Reporting & Disclosure

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Another Chapter in Buschau v. Rogers Litigation.
Yau, Andrea; Plans & Trusts; v30 no2 pp 13-14 Mar-Apr 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The case of Buschau v. Rogers Communications Inc. started in 1995, questioning the disposition of the actuarial surplus in a pension plan sponsored by Premier Communications, which Rogers acquired in 1980. Rogers transferred much of the surplus to itself and merged the plan with four other plans, three in deficit. This phase of the litigation stems from an application for judicial review of the 2010 decision of the Office of the Superintendent of Financial Institutions. The court refused to reconsider four of the eight issues raised, since they had been correctly decided in 2007 and there was no legislative authority to reopen the decisions. The applicants pointed to more recent cases they claimed gave new and stronger weight to their cause, but the court felt the circumstances were insufficient to revive the points of contention. The court also rejected the applicants' pleas about adding new members to the plan, legal costs and employer disclosure obligations. The case is next headed for the Federal Court of Appeal.
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CIGNA Corp. v. Amara and ERISA's Equitable Remedies: Revolutionary Overthrow or Doctrinal Clarification?
Rachal, Robert; Lincoln, Kara; Benefits Law Journal; v25 no1 pp 37-62 Spring 2012; journal article

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Abstract : In CIGNA Corp. v. Amara, the Supreme Court took a somewhat different stance on the concept of appropriate equitable relief. The court ruled ERISA Section 502(a)(1)(B) relief may not exceed plan benefits, but claims against fiduciaries are not restricted by the monetary relief limits of Section 502(a)(3) set in Mertens v. Hewitt Associates. The court's conclusion appears not to overhaul prior thinking on appropriate equitable relief. It is likely that trust law limits to such relief will stand and that claimants must satisfy a standard of harm and proof of causation. Thus, the Amara decision appears consistent with jurisprudence on equitable remedies in trust law, though certain ambiguities may have to be worked out.
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COLI and the Fair Value Option Under US GAAP.
Nunn, Lee; Journal of Pension Planning & Compliance; v38 no1 pp 1-16 Spring 2012; journal article

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Abstract : The U.S. Generally Accepted Accounting Principles (GAAP) addresses recognition of assets in corporate owned life insurance (COLI) in detail in the FASB Emerging Issues Task Force Issue 06-5 and Subtopic 325-30. The guidance recommends recording COLI at its cash surrender value, rather than the fair value option. The lack of health information undermines the fair value to its surrender value, and several practical issues discourage its use, including setting an election date, valuation methods and extensive disclosure. Firms should avoid the fair value option if possible, instead reporting the cash surrender value of a COLI. However, if the fair value option has already been elected, it is better not to make a change, since it would trigger disclosure requirements.
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Considerations and Challenges When Changing 403(B) Plan Vendors.
Samsa, Mary K.; Journal of Compensation and Benefits; v28 no2 pp 15-20 Mar-Apr 2012; journal article

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Abstract : Sponsors of 403(b) plans trying to streamline plan operations following the IRS 2009 regulations should keep in mind five key considerations. First, they should be aware of the distinct provisions of the IRS and DOL regarding dropping orphan contracts. They should avoid starting any new group annuity contracts that need the consent of individual participants or that ban transfers to competing funds. It is reasonable that contracts restrict or penalize withdrawals from contracts, but these limits should be appropriate for the employer's circumstances. Any new administrative services agreements should address transitions and provide for electronic transfer of records. Legal counsel should review existing and proposed contracts, and negotiations for changing vendors should start early to provide the greatest leverage.
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Court Affirms Denial of Benefits.
Benefits Magazine; v49 no3 pp 56-57 Mar 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The Tenth Circuit Appeals Court affirmed the lower court's ruling in Eugene S. v. Horizon Blue Cross Blue Shield, which revolved around delegation of authority to make benefits decisions to a third-party administrator (TPA). The plaintiff sought coverage for residential treatment for his son but was granted only partial coverage. The plaintiff sought to block the defendant's supplemental declaration authorizing its TPA to decide claims. The district court permitted the declaration and was affirmed by the Appeals Court. The Appeals Court noted the summary plan description gave the TPA discretionary authority and found this delegation sufficiently mitigated any conflict of interest from a dual role. Using an arbitrary and capricious standard of review, the court ruled the defendant TPA's decision was reasonable and made in good faith.
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Feds Propose Rules on New Four-Page Health Plan Summaries and Advance Notice Requirements for Plan Changes.
Holloway, Mark; Fensholt, Edward; Benefits Law Journal; v25 no1 pp 77-85 Spring 2012; journal article

