Monthly Benefits Update - November 2013

by Franczek Radelet P.C.

Monthly Benefits Update - November 2013 [pdf]

Health & Welfare Plans

Health Care Reform: Supreme Court Grants Review to Two Cases Challenging ACA’s Contraception Coverage Mandate

The United States Supreme Court has agreed to hear two cases challenging the Affordable Care Act’s (ACA) contraception mandate, which requires health plans sponsored by employers with 50 or more employees to offer coverage for contraception-related services, including drugs, devices, and counseling at no charge to their employees (Sebelius v. Hobby Lobby Stores, Inc., U.S., No. 13-354 from the Tenth Circuit Court of Appeals, and Conestoga Wood Specialties Corp. v. Sebelius, U.S., No. 13-356 from the Third Circuit). The Supreme Court announced it will hear combined oral arguments for the two cases.

Both cases involve plaintiffs that are closely held, for-profit corporations. At issue is whether closely held corporations are exempt from the contraception mandate if its owners object to the mandate on religious grounds. The plaintiffs are challenging the mandate under both the free exercise clause of the First Amendment and the federal Religious Freedom Restoration Act (RFRA), which states that the government may not impose a “substantial burden” on a person’s religious exercise absent a compelling governmental interest and a showing that the burden is the least restrictive means of furthering the compelling interest.  

The Tenth Circuit ruled in the Hobby Lobby case that the corporation-plaintiffs were likely to succeed on the merits in establishing that they are exempt from the ACA’s mandate because they qualify as “person[s]” who can exercise religion and assert rights under the RFRA. By contrast, the Third Circuit ruled in the Conestoga case (involving a Mennonite family’s incorporated woodworking business) that the plaintiffs were unlikely to succeed on the merits because “for-profit, secular corporations—apart from its owners—[cannot] exercise religion.”

The Supreme Court’s decision to weigh in on the issue may resolve the circuit split and provide clearer guidance on the applicability of the contraceptive mandate. It should be noted that many religious, non-profit organizations are already exempt from ACA’s contraceptive mandate.

Health Care Reform: IRS Publishes Final Rules on Additional Medicare Tax

The Internal Revenue Service (IRS) has issued final regulations on the Additional Medicare Tax added by the ACA which increased the employee portion of the Medicare tax for high-income employees from 1.45% to 2.35% beginning in 2013. The employer portion of the Medicare tax remained at 1.45%. Employers are required to withhold the Additional Medicare Tax from employees earning more than $200,000 (but the actual liability thresholds for employees are: $250,000 for married individuals filing jointly, $125,000 for married individuals filing separately, and $200,000 for all other individuals).

The final rules provide guidance for employers with respect to withholding of the Additional Medicare Tax from employees’ wages, filing and reporting requirements for the tax, and the process for correcting underpayments and seeking refunds for overpayments of the tax. The rules went into effect on November 29, 2013.

Agencies Issue Final Regulations on Mental Health Parity Requirements

The Departments of Treasury, Labor, and Health and Human Services (collectively, the “Agencies”) issued final regulations implementing the Mental Health Parity and Addiction Equity Act (MHPAEA) of 2008. The rules generally require that health plans offering mental health/substance abuse disorder services offer parity of coverage between those services and medical/surgical services. That is, plans may not make the financial requirements (e.g., coinsurance, deductibles, and copayments) and treatment limitations (e.g., annual or lifetime limits or visit limits) for mental health/substance abuse disorder services more restrictive than medical/surgical services. 

The rules largely implement the interim regulations issued in February 2010. Like the interim regulations, the final regulations include the ACA-implemented rule that mental health/substance abuse disorder services are an essential health benefit (EHB) that must be offered by small group and individual non-grandfathered plans. However, a notable difference between the 2010 rules and the final rules is that the final rules provide that a plan may not impose a non-quantitative treatment limitation (NQTL) which is a limitation on the scope or duration of a treatment not expressed numerically (e.g., medical management technique such as prior authorization), on a mental health/substance abuse disorder treatment, unless it is applied no more stringently than it is to comparable medical/surgical services.

The final regulations apply for plan years beginning on or after July 1, 2014 (January 1, 2015 for calendar year plans).

Retirement Plans

IRS Publishes Final Business Hardship Rules for Safe Harbor Defined Contribution Plans

The IRS published final regulations permitting sponsors of 401(k) plans to reduce or suspend nonelective safe harbor contributions in the middle of the plan year. The regulations provide that such midyear contribution changes may be made if (1) the employer is operating at an economic loss; or (2) the employer provides notice to participants prior to the start of a plan year that nonelective contributions may be reduced or suspended during that upcoming plan year and provides a supplemental notice to participants at least 30 days before making any midyear contribution changes. Prior to the issuance of these rules, the 2009 proposed rules provided that safe harbor plan sponsors must show a “substantial business hardship” in order to be able to make midyear reductions or suspensions to nonelective contributions.

In addition, to achieve uniformity between the rules applying to nonelective contributions and those applying to safe harbor matching contributions, the final regulations provide that the requirements for making midyear matching contributions changes are the same as they are for nonelective contributions. In other words, employers may suspend or reduce safe harbor matching contributions if they meet either (1) or (2), as stated above.

These rules go into effect for plan years beginning on or after January 1, 2015. The IRS also indicated that it may provide additional relief in the future for safe harbor plans.

IRS Permits 403(b) Plan Sponsors to Correct Failure to Adopt Written Plan Document Using VCP

In its retirement plan newsletter dated November 22, 2013, the IRS stated that 403(b) plan sponsors who did not adopt a written plan document by the December 31, 2009 deadline can correct the error by making a Voluntary Correction Program (VCP) submission under the IRS’s Employee Plans Compliance Resolution System (EPCRS).

If the plan’s only error is its failure to timely adopt a written plan document, it can get a 50% discount on the VCP fee as long as the filing is sent to the IRS by December 31, 2013.

Public Plans

State Legislators Reach Deal to Increase Pension Funding

On November 27, 2013, leaders of the Illinois General Assembly reportedly struck a deal to address the state pension system’s nearly $100 billion of unfunded pension liability. Much of the savings would reportedly come from a reduction in annual cost-of-living adjustments (COLA) to pensions. Instead of a flat 3% annual COLA for all pensioners as the current formula provides, the proposed change would provide a 3% COLA for each year of the employee’s service times $1,000 (e.g., a pensioner with 20 years of service would get a 3% COLA on the first $20,000 of her annual pension, even if the pensioner’s actual pension amount is higher than $20,000). In addition, further savings would come from increased minimum retirement ages for workers who are currently 45 and younger. Employees older than 45 would be unaffected by this change.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Franczek Radelet P.C. | Attorney Advertising

Written by:

Franczek Radelet P.C.

Franczek Radelet P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.