to view past webinars, the PowerPoint presentations and recordings can now be accessed on the Resources page of the eHealth website. For more information about CMS’ eHealth Initiatives, visit the CMS eHealth website for the latest news and updates on CMS’ eHealth initiatives.

For Help or More Information

If you need help understanding or dealing with these eHealth or other health and health benefit programs, or with other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, insurers and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns.
Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, HR.com, Insurance Thought Leadership, Solutions Law Press, Inc. and other publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and register to receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc. including:

Comments Off on CMS Hosts Webinar Celebrating National Health IT Week 9/16-20 | Data Security, Employee Benefits, ERISA, Fiduciary Responsibility, Health Plans, Patient Protection and Affordable Care Act, Uncategorized | Tagged: Affordable Care Act, e-health, Employee Benefits, ERISA, Exchange Notice, Health IT, Health Plans, Model NOtices, Section 18B | Permalink
Posted by Cynthia Marcotte Stamer

New DOL Guidance Makes Many Employers Rethink Giving FLSA 18B Exchange Notices

September 12, 2013

But Informal Agency Communications Suggest Don’t Be Too Quick To Assume No Consequences For Not Giving Notice

Employer and union group health plan sponsors and insurers of group and individual health plans who have struggled to complete and send the new employer notice (Exchange Notice) to employees required by Fair Labor Standards Act (FLSA) Section 18B by the October 1, 2013 deadline set by the U.S. Department of Labor Employee Benefit Security Administration (EBSA) should contact their legal counsel to discuss the advisability of sending the Exchange Notice in light of a new informal guidance posted and distributed by EBSA yesterday (September 11, 2013) here titled “FAQ On Notice of Coverage Options.” While many employers are reading the guidance in the new FAQ On Notice of Coverage Options as justification for not sending the notice, some EBSA representatives asked about the FAQ are cautioning that its provisions does not mean that there is no consequence for not sending an Exchange Notice. In the face of these conflicting messages, employers under pressure to decide what Exchange Notice, if any to send by October 1, 2013 are more confused than ever.

Exchange Notice Requirement Under 18B Due October 1

To promote awareness among employees of the option scheduled to take effect on January 1, 2014 under ACA to obtain health coverage through their state’s Marketplace, ACA amended the FLSA to require each FLSA-covered employer to give each employee a notice about the option to enroll in health coverage through a Marketplace and certain other information required by new Section 18B of the FLSA.

Although the Labor Department’s Wage & Hour Division usually interprets and administers the FLSA, EBSA as the agency with primary authority over health and other employee benefit plan regulation has taken the lead in interpreting and implementing FLSA Section 18B and issuing its implementing guidance.

In the EBSA interim guidance implementing Section 18B published in Technical Release 2013-02 and later communications and guidance prior to September 11, 2013, EBSA construes Section 18B as requiring that each employer covered by the FLSA “must” provide each employee at the time of hiring a written notice that meets the requirements of Section 18B to inform the employee:

Of the existence of the Marketplace (referred to in the statute as the Exchange) including a description of the services provided by the Marketplace, and the way the employee may contact the Marketplace to request assistance;
If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through the Marketplace; and
If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

According to Technical Release 2013-02, an employer covered by the FLSA must give each employee notice under FLSA Section 18B whether the employer offers coverage, whether a particular employee qualifies for health coverage, if any, offered by the employer, or both.

Since publishing Technical Release 2013-02, EBSA also continuously told employers Section 18B “requires” their timely delivery of Exchange Notices in Model Notices that the Labor Department said it published to help employers prepare their Exchange Notices to comply with Section 18B’s requirement to provide the Exchange Notice. See Model Notice For Employers Who Offer A Health Plan To Some or All Employees; Model Notice for Employers Who Do Not Offer A Health Plan; and COBRA Model Election Notice. Indeed, the Model Notice For Employers Who Offer A Health Plan To Some or All Employees reinforced this message by specifically delineating the employer’s completion of the last portion of the form by the employer as “optional.” Likewise, the responses shared by EBSA representatives in response to questions from employers and others about Section 18B and the Model Notices caused employers to believe that employers faced liability if they didn’t timely give an Exchange Notice to their employees by the October 1, 2013 deadline established by the Labor Department.

9/11/13 FAQ On Notice of Coverage Options Not Necessarily Mean No Consequence For Not Giving Notice

In the face of the previous zealous efforts by the EBSA telling employers about their obligations under Section 18B and urging them to comply, EBSA’s announcement in its September 11, 2013 FAQ on Notice of Coverage Options is creating a stir among employers and their advisors. The FAQ on Notice of Coverage Option and the responses of EBSA representatives to questions about its interpretation and effect are confusing to say the least.

In the FAQ on Notice of Coverage Options, the EBSA responds “No.” to the sole question addressed by the FAQ: “Can an employer be fined for failing to provide employees with notice about the Affordable Care Act’s new Health Insurance Marketplace?”

EBSA representatives asked on the morning of September 12, 2013 about the FAQ on Notice of Coverage Options stated that while employers “should” and EBSA “encourages” employers to in fact provide the Exchange Notices, EBSA does not view employers as subject to any penalty under “ERISA” (emphasis added) for not providing an Exchange Notice in accordance with Section 18B of the FLSA.

On the other hand, statements made by other EBSA officials responding to questions about the implications of the FAQ on Notice of Coverage Options on the afternoon of September 12, 2013 raise concerns about reading the FAQ to mean that there is no consequence for an employer’s failure to provide the Exchange Notice. These EBSA officials cautioned that employers should not interpret the statement in the FAQ on Notice of Coverage Options there is no penalty under ERISA for not providing the Exchange Notice as meaning that there will be no adverse consequence if an employer does not provide an 18B Exchange Notice to its employees. On the contrary, these EBSA officials caution that EBSA may view the Exchange Notice as a required disclosure about the plan, which could trigger audit or other enforcement activity.

EBSA representatives also are declining to comment on whether not providing the Exchange Notice might trigger penalties or other liabilities from other agencies. When asked whether employers failing to provide an Exchange Notice could face penalties imposed by the Department of Labor Wage & Hour division under the FLSA, the Internal Revenue Service under Section 8928 or other provisions of the Internal Revenue Code, the Department of Health & Human Services under the Public Health Services Act, plaintiffs’ in a private cause of action brought under ERISA or the FLSA, or otherwise, EBSA representatives declined to comment about the potential implications of an employer’s failure to provide an Exchange Notice in accordance with FLSA Section 18B under laws administered or construed by other agencies. EBSA representatives instead referred these inquiries for response to the applicable enforcement agency.

The author has contacted and is awaiting reply from the Department of Labor Wage & Hour Division and the Departments of Treasury and Health & Human Services on their position, if any, on the potential liability of an employer for failing to timely deliver and Exchange Notice under the laws and rules subject to that agency’s jurisdiction. Stay tuned for any future updates.

Consult With Qualified Counsel About What To Do & Document Analysis

The ambiguities created by the EBSA’s release of the FAQ on Notice of Coverage Options make it more necessary than ever that employers obtain documented advice from qualified legal counsel about responding to the requirements of Section 18B of the FLSA.

Because the preparation and distribution of an Exchange Notice by necessity involves an employer in making statements about its employee benefit plans, employers generally should use care to prudently craft each statement in any Exchange Notice to fit the actual terms of the applicable health plan to which it relates to manage fiduciary liability and other potential liabilities potentially arising from sending an inaccurate or misleading the Exchange Notice. See Employers Beware! DOL-Model FLSA Section 18B Exchange Notice Requires Tailoring! Furthermore, depending on the size of the employer’s workforce, an employer generally must invest significant time and money to prepare and distribute the Exchange Notice to its employees.

In light of the EBSA’s position in FAQ on Notice of Coverage Options, employers may want to consult experienced legal counsel about whether to provide the Exchange Notice after all pending further guidance from the Employee Benefit Security Administration or other relevant agencies. If and to the extent that an employer has or in the future does provide the Exchange Notice, employers also should consult with counsel on the appropriate tailoring of the content of the Exchange Notice. Whether or not the employer elects to provide the Exchange Notice, however, employers and the plan fiduciaries, administrators and insurers that administer the employer’s health plan will want to ensure that the plan administrator or other appropriate named fiduciary of its health plan is timely preparing and distributing the Summary of Benefits and Communications (SBC), 60-day prior notice of material plan amendments reducing coverage or service, summary plan description and host of other notices required with respect to the health plan by ERISA and other applicable laws, See e.g. Impending 10/1 Exchange Notice & Other New Notice Deadlines Cut Time Short For Employers To Finalize 2014 Health Plan Terms & Contracts.

In connection with these and other upcoming 2013 health plan preparations, employers and applicable health plan fiduciaries, insurers, and service providers should work together to ensure that plan terms and practices are carefully updated to meet new rules, as well as to tighten long-standing terms to promote enforceability and minimize fiduciary and other exposures. All communications about the plan generally should both match as closely as possible the language contained in the official plan documents, as well as accurately identify the relevant named fiduciary and its role on the matters addressed, notify reads of the retained rights of the plan sponsor to amend the plan, and contain other appropriate disclaimers and disclosures.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc. including:

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Posted by Cynthia Marcotte Stamer

Tell HHS What You Think About Obamacare & Other Rules

September 9, 2013

Health plans and their employer or union sponsors, health insurers, health care providers and others concerned about the regulatory and enforcement activities of the Department of Health & Human Services (HHS) can make their concerns known by speaking up now. Share your input on the draft HHS strategic plan that will guide HHS’ regulatory and enforcement agenda for the next 4 years.

The sweeping reforms of the Patient Protection & Affordable Care Act have granted HHS unprecedented power over employer and other health plans, insurers and individual Americans as well as the health care providers HHS traditionally has primarily regulated. Employers, health insurers, individuals and others concerned about the regulations HHS has issued already or those regulations and enforcement actions that it may take in the future should not miss the invaluable opportunity to share their concerns with HHS as it prepares its new strategic plan.

Every 4 years, HHS updates its strategic plan, which describes its work to address complex, multifaceted, and ever-evolving health and human service issues, including:

Health Care
Research and Innovation
Prevention and Wellness

HHS is inviting public input on the draft HHS Strategic Plan for FY 2014-2018. The comment period is open until October 15, 2013. Individuals or organizations wishing to respond to this invitation can read the HHS Strategic Plan FY 2014-2018 (Draft) and submit your comments several ways including:

Submit your comments online here
Via Email to: strategicplanning@hhs.gov
Via Fax: (202) 690-8252
U.S. Mail (not recommended as security screening results in significant delay.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

Comments Off on Tell HHS What You Think About Obamacare & Other Rules | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Patient Protection and Affordable Care Act, Uncategorized, Wage & Hour | Tagged: Affordable Care Act, Employee Benefits, ERISA, Exchange Notice, Health Plans, Model NOtices, Section 18B | Permalink
Posted by Cynthia Marcotte Stamer

Employers Beware! DOL-Model FLSA Section 18B Exchange Notice Requires Tailoring!

September 5, 2013

Employers considering using model notices published by the Department of Labor Employee Benefit Security Administration (DOL) here to prepare the notice (“Exchange Notice”) that the Patient Protection & Affordable Care Act (ACA) requires employers to give employees beginning October 1, 2014 about the new option created by to get health coverage beginning January 1, 2014 through the Health Insurance Exchange or “Marketplaces” should use care to tailor the notices to fit their plan design and terms.

DOL published the Model Notices in conjunction of its publication of interim guidance implementing the Exchange Notice requirements in Technical Release No. 2013-02 on May 8, 2013. While DOL says it intended for the Model Notices to help employers to prepare their Exchange Notices, the Technical Release No. 2013-02 and Model Notices have raised as many questions as they answer.

The actual content that FLSA Section 18B expressly requires that employers to provide in their Exchange Notices is relatively limited. Section 18B only expressly requires that the Exchange Notice:

Inform employees of coverage options, including information about the existence of the new Marketplace as well as contact information and description of the services provided by a Marketplace;
Inform the employee that the employee may be eligible for a premium tax credit under section 36B of the Code if the employee purchases a qualified health plan through the Marketplace; and
Include a statement informing the employee that if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes. At minimum, this generally requires that the Exchange Notice distributed by an employer must inform the employee.

The proposed language and content of the Model Notices proposed by the DOL does well beyond these minimum requirements.

Since DOL published Technical Release No. 2013-02 and the Model Notices, employers have struggled to determine exactly DOL considers the required content, logistics and other details of the Exchange Notice. Technical Release 2013-02 quite clearly states that employers are not required to use the Model Notices to prepare the Exchange Notice for their health plans. Technical Release 2013-02 also clearly indicates that the content proposed in the Model Notice goes beyond the minimum required content necessary to satisfy Section 18B and not all of the language proposed in the Model Notices is “required.” Figuring out what language is mandatory and what is option, however, is unclear. The majority of these questions and concerns are not resolved by the newly-released FAQs about the Affordable
Care Act Implementation Part XVI (FAQ XVI) published by DOL on September 4, 2013, discussing the appropriateness of allowing third parties to distribute the notice on behalf of an employer.

Furthermore, much of the proposed language in the Model Notices also raises concerns for employers, health plan fiduciaries and service providers. Among other things, certain language in the Model Notices raises the risk that using the Model Notices without appropriate changes might cause the Exchange Notice to:
Communicate significantly more information than the minimum information expressly required by FLSA Section 18B;
Incorporate speculative statements about the future eligibility of an employee for coverage or benefits that could compel the health plan or the employer to provide coverage to an employee or dependent in the future even through that individual does not meet applicable plan terms as in effect at that time;
Misrepresent plan information or otherwise confuse or mislead employees about the plan terms or the implications of the offered coverage on the rights of the employee to obtain a subsidy for enrolling in health coverage through the Marketplace in lieu of enrolling in employer coverage;
Provide misleading information about the parties authorized to interpret plan terms or make other determinations about the plan that could spread fiduciary liability to employers or their management, service providers or others not appointed to serve as named fiduciaries of the plan;
Inappropriately misrepresent the role, responsibility and authority of the employer, service providers or other parties in relation to critical plan responsibilities; and/or
Undermine the employer’s ability to modify or amend the plan in the future.

Since the Technical Release makes use of the language in the Model Notices optional, these and other issues in the language raise concerns raise concerns for employers and their health plan fiduciaries that using the Model Notice without tailoring their Exchange Notice to fit the applicable health plan could expose named fiduciaries, the employer or both to potential fiduciary liability exposures under the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA). While FAQ XVI only expressly answers a narrow set of questions about the Exchange Notice, the warning included the FAQ XVI from DOL that DOL expects the Exchange Notice to properly disclose the authority and role of the employers, plan fiduciaries and service providers under the health plan appears to affirm that DOL expects employers and health plan fiduciaries to tailor the notice as prudently necessary accurately to reflect plan terms and other included information.

Consequently, while employers should ensure that they meet the October 1, 2013 deadline to begin providing the Exchange Notices, they also must use care to ensure that the Exchange Notices provided are properly drafted to accurately reflect the plan terms, fiduciary allocations and other material information and incorporate other appropriate disclaimers and safeguards not included in the Model Notices.

Employers needing help with preparing the Exchange Notice or other Affordable Care Act compliance and risk management challenges are encouraged to contact the author of this article, Cynthia Marcotte Stamer, who has extensive experience aiding employers, insurers and others with these and other related matters.

Editors Note: The formatting issues in this article are the result of technical difficulties that we are working with the WordPress blog service provider to address. Thank you for your understanding.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this of interest, you may also be interested in the following recent publications by Ms. Stamer published by Solutions Law Press, Inc.:

Comments Off on Employers Beware! DOL-Model FLSA Section 18B Exchange Notice Requires Tailoring! | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Patient Protection and Affordable Care Act, Uncategorized, Wage & Hour | Tagged: Affordable Care Act, Employee Benefits, ERISA, Exchange Notice, Health Plans, Model NOtices, Section 18B | Permalink
Posted by Cynthia Marcotte Stamer

Self-Dealing Or Other Mishandling of Employee Benefit Plan Funds Risky For Fiduciaries & Those Appointing Them

July 31, 2013

New litigation against the former trustee and former investment service provider of four pension plans reminds employer or other employee benefit plan sponsors, business owners or management, investment advisors and others serving as fiduciaries or advisors of employee benefit plans of the need to ensure that employee benefit plans are only used for the benefit of participants and beneficiaries, and prudently and properly invested and administered. Businesses sponsoring plans and their leaders, as well as others serving as fiduciaries or investment advisors are cautioned that mishandling of plan assets or investments can create significant liability both for those who improperly handle plan responsibilities and the employer or other plan sponsor, business owner or management, and others who are involved in their selection, oversight and retention. Consequently, parties should ensure act prudently to ensure plan assets are only invested prudently and for the sole benefit of the plan and its members, as well as to appropriately monitor the actions of other plan fiduciaries or personnel, investment managers, advisors, and others handing investments or other plan transactions, and be prepared to prove it.

The U.S. District Court for the Eastern District of Kentucky on July 26 granted in part the U.S. Department of Labor’s motion for a preliminary injunction against George S. Hofmeister and Bernard Tew, former fiduciaries of four Lexington-based pension plans: the Hillsdale Salaried, Hillsdale Hourly, Revstone Casting Fairfield GMP Local 359, and Fourslides Inc. The injunctions stem from ongoing litigation against the defendants filed by the Labor Department under the Employee Retirement Income Security Act of 1974 (ERISA). See Perez v. George Hofmeister, et al. Civil Action File Number 5:12-cv-00250-KKC, Perez v. George Hofmeister, et al. Civil Action File Number 5:13-cv-00156-KKC and Perez v. Robert La Courciere, et al. Civil Action File Number 5:13-cv-00158-KKC.

The Labor Department previously filed lawsuits in the same court that named Hofmeister and Tew, among others. Hofmeister was the trustee of the four pension plans, and Tew was managing director of their investment service provider, Bluegrass Investment Management LLC. The court’s order removes Hofmeister as a fiduciary of the plans and prohibits him from taking any actions with respect to the pensions plans or their assets. Tew resigned as fiduciary of the plans a few days before a hearing regarding the Labor Department’s motion. The lawsuits alleged that the defendants engaged in a series of prohibited transactions resulting in the misuse of approximately $12.1 million from the Hillsdale Salaried pension plan, approximately $22.5 million from the Hillsdale Hourly pension plan, approximately $4.4 million from the Revstone Casting Fairfield GMP Local 359 pension plan, and approximately $500,000 from the Fourslides Inc. pension plan. The four plan sponsors are closely affiliated with Lexington-based Revstone Industries LLC and Spara LLC.

The suits follow an EBSA investigation that found violations of the Employee Retirement Income Security Act, including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to services providers, and payment of fees on behalf of the companies.

ERISA’s fiduciary responsibility rules compel individuals named as employee benefit plan fiduciaries, or who functionally exercise or have discretion or control over plan assets or their investments, or certain other plan actions to act prudently and for the exclusive benefit of participants and beneficiaries. Plan fiduciaries must act “solely in the interest” of the plan and its members. ERISA also expressly prohibits fiduciaries from dealing with the plan or its assets for the benefit of themselves or any third party. Meanwhile, ERISA’s prohibited transaction rules identify a list of parties and transactions that are per se prohibited and violate ERISA’s fiduciary responsibility rules unless the fiduciary demonstrates that an applicable exception applies. These transactions commonly are referred to as “prohibited transactions.”

According to the Labor Department brief Hofmeister, Tew and Bluegrass have repeatedly violated ERISA, using nearly $40 million in pension plan assets to benefit themselves or related parties. The department’s investigation of these pension plans revealed a pattern of prohibited transactions involving the use of these plans’ assets by Hofmeister, Tew and investment adviser firms. Alleged improper use of the plans’ assets began within days or months of Hofmeister assuming control of the pension plans. The department contends that Hofmeister has placed millions of dollars in pension plan assets at risk and has consistently failed to act to protect these assets when required.

Under ERISA, fiduciaries that commit prohibited transactions or breach other fiduciary duties rules of ERISA generally are liable personally to the employee benefit plan for the greater of damages resulting from the breach or profits realized, plus attorneys’ fees and other costs of recovery. In addition, the Labor Department also can impose penalties of up to 20 percent of the amount of the fiduciary breach, seek to enjoin the breaching fiduciaries from serving in a fiduciary capacity, and refer them to the Department of Justice for criminal prosecution. Bankruptcy often does not provide any protection against the obligation to repay.

Employers, members of management, and others with discretion or control over plan assets or the selection, appointment, oversight or retention for those providing fiduciary or other plan services should be careful to act prudently when performing these duties to avoid becoming exposed to liability for bad actors. Beyond avoiding committing its own breach of fiduciary duties, a plan sponsor, member of management or other party who is a named fiduciary or possesses fiduciary power or authority over the plan also sometimes can be liable for the prohibited transactions or other fiduciary breaches of another fiduciary under ERISA’s co-fiduciary responsibility rules. These rules generally allow co-fiduciary liability to attach when an otherwise innocent fiduciary either enabled the breach by failing to appropriately fulfill its own fiduciary responsibilities, knew or should have have known of the breach but failed to properly act to prudently intervene to protect the plan and its assets, or later discovers the breach and fails to prudently act to intervene to protect the plan and its assets.

In addition to prudently overseeing those handling investments or other plan assets or performing other fiduciary functions, parties engaging these individuals should ensure that all fiduciaries, investment advisors and service providers of the plan handing plan matters are carefully credentialed. A documented background check should be conducted to confirm that the individuals or their organizations are not disqualified from serving as fiduciaries and have appropriate credentials and reputations to perform those duties. This analysis should be periodically rechecked and that documentation and its review also carefully preserved.

Furthermore, employers and plan fiduciaries also should confirm and retain documentation that the parties serving as fiduciaries, involved in the handling of plan assets or funds, or acting in certain other capacities are bonded as required by ERISA. ERISA’s fiduciary responsibility rules require appropriate bonding. In addition to overlooking the necessity of bonding, many plan sponsors and vendors underestimate the amount and required terms of the bonding and the scope of individuals required to be bonded.

Failing to meet this requirement can broaden the scope of fiduciary liability to a plan sponsor or member of management who selected or appointed the fiduciary or service provider that engages in the prohibited transaction or other inappropriate conduct. Consequently, in the event of a plan loss, Labor Department investigators typically request documentation of this credentialing and bonding early in the investigation.

Employee benefit plan vendor selection and compensation arrangements made by association and other employee benefit plan sponsors, fiduciaries and service providers are coming under increasing scrutiny by the EBSA. While ERISA technically grants plan sponsors and fiduciaries wide latitude to make these choices, the exercise of these powers comes with great responsibility. See e.g., Plan Sponsors. Their Owners & Management & Others Risk Personal Liability If Others Defraud Plans or Mismanage Employee Benefit Plan Responsibilities; New Rules Give Employee Benefit Plan Fiduciaries & Investment Advisors New Investment Advice Options; DOL Proposes To Expand Investment Related Services Giving Rise to ERISA Fiduciary Status As Investment Fiduciary.

Associations, employer and other plan sponsors, and other entities and individuals who in name or in function have or exercise discretionary responsibility or authority over the selection of plan fiduciaries, administrative or investment service providers or other services to the plan or the establishment of their compensation generally must make those decisions in accordance with the fiduciary responsibility and prohibited transaction rules of ERISA.

Since the earliest days of ERISA, the EBSA as well as private plaintiffs have aggressively enforced these and other fiduciary responsibility rules. In recent years, EBSA has taken further steps to tighten and enforce these protections such as the new fee disclosure rules recently implemented by the EBSA and other fiduciary guidance. See, e.g., Western Mixers & Officers Ordered To Pay $1.2M+ For Improperly Using Benefit Plan Funds For Company Operations, Other ERISA Violations; Plan Administrator Faces Civil & Criminal Prosecution For Allegedly Making Prohibited $3.2 Million Real Estate Investment; Tough times are no excuse for ERISA shortcuts.

Despite these well-document fiduciary exposures and a well-established pattern of enforcement by the Labor Department and private plaintiffs, many companies and their business leaders fail to appreciate the responsibilities and liabilities associated with the establishment and administration of employee benefit plans. Frequently, employer and other employee benefit plan sponsors fail adequately to follow or document their administration of appropriate procedures to be in a position to prove their fulfillment of these requirements when selecting plan fiduciaries and service providers, determining the compensation paid for their services, overseeing the performance of these parties, or engaging in other dealings with respect to plan design or administration. In other instances, businesses and their leaders do not realize that the functional definition that ERISA uses to determine fiduciary status means that individuals participating in discretionary decisions about the employee benefit plan, as well as the plan sponsor, may bear liability under many commonly occurring situations if appropriate care is not exercised to protect participants or beneficiaries in these plans. For this reason, businesses and associations providing employee benefits to employees or dependents, as well as members of management participating in, or having responsibility to oversee or influence decisions about the establishment, maintenance, funding, and administration of their organization’s employee benefit programs need a clear understanding of their responsibilities with respect to such programs, the steps that they should take to prove their fulfillment of these responsibilities, and their other options for preventing or mitigating their otherwise applicable fiduciary risks.

In light of the significant liability risks, employer, association and other employee benefit plan sponsors and their management, plan fiduciaries, service providers and consultants should exercise care when selecting plan fiduciaries and service providers, establishing their compensation and making other related arrangements. To minimize fiduciary exposures, parties participating in these activities should seek the advice of competent legal counsel on their potential fiduciary status and responsibilities on these activities and take appropriate steps to minimize potential exposures.

For Help or More Information

If you need help reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices or with other employee benefits, human resources, health care or insurance matters, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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1 Comment | Bankruptcy, Corporate Compliance, Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Mental Health, Mental Health Parity, Professional Liability, Retirement Plans, Risk Management, Tax | Tagged: ERISA, fee disclosure, Fiduciary, participant fee disclosuyrenvestment-advisor, plan investiments, prohibited traansaction, Prudence | Permalink
Posted by Cynthia Marcotte Stamer

Id & Manage Hidden Employee Benefit Exposures In Business Insolvency Or Other Transactions

June 5, 2013

The June 4, 2013 announcement of the Employee Benefit Security Administration (EBSA) provides a timely reminder to businesses sponsoring employee benefit plans, their owners and management, plan fiduciaries, banks, administrative service providers and other plan vendors, employee benefit plan and bankruptcy trustees, corporate receivers, creditors, and others looking to expedite the windup of abandoned 401(k), profit-sharing and other individual account pension plans of the challenges that can result when employee benefit plan responsibilities are mishandled when companies fail or experience other significant events, as well as the availability of tools to help mitigate or prevent these challenges through responsible proactive action.

Hidden Employee Benefit Exposures For Unwary Abound For Parties In Business Insolvency Or Other Transactions

A complex maze of ERISA, tax and other rules make, administration and termination of employee benefit plans a complicated matter. When the company sponsoring a plan experiences a significant workforce or other restructuring, becomes distressed, goes bankrupt or liquidates, merges, sells assets or engages in other significant business transaction impacting the plans or its workforce, the rules, as well as the circumstances, can create a liability and operational quagmire for everyone from the sponsoring business, its management, buyers, vendors, plan fiduciaries, plan participants and beneficiaries, related entities, asset purchasers and others. While tough economic times may tempt business leaders to cut corners, more than 3o years of litigation and enforcement precedent make clear that cutting corners on the assessment and handling of employee benefit and other workforce responsibilities amid business distress or in other business transactions or events presents risks for all parties involved. See e.g., Tough Times Are No Excuse For ERISA Shortcuts; Mishandling Employee Benefit Obligations Creates Big Liabilities For Distressed Businesses & Their Business Leaders. While many business leaders and plan fiduciaries lack a strong understanding of these rules and their implications in times of business or benefit plan distress or other significant business transactions, even those experienced with these concerns need to use caution to understand and respond to the series of ongoing changes in these rules, regulations and precedent that impact on the handling of plan related responsibilities in these and other special situations.

The Internal Revenue Code (Code) requires contains a maze of requirements that companies sponsoring pension, profit-sharing, health and other employee benefit plans, their plans, and plan administrators must follow when maintaining, administering, or terminating these plans including in many instances, special rules on the termination of the plans, distribution of assets, and the liabilities that attach to affiliated companies, successors, and assets resulting from transactions involving employee benefit plans or their sponsors.

In addition to the Code’s rules, companies and other individuals that in name or in function have or exercise discretionary responsibility or authority over the maintenance, administration or funding of employee benefit plans regulated by ERISA also generally must meet ERISA’s high standards for carrying out these duties based on their functional ability to exercise discretion over these matters, whether or not they have been named as fiduciaries formally. Under many circumstances these rules, or the handling of transactions can broaden the scope of responsibility or create exposures for a surprising range of parties dealing with the plan sponsor, related corporations or their stock, assets, benefit plans or workforce in corporate bankruptcies, mergers, asset or stock acquisitions, liquidations or other transactions.

Beyond these basic tax and fiduciary obligations, ERISA and the Internal Revenue Code (Code) create additional responsibilities and liabilities for when dealing with defined benefit or other pension plans subject to ERISA’s minimum funding and plan termination rules that when violated trigger a plethora of funding and notification obligations, penalties, liens on assets, and other obligations that can create significant traps for unwary plan fiduciaries and administrators, the sponsoring corporation, its management, affiliates and successors, as well as creditors or purchasers of stock or assets and others dealing with them.

Despite these well-documented responsibilities and a well-established pattern of enforcement by the Department of Labor, Pension Benefit Guarantee Corporation, Internal Revenue Service and private plaintiffs, many businesses and business leaders fail to appropriately understand these and other basic responsibilities and liabilities associated with the establishment, administration, termination and windup of employee benefit plans and other details about how their or others mishandling of employee benefit plan related responsibilities can undermine business goals and create unanticipated liability exposures.

Frequently, companies sponsoring their employee benefit plans and their executives mistakenly assume that they can rely upon vendors and advisors to ensure that their programs are appropriately established. The establishment and maintenance of these arrangements with limited review or oversight by the sponsoring company or its management team can be risky.

In other instances, businesses and their leaders do not realize that ERISA’s functional definition to determine fiduciary status means that individuals participating in discretionary decisions about the employee benefit plan, as well as the plan sponsor, may bear liability under many commonly occurring situations if appropriate care is not exercised to protect participants or beneficiaries in these plans.

In yet other instances, purchasers, related entities, bankruptcy trustees and creditors or others don’t appreciate the way their own or others mishandling of employee benefit plan obligations or exposures can impact their transactions and associated risks.

Proactive Action Can Mitigate Exposures & Costs

For this reason, companies providing employee benefits and their management, service providers, and related entities and the businesses dealing with them need a clear understanding of the rules and responsibilities Federal law imposes on the funding, administration and termination of these programs, how these rules can impact their responsibilities and goals, and the steps necessary to avoid or mitigate exposures likely to result if they or others mishandle employee benefit plan related responsibilities or assets and how to avoid or mitigate these concerns.

The challenges of winding up an abandoned plan discussed in the EBSA news release yesterday highlights just one of these complications, the problem of dealing with abandoned plans.

When companies and their management abandon plans, they leave their plans, participants and beneficiaries, service providers and others in limbo, without the authority or funds to wind up the plans. When employers abandon their individual account pension plans, custodians such as banks, insurers and mutual fund companies are left holding the assets of these abandoned plans but without the authority to terminate such plans and make benefit distributions even in response to participant demands. Service providers often find themselves in the legally awkward situation of having continuing plan responsibilities without necessary direction or compensation for performance. Meanwhile, participants and beneficiaries can’t manage, access or often even get information about their funds until the situation resolves. Dealing with these issues usually requires cumbersome, time-consuming and costly processes often requiring complex, lengthy, highly formalistic and expensive judicial and administrative procedures to resolve while fiduciary, tax and other liabilities mount. Meanwhile, participants and beneficiaries often lose access to their accounts or benefits or even see plan value decline as plan assets that could go to benefits are diverted to cover administrative costs of winding up the plan.

The EBSAs abandoned plan program is just one of many examples of tools that parties struggling with these issues can use to mitigate these challenges and exposures. EBSA uses its abandoned plan program to facilitate a voluntary efficient process for winding up the affairs of abandoned individual account plans so that benefit distributions are made to participants and beneficiaries when this occurs.

The EBSA Abandoned Plan News Release and the EBSA’s related response Response to ADP/JP Morgan published June 4, 2013 show an example of how EBSA used its abandoned plan program to give critical relief to JP Morgan Chase Bank NA and ADP Inc. to use to wind up certain abandoned plans without exhausting the 90-day waiting period that ordinarily applies before the termination of a retirement plan based on the best interest of participants pursuant to 29 CFR §2578.1. By exercising its discretion to waive the 90-day notice period, the EBSA allowed JP Morgan Chase Bank NA and ADP Inc. to terminate immediately and wind up approximately 180 defined contribution pension plans abandoned due to corporate crises or neglect.

Requesting relief from the EBSA like that granted to JP Morgan Chase Bank NA and ADP Inc. in the announcement made yesterday is just one of various types of relief that legal counsel experienced with dealing with workforce and employee benefit plan challenges that can arise when companies or their plans become inadequately funded, bankrupt, or experience other significant transactions or events, can use to help debtors, and other plan sponsors, their management, affiliates, successors, buyers, plan fiduciaries, vendors, bankruptcy creditors and trustees.

Experienced counsel can help companies understand and negotiate the complex rules of the EBSA, the Pension Benefit Guarantee Corporation and the Internal Revenue Service governing dealings with these plans and where appropriate and available by taking advantage of relief or other options to mitigate these challenges. Involving experienced counsel to explore and use these options early can help all parties get participants and beneficiaries their benefits while minimizing legal risks, time and expenses associated with the wind up of these troubled or abandoned plans. Even where special dispensation is not available, the early involvement of experienced legal counsel as early as possible after the possibility that a business or its plans or assets will be impacted by underfunding, insolvency, a bankruptcy or liquidation, workforce reduction, sale, merger or other significant event can help plan and administer the steps necessary to handle cost effectively employee benefit related responsibilities and impacts.

For Help or More Information

If you need help with assessing or handing employee benefit or workforce challenges arising from business or employee benefit plan insolvency, stock or asset sales, mergers, bankruptcy or liquidation, reductions or other workforce changes or other significant business transactions or events, or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters including extensive experience handling workforce and employee benefit challenges arising from plan underfunding, company restructurings, workforce change, insolvencies, bankruptcies, mergers, stock or asset acquisitions, or other significant business or plan transactions.

A board certified labor and employment attorney widely known for her extensive and creative knowledge and experienced with these and other employment, employee benefit and compensation matters, Ms. Stamer continuously advises and assists employers, employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators, service providers, and insurers, bankruptcy trustees and receivers, asset purchasers, creditors and others dealing with plans and their sponsors, and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend medical and other welfare benefit, qualified and non-qualified deferred compensation and retirement, severance and other employee benefit, compensation, and human resources, management and other programs and practices tailored to the client’s human resources, employee benefits or other management goals. A primary drafter of the Bolivian Social Security pension privatization law, Ms. Stamer also works extensively with management, service provider and other clients to monitor legislative and regulatory developments and to deal with Congressional and state legislators, regulators, and enforcement officials about regulatory, investigatory or enforcement concerns. Her experience includes involvement in the planning, execution and resolution of workforce and employee benefit related details of a multitude of high and low profile restructurings, bankruptcies and other significant transactions throughout her more than 25 year career.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

For important information about this communication click here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

1 Comment | Affordable Care Act, Bankruptcy, Claims Administration, Corporate Compliance, Defined Benefit Plans, Defined Contribution Plans, Employee Benefits, Employers, Employment Agreement, ERISA, Excise Tax, Executive Compensation, Fiduciary Responsibility, Health Care Reform, Health Plans, HIPAA, Human Resources, Income Tax, Insurance, MEWA, Patient Protection and Affordable Care Act, Professional Liability, Reporting & Disclosure, Restructuring, Retirement Plans, Risk Management, Tax | Tagged: abandoned plans, bankkruptcy, employee benefit plans, ERISA, fiduciary responsibiltiies, illiquid, insolvancy, reductions in force, Reengineering | Permalink
Posted by Cynthia Marcotte Stamer

Group Health Plans &No-Fault & Worker’s Comp Ruled Primary Plans When Coordinating With Medicare Advantage Plans

May 9, 2013

Group health plans and liability, no-fault and worker’s compensation insurers should confirm they are properly coordinating benefits with Medicare Advantage organizations (MAOs) to avoid a private cause of action for double damages to recover amounts under the Medicare Secondary Payer Act (MSP Act) in light of the U.S. Supreme Court’s denial of certiorari on an appeal of the Third Circuit’s decision in In Re Avandia Marketing Sales Practices GlaxoSmithKline LLC v. Human Medical Plans, Inc. (Glaxo). The Supreme Court’s decision denying certiorari reported here lets stand a Third Circuit decision that the private right of action provision in the MSP Act, set forth at 42 U.S.C. 1395y(b)(3), gives Humana a private cause of action as a primary plan against GSK to recover the double damage award.