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Abstract : Under the Patient Protection and Affordable Care Act, health plan sponsors must provide plan members and beneficiaries a concise summary of health benefits and coverage (SBC). The document must not exceed four double-sided pages printed in least 12-point font size and be written in a culturally and linguistically sensitive manner. Sponsors must distribute SBCs before initial enrollment, at open enrollment and within one week of an individual or special request. The proposed regulation that notification about any material plan changes must be provided at least 60 days before the change is under review as of spring 2012. The National Association of Insurance Commissioners has developed a model SBC with glossary.
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Get In on the Act.
Sharma, Arti; Benefits Canada; v36 no3 p 42 Mar 2012; journal article

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Abstract : The American Dodd-Frank Wall Street Reform and Consumer Protection Act will have repercussions for Canadian institutional investors. Focused on systemic risk in the marketplace, two major goals are to rein in derivative products and increase disclosures by public companies. In Canada, individual provincial regulators are likely to adopt reforms similar to the U.S. law and banks are working jointly on a Canadian central counterparty (CCP) for clearing trades. Institutional investors must appoint a futures commission merchant, which must contribute to a CCP default fund. By 2012 a registered CCP must clear swap contracts written by U.S. or European counterparties. The changes will have implications for fixed margining, initial margin and collateral requirements, common credit and trade portability.
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How Report Cards on Physicians, Physician Groups, and Hospitals Can Have Greater Impact on Consumer Choices.
Sinaiko, Anna D.; Eastman, Diana; Rosenthal, Meredith B.; Health Affairs; v31 no3 pp 602-611 Mar 2012; journal article

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Abstract : Part of consumer education for health choices can come from report cards on physicians, groups and hospitals, but existing reports appear to make little difference in decision making. Discussion and survey responses of attendees at the 2011 National Summit on Public Reporting for Consumers in Health Care, sponsored by the Agency for Healthcare Research and Quality, revealed consensus that weaknesses in card content, design and accessibility may be to blame. The reports may prompt care providers to improve their performance, but major concerns focused on the adequacy of quality measures, poor presentation and delivery, and marginal consumer engagement. The observed need for the development of consumer-focused measures is echoed in the mandate for performance metrics in the Patient Protection and Affordable Care Act.
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Implementing the Revisions to 2011 Employee Benefit Plans.
Ernst & Young; Journal of Compensation and Benefits; v28 no2 pp 21-35 Mar-Apr 2012; journal article

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Abstract : The revision of the International Accounting Standards Board's IAS 19 significantly changes the way postemployment benefits are recognized, presented and disclosed. Key changes include dealing with actuarial gains and losses, expected returns on assets and unvested past service costs. IAS 19R modifies accounting for recognition of termination benefits. IAS 19R changes the definition of short-term employee benefits, which will use expected timing of benefit settlement to determine whether a benefit is short term or long term. The revised standards are applicable retrospectively for annual periods starting January 1, 2013. In the view of Ernst & Young, the changes have a number of ramifications, including leading to greater balance sheet volatility for some firms, with impacts on performance measures and debt covenants. Financial officers must analyze the changes and communicate the effects with actuaries, creditors and investors.
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Incorporating Best Practices Into Your 403(b) Plan.
Luckenbach, Carole Anne; Benefits Magazine; v49 no3 pp 22-29 Mar 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : As individual participant investing becomes more important in 403(b) plans, sponsors should adopt a best practices model to support participants. Since these plans are more likely to feature investments with higher fees, fee disclosure is crucial. Unbundling services and fees and moving toward an open investment architecture plan is strongly recommended. Plan sponsors, even if not bound by ERISA, have some fiduciary responsibility under state or other laws and may want to consider fiduciary liability insurance. Aon Hewitt found that offering participants decision making tools and target date funds leads to higher returns and lower risk. Plan sponsors and committee members would do well to seek the services of an investment or pension consultant. A white paper produced by the California Teachers Association details institutional best practices for 403(b) and 457 plans, starting with the need for an appropriate plan governance structure.
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IRS Issues W-2 Reporting Guidance.
Bongiovanni, Kate; Employee Benefit News; v26 no3 p 26 Mar 2012; journal article