MSP Act Secondary Payor Rules Require Proper Coordination

The MSP Act contains specific rules about when and how group health plans, automobile and liability insurance, no fault insurance policies and amounts recovered from tort actions are coordinated with benefits under the Medicare Statute. The MSP Act’s Secondary Payor Rules require group health plans, automobile and liability insurance and no fault insurance policies to treat their coverage as the “primary plan” for purposes of coordinating their coverage with the benefits provided under the Medicare Statute under certain conditionsbenefits face double damage for improperly coordinating their benefits and coverage with those provided under the Medicare Statute. The MSP Act generally dictates the conditions under which these coverages are primary to benefits provided under the Medicare Statute and obligates primary plans and individuals receiving judgment or settlements that include payment for medical expenses for which benefits were received under the Medicare Statute to repay Medicare. Violation of these rules exposes the applicable plan to double damages and other costs of recovery.

Glaxo On MA Plan MSP Act Rights

In Glaxo, the Third Circuit ruled that MAOs can sue primary plans under the MSP Act for double damages when a primary plan fails to appropriately reimburse the MAO as a secondary payor.

In Glaxo, Humana Medical Plan Inc. and Humana Insurance Company (collectively, Humana) sued GlaxoSmithKline LLC and GlaxoSmithKline PLC (collectively, GSK) for reimbursement of expenses Humana incurred from injuries its MA members sustained from use of GSK’s type 2 diabetes drug, Avandia. GSK has paid more than $460 million to Avandia patients settle patient claims that Avandia patients sustained heart attacks, strokes or other injuries from taking the drug. In the settlement, GSK reserved monies to reimburse the Medicare Trust Fund for payments it made to cover the costs of treatment for the Medicare fee-for-service (FFS) enrollees’ Avandia-related injuries but did not set aside funds for reimbursement to MAOs. Humana sued GSK for reimbursement, claiming that GSK has a primary plan obligation under the MSP Act to reimburse Humana as a secondary payor.

The Supreme Court’s decision not to review the appeal from this Third Circuit decision means that in the Third Circuit (and perhaps other jurisdictions), MAOs can pursue an action for double damages under the Medicare Secondary Payor Act against a group health plan, no-fault carrier or worker’s compensation insurer that fails to fulfill its obligation as a primary plan to reimburse Medicare conditional payments paid by the MAO.

The Third Circuit’s decision in Glaxo is distinguishable from the Ninth Circuit’s position on a similar issue in Parra v. PacifiCare of Arizona, Inc. (PacifiCare), where the 9^th Circuit ruled PacifiCare did not have a private right of action under the MA statute or under 42 U.S.C. 1395y(b)(3)(A) against the surviving family members for amounts recovered in a wrongful death action since that provision of the MSP Act only applies in cases where a primary plan fails to reimburse an insurer as a secondary payor.

Proper identification and payment of claims and settlements in coordination with MAOs and their Plans is important because improper coordination may expose a group health plan or other primary payer to double damage liability, attorneys fees’ and other costs.

In light of Glaxo, group health plans and their administrators, and group health insurers, worker’s compensation insurers, and liability insurers should ask if asking Medicare beneficiares if they are or have been enrolled in a MA plan when paying or processing claims and if so, act proactively to ensure that payments under their programs are properly processed and paid to take into account responsibilities under the Medicare Secondary Payer rules. Determination and handling these types of payments and settlements likely will require special handling because the Medicare Secondary Payer system currently doesn’t distinguish MA Plans as primary plans. Accordingly, group health plans and the fiduciaries and administrators involved in their administration will want to take proper steps to identify claims that may involve individuals covered by MA Plans in a manner that allows the group health plan to track and distinguish the coverage provided by the MA Plan from other insurance coverage as needed to comply with the MSP Act.

For Help or More Information

If you need help with the MSP Act or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters including extensive experience on HIPAA and other privacy and data security issues.

Extensively published and a popular speaker on HIPAA and other data security matters, Ms. Stamer works extensively with health care providers, health plans, employers, insurance and financial services, technology and other clients on privacy, data seurity and other privacy and cybercrime concerns. She also serves as the Scribe for the ABA JCEB Agency Techical Sessions Meetings with the Office of Civil Rights which occur each May in Washington, D.C.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

Comments Off on Group Health Plans &No-Fault & Worker’s Comp Ruled Primary Plans When Coordinating With Medicare Advantage Plans | Employee Benefits, Employers, ERISA, Excise Tax, Health Plans, Human Resources, Insurance, Tax, Uncategorized | Tagged: Affordable Care Act, annual limits, Business Associate, Coordination of Benefits, Covered Entity, Employee Benefits, ERISA, Health Insurance, Health Plans, HIPAA, Isurance, Medicare, MSP Act, Personal Health Information, PHI, Privacy, RE, SBC, Summary of Benefits and Communications | Permalink
Posted by Cynthia Marcotte Stamer

Changing Plan Years Won’t Extend Health Plan’s Affordable Care Act Annual Limit Waiver Eligibility

May 6, 2013

Employer and other group health plan sponsors, insurers, fiduciaries and administrators should brace to cope with difficulties in upcoming 2014 health plan enrollment challenges in light of sweeping health plan changes, process and system disruptions complicated by incomplete and delayed guidance, and other changes arising from the rollout of the Patient Protection & Affordable Care Act (ACA), particularly with the deadline to provide ACA-required Summary of Benefits and Coverage (SBC) disclosures by the first day of the annual enrollment period for the 2014 plan year rapidly approaching.

Confusion and indecision about health plan choices is a common challenge for employees and participants that historically has plagued efforts by employer and other group health plans, their sponsors, administrators and insurers to efficiently conduct annual enrollment. Sweeping health plan changes and other simultaneous changes to the U.S. health care system resulting from the reforms enacted as part of ACA promise to add significant complexity and confusion to the process.

Recent polls confirm that American workers generally are unfamiliar and confused about ACA, its status and its implications for them. See Kaiser Tracing Poll: April 2013 ; See also Kaiser Foundation Poll Finds Confusion Over ACA Abounds With Open Enrollment Six Months Away.

Amid this confusion, employer and other group health plans and insurers are struggling to finalize decisions and begin preparations as a result in delays in guidance, delayed or slow implementation of exchanges, and other challenges arising in response to the ACA reforms that obstruct plan sponsor decision-making and health plan’s ability to implement these decisions. Much guidance group health plans, their sponsors and insurers need to make decisions and implement arrangements is only now emerging, and that in largely late-breaking and/or transitional form. These delays, in turn, are making group health plans, their sponsors, insurers, fiduciaries and administrators ability to finalize arrangements and contracts, amend plan documents, prepare newly required Summary of Benefits & Coverage (SBC) disclosures (required to be distributed by first day of enrollment period), summary plan descriptions (SPDs), enrollment materials and other communications and processes. With SBCs due to be distributed by the first day of any enrollment period for 2014, the time to prepare is running extremely short. Deadline To Send ACA Summary of Benefits & Coverage Adds Pressure To Finalize 2014 Plan Designs As Agencies Add MEC & MV Disclosures To SBC.

In the face of these challenges, Federal regulators are looking to shift many of the burdens of dealing with enrollment difficulties on employers and insurers. See Insurers Prepare, Reluctantly, To Help With Obamacare Enrollment.

While employer and other plan sponsors, insurers, fiduciaries and administrators may not have all of the information and rules they might need or ideally like to finalize all arrangements and documents, they generally must get moving on those preparations that they can begin now to allow adequate time to deal with late-breaking guidance and finalize other arrangements. To minimize the risk of running outof time and to allow time to smooth out confusion and other arrangements, employer and other health plans, their sponsors, insurers, fiduciaries and administrators should get started preparing draft contracts, plan amendments or restatements, draft SBC, SPD and other enrollment and coverage materials and processes to position themselves to be able to timely finalize and launch these arrangements.

For Help or More Information

If you need help with the SBC or other 2014 health plan decision-making or preparation, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

Comments Off on Changing Plan Years Won’t Extend Health Plan’s Affordable Care Act Annual Limit Waiver Eligibility | Employee Benefits, Employers, ERISA, Excise Tax, Health Plans, Human Resources, Insurance, Tax, Uncategorized | Tagged: Affordable Care Act, annual limits, Employee Benefits, ERISA, Health Insurance, Health Plans, Isurance, RE, SBC, Summary of Benefits and Communications | Permalink
Posted by Cynthia Marcotte Stamer

Former White House Cybersecurity Coordinator Schmidt, Stamer & Others Share Key HIPAA & Other Privacy & Data Security Insights 5/21 In LA

May 3, 2013

Former White House Cybersecurity Coordinator Howard Schmidt and Solutions Law Press, Inc. editor attorney Cynthia Marcotte Stamer are two of an impressive lineup of leaders scheduled to share key HIPAA & other privacy and data security compliance and risk management strategies at the Healthcare HITECH Privacy and Security Summit at the Fifth Annual Information Security Summit on May 21 in Los Angeles.

The Healthcare HITECH Privacy and Security Summit will bring together leaders in Privacy and Security within government and private industry for a day of collaboration, networking and presentations by leading Privacy and Security professionals sharing who HIPAA covered entities and business associates need to know to comply with new HITECH rules and OCR investigations.

Solutions Law Press, Inc. editor attorney Cynthia Marcotte Stamer will help lay the foundation for the workshop by briefing participants on changes made to HIPAA rules by the new Omnibus HIPAA Rulemaking changes that the Office of Civil Rights (OCR) plans to start enforcing in September, 2013.

With the rapidly approaching and privacy and data breach penalties and enforcement rising, health care providers, health plans, health care clearinghouses and their business associates must get moving to update business associate contracts, policies and notices and processes to meet changing HIPAA rules while managing ongoing compliance and risks.

Stamer Speaks On Latest HIPAA Privacy, Security, Breach Notification & Enforcement Rules & Developments

Armed with the latest insights from serving as the scribe for the ABA JCEB annual agency meeting with the Office of Civil Rights (OCR), Ms. Stamer, a practicing attorney and widely published author and speaker, will discuss required changes and other recommended steps and strategies that covered entities and their business associates should take to maintain HIPAA compliance and manage HIPAA and other related risks in light of the Omnibus HIPAA Rulemaking changes, new OCR guidance for health care providers about disclosures to avert threats to health or safety, recent audit and enforcement activities and other changing risks and responsibilities including:

The latest on OCR’s regulatory guidance, audit and investigation and enforcement rules, actions and strategies and their implications on covered entities and business associates;
Changes to breach notification rules and their implications on covered entities and their business associates;
Practical implications of new rules on who is covered and their responsibilities;
Required and recommended updates to policies, business associate and other agreements, privacy notices and other HIPAA compliance arrangements;
Effective training and other risk management strategies;
Planning for, investigating and mitigating PHI privacy breaches and other compliance concerns under new rules other selected events; and
Other selected strategies for coordinating HIPAA and other privacy and data breach responsibilities and risk management; and
Participant questions.

For a complete agenda, to register, to get details on sponsorship or for other information, see here.

For Help or More Information

If you need help with the HIPAA, Affordable Care Act or other 2014 health plan compliance, risk management or defense, or with reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters including extensive experience on HIPAA and other privacy and data security issues.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

Comments Off on Former White House Cybersecurity Coordinator Schmidt, Stamer & Others Share Key HIPAA & Other Privacy & Data Security Insights 5/21 In LA | Employee Benefits, Employers, ERISA, Excise Tax, Health Plans, Human Resources, Insurance, Tax, Uncategorized | Tagged: Affordable Care Act, annual limits, Business Associate, Covered Entity, Employee Benefits, ERISA, Health Insurance, Health Plans, HIPAA, Isurance, Personal Health Information, PHI, Privacy, RE, SBC, Summary of Benefits and Communications | Permalink
Posted by Cynthia Marcotte Stamer

Strengthen Health Plan Privacy Compliance & Risk Management Using Lessons From New OCR Provider & Consumer Tools

April 30, 2013

Get More Key Information By Participating in 5/21 Workshop In LA

The U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) has developed an array of new tools to educate consumers and health care providers about the Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules.

Many consumers are unfamiliar with their rights under the HIPAA Privacy Rule. With that in mind, OCR has posted a series of factsheets, also available in eight languages, to inform consumers about their rights under the HIPAA Privacy Rule. These materials are available on OCR’s website here.

The fact sheets compliment a set of seven consumer-facing videos released earlier this year on OCR’s YouTube channel. An additional video, The HIPAA Security Rule, has been designed for providers in small practices and offers an overview of how to establish basic safeguards to protect patient information and comply with the Security Rule’s requirements. The videos are available on the HHS OCR YouTube Channel at here.

OCR has also launched three modules for health care providers on compliance with various aspects of the HIPAA Privacy and Security Rules, available at Medscape.org:

Patient Privacy: A Guide for Providers at here;
HIPAA and You: Building a Culture of Compliance here; and
Examining Compliance with the HIPAA Privacy Rule here.

The Medscape modules offer free Continuing Medical Education (CME) credits for physicians and Continuing Education (CE) credits for health care professionals.

Although the materials are primarily consumer and provider focused, health plans and their sponsors, fiduciaries, administrators, business associates and others in the health plan workforce should review and incorporate the materials and principles contained in these materials as part of their own HIPAA compliance efforts. With the deadline to comply with recent amendments to the HIPAA rules in September, 2013 and enforcement and penalties rising, the insights and resources provided these rules can help strengthen compliance efforts.

Participate In 5/21 Workshop In LA To Get Other Key Information Needed To Update Compliance & Risk Management

With the September 23, 2013 enforcement date of the new Omnibus HIPAA Rulemaking changes rapidly approaching and privacy and data breach penalties and enforcement rising, health care providers, health plans, health care clearinghouses and their business associates must get moving to update business associate contracts, policies and notices and processes to meet changing HIPAA rules while managing ongoing compliance and risks.

Armed with the latest insights from serving as the scribe for the ABA JCEB annual agency meeting with the Office of Civil Rights (OCR), attorney and author Cynthia Marcotte Stamer will discuss required changes and other recommended steps and strategies that covered entities and their business associates should take to maintain HIPAA compliance and manage HIPAA and other related risks in light of the Omnibus HIPAA Rulemaking changes, new OCR guidance for health care providers about disclosures to avert threats to health or safety, recent audit and enforcement activities and other changing risks and responsibilities including:

The latest on OCR’s regulatory guidance, audit and investigation and enforcement rules, actions and strategies and their implications on covered entities and business associates;
Changes to breach notification rules and their implications on covered entities and their business associates;
Practical implications of new rules on who is covered and their responsibilities;
Required and recommended updates to policies, business associate and other agreements, privacy notices and other HIPAA compliance arrangements;
Effective training and other risk management strategies;
Planning for, investigating and mitigating PHI privacy breaches and other compliance concerns under new rules other selected events; and
Other selected strategies for coordinating HIPAA and other privacy and data breach responsibilities and risk management; and
Participant questions.

To register, review the agenda, get details on sponsorship or for other information, see here.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters including extensive experience on HIPAA and other privacy and data security issues.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

Comments Off on Strengthen Health Plan Privacy Compliance & Risk Management Using Lessons From New OCR Provider & Consumer Tools | Employee Benefits, Employers, ERISA, Excise Tax, Health Plans, Human Resources, Insurance, Tax, Uncategorized | Tagged: Affordable Care Act, annual limits, Business Associate, Covered Entity, Employee Benefits, ERISA, Health Insurance, Health Plans, HIPAA, Isurance, Personal Health Information, PHI, Privacy, RE, SBC, Summary of Benefits and Communications | Permalink
Posted by Cynthia Marcotte Stamer

Changing Plan Years Won’t Extend Health Plan’s Affordable Care Act Annual Limit Waiver Eligibility

April 29, 2013

Changing plan years won’t extend the period that a group health plan or group or individual health insurance policy can qualify for a waiver of the annual limitation restrictions (Annual Limit Rule) of the Patient Protection & Affordable Care Act (Affordable Care Act) according to new guidance issued by the US Departments of Health & Human Services (HHS), Treasury (IRS) and Labor (DOL)(collectively, the Agencies) on April 29, 2013.

PHS §2711 as amended by the Affordable Care Act generally prohibit nongrandfathered group health plans and health insurance issuers offering group or individual health insurance coverage from imposing lifetime or annual limits on the dollar value of essential health benefits within the meaning of Affordable Care Act § 1302(b) but allow ‘‘restricted annual limits’’ with respect to essential health benefits for plan years (in the individual market, policy years) beginning before January 1, 2014 (hereafter, the Annual Limit Rule).

Interim regulations (IFR) implementing this Annual Limit Rule allowed the Secretary of HHS temporarily to waive compliance with the Annual Limit Rule for certain group health plans that showed that compliance with the IFR would result in a significant decrease in access to benefits or a significant increase in premiums and timely applied for and received a waiver in accordance with guidance established by HHS. See 26 CFR 54.9815-2711T; 29 CFR 2590.715-2711; 45 CFR 147.126. For a listing of relevant guidance, see here.

While HHS no longer allows new applications for waivers, certain group health plans previously timely applied and qualified to for waiver of compliance for the Annual Limit Rule for their group health plan for the plan or policy year in effect when the plan or issuer applied for the waiver. Many of these group health plans later extended and currently continue to qualify for relief from the obligation to comply with the Annual Limit Rule based on extensions of that waiver.

According to FAQs About Affordable Care Act Implementation (Part XV), changes in plan or policy years made subsequent to the application for an Affordable Care Act Annual Limitation waiver do not extend the expiration date of a waiver.

In the FAQ, the Agencies state changes in plan or policy years made after the waiver is obtained and while a waiver remains in effect do not change the termination date of an otherwise applicable waiver. Rather, Annual Limit Rule waivers are granted based on the date of the plan or policy year in effect when the initial application was submitted regardless of whether the plan or issuer later amends its plan or policy year. That said, the FAQ confirms that waiver recipients may end the waiver at any time prior to its otherwise applicable approved expiration date.

The Guidance nixes hopes of many group health plans and insurers that obtained waivers that they could extend temporarily their ability to avoid complying with the Annual Limit Rule by cutting short their current plan or policy year so as as to cause a new plan year to start before January 1, 2014. The idea suggested by some was that starting a plan year mid-year during 2013 would push back the start of the first plan or policy year beginning after December 31, 2013, and thereby delay the deadline for complying with the Annual Limit Rule until a later day in 2014. Today’s Guidance makes clear that the Agencies do not intend to allow such delays. Therefore, group health plans and health insurance issuers with current waivers should be ready to begin complying with the Annual Limit Rule no later than the date that their existing waiver is scheduled to expire and budget accordingly.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

Deadline To Send ACA Summary of Benefits & Coverage Adds Pressure To Finalize 2014 Plan Designs As Agencies Add MEC & MV Disclosures To SBC

April 25, 2013

Employer and union group health plan sponsors and insurers of group and individual health plans (Health Plans) agonizing over 2014 health plan design decisions need to keep in mind that impending deadlines to update and deliver required Summary of Benefits and Communications (SBC) disclosures mandated by the Patient Protection and Affordable Care Act (Affordable Care Act) shorten the time to finalize decisions including new requirements to disclose whether the Affordable Health Plan-covered Health Plans provide “minimum essential coverage” (MEC) and “minimum value” within the meaning of the Affordable Care Act.

The Affordable Care Act’s requirement that Health Plans distribute updated SBCs before the beginning of the enrollment period for coverage to be provided in 2014 creates added urgency and pressure for Health Plans and their employer and other sponsors to finalize and implement their decisions on their Health Plans 2014 plan designs and coverages to allow adequate lead time to prepare and deliver the required SBCs for 2014.

The Departments of Health & Human Services (HHS), Labor (DOL) and Treasury (IRS)(collectively, the Agencies) announced April 23, 2013 that SBCs for periods of coverage after December 31, 2013 must disclose if the Health Plans provide MEC and minimum value. Health Plans, their sponsors, fiduciaries, and insurers generally will need to update their Health Plans’ SBCS to include these disclosures as well as to incorporate other changes necessary to accurately disclose other plan design changes made to post-December 31, 2013 coverage before the enrollment period begins. Plan sponsors planning changes to their health plans must allow sufficient lead time to finalize plan designs and contracts, amend plan documents, make MEC and minimum value determinations, and then timely update and distribute the SBC in accordance with the SBC rules. This means that most plan sponsors of Health Plans have much less time than historically used to finalize their decisions.

ACA SBC Mandate Overview

As amended by the Affordable Care Act amended the Public Health Services Act (PHS) § 2715, Employee Retirement Income Security Act (ERISA) § 715 and the Internal Revenue Code (Code) §§ 9815 require that Health Plans provide a SBC and a “Uniform Glossary” that “accurately describes the benefits and coverage under the applicable plan or coverage” in a way that meets the format, content and other detailed SBC standards set for the Affordable Care Act as implemented by the Departments regulatory guidance.

The Summary of Benefits and Coverage and Uniform Glossary Final Regulation (Final Regulation) implementing this requirement published February 14, 2012 generally requires Health Plans at specified times including before the first offer of coverage under the Plan as well as following certain material changes to the Plan. For Health Plans providing group health plan coverage, FAQs About Affordable Care Act Implementation (Part VII)[*] set the deadline for Health Plan to deliver a SBC as follows, while at the same time indicating that the Departments would not impose penalties on plans and issuers “working diligently and in good faith” to provide the required SBC content in an appearance consistent with the Final Regulations:

To covered persons enrolling or re-enrolling in an open enrollment period (including late enrollees and re-enrollees) as the first day of the first open enrollment period that begins on or after September 23, 2012; and
For individuals enrolling in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) as the first day of the first plan year that begins on or after September 23, 2012. See FAQs About Affordable Care Act Implementation (Part VIII).

The Final Regulation and other existing guidance generally dictates that Health Plans follow a required template for providing the SBC and accompanying glossary. When publishing the Final Regulation, the Departments also published the required SBC template form (2013 SBC Template) and instructions for Health Plans to use to prepare and provide the required SBC for coverage beginning before January 1, 2014 and promised updated guidance and templates for use in providing SBCs for post-2013 coverage. While the Agencies clarified certain other details about the SBC rules, they did not materially change the required content or form of the 2013 SBC Template until their April 23, 2013 release of FAQs About Affordable Care Act Implementation (Part XIV). See e.g. FAQs About Affordable Care Act Implementation Part IX and Part X.

FAQ Part XIV Updates To SBC

FAQs About Affordable Care Act Implementation (Part XIV) published April 23, 2013 announces the updated required 2014 SBC Template that the Agencies are requiring to SBCs for periods of health coverage from January 1, 2014 to December 31, 2014. Along with the 2014 SBC Template, the Agencies also published 2014 Sample Completed SBC, which provides an example of a SBC completed for a hypothetical health plan prepared by the Agencies.

The 2014 SBC Template updates the 2013 SBC Template and Sample Completed Template to add information the Agencies believe individuals eligible for Health Plan coverage should know in light of the impending implementation of the individual shared responsibility requirements of Internal Revenue Code (Code) § 5000A and the employer shared responsibility rules of Code § 4980H commonly called the Affordable Care Act’s “pay-or-play” rules. These were the “penalty” provisions that the Supreme Court ruled are taxes last Summer.

Rationale For SBC Changes

Beginning in 2014, Code § 4980H generally requires employers of 50 or more full-time employees to pay a penalty if the employer fails to offer a group health plan providing MEC and meeting the “minimum value” requirements of the Affordable Care Act. Code § 36B(c)(2)(C)(ii) provides that an employer-sponsored Health Plan provides MV if the ratio of the share of total costs paid by the Health Plan relative to the total costs of covered services is no less than 60% of the anticipated covered medical spending for covered benefits paid by a group health plan for a standard population, computed in accordance with the plan’s cost-sharing, and divided by the total anticipated allowed charges for covered benefits provided to a standard population is no less than 60%. See Patient Protection and Affordable Care Act: Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation Regulation. HHS has published a MV Calculator for use in calculating this percentage.

Meanwhile, Code § 5000A generally imposes a penalty tax on individuals that fail to maintain enrollment in “minimum essential coverage” (MEC) within the meaning of Code § 5000A(f) and not otherwise exempt under Code § 5000A(d).

SBC Changes Required By FAQs XIV In Response To Pay-Or-Play Rules

Since choosing to enroll in an employer-sponsored health plan providing MEC is one of the options that individuals can choose to avoid incurring the individual penalty under Code § 5000A, the Agencies feel that the SBC should disclose whether the offered Health Plan provides MEC and provides the requisite Minimum Value. Accordingly, the 2014 SBC Template requires that the SBC disclose if the Health Plan provides MEC and meets Minimum Value. The Agencies did not make any changes to the uniform glossary, Instructions for Completing the SBC, “Why This Matters” language, or to the coverage examples for the SBC.

In general, the SBC requires that Health Plans update their existing SBCs to make the following disclosures for post-December 31, 2013 periods of coverage:

”Does this Coverage Provide Minimum Essential Coverage?

The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan or policy [does/does not] provide minimum essential coverage.

Does this Coverage Meet the Minimum Value Standard?

In order for certain types of health coverage (for example, individually purchased insurance or job-based coverage) to qualify as minimum essential coverage, the plan must pay, on average, at least 60 percent of allowed charges for covered services. This is called the “minimum value standard.” This health coverage [does/does not] meet the minimum value standard for the benefits it provides.”

Health Plans will need to finalize plan designs and conduct the necessary analysis to decide the correct way to complete this language, then update SBCs to be provided for post-December 31, 2013 periods of coverage to include the required language appropriately completed based on the findings. Where the design of the 2014 SBC is too advanced already to do this, the Guidance allows Health Plans to provide the required language by sending the language in a supplemental SBC communication. However, most Health Plans will want to avoid the added cost and expense of the printing and distribution of this notification.

Other SBC Requirement Clarifications in FAQs XIV

While the 2014 SBC Template remains unchanged other than for the additional required statements about the MEC and minimum essential coverage, FAQs XIV does provide various other helpful clarifications about how to complete the 2014 SBC Template about the applicability of lifetime and annual limits in light of the Affordable Care Act’s restrictions on these limitations.

In addition, FAQs XIV also continues for another year the guidance in:

Affordable Care Act Implementation FAQs Part VIII, Q2 (regarding the Departments’ basic approach to implementation of the SBC requirements during the first year of applicability) for another year;
Affordable Care Act Implementation FAQs Part IX, Q1 regarding the circumstances in which an SBC may be provided electronically and associated enforcement relief;
Affordable Care Act Implementation FAQs Part IX, Q8 (regarding penalties for failure to provide the SBC or uniform glossary);
Affordable Care Act Implementation FAQs Part IX, Q9 (regarding the coverage examples calculator); and related information related to use of the coverage examples calculator;
Affordable Care Act Implementation FAQs Part IX, Q10 (regarding an issuer’s obligation to provide an SBC with respect to benefits it does not insure); and
Affordable Care Act Implementation FAQs Part IX, Q13 (regarding expatriate coverage);
Current enforcement relief about the Special Rule contained in the Instruction Guides for Group and Individual Coverage and about Medicare Advantage Plans contained in Affordable Care Act Implementation FAQs Part X, Q1
Continues Affordable Care Act Implementation FAQs Part VIII, Q5 regarding use of carveout arrangements “until further guidance is issued.”
Extends to September 23, 2014 existing relief for plans and issuers with respect to an insured health insurance product is not being actively marketed where the health insurance issuer has not actively marketed the product at any time on or after September 23, 2012 provided the SBC is provided for that product no later than September 23, 2014; and
The anti-duplication rule for student group health coverage in the Final SBC regulations.

SBC Delivery Deadline Means Time Short To Finalize 2014 Plan Designs

Employer and other health plan sponsors, insurers, administrators and others involved in 2014 Health Plan decisions and preparations must take into account the deadline for distributing the SBC before the enrollment period begins and allow adequate lead time to properly finalize their Health Plan design decisions and the analysis required to accurately prepare and deliver the SBC.

Since Health Plan design decisions must be finalized to properly prepare the newly added MEC and minimum value and other required SBC disclosures, the need to prepare and distribute the SBC by the beginning of enrollment periods for post-December 31, 2013 periods of coverage means time running short to finalize 2014 plan designs. Employer and other Health Plan sponsors and others involved in 2014 Health Plan decision-making must take into account the SBC requirements and deadlines to ensure that they allow adequate time to complete the analysis and other preparations necessary timely to prepare and distribute SBCs in respond to the design decisions ultimately elected.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 25 years of work, advocacy, education and publications on cutting edge health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Posted by Cynthia Marcotte Stamer

Company President, Officer Can’t Use Bankruptcy To Avoid Liability For Using Plan Money For Company Operations

December 27, 2012

John Dombek III and John Dombek Jr. cannot use personal bankruptcy to avoid complying with a federal court order to restore $69,521 in health-care premiums and retirement plan contributions withheld from the paychecks of employees at several companies that are part of the JJD Industries in violation of the Employee Retirement Income Security Act (ERISA). The recent judgement against the two men in Solis v. John Dombek Jr., John Dombek III, Wisconsin Tool & Stamping Co. 401(k) Profit Sharing Plan & Trust, J.D. Acquisition 401(k) Profit Sharing Plan and Trust, and the JJD Industries Group Health Plan is a reminder to business owners, management and others with discretionary control over employee contributions or other plan assets of the importance of ensuring that all employee contributions withheld from pay and other plan assets are used only for appropriate plan expenses and timely deposited in trust or otherwise appropriately applied. Businesses owners and managers should treat these and other similar judgmentsas a wake-up call to meet employee benefit funding obligations, not to use plan monies for company operations and to take other required steps to make sure that retirement, health and other employee benefit plans moneys and other responsibilities are properly handled.

Company Leaders Ordered To Restore Misdirected Monies

A Chicago federal court ordered the two men to make restitution of $69,521 of employee contributions withheld from employee pay that the court ruled the Dombeks mismanaged by failing to ensure the timely deposit of these funds with the plans. See

Dombek III, who is president of the JJD Industries Group, and Dombek Jr. were co-fiduciaries of the Wisconsin Tool & Stamping Co. 401(k) plan and have been ordered to restore $22,164.45 in unremitted contributions and lost opportunity costs to the plan. Dombek III is also liable for an additional $2,222.78 in unremitted contributions and lost opportunity costs to the J.D. Acquisition 401(k) plan.

Dombek III must also restore $45,134.08 in unremitted contributions and lost opportunity costs to the JJD Industries sponsored group health plan. The company contracted with Blue Cross and Blue Shield of Illinois to provide health and dental benefits to the employees of its related companies, including Wisconsin Tool & Stamping Co., J.D. Acquisition Corp., Akorat Metal Fabricators Inc./Smithco Fabricators Inc. and Pavo Inc./Injection Plastics Corp. The companies paid their premiums separately, and premiums were partially funded through weekly employee payroll deductions.

The judgment also bars Dombek Jr. and Dombek III from serving as fiduciaries or service providers to any employee benefit plan subject to ERISA for a period of five years. An independent fiduciary will oversee the termination of the 401(k) plans of both Wisconsin Tool & Stamping and J.D. Acquisition, as well as the distribution of plan assets to eligible participants.

The Dombeks will not be able to claim bankruptcy protection to avoid liability for the judgments. Dombek Jr. and Dombek III both previously had filed for Chapter 7 bankruptcy protection. The Labor Department filed separate complaints to determine the dischargeability of these obligations and seek the enforcement of any monetary judgment against both individuals to restore the funds to the employee benefit programs. On October 5 and October 16, 2012, the U.S. Bankruptcy Court for the Northern District of Illinois granted the Labor Department’s motions for default judgment, finding that the debts Dombek Jr. and Dombek III owed to the plans were not dischargeable in bankruptcy.

Business Leaders Risk Personal Liability When Employee Contributions Used In Company Operations

The judgement is another reminder to business owners and leaders not to allow employee contributions or other plan assets to be used to pay company expenses or otherwise misdirected. The judgment is one many enforcement actions that the Department of Labor regularly takes against businesses and business leaders that allow plan assets to be used for company operations or other improper purposes.

“Failing to administer health insurance premiums properly demonstrates a total lack of concern for employees and their families,” said Steve Haugen, director of the Chicago Regional Office of the Labor Department’s Employee Benefit Security Administration. “Incorporating employees’ voluntary salary contributions into the general assets of a company and failing to forward them to the retirement plan are violations of both the law and the trust workers have placed in their employers.”

The judgement shows that owners, operators and managers of businesses that exercise discretion and control over the funding, investment or administration of employee benefit plans or their assets face significant liability for failing to properly fulfill their responsibilities with respect to their employee benefit plans. Businesses, their owners, board members, officers, and other members of management making decisions about the maintenance, funding, administration, termination, hiring or appointment of fiduciaries or service providers or other matters impacting the employee benefit plan should ensure that they understand the potential implications and responsibilities associated with these activities for themselves and their companies. Individuals who have authority or responsibility for employee benefit plans who also perform or take part in the performance of other company management functions also should pre-educate themselves about when ERISA may require that their plan responsibilities be put before otherwise applicable responsibilities to their company, appropriate processes for documenting decisions and activities, and other procedures to help position activities to mitigate exposures and promote defensibility.

For Help or More Information

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices or with other employee benefits, human resources, health care or insurance matters, please contact the author of this update, Cynthia Marcotte Stamer.

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and registerto receive future updates about developments on these and other concerns from Ms. Stamer here.

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1 Comment | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Mental Health, Mental Health Parity, Retirement Plans, Tax | Tagged: Bankruptcy, ERISA, fee disclosure, Fiduciary, plan investiments, prohibited traansaction, Prudence | Permalink
Posted by Cynthia Marcotte Stamer

Peter Madoff 10 Sentence For Defrauding ERISA Plans Reminder Manage Plan Investment Responsibilities

December 27, 2012

Peter Madoff (Madoff), the former Chief Compliance Officer and Senior Managing Director of Bernard L. Madoff Investment Securities LLC (BLMI), was sentenced on December 20, 2012 to 10 years in prison after he pled guilty among other things, to conspiracy to commit securities fraud, tax fraud, mail fraud, ERISA fraud and falsifying records of an investment adviser.

In addition to the prison term, Madoff also was sentenced to one year of supervised release, ordered to pay a $200 special assessment, and ordered to forfeit $143.1 billion, including all of his real and personal property. This amount represents all of the investor funds paid into BLMIS from 1996 – the start of Madoff’s involvement in the conspiracy – through December 2008.

As part of the defendant’s forfeiture, the Government previously entered into a settlement with Madoff’s family that requires the forfeiture of all of his wife Marion’s and daughter Shana’s assets, and assets belonging to other family members. The surrendered assets include, among other things, several homes, a Ferrari and more than $10 million in cash and securities. Marion Madoff was left with approximately $771,733 to live on for the rest of her life.

Madoff’s Sentence Part of Continuing Actions Seeking To Rectify BLMIS Fraud

Among other things, the Superseding Information against Madoff charged that the overt acts in the conspiracy count also included, among other things, making false statements to investors about BLMIS’s compliance program and the nature and scope of its Investment Advisory business. Madoff pled guilty in June 2012. He was sentenced in Manhattan federal court by U.S. District Judge Laura Taylor Swain.

Manhattan U.S. Attorney Preet Bharara said: “Peter Madoff was a gatekeeper, who was supposed to guard against fraud, but instead enabled it – facilitating his brother Bernie’s breathtaking scheme by falsifying compliance records and lying to both regulators and clients of BLMIS. The decade he will spend in prison and the disgorgement of his assets are a just result. Our efforts to hold to account anyone and everyone who played a role in this unprecedented Ponzi scheme continue.”

According to the Superseding Information to which Madoff pled guilty and other court filings:

Madoff was employed at BLMIS from 1965 through December 2008. Beginning in 1969, he became the Chief Compliance Officer (“CCO”) and Senior Managing Director of BLMIS. In his role as CCO, Madoff created false and misleading BLMIS compliance documents, as well as false reports that were filed with the U.S. Securities and Exchange Commission (“SEC”) that materially misstated the nature and scope of BLMIS’s Investment Advisory (“IA”) business.
As CCO, Madoff created numerous false compliance documents in which he stated that he had performed compliance reviews of the trading in the BLMIS IA business on a regular basis, when in reality, the reviews were never performed. The false statements were designed to mislead regulators, auditors, and IA clients.
In August 2006, BLMIS registered as an investment adviser with the SEC. As a registered investment adviser, on at least an annual basis, BLMIS was required to file forms with the SEC that are used as part of the oversight process of investment advisers. Madoff was integrally involved with both the SEC registration process and in the creation of the forms, known as “Forms ADV,” which were materially false and misleading. The numerous false statements in the Forms ADV created the false appearance that BLMIS’s IA business had a small number of highly sophisticated clients and far fewer assets under management than was actually the case. Madoff also misrepresented that he, as CCO, ensured that reviews of the IA trading were being performed.
From 1998 through 2008, Madoff engaged in a tax fraud scheme involving the transfer of wealth within the Madoff family in ways that allowed him to avoid paying millions of dollars in required taxes to the IRS. Most, if not all of the “wealth,” came directly or indirectly from IA client funds held at BLMIS. The schemes in which he engaged also allowed Bernard L. Madoff to evade his tax obligations.
The methods by which Madoff engaged in tax fraud included the following:
Madoff also arranged for his wife to have a “no-show” job at BLMIS from which she received between approximately $100,000 to $160,000 per year in salary, a 401(k), and health benefits to which she was not entitled.
In December 2008, when the collapse of BLMIS was virtually certain, Madoff agreed with others to send the $300 million that remained in the IA accounts to preferred employees, family members and friends. BLMIS collapsed before the funds were ever disbursed. On December 10, 2008, one day prior to BLMIS’s collapse, Madoff also withdrew $200,000 from BLMIS for his personal use.
Madoff received approximately $15,700,000 from Bernard L. Madoff and his wife, and executed sham promissory notes to make it appear that the transfers were loans, in order to avoid paying taxes;
Madoff gave approximately $9,900,000 to family members, and in order to avoid paying taxes, executed sham promissory notes to make it appear that the transfers of these funds were loans;
Madoff did not pay taxes on approximately $7,750,000 that he received from BLMIS;
Madoff received approximately $16,800,000 from Bernard L. Madoff from two sham trades, and disguised the proceeds of the trades as long-term stock transactions in order to take advantage of the lower tax rate for long-term capital gains;
Madoff charged approximately $175,000 in personal expenses to a corporate American Express card and did not report those expenses as income.

Madoff Victim Compensation Process Continues

In addition to the sentencing of Madoff, the Government has taken steps to clear the way to begin distributing assets forfeited by Peter Madoff in connection with the victim compensation process by filing a motion requesting that the Court find restitution to be impracticable, A similar motion was granted by United States Circuit Judge Denny Chin, who as a United States District Judge sentenced Bernard L. Madoff in 2009. The Department of Justice intends to return the assets forfeited as a result of the Madoff fraud to victims through the remission process.

Richard C. Breeden was retained to serve as Special Master on behalf of the Department of Justice to administer the process of compensating the victims of the Madoff fraud with the forfeited funds. A former chairman of the SEC, Mr. Breeden is Chairman of Richard C. Breeden & Co., which has been involved in (among other things) the administration and distribution of securities fraud claims since 1996. Among other things, Mr. Breeden has served as Corporate Monitor of WorldCom, Inc. and KPMG under its deferred prosecution agreement with the U.S. Attorney’s Office. Mr. Breeden also served as remission special master in connection with the fraud committed through Adelphia Communications Corporation. In April 2012, more than $728 million forfeited in connection with this Office’s investigation and prosecution of the Adelphia fraud was distributed to approximately 8,500 victims, the largest single distribution of forfeited assets to victims in Department of Justice history.

Now that a new Special Master has been retained, and given the pledge of SIPC Trustee Irving Picard and his counsel to lend their support and resources to the new Special Master for the benefit of the fraud victims, we expect the victim claims process to begin shortly. It is anticipated that victims who filed claims in the SIPA proceeding will not have to refile their claims to be eligible for remission. New information about the remission Special Master, and information about the victim claims process, will be posted on the Office’s Madoff website at http://www.justice.gov/usao/nys/vw_cases/madoff.html as soon as it becomes available, along with a link to a dedicated website Mr. Breeden’s firm will establish in connection with the remission proceedings.

Investment Advisors and Others With Discretion Over Funds Should Exercise Fiduciary Care

While the Madorf scandle represents an exceptionally large and long-standing stream of mishandling of employee benefit funds, the investigations and prosecutions also serve as a reminder of the need to carefully comply with the fiduciary responsibility and other requirements of ERISA and other laws to investment advisors and other employee benefit plan asset service providers, plan committees and fiduciaries and the plan sponsors, boards and other individuals responsible for investing or handling employee benefit monies or choosing the parties that possess and exercise that discretion.

ERISA generally requires that plan asset investments be made prudently and for the exclusive benefit of participants and beneficiaries. Service providers or others with discretionary responsibiliity or that are investment managers of plan assets must be prudently selected based on careful credentialing and other procedures. e No prohibited transactions should be permitted. Fees and other compensation must be set appropriately and properly reported in accordance with ERISA’s fee disclosure rules. The actions and performance of parties investing in plan assets and their investment performance must be reviewed and monitored prudently. Proper bonding must be maintained. Concerns and questions about these activities must be timely investigated in a prudent manner. Failure to properly conduct these and other ERISA fiduciary responsibilities can expose responsible parties to personal liability for losses, profits improperly realized, a fiduciary administrative penalties, disqualification to serve in plan fiduciary or other positions, and attorneys fees and other costs of recovery, as well as in certain cases like the Madorff fraud, criminal prosecution.

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Posted by Cynthia Marcotte Stamer

ESOP, Other Employee Plan Investments In Company Stock Land Plans, Fiduciaries, Sponsors & Others In Hot Water

December 10, 2012

Companies that sponsor employee benefit plans that have purchased or own stock in their sponsor beware. Declines in the stock value of company stock purchased by employee stock ownership plans (ESOP) or other employee benefit plans in their plan sponsor have a growing number of plans and the plan sponsors, sponsoring company owners and management, plan trustees and other plan fiduciaries in hot water with the Department of Labor. ESOP or other employee plans that have purchased or allow investments in company stock and their sponsors, fiduciaries and advisors should carefully review for defensibility the current stock value, the purchase price and analysis supporting that purchase and other aspects of these investments of plan assets and take carefully documented action to prove the prudence and other appropriateness of the investment and continued retention of the investment in these assets.

Company Stock Investments Carry Special ERISA Risks

Purchases of company stock by an ESOP or other employee benefit plan can create a wide range of risks under the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA). When making investment or other decisions under an employee benefit plan, the general fiduciary duty standards of ERISA § 404 generally require plan fiduciaries to act prudently and solely in the interest of participants and beneficiaries. Meanwhile, except in certain narrow circumstances and subject to fulfillment of ERISA § 404, the prohibited transaction rules of ERISA § 406 among other things prohibits plan fiduciaries from causing the plan to engage in a transaction, if he knows or should know that such transaction is a direct or indirect:

Sale or exchange, or leasing, of any property between the plan and a party in interest;
Furnishing of goods, services, or facilities between the plan and a party in interest;
Transfer to, or use by or for the benefit of a party in interest, of any assets of the plan; or
Acquisition, on behalf of the plan, of any employer security or employer real property in violation of section 1107 (a) of this title.

Stock Drops Create Rising Exposures For Plans Invested In Company Stock

Amid economic downturns or other situations where the stock value of company held by plans significantly lower than the price the plan paid for the stock, the Labor Department, plaintiffs in private lawsuits or both may bring “stock drop” or other lawsuits against the plan, its sponsor and its officers and board members, its fiduciaries and others for breach of fiduciary duties under these rules. See e.g., Enron v. Tittle, 463 F.3d 410 (5th Cir. 2006); In Re: BP p.l.c. ERISA Litig., No. 4:10-cv-4214 (S.D. Texas); Vivian v. Worldcom (N.D. Cal. 2002). Since the sponsoring company is a party-in-interest of the plan, using plan assets to purchase company stock or other activities resulting in the inclusion of company stock among the plan assets held by the plan creates presumptions of impropriety that impose higher than usual burdens upon the plan, its sponsor and fiduciaries to prove the appropriateness of the transaction. See e.g., Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012).

The filing of stock drop cases tends to rise and fall in reflection to the economic times. Following the economic downturn in 2002, federal courts saw a surge in stop drop case challenges as well as Labor Department enforcement actions. The number of these cases dropped as the economy improved later in the decade only to rise again between 2010 and the present in response to the current economic crisis.

Tough Economic Times Fueled Stock Drops Creating Rising Risks & Enforcement

The latest economic downturn is fueling resurgence in these “stock drop” challenges. Fifteen stop drop lawsuits were filed during 2010 and 2011. Additional suits and Labor Department stop drop challenges have emerged this year.

In Griffin v. Flagstar Bancorp, Inc., No. 11-1497 (6th Cir. 2012), for instance, plaintiffs alleged various fiduciaries allegedly breached their duties under ERISA by allowing employer stock to be offered as a 401(k) plan investment option while the company was facing a precarious financial situation. The Griffin court overruled the lower court’s dismissal of the plaintiff’s lawsuit. The Court of Appeals held that the defendants offering of company stock to plan participants made ERISA’s “safe harbor” (Section 404(c)) provision for participant self-directed investments inapplicable. The Sixth Circuit ruled “[a]fter reviewing the factual allegations in the complaint – which go far beyond documenting a simple drop in stock price to recite announcements from Flagstar itself, statements by analysts and financial media publications, and actions taken by Flagstar suggesting a precarious financial situation– we must conclude that the complaint raises a plausible claim for breach of fiduciary duty.”

In addition to private class action lawsuits like Griffin, plans holding company stock, their sponsors, owners, management and fiduciaries also need to be ready to defend against investigations and enforcement by the Labor Department, which often zealously investigates and takes enforcement action against plans, their fiduciaries, sponsors, company boards and management and others for losses to plan asset values resulting due to the investment or retention of investments by their plans in company stock. See also Labor Department Backs M&I Employees In Stock-Plan Suit.

Labor Department Suits Show Particular Risks For ESOPs

Over the past year, the Labor Department has been particularly aggressive in taking action when the value of company stock purchased or held by employee stock purchase plans or “ESOPS” drops significantly.

Rembar

For instance, the purchase by the Rembar Inc. Employee Stock Ownership Plan (“Rembar Plan”) of all the stock of its sponsor, Rembar Inc. has landed the trust company that served as the Plan’s independent fiduciary and Rembar Inc.’s owner and Chief Executive Officer in hot water.

The Labor Department is suing Rembar Inc.’s Chief Executive Officer and owner, Frank Firor, First Bankers Trust Services Inc. and the Rembar Plan to recover losses that the Labor Department charges Rembar Plan participants suffered because the Rembar Plan paid too much when it purchased all of the stock of Rembar Inc.

Rembar Inc. manufactures and distributes precision parts made from refractory metals. The Labor Department lawsuit alleges that, in June 2005, First Bankers Trust Services allowed the Rembar Plan to purchase 100 percent of the company’s stock from Firor and Firor’s relatives for $15.5 million. A Labor Department investigation found that First Bankers Trust Services failed to comply with its duty to understand the valuation report that set the purchase price, identify and question assumptions in the report, and verify that the conclusions in the report were consistent with the company’s financial data. As a result of First Bankers Trust Services’ failure to comply with its fiduciary duties, the Labor Department claims the Rembar Plan overpaid for the stock and suffered losses. The suit seeks, among other things, to recover jointly from First Bankers Trust Services and Firor all losses suffered by the Rembar Plan.

Maran

Similarly, the Labor Department also has filed an ERISA stock drop lawsuit against the Maran Inc. Employee Stock Ownership Plan (Maran Plan), First Bankers Trust Services Inc. and others to recover losses suffered by participants.

According to the pleadings, First Bankers Trust Services was hired as an independent fiduciary and trustee in connection with the company’s ESOP to decide whether, and at what price, to purchase shares of Maran Inc. from majority shareholders. The suit charges First Bankers Trust Services violated ERISA in 2006 when it approved the ESOP’s purchase of 49 percent of the outstanding stock of Maran Inc. for about $71 million, which was more than the fair market value. The Labor Department claims that as a result of the purchase of overvalued stock, the Maran Plan participants suffered significant losses. The suit seeks to recover all losses and have First Bankers Trust Services enjoined from serving as a fiduciary to ESOP plans.

Parrot

Likewise, the Labor Department in April sued in the U.S. District Court for the Northern District of California seeking to recover losses suffered by participants in the Parrot Cellular Employee Stock Ownership Plan (Parrot Plan).

The suit names as a defendant Dennis Webb, the principal owner of Entrepreneurial Ventures Inc. (EVI), which operates Parrot Cellular telephone retail stores in northern and central California, and is the sponsor of the Parrot Plan; EVI executives Matthew Fidiam and J. Robert Gallucci; Consulting Fiduciaries Inc., an Illinois company that served as the independent fiduciary and investment manager for the Parrot Plan in 2002 when the Parrot Plan bought 90 percent of EVI stock.

According to the pleadings, the Parrot Plan paid for more than $28 million to buy approximately 90 percent of EVI’s stock in 2002. Around the same time as the stock purchase, EVI also set aside $4 million pursuant to a deferred compensation agreement with Webb and entered into a second executive compensation agreement with Webb for $12 million.

The Labor Department charges defendants allegedly violated ERISA by rejecting their fiduciary duties of loyalty and prudence to the plan, engaging in self-dealing, permitting or engaging in prohibited transactions, and failing to monitor the performance of the plan’s appraiser when they caused or permitted the Parrot Plan to purchase EVI stock for more than fair market value. The suit also charges that Webb enriched himself by millions of dollars at the expense of the plan and its participants because a reasonable value for the company as of November 2002 was far less than the amounts the Parrot Plan paid for the stock and the total deferred compensation agreements entered into with Webb.

In addition to seeking the recovery of all losses to the Parrot Plan resulting from the above violations, the Labor Department’s suit seeks the disgorgement of unjust profits from Webb that he received from the two deferred compensation agreements and from his sale of EVI stock to the Parrot Plan.

Plans, Sponsors and Fiduciaries Must Act Continously To Manage Risks

These and other actions send a stong message for ESOP and other employee benefit plans, their fiduciaries and sponsors about the need to continuously and prudently evaluate and monitor the investment of plan assets in company stock,the analysis and decisions about whether to continue to keep and offer this stock under the plan, as well as the qualifications, credentials and conduct of the fiduciaries and others empowered to influence these decisions. The Labor Department’s statement in announcing the Parrot litigation sums up the messages from these cases. “Plan officials are required by law to manage the ESOP in a careful, prudent manner and to act solely to benefit the plan’s participants,” said Jean Ackerman, director of EBSA’s San Francisco Regional Office, which conducted the investigation. “This action underscores the department’s commitment to protect the benefits that employers promise to their employees.” Plan fiduciaries, sponsors and their management, service providers and consultants participating in these activities need to both act with care and carefully document their actions to position to defend potential challenges.

For Help or More Information

About Ms. Stamer

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Posted by Cynthia Marcotte Stamer

Catch Up On Health Reform & Other Key Employee Benefits & Insurance Issues Emerging Issues and Litigation Relating to Life, Health, Disability and ERISA Symposium In Ft. Lauderdale

December 7, 2012

Cynthia Marcotte Stamer will be one of the featured panelists discussing “Implications of PPACA” on January 18, 2013 at the American Bar Association Tort Trial & Insurance Practice Section’s (TIPS) 39th Annual TIPS Midwinter Symposium on Insurance and Employee Benefits “Emerging Issues and Litigation Relating to Life, Health, Disability and ERISA” in Fort Lauderdale.

The “Implications on PPACA” program scheduled at 3:30 p.m. on January 18, 2012 is one of many content-rich series of programs on employee benefit and insurance issues that leading practitioners will lead during the Symposium W Hotel Fort Lauderdale in Fort Lauderdale, FL on January 17-19, 2013. To register, review the full agenda or get additional information about the Symposium, see here.

About Ms. Stamer

Managing Editor of Solutions Law Press, Inc. and a noted Texas-based employee benefits and employment lawyer with extensive involvement in the leadership of the ABA and other professional organizations involved in employee benefits, health care and workforce matters, is nationally and internationally known for her knowledgeable and creative leadership and work as an attorney, consultant, policy advocate, speaker and author helping businesses, governments, and communities on health and other insurance and employee benefits, patient education and empowerment, wellness and disease management, and other programs, policies, and processes. For more than 24 years, Ms. Stamer’s legal practice has focused on advising and representing employers, insurers, health care providers, community leaders and governments about health care and employee benefits policy and process improvement, quality, performance management, education, compliance, communications, risk management, reimbursement and finance, and other related matters. In addition to her legal practice, Stamer also extensively consults and provides leadership to a broad range of clients, professional and civic organizations, and others on strategies for improving the health care system and the ability of health care providers, payers, employers, community organizations, government agencies to promote the ability of patients and their families to access cost-effective, quality, affordable health care and other resource needs. She also has worked extensively with a broad range of business and government clients on health care, pension, social security, workforce, insurance and many other related policy matters.

In addition to her service with TIPS, Ms. Stamer also is active in the leadership of a broad range of other professional and civil organizations. For instance, Ms. Stamer presently serves as Executive Director of Project COPE, the Coalition on Patient Empowerment and the Coalition for Responsible Healthcare Policy; Vice President of the North Texas Healthcare Compliance Professionals Association; Immediate Past Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Committee and its representative to the ABA Joint Committee on Employee Benefits and Vice Chair of its Welfare Benefits Committee; Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and a current member of its Healthcare Coordinating Council; and as the Gulf Coast TEGE Council TE Committee Coordinator. She previously served as a founding Board Member and President of the Alliance for Healthcare Excellence, as a Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; the Board President of the early retirement intervention agency, The Richardson Development Center for Children; Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee; a member of the Board of Directors of the Southwest Benefits Association; on many seminar faculties and in many other professional and civic leadership and volunteer roles.

Author of the hundreds of publications and workshops these and other employment, employee benefits, health care, insurance, workforce and other management matters, Ms. Stamer’s insights on employee benefits, insurance, health care and workforce matters in Atlantic Information Services, The Bureau of National Affairs, HealthLeaders, Modern Healthcare, Business Insurance, Employee Benefits News, World At Work, Benefits Magazine, the Wall Street Journal, the Dallas Morning News, the Dallas Business Journal, the Houston Business Journal, and many other publications. Nationally known for her work on health care reform and related matters, Ms. Stamer also regularly conducts training and speaks on these and other management, compliance and public policy concerns. For more information about Ms. Stamer, upcoming training, publications or other materials or events, see here or contact Ms. Stamer directly via email here or (469) 767-8872.

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Posted by Cynthia Marcotte Stamer

2013 Maximum Yearly PBGC Guaranteed Pension Benefit Amount To Increase Slightly In 2013

November 28, 2012

The yearly maximum guaranteed benefit for a 65-year-old retiree under the Pension Benefit Guaranty Corporation (PBGC) insurance program will increase to almost $57,500 in 2013, up from $56,000 in 2012. Beginning in 2013, the PBGC announced November 27, 2012 that the maximum yearly guarantee for a 65-year-old retiree is $57,477.24. The increase is not retroactive.

The slight increase in the guaranteed benefit is likely to be meaningful for the many pensioners receiving benefits under pension plans covered by the PBGC insurance program. This program insures guaranteed benefits amounts for pensioners of defined benefit plans covered by the PBGC insurance programs that are underfunded under the PBGC rules when terminated and otherwise meet program requirements. Most retirees who get their pension from PBGC — almost 85 percent — receive the full amount of their promised benefit. In some cases, retirees can receive more than the PBGC maximum guarantee.

The PBGC maximum guarantee is based on a formula prescribed by federal law. Yearly amounts are higher for people older than age 65, and lower for those who retire earlier or choose survivor benefits (see chart). If a pension plan ends in 2013, but a retiree does not begin collecting benefits until a future year, the 2013 rates still apply. For plans that terminate as a result of bankruptcy, the maximum yearly rates are guided by the limits in effect on the day the bankruptcy started, not the day the plan ended.

The following chart shows the 2013 annual and monthly maximum benefit guarantees for retirees from ages 45 to 75. The maximum amount is lower for retirees who begin getting benefits at ages below 65, reflecting the fact that younger retirees receive more monthly pension checks over a longer lifetime. The maximum amount is higher for benefits starting at ages above 65, because older retirees receive fewer monthly pension checks over their expected lifetimes.

PBGC Maximum Monthly Guarantees for 2013
Age	Annual Maximum	Monthly Maximum	Monthly Joint and 50% Survivor Maximum*
75	174,730.80	14,560.90	13,104.81
74	158,867.04	13,238.92	11,915.03
73	143,003.40	11,916.95	10,725.26
72	127,139.64	10,594.97	9,535.47
71	111,275.88	9,272.99	8,345.69
70	95,412.24	7,951.02	7,155.92
69	85,641.12	7,136.76	6,423.08
68	77,019.48	6,418.29	5,776.46
67	69,547.44	5,795.62	5,216.06
66	63,225.00	5,268.75	4,741.88
65	57,477.24	4,789.77	4,310.79
64	53,453.88	4,454.49	4,009.04
63	49,430.40	4,119.20	3,707.28
62	45,407.04	3,783.92	3,405.53
61	41,383.56	3,448.63	3,103.77
60	37,360.20	3,113.35	2,802.02
59	35,061.12	2,921.76	2,629.58
58	32,762.04	2,730.17	2,457.15
57	30,462.96	2,538.58	2,284.72
56	28,163.88	2,346.99	2,112.29
55	25,864.80	2,155.40	1,939.86
54	24,715.20	2,059.60	1,853.64
53	23,565.72	1,963.81	1,767.43
52	22,416.12	1,868.01	1,681.21
51	21,266.52	1,772.21	1,594.99
50	20,117.04	1,676.42	1,508.78
49	18,967.44	1,580.62	1,422.56
48	17,817.96	1,484.83	1,336.35
47	16,668.36	1,389.03	1,250.13
46	15,518.88	1,293.24	1,163.92
45	14,369.28	1,197.44	1,077.70
* Both spouses the same age

The PBGC insurance program is funded through insurance premiums paid by covered plans. In recent years, the number of underfunded plans has increased due to a lagging economy, declines in market performance and other factors. The demands on the PBGC insurance program prompted Congress to increase premiums, modify pension funding rules and enact various other reforms in an effort to shore up the PBGC insurance program. The PBGC also has undertaken a number of regulatory and operational reforms. Companies sponsoring plans covered by the PBGC insurance program should review their existing funding and insurance requirements to ensure that they are in compliance with existing rules and taking advantage of the most favorable opportunities under these rules. In addition, companies sponsoring defined benefit plans govered by the PBGC insurance program and/or the Internal Revenue Code and Employee Retirement Income Security Act’s minimum funding rules or entities that are part of commonly controlled or affiliated groups of companies, purchasing stock or assets from such company groups or lending to or investing in such entities should evaluate the funding status of these programs and the responsibilities and liability exposures that might impact their interests.

For additional information, see PBGC’s fact sheet “Pension Gurantees” and for information about the benefits guaranteed by the PBGC, see “Making Sense of the Maximum Insurance Benefit.”

For Help or More Information

If you need help reviewing and updating, administering or defending your employee benefit, human resources, insurance, health care matters or related documents or practices to respond to emerging health plan regulations, monitoring or commenting on these rules, defending your health plan or its administration, or other health or employee benefit, human resources or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

About Ms. Stamer

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and registerto receive future updates about developments on these and other concerns see here or contact Ms. Stamer via telephone at 469.767.8872 or via e-mail to cstamer@solutionslawyer.net.

About Solutions Law Press

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Posted by Cynthia Marcotte Stamer

Boost Employee Recognition of Value Of Employer & Other Retirement Savings Tools & Plans

October 22, 2012

Studies suggest that employees need to save an estimated 40% of current earnings to have sufficient savings to fund the anticipated cost to keep up their lifestyle post retirement for their expected post retirement life expectancy. Although times are tough, American workers need to understand the importance of taking advantage of employer sponsored and other retirement saving and funding tools. Here is a free Department of Labor resource that employers might want to include in their retirement education toolkit.

For More Information Or Assistance

If you need help reviewing or responding to the defined benefit plan funding or other employee benefit, compensation or employment regulations or other related matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

About Ms. Stamer

Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, an American College of Employee Benefits Counsel Fellow, past Chair and current Welfare Benefit Committee Co_Chair of the American Bar Association (ABA) RPTE Employee Benefit & Other Compensation Group, a Council Member of the ABA Joint Committee on Employee Benefits, current TIPS Employee Benefits Committee, Vice Chair, and Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, management attorney and consultant Cynthia Marcotte Stamer has more than 25 years experience advising and representing employers, health and other employee benefit plans, their sponsors, fiduciaries and plan administrators, consultants, vendors, outsourcers, insurers, governments and others about employment, employee benefit, compensation, and a wide range of other performance, legal and operational risk management practices and concerns. As a part of this work, Ms. Stamer has worked extensively with clients to manage risks and defend practices under a wide range of laws and circumstances. Her experience includes extensive work advising and representing employers, plans, plan fiduciaries, trustees, investors, and others about managing and resolving risks relating to distressed pension and other employee benefit plans, downsizing and other workforce re-engineering and other similar matters. A prolific author and popular speaker, Ms. Stamer also publishes, conducts client and other training, testifies, speaks and consults extensively on other employment and employee benefit risk management practices and concerns for the ABA, World At Work, SHRM, American Health Lawyers Association, Institute of Internal Auditors, Society for Professional Benefits Administrators, HCCA, Southwest Benefits Association and many other organizations. An Editorial Advisory Board member and contributing author of HR.com, Insurance Thought Leaders, Employee Benefit News and many other publications, her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications. To learn more about Ms. Stamer, her experience, involvements, programs and publications, see here or contact Ms. Stamer.

Other Resources & Developments

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

If you or someone else you know would like to receive future updates and notices about upcoming programs and events, please be sure that we have your current contact information – including your preferred e-mail- by creating or updating your profile at here. For important information concerning this communication click here.

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Posted by Cynthia Marcotte Stamer

USI Advisors Will Pay $1.27 Million To Settle Charges It Violated ERISA Fee Disclosure Requirements

August 23, 2012

USI Advisors Inc. (USI) will pay $1,265,608.70 to 13 pension plans to resolve charges it violated the Employee Retirement Income Security Act (ERISA) by failing to properly disclose 12b-1 fees it collected off of fund investments. The complaint behind the settlement reflects the commitment of the U.S Department of Labor Employee Benefit Security Administration (EBSA) to enforcing Employee Retirement Income Security Act (ERISA) fee disclosure and other requirements against service providers to employee benefit plans. With regulations tightening, the tough economy driving greater scrutiny of plan investments, expenditures and performance, and enforcement rising, plan vendors, and the employee benefit plan sponsors and fiduciaries responsible for their engagement, compensation and oversight need to ensure the adequacy of their processes for deciding and reporting compensation, as well as the qualification, selection and oversight of vendors and fiduciaries generally.

USI Settlement

An investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) USI, fiduciary investment adviser made investments in mutual funds on behalf of ERISA-covered defined benefit plan clients and received 12b-1 fees from those funds. A 12b-1 fee is paid by a mutual fund out of fund assets to cover certain expenses. USI Advisors failed to fully disclose the receipt of the 12b-1 fees, and to use those fees for the benefit of the plans either by directly crediting the amounts to the plans or by offsetting other fees the plans would be obligated to pay the company.

“If you, as an investment adviser, are a fiduciary under ERISA with respect to plan investments in mutual funds, you cannot use your fiduciary authority to receive an additional fee or to receive compensation from third parties for your own personal account in transactions involving plan assets. We are very pleased that this settlement addresses the problems we identified with USI’s practices and restores funds to the plans and their participants,” said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. “We are also very pleased that recently finalized fee disclosure regulations issued by the Labor Department will require fiduciaries like USI to be more transparent about the fees they receive when dealing with their plan clients.”

Under the terms of the settlement, USI Advisors has agreed not to provide bundled investment advisory and actuarial services to any ERISA-covered defined benefit plan client without first entering into a written agreement, contract or letter of understanding that specifies the services provided and whether the company or its affiliates will act as a fiduciary to those plans. USI Advisors also will provide to clients a description of all compensation and fees received, in any form, from any source, involving any investment or transaction related to them.

The alleged violations in this case occurred between 2004 and 2010. USI Advisors is a wholly owned subsidiary of USI Consulting Group, a Goldman Sachs Capital Partners Co.

The investigation conducted by EBSA as part of the agency’s Consultant/Adviser Project, highlights the need for employee benefit plan fiduciaries and vendors alike to properly identify and report all vendor compensation received by employee benefit plan investment advisors and other service providers in compliance with ERISA’s fee disclosure and other requirements. The Consultant/Adviser Project targets vendors and advisors to employee benefit plans for review, and where applicable, enforcement action when service providers violate ERISA’s requirements. EBSA has made misconduct by consultants, advisors and other service providers a priority as part of its broader emphasis on enforcement of ERISA’s fiduciary responsibility and reporting requirements.

Tightening Rules, Enforcement & Tough Times Driving Risks

The EBSA’s announcement of the USI settlement comes as it continues to move forward to strengthen the transparency of vendor compensation and other fiduciary regulations and enforcement. Just shortly before today’s announcement, EBSA recently clarified its guidance about how its rules affect 401(k) plan brokerage window arrangements in response to public feedback. Field Assistance Bulletin No. 2012-02R published July 30, 2012, modifies and replaces Q&A 30 of Field Assistance Bulletin No. 2012-02 (issued May 7, 2012) with a new Q&A 39.

EBSA’s final fee disclosure regulation[i] published on requires plan administrators to make to disclose specified information about retirement plan fees and expenses to participants and beneficiaries. The regulation requires plan administrators to give participants and beneficiaries more informationm about administrative and investment fees and expenses in their 401(k) plans.

EBSA issued Field Assistance Bulletin No. 2012-02, which provided guidance to its field enforcement personnel in question and answer format on the obligations of plan administrators under the fee disclosure regulation on May 7, 2012. In response to questions and concerns about statements in Question 30 regarding brokerage windows and other arrangements that enable plan participants and beneficiaries to select investments beyond those designated by the plan, EBSA issued Field Assistance Bulletin No. 2012-02 which supersedes Field Assistance Bulletin 2012-02 by modifying its provisions about brokerage windows and inviting more public comments for EBSA to use to consider further clarification of this guidance.

As did its predecessor, Field Assistance Bulletin No. 2012-02R specifies that while the fee disclosure regulation covers “brokerage windows,” “self-directed brokerage accounts,” and other similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan, its coverage of brokerage windows is limited to the disclosure requirements in paragraph (c) of the regulation relating to plan-related information. The disclosure requirements for investment-related information in paragraph (d) of the regulation do not apply to brokerage windows, self-directed brokerage accounts, and similar arrangements or to any investment selected by a participant or beneficiary that is not designated by the plan (i.e., any investments made through the window, account, or arrangement).

Beyond meeting the technicalities of the fee disclosure requirements, plan sponsors, fiduciaries and vendors should also ensure that their selection, oversight, determination of compensation and other dealings with plan vendors and consultants meet the general fiduciary responsibility, prohibited transaction, bonding and other requriements of ERISA, as well as any applicable securities and tax requirements.

Through its participant fee disclosure and other stepped up fiduciary regulations and enforcement, EBSA is sending clear signals that it stands ready to investigate and take action against service providers or others that charge excessive fees, failure to adequately justify or appropriately disclose fees or other compensation from plan transactions, or other fiduciary protections of ERISA. In the face of these requirements, plan fiduciaries, sponsors, advisors and vendors should carefully review the appropriateness of compensation received or promised to plan vendors, as well as the adequacy of practices for identifying and reporting that compensation and the selection and oversight of the vendors receiving that compensation.

For Help or More Information

If you need help reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices to respond to emerging regulations, monitoring or commenting on these rules, defending your health plan or its administration, or other health or employee benefit, human resources or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and registerto receive future updates about developments on these and other concerns from Ms. Stamer here.

For important information concerning this communication click here. THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS. ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

[i]See 75 FR 64910 (Oct. 20, 2010).

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Posted by Cynthia Marcotte Stamer

EBSA Updates Guidance On Fee Disclosure Requirements For 401(k) Plan Brokerage Window Arrangements

August 6, 2012

U.S. Department of Labor’s Employee Benefits Security Administration recently clarified its guidance about how its rules affect 401(k) plan brokerage window arrangements in response to public feedback. Field Assistance Bulletin No. 2012-02R published July 30, 2012, modifies and replaces Q&A 30 of Field Assistance Bulletin No. 2012-02 (issued May 7, 2012) with a new Q&A 39.

New Q-39 of Field Assistance Bulletin No. 2012-02R addresses when a plan offers an investment platform that includes a brokerage window, self-directed brokerage account, or similar plan arrangement but the fiduciary did not designate any of the funds on the platform or available through the brokerage window, self-directed brokerage account, or similar plan arrangement as “designated investment alternatives” under the plan, if the brokerage account platform or the brokerage window, self-directed brokerage account, or similar plan arrangement is a designated investment alternative for purposes of the regulation. According to Field Assistance Bulletin No. 2012-02R, it is not. According to the Field Assistance Bulletin, the regulation does not require that a plan have a particular number of “designated investment alternative” (DIA), and the Bulletin does not prohibit the use of a platform or a brokerage window, self-directed brokerage account, or similar plan arrangement in an individual account plan. Rather, whether an investment alternative is a DIA for purposes of the regulation depends on whether it is specifically identified as available under the plan.

However Question 39 also cautions plan administrators and fiduciaries about the need to ensure other applicable ERISA obligations are fulfilled. Field Assistance Bulletin 2012-02R notes it does not change the 404(c) regulation or the requirements for relief from fiduciary liability under section 404(c) of ERISA or address the application of ERISA’s general fiduciary requirements to SEPs or SIMPLE IRA plans. Also, fiduciaries of such plans with platforms or brokerage windows, self-directed brokerage accounts, or similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan are still bound by ERISA section 404(a)’s statutory duties of prudence and loyalty to participants and beneficiaries who use the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement, including taking into account the nature and quality of services provided in connection with the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement. It also notes that that a 401(k) or other individual account plan fiduciary’s failure to designate investment alternatives to avoid investment disclosures under the regulation, raises questions under ERISA section 404(a)’s general statutory fiduciary duties of prudence and loyalty.

For Help or More Information

If you need help reviewing and updating, administering or defending your group health or other employee benefit, human resources, insurance, health care matters or related documents or practices to respond to emerging health plan regulations, monitoring or commenting on these rules, defending your health plan or its administration, or other health or employee benefit, human resources or risk management concerns, please contact the author of this update, Cynthia Marcotte Stamer.

Recognized in Who’s Who In American Professionals and both an American Bar Association (ABA) and a State Bar of Texas Fellow, Ms. Stamer serves on the Editorial Advisory Board of Employee Benefits News, the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, and active in a multitude of other employee benefits, human resources and other professional and civic organizations. She also is a widely published author and highly regarded speaker on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, Modern and many other national and local publications. You can learn more about Ms. Stamer and her experience, review some of her other training, speaking, publications and other resources, and registerto receive future updates about developments on these and other concerns from Ms. Stamer here.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

[i]See 75 FR 64910 (Oct. 20, 2010).

Congress Gives Defined Benefit Plan Sponsors Welcome Funding Relief, Raises PBGC Premiums & Makes Other Reforms

July 31, 2012

The Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code generally require employers that sponsor defined benefit pension plans make sufficient contributions to their defined benefit pension plans to ensure that their plans meet minimum funding requirements.

Failure to meet minimum funding requirements triggers a series of complicated reporting and disclosure, funding and excise tax liabilities, liens and other obligations that are serious and require prompt redress through prompt payment of required contributions and penalties, request for funding waivers or termination under a series of complicated rules or both. Special controlled group, lien and successor liability rules incorporated into these funding requirements often spread the risk of funding deficiencies under these rules by extending liabilities to commonly controlled or affiliated employers, lenders, potential purchasers and others dealing with these plans or the businesses that sponsor them.

Because employer funding obligations under these rules depend heavily upon interest and other investment performance used to calculate funding levels, employer funding obligations tend to spike during economic depressions or slowdowns, resulting in sharp increases in funding obligations for employers at a time when the tight economy already makes finances tight. Congress has faced growing pressure to provide some sort of defined benefit pension plan funding relief as low investment returns and strained corporate budgets during the ongoing economic crisis have fueled an underfunding epidemic among employers sponsoring defined benefit pension plans and threatened the financial viability of many sponsoring employers and the federal insurance program responsible for providing backup insurance for private employer defined benefit commitments administered by the PBGC.

MAP-21 provides immediate defined benefit plan funding relief by changing how the interest rates that employers must use to calculate their current defined benefit plan funding obligations are calculated. MAP-21 defined benefit plan funding reforms effectively decrease current defined benefit plan funding costs by establishing a minimum and maximum for the interest segment rates defined benefit plans use to calculate currently required funding based on a historic 25-year average of those segment rates. It is important that employers and plan fiduciaries keep in mind that the MAP-21 interest rate change applies to the calculation of current funding obligations that employer. It does not apply for purposes of calculating lump sum distributions, limits on deductible contributions to single-employer plans, PBGC variable-rate premiums, fi

With many employers continuing to meet defined benefit plan funding requirements driven up by the continued excessively low investment performance of their benefit plan investment in the slow economic environment, defined benefit pension plan funding relief included in the “Moving Ahead for Progress in the 21st Century Act”(MAP–21”) signed into law by President Obama on July 6, 2012 provides welcome and much-needed pension funding relief. For many financially strapped businesses that sponsor defined benefit plans, the MAP-21 relief may allow the employer to avoid terminating its defined benefit plan, escape costly underfunding consequences that many defined benefit plan sponsors fear will financially cripple or bankrupt their companies, or both.