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Abstract : Notice 2012-9, issued by the IRS in January 2012, addresses reporting on the cost of employer-provided health benefits on Form W-2, as required by the Patient Protection and Affordable Care Act. The notice makes clear that employers need not report on some kinds of coverage, including dental and vision benefits under separate policies, wellness programs, onsite clinics and employee assistance programs. Contributions to health reimbursement arrangements, health savings account and health flexible spending arrangements may be included on W-2s but are not required. The notice discusses use of the small employer exception when an agent files the W-2s as well as reporting health FSA costs when the amount exceeds the employee's deferral election. The reporting requirement takes effect with the 2012 calendar year.
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PBGC Developments: Reportable Events and Recharacterizing Premium Contributions.
Stapel, Julie K.; Employee Benefit Plan Review; v67 no3 pp 22-24 Mar 2012; journal article

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Abstract : In 2011 the PBGC issued Technical Update 11-1 regarding reportable events. It had proposed in 2009 changes to reportable event regulations but withdrew the proposed regulations and provided Update 11-1, with the intent that final regulations will supersede the update. The same update pertained to the elimination of most automatic waivers and extensions for reportable events and addressed the difference between rules for premium calculations and reportable event rules. Update 11-1 extended through 2012 the waiver of reporting requirements for missed quarterly contributions for certain plans under 100 participants. The PBGC also put out a Policy Statement clarifying the PGBC's intent to deny plans' recharacterizations of contributions beyond one previous year except in clear cases of error.
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QROPS: The New Normal?
Ainsworth, Stephen; Smith, Debra; Benefits & Compensation International; v41 no7 pp 17-21 Mar 2012; journal article

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Abstract : A Qualified Recognised Overseas Pension Scheme (QROPS) is a pension plan set up outside the United Kingdom to which benefits from an internal U.K. plan may be transferred without adverse tax consequences. The arrangement resulted from the 2003 EU Pensions Directive mandating freedom to move pension assets and became part of an effort toward pension simplification in 2006. A third country QROPS market has developed to receive assets. HRMC, the British revenue and customs agency, proposed QROPS amendments in late 2011 that would revise the conditions QROPS must meet and strengthening information and reporting requirements. A revised definition affects New Zealand QROPS, and tax exemptions available to nonresidents of QROPS countries must also be available in their home country, affecting Guernsey and the Isle of Man. QROPS members will have to sign a declaration that they understand tax liabilities.
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Sifting Through Models and Motives.
Reynolds, Dan; Risk & Insurance; v23 no2 pp 46, 48 Mar 2012; journal article

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Abstract : Predictive modeling software is bringing insight to the workers compensation arena, of interest to both investors and insurance carriers. While the primary objective is to help injured workers get better and back on job, vendors seek commercial profit for a valuable tool and insurers seek to manage their costs. Towers Watson found that personal lines and commercial insurers are already using predictive modeling, and its use is set to expand into workers compensation. Though applying predictive modeling nationwide is complicated by disparate workers comp state reporting requirements and fragmented data, there is optimism that it will help to identify and help injured employees return to productivity without falling into abuse of pain medications.
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The Reasonable Expectations Doctrine.
Salkin, Barry L.; Journal of Pension Planning & Compliance; v38 no1 pp 26-37 Spring 2012; journal article