MAP-21 provides immediate funding relief for financially strapped defined benefit plan sponsors and makes various other reforms impacting defined benefit pension plans and the Pension Benefit Guarantee Corporation (PBGC) insurance program that helps to insure certain benefit commitments made under these defined benefit plans. The MAP-21 funding relief is intended to help employers struggling to meet heightened pension funding obligations brought about by the decline in investment performance resulting from the economic downturn.

nancial reporting under Section 4010 of ERISA, and qualified transfers of excess pension assets to retiree medical accounts.

In addition to changing the rules for calculating interest rates for purposes of determining defined benefit plan minimum funding obligations, MAP-21 also extends rules allowing transfers of excess pension assets to retiree health accounts to December 31, 2021 and expands those transfer rules also to allow transfers to fund retiree group term life insurance accounts.

Finally, in addition to these changes to defined benefit pension plan funding rules, MAP-21 also reorganizes the PBGC organizational structure and increases PBGC insurance premiums.

While the MAP-21 reforms will provide welcome relief, sponsoring businesses, their commonly controlled and affiliated employers, lenders, investors and successors still must exercise care to carefully monitor the funding status of defined benefit plans and the potential liabilities and responsibilities associated with these plans. Appropriate steps should be taken to maintain required funding levels or, at the first sign of trouble, to seek experienced legal and actuarial advice and help to identify and take prompt steps to pursue options to head off a potential crisis by freezing or terminating the plan, providing required notifications and disclosures to participants and beneficiaries, the PBGC, lenders, investors, and other concerned parties, and other actions to mitigate exposures.

For More Information Or Assistance

A Fellow in the the American College of Employee Benefits Council, Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, Immediate Past Chair and current Welfare Plan Committee Co-Chair of the American Bar Association (ABA) RPTE Employee Benefit & Other Compensation Group, a Council Member of the ABA Joint Committee on Employee Benefits, Vice-Chair of the ABA TIPS Employee Benefits Commitee, Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, management attorney and consultant Cynthia Marcotte Stamer nearly 25 years experience advising and representing employers, employee benefit plans, their sponsors, bankruptcy creditors, debtors and trustees, plan fiduciaries and plan administrators, consultants, vendors, outsourcers, insurers, governments and others about employment, employee benefit, compensation, and a wide range of other performance, legal and operational risk management practices and concerns. As a part of this work, Ms. Stamer has worked extensively with clients to manage risks and defend practices under a wide range of laws and circumstances. Her experience includes extensive work advising and representing employers, plans, plan fiduciaries, trustees, investors, and others about managing and resolving risks relating to distressed pension and other employee benefit plans, downsizing and other workforce reengineering and other similar matters. A prolific author and popular speaker, Ms. Stamer also publishes, conducts client and other training, speaks and consults extensively on GINA and other employment and employee benefit risk management practices and concerns for the ABA, World At Work, SHRM, American Health Lawyers Association, Institute of Internal Auditors, Society for Professional Benefits Administrators, HCCA, Southwest Benefits Association and many other organizations. Her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications. To learn more about Ms. Stamer, her experience, involvements, programs and publications, see here or contact Ms. Stamer.

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Posted by Cynthia Marcotte Stamer

Stamer Speaks 11/15 About Things Plan Committees Must Do Differently In 2012 At SWBA Meeting

July 10, 2012

Stamer Speaks About Things Plan Committees Must Do Differently In 2012 At SWBA Meeting In November

Cynthia Marcotte Stamer will be among the featured panelists speaking about “The Flood of Things a Plan Committee Must Do Differently in 2012” at the Southwest Benefits Association (SWBA) 23rd Annual Employee Benefits Conference for Practitioners and Plan Sponsors scheduled for November 15-16, 2012 at the Doubletree Galleria Hotel in Dallas, Texas

During “The Flood of Things a Plan Committee Must Do Differently in 2012” program, scheduled to begin at 4:00 PM on November 15, Ms. Stamer and other panelists will discuss the grow emerging challenges and responsibilities that employee benefit plan committees and other fiduciaries must deal with in 2012 such as new provider disclosures and participant disclosures about internal retirement plan fees, to new processes for handling claims and appeals arising under health plans now (and other types of plans soon), to identifying and documenting who really are the other fiduciaries of its plan, to avoiding stock drop exposure (especially after Pfiel), excessive fees exposure, securities lending exposure and others.

The program is part of two days of educational programs that the SWBA will provide during the Conference. To register or for additional details, see here.

About Ms. Stamer

A well-known and prolific author and popular speaker Board Certified in Labor & Employment Law, Ms. Stamer presently serves as Co-Chair of the ABA RPTE Section Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Committee, an ABA Joint Committee on Employee Benefits Representative, an Editorial Advisory Board Member of the Institute of Human Resources (IHR/HR.com) and Employee Benefit News, and various other publications. A primary drafter of the Bolivian Social Security privatization law with extensive domestic and international regulatory and public policy experience, Ms. Stamer also has worked extensively domestically and internationally on public policy and regulatory advocacy on health and other employee benefits, human resources, insurance, tax, compliance and other matters and representing clients in dealings with the US Congress, Departments of Labor, Treasury, Health & Human Services, Federal Trade Commission, HUD and Justice, as well as a state legislatures attorneys general, insurance, labor, worker’s compensation, and other agencies and regulators. A prolific author and popular speaker, Ms. Stamer regularly authors materials and conducts workshops and professional, management and other training on employee benefits, human resources, health care, privacy and data security, technology and other compliance and management topics. Her publications and insights appear in the Health Care Compliance Association, American Bar Association, Atlantic Information Service, Bureau of National Affairs, World At Work, SHRM, The Wall Street Journal, Government Institutes, Inc.,Business Insurance, the Dallas Morning News, HR.Com, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. An Editorial Advisory Board member and author for HR.com, Insurance Thought Leaders and many other publications, Ms. Stamer also regularly serves on the faculty and planning committees of a multitude of symposium and other educational programs. For more details about Ms. Stamer’s services, experience, presentations, publications, and other credentials or to inquire about arranging counseling, training or presentations or other services by Ms. Stamer, see www.CynthiaStamer.com or contact Ms. Stamer at (469) 767-8872 or via e-mail here

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

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Posted by Cynthia Marcotte Stamer

$27M+ Settlement Highlights Fiduciary Risks Plan Sponsors & Fiduciaries Risk If Plan Vendors, Compensation Improperly Set

July 7, 2012

A $27 million settlement announced by the Department of Labor on July 7 shows the big liability that employer, union or association plan sponsors and their fiduciaries risk by failing to take appropriate steps when deciding who will serve as fiduciaries or other plan sponsors or setting the compensation paid by the plan for those services.

The National Rural Electric Cooperative Association (NRECA) will restore $27,272,727 to three association-sponsored employee benefit plans covered by the Employee Retirement Income Security Act (ERISA) to settle U.S. Department of Labor Employee Benefits Security Administration (EBSA) charges that the association violated ERISA by selecting itself as a service provider to the plans, determining its own compensation and making payments to itself that exceeded NRECA’s direct expenses in providing services to the employee benefit plans. EBSA announced the settlement on July 5, 2012.

Following an EBSA investigation, EBSA accused NRECA of violating NRECA by selecting itself to act as the administrator of various association employee benefit plans and arranging for the NRECA to receive unreasonable compensation for these services which NRECA set without the use of independent parties to prudently verify the appropriateness of the selection or compensation arrangements. EBSA said these arrangements violated the self-dealing and other fiduciary responsibility requirements of ERISA.

Headquartered in Arlington, NRECA is a nonprofit trade association for electric power cooperatives. The sponsored plans are open to members of the trade association as well as the association’s employees. As of 2010, the latest information available, the NRECA 401(k) Plan had 68,970 participants, the NRECA Retirement Security Plan had 64,286 participants and the NRECA Group Benefits Plan had 73,644 participants.

Under the terms of the agreement, NRECA will not provide administrative services to the NRECA Retirement Security Plan, the NRECA 401(k) Plan and the NRECA Group Benefits Plan without entering into a written contract or agreement with the plans that must be approved by an independent fiduciary. The independent fiduciary must determine whether the use of NRECA to provide administrative services to the plans is prudent and reasonable, determine the categories of direct expenses that NRECA may charge to the plans and the methods of calculating those expenses, and monitor NRECA’s compliance with certain terms of the agreement. The agreement also provides that during a 60-month period following the implementation date, NRECA shall discount the amount of permissible direct expenses for which it seeks reimbursement from all three plans in the amount of $22,727,272. The balance of the settlement payment, $4,545,455, already has been paid directly to the NRECA 401(k) Plan. In addition to the amounts returned to the plans, NRECA will pay $2,727,276 in civil penalties.

“This settlement sends a clear message to plan fiduciaries that they cannot profit from selecting themselves to provide services to plans,” said Phyllis Borzi, assistant secretary of labor for employee benefits security in announcing the settlement.

Employee benefit plan vendor selection and compensation arrangements made by association and other employee benefit plan sponsors, fiduciaries and service providers are coming under increasing scrutiny by the EBSA. While ERISA technically grants plan sponsors and fiduciaries wide latitude to make these choices, the exercise of these powers comes with great responsibility. See e.g., Plan Sponsors. Their Owners & Management & Others Risk Personal Liability If Others Defraud Plans or Mismanage Employee Benefit Plan Responsibilities; New Rules Give Employee Benefit Plan Fiduciaries & Investment Advisors New Investment Advice Options;DOL Proposes To Expand Investment Related Services Giving Rise to ERISA Fiduciary Status As Investment Fiduciary.

Associations, employer and other plan sponsors, and other entities and individuals who in name or in function possess or exercise discretionary responsibility or authority over the selection of plan fiduciaries, administrative or investment service providers or other services to the plan or the establishment of their compensation generally must make those decisions in accordance with the fiduciary responsibility and prohibited transaction rules of ERISA. Among other things, these rules generally require that fiduciaries exercising discretion over these and other plan matters:

ü Must act prudently for the exclusive benefit of plan participants and beneficiaries;

ü Must not involve the plan or its assets in any arrangement that is listed as a prohibited transaction under ERISA § 406; and

ü Must not act for the benefit of themselves or any third party.

Fiduciaries that violate these rules risk personal liability to the plans for the greater of profits realized or losses sustained by the plan, plus attorneys’ fees and costs, as well as exposure to an EBSA-assessed ERISA civil penalty equal to 20% of the amount of the fiduciary breach.

Despite these well-document fiduciary exposures and a well-established pattern of enforcement by the Labor Department and private plaintiffs, many companies and their business leaders fail to appreciate the responsibilities and liabilities associated with the establishment and administration of employee benefit plans. Frequently, employer and other employee benefit plan sponsors fail adequately to follow or document their administration of appropriate procedures to be in a position to demonstrate their fulfillment of these requirements when selecting plan fiduciaries and service providers, determining the compensation paid for their services, overseeing the performance of these parties, or engaging in other dealings with respect to plan design or administration. In other instances, businesses and their leaders do not realize that the functional definition that ERISA uses to determine fiduciary status means that individuals participating in discretionary decisions relating to the employee benefit plan, as well as the plan sponsor, may bear liability under many commonly occurring situations if appropriate care is not exercised to protect participants or beneficiaries in these plans. For this reason, businesses and associations providing employee benefits to employees or dependents, as well as members of management participating in, or having responsibility to oversee or influence decisions concerning the establishment, maintenance, funding, and administration of their organization’s employee benefit programs need a clear understanding of their responsibilities with respect to such programs, the steps that they should take to demonstrate their fulfillment of these responsibilities, and their other options for preventing or mitigating their otherwise applicable fiduciary risks.

In light of the significant liability risks, employer, association and other employee benefit plan sponsors and their management, plan fiduciaries, service providers and consultants should exercise care when selecting plan fiduciaries and service providers, establishing their compensation and making other related arrangements. To minimize fiduciary exposures, parties participating in these activities should seek the advice of competent legal counsel concerning their potential fiduciary status and responsibilities relating to these activities and take appropriate steps to minimize potential exposures.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

Comments Off on $27M+ Settlement Highlights Fiduciary Risks Plan Sponsors & Fiduciaries Risk If Plan Vendors, Compensation Improperly Set | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Mental Health, Mental Health Parity, Retirement Plans, Tax | Tagged: ERISA, fee disclosure, Fiduciary, participant fee disclosuyrenvestment-advisor, plan investiments, prohibited traansaction, Prudence | Permalink
Posted by Cynthia Marcotte Stamer

Coping With Health Care Reform: 2012 Health Plan Update Workshop July 24, 2012: Register Now!

July 2, 2012

Coping With Health Care Reform: 2012 Health Plan Update

A Solutions Law Press HR & Benefits Workshop

July 24, 2012

10:30 A.M.-Noon Eastern | 11:30 A.M.-1:00 P.M. Central | 9:30 A.M-11:00 A.M. Pacific

Register Now!

Get a 2012/2013 Health Plan Compliance Checkup!

Learn Latest About What Your Health Plan Must Do To Meet Patient Protection & Affordable Care Act (ACA) Summary of Benefits & Communications (SBC), External Review, Culturally & Linguistically Appropriate, Nondiscrimination, Mandated Coverage & Benefit & Other Affordable Care Act, As Well As The Latest On ERISA & Other Federal Health Plan Rules!

The June 28, 2012 Supreme Court National Federation of Independent Business v. Sebelius ruling rejecting constitutional challenges to the ACA health care reform law means most health plans, their employer and other sponsors, fiduciaries and administrators, and insurers must rush to update their health plan documents, summary plan descriptions and other communications, administrative procedures and contracts, reporting and other arrangements to meet the requirements of ACA that have, or by year end will, take effect pending the full rollout of the law in 2014.

Solutions Law Press, Inc. invites you to catch up on the latest requirements and guidelines impacting employer and union sponsored group health plans under ACA and other federal health plan regulations by participating in “Coping With Health Care Reform: 2012 Health Plan Update Workshop on Tuesday, July 24, 2012. Participants may choose to attend the live briefing in Addison, Texas or take part via WebEx for a registration fee of $125.00. Texas Department of Insurance Continuing Education Credit and other professional certification credit may be requested by qualifying participant for an added charge.

Learn Latest On 2012/2013 Federal Health Plan Requirements

The Coping With Healthcare Reform: 2012 Health Plan Update Workshop will cover the latest guidance on Affordable Care Act and other federal health plan regulatory changes impacting employment-based group health plans and other key information employer and other group health plan sponsors, group health plans, insurers, plan administrators, fiduciaries, brokers and advisors and others working with these plans need to understand and cope with 2012-2013 ACA and other health plan requirements including:

ACA Summary of Benefits And Communications Mandates & Their Implications On Plan Documents, SPDs & Administration
ACA Culturally and Linguistically Appropriate Mandates
ACA External & Internal Review, ERISA Claims & Appeals, & Other Federal Claim Handling Requirements: What rules apply to which plans? What to do to minimize the impact of changing requirements.
ACA “Essential Health Benefit” Rules & Their Implications For Health Plans & Their Sponsors Now & After 2014
ACA, ADA & Other Federal Health Plan Nondiscrimination Rules
ACA W-2 & Other Federal Reporting, Notice & Disclosure Requirements
ACA grandfathered plan status: Do you have it? How do you lose it? What it does for your program?
ACA, COBRA, HIPAA, GINA, FMLA, Military Leave, Michelle’s Law & Other Federal Eligibility Mandates
Preventive care coverage & wellness program rules under Affordable Care Act, GINA, ADA & other federal regulations
Mental health & substance abuse, provider choice & other benefit mandates under ACA, Mental Health Parity & other federal rules
Federal Health Plan Notice & Communication Rules
ERISA Fiduciary Responsibility, Reporting & Disclosure & Other Rules
New HIPAA Privacy Rules & Audits & How Plans & Plan Sponsors Should Respond
Consumer Driven Health Plan Communication Strategies
Tips To Help Review & Update Plans, Communications, Vendor Agreements & Processes
Expected & Proposed ACA & Other Federal Health Plan Rules
Practical Strategies For Monitoring & Responding To New Requirements & Changing Rules
Participant Questions
More

About The Speaker

A Fellow in the American College of Employee Benefits Counsel, recognized in International Who’s Who, and Board Certified in Labor & Employment Law, attorney and health benefit consultant Cynthia Marcotte Stamer has 25 years experience advising and representing private and public employers, employer and union plan sponsors, employee benefit plans, associations, their fiduciaries, administrators, and vendors, group health, Medicare and Medicaid Advantage, and other insurers, governmental leaders and others on health and other employee benefit. employment, insurance and related matters. A well-known and prolific author and popular speaker Board Certified in Labor & Employment Law, Ms. Stamer presently serves as Co-Chair of the ABA RPTE Section Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Committee, an ABA Joint Committee on Employee Benefits Representative, an Editorial Advisory Board Member of the Institute of Human Resources (IHR/HR.com) and Employee Benefit News, and various other publications. A primary drafter of the Bolivian Social Security privatization law with extensive domestic and international regulatory and public policy experience, Ms. Stamer also has worked extensively domestically and internationally on public policy and regulatory advocacy on health and other employee benefits, human resources, insurance, tax, compliance and other matters and representing clients in dealings with the US Congress, Departments of Labor, Treasury, Health & Human Services, Federal Trade Commission, HUD and Justice, as well as a state legislatures attorneys general, insurance, labor, worker’s compensation, and other agencies and regulators. A prolific author and popular speaker, Ms. Stamer regularly authors materials and conducts workshops and professional, management and other training on employee benefits, human resources and related topics for the ABA, Aspen Publishers, the Bureau of National Affairs (BNA), SHRM, World At Work, Government Institutes, Inc., the Society of Professional Benefits Administrators and many other organizations. She also regularly serves on the faculty and planning committees of a multitude of symposium and other educational programs. For more details about Ms. Stamer’s services, experience, presentations, publications, and other credentials or to inquire about arranging counseling, training or presentations or other services by Ms. Stamer, see http://www.CynthiaStamer.com.

Registration, Education Credit & Other Details

REGISTRATION FEE: Registration Fee $125.00 per person (plus an additional $10 service fee for parties seeking Texas Department of Insurance Continuing Education Credit). Registration Fee Discounts available for groups of three or more. Payment required via website registration required 48 hours in advance of the program to complete registration. Payment only accepted via website PayPal. No checks or cash accepted. Persons not registered at least 48 hours in advance will only participate subject to system and space availability. Register Now!

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OTHER PROFESSIONAL CERTIFICATION OR CONTINUING EDUCATION CREDIT: HRCI and World At Work certification credit requested and pending. If you have special continuing education credit needs that you wish us to consider, please let us know. We are happy to visit with you about our ability to accommodate your request. Special fees or other conditions may apply.

CANCELLATION & REFUND POLICY: In order to receive credit, cancellation (either fax or mail) must be received at least 48 hours in advance of the meeting and are subject to a $10.00 refund processing fee. Refunds will be made within 60 days of receipt of written cancellation notice.. DISABILITIES ACCOMMODATION: If you are an individual with a disability who requires accommodation to take part, please let us know when registering so that we may consider your request.

About Solutions Law Press, Inc.™

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Save The Date & Register For These Upcoming HR & Benefits Workshops

Solutions Law Press, Inc sponsors many valuable Human Resources and Employee Benefits Workshops. Register or get more information on the following upcoming Health Plan Workshops Here:

July 24, 2012, Coping With Health Care Reform: 2012 Health Plan Update Workshop

July 31, 2012, Claims & Appeals Bootcamp

August 14, 2012, HIPAA Bootcamp

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Comments Off on Coping With Health Care Reform: 2012 Health Plan Update Workshop July 24, 2012: Register Now! | Uncategorized | Tagged: ADA, Affordable Care Act, ERISA, FMLA, GINA, Health Care Reform, Health Plans, Patient Protection and Affordable Care Act | Permalink
Posted by Cynthia Marcotte Stamer

Western Mixers & Officers Ordered To Pay $1.2M+ For Improperly Using Benefit Plan Funds For Company Operations, Other ERISA Violations

May 23, 2012

Businesses owners and managers should treat last week’s judgment against a California fruit and nut supplier Western Mixers Inc. and its officers as a wake-up call to meet employee benefit funding obligations, not to use plan monies for company operations and to take other required steps to make sure that retirement, health and other employee benefit plans moneys and other responsibilities are properly handled.

Under a judgment entered in Solis v. Frank L. Rudy et. al. and Western Mixers Inc. Money Purchase Pension Plan, Western Mixers Inc., its owners and officers will pay a total of $1,287,901 to the company’s pension plan, plus a 20 percent penalty to the Department of Labor.

Following an investigation by the Employee Benefits Security Administration (EBSA), the Department of Labor sued Western Mixers Inc. and two officers who served as trustees of the plan for failing to make approximately $952,511 in mandatory employer contributions for the benefit of participants and beneficiaries and improperly using plan monies in the company’s business operations. Investigators also found that the same two officers as well as the company’s chief financial officer made $565,000 in unauthorized withdrawals from the plan accounts, commingling those funds in the company’s general accounts and using them for the benefit of the business.

Labor Department officials sued the company, and the officers for violation of the fiduciary responsibility rules of the Employee Retirement Income Security Act (ERISA). ERISA generally requires that plan trustees and other plan fiduciaries carry out duties with respect to an employee benefit plan assets prudently for the exclusive benefit of participants.

Pursuant to the consent judgment, the company and its officers admitted to violation of ERISA. During the course of the investigation leading up to the lawsuit, the company previously repaid to the plan $485,000 of the total funds identified as missing by the Labor Department. According to an announcement of the U.S. Department of Labor on May 14, 2012, Midwest Mixers Inc.’s officers agreed to repay $802,901 to participants’ accounts within 10 day of the judgment.

In addition to repaying the missing funds with interest, defendants also must pay a penalty equal to 20 percent of the recovered amount. The court also has appointed an independent fiduciary to terminate the plan and to collect, marshal, pay out and administer plan assets. Frank L. Rudy and David H. Bolstad, owners of the company, are removed as plan trustees and fiduciaries. Together with Robert J. Fischer, Western Mixers, Inc.’s chief financial officer, they are permanently enjoined and restrained from violating ERISA and from serving as fiduciary or service providers to any ERISA-covered plan in the future.

The Western Mixer’s judgement demonstrates that owners, operators and managers of businesses that exercise discretion and control over the funding, investment or administration of employee benefit plans or their assets face significant liability for failing to properly fulfill their responsibilities with respect to their employee benefit plans. Businesses, their owners, board members, officers, and other members of management making decisions about the maintenance, funding, administration, termination, hiring or appointment of fiduciaries or service providers or other matters impacting the employee benefit plan should ensure that they understand the potential implications and responsibilities associated with these activities for themselves and their companies. individuals who have authority or responsibility for employee benefit plans who also perform or take part in the performance of other company management functions also should pre-educate themselves about when ERISA may require that their plan responsibilities be put before otherwise applicable responsibilities to their company, appropriate processes for documenting decisions and activities and other procedures that can help position activities to mitigate exposures and promote defensibility.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

About Solutions Law Press

Comments Off on Western Mixers & Officers Ordered To Pay $1.2M+ For Improperly Using Benefit Plan Funds For Company Operations, Other ERISA Violations | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Mental Health, Mental Health Parity, Retirement Plans, Tax | Tagged: Bankruptcy, ERISA, fee disclosure, Fiduciary, plan investiments, prohibited traansaction, Prudence | Permalink
Posted by Cynthia Marcotte Stamer

Plan Administrator Faces Civil & Criminal Prosecution For Allegedly Making Prohibited $3.2 Million Real Estate Investment

May 22, 2012

The U.S. Department of Labor has filed a complaint in the U.S. District Court for the District of Idaho against Matthew D. Hutcheson alleging that he violated the Employee Retirement Income Security Act (ERISA) by imprudently investing retirement plan assets in a now-failed real estate venture. Hutcheson also faces a separate criminal indictment, which was filed in the same court on April 10, in connection with the same transaction.

The Labor Department civil complaint alleges that, toward the end of 2010, Hutcheson used more than $3.2 million representing the retirement plan savings of workers from multiple employers for his own personal expenses and in an attempt to buy an interest in the Tamarack Resort – a failed ski and golf resort in Idaho.

Labor Department officials charge this imprudent prohibited transaction has left affected retirement plans without sufficient funds to pay participants all the benefits owed to them.

The Labor Department also has filed an application for a temporary restraining order seeks to remove Hutcheson and other named defendants as fiduciaries of the affected plans, and seeks to appoint an independent fiduciary to administer the plans. In addition to Hutcheson, defendants include Hutcheson Walker Advisors LLC; Green Valley Holdings LLC; and the Retirement Security Plan and Trust, formerly known as the Pension Liquidity Plan and Trust.

Appropriate management of retirement and other employee benefit plan assets is a key obiligation of employee benefit plan investment advisors and other fiduciaries that have authority over plan assets. Plan fiduciaries generally are required by ERISA 404 to invest prudently and for the exclusive benefit of plan participants and beneficiaries. Additionally, ERISA generally prohibits plan fiduciaries from investing in or involving the plan or its assets in certain prohibited transactions or dealing with plan assets for the benefit of themselves or other third parties.

Because violations of ERISA’s fiduciary responsibility rules can create personal liability, employer and other plan sponsors, plan fiduciaries and others participating in decisions or administration of a rebate exercise care in dealing with any rebate. Many plan sponsors also may want to consider reviewing and tightening as warranted existing plan, trust, insurance policy, plan communications and other documentation to lower risks and promote desired characterization of rebates and other amounts paid into or with respect to their plans.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

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Posted by Cynthia Marcotte Stamer

Employee Plan Fee Disclosure Rules Clarified

May 22, 2012

The Department of Labor’s Employee Benefits Security Administration (EBSA) has made a technical correction to recently released participant-level fee disclosure regulation (29 CFR § 2550.404a-5) contained in Field Assistance Bulletin No. 2012-02 (Fab 2012-02) as initially released on May 7, 2012.

Fab 2012-02 contains frequently asked questions and answers about the Department’s participant-level fee disclosure regulation. As originally released a sentence in the answer to Question 19 concerning quarterly Web site updates to “average annual total return” information inadvertently referred to the most recently completed calendar “year” rather than the most recently completed calendar “quarter.”

In its technical correction of this provision on May 17, 2012, EBSA revised the Faq to track the regulation of the regulation amd re,pved the word “calendar”from the phrase “… 10-calendar year periods …” in the same sentence. See Q-19, n.2. The Fab as revised is available at: here.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

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Posted by Cynthia Marcotte Stamer

Brokerage Firm To Pay $630,000+ To Benefit Plans To Settle DOL Charges It Wrongfully Steered Clients To Investments

April 18, 2012

News that Memphis-based brokerage firm Morgan Keegan and Co., Inc. will pay more than $600,000 to settle charges it violated the Employee Retirement Income Security Act (ERISA) reminds employee benefit plan fiduciaries and brokerage or other providers of investment advice or services to employee benefit plans.

The Employee Benefit Security Administration (EBSA) announced April 16, 2012 that Morgan Keegan has agreed to pay $633,715.46 to 10 ERISA-covered pension plans to settle EBSA charges that it violated ERISA when it recommended certain hedge funds of funds as investments to its ERISA-covered employee benefit plan clients. These recommendations resulted in the hedge funds of funds paying Morgan Keegan revenue-sharing and other fees.

Following an investigation by EBSA’s Atlanta Regional Office as part of EBSA’s “Consultant/Adviser Project,” EBSA charged Morgan Keegan violated ERISA between April 2001 and November 2008 by accepting undisclosed compensation to steer employee benefit plan investments. The Consultant/Advisor Project focuses on the receipt of improper or undisclosed compensation by employee benefit plan consultants and other investment advisers.

Under the terms of the settlement, Morgan Keegan has agreed to disclose to its ERISA plans clients whether the company will act as a fiduciary to those plans. If the company is acting as a fiduciary, Morgan Keegan has agreed to specify the services that it is providing as a fiduciary and to provide the ERISA plan clients a description of all compensation and fees received, in any form, from any source, involving any investment or transaction related to them. Morgan Keegan also agrees not to collect commissions or, if it does collect them, to refund to its ERISA plans clients 100 percent of the amount collected from third parties.

Meanwhile, EBSA also increasingly has focused regulatory and enforcement attention on broker or other service provider arrangements involving compensation arrangements that might involve a brokerage or other fiduciary service provider in a conflict of interest in contravention of these ERISA duty of loyalty requirements.

ERISA Section 404 generally requires that plan fiduciaries act prudently and for the exclusive benefit of plan participants and beneficiaries when dealing with plan assets or conducting other plan related responsibilities.

As part of this general fiduciary duty, plan fiduciaries selecting service providers for the plan generally are required to conduct due diligence and prudently review the fees and other compensation received by a service provider. To help support the ability of plan fiduciaries to carry out these responsibilities, EBSA fee disclosure regulations also generally require plan consultants and investment advisors to disclose compensation they receive as a result of plan related transactions and activities.

Along side their fee disclosure obligations, where investment advisor and other service provider acts as employee benefit plan fiduciary, ERISA Section 404 also requires that service provider to conduct its duty prudently and “for the exclusive benefit” of the plans and their beneficiaries. Additionally, ERISA Section 406 generally prohibits plan fiduciaries and other parties in interest from acting for the benefit of a party other than the plan and from engaging in certain other enumerated “party-in-interest” transactions except in certain narrowly proscribed circumstances.

The Morgan Keegan investigation and settlement highlights the readiness of the EBSA to enforce these requirements against broker or other service providers who abuse these rules. “The law is very clear: If you accept a fee to give investment advice to a retirement plan, you are a fiduciary and must therefore act solely in the best interests of the participants in that plan,” said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. “Third-party payments should never be the motivating factor behind which investments brokers and advisers steer retirement clients into.”

To mitigate liability risks arising from fee related violations like those charged against Morgan Keegan, employee benefit plan fiduciaries and brokerage other service providers to employee benefit plans should carefully review and update existing fee and other practices to ensure that the fee disclosure, fiduciary responsibility, prohibited transaction and other requirements of ERISA and other applicable federal law are met. Documented analysis should be conducted and retained to position the parties to demonstrate that the service provider and its fees were prudently determined and disclosed, and that the transaction is free from any prohibited conflicts of interests.

For Help or More Information

A Fellow in the American College of Employee Benefit Council, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on leading health and managed care, employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Posted by Cynthia Marcotte Stamer

IRS Publishes More Guidance For Tax Preparers On Preparer Tax Identification Number

October 30, 2011

Tax attorneys, accountants and certain other tax advisors or representatives are required by new Internal Revenue Service rules to obtain a preparer tax identification number (PTIN).

Notice 2011-80 provides guidance to individuals who have or will obtain a PTINincluding a provisional PTIN, or who become registered tax return preparers.

Notice 2011-80 was published in IRB 2011-43 on October 24, 2011.

For Help or More Information

If you need help reviewing and updating your employee benefit plan investment advice arrangements or with other employee benefits, human resources or related matters, please contact the author of this update, Cynthia Marcotte Stamer.

Recently selected for induction as a Fellow in the American College of Employee Benefit Council and for extensive work and accomplishments in the employee benefits area, immediate past Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and current Co-Chair of its Welfare Benefit Committee, Vice-Chair of the ABA TIPS Employee Benefits Committee, a council member of the ABA Joint Committee on Employee Benefits, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is recognized, internationally, nationally and locally for her more than 24 years of work, advocacy, education and publications on employee benefit, human resources and related workforce, insurance and financial services, and health care matters.

Other Resources

If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Posted by Cynthia Marcotte Stamer

Plans & Investment Advisors Get Flexibility To Give Investment Advice To 401(k) & Other Individual Account Plan Participants & Beneficiaries

October 30, 2011

The Internal Revenue Service (IRS) recently updated the applicable interest rates used for purposes of making calculations under Internal Revenue Code § 412(b)(5)(B)(ii)(II) and Code § 430(h)(2).

Notice 2011-84 provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

Notice 2011-84 was published in the IRB 2011-43, dated October 24, 2011.

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If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Posted by Cynthia Marcotte Stamer

IRS To Waive User Fee On Certain Plan Qualification Determination Applications

October 30, 2011

The Internal Revenue Service has announced plans to waive the user fee requirement that normally applies when plan sponsors seek determination letters on the qualified status for certain qualified employee benefit plans.

Notice 2011-86. The Code provides for exemption from the requirement to pay a user fee for certain applications to the Service for determination letters on the qualified status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership (ESOP) plans. This notice amplifies Notice 2002–1, 2002–1 C.B. 283, by explaining how to determine, for purposes of eligibility for exemption from the user fee requirement, if such an application has been filed within a remedial amendment period with respect to the plan beginning within the plan’s first five plan years. The guidance in this notice generally pertains to such applications that are filed with the Service after January 31, 2011.

Notice 2011-86 will appear in IRB 2011-45 dated Nov. 7, 2011.

For Help or More Information

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If you found this update of interest, you also may be interested in reviewing some of the other updates and publications authored by Ms. Stamer available including:

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Posted by Cynthia Marcotte Stamer

Borzi Tells House Committee Current Fiduciary Regs Flawed; Must Fix Loopholes In Investment Advisor Definition To Protect Plans

July 28, 2011

Assistant Secretary of Labor, Employee Benefits Security Administration (EBSA) Phyllis C. Borzi testified Tuesday, July 26, 2011 to the House Committee on Education and the Workforce Subcommitte on Health, Employment, Labor, and Pensions that EBSA a proposed fiduciary regulation that would update EBSA regulations defining when a person is considered a “fiduciary” by reason of giving investment advice for a fee with respect to assets of an employee benefit plan or IRA will help protect employee benefit plan participants by correcting “loopholes” in a “flawed 35-year-old rule” that allow many parties providing advice about the investment of retirement plan assets to escape coverage by ERISA’s fiduciary responsibility rules. The proposed regulations and other stepped up regulations and enforcement of ERISA’s fiduciary protections by the EBSA means that plan sponsors, fiduciaries, investment advisors and other plan service providers and others involved in the sponsorship, design, and administration of an employee benefit plan need to act to manage expanding fiduciary responsibilities and exposures.

Borzi Says Loopholes & Other Flaws In Existing Regulations Hurt Plans & Their Participants

Borzi told the Committee that EBSA believes its rules about the types of advisory relationships that give rise to fiduciary status under the ERISA on the part of those providing investment advice services need to change because “technicalities” and “loopholes” in the current EBSA fiduciary regulations definition of “investment advisor” in effect since 1975 harms participants and beneficiaries by allowing many advisers to easily dodge fiduciary status.

Borzi testified that the five-part regulatory test used under the current regulations to determine when ERISA’s fiduciary requirements apply to “investment advice” and when the advisor is a “fiduciary” significantly narrowed the plain language of the ERISA statute so that much of what plainly is advice about plan investments is not treated as investment advice as fiduciary conduct under ERISA and the person paid to render that advice is not treated as an ERISA fiduciary.

Under current fiduciary regulation, an investment adviser is not treated as a fiduciary accountable for complying with ERISA’s prudence, exclusive benefit, prohibited transaction and other fiduciary responsibility safeguards if and when providing advice that meets each element of a five part test.

Under the current regulation, a person is a fiduciary under ERISA and/or the tax code with respect to their advice only if and when he or she:

Make recommendations on investing in, purchasing or selling securities or other property, or give advice as to their value;
On a regular basis;
Pursuant to a mutual understanding that the advice;
Will serve as a primary basis for investment decisions; and
Will be individualized to the particular needs of the plan.

Borzi told members of Congress this narrow definition of investment advisor exempts a wide range of parties receiving compensation for providing advice about the investment of employee benefit funds from coverage by ERISA’s fiduciary responsibility requirements. Borzi testified that the narrowness of the existing regulation opened the door to serious problems, and changes in the market since the regulation was issued in 1975 have allowed these problems to proliferate and intensify. Borzi says the narrowness of the regulation has harmed some plans, participants, and IRA holders. Research has linked adviser conflicts with underperformance. SEC reviews of certain financial sales practices may also reflect these influences. Finally, EBSA’s own enforcement experience has demonstrated specific negative effects of conflicted investment advice.

Borzi Says Proposed Regulation Would Strengthen Protections For Plans & Their Participants

Borzi said the proposed regulation published in the Federal Register on October 22, 2010 would change the rules defining a person is considered to be a “fiduciary” by reason of giving investment advice for a fee with respect to assets of an employee benefit plan or IRA by modifying the current regulation in effect since 1975 would replace the five-part test of “investment advisor” with a broader definition more in keeping with the statutory language while providing clear exceptions for conduct that should not result in fiduciary status.

According to Borzi, types of advice and recommendations that generally would trigger fiduciary status under the proposed regulations include: (1) appraisals or fairness opinions concerning the value of securities or other property; (2) recommendations as to the advisability of investing in, purchasing, holding or selling securities or other property; or (3) recommendations as to the management of securities or other property.

To be a fiduciary for performing these or other activities treated as fiduciary investment advice, Borzi explained that a person engaging in one of these activities must receive a fee and also meet at least one of the following four conditions:

Represent to a plan, participant or beneficiary that the individual is acting as an ERISA fiduciary;
Already be an ERISA fiduciary to the plan by virtue of having any control over the management or disposition of plan assets, or by having discretionary authority over the administration of the plan;
Be an investment adviser under the Investment Advisers Act of 1940; or
Provide the advice pursuant to an agreement or understanding that the advice may be considered in connection with investment or management decisions with respect to plan assets and will be individualized to the needs of the plan.

At the same time, Borzi testified that the proposed regulation recognizes that activities by certain persons should not result in fiduciary status. Specifically, these are:

Persons who do not represent themselves to be ERISA fiduciaries, and who make it clear to the plan that they are acting for a purchaser/seller on the opposite side of the transaction from the plan rather than providing impartial advice;
Persons who provide general financial/investment information, such as recommendations on asset allocation to 401(k) participants under existing Departmental guidance on investment education;
Persons who market investment option platforms to 401(k) plan fiduciaries on a non-individualized basis and disclose in writing that they are not providing impartial advice; and
Appraisers who provide investment values to plans to use only for reporting their assets to the DOL and IRS.
EBSA Still Working To Address Expressed Concerns

The proposed regulation has prompted a large volume of comments and a vigorous debate. Borzi testified that the EBSA is working hard to hear and consider every stakeholder concern and shared some examples of how EBSA is considering addressing certain of these concerns. Borzi said EBSA is taking multiple steps in its effort to respond to these and other concerns in its efforts to finalize the regulation including:

Borzi told the Committee EBSA is working to better understand how specific compensation arrangements would be affected by the proposed rule and whether clarifications of existing prohibited transactions exemptions would be appropriate. Borzi said EBSA has already begun to issue subregulatory guidance describing some of these clarifications and will continue to do so as necessary as it completes its analysis.

Borzi also said that as EBSA further develops its thinking in this rulemaking, EBSA is paying special attention to the two primary exceptions to fiduciary status under the proposed rule: (1) clarifying the difference between investment education that does not give rise to fiduciary status and fiduciary investment advice; and (2) clarifying the scope of the so-called “sellers’ exception” under which sales activity is not fiduciary advice. In both cases, Borzi said EBSA intends to analyze and address the comments and concerns that were raised during our extensive public comment period.

Finally, Borzi said EBSA is exploring a range of appropriate regulatory options for moving forward, taking into consideration public comments submitted for the record, EBSA’s economic analysis, and relevant academic research. In so doing, Borzi told the Committee EBSA is aiming to address conflicted investment advice while not unnecessarily disrupting existing compensation practices or business models.

Plan Sponsors, Fiduciaries, Service Providers Should Prepare For Tighter Rules While Continuing To Provide Input To EBSA

The proposed changes to the definition of investment advisor is one of many steps that EBSA is taking to tighten the regulations implementing ERISA’s fiduciary requirements and to enforce the protections of ERISA. The proposal to expand the conditions that providing investment advice regarding retirement plan assets will trigger the fiduciary protections of ERISA is designed to expand the reach of those regulations. Service providers involved in providing these or other related services generally will want to review and update their processes, documentation and training to manage new exposures likely to arise from these proposed regulations, while continuing to share feedback to EBSA and other rulemakers.

Service providers are not the only parties that need to update practices and provide input about these rules. Plan sponsors, fiduciaries, service providers, participants and beneficiaries also are impacted. Employers and other plan sponsors, fiduciaries and others need to anticipate and respond effectively to the inevitable efforts by providers of investment advice and other services to avoid or shift liability. Parties securing or relying on advice or services about investments or other responsibilities should:

Carefully, prudently conduct a documented investigation and critical analysis of existing and proposed advisors and other service providers credentials, analysis, performance, contract, recommendations and other conduct;
Carefully review contracts and other materials and secure appropriate constractual and other safeguards;
Require indemnification, insurance and other protections;
Ensure that appropriate action is taken to appoint parties intended to perform fiduciary advisory or other services to manage risks
Secure and maintain appropriate fiduciary and other liability insurance coverage;
Carefully conduct an appropriate, well-documented prudent review of performance, credentials and other relevant factors on a regular basis to preserve ongoing evidence of prudence; and
Other appropriate safeguards to manage risks and liabilities.

To help guard and position themselves to defend against fiduciary exposures plan sponsors, fiduciaries, service providers and others involved in the administration of health or other employee benefit plans should seek the advice of legal counsel with appropriate experience with employee benefit and other related matters to develop an understanding of ERISA and other laws and the duties and liabilities that these rules may create for their organizations and themselves personally. For additional tips and information about managing these risks, see here.

For Help With These Or Other Risk Management Matters

If you need assistance in auditing or assessing, updating or defending your wage and hour or with other labor and employment, employee benefit, compensation or internal controls practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend wage and hour and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on wage and hour, worker classification and other human resources and workforce, employee benefits, compensation, internal controls and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

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Comments Off on Borzi Tells House Committee Current Fiduciary Regs Flawed; Must Fix Loopholes In Investment Advisor Definition To Protect Plans | Bankruptcy, Corporate Compliance, Defined Benefit Plans, Defined Contribution Plans, Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Human Resources, Insurance, Internal Controls, Internal Investigations, Professional Liability, Reporting & Disclosure, Restructuring, Retirement Plans, Risk Management, Union | Tagged: 404, Director Liability, embezzlement, ERISA, Fiduciary, Fiduciary Responsibility, Officer Liability, Officers & Directors Liability, Owner Liability, Plan Sponsor Liability, Service Provider Liability, tpa | Permalink
Posted by Cynthia Marcotte Stamer

Plan Sponsors. Their Owners & Management & Others Risk Personal Liability If Others Defraud Plans or Mismanage Employee Benefit Plan Responsibilities

April 4, 2011

Mitigate Risk With Appropriate Prevention, Monitoring & Response

Executives, board members, and other business leaders of companies providing health, 401(k) or other employee benefits under plans regulated by the Employee Retirement Income Security Act of 1974, as amended (ERISA) should heed a series of recent fiduciary liability settlement orders and lawsuits of the U.S. Department of Labor (Labor Department) as important reminders of the potential personal liability exposures executives can may face if their company’s benefit programs are not appropriately maintained and administered.

Recent Enforcement Actions, Changing Regulations Highlight Fiduciary Risks

On March 29, 2011, the Labor Department sued the owner of Eyeglass Factory, Inc. (EGF), Stephen Schaffer, for breach of fiduciary duties under ERISA by failing to ensure that EGF timely forwarded health plan contributions collected from employees to pay health plan contributions to the plan and failing to ensure that he and other plan fiduciaries and service providers were bonded in accordance with ERISA’s fidelity bond requirements.[i] The Labor Department suit charges that from July 1, 2000 to October 1, 2000, Schaffer and EGF withheld and failed to forward to the health plan contributions deducted from employee pay for health insurance coverage and contributions made to the flexible benefit plan sponsored by EGF from January 1, 2000 to December 4, 2000. The employees’ paycheck withholdings were commingled with the company’s general assets and used for its general operating expenses. The Labor Department is asking the court to order that Schaffer and other defendants make restitution to the plan for the misapplied contributions, including lost opportunity costs, to correct prohibited transactions and to appoint an independent fiduciary to oversee the plans once Schaffer is removed as the plan fiduciary.

The Schaffer suit follows the Labor Department’s successful prosecution of a breach of fiduciary duty action against Larry Lauterback, the president and former owner of a Minnesota Cement Company, for his role in allowing his construction company to commingle with company assets and divert to company use employee health and 401(k) contributions withheld from employee’s pay. In Solis v. Larry Lauterback, [ii] the District Court ordered Lauterback to restore $17,273.18 in unremitted employee contributions and lost opportunity costs to the company’s health and dental plan, and $747.20 in unremitted employee contributions to the company’s 401(k) plan and enjoins Lauterback from serving or acting as a fiduciary or service provider to any employee benefit plan for three years.. The order followed the entry of a consent judgment against Lauterback and the plan sponsor, Slate Cement, Inc., for failure to remit employee contributions, failure to forward employee contributions to medical and dental providers, co-mingling employee contributions of the general assets and using those assets for company operations.

The Schaffer and Lauterback actions taken in March, 2011 are only the most recent in a series of enforcement actions taken against business executives, board members, plan vendors and others for their role in committing or failing to take prudent steps to prevent or redress alleged misconduct relating to the maintenance, administration and funding of various employee benefit programs regulated by ERISA. In recent months and years, the Labor Department has filed several lawsuits against business executives and businesses for alleged breaches of fiduciary duties. While misuse of employee contributions by plan sponsors is a common focus of many of these actions, plan sponsors, plan service providers and members of their management with discretionary authority or responsibility over plan assets or administration or the election of those appointed to administer those responsibilities often arise out of the failure or these individuals to take prudent steps to prevent, monitor or address misconduct by other plan fiduciaries or service providers.[iii]

Plan sponsors, fiduciaries, service providers and their management should anticipate these risks and their attendant responsibilities will continue to rise as the Labor Department moves forward to adopt and implement revisions and enhancements to its fiduciary regulations such as those provided for in the new “Interim Final Regulation Relating to Improved Fee Disclosure for Pension Plans” scheduled to take effect in July, 2011 and the Proposed Regulation on the “Definition of the Term Fiduciary” published by the Labor Department in July and October, 2010 respectively.

Meanwhile, the Labor Department enforcement activities highlight the longstanding and ongoing policy of aggressive investigation and enforcement of alleged misconduct by companies, company officials, and service providers in connection with the maintenance, administration and funding of ERISA-regulated employee benefit plans. In its Fiscal Year 2010, the Labor Department closed 3,112 civil investigations, of which 2,301 (73.94%) resulted in monetary recoveries or other corrective action. The Labor Department referred 264 cases for civil litigation and filed 128 civil lawsuits. Meanwhile on the criminal side, the Labor Department closed 281 criminal investigations and obtained indictments against 96 people.

In addition to prosecutions brought by the Labor Department, companies and individuals that exercise discretion and control of the administration or funding of employee benefit plans regulated by ERISA also may be sued personally by participants and beneficiaries for breach of fiduciary under ERISA. A review of the Labor Department’s enforcement record and existing precedent makes clear that where the Labor Department perceives that a plan sponsor or its management fails to take appropriate steps to protect plan participants, the Labor Department will aggressively pursue enforcement regardless of the size of the plan sponsor or its plan, or the business hardships that the plan sponsor may be facing.

Plan Sponsors, Fiduciaries, Service Providers & Their Management Should Act To Manage Exposures

Given these exposures, businesses providing employee benefits to employees or dependents, as well as members of management participating in, or having responsibility to oversee or influence decisions concerning the establishment, maintenance, funding, and administration of their organization’s employee benefit programs need a clear understanding of their responsibilities with respect to such programs, the steps that they should take to demonstrate their fulfillment of these responsibilities, and their other options for preventing or mitigating their otherwise applicable fiduciary risks.

To help guard and position themselves to defend against these and other exposures, plan sponsors, fiduciaries, service providers and others involved in the administration of health or other employee benefit plans should seek the advice of legal counsel with appropriate experience with employee benefit and other related matters to develop an understanding of ERISA and other laws and the duties and liabilities that these rules may create for their organizations and themselves personally. For additional tips and information about managing these risks, see here.

For Help With These Or Other Risk Management Matters

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employers; employee benefit plans and their sponsors, administrators, fiduciaries; employee leasing, recruiting, staffing and other professional employment organizations; and others design, administer and defend innovative workforce, compensation, employee benefit and management policies and practices. Her experience includes extensive work helping employers implement, audit, manage and defend wage and hour and other workforce and internal controls policies, procedures and actions. The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, and past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer works, publishes and speaks extensively on wage and hour, worker classification and other human resources and workforce, employee benefits, compensation, internal controls and related matters. She also is recognized for her publications, industry leadership, workshops and presentations on these and other human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

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[i] Chao v. Stephen Schaffer, the Eyeglass Factory, Inc., No O2-CV-60197, as announced in EBSA Release No. 11-341-CHI (March 29, 2011).

[ii] Solis v. Larry Lauterback, as announced in EBSA Release No 11-322-CHI (March 14, 2011).

[iii] See, e.g. Chao v. Associated Plan Administrators, as announced in EBSA Release No. 07-1265-BOS/BOS 2007-298 (October 16, 2007); Chao v. Starkey, as announced in EBSA Release No. 05-747-ATL (May 2, 2005); Chao v. Perry., as announced in EBSA Release BOS 2002-054 (March 21, 2002); Chao v. Mabry, as announced in EBSA Release No. 160 (March 20, 2002). See also, e.g., Baker v. Kingsley, 2006 WL 2027606 (N.D.Ill.2007); In Re Enron Corp Securities Derivative & “ERISA” Litigation, 284 F.Supp. 511 (S.D.Tex. 2003); Varity Corp. v. Howe, 516 U.S. 489 (1996); Brink v. DeLesio, 496 F. Supp. 1350 (D.Md. 1980).

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Posted by Cynthia Marcotte Stamer

Health Plans, Insurers Get Limited & Imperfect Relief From Grace Period Extension For Some New Affordable Care Act Health Claims & Appeals Rules

March 24, 2011

The Departments of Labor, Health & Human Services and Internal Revenue Service are extending a previously announced enforcement grace period under which the agencies will not take enforcement against health plans or health insurers that attempt to operate in good faith compliance with, but fail to meet certain new requirements for handing medical claims and appeals enacted as part of the Patient Protection and Affordable Care Act (Affordable Care Act). While health plans and insurers working in good faith to comply with the new requirements may find the enforcement relief helpful for dealing with some areas of uncertainty about the interpretation of certain requirements, it is important to keep in mind that the enforcement grace period provides only limited and somewhat imperfect relief. As a result, health plans, health insurers and those responsible for their design and administration are encouraged to continue to move forward on efforts to comply with the new requirement in thoughtful and well-documented manners despite the announced grace period extension.

New Claims & Appeals Requirements & Enforcement Grace Period

As signed into law on March 23, 2010, the Affordable Care Act generally requires that health plans and health insurance policies that are not “grandfathered” to begin complying with a series of new requirements by the first day of the first plan year that begins after September 22, 2010. These new requirements include a number of new requirements about the way that nongrandfathered health plans and health insurance policies handle medical claims and appeals. For instance, the Affordable Care Act as construed by the agencies in interim final regulations published by the agencies on July 23, 201 will require that non-grandfathered group health plans and insurers issuing non-grandfathered health insurance plans and policies:

Implement specified internal and external review procedures that among other things mandate independent external review of medical judgment based decisions in accordance with the regulations for reviews of appeals of medical judgment based denials;
Provide a broad range of new information in notices regarding claims and do so in a culturally and linguistically appropriate manner;
Provide continued coverage pending the outcome of an internal appeal; and
Comply with a laundry list of additional criteria for ensuring that a claimant receives a full and fair review in addition to complying with the requirements of existing Labor Department claims and appeals procedures.

After the agencies jointly published interim final regulations defining and implementing these requirements on July 23, 2010, last September the agencies announced that they would not enforce certain elements (but not all) of the new requirements set forth in the interim final regulations against covered health plans or health insurers seeking to comply in good faith with the new requirements through July 1, 2011. In the March 18, 2011 announcement, the Department of Labor said that the agencies now have agreed to extend this reprieve from agency enforcement of the requirements listed in the guidance against plans seeking to comply in good faith with the new requirements until plan years beginning on or after January 1, 2012.

While offering welcome relief, covered health plans and insurers, their sponsors and issuers should not over-estimate the reach and protection provided by this new guidance. For instance:

First, in order to qualify for the enforcement grace period, efforts must be made to administer the health plan or health insurance policy in good faith compliance with the new requirements during the enforcement grace period.
Second, the enforcement grace period provides only limited relief. The extension to 2012 only four of a series of new requirements set forth in the interim final regulations. Nongrandfathered plans and their administrators and insurers remain accountable for prudently administering claims and appeals in accordance with all other requirements of the Affordable Care Act as well as pre-existing claims and appeals regulations set forth in 2000 claims regulations issued by the Department of Labor pursuant to the Employee Retirement Income Security Act.

Third, the enforcement grace period guidance only means that the agencies will not exercise their power to take action against a non-compliant plan. It does not prevent plan members, health care providers with benefit assignments or other plan beneficiaries from bringing lawsuits against health plans, health insurers or their administrators for failing to comply with the new requirements during post- September 22, 2010 plan years even if the enforcement grace period otherwise protects the plan or insurer from agency enforcement action. This means that health insurers and health plans may still run the risk that plan members or beneficiaries will ask courts to reverse claims or appeals denials or impose other penalties and sanctions against plans or their fiduciaries for failing to meet the new requirements for post-September 22, 2010 plan years.

Finally, and perhaps most significantly, the grace period guidance requires nongrandfathered plans and insurers to make “good faith” efforts to comply with the requirements covered by the relief during the grace period in order to be eligible to claim the relief offered by the enforcement grace period guidance.

Consequently, despite the relief announced March 18, nongrandfathered health plans still have significant work to do to comply with the new Affordable Care Act claims and appeals requirements even during the announced enforcement grace period.

For Help With Affordable Care Act or Other Employee Benefits or HR Needs

If you have any questions or need help responding to the Affordable Care Act or other any other health plan or insurance employee benefit, compensation, workforce or internal control concerns, please contact the author of this update, Cynthia Marcotte Stamer here or at (469)767-8872.

About Solutions Law Press

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Posted by Cynthia Marcotte Stamer

Avoiding Liability For Another’s Health Plan Fraud

February 25, 2011

TPA’s Embezzlement Guilty Plea Reminds Plan Sponsors, Fiduciaries & Service Providers To Ensure Fiduciaries, Administrators & Staff Prudently Selected, Monitored & Bonded

The guilty plea of an Ohio-based third-party administrator to embezzlement of $1 million in plan assets reminds employers and other employee benefit plan sponsors and members of their management participating in plan related activities, plan administrators and other plan fiduciaries and plan service providers (“plan decision-makers”) of the importance of ensuring appropriate, well-documented credentialing and selection, oversight, auditing and bonding the individuals and companies acting as fiduciaries and others participating in administration of plans or their assets (“plan workforce members”) to minimize their potential exposure to potential personal liability as a result of the fraud under the Employee Retirement Income Security Act (ERISA).

Cox Prosecution Reflective DOL Readiness To Prosecute Parties For Misuse of Plan Monies & Other Plan Fraud

According to a February 23, 2011 U.S. Department of Labor (DOL) announcement, Rhonda Sue Irvin Cox, owner of Irvin Administrative Solutions LLC (IAS), pleaded guilty to the embezzlement of $1 million of retirement plan assets from client plans administered by IAS. The DOL reports that between January 2003 and April 2007, Cox plead guilty to using used her position with ISC to embezzle the funds from 12 of 59 plans for which IAS served as a third party administrator. Cox also pleaded guilty to one count of making false statements in documents required under ERISA to be kept and certified by the plans’ administrator. Scheduled to be sentenced on June 1, 2011, Cox faces a maximum of five years in prison on each criminal count, a $250,000 fine and a special assessment. Cox is scheduled to be sentenced on June 1, 2011.

The DOL and Justice Department have a long-standing record of aggressive investigation and prosecution of embezzlement or other fraud impacting health and other employee benefit plans. Their criminal and civil enforcement and prosecution record makes clear this commitment remains strong.

Plan Sponsors, Fiduciaries & Service Providers May Face Civil Liability From When Others Defraud Their Plans

While plan decision-makers generally are aware that individuals defrauding health or other employee benefit plans risk criminal and civil prosecution, many fail to recognize their own potential civil liability exposures that may arise out of the fraudulent acts or other misconduct of another plan workforce member.

Embezzlement of plan assets is one of many acts of misconduct that can create potential fiduciary liability exposure for plan decision-makers under ERISA. Until confronted with potential fraud, misconduct or other misfeasance by a plan fiduciary, service provider or other plan workforce member, many plan decision-makers lack an adequate appreciation of the personal liability they may incur if they cannot demonstrate appropriate steps were taken to protect their health plan from this misconduct.

Under ERISA’s fiduciary responsibility rules, embezzlement or other misuse of employee contributions or other plan assets as well as certain other misconduct or misfeasance by a plan fiduciary, service provider or other plan workforce member can create personal liability exposures for plan decision-makers with responsibility or discretionary authority over the selection, retention, or management of plan workforce members if the plan decision-maker cannot demonstrate appropriate steps were taken to select, monitor and bond the plan workforce and other prudent action was taken to prevent and redress the fraud. Accordingly, health plans, their sponsors, fiduciaries, service providers, their management, and others serving as, or selecting, managing or retaining companies or individuals that participate in the handling of health plan assets or administration should act to strengthen their health plans and themselves against these exposures.

Risk Management Strategies & Tips

When embezzlement or other concern affecting their health plan arises, plan decision-makers concerned about protecting their health plans and themselves must act promptly in a carefully documented, prudent manner to investigate and respond to the concern. They should be prepared to present well-documented evidence of the scope and limits of their responsibility, authority, awareness, and potential for the selection, monitoring and oversight of the plan workforce member or others responsible for the performance of those actions, the adequacy of the bonding arrangements for the plan, and other efforts to prudently protect the plan before, during and after the discovery of the concern. While these and other steps can help strengthen the ability of a plan decision-maker to liability exposures that can result from the other plan workforce member’s embezzlement of plan assets or other misconduct, plan sponsors and plan decision-makers also should acquire suitable fiduciary and other liability insurance coverage and make other arrangements to help provide for the potential financial costs and other demands that are likely to arise in the event that it becomes necessary to investigate or redress fraud or other misconduct. Learn more here.

For Help With Investigations, Policy Review & Updates Or Other Needs

If you need help investigating or responding to fraud or other misconduct affection a health or other employee benefit plan, dealing with an employee benefit plan investigation or enforcement action by the Labor Department, private plaintiffs or another public or private party, reviewing current or proposed health plan processes or procedures, or responding to other employee benefit, labor and employment or other related controls and practices, please contact the author of this update, attorney Cynthia Marcotte Stamer here or at (469)767-8872.

For more than 23 years, Ms. Stamer has counseled, represented and trained employers and other employee benefit plan sponsors, plan administrators and fiduciaries, insurers and financial services providers, third party administrators, human resources and employee benefit information technology vendors and others privacy and data security, fiduciary responsibility, plan design and administration and other compliance, risk management and operations matters. In connection with this work, Ms. Stamer regularly counsels and helps clients to defend a broad range of clients about employee benefit plan fraud and other fiduciary responsibility concerns. Throughout her career, she has represented and served as special counsel to health and other employee benefit plans, plan sponsors, plan service providers, officers, directors and other management officials, bankruptcy trustees, debtors and creditors, and others in connection with health and other employee benefit plan fraud and other fiduciary responsibility and related investigations, prosecutions and other actions involving the Labor Department, IRS, HHS, Justice Department, state insurance and attorneys general, bankruptcy actions, and participant, beneficiary and vendor disputes. She also is recognized for her publications, industry leadership, workshops and presentations on these and other employee benefits, insurance and human resources concerns and regularly speaks and conducts training on these matters. Her insights on these and other matters appear in the Bureau of National Affairs, Spencer Publications, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, and many other national and local publications. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on health care, human resources, employee benefits, data security and privacy, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources including:

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Posted by Cynthia Marcotte Stamer

ERISA Leader Nell Hennessy Dies From Cancer

February 4, 2011

Nell Hennessy died February 4, 2011 after a brave battle with cancer. Her passing was announced earlier today by Phyllis C. Borzi, Assistant Secretary of Labor Employee Benefits Security Administration.

Ms. Hennessy, Chief Executive Officer of Fiduciary Counselors Inc., was widely respected in the employee benefit community for both her professional leadership in the development of employee benefit law and her generous mentorship and friendship to employee benefits practitioners throughout her career.

Ms. Hennessy began her legal career as an attorney in two of the three federal agencies that regulate employee benefits, first in the Office of the Chief Counsel at the Internal Revenue Service (1978-80) and then at the PBGC (1980-81). She later served as Deputy Executive Director and Chief Negotiator of the Pension Benefit Guaranty Corporation (PBGC), the federal agency that guarantees private defined benefit pensions. She represented PBGC in negotiations with major corporate pension plan sponsors and unions in a wide range of industries, including auto, steel, chemical, textile and airlines. Working closely with the Department of Labor, she negotiated an agreement with General Motors that permitted GM to contribute employer stock to its hourly plan – the largest such transaction in U.S. history — forming the basis for a ground-breaking prohibited transaction exemption that allowed GM to subsequently spin off its EDS subsidiary. She negotiated the restructuring of TWA’s debt to PBGC and Carl Ichan, which allowed TWA to successfully reorganize. The Early Warning Program she headed at PBGC was awarded one of the first federal Innovations in American Government Awards by the Ford Foundation and the Kennedy School of Government at Harvard University.

In addition to her professional service, Ms. Hennessy also generously mentored others in the profession. Ms. Hennessy chaired the ABA Joint Committee on Employee Benefits and the Employee Benefits and Executive Compensation Committee in the ABA Section of Business Law. She was a member of the ABA Standing Committee on Technology and Information Systems and was a member of the ABA Presidential Task Force on Corporate Responsibility, which produced the “Cheek Report” cited favorably by the SEC in regulations regulating the conduct of lawyers under the Sarbanes-Oxley Act.

Since 1985 Ms. Hennessy has been an adjunct professor at Georgetown University Law Center, where she helped develop the graduate certificate program in employee benefits. She was a founding Board member of the American College of Employee Benefits Counsel and she a founding member and past President of the Worldwide Employee Benefits Network (WEB). Ms. Hennessy is also a member of the National Bankruptcy Conference, a non-partisan, organization of approximately 60 lawyers, law professors and bankruptcy judges who advise Congress on bankruptcy law.

Ms. Hennessy received her B.A. from James Madison College at Michigan State University in 1971, her J.D. from the Catholic University of America in 1978 and her L.L.M. in Taxation from Georgetown University Law Center in 1984. Her publications include ERISA—Fiduciary Responsibility and Prohibited Transactions (BNA Tax Management Portfolio No. 365) and the HR and Benefits Guide to Mergers and Acquisitions (Thompson Publishing 2001).

A memorial service for Ms. Hennessy is planned for Saturday, February 26th at 11 a,m.at St. Joseph’s Church on Capitol Hill, 313 2nd St NE, Washington DC 20002, followed by a reception at the Irish Channel at 500 H St. NW, Washington DC 20001.

According to Ms. Borzi, persons wishing to memorialize Ms. Hennessy are encouraged to contribute to the Nell Hennessy Employee Benefits Scholar Award at the Catholic University of America, Office of Development and Alumni Relations, 3600 John McCormack Rd., NE, suite 339, Washington, DC 20064.

If you or someone else you know would like to receive future updates about human resources or employee benefits developments, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here. For important information concerning this communication click here.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested in exploring other Solutions Law Press, Inc. ™ tools, products, training and other resources here and reading some of our other Solutions Law Press, Inc.™ human resources news here.

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Posted by Cynthia Marcotte Stamer

Proposed New Defined Benefit Plan Annual Funding Notice Rule Reminder of Need to Carefully Manage Pension Plan Responsibilities

November 18, 2010

Plan sponsors and administrators of defined benefit plans must carefully monitor and comply with the funding, notification, insurance and other associated requirements of the minimum funding rules imposed under the Employee Retirement Income Security Act and the Internal Revenue Code. The Department of Labor’s Employee Benefits Security Administration today (November 18, 2010) its Pension Protection Act web page with the Annual Funding Notice for Defined Benefit Plans Proposed Rule, available at here, a fact sheet, available here, a model notice for single employer plans, available here, and a model notice for multiemployer plans, available here.

Pension plan funding, reporting and disclosure and termination requirements are complicated in non-distress situations. This complexity and the potential legal exposures of non-compliance can grow exponentially when a pension plan or one or more of its contributing employers becomes distress. Furthermore, special controlled group, lien and successor liability rules incorporated into these funding requirements often create hidden risks for affiliated employers, lenders, potential purchasers and others dealing with these plans or the businesses that sponsor them. As a consequence, all parties dealing with these plans should exercise care to understand and properly manage these exposures to avoid unintentionally triggering liability under these rules.

For More Information Or Assistance

About Ms. Stamer

Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization, Chair of the American Bar Association (ABA) RPTE Employee Benefit & Other Compensation Group, a Council Member of the ABA Joint Committee on Employee Benefits, Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, management attorney and consultant Cynthia Marcotte Stamer has more than 23 years experience advising and representing employers, health and other employee benefit plans, their sponsors, fiduciaries and plan administrators, consultants, vendors, outsourcers, insurers, governments and others about employment, employee benefit, compensation, and a wide range of other performance, legal and operational risk management practices and concerns. As a part of this work, Ms. Stamer has worked extensively with clients to manage risks and defend practices under a wide range of laws and circumstances. Her experience includes extensive work advising and representing employers, plans, plan fiduciaries, trustees, investors, and others about managing and resolving risks relating to distressed pension and other employee benefit plans, downsizing and other workforce reengineering and other similar matters. A prolific author and popular speaker, Ms. Stamer also publishes, conducts client and other training, speaks and consults extensively on GINA and other employment and employee benefit risk management practices and concerns for the ABA, World At Work, SHRM, American Health Lawyers Association, Institute of Internal Auditors, Society for Professional Benefits Administrators, HCCA, Southwest Benefits Association and many other organizations. Her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications. To learn more about Ms. Stamer, her experience, involvements, programs and publications, see here or contact Ms. Stamer.

Other Resources & Developments

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Posted by Cynthia Marcotte Stamer

Affordable Care Act’s Health Plan External & Internal Review Safe Harbor & Other Regulations Require Health Plan Updates

August 26, 2010

The Patient Protection & Affordable Care Act (Affordable Care Act) generally mandates that all group and individual health plans and policies comply with these mandates no later than the first plan or policy year beginning after September 22, 2010 unless the plan or policy qualifies as a “grandfathered plan” under the Affordable Care Act. Employer and other health plan sponsors, insurers, fiduciaries and administrators of all federally-regulated employment-based health plans should move quickly to update plan documents, administrative procedures and agreements, decisional criteria, investigation and decision-making documentation, and claims and appeals-related notification and other communications to comply with a series of new Federal guidance governing health plan claims and appeals published in the Federal Register on July 23, 2010 as further supplemented by additional “safe harbor” external review procedures published in the Federal Register today (August 26, 2010) (collectively the ACA Appeals Rules”).

Although the ACA Appeals Rules technically apply only to non-grandfathered plans, Agency commentary about existing Labor Department health plan claims and appeals procedures published along with the ACA Appeals rules sends a strong signal that the adequacy of all health plan claims and appeals procedures is warranted. As many health plan sponsors and health insurers are deciding that compliance with Affordable Care Act mandates is more cost effective than meeting the conditions that federal regulations require for a health plan to maintain grandfathered plan status, most group health plans and policies will need to be updated to comply with these new rules quickly. Even if a plan qualifies as a grandfathered plan, however, comments contained included the preamble to the July 23, 2010 guidance and recent court decisions send a strong signal that a review and update of existing claims and appeals procedures and practices is warranted. Read more.

For assistance to review and update your health or other employee benefit claims and appeals or other terms, processes, notices and communication or other processes and procedures, please contact the author of this update, attorney Cynthia Marcotte Stamer at (469) 767-8872 or cstamer@solutionslawyer.net.

Learn More About Affordable Care Act Mandates: Order Recording of August 24 “2010 Health Plan Update”

Details of recently released guidance about federal health plan rules applicable to employment-based health plans under the Affordable Care Act and other federal health plan regulations were among the topics covered in a “2010 Health Plan Update” internet broadcast briefing on Tuesday, August 24 2010. For more information about this briefing, see here. If you are interested in purchasing a recording of this briefing, e-mail here.

For Assistance or More Information

If your organization needs assistance updating your heath care program documentation, policies or procedures in response to these or other requirements or with other employee benefit, insurance or human resources matters, please contact the author of this update, Board Certified Labor & Employment attorney Cynthia Marcotte Stamer at (469) 767-8872 or via e-mail here.

Current Chair of the American Bar Association (ABA) RPTE Employee Benefit & Other Compensation Group, a Council Member of the ABA Joint Committee on Employee Benefits and Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer continuously advises employers, health and other employee benefit plans, plan sponsors, fiduciaries, plan administrators, plan vendors, insurers and others about health program related legal, operational, documentation, public policy, enforcement, privacy, technology, litigation and risk management and other concerns. Ms. Stamer also publishes, conducts client and other training, speaks and consults extensively on these and other health and managed care program concerns and practices. She regularly speaks and conducts training for the ABA, American Health Lawyers Association, Institute of Internal Auditors, Society for Professional Benefits Administrators, Southwest Benefits Association and many other organizations. Her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications. To contact Ms. Stamer or for additional information about Ms. Stamer, her experience, involvements, programs or Publishers of her many highly regarded writings on health industry and human resources matters include the Bureau of National Affairs, Aspen Publishers, ABA, AHLA, Aspen Publishers, Schneider Publications, Spencer Publications, World At Work, SHRM, HCCA, State Bar of Texas, Business Insurance, James Publishing and many others. You can review other highlights of Ms. Stamer’s experience here.

Other Resources

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources available for review here. If you or someone else you know would like to receive future updates and notices about other upcoming Solutions Law Press events, please be sure that we have your current contact information – including your preferred e-mail- by creating or updating your profile at here. For important information concerning this communication click here.

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Posted by Cynthia Marcotte Stamer

Assess Your Health Plan Compliance 8/24: Register Now!

August 12, 2010

Get a Health Plan Compliance Checkup

Learn What You Must Do Now To Meet Key 2010/2011
Affordable Care Act & Other Health Plan Compliance Deadlines

2010 Health Plan Update

A Solutions Law Press Live Internet Broadcast Briefing

August 24, 2010

10:00 A.M.-12:30 P.M. Eastern | 11:00 A.M.-1:30 P.M. Central | 9:00 A.M-11:30 A.M. Pacific

Earn 2 Hours of Texas Insurance Continuing Education Credit, WorldAtWork or HRCI Credit!

Solutions Law Press invites you to catch up on the latest guidance on new group health plan mandates imposed under the Patient Protection and Affordable Care Act (Affordable Care Act) and other federal health plan regulations by participating in the “2010 Health Plan Update” briefing on Tuesday, August 24, 2010. The briefing will be held via a live internet broadcast from 11:00 to 1:30 P.M. Central Time. Registrants can elect to participate in person or watch via the Internet for a registration fee of $150.00. To register click here.

Affordable Care Act Requires Prompt Action By Group Health Plans, Employee Sponsors, Fiduciaries, Administrators, & Insurers

Health benefit costs and legal risks continue to grow for U.S. businesses. The Affordable Care Act and other impending federal health plan regulatory changes will require employment-based group health plans, their employer and other plan sponsors, insurers plan fiduciaries, plan administrators and other service providers and insurers to make quick decisions and to act quickly to meet impending federal compliance deadlines while preserving flexibility. All employer and other group health plan sponsors, fiduciaries, insurers and administrators must act quickly to update their health plan documents, communications, insurance and vendor agreements and practices to comply with new federal requirements that become effective under the Affordable Care Act on the first day of the next plan year beginning after September 22, 2010 and various other changes in federal health plan rules effective or scheduled to take effect during 2010 or 2011 plan years. Many plan sponsors also may need to act quickly to cancel or revise plan design or vendor changes planned or already implemented since March 23, 2010 to position their health plan to qualify for grandfather status. Quick action also may be needed to qualify for small employer tax credits, retiree medical subsidies or other benefits.

August 24 Briefing Provides Key Information

The August 24, 2010 “2010 Health Plan Update” briefing will cover the latest guidance on Affordable Care Act and other federal health plan regulatory changes impacting employment-based group health plans and their sponsors for plan years beginning between September 23, 2010 and September 22, 2011 and other key information to help employers, group health plans, insurers, plan administrators, fiduciaries, broker and others working with these plans to understand and respond to these new requirements including:

How to qualify your health plan as a grandfathered plan under the Affordable Care Act
How to decide if maintaining grandfathered plan status is worthwhile
Claims & appeals requirements for grandfathered & non-grandfathered plans
Preventive care coverage & wellness program rules under Affordable Care Act, GINA, ADA & other federal regulations
Updated dependent child eligibility, pre-existing condition & other dependent coverage rules for grandfathered & non-grandfathered plans
Special enrollment, preexisting condition & other eligibility mandates for grandfathered & non-grandfathered plans under new Affordable Care Act, FMLA, Michelle’s Law, HIPAA & other regulations
Mental health & substance abuse, provider choice & other benefit mandates under new Affordable Care Act, Mental Health Parity & other federal rules
New HIPAA Privacy Rules
Update on other recent & pending Affordable Care Act group health plan rule guidance
Cafeteria plan implications
Tips to review & update your plans, vendor agreements & processes to meet Affordable Care Act & other federal group health plan dictates
Expected future Affordable Care Act & other federal rule changes & tips for preparing
Practical strategies for responding to new requirements & changing rules
Participant questions

About The Presenter

The program will be conducted by attorney Cynthia Marcotte Stamer. Ms. Stamer is nationally known for her more than 23 years of work, publications and presentations on health plan and other employee benefit, health care and insurance matters. Current Chair of the American Bar Association (ABA) RPTE Employee Benefit & Other Compensation Group, a Council Member of the ABA Joint Committee on Employee Benefits and Past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer continuously advises group health plans, insurers, employer and other plan sponsors, plan fiduciaries, plan administrators and vendors, and others about health plan design, administration, defense, contracting and related legal compliance, operational, documentation, public policy, enforcement, privacy, technology, litigation and risk management and other concerns. Ms. Stamer also publishes and speaks extensively on these and other health and managed care program concerns and practices. Her insights on these and related topics have appeared in Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, Managed Healthcare, Health Leaders, various ABA publications and a many other national and local publications. To contact Ms. Stamer or for additional information about Ms. Stamer, her experience, involvements, programs or publications, contact Ms. Stamer at (469) 767-8872 or via e-mail here or see here. Texas Insurance Department Continuing Education Provider Number 3544.