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Abstract : Under the reasonable expectations doctrine, contract provisions are to be interpreted as a reasonable person, not a legal specialist, would comprehend them. Points of contention may be ambiguous terminology, fine print and communications outside a written contract. The doctrine is controversial, leading to differences in courts' judgments. A leading example is Saltarelli v. Bob Baker Group Medical Trust, in which the Ninth Circuit Appeals Court found the defendant buried a critical exclusion rather than making it prominent in the plan document. Although the doctrine rose out of standard insurance contracts, a person whose benefits are covered by a self-insured plan would not expect to be treated differently. Yet the doctrine of reasonable expectations may be at odds with the ERISA federal common law of contracts, plan members' reliance on summary plan descriptions rather than full plan documents and plan administrators' discretion to interpret a plan.
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The Retirement Plan Industry Needs Better-Informed Buyers.
Hagan, Ronald E.; Journal of Compensation and Benefits; v28 no2 pp 36-42 Mar-Apr 2012; journal article

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Abstract : The DOL's regulations on vendor compensation, reflected in ERISA Section 408(b)(2), demand considerable knowledge and vigilance from pension plan sponsors. Vendor services may be categorized as investments, including both investment consultants and investment products, plan administration and fiduciary support. Crossover between categories by multiple-hat vendors is widespread but opens the door to potential conflicts of interest. When hiring brokers, insurance agents and registered investment advisors, plan sponsors should understand they do not share the same credentials, performance measurement standards, role as ERISA fiduciaries and written disclosures about fees and fiduciary status. For administration, third-party recordkeepers are common, often bundling services with investment advice and custodianship, again requiring plan sponsors' vigilance. Diligent annual audits of vendors are strongly recommended.
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The Tin Can Buried in the Backyard: How Revised FBAR and New FATCA Information Reporting Rules May Stage a Comeback.
Baker, Mary Burke; Benefits Law Journal; v25 no1 pp 5-23 Spring 2012; journal article

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Abstract : Holding foreign bank accounts is more sophisticated than burying cash in the backyard but involves considerable reporting requirements and potential penalties. The Report of Foreign Bank and Financial Accounts (FBAR) requires anyone with signature or other authority over employees' foreign financial accounts to report holdings annually to the IRS and the Financial Crimes Enforcement Network. Bank accounts, securities accounts, insurance or annuity policies and investment accounts are reportable. Swiss bank accounts, especially with UBS, are under scrutiny by the IRS and Justice Department, though there is a voluntary disclosure initiative. The Foreign Account Tax Compliance Act (FATCA) has similar reporting requirements and enables third parties to identify Americans holding foreign accounts. Though FBAR and FATCA are complex, both involve serious penalties for noncompliance.
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Plan Fees: 408(b)(2) Rule to Help With 404 Disclosures, but Guide Raises Concerns, Practitioners Say.
Ricaurte-Knebel, Kristen; BNA's Pension & Benefits Reporter; v39 p 285 Feb 14, 2012; journal article

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Abstract : The DOL's final regulations on ERISA Section 408(b)(2) specify the information pension plan service providers must provide to plan fiduciaries to judge the reasonableness of compensation. Key differences between the interim rule and final version are the need to provide information serving participant-level fee disclosures and to describe service arrangements for the evaluation of potential conflicts of interest. The fiduciary bears responsibility for asking the service provider in writing for additional information that may be needed. A sample guide included with the final rule helps fiduciaries identify required disclosures using a standardized format, replacing the summaries many providers use. However, the sample and process of collecting and evaluating required documents is viewed as complex and costly.
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Reporting: Computations of Health Benefit Costs on W-2 Ignore Tax Treatment, Attorney Says.
Olsen, Florence; BNA's Pension & Benefits Reporter; v39 p 299 Feb 14, 2012; journal article

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Abstract : In a February 2011 webcast, benefits attorney John L. Barlament addressed how health benefit costs are to be determined under the Patient Protection and Affordable Care Act. Since IRS Notice 2012-9 exempts some employers and some health benefits, employers should first determine if the reporting rules apply to them and to the specific coverage they offer. If so, the total employer and employee contributions for all health plans an individual participates in must be calculated and reported on Form W-2. Notice 2012-9, which supersedes Notice 2011-28, also provides an exception that pertains to treating discriminatory coverage for highly compensated individuals as taxable income.
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Reporting: Government Unveils Sweeping Guidance on FATCA Reporting, Wins Practitioner Praise.
Bennett, Allison; BNA's Pension & Benefits Reporter; v39 p 293 Feb 14, 2012; journal