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other updates, consultation, training and education, tools, and other resources for businesses on human resources, employee benefits, compensation, data security and privacy, health care, insurance, and other key compliance, risk management, internal controls and other key concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press™ resources available for review here. If you or someone else you know would like to receive future updates and notices about other upcoming Solutions Law Press™ events, please be sure that we have your current contact information – including your preferred e-mail- by creating or updating your profile at here. For important information concerning this communication click here.

Solutions Law Press ™ Thanks Our Sponsors

Benefit HR Productions is a producer of enrollment and employee benefit and human resources orientation and on boarding enrollment and other human resources video communications for employers and their service providers. For more information, contact Bill at (972) 267-8410.

NFC offers supplemental insurance benefits to individuals and families that pay benefits directly to the insured and offers cafeteria plan administration services at no cost to employers including a Debit Card feature. To learn more about NFC cafeteria plan services or its supplemental insurance products contact Art Mueller at National Family Care Life Insurance Company, 13530 Inwood Rd, Dallas, Tx 75244. 800-527-0996. acmnfc@flash.net

A limited number of participants on a space available basis will have the opportunity to participate in the briefing as a member of the live studio audio audience in Plano, Texas. Interested persons should e-mail support@solutionslawyer.net.
Discounts available for groups registering three or more participants. E-mail support@solutionslawyer.net.

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Posted by Cynthia Marcotte Stamer

New Regulations & Court Decisions Require Health Plan Claims & Appeal Updates & Strengthening

August 8, 2010

Register Now For 8/24 Health Plan Update Briefing

Employer and other health plan sponsors, insurers, fiduciaries and administrators should move quickly to review, update and tighten their plan documents, administrative procedures and agreements, decisional criteria, investigation and decision-making documentation, and claims and appeals-related notification and other communications in response to new requirements and guidance in recently proposed Labor Department Regulations and the increased willingness of Federal courts to scrutinize and overturn benefit denials.

New regulations (ACA Appeals Rules) implementing tighter health plan claims and appeals rules enacted under the Patient Protection & Affordable Care Act (Affordable Care Act) are the latest in a wave of new Affordable Care Act and other federal regulations that require quick updates to employment-based health plans.

The new ACA Appeals rules published July 23, 2010 primarily focus on additional claims and appeals standards that group health plans not “grandfathered” under the Affordable Care Act must meet by the first plan year beginning after September 22, 2010. However, clarifications of the Labor Department’s interpretation of existing claims and appeals rules for employment-based group health plans shared with the ACA Appeals Rules make clear grandfathered plans also have work to do. Therefore, group health plan sponsors, insurers, fiduciaries and administrators of all group health plans should review and tighten their claims and appeals procedures in response to the guidance recently published in connection with the ACA Appeals Rules.

Beyond responding to the Labor Department’s ACA Appeals Rules, employer and other health and employee benefit plan sponsors, insurers, fiduciaries and administrators also should consider tightening and strengthening their claims and appeals decision-making, documentation and notice processes and procedures to reduce the risk that the courts will overturn benefit denials to guard against the growing willingness of federal courts to overturn benefit denials based upon their findings of process, documentation, notification, conflict of interest or other deficiencies that make the decision “arbitrary or capricious” or otherwise unsustainable under ERISA. Read more.

Many Other Changing Federal Rules Require Other Plan Updates

Changing claims and appeals standards are only a small part of the sweeping range of developments that employer and other plan sponsors, administrators, and fiduciaries of group health plans must deal with as the struggle to design and administer legally defensible plans this year.

The new ACA Appeals Rules are the latest in a wave of new Affordable Care Act and other federal regulations that require quick action by employment based health plans, their employer and other sponsors, fiduciaries, administrators and insurers. Regulations issued in previous weeks define when health plans and health insurance policies qualify as “grandfathered” under the Affordable Care Act and interpret and implement many other federal health plan rule changes enacted by the Affordable Care Act.

All employer and other group health plan sponsors, fiduciaries, insurers and administrators should be prepared to act quickly to update their health plan documents, communications, insurance and vendor agreements and other practices to comply with new federal requirements that become effective under the Affordable Care Act on the first day of the plan year beginning after September 22, 2010 and various other changes in federal health plan rules effective or scheduled to take effect during 2010 or 2011 plan years. Many plan sponsors also may need to act quickly to cancel or revise certain design or vendor changes planned or already implemented since March 23, 2010 to position their health plan to qualify for grandfather status. Quick action also may be needed to preserve options to claim small employer tax credits, retiree medical subsidies or other opportunities.

In addition to responding to these Affordable Care Act changes, most group health plans also will require updates in response to other federal health plan rule changes beyond those enacted under the Affordable Care Act. These Affordable Care Act and other impending federal health plan changes will require employment-based group health plans, their employer and other plan sponsors, plan fiduciaries, plan administrators and other service providers and insurers to make quick decisions and to act quickly to meet impending federal compliance deadlines while preserving flexibility and managing costs.

August 24 “2010 Health Plan Update” Internet Workshop Provides Key Information

Solutions Law Press invites you to catch up on the latest guidance about the new group health plan Affordable Care Act and other federal health plan regulations by participating in a live “2010 Health Plan Update” internet broadcast briefing on Tuesday, August 24 2010. The briefing will be conducted via live video broadcast from 11:00 A.M.-1:30 P.M. Central Time. Register & Get More Details.

Learn the tests that will decide if your group health plan will qualify as “grandfathered” from key Affordable Care Act requirements and assess what updates you should consider making to meet critical 2010/2011 Affordable Care Act & other federal health plan compliance deadlines.

How to qualify your health plan as a grandfathered plan under Affordable Care act
How to decide if maintaining grandfathered plan status is worthwhile
Claims & appeals requirements for grandfathered & non-grandfathered plans
Preventive care coverage mandates & wellness program requirements & rules under Affordable Care Act & other federal regulations
Updated dependent child eligibility, pre-existing condition & other requirements for grandfathered & non-grandfathered plans
Special enrollment, preexisting condition & other eligibility mandates for grandfathered & non-grandfathered plans under new Affordable Care Act, new FMLA, COBRA, Michelle’s Law, HIPAA & other federal regulations
Mental health & substance abuse, provider choice & other benefit mandates under Affordable Care Act, Mental Health Parity & other federal rules
Update on other recent & pending Affordable Care Act group health plan rule guidance
Tips to review & update your plans, vendor agreements & processes to meet Affordable Care Act & other federal group health plan dictates
Expected future Affordable Care Act & other federal rule changes & tips for preparing
Practical strategies for responding to new requirements & changing rules
Participant questions

To register or get additional information, see here.

For Assistance or More Information

Other Resources

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

About Solutions Law Press

Comments Off on New Regulations & Court Decisions Require Health Plan Claims & Appeal Updates & Strengthening | Affordable Care Act, Claims Administration, Disability Plans, Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Human Resources, Insurance, Preemption, Reporting & Disclosure | Tagged: Affordable Care Act, Appeals, Claims, ERISA, Health Plans | Permalink
Posted by Cynthia Marcotte Stamer

New Affordable Care Act Health Plan Appeals Regulations Require Health Plan Updates

July 23, 2010

Register For August 24^th 2010 Health Plan Update To Catch Up On Latest Federal Health Plan Regulations

Employer and other plan sponsors, administrators, and fiduciaries of non-grandfathered group health plans must move quickly to update their plan documents, administrative procedures and agreements, claims and other communications and other processes and procedures to comply with new regulations (Appeals Rules) implementing tightened health plan claims and appeals rules enacted under the Patient Protection & Affordable Care Act (Affordable Care Act) jointly published by the U.S. Departments of Health & Human Services (HHS), Labor (DOL) and Treasury yesterday (July 23, 2010). The new Appeals Rules are the latest in a wave of new Affordable Care Act and other federal regulations that require quick action by employment based health plans, their employer and other sponsors, fiduciaries, administrators and insurers. Regulations issued in previous weeks by the Departments define when health plans and health insurance policies qualify as “grandfathered” under the Affordable Care Act and interpret and implement many other federal health plan rule changes enacted by the Affordable Care Act. In addition to responding to these Affordable Care Act changes, most group health plans also will require updates in response to other federal health plan rule changes beyond those enacted under the Affordable Care Act. To assist concerned business leaders, plan fiduciaries and plan administrators to understand and cope with these new rules, Solutions Law Press invites you to participate in the live “2010 Health Plan Update,” internet workshop on August 24, 2010 from 11:00 a.m.-1:30 p.m. Central Time. To register or for other details, see here.

Affordable Care Act Appeals Rules & Other Federal Claims & Appeals Regulations Make Prompt Plan Review & Update Advisable

Currently, all group health plans covered by the Employee Retirement Income Security Act (ERISA) must prudently process and administer claims and appeals using reasonable claims and appeals procedures that comply with detailed Labor Department regulations. Recent Supreme Court and other decisions send a strong signal that many group health plans, their insurers, and administrators need to tighten their existing documentation and practices to promote the defensibility of claims and appeal decision making under the existing requirements of ERISA and the existing Labor Department regulations implementing these requirements. These existing claims and appeals requirements generally will continue to apply to all ERISA-covered group health plans without regard to whether the group health plan qualifies as grandfathered or non-grandfathered for purposes of the affordable care act.

The new requirements generally will apply to claims denials and coverage rescissions made by non-grandfathered health plans beginning with the first plan year beginning after September 22, 2010. Furthermore, non-grandfathered group and individual health policies subject to the Appeals Rules also may continue to be required to comply with state-mandated external and/or independent review and other state-imposed claims and appeals procedures.

In addition to complying with existing claims and appeals requirements, the new Appeals Rules also will require that non-grandfathered health plans modify existing claims and appeals procedures to comply with new federal appeals protections mandated under the Affordable Care Act. The Appeals Rules requirements for internal claims and appeals processes generally will apply to any denial, reduction, or termination of, or failure to provide or make a payment (in whole or in part) for a benefit, including any:

Rescission of coverage as defined in the regulations restricting rescissions
Determination of an individual’s eligibility to participate in a plan or health insurance coverage
Determination that a benefit is not a covered benefit
Imposition of a preexisting condition exclusion, source-of-injury exclusion, network exclusion, or other limitation on otherwise covered benefits
Determination that a benefit is experimental, investigational, or not medically necessary or appropriate
Other denial, reduction, or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit can include both pre-service claims (for example, a claim resulting from the application of any utilization review), as well as post-service claims and
Any other instance where a plan pays less than the total amount of expenses submitted with regard to a claim, including a denial of part of the claim due to the terms of a plan or health insurance coverage regarding co-payments, deductibles, or other cost-sharing requirements.

When applicable, the new Appeals Rules among other things will require that non-grandfathered group health plans and insurers issuing non-grandfathered health insurance plans and policies:

Implement specified internal and external review procedures
Must continue to provide continued coverage pending the outcome of an internal appeal
Comply with the Appeals Rules’ additional criteria for ensuring that a claimant receives a full and fair review in addition to complying with the requirements of existing Labor Department claims and appeals procedures.

Highlights of some of these fair review requirements include:

Timely allowing a claimant to review the claim file and to present evidence and testimony as part of the internal claims and appeals process
Before issuing a final internal adverse benefit determination based on a new or additional rationale, timely proving the claimant free of charge, with the rationale
Complying with the Appeals Rules’ requirements for ensuring that all claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision
Providing certain notifications regarding appeals and other rights as required by the Appeals Rules

The Appeals Rules also state that if a plan or issuer that fails to strictly adhere to all of its requirements with respect to a claim, the claimant may initiate an external review and pursue any available remedies under applicable law, such as judicial review regardless of whether the plan or issuer asserts that it substantially complied with these requirements or that any error it committed was de minimis.

Both Grandfathered & Non-Grandfathered Plans Should Review Existing Claims & Appeals Procedures For Compliance With Existing Labor Department Regulations

Grandfathered health plans will not be required to comply with the new Appeals Rules. Like non-grandfathered plans, however, grandfathered plans will remain covered by the current claims and appeals requirements of ERISA and the existing Labor Department regulations. Along the Labor Department updated its existing claims and appeals regulations a decade ago, many plan fiduciaries, administrators and insurers have failed to fully update their plan documentation, processes and notifications to comply with these highly specific and detailed requirements. Furthermore, most grandfathered health plan sponsors and administrators also will want to consider whether any tightening of their health plan’s claims and appeals processes is warranted by language contained in the preamble to the Appeals Rules that that clarifies the Labor Department’s interpretation of existing claims and appeals procedures.

Other Affordable Care Act & Other Health Plan Rule Changes Require Prompt Action By Group Health Plans, Sponsors, Fiduciaries & Administrators

The Appeals Rules are the latest in a series of recently-issued guidance implementing various health coverage requirements of the Affordable Care Act. It follows closely the publication by the Agencies of regulations about when group health plans and insurance qualify as “grandfathered plans” for purposes of determining deadlines for complying with certain health care reform requirements imposed under the Affordable Care Act and a series of other regulations construing and implementing various other Affordable Care Act requirements. For additional information about these other Affordable Care Act requirements, see here.

These Affordable Care Act and other impending federal health plan changes will require employment-based group health plans, their employer and other plan sponsors, plan fiduciaries, plan administrators and other service providers and insurers to make quick decisions and to act quickly to meet impending federal compliance deadlines while preserving flexibility.

August 24 “2010 Health Plan Update” Internet Workshop Provides Key Information

How to qualify your health plan as a grandfathered plan under Affordable Care act
How to decide if maintaining grandfathered plan status is worthwhile
Claims & appeals requirements for grandfathered & non-grandfathered plans
Preventive care coverage mandates & wellness program requirements & rules under Affordable Care Act & other federal regulations
Updated dependent child eligibility, pre-existing condition & other requirements for grandfathered & non-grandfathered plans
Special enrollment, preexisting condition & other eligibility mandates for grandfathered & non-grandfathered plans under new Affordable Care Act, new FMLA, COBRA, Michelle’s Law, HIPAA & other federal regulations
Mental health & substance abuse, provider choice & other benefit mandates under Affordable Care Act, Mental Health Parity & other federal rules
Update on other recent & pending Affordable Care Act group health plan rule guidance
Tips to review & update your plans, vendor agreements & processes to meet Affordable Care Act & other federal group health plan dictates
Expected future Affordable Care Act & other federal rule changes & tips for preparing
Practical strategies for responding to new requirements & changing rules
Participant questions

To register or get additional information, see here.

About The Author

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employer and other plan sponsors, insurers, administrators, fiduciaries, governments and others design, administer and defend innovative health and other employee benefit programs and other human resources, compensation and management policies and practices. Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer also is recognized for her publications, industry leadership, workshops and presentations on these and other health industry and human resources concerns. You can review other highlights of Ms. Stamer’s experience here. If you need help with human resources or other management, concerns, wish to ask about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

Solutions Law Press & Other Solutions Law Press Resources

If you found this information of interest, you also may be interested in reviewing other recent Solutions Law Press updates including:

Comments Off on New Affordable Care Act Health Plan Appeals Regulations Require Health Plan Updates | Affordable Care Act, COBRA, COBRA Subsidy, Employee Benefits, Employers, ERISA, family leave, Fiduciary Responsibility, FMLA, H.R. 4872, Health Care Reform, Health Plans, Human Resources, Insurance, Leave, medical leave, Mental Health, Mental Health Parity, Patient Protection and Affordable Care Act, Protected Health Information, Tax, Wellness, Wellness Programs | Tagged: Affordable Care Act, Appeals, Claims, Claims Procedures, ERISA, Health Care Reform. Health Plans, Health Insurance, Health Plans | Permalink
Posted by Cynthia Marcotte Stamer

HHS, DOL & IRS Rules Define “Grandfathered” Group Health Plans & Health Insurance Coverage under Affordable Care Act

June 15, 2010

Affordable Care Act Health Plan Guidance Update Teleconference Briefing Planned July 9

The U.S. Departments of Health and Human Services, Labor and Treasury on Monday (June 14, 2001) published regulations on when group health plans and insurance qualify as “grandfathered plans” for purposes of determining certain deadlines for complying with certain health care reform requirements imposed under the Patient Protection & Affordable Care Act (Affordable Care Act).

The regulations are the latest in a series of emerging guidance that federal agencies have issued regarding the Affordable Care Act since its enactment in March, 2010. Solutions Law Press author Cynthia Marcotte Stamer will host a teleconference briefing on these new regulations and other Affordable Care Act health plan guidance on July 9, 2010 from 11:30 a.m. to 1:30 p.m. Central Time. E-mail here to request an invitation and registration information.

While the Affordable Care Act generally will require that all health plans provide new mandated benefits and other rights to covered persons beginning with plan years starting after September 22, 2010, health plans that existed on March 23, 2010 that qualify as “grandfathered” are exempt from some new requirements. The regulation published yesterday specifies what health plans must do to qualify for grandfathered status for purposes of these requirements.

As part of its first wave of health insurance reforms, the Affordable Care Act dictates that all health plans – whether or not they are grandfathered plans – provide certain benefits to their covered persons for plan years starting on or after September 23, 2010 including:

New restrictions on lifetime limits on essential benefit coverage;
No rescissions of coverage when people get sick and have previously made an unintentional mistake on their application; and
Extension of parents’ coverage to young adult children under 26 years old.

For post September 22, 2010 plan years, non-grandfathered plans also generally must meet certain other conditions including:

No coverage exclusions for children with pre-existing conditions;
No “restricted” annual limits set by regulations to be issued in the future;
Coverage of recommended prevention services with no cost sharing;
Patient protections such as access to OB-GYNs and pediatricians without a referral by a separate primary care provider;
Greater freedom for patients to obtain certain emergency treatment without certain plan restrictions; and
Other requirements.

Under the Affordable Care Act, grandfathered plans are exempt from certain of these mandates and may enjoy delayed compliance deadlines for certain other requirements.

The grandfather rule published June 14 provides certain “routine changes” will not cause a health plan that existed on March 23, 2010 to give up grandfathered status. Allowable changes include cost adjustments to keep pace with medical inflation, adding new benefits, making modest adjustments to existing benefits, voluntarily adopting new consumer protections under the new law, or making changes to follow State or other Federal laws. For this purpose, the regulation states that premium changes are not taken into account when determining whether or not a plan is grandfathered.

On the other hand, the regulation provides that a health plan that existed on March 23, 2010 will lose its eligibility for grandfathered status if the plan is amended to make significant changes that cut benefits or increase costs to covered persons.

Furthermore the regulation also addresses the effect of mergers and acquisitions and various other events and amendments on the eligibility of health plans for grandfathered status.

You can view the regulation here. Details about what routine changes insurers and employers can make without losing their grandfathered status, and the projected impact on large and small employer plans and the individual plan market can be found here. A fact sheet about the regulation can be found here. You can read the Questions and Answers on the Regulation here.

If you need help reviewing or responding to this or other health benefit regulations or other related matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

About Ms. Stamer

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping employer and other plan sponsors, insurers, administrators, fiduciaries, governments and others design, administer and defend innovative health and other employee benefit programs and other human resources, compensation and management policies and practices.

As a core focus of her practice, Ms. Stamer works extensively with employer and other health plan sponsors, fiduciaries, administrative and other service providers, insurers, and other clients on health benefit program and product design, documentation, administration, compliance, risk management, and public policy matters. The publisher of Solutions Law Press, Ms. Stamer also publishes, conducts training and speaks extensively on these and related concerns for the ABA, the Bureau of National Affairs and many other organizations. Please join us for what promises to be a most interesting discussion.

The Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Committee, a Council Representative on the ABA Joint Committee on Employee Benefits, Government Affairs Committee Legislative Chair for the Dallas Human Resources Management Association, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, and the editor and publisher of Solutions Law Press HR & Benefits Update and other Solutions Law Press Publications, Ms. Stamer also is recognized for her publications, industry leadership, workshops and presentations on these and other health industry and human resources concerns. She regularly speaks and conducts training for the ABA, Institute of Internal Auditors, Society for Professional Benefits Administrators, Southwest Benefits Association and many other organizations. Publishers of her many highly regarded writings on health industry and human resources matters include the Bureau of National Affairs, Aspen Publishers, ABA, AHLA, Aspen Publishers, Schneider Publications, Spencer Publications, World At Work, SHRM, HCCA, State Bar of Texas, Business Insurance, James Publishing and many others. You can review other highlights of Ms. Stamer’s experience here. Her insights on these and other matters appear in Managed Care Executive, Modern Health Care, the Wall Street Journal, the Dallas Business Journal, the Houston Business Journal, MDNews, Kentucky Physician, and many other national and local publications.

If you need help with human resources or other management, concerns, wish to ask about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer here or (469)767-8872.

Other Resources

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

Comments Off on HHS, DOL & IRS Rules Define “Grandfathered” Group Health Plans & Health Insurance Coverage under Affordable Care Act | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Human Resources, Insurance, Internal Controls, Patient Protection and Affordable Care Act, Wellness Programs | Tagged: Affordable Care Act, ERISA, Grandfathered Plans, Health Care Reform, Health Plans, Insurance | Permalink
Posted by Cynthia Marcotte Stamer

Stamer Speaks June 9 On “Health Care Reform’s Implications For Employers, Health Plans & Employee Benefits Practitioners” In Houston

May 19, 2010

Cynthia Marcotte Stamer will discuss “Health Care Reform’s Implications for Employers, Health Plans and Employee Benefits Practitioners” at the June 9, 2010 meeting of Houston WEB. The program is scheduled for Wednesday, June 9, 2010 at the DoubleTree Guest Suites, 5353 Westheimer, Houston, Texas from 11:30 a.m. to 1:30 pm.

Narrowly passed by Congress in March after a year of contentious debate, the comprehensive health care reform legislation imposes a complex array of reforms impacting employment based health plans, employers, and the insurers and other vendors and administrators of these programs. Ms. Stamer will explore key elements of these reforms impacting employers and employment based health coverage and their implications for employers, employment based health plans, and employee benefits and other attorneys providing advice about these arrangements.

To register or for more information about this event, see here. If you need assistance reviewing or responding to these or other employee benefit, compensation or labor and employment concerns, contact the author of this update, Cynthia Marcotte Stamer, for assistance at (469) 767-8872 or here.

About Ms. Stamer

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping businesses manage labor and employment, employee benefits, performance management and discipline, compliance and internal controls, risk management, and public policy matters including significant, cutting edge experience advising employer and other health plan sponsors, fiduciaries, insurers, administrators and others design, administer, and defend defensible, cost-effective health and other employee benefit programs.

Other Resources

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

Comments Off on Stamer Speaks June 9 On “Health Care Reform’s Implications For Employers, Health Plans & Employee Benefits Practitioners” In Houston | Affordable Care Act, CHIP, COBRA, COBRA Subsidy, Corporate Compliance, Employee Benefits, Employers, Employment Tax, ERISA, Fiduciary Responsibility, FMLA, HIPAA, Human Resources, Insurance, Internal Controls, Medicare Part D, Mental Health, Mental Health Parity, Payroll Tax, Prescription Drugs, Privacy, Protected Health Information, Public Policy, Risk Management, Tax, Uncategorized, Wellness, Wellness Programs | Tagged: Affordable Care Act, Employee Benefits, Employers, ERISA, Fiduciary, Health Care Reform, Health Insurance, Health Plan, Health Plans, Insurer | Permalink
Posted by Cynthia Marcotte Stamer

Defined Contribution Plans Investing In Publically Traded Employer Securities Face New Requirements

May 19, 2010

Employer and other sponsors, fiduciaries and administrators of 401(k) and other defined contribution pension plans that hold publically traded employer securities should review and update their plan documentation, communications and practices in response to new Internal Revenue Service (IRS) final regulations implementing new investment diversification requirements for these programs under Internal Revenue Code (Code) § 401(a)(35) and Employee Retirement Income Security Act (ERISA) § 204(j), as amended by the Pension Protection Act of 2006.

The new regulations for defined contribution plans investing in publically traded employer securities took effect immediately today (May 19, 2010) upon their publication here in the Federal Register.

Covered defined contribution plans generally will be required to comply with these new regulations beginning by the first plan year beginning after December 31, 2010 to maintain qualified status under Code § 401(a) and to comply with ERISA.

If you need help reviewing or responding to these new regulations or addressing other employee benefit, compensation or labor and employment concerns, contact the author of this update, Cynthia Marcotte Stamer at (469) 767-8872 or here

About Ms. Stamer

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, management attorney and consultant Ms. Stamer is nationally and internationally recognized for more than 23 years of work helping businesses manage labor and employment, employee benefits, performance management and discipline, compliance and internal controls, risk management, and public policy matters including significant, cutting edge experience advising employer and other health plan sponsors, fiduciaries, insurers, administrators and others design, administer, and defend defensible, cost-effective health and other employee benefit programs.

Other Recent Updates and Resources

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

Comments Off on Defined Contribution Plans Investing In Publically Traded Employer Securities Face New Requirements | Corporate Compliance, Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Retirement Plans, Uncategorized | Tagged: 401(k) Plan, defined contribution plan, employer securities, ERISA, Fiduciary Responsibility, Retirement Plans | Permalink
Posted by Cynthia Marcotte Stamer

Stamer To Discuss “Health Care Reform’s Implications For Employers, Health Plans & Employee Benefits Practitioners” At May 5 Dallas Bar Association Meeting

March 22, 2010

Cynthia Marcotte Stamer will discuss “Health Care Reform: Implications for Employers, Health Plans and Employee Benefits Practitioners” at the May 5, 2010 meeting of Dallas Bar Association Employee Benefits/Executive Compensation Section to be held from 12:00 noon – 1:00 p.m. in the Haynes & Boone Ballroom of Dallas Bar Association Belo Mansion located at 2101 Ross Avenue in Dallas, Texas.

Chair of the American Bar Association RPTE Employee Benefits & Compensation Committee, an ABA Joint Committee on Employee Benefits Council member, Chair of the Curran Tomko Tarski Labor, Employment & Employee Benefits Practice and former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and the Dallas Bar Association Employee Benefits & Executive Compensation Section, Ms. Stamer is nationally recognized for more than 22 years of work with employer and other health plan sponsors, fiduciaries, administrative and other service providers, insurers, and other clients on health benefit program and product design, documentation, administration, compliance, risk management, and public policy matters. The publisher of Solutions Law Press, Ms. Stamer also publishes, conducts training and speaks extensively on these and related concerns for the ABA, the Bureau of National Affairs and many other organizations. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

If you need assistance with evaluating or responding to this new legislation or other employee benefits, employment, compensation or other management concerns, wish to inquire about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer at cstamer@cttlegal.com, 214.270.2402; or your other preferred Curran Tomko Tarski LLP attorney.

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of Ms. Stamer here and learn more about other Curran Tomko Tarski LLP attorneys here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information to Cstamer@CTTLegal.com or registering to participate in the distribution of these and other updates on our Solutions Law Press distributions here. For important information concerning this communication click here.

Comments Off on Stamer To Discuss “Health Care Reform’s Implications For Employers, Health Plans & Employee Benefits Practitioners” At May 5 Dallas Bar Association Meeting | Corporate Compliance, Disease Management, Employers, Employment Tax, ERISA, Excise Tax, GINA, Health Plans, Human Resources, Income Tax, Insurance, Internal Controls, Payroll Tax, Risk Management, Tax | Tagged: COBRA, Corporate Compliance, Disability Discrimination, Disease Management, Employee Benefits, Employer, Employment, ERISA, GINA, Health Care Reform, Health Insurance, Health Plans, HIPAA, Human Resources, Insurance, Insurer, Managed Care, Medical Coverage, Risk Management, Wellness | Permalink
Posted by Cynthia Marcotte Stamer

House Could Vote On Obama Health Care Reform Sunday

March 18, 2010

By Cynthia Marcotte Stamer

Time is running out for Americans to make their health care reform views known to key Congressional decision-makers. The stage now appears to be set for the House of Representatives to vote as early as Sunday on the Reconciliation Act of 2010 (H.R. 4872), the latest version of health care reform backed by President Obama, Speaker Nancy Pelosi and other key Congressional Democrats. The impending deadline means that Americans concerned about the potential outcome of the impending vote need to act quickly if they wish to attempt to influence the decision. For tips about sharing your input with Congress effectively, see Getting Your Health Care Reform Message Heard By Key Congressional Leaders.

Developments Today Start Clock Running For Vote

On Thursday, March 18, 2010, two key developments set the stage for a vote on H.R. 4871 as early as Sunday:

The House Rules Committee posted the text of H.R. 4872 on its website; and
The Congressional Budget Office (CBO) delivered its scoring of H.R 4872 to House Speaker Nancy Pelosi.

The delivery of CBO scoring started the clock running on the 72 hour mandatory period between the release of the CBO scoring and any final vote on the bill. This means the House could vote on H.R. 4872 as early as Sunday, March 21.

If passed by the House, H.R. 4872 would make sweeping changes to the U.S. health care system impacting virtually every American patient, health care provider, employer and taxpayer. To learn the facts about these proposed changes, read the full text of H.R. 4872 here.

According to the CBO, H.R. 4872 will cost $940 billion over 10 years to extend coverage to 32 million uninsured people. To learn more specifics about these CBO cost and other determinations, review the CBO scoring here.

This Is Only The Beginning: Stay Involved

The outcome of this latest health care reform push is only a small part of a continuing process. Whether or not the President’s proposal or some other version of health care reform passes this week, Congress already has and will continue to consider other legislation impacting health care reform. This reality is demonstrated by Congressional actions recently taken on the COBRA premium subsidy extension, Medical reimbursement for physicians, continuing federal efforts to develop and implement federal health care quality and technology standards, and other legislative, regulatory and enforcement actions taken while public attention has been focused largely only on the broader health care reform debate.

Upcoming mid-term elections will significantly impact the nature and scope of these upcoming efforts. Perhaps even more significantly, the enactment of legislation is only a beginning point. The real meaning of these or other health care reforms will be determined largely by the shaping and implementation of regulations and enforcement actions which generally are conducted outside the public eye. Monitoring and staying active in these ongoing processes provides a critical opportunity to continue to monitor your issues and provide input to shape how they are addressed.

To help stay informed about health industry and other developments and join the discussion about these and other health care reform proposals, concerned Americans are invited to join the Coalition for Responsible Health Care Reform Group on Linkedin and registering to receive these updates here.

If you need assistance evaluating or formulating comments on the proposed reforms contained in the House Bill or on other health industry matters please contact Cynthia Marcotte Stamer at cstamer@cttlegal.com or 214.270.2402.

Ms. Stamer has extensive experience advising and assisting employers, health industry, and health insurance clients and others about a diverse range of health care, employee benefit, and employment policy, regulatory, compliance, risk management and operational concerns. You can get more information about her health industry experience here.

Former Chair of the American Bar Association Health Law Section Managed Care & Insurance Interest Group and currently Chair of the American Bar Association RPTE Employee Benefits & Compensation Committee, a Council Representative to the ABA Joint Committee on Employee Benefits and Vice President of the North Texas Health Care Compliance Association, Ms. Stamer is nationally recognized for more than 22 years work with health care providers, managed care and other payers, employers, governments and other clients on health care, employee benefit, and other concerns. From her extensive involvement with federal and state legislative and regulatory health, pension and other reforms in the U.S. to her involvement as a lead advisor to the Government of Bolivia on its pension privatization legislation, Ms. Stamer’s experience includes significant experience working with clients domestically on key health care and other public policy matters. The publisher of Solutions Law Press, Ms. Stamer also publishes, conducts training and speaks extensively on these and related concerns. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

You can review other publications and resources and additional information about the experience of Ms. Stamer here and learn more about other Curran Tomko Tarski LLP attorneys here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information to Cstamer@CTTLegal.com or registering to participate in the distribution of these and other updates on our Solutions Law Press distributions here. For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject to here.

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Posted by Cynthia Marcotte Stamer

Stamer To Speak About TPA & Other Plan Services Agreement Contracting Strategies For Managing Risks & Improving Effectiveness At 2010 Great Lakes Benefits Conference

March 13, 2010

Curran Tomko Tarski LLP Labor & Employment Practice Chair and Solutions Law Press Publisher Cynthia Marcotte Stamer will discuss “TPA & Other Plan Services Agreements- Managing Risks & Improving Effectiveness” At 2010 Great Lakes Benefits Conference to be held at the Wyndham Chicago Hotel on June 16-17, 2010.

Growing regulatory, fiduciary and other compliance risks magnify the importance of the careful negotiation and documentation of third party administration and other plan-related service agreements for plans, plan sponsors, plan fiduciaries and service providers. Careful credentialing, negotiation and documentation of administrative and other services relationships plays an increasingly key role in the ability of plan sponsors, plans, fiduciaries and service providers to allocate and efficiently manage plan operations, meet compliance obligations, and allocate and manage fiduciary and other legal risks.

Ms. Stamer’s workshop will examine key concerns like how administrative services contract terms, plan terms, the parties of actions and other factors help determine which parties are exposed to fiduciary and other liabilities; who is responsible for fiduciary, administrative, reporting and disclosure, bonding, indemnification and other responsibilities; and terms and processes that may help parties manage their relationships and legal risks by exploring some of the common issues and concerns that need to be considered when entering into these contractual arrangements.

Co-hosted by the Internal Revenue Service and ASPPA, this two day Conference features presentations on regulatory, legislative, administrative and actuarial and other employee benefit issues lead by local, regional and national government representatives from the Internal Revenue Service and the Department of Labor and nationally recognized employee benefit leaders from private industry. To register for the Conference or for additional information, see here.

Chair of the American Bar Association RPTE Employee Benefits & Compensation Committee, an ABA Joint Committee on Employee Benefits Council member, Chair of the Curran Tomko Tarski Labor, Employment & Employee Benefits Practice and former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer is nationally recognized for more than 22 years domestic work with employer and other plan sponsors, fiduciaries, administrative and other service providers, insurers, and other clients on employee benefit program and product design, documentation, administration, compliance, risk management, and public policy matters. The publisher of Solutions Law Press, Ms. Stamer also publishes, conducts training and speaks extensively on these and related concerns. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

If you need assistance with vendor or other outsourcing contracts, or other employee benefits, employment, compensation or other management concerns, wish to inquire about compliance, risk management or training, or need legal representation on other matters please contact Cynthia Marcotte Stamer, CTT Labor & Employment Practice Chair at cstamer@cttlegal.com, 214.270.2402; or your other preferred Curran Tomko Tarski LLP attorney.

If you found this information of interest, you also may be interested in reviewing other updates and publications by Ms. Stamer including:

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of Ms. Stamer here and learn more about other Curran Tomko Tarski LLP attorneys here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information to Cstamer@CTTLegal.com or registering to participate in the distribution of these and other updates on our Solutions Law Press distributions here. For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject to here.

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Posted by Cynthia Marcotte Stamer

Privacy Rule Changes & Posting of Breach Notices On OCR Website Signal New Enforcement Risks For Health Plans, Their Sponsors & Business Associates

February 23, 2010

By Cynthia Marcotte Stamer

The Department of Health and Human Services Office of Civil Rights (OCR) has begun disclosing on its website the employer and other health plans, health care providers, health care clearinghouses and their business associates (Covered Entities) that report breaches of unsecured protected health information (UPIC) affecting more than 500 individuals as required by new rules enacted as part of the Health Information Technology for Economic and Clinical Health Act (HITECH Act). This posting of Covered Entities reporting breaches comes just days after these and other Covered Entities became subject on February 17, 2010 to a host of other tighter federal requirements for the use, access, protection and disclosure of protected health information under Privacy & Security Standards of the Health Insurance Portability & Accountability Act (HIPAA) also enacted as part of the HITECH Act. As failing to comply with the amended rules effective February 17, 2010 can trigger obligations under the Breach Regulations and other exposures, prompt action to manage risk under both the Breach Regulations and the revised HIPAA rules is critical to minimize Covered Entity and business associate exposures under both these rules. With criminal, administrative and civil prosecutions of such violations increasing and likely to expand, timely action to manage compliance and other risks is warranted. Health plans and their business associates also should prepare for increased awareness and oversight of the adequacy of their medical information safeguards as these disclosures and other enforcement actions heighten interest and awareness of employees and others in these rules.

Covered Entity Breach Notification Requirements

OCR posted the initial list of Covered Entities disclosing these breaches on its website for the first time yesterday (February 22, 2010) to comply with breach notification requirements imposed by Section 164.408 of the interim “Breach Notification For Unsecured Protected Health Information” regulation (Breach Regulation) published here.

The Breach Regulation requires Covered Entities subject to the Health Insurance Portability & Accountability Act (HIPAA) to notify affected individuals, OCR and certain other parties following a “breach” of “unsecured” protected health information occurring on or after September 23, 2009. The Breach Regulation implements new breach notification requirements added to HIPAA by Section 13402(e)(3) of the Health Information Technology for Economic and Clinical Health Act (HITECH Act). It and the posting of Covered Entities reporting breaches of protected health information are part of the ongoing implementation and enforcement of new and stricter personal health information privacy and data security requirements for Covered Entities added to HIPAA under provisions of the HITECH Act and expanded remedies for violations signed into law on February 17, 2009 as part of American Recovery and Reinvestment Act of 2009 (ARRA).

You can review the list of Covered Entities that have reported breaches on the OCR website here. Learn more about the Breach Regulation requirements here.

Broader & Stricter Medical Privacy Mandates Effective 2/17/210

Just last Wednesday (February 17, 2010) Covered Entities and their business associates also became subject to tighter federal requirements for the use, access, protection and disclosure of protected health information under amendments to HIPAA’s Privacy & Security Standards enacted by the HITECH Act. The changes that became effective on February 17, 2010 generally require that Covered Entities and their business associates make specific changes to update their written policies, operational procedures, privacy notices, business associate agreements, training, and other management procedures in several respects. For more details, see here.

While the HITECH Act gave Covered Entities and business associates a year to complete the necessary arrangements to comply with these HITECH Act changes, many Covered Entities and business associates have remain unnecessarily exposed under these new requirements by not completing or otherwise failing to adequately implement the necessary arrangements despite expanding liability exposures that can result from noncompliance. To mitigate these exposures, Covered Entities and their business associates should act quickly to review and update their policies, procedures, training, business associate and other services agreements, and other practices and procedures, as well as to implement the training, oversight, and other management necessary to comply with the HITECH Act changes and to mitigate other HIPAA risks.

Exposures Significant & Growing

Covered Entities and business associates failing to devote adequate attention and resources to managing HIPAA compliance and associated risks risk increasing peril. Aside from the potential implications that disclosures of violations may have on patients and others impacting their business, the legal risks of noncompliance for Covered Entities, business associates and others mishandling protected health information are real and growing.

Timely action to comply with the amended HIPAA requirements and Breach Regulations is important both to preserve critical trust in the business, to avoid triggering breach notifications that can undermine this trust and fuel legal complaints, and to avoid exposure to an expanding range of sanctions that can result when a violation occurs.

Amendments made under the HITECH Act have expanded the size and availability of remedies that can be imposed for HIPAA violations as well as the parties empowered to pursue these remedies. Wrongful use, access or disclosure of protected health information in violation of HIPAA subjects participating health plans, health care providers, health care clearinghouses, their business associates and other workforce members and others to civil penalties, criminal prosecution and, since February 17, 2009, civil lawsuits brought by state attorneys general on behalf of citizens of their states whose HIPAA rights were violated. Since September 23, 2009, health plans and other HIPAA Covered Entities as well as their business associates also became obligated to provide breach notification under new mandates imposed by the HITECH Act. Coupled with increased enforcement emphasis by regulators, these expansions to HIPAA’s remedy provisions increase the risk that Covered Entities or business associates violating HIPAA face investigation and sanction. Furthermore, the wrongful use, access or disclosure of protected health information or other confidential information also increasingly is the basis of civil or criminal actions brought under a variety of other federal and state laws.

Expanded HIPAA & Other Federal Prosecutions & Remedies

The expanded requirements imposed under the Breach Regulation and the other HITECH Act changes that took effect on February 17, 2010 follow the implementation changes to HIPAA’s civil and criminal sanctions that took effect on February 17, 2009, when President Obama signed the HITECH Act into law. The HITECH Act amendments to HIPAA’s remedies significantly increase the risk that health plans and other Covered Entities and their business associates will face civil lawsuits, civil or criminal penalties or other consequences for violating HIPAA. Noncompliance with these and other HIPAA requirements subjects Covered Entities and business associates to civil penalties, criminal prosecution, civil damage awards under lawsuits brought by state attorneys general, and other legal remedies. In addition, timely update written policies, procedures, business associate agreements, training and documentation is imperative in order for Covered Entities and their business associates to fulfill their breach notification obligations under new rules enacted as part of the HITECH Act.

HITECH Amendments Expand Liability Exposures

The expanded risks stem in part from the HITECH Act’s amendments to HIPAA’s remedy provisions. Among other things, the HITECH Act amended HIPAA to:

Allow a State Attorney General to sue health plans or other Covered Entities, business associates or both that harm state citizens by committing HIPAA violations after February 16, 2009;
Expand the mandate by OCR to investigate violations and audit compliance with HIPAA;
Require Office of Civil Rights to impose civil sanctions against Covered Entities and business associates involved in violations of HIPAA in accordance with tightened standards added to HIPAA by the HITECH Act;
Revise the criminal sanctions that the Department of Justice can seek against Covered Entities, their business associates and others for violations of HIPAA; and
Amend HIPAA to make clear that HIPAA’s criminal sanctions also can imposed on business associates, workforce members and other persons that improperly use, access and disclose protected health information in violation of HIPAA.

State Attorney General Lawsuit Exposures

Covered Entities and their business associates now also need to be concerned about the potential that a state Attorney General may bring civil suit to remedy damages caused to state citizens by a breach of HIPAA.

The HITECH Act empowers a state attorney general to sue Covered Entities or business associates engaging in HIPAA violations that harms citizens of the state for statutory damages equal to the sum of the number of violations multiplied by 100 up to a maximum of $25,000 per calendar year plus attorneys fees and costs

A HIPAA civil lawsuit filed on January 13, 2010 demonstrates the willingness of at least some states to exercise the new authority created by the HITECH Act on February 17, 2009 to sue Covered Entities and business associates that violate HIPAA for civil damages.

On January 13, 2010 Connecticut Attorney General Richard Blumenthal sued Health Net of Connecticut, Inc. (Health Net) for failing to secure private patient medical records and financial information involving 446,000 Connecticut enrollees and promptly notify consumers endangered by the security breach. The suit also names UnitedHealth Group Inc. and Oxford Health Plans LLC, who have acquired Health Net. The first attorney general enforcement action brought based on amendments made to HIPAA under the HITECH Act, Connecticut charges that Health Net violated HIPAA by failing to safeguard protected medical records and financial information on almost a half million Health Net enrollees in Connecticut then allowing this information to remain exposed for at least six months before notifying authorities and consumers.

Stepped Up Federal Enforcement

Even before the HITECH Act amendments, however, OCR and Department of Justice already were stepping up HIPAA investigation and enforcement. The Department of Justice has obtained a variety of criminal convictions against violators of HIPAA. See, e.g., 2 New HIPAA Criminal Actions Highlight Risks From Wrongful Use/Access of Health Information. Meanwhile, OCR also is emphasizing HIPAA enforcement. In February, 2009, for instance, OCR announced that CVS Pharmacies, Inc. would pay $2.25 million to resolve HIPAA charges. This announcement followed OCR’s announcement in July, 2008 that Providence Health Care would pay $100,000 to resolve HIPAA violation charges. OCR also has taken HIPAA enforcement actions against a broad range of other Covered Entities to redress HIPAA violations or other compliance concerns. To review examples of these other actions, see here. While not resulting in the significant payments involved in CVS or Providence, all Covered Entities involved in these and other enforcement actions or investigations have incurred significant legal and other defense costs, loss of community trust, or both.

In addition to these HIPAA-specific exposures, wrongful use, access or disclosure of medical information also can give rise to liability for health plans and other Covered Entities, business associates, employees and other members of their workforce and others improperly using, accessing or disclosing protected health information. Federal and state prosecutions may and increasingly do criminally prosecute individuals for improperly accessing or using medical or other personal information under a variety of other federal or state laws . See e.g., Cybercrime & Identity Theft: Health Information Security Beyond HIPAA; NY AG Cuomo Announcement of 1st Settlement For Violation of NY Security Breach Notification Law; Woman Who Revealed AIDs Info Gets A Year. Additionally, State courts also increasingly are permitting individuals harmed by HIPAA violations to use HIPAA as the foundation of state law duties used to maintain state negligence, invasion of privacy, retaliation or other claims for damages. Read more here.

State Civil Lawsuits

Meanwhile, disgruntled employees or other business partners also increasingly raise alleged HIPAA misconduct as a basis of their legal complaints. For instance, private plaintiffs employed by Covered Entities also are increasingly pointing to HIPAA as the basis for their retaliation or wrongful discharge claims. See, e.g., Retaliation For Filing HIPAA Complaint Recognized As Basis For State Retaliatory Discharge Claim. Coupled with the HITECH Act changes, these and other enforcement actions signal growing potential hazards for Covered Entities and their business associates that fail to properly manage their HIPAA compliance obligations and risks.

Given these and other developments, Covered Entities and their business associates generally should resist the temptation to underestimate their potential HIPAA exposure for a variety of reasons. In fact, a number of factors demonstrate that the risks are significant and growing for Covered Entities, business associates and others that breach HIPAA’s mandates or otherwise inappropriately access protected health information.

Covered Entities & Business Associates Urged To Act Promptly To Manage Expanded HIPAA Risks & Obligations

As a consequence of these collective HITECH Act changes and growing HIPAA-related and other exposures, Covered Entities, their business associates and business associates generally will find it necessary or advisable among other things to:

Conduct well-documented due diligence within the scope of attorney-client privilege on their own practices and procedures;
Review the adequacy of the practices, policies and procedures of the Covered Entities, business associates, and others that may come into contact with protected health information;;
Renegotiate their service provider agreements to detail the specific compliance obligations of each party relating to for auditing compliance, investigating potential breaches; providing required breach notifications; specify leadership and required cooperation in the event of a breach, charge, or other concern; indemnification and other liability allocations; and other related matters;
Update policies, privacy and other notices, practices, procedures, training and other practices as needed to promote compliance and defensibility;
Conduct well-documented training as necessary to ensure that business associates and other members of the Covered Entity’s workforce understand and are prepared to comply with the expanded requirements of HIPAA, can detect potential breaches or other compliance concerns, and understand and are prepared to follow appropriate procedures for reported suspected violations; and
Pursue appropriate liability and other protection as appropriate to improve their ability to demonstrate both their commitment to compliance and their realistic efforts to ensure that these commitments are both appropriately documented on paper and operationalized in performance.

As part of these compliance and risk management efforts, most Covered Entities and their business associates will find it advisable to devote significant attention to the business associate relationship and its associated business associate agreements. Proper management of the expanded compliance obligations and liability exposures created by the HITECH Act generally will necessitate that Covered Entities and their business associates focus significant attention on the reworking of their operating and contractual relationships including the definition of detailed procedures for monitoring, reporting, investigating, and resolving potential breaches or other compliance concerns.

Even before the impending HIPAA changes scheduled to take effect on February 17, 2010, a strong need for more detailed contracting and planning of these relationships already existed. Since the enactment of HIPAA, the practice of many Covered Entities and their business associates of appending generic “business associate” representations onto existing services contracts without specific tailoring and planning has created undesirable ambiguities in these agreements. Further updating and tailoring of these and other provisions of services agreements has become even more important over the past year in light of the new breach notification mandates that took effect under the HITECH Act in September, 2009, changes to HIPAA’s civil and criminal sanctions that took effect on February 17, 2009, and the impending extension by the HITECH Act to business associates of direct liability for compliance with HIPAA scheduled to occur on February 17, 2010.

These and other stepped up oversight and enforcement activities make it critical that all Covered Entities and their business associates update their policies and practices, conduct training, tighten their compliance and data breach monitoring processes, strengthen their internal controls and documentation, and take other steps to prepare to defend their actions under the newly strengthened Privacy Rules. Covered Entities and their business associates more than ever must ensure their ability to demonstrate to federal regulators the effectiveness of their HIPAA compliance efforts by both adopting the written policies and procedures required by HIPAA and continuously monitoring and administering these safeguards. Covered Entities should consider reviewing the adequacy of their current HIPAA Privacy and Security compliance practices taking into consideration the Corrective Action Plan, published OCR noncompliance and enforcement statistics, their own and reports of other security and privacy breaches and near misses, and other developments to determine if additional steps are necessary or advisable.

For Assistance With Compliance Or Other Concerns

If your organization need advice or assistance in reviewing, updating, administering or defending its HIPAA or other privacy policies, practices, business associate or other agreements, notices or other related activities, consider contacting the author of this article, Curran Tomko Tarski LLP Partner Cynthia Marcotte Stamer at (214) 270-2402 or via e-mail here.

Ms. Stamer is nationally known for her work, training and presentations, and publications on privacy and security of health and other sensitive information in health and managed care, employment, employee benefits, financial services, education and other contexts.

Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 22 years experience advising clients about health and other privacy and security matters. A popular lecturer and widely published author on privacy and data security and other related health care and health plan matters, Ms. Stamer is the Editor in Chief of the forthcoming 2010 edition of the Information Security Guide to be published by the American Bar Association Information Security Committee in 2010, as well as the author of “Protecting & Using Patient Data In Disease Management: Opportunities, Liabilities And Prescriptions,” “Privacy Invasions of Medical Care-An Emerging Perspective,” “Cybercrime and Identity Theft: Health Information Security Beyond HIPAA,” and a host of other highly regarded publications. She has continuously advises employers, health care providers, health insurers and administrators, health plan sponsors, employee benefit plan fiduciaries, schools, financial services providers, governments and others about privacy and data security, health care, insurance, human resources, technology, and other legal and operational concerns. Ms. Stamer also publishes and speaks extensively on health and managed care industry privacy, data security and other technology, regulatory and operational risk management matters. Her insights on health care, health insurance, human resources and related matters appear in the Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Managed Healthcare, Health Leaders, and a many other national and local publications. For additional information about Ms. Stamer, her experience, involvements, programs or publications, see here.

Other Recent Developments

If you found this information of interest, you also may be interested in information about upcoming programs to be presented by Ms. Stamer, acquiring a copy of a recording or materials from previous programs she has presented, or arranging training for your organization. For more information about these opportunities, contact Ms. Stamer directly.

If you found this information of interest, you also may be interested in reviewing some of the following recent Updates available online by clicking on the article title:

Curran Tomko Tarski LLP Can Help

If your organization need advice or assistance in reviewing, updating, administering or defending its HIPAA or other privacy policies, practices, business associate or other agreements, notices or other related activities, consider contacting Curran Tomko Tarski LLP Partner Cynthia Marcotte Stamer.

A widely published author and speaker on HIPAA and other employee benefit and human resources related matters, Ms. Stamer has extensive experience advising health plans, their employer and other sponsors, health insurers, TPAs and other business associates and others about HIPAA and other health plan and privacy matters. Currently serving as both Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and as an ABA Joint Committee on Employee Benefits Council representative and Former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer has more than 23 years experience assisting employers, insurers, plan administrators and fiduciaries and others to design, implement, draft and administer health and other employee benefit plans and to defend audits, litigation or other disputes by private parties, the IRS, Department of Labor, Office of Civil Rights, Medicare, state insurance regulators and other federal and state regulators. A nationally recognized author and lecturer, Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Examples of other recent updates that may be of interest include:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

Stamer To Present “2010 Health Plan Checkup” At Annual DFW ISCEBS Employee Benefits Fundamentals Workshop

February 22, 2010

Cynthia Marcotte Stamer will discuss the latest changes and requirements affecting employer sponsored group health plans, their sponsors, fiduciaries, insurers and vendors during her presentation titled “2010 Health Plan Checkup” at the Dallas/Fort Worth ISCEBS Annual Fundamentals Workshop currently scheduled for May 13, 2010 in Dallas.

With Congress and federal regulators turning up the heat on health care, keeping up to date with the latest developments is both critical and increasingly challenging for employers, their employee benefits and human resources staff, and the fiduciaries, insurers, administrators and others dealing with health plan design and administration. Coming as U.S. employers continue to struggle to provide health benefits in the face of skyrocketing health benefit costs, tighter health plan medical privacy, nondiscrimination, mental health and other benefit mandates, and a host of other tighter new federal regulations impacting employment-based health plans and their sponsoring businesses, fiduciaries and administrators increasingly are forcing U.S. business leaders to make appropriate health plan cost and compliance management a key management priority. Ms. Stamer will discuss key developments, highlight new developments on the horizon, and provide tips to participants for monitoring and responding to these and other developments. To register or for additional information, contact the Dallas/Fort Worth ISCEBS here.

Nationally recognized for her more than 22 years of work on managed care and other health and other employee benefits, human resources, insurance, and health care matters, Ms. Stamer assists employee benefit plans, their sponsoring employers, fiduciaries, insurers, administrators and others to monitor and respond to evolving legal and operational requirements and to design, administer, document and defend managed care and other medical benefit programs and practices. She also regularly advises and assists these and other clients to monitor and respond to evolving legislation, regulations, enforcement activities by federal and state regulators, evolving product and market changes, and private litigation and other disputes. Past Chair of the American Bar Association (ABA) Health Law Section Managed Care & Insurance Interest Group and the Current Chair of the ABA RPTE Employee Benefits & Compensation Committee, an ABA Joint Committee on Employee Benefits Council member, Chair of the Curran Tomko Tarski Labor, Employment & Employee Benefits Practice and Board Certified in Labor & Employment Law, Ms. Stamer also is a widely published author and highly regarded speaker on these and other employee benefit and human resources matters. Some other recent updates on these topics recently published by Ms. Stamer include :

For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

If you need assistance with these or other compliance concerns, wish to inquire about federal or state regulatory compliance audits, risk management or training, assistance investigating or responding to a known or suspected compliance or risk management concern, or need legal representation on other matters please contact the author of this update, Cynthia Marcotte Stamer, CTT Labor & Employment Practice Chair at cstamer@cttlegal.com, 214.270.2402; or your other preferred Curran Tomko Tarski LLP attorney.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of Ms. Stamer here and learn more about other Curran Tomko Tarski LLP attorneys here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information to Cstamer@CTTLegal.com or registering to participate in the distribution of these and other updates on our Solutions Law Press distributions here. For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject to here.

Comments Off on Stamer To Present “2010 Health Plan Checkup” At Annual DFW ISCEBS Employee Benefits Fundamentals Workshop | ARRA, CHIP, COBRA, COBRA Subsidy, Employee Benefits, Employers, ERISA, Excise Tax, Fiduciary Responsibility, Health Plans, HIPAA, Human Resources, Medicare Part D, Mental Health, Mental Health Parity, Prescription Drugs, Stimulus Bill, Tax, Wellness, Wellness Programs | Tagged: COBRA, Disability Discrimination, Disease Management, Employer, Employers, Employment, ERISA, Health Care Reform, Health Insurance, Health Plans, HIPAA, Human Resources, Insurance, Insurer, Internal Controls, Managed Care, Medical Coverage, Military Leave, Premium Subsidy, Privacy, Risk Management, Wellness | Permalink
Posted by Cynthia Marcotte Stamer

Health Plans & Business Associates Face 2/17 Deadline To Update Policies, Contracts & Procedures For HIPAA Privacy Rule Changes

February 15, 2010

Connecticut AG Lawsuit Highlights Expanding Civil Damage Exposure Risks Of Noncompliance

By Cynthia Marcotte Stamer

By Wednesday, February 17, 2010, employer and other health plans and health insurers (“covered entities”) and service providers performing functions on behalf of these entities (“business associates”) must begin complying with tighter federal requirements for the use, access, protection and disclosure of protected health information under Privacy & Security Standards of the Health Insurance Portability & Accountability Act (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH Act). The changes scheduled to take effect February 17, 2010 are likely to require that health plans and their business associates update their written policies, operational procedures, privacy notices and business associate agreements in several respects.

While the HITECH Act gave covered entities and business associates a year to complete the necessary arrangements to comply with these impending HITECH Act changes, many health plans and business associates have not completed the necessary arrangements despite expanding liability exposures that can result from noncompliance. To mitigate these exposures, covered entities and their business associates should act quickly both to update their services agreements, plans and policies, practices, and procedures, and to implement the training, oversight, and other management procedures necessary to comply with the HITECH Act changes and to mitigate other HIPAA risks.

2/17/10 Deadline To Comply With HITECH Act HIPAA Amendments

On February 17, 2010, health plans and other covered entities and their business associates will become subject to the latest to take effect in a series of amendments to the HIPAA enacted under the HITEC Act. The new rules are part of a broader series of changes to HIPAA made by the HITECH Act that collectively both significantly expand the obligations of covered entities and their business associates to regarding the use, protection and disclosure of protected health information and the liability exposures that can result when covered entities or business associates violate these requirements.

The changes scheduled to take effect February 17, 2010 are likely to require that health plans and their business associates update their written policies, operational procedures, privacy notices and business associate agreements in several respects. For instance, effective February 17, 2010, the HITECH Act generally requires that covered entities and their business associates revise their written privacy policies, privacy notices and operating procedures:

To meet expanded requirements to honor individual’s requests for special restrictions on uses and disclosures of protected health information to health plans for payment purposes
To restrict protected health information disclosures to the minimum necessary required to accomplish otherwise allowable purpose;
To comply with new rules that require that the covered entity and its business associates treat any use, access or disclosure of any protected health information made for purposes of making communications about products or services as made for marketing, rather than operational, purposes which are prohibited by HIPAA except where HIPAA’s requirements are met;
To comply with new restrictions on certain fundraising communications made for operational purposes including expanded obligations to allow recipients to opt out of further fundraising communications;
To prohibit covered entities or business associates from selling protected health information without meeting the amended requirements of HIPAA that a valid HIPAA authorization from the subject of the information and specific reassurances from the purchaser concerning its subsequent use of the protected health information except as otherwise permitted by HIPAA;
To take into account these tightened restrictions on the use, access or disclosure of protected health information for purposes of complying with new HITECH Act breach notification requirements that took effect in September, 2009, which apply when a covered entity or its business associate knows or should know a breach of “unsecured protected health information” has occurred and for purposes of making the necessary changes in written policies and business associate agreements, training and operational procedures necessary to comply with these rules;
To directly require business associates comply with HIPAA’s requirements in the same manner as other covered entities and make it necessary or advisable that that service provider agreements between health plans and business associates be updated to reflect these and other changes to HIPAA; and
To implement the necessary written policy changes, notification updates, business associate agreement amendments, training, management oversight and other procedural changes necessary to demonstrate fulfillment with these requirements.

Noncompliance with these and other HIPAA requirements subjects covered entities and business associates to civil penalties, criminal prosecution, civil damage awards under lawsuits brought by state attorneys general, and other legal remedies. In addition, timely update written policies, procedures, business associate agreements, training and documentation is imperative in order for covered entities and their business associates to fulfill their breach notification obligations under new rules enacted as part of the HITECH Act.

Under the HITECH Act, health plans and other covered entities and their business associates have been obligated since September 23, 2009 to notify individuals who are the subject of protected health information, the Department of Health & Human Services and in some cases the media if and when a breach of “unsecured protected health information occurs. Failing to timely update written policies, procedures and training increases the likelihood that health plans, other covered entities or business associates will be obligated to provide breach notifications under these new rules, in addition to their otherwise applicable exposures under HIPAA.

HIPAA Enforcement & Liability Exposures Real and Rising

Health plans and other covered entities, their business associates and others involved in health plan design and operations generally should resist the temptation to underestimate their potential HIPAA exposure based on the limited enforcement of HIPAA by the Office of Civil Rights between 2003 and 2009 for a variety of reasons.

First, the changes taking effect on February 17, 2010 follow the implementation changes to HIPAA’s civil and criminal sanctions that took effect on February 17, 2009, when President Obama signed the HITECH Act into law and the new breach notification requirements added by the HITECH Act that took effect on September 23, 2009. The HITECH Act amendments to HIPAA’s remedies significantly increase the risk that health plans and other covered entities and their business associates will face civil lawsuits, civil or criminal penalties or other consequences for violating HIPAA.

The expanded risks stem in part from the HITECH Act’s amendments to HIPAA’s remedy provisions. Among other things, the HITECH Act amended HIPAA to:

Allow a State Attorney General to sue health plans or other covered entities, business associates or both that harm state citizens by committing HIPAA violations after February 16, 2009;
Expand the mandate by the Office of Civil Rights to investigate violations and audit compliance with HIPAA;
Require Office of Civil Rights to impose civil sanctions against health plans and other covered entities and their business associates involved in violations of HIPAA in accordance with tightened standards added to HIPAA by the HITECH Act;
Revise the criminal sanctions that the Department of Justice can seek against health plans and other covered entities, their business associates and others for violations of HIPAA;
Amend HIPAA to make clear that HIPAA’s criminal sanctions also can imposed on business associates, workforce members and other persons that improperly use, access and disclose protected health information in violation of HIPAA.

A HIPAA civil lawsuit filed on January 13, 2010 demonstrates the willingness of at least some states to exercise the new authority created by the HITECH Act on February 17, 2009 to sue covered entities and business associates that violate HIPAA for civil damages.

The HITECH Act empowers a state attorney general to sue covered entities or business associates engaging in HIPAA violations that harms citizens of the state for statutory damages equal to the sum of the number of violations multiplied by 100 up to a maximum of $25,000 per calendar year plus attorneys fees and costs

Even before the HITECH Act amendments, however, the Office of Civil Rights and Department of Justice already were stepping up HIPAA investigation and enforcement. The Department of Justice has obtained a variety of criminal convictions against violators of HIPAA. See, e.g., 2 New HIPAA Criminal Actions Highlight Risks From Wrongful Use/Access of Health Information. Meanwhile, the Office of Civil Rights in February, 2009 announced that CVS Pharmacies, Inc. would pay $2.25 million to resolve HIPAA charges. This announcement followed the Office of Civil Rights announcement in July, 2008 that Providence Health Care would pay $100,000 to resolve HIPAA violation charges. While not resulting in the significant payments involved in CVS or Providence, the Office of Civil Rights also taken HIPAA enforcement actions against a broad range of other covered entities to redress HIPAA violations or other compliance concerns. To review examples of these other actions, see here.

Along side these governmental actions, state courts also increasingly are willing to allow individual plaintiffs to rely on violations of HIPAA as the basis for bringing state privacy, retaliation or other actions. While prior to the recent HITECH Act amendments, federal courts had ruled that private plaintiffs could not sue under HIPAA for damages they incurred from a covered entity’s violation of HIPAA, state courts have allowed private plaintiff’s to use the obligations imposed by HIPAA as the basis of a covered entity’s duty for purposes of certain state law lawsuits. In Sorensen v. Barbuto, 143 P.3d 295 (Utah Ct. App. 2006), for example, a Utah appeals court ruled a private plaintiff could use HIPAA standards to establish that a physician owed a duty of confidentiality to his patients for purposes of maintaining a state law damages claim. Similarly, the Court in Acosta v. Byrum, 638 S.E. 2d 246 (N.C. Ct. App. 2006) ruled that a plaintiff could use HIPAA to establish the “standard of care” in a negligence lawsuit. Meanwhile, private plaintiffs employed by covered entities also are increasingly pointing to HIPAA as the basis for their retaliation claims. See, e.g., Retaliation For Filing HIPAA Complaint Recognized As Basis For State Retaliatory Discharge Claim. Coupled with the HITECH Act changes, these and other enforcement actions signal growing potential hazards for covered entities and their business associates that fail to properly manage their HIPAA compliance obligations and risks.

Health Plans & Business Associates Should Take Timely Action To Comply & Manage Risks

As a consequence of these collective HITECH Act changes and growing HIPAA-related exposures, both health plans and business associates generally will find it necessary or advisable among other things to:

Conduct well-documented due diligence on each other’s practices and procedures to improve their ability to demonstrate both their commitment to compliance and their realistic efforts to ensure that these commitments are operationalized in performance;
Renegotiate their service provider agreements to detail the specific compliance obligations of each party relating to for auditing compliance, investigating potential breaches; providing required breach notifications; specify leadership and required cooperation in the event of a breach, charge, or other concern; indemnification and other liability allocations; and other related matters; and
Pursue appropriate liability and other protection as appropriate.

As part of these compliance and risk management efforts, most covered entities and their business associates will find it advisable to devote significant attention to the business associate relationship and its associated business associate agreements.

Proper management of the expanded compliance obligations and liability exposures created by the HITECH Act generally will necessitate that health plans and other covered entities and their business associates focus significant attention on the reworking of their operating and contractual relationships.

Further updating and tailoring of these and other provisions of services agreements has become even more important over the past year in light of the new breach notification mandates that took effect under the HITECH Act in September, 2009, changes to HIPAA’s civil and criminal sanctions that took effect on February 17, 2009, and the impending extension by the HITECH Act to business associates of direct liability for compliance with HIPAA scheduled to occur on February 17, 2010.

Given these changes and the associated obligations and risks, both health plans and other covered entities and their business associates generally should act quickly to manage their own compliance and to minimize exposures that may result from the other’s compliance deficiencies. As part of these efforts, both covered entities and their business associates generally should review and tighten business associate and other service agreement provisions to provide for more specific and comprehensive HIPAA-related contractual assurances, as well as improved cooperation, coordination, management and oversight.

Curran Tomko Tarski LLP Can Help

If your organization need advice or assistance in reviewing, updating, administering or defending its HIPAA or other privacy policies, practices, business associate or other agreements, notices or other related activities, consider contacting Curran Tomko Tarski LLP Partner Cynthia Marcotte Stamer.

A widely published author and speaker on HIPAA and other related matter, Ms. Stamer has extensive experience advising health plans, their employer and other sponsors, health insurers, TPAs and other business associates and others about HIPAA and other health plan and privacy matters. Currently serving as both Chair of the American Bar Association (ABA) RPTE Employee Benefits & Other Compensation Group and as an ABA Joint Committee on Employee Benefits Council representative and Former Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, Ms. Stamer has more than 23 years experience assisting employers, insurers, plan administrators and fiduciaries and others to design, implement, draft and administer health and other employee benefit plans and to defend audits, litigation or other disputes by private parties, the IRS, Department of Labor, Office of Civil Rights, Medicare, state insurance regulators and other federal and state regulators. As part of this work, she regularly assists clients to review and update policies, practices, contracts, notices and procedures to comply with HIPAA and other requirements. A nationally recognized author and lecturer, Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

Inapplicability of HIPAA Privacy To Disability Insurer Not License To Impose Unreasonable Claims Requirements

February 8, 2010

By Cynthia Marcotte Stamer

While finding the Privacy Standards imposed by the Health Insurance Portability & Accountability Act (HIPAA) inapplicable to disability insurers, a recent Louisiana Court of Appeals nevertheless ruled that the insurer was not entitled to dismissal of the lawsuit challenging the denial of disability benefits brought by a state employee for failure to meet proof of loss requirements based on his failure to sign insurer required medical authorization. Disability insurers and plan fiduciaries should heed the decision as a reminder that exemption from HIPAA does not amount to a license to impose unreasonable proof of loss or requirements inconsistent with a reasonable reading of the terms of the applicable plan or policy, or other applicable regulations.

Harris v. Metropolitan Life Ins. Co., — So.3d —-, 2010 WL 415262, 2009-0034 (La.App. 1 Cir. 2/5/10), involved a lawsuit challenging the continuing refusal of Metropolitan Life Insurance to and its designates to approve the disability benefit claim of Louisiana Supreme Court employee Jack Harris. Metropolitan repeatedly asked insisted that Mr. Harris submit to a physical examination and sign various medical and other authorizations including an “Attending Physician’s Statement” and an “Employee Authorization,” and sign certain other documents. While Mr. Harris sent the “Attending Physician’s Statement” to his treating physician, he declined to sign the Employee Authorization and certain other subsequently requested consents on the grounds of HIPAA. While he provided to a HIPAA-compliant authorizations to his medical providers to release all medical records, medical opinions, and medical reports relating to Mr. Harris’ past and current treatment for purposes of the claim, he declined and instead filed suit contending that the information and releases already provided met the proof of loss requirements of the policy.

Upon motion of Metropolitan, the trial court found that Mr. Harris’ failure to sign the authorizations and submit to the medical examination required by Metropolitan rendered his claim “premature.” Upon appeal, however, the Court of Appeals overruled this determination. While the Court of Appeals agreed with the trial court that the special authorization rules imposed by HIPAA did not apply to a disability insurer such as Metropolitan, it also ruled that its right to require a claimant to sign authorizations, submit to medical examinations or meet other proof of loss conditions must be reasonable in light of the terms of the policy. Accordingly, although the Court of Appeals agreed that the proof of loss and other provisions of the disability policy authorized Metropolitan to require a disability claimant to undergo an independent medical examination “as often as reasonably required,” the Court of Appeals ruled that Mr. Harris’ submission to the independent medical examination was not a condition precedent to the initiation of litigation by an insured and that the “medical authorization” demanded by Metropolitan was far broader than what the policy allowed as reasonably required for the independent medical examination. Accordingly, the Court of Appeals overruled the trial court’s dismissal of the disability claim and remanded the action to the trial court for hearing.

While affirming that the HIPAA Privacy Standards don’t directly apply to disability insurers, the Harris decision also demonstrates that disability insurers should not over-estimate the effect of this exemption. While HIPAA may not apply, disability insurers generally remain bound by the reasonable construction of their policy terms, taking into account otherwise applicable laws and regulations. Accordingly, disability and other HIPAA-exempt insurers and plans should not confuse the inapplicability of the HIPAA authorization requirements for carte blanche to impose unreasonable authorization or other proof of loss requirements inconsistent with their policy terms.

If you have questions about or need assistance evaluating, commenting on or responding to this invitation or other employee benefit, employment, compensation, employee benefit, workplace health and safety, corporate ethics and compliance practices, concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, and a Council Member on the ABA Joint Committee on Employee Benefits, Ms. Stamer has more than 22 years experience advising and assisting employers, employee benefit plan and their fiduciaries, insurers, administrators, and others about policy and plan, process, and product design, administration, documentation, risk management and defense under ERISA, COBRA, HIPAA, labor and employment, tax, state banking and insurance, and other laws. Her work includes extensive experience advising and defending employee benefit plan fiduciaries and insurers about the investigation of disability, health and other claims and appeals. She also advises, assists, trains, audits and defends employers and others regarding the federal and state Sentencing Guideline and other compliance, equal employment opportunity, privacy, leave, compensation, workplace safety, wage and hour, workforce reengineering, and other labor and employment and defends related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer also speaks, writes and conducts training extensively on these and other related matters. For additional information about Ms. Stamer and her experience, see here or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

New Mental Health Parity Regulations Require Health Plan Review & Updates

January 31, 2010

By Cynthia Marcotte Stamer

Employer and union-sponsored group health plans and insurers generally must update their group health plans to comply with expanded federal “mental health parity” regulations (MHP Regulations) published on Friday, January 29, 2010 will require changes to most covered group health plans to comply with the new rules and to make adjustments to broader benefit provisions as appropriate to mitigate potential cost implications no later than the first plan year beginning after June 30, 2010.

Jointly published by the Treasury, Health & Human Services and Labor Departments and available for review here , the MHP Regulations interpret and implement federal rules prohibiting group health plans and their insurers from imposing certain special limits on benefits provided for mental health and substance abuse treatments not applicable to general medical or surgical benefits.

The Paul Wellstone and Pete Domenici Mental Health Parity and Addition Equity Act of 2008, Public Law 110-343 (MHPAEA) expands the scope of prohibited restrictions on mental health benefits beginning after June 30, 2010. Under the MHPAEA amendments, any covered group health plan that includes mental health and substance use disorder benefits along with standard medical and surgical benefits generally cannot apply more limited benefit limits, out-of-pocket cost limitations, prior authorization and utilization review or other benefit restrictions than apply to medical or surgical benefits. In addition, group health plan utilization review, medical necessity and appropriateness and other rules and procedures used to decide mental health and substance abuse benefits generally must be based on the same level of scientific evidence used by the group health plan or insurer to determine medical and surgical benefits.

Before the MHPAEA amendments took effect, the Mental Health Parity Act of 1996 (MHPA) generally only prohibited group health plans from applying more restrictive aggregate lifetime and annual dollar limits on mental health benefits than applied to general medical or surgical benefits and did not extend these restrictions to substance use disorder benefits.

The MHP Regulations generally apply to group health plans of employers with 50 or more workers that offer mental health or substance use disorder benefits for plan years beginning on or after July 1, 2010. Until then, covered group health plans and their insurers generally must continue to comply with the more limited mental health parity requirements imposed under the MHPA, as well as other federal group health plan mandates.

Federal law increasingly is curtailing the significant latitude that employers and unions once enjoyed in deciding the benefits, eligibility and other terms and conditions of their group health plans, including many significant changes that took effect or will take effect during 2009 and 2010. You can learn more about some of these developments by reviewing the 2009 Health Plan Update presentation posted here. In light of the liabilities and costs arising under these and other rules, plan sponsors, administrators, fiduciaries and executives with responsibility over these plans, their establishment, funding or administration should take prompt and prudent steps to verify that their plan documents, communications, agreements and practices are updated to minimize risks and avoid unanticipated expense.

If your organization needs assistance with monitoring, assessing, managing or defending these or other health or other employee benefit, labor and employment, or compensation practices, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer or another Curran Tomko Tarski LLP attorney of your choice. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group and a nationally recognized author and speaker, Ms. Stamer is experienced with assisting employers and others about compliance with health and other employee benefit, labor and employment laws, safety, compensation, insurance, and other laws. She also advises and defends employers and other plan sponsors, fiduciaries, employee benefit plans and others about litigation and other disputes relating to these matters, as well as charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. She has counseled and represented employers on these and other workforce matters for more than 22 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

New Labor Department Rule Allows Employers 7 Days To Deliver Employee Contributions To Employee Benefit Plans

January 14, 2010

By Cynthia Marcotte Stamer

Regulations published by the Department of Labor today (January 14, 2010) offer employers the opportunity to know their deposit of employee contributions and other amounts withheld from wages or otherwise received from employees with a pension, profit-sharing, health, or other welfare benefit plan is timely for purposes of the fiduciary responsibility requirements of the Employee Retirement Income Security Act (“ERISA”) and the prohibited transaction rules of the Internal Revenue Code (the “Code”) by depositing those amounts with the plan within the seven day period specified in a new safe harbor included in the Regulations.

Certainty about the timeliness of these deposits is important, as mishandling of these employee contributions, participant loan repayments or other employee benefit plan assets frequently triggers judgments, fines and penalties against companies that sponsor employee benefit plans as well as owners, board members, or other members of management. See Mishandling Employee Benefit Obligations Creates Big Liabilities For Distressed Businesses & Their Leaders. Consequently, businesses sponsoring employee benefit programs and owners, officers, directors or other members of management with authority over or responsibility for the handling or application of amounts withheld or collected from employees as employee contributions or plan loans should make arrangements for these amounts to be properly handled and timely deposited with the appropriate employee benefit plan in accordance with these new plan asset regulations.

Title I of ERISA generally requires that employee benefit “plan assets” be held in trust, prudently handled and invested, used for the exclusive benefit of the plan and its participants, and otherwise used and administered in accordance with ERISA’s fiduciary responsibility rules. Meanwhile, the use of “plan assets” of certain employee benefit plans in a manner prohibited by the Code’s prohibited transaction rules also may trigger excise taxes and other penalties.

For purposes of both ERISA and the Code, Labor Department Regulation § 2510.3-102, specifies that amounts (other than union dues) that an employer withholds from wages or otherwise collects from employees as employee contributions or loan repayments to an employee benefit plan generally become plan assets subject to these fiduciary responsibility rules “as of the earliest date on which such contributions or repayments can reasonably be segregated from the employer’s general assets.” Since employers, business owners, members of management can risk exposure to damages, administrative penalties and/or excise taxes, knowing when amounts collected from employees are considered plan assets is a critical first step to managing these risks.

Unfortunately, the subjectivity of this standard leaves room for much uncertainty and debate about the precise deadline by which employee contributions, plan loans and other amounts from employees must be received by the plan. The subjectivity inherent in this standard leaves many employers uncertain about the adequacy of their compliance efforts and frequently fuels debate among plans, debtors, creditors, regulators or others about the when amounts earmarked to be withheld from employee wages cease to be assets of the debtor employer and become plan assets.

To mitigate debate and uncertainty about the timing of these events, Labor Department Regulation § 2510.3-102 as published in final form today includes a new “safe harbor” rule for plans with fewer than 100 participants at the beginning of the plan year. Under the safe harbor, employee contributions, plan loans and other amounts withheld from wages or received from employees for payment to an employee benefit plan are treated as treated timely paid to the plan if deposited with the plan not later than the 7th business day following the day on which such amount is received by the employer (in the case of amounts that a participant or beneficiary pays to an employer), or the 7th business day following the day on which such amount would otherwise have been payable to the participant in cash (in the case of amounts withheld by an employer from a participant’s wages). While this safe harbor assures employers and others that withhold from wages or receive employee contributions or participant loan payments owing to less than 100 participant plans that their deposit will be considered timely if received by the plan within seven days, the plan asset regulations leave open that deposit with the plan more than 7 after receipt might still be considered timely deposit with the plan under certain circumstance.

Where deposit with the plan is not made within the seven-day period established by the safe harbor, the plan asset rules continue to leave room for great subjectivity in the determination of the deadline for deposit. In addition to the seven-day safe harbor, the plan asset regulations clearly establish bright-line deadlines after which the deposit of employee contribution or plan loan amounts always will be considered untimely. Thus, the plan asset rules provide that the deadline for depositing employee contributions and plan loans with the plan in no event ever extends beyond the applicable of the following dates (the “Latest Date”)

For pension plans, the 15th business day of the month following the month in which the employee contribution or participant loan repayment amounts are withheld or received by the employer;
With respect to a SIMPLE plan that involves SIMPLE IRAs the 30th calendar day following the month in which the participant contribution amounts would otherwise have been payable to the participant in cash; and
For health and other welfare benefit plans, 90 days from the date on which the employee contribution is withheld or received by the employer.

In all other instances, the plan asset regulations leave open to uncertainty and debate when and if an employer’s deposit of employee contributions and plan loans more than seven-days after payroll deduction or receipt but before the Latest Date will qualify as timely for purposes of ERISA Title I or the Code’s prohibited transaction provisions.

Companies and owners, officers and directors of businesses that harm plans by failing to ensure that these amounts are timely deposited into an employee benefit plan or otherwise are involved in the mishandling of these funds frequently become subject to prosecution, damage awards, civil penalties and excise taxes. To mitigate potential exposure to these risks, businesses and leaders of businesses that withhold from wages or collect employee contributions or plan loan payments from employees should make arrangements to ensure that these amounts timely are deposited with the appropriate plans and otherwise handled appropriately in accordance with ERISA and the Code.

If your business or employee benefit plan needs assistance evaluating or responding to these or other employee benefit, or other employment, workplace health and safety, corporate ethics and compliance or other concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer.

Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, a representative to the ABA Joint Committee on Employee Benefits Council, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 22 years. She is experienced with assisting employers, insurers, administrators, and others to design and administer group health plans cost-effectively in accordance with these and other applicable federal regulations as well as well as advising and defending employers and others against tax, employee benefit, labor and employment, and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

Comments Invited On Burdensomeness of Requirements To Obtain DOL Determination That Benefit Plan Qualifies as As Collectively Bargained Plan

December 30, 2009

By Cynthia Marcotte Stamer

The Employee Benefit Security Administration (EBSA) is inviting public comment on the compliance burdens to comply with its administrative procedure (‘‘procedural rules’’) for obtaining a determination by the EBSA if a particular employee benefit plan is established or maintained under or pursuant to one or more collective bargaining agreements for purposes of section 3(40) of the Employee Retirement Income Security Act (ERISA).

Codified beginning at 29 CFR 2570.15, these procedural rules concern specific criteria set forth in 29 CFR 2510.3–40 which, if met, constitute a finding by EBSA that a plan is collectively bargained. Plans that meet the requirements of the criteria rules are not subject to state law and qualify for delayed compliance, exemption or other special treatment under various requirements of ERISA, the Internal Revenue Code or other applicable requirements. Among other things, overzealous characterization and marketing of self-insured health plans covering employees of multiple employers as collectively bargained and therefore exempt from state insurance regulation has resulted in numerous high profile enforcement actions for insurance fraud or other violations around the country over the past decade.

The procedural rules require applicants to submit certifications and other documentation. EBSA is inviting comments on the appropriateness of the assessment currently published in connection its publication of the procedural rules of the compliance burden estimates these procedural rules

EBSA particularly is interested in comments that:

Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
Evaluate the accuracy of the agency’s estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
Enhance the quality, utility, and clarity of the information to be collected; and
Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., by permitting electronic submissions of responses.

If you have questions about or need assistance evaluating, commenting on or responding to this invitation or other employee benefit, employment, compensation, employee benefit, workplace health and safety, corporate ethics and compliance practices, concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, and a Council Member on the ABA Joint Committee on Employee Benefits, Ms. Stamer is experienced advising and assisting employers, employee benefit plan and their fiduciaries, insurers, financial advisory services, administrators and custodians, debtors, trustees and creditors in bankruptcy and others about plan, process, and product design, administration, documentation, risk management and defense under ERISA, COBRA, HIPAA, labor and employment, tax, state banking and insurance, and other laws. She also advises, assists, trains, audits and defends employers and others regarding the federal and state Sentencing Guideline and other compliance, equal employment opportunity, privacy, leave, compensation, workplace safety, wage and hour, workforce reengineering, and other labor and employment and defends related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 20 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience, see here or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

3 Articles On Employee Benefit Risk Management Published In ABA RPTE E-Report

December 23, 2009

Curran Tomko Tarski LLP Labor & Employment Practice Chair Cynthia Marcotte Stamer the author of three articles in the December 2009 Issue of the American Bar Association Real Property Probate & Trust Section E-Report:

Chair of the American Bar Association RPTE Employee Benefits & Compensation Committee, an ABA Joint Committee on Employee Benefits Council member, and Chair of the Curran Tomko Tarski Labor, Employment & Employee Benefits Practice, Cynthia Marcotte Stamer is nationally and internationally recognized for her work assisting businesses, employee benefit plan fiduciaries and vendors, insurers, administrative services providers, governments, and other entities to develop administer and defend cost-effective employee benefit other human resources programs, policies and procedures to meet their budgetary, risk management and compliance and other objectives. Board certified in Labor & Employment law, Ms. Stamer applies her extensive experience regarding employment, employee benefit, and other related laws to assists clients in a wide range of business and litigation contexts. The co-founder of the Solutions Law Consortium, Ms. Stamer, also is the publisher of Solutions Law HR & Benefits Update. She speaks and writes extensively about employee benefits and other human resources, compensation and internal controls matters.

If your organization or employee benefit plan needs assistance with employee benefits, labor and employment or other internal controls and risk management matters, please contact Ms. Stamer at cstamer@cttlegal.com, (214) 270-2402; or another Curran Tomko Tarski, LLP attorney of your choice. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi, LLP team, see here.

Other Helpful Resources & Information

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information to cstamer@cttlegal.com or registering to participate in the distribution of these and other updates on our CTT HR & Employee Benefits Update distributions in blog form via RSS feed here. You also may be interested in staying abreast of emerging internal controls and compliance challenges by reviewing and registering for our Corporate Compliance, Risk Management & Internal Controls distributions. For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject to support@cttlegal.com.

If you have questions about or need assistance evaluating, commenting on or responding to the Proposed Regulations, the Q&As, or other employment, compensation, employee benefit, workplace health and safety, corporate ethics and compliance practices, concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, Ms. Stamer is experienced with assisting employers and others about compliance with federal and state equal employment opportunity, compensation and employee benefit, workplace safety, and other labor and employment, as well as advising and defending employers and others against tax, employment discrimination and other labor and employment, and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 20 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

IRS Proposes To Update Regulations On Exclusion of Damages Received on Account of Personal Physical Injuries or Physical Sickness To Eliminate Tort Test
OSHA Final Rule Updates OSHA Personal Protective Equipment Standards
DOL Proposes Changes To H-2A Temporary & Seasonal Agricultural Nonimmigrant Worker Certification Procedures & Related Rules
Register Now For HITECH Act Health Data Security & Breach Update: Learn What You Must Do This Month To Comply With New Health Data Breach Regulations
ADAAA Amendment Broader ADA “Disability” Definition Not Retroactive, Employer Action Needed To Manage Post 1/1/2009 Risks
New Study Shares Data On Migrant Health Care Challenges Along The Border
Employer & Other Health Plans & Other HIPAA-Covered Entities & Their Business Associates Must Comply With New HHS Health Information Data Breach Rules By September 23
Stamer, Others To Discuss Technology Use/Risks in Employee Benefits, Tax & HR Consulting & Administration
Businesses Cautioned To Strengthen Investigation & Employment Practices To Minimize Potential Exposure To Retaliation Claims In Light Of Recent Supreme Court Retaliation Decision
OFCCP To Apply Special Procedures, Heightened Scrutiny To Equal Employment Practices of Government Contractors, Subcontractors On ARRA Funded Projects
With September 8 Deadline For Government Contractors To Use E-Verify, USCIS Invites Comments On E-Verify Program Designated Agent Processr Enforcement

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

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Posted by Cynthia Marcotte Stamer

President Signs Law Extending & Expanding Temporary AARA COBRA Subsidy Requirements For Group Health Plans

December 22, 2009

By Cynthia Marcotte Stamer

Employer and union sponsored group health plans, their sponsors and administrators must act quickly to comply with the extension and expansion of temporary “COBRA Subsidy Rules” for “assistance eligible individuals” originally added to the group health plan medical coverage continuation requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) by the American Recovery and Reinvestment Act of 2009 (“AARA”) last February.

The Department of Defense Appropriations Act (H.R. 3326) signed into law by President Obama on December 19, 2009 extended the period that employer and union-sponsored group health plans must allow employees and members of their family that lose group health plan coverage due to an involuntary employment loss to continue their group medical coverage under the reduced premium and other temporary ARRA COBRA Subsidy Rules and lengthened the period during which an involuntary employment loss can qualify an otherwise COBRA-eligible employee or dependent as an assistance eligible individual.

Original COBRA Subsidy Rules

As originally enacted, the ARRA COBRA Subsidy Rules limited the COBRA premium that a COBRA-covered group health plan could charge a COBRA-eligible employee or dependent whose group health plan eligibility ended due to an involuntary employment loss between September 1, 2008 and December 31, 2009 (“assistance eligible individual”) to 35% of the otherwise applicable COBRA premium (the “Reduced ARRA Premium”) for a period of up to 9 months (the “Subsidy Period”). ARRA dictated that employers sponsoring these group health plans must pay the remaining 65% of the COBRA premium (the “COBRA Subsidy”) for the assistance eligible individual during the Subsidy Period, but allowed employers to seek reimbursement by claiming a payroll tax credit for these COBRA Subsidy payments by complying with applicable IRS procedures. AARA also mandated that group health plans offering a choice of coverage options offer assistance eligible individuals the option to switch coverage options and required group health plans to notify assistance eligible individuals of the special COBRA Subsidy Rules.

H.R. 3326 COBRA Subsidy Rules Extension

As signed into law on December 19, 2009, H.R. 3326:

Extends the period during which an involuntary employment loss can qualify an otherwise COBRA-eligible employee or dependent as an assistance eligible individual for an additional two months (from December 31, 2009 to February 28, 2010);
Adds an additional six months (from 9 to 15 months) the Subsidy Period during which an assistance eligible individual experiencing an involuntary loss of employment between September 1, 2008 and February 28, 2010 is entitled to pay the Reduced AARA Premium;
Requires group health plans to notify assistance eligible individuals of the extension; and
Requires group health plans to allow additional time for assistance eligible individuals who had exhausted their original 9-month Subsidy Period before H.R. 3326 extended the Subsidy Period to 15 months to pay the Reduced AARA Premium related to the extension.

Group health plans, their employer or union sponsors, administrators, insurers and service providers will need to act quickly to prepare and provider required updated notifications to assistance eligible individuals of these extended eligibility periods and their resulting rights, and otherwise update their plan documents, procedures, and COBRA notifications in light of these new rules.

If you have questions about or need assistance evaluating, commenting on or responding to these or other employment, health or other employee benefit, workplace health and safety, corporate ethics and compliance or other concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer. The author of the “Health Plan Eligibility Toolkit,” Ms. Stamer is experienced with assisting employers, insurers, administrators, and others to design and administer group health plans cost-effectively in accordance with COBRA and other applicable federal regulations as well as advising and defending employers and others against tax, employment discrimination and other labor and employment, and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators.. Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, a representative to the ABA Joint Committee on Employee Benefits Council, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group and Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 22 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

Comments Off on President Signs Law Extending & Expanding Temporary AARA COBRA Subsidy Requirements For Group Health Plans | ARRA, Bankruptcy, COBRA, COBRA Subsidy, Corporate Compliance, Employee Benefits, Employers, ERISA, Health Plans, Human Resources, Insurance, Internal Controls, Public Policy, Stimulus Bill, Tax | Tagged: ARRA COBRA Premium, COBRA, COBRA Subsidy, Corporate Compliance, Employee Benefits, Employers, Employment, ERISA, Health Insurance, Human Resources, Insurance, Insurer, Internal Controls, Labor, Managed Care, Medical Coverage, Stimulus Bill, Subsidy Bill, Tax | Permalink
Posted by Cynthia Marcotte Stamer

Mishandling Employee Benefit Obligations Creates Big Liabilities For Distressed Businesses & Their Business Leaders

December 18, 2009

By Cynthia Marcotte Stamer

Business owners, executives, board members, and other business leaders of companies facing financial challenges should heed a mounting series of recent fiduciary liability settlement orders, judgments and prosecutions as strong reminders of the potential personal risk they may face if their health, 401(k) or other employee benefit programs are not appropriately funded and administered as required by the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Businesses leaders struggling to deal with economic setbacks frequently may be tempted to use employee benefit plan contributions or funds for added liquidity or otherwise fail to take appropriate steps to protect and timely deposit plan contributions or other plan assets. A long and ever-mounting series of decisions demonstrates the risks of yielding to these temptations for businesses that sponsor these plans and the business leaders that make these decisions.

EBSA Prosecutes Businesses & Executives That Bungle ERISA Obligations

The mishandling of employee benefit obligations by financially distressed companies during the ongoing economic downturn is fueling an increase in Department of Labor Employee Benefit Security Administration (EBSA) enforcement actions against distressed or bankrupt companies and their officers or directors for alleged breaches of fiduciary duties or other mishandling of medical, 401(k) or other pension, and other employee benefit programs sponsored by their financially distressed companies.

EBSA enforcement activities during 2009 continue to highlight the longstanding and ongoing policy of aggressive investigation and enforcement of alleged misconduct by companies, company officials, and service providers in connection with the maintenance, administration and funding of ERISA-regulated employee benefit plans. A review of the Labor Department’s enforcement record makes clear that where the Labor Department perceives that a plan sponsor or its management fails to take appropriate steps to protect plan participants, the Labor Department will aggressively pursue enforcement regardless of the size of the plan sponsor or its plan, or the business hardships that the plan sponsor may be facing.

EBSA reports enforcing $1.3 billion in recoveries related to pension, 401(k), health and other benefits during fiscal year 2009. EBSA has filed numerous lawsuits to compel distressed companies and/or members of their management to pay restitution or other damages for alleged breaches of ERISA fiduciary duties, to appoint independent fiduciaries, or both for plans sponsored by bankrupt or financially distressed companies.

Recent settlements and judgments obtained by the Labor Department and through private litigation document that officers and other members of management participating, or possessing authority to influence, the handling of heath, 401(k) and other pension, or other employee benefit plans regulated by ERISA may be exposed to personal liability if these benefit programs are not maintained and administered appropriately. This risk is particularly grave when the sponsoring company becomes financially distressed or goes bankrupt, as the handling of employee benefit and other responsibilities becomes particularly disrupted and the lack of company liquidity often leaves executives and service providers as the only or best source of recovery for government officials and private plaintiffs.

Executives Ordered To Pay To Make Things Right

In the December 2, 2009 decision in Solis v. Struthers Industries Inc., for instance, a federal district judge ordered business leader Jomey B. Ethridge liable to pay $303,084.61 to restore assets belonging to the 401(k) plan of bankrupt Struthers Industries in an ERISA fiduciary responsibility action filed by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). Filed by the EBSA in the U.S. District Court for the Southern District of Mississippi, the Struthers Industries lawsuit alleged that Ethridge and Struthers Industries allowed employee contributions to be used for purposes other than providing benefits resulting in losses of $310,084.57. According to court documents, Struthers Industries designed and built heat transfer and pressure vessels at its Gulfport facility. In 2001, its 401(k) plan had 278 participants and assets totaling $8,279,083. The company filed for bankruptcy in 2003, and its assets were auctioned off in 2005. An independent fiduciary was appointed by the court in 2007 to manage the plan’s assets. The ordered Ethridge personally to pay $303,084.61 in restitution to the plan for his involvement in the mishandling of the plan’s assets. The order also bars Ethridge from acting as a benefit plan fiduciary in the future.

The Struthers Industries decision comes on the heels of EBSA’s success in Solis v. T.E. Corcoran Co. Inc. last month in recovering more than $89,000 from business owners and operators found to have breached fiduciary duties to the participants of the T.E. Corcoran Co. Inc. Profit Sharing Plan by improperly loaning plan assets to he plan sponsor and an affiliated company. The Labor Department sued T.E. Corcoran Co. and its owners, John F. Corcoran and Thomas E. Corcoran Jr., alleging that the company and its owners caused the plan to lend money to the two companies at below market interest rates, without terms of payment and without documentation in violation of ERISA. The suit filed in the U.S. District Court for the District of Massachusetts, also named as a defendant Coran Development Co. Inc., a company co-owned by the Corcorans. T.E. Corcoran Co. Inc. was the sponsor and administrator of the plan, while John and Thomas Corcoran were trustees of the plan, making all three fiduciaries and parties in interest with respect to the plan. ERISA specifically prohibits the use of employee benefit plan funds to benefit parties in interest.

The Corcoran judgment requires that the plan account balances of defendants John F. Corcoran and Thomas E. Corcoran Jr. be offset in the amount of $89,273 plus interest to be allocated to the accounts of the other plan participants. The offset will make whole all of the accounts of the non-trustee participants. In addition, the court order appoints an independent trustee to oversee the final distribution of the plan’s assets and the proper termination of the plan, requires the defendants to cooperate fully with the independent trustee in this process, and then prohibits them from serving as fiduciaries to any ERISA-covered plan for 10 years.

A complex maze of ERISA, tax and other rules make the establishment, administration and termination of employee benefit plans a complicated matter. When the company sponsoring a plan goes bankrupt or becomes distressed, the rules, as well as the circumstances can make the administration of these responsibilities a powder keg of liability for all involved. Companies and other individuals that in name or in function possess or exercise discretionary responsibility or authority over the maintenance, administration or funding of employee benefit plans regulated by ERISA frequently are found to be accountable for complying with the high standards required by ERISA for carrying out these duties based on their functional ability to exercise discretion over these matters, whether or not they have been named as fiduciaries formally.

In other instances, businesses and their leaders do not realize that the functional definition that ERISA uses to determine fiduciary status means that individuals participating in discretionary decisions relating to the employee benefit plan, as well as the plan sponsor, may bear liability under many commonly occurring situations if appropriate care is not exercised to protect participants or beneficiaries in these plans.

For this reason, businesses providing employee benefits to employees or dependents, as well as members of management participating in, or having responsibility to oversee or influence decisions concerning the establishment, maintenance, funding, and administration of their organization’s employee benefit programs need a clear understanding of their responsibilities with respect to such programs, the steps that they should take to demonstrate their fulfillment of these responsibilities, and their other options for preventing or mitigating their otherwise applicable fiduciary risks.

If you have questions about or need assistance evaluating, commenting on or responding to these or other employment, health or other employee benefit, workplace health and safety, corporate ethics and compliance or other concerns or claims, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group, Ms. Stamer is experienced with assisting employers and others about compliance with federal and state equal employment opportunity, compensation and employee benefit, workplace safety, and other labor and employment, as well as advising and defending employers and others against tax, employment discrimination and other labor and employment, and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. Ms. Stamer has advised and represented employers on these and other labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 20 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

We hope that this information is useful to you. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile here or e-mailing this information here or registering to participate in the distribution of our Solutions Law Press HR & Benefits Update distributions here. Some other recent updates that may be of interested include the following, which you can access by clicking on the article title:

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

Comments Off on Mishandling Employee Benefit Obligations Creates Big Liabilities For Distressed Businesses & Their Business Leaders | Bankruptcy, Corporate Compliance, Defined Benefit Plans, Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Health Plans, Internal Controls, Internal Investigations, Professional Liability, Restructuring, Retirement Plans | Tagged: Bankruptcy, Corporate Compliance, Distressed Company, E&O Liability, EBSA, ERISA, Fiduciary Liability, Fiduciayr Responsibility, Officers & Directors Liability, Reorganization, Restructuring | Permalink
Posted by Cynthia Marcotte Stamer

Employee Benefit Plan Sponsors & Fiduciaries Urged To Review Bonding, Credentials of Staff & Service Providers Under ERISA

December 14, 2009

By Cynthia Marcotte Stamer

Businesses sponsoring employee benefit plans and officers, directors, employees and others acting as fiduciaries with respect to these employee benefit plans should take steps to confirm that all of the appropriate fiduciary bonds required by the Employee Retirement Income Security Act of 1974, as amended (ERISA) are in place, that all employee benefit plans sponsored are appropriately covered, and that all individuals serving in key positions requiring bonding are covered and appropriately qualified to serve in that capacity under ERISA and the terms of the bond. Adequate attention to these concerns not only is a required component of ERISA’s fiduciary compliance, it also may provide invaluable protection if a dishonesty or other fiduciary breach results in a loss or other exposure.

ERISA generally requires that every employee benefit plan fiduciary, as well as every other person who handles funds or other property of a plan (a “plan official”), be bonded if they have some discretionary control over a plan or the assets of a related trust. While some narrow exceptions are available to this bonding requirement, these exceptions are very narrow and apply only if certain narrow criteria are met.

Plan sponsors and other plan fiduciaries should take steps to ensure that all of the bonding requirements applicable to their employee benefit plans are met at least annually. Monitoring these compliance obligations is important not only for the 401(k) and other retirement plans typically associated with these requirements, but also for self-insured medical and other ERISA-covered employee benefit plans.

The bonding and credentialing audit should include adopting a written policy requiring appropriate credentialing and bonding and verifying that appropriate bonds are in place for all internal personnel and outside service providers subject to the bonding requirements.

Steps should be taken to ensure that the required fiduciary bonds are secured in sufficient amounts and scope to meet ERISA’s requirements. In addition to confirming the existence and amount of the fiduciary bonds, plan sponsors and fiduciaries should confirm that each employee plan for which bonding is required is listed in the bond and that the bond covers all individuals or organizations that ERISA requires to be bonded. For this purpose, the review should verify the sufficiency and adequacy of bonding in effect for both internal personnel as well as outside service providers. In the case of internal personnel, the adequacy of the bonds should be reviewed annually to ensure that bond amounts are appropriate. Unless a service provider provides a legal opinion that adequately demonstrates that an ERISA bonding exemption applies, plan sponsors and fiduciaries also should require that third party service providers provide proof of appropriate bonding as well as to contract to be bonded in accordance with ERISA and other applicable laws, to provide proof of their bonded status or documentation of their exemption, and to provide notice of events that could impact on their bonded status.

When verifying the bonding requirements, it also is a good idea to conduct a criminal background check and other prudent investigation to reconfirm the credentials and suitability of individuals and organizations serving in fiduciary positions or otherwise acting in a capacity covered by ERISA’s bonding requirements. ERISA generally prohibits individuals convicted of certain crimes from serving, and prohibits plan sponsors, fiduciaries or others from knowingly hiring, retaining, employing or otherwise allowing these convicted individuals during or for the 13-year period after the later of the conviction or the end of imprisonment, to serve as:

An administrator, fiduciary, officer, trustee, custodian, counsel, agent, employee, or representative in any capacity of any employee benefit plan,
A consultant or adviser to an employee benefit plan, including but not limited to any entity whose activities are in whole or substantial part devoted to providing goods or services to any employee benefit plan, or
In any capacity that involves decision-making authority or custody or control of the moneys, funds, assets, or property of any employee benefit plan.

Knowing or intentional violation of this prohibition may expose violating party to fines of up to $10,000, imprisonment for not more than five years, or both. Even where the violation is not knowing or willful, however, allowing disqualified persons to serve in fiduciary roles can have serious consequences such as exposure to Department of Labor penalties and personal liability for breach of fiduciary duty for damages resulting to the plan if it is established that the retention of services was an imprudent engagement of such an individual that caused the loss. When conducting such a background check, care should be taken to comply with the applicable notice and consent requirements for conducting third party conducted background checks under the Fair Credit Reporting Act (FCRA) and otherwise applicable law. As such background investigations generally would be conducted in such a manner as to qualify as a credit check for purposes of the FCRA, conducting background checks in a manner that violates the FCRA credit check requirements itself can be a source of significant liability.

Curran Tomko Tarski LLP Attorneys Can Help

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group and a nationally recognized author and speaker, Ms. Stamer is experienced with advising and assisting employers with these and other labor and employment, employee benefit, compensation, risk management and internal controls matters. Ms. Stamer is experienced with assisting employers, fiduciaries, bankruptcy trustees, investors, purchasers and others about defined benefit plan and other employee benefit, labor and employment, compensation and other related concerns involved with distressed businesses or benefit plans, bankruptcy and restructuring transactions and other corporate or plan related events. Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group and a Joint Committee on Employee Benefit Council Member, Ms. Stamer has advised and represented these and other business clients on employee benefit, labor and employment, compensation, employee benefit and other personnel and staffing matters for more than 20 years. Her experience includes significant experience representing and advising employee benefit plan sponsors, fiduciaries, and service providers and their affiliates; investors, creditors, bankruptcy trustees, and others about employee benefit, labor and employment and related services and compensation concerns affecting transactions involving bankrupt or distressed corporations. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

Other Information & Resources

For important information concerning this communication click here. If you do not wish to receive these updates in the future, send an e-mail with the word “Remove” in the Subject here.

Comments Off on Employee Benefit Plan Sponsors & Fiduciaries Urged To Review Bonding, Credentials of Staff & Service Providers Under ERISA | Employee Benefits, Employers, ERISA, Fiduciary Responsibility, Human Resources, Internal Controls | Tagged: 401(k) Plan, ERISA, Fiduciary Responsibility, Health Plan, investment advisor, retirement plan, tpa | Permalink
Posted by Cynthia Marcotte Stamer

Labor Department To Expand Employee Benefits, Wage & Hour, OSHA & Other Reporting & Disclosure Requirements & To Implement Other New Employee Benefit Regulations

December 8, 2009

By Cynthia Marcotte Stamer

The U.S. Department of Labor (Labor Department) plans to implement a host of new employee benefit and employment regulations seeking to strengthen employee benefit, wage and hour, safety and other protections with greater transparency and disclosure, the Labor Department announced yesterday.

Employee Benefits, Wage & Hour, OSHA & Other Rules Seek To Protect Workers With Transparency

Employee Benefits Security Administration (EBSA) plans to implement a host of new rules designed to strengthen retirement security by expanding the private employee benefit plan disclosure requirements and enhancing the availability of information to pension plan participants and beneficiaries and employers, according to the Department of Labor (DOL) 2009 Regulatory Agenda (the “Regulatory Agenda”) announced yesterday.

According to the Regulatory Agenda, EBSA plans to promote these goals through the implementation of a host of new rules including:

Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans, which would increase transparency between individual account pension plans and their participants and beneficiaries by ensuring that participants and beneficiaries are provided the information they need, including information about fees and expenses, to make informed investment decisions.
Amendment of Standards Applicable to General Statutory Exemption for Services, which would require service providers to disclose to plan fiduciaries services, fees, compensation and conflicts of interest information.
Annual Funding Notice for Defined Benefit Plans, which would require defined benefit plan administrators to provide all participants, beneficiaries and other parties with detailed information regarding their plan’s funding status.
Periodic Pension Benefits Statements, which would require pension plans to provide participants and certain beneficiaries with periodic benefit statements.
Multiemployer Plan Information Made Available on Request, which would require pension plan administrators to provide copies of financial and actuarial reports to participants and beneficiaries, unions and contributing employers on request.

The 2009 Regulatory Agenda highlights the most noteworthy and significant regulatory projects that the Labor Department has established for the EBSA, the Employment Standards Administration (ESA), Mine Safety and Health Administration (MSHA), Occupational Safety and Health Administration (OSHA), and Employment and Training Administration (ETA) for the upcoming year. In addition to the transparency rules planned for EBSA, the 2009 Regulatory Agenda also indicates that employers can expect new Labor Department regulations targeting transparency in other areas. These include:

The MSHA to propose a rule on Notification of Legal Identity, which would require mine operators to provide increased identification information, would allow the agency to better target the most egregious and persistent violators and deter future violations.
The Office of Labor-Management Standards’ to propose regulations on Notification of Employee Rights Under Federal Labor Laws, which would implement Executive Order 13496 and require all Government contracting agencies to include a contract clause requiring contractors to inform workers of their rights under Federal labor laws.
The Wage and Hour Division to update its regulations about Records to be Kept by Employers Under the Fair Labor Standards Act to enhance the transparency and disclosure to workers as to how their wages are computed and to allow for new workplace practices such as telework and flexiplace arrangements.
OSHA to modify its Hazard Communication Standard to require standardized labeling requirements and order of information for safety data sheets and to update its Occupational Injury and Illness Recording and Reporting Requirements rule, which would propose the collection of additional data to help employers and workers track injuries at individual workplaces, improve the Nation’s occupational injury and illness information data, and assist the agency in its enforcement of the safety and health workplace requirements.

Other Employee Benefit Regulations Planned

Beyond its planned EBSA transparency initiative, the 2009 Regulatory Agenda reflects that other EBSA regulatory priorities for the year ahead include:

Issue guidance implementing the group health plan Genetic Information Nondiscrimination Act of 2008 (GINA) amendments to ERISA which generally prohibit group health plans from discriminating in health coverage based on genetic information and from collecting genetic information. This will be a joint rulemaking action with the Departments of Health and Human Services and the Treasury.
Provide guidance regarding the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) amendments to ERISA. MHPAEA creates parity for mental health and substance use disorder benefits under group health plans by mandating that any financial requirements and treatment limitations applicable to mental health and substance abuse disorder benefits to be no more restrictive than predominant requirements or limitations applied to substantially all medical and surgical benefits covered by a plan.
Issue guidance clarifying the circumstances under which health care arrangements established or maintained by state or local governments for the benefit of non-governmental employees do not constitute an employee welfare benefit plan for purposes of ERISA.
Propose amendments to its regulations to clarify the circumstances under which a person will be considered a fiduciary when providing investment advice to employee benefit plans and their participants and beneficiaries of such plans.
Explore steps it can take by regulation, or otherwise, to encourage the offering of lifetime annuities or similar lifetime benefits distribution options for participants and beneficiaries of defined contribution plans.

Employers and employee benefit plan sponsors, fiduciaries, and service providers should take into account these planned regulatory changes for budgeting and program design purposes and keep alert for announcements of proposed or final regulations or other guidance in these and other areas.

If your organization needs assistance with monitoring, assessing, managing or defending these or other labor and employment, compensation or benefit practices, please contact the author of this article, Curran Tomko Tarski LLP Labor & Employment Practice Group Chair Cynthia Marcotte Stamer or another Curran Tomko Tarski LLP attorney of your choice. Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization and Chair of the American Bar Association RPTE Employee Benefits & Other Compensation Group and a nationally recognized author and speaker, Ms. Stamer is experienced with advising and assisting employers with these and other labor and employment, employee benefit, compensation, risk management and internal controls matters. Ms. Stamer is experienced with assisting employers and others about compliance with federal and state equal employment opportunity, compensation, health and other employee benefit, workplace safety, and other labor and employment laws, as well as advising and defending employers and others against tax, employment discrimination and other labor and employment, and other related audits, investigations and litigation, charges, audits, claims and investigations by the IRS, Department of Labor and other federal and state regulators. She has counseled and represented employers on these and other workforce matters for more than 22 years. Ms. Stamer also speaks and writes extensively on these and other related matters. For additional information about Ms. Stamer and her experience or to access other publications by Ms. Stamer see here or contact Ms. Stamer directly. For additional information about the experience and services of Ms. Stamer and other members of the Curran Tomko Tarksi LLP team, see here.

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Comments Off on Labor Department To Expand Employee Benefits, Wage & Hour, OSHA & Other Reporting & Disclosure Requirements & To Implement Other New Employee Benefit Regulations | Absenteeism, ADA, Affirmative Action, Corporate Compliance, Defined Benefit Plans, EEOC, Employee Benefits, Employers, ERISA, family leave, GINA, Government Contractors, Human Resources, Military Leave, OFCCP, OSHA, Retirement Plans, Risk Management, Safety, Uncategorized, Wellness | Tagged: COBRA, Corporate Compliance, defined benefit plan, Disability Discrimination, Disease Management, Employee Benefits, Employers, Employment, ERISA, GINA, Human Resources, Insurance, Internal Controls, Medical Coverage, Military Leave, Minimum Wage, Occupational Injury, Overtime, Privacy, Retirement Plans, Risk Management, Wellness | Permalink
Posted by Cynthia Marcotte Stamer

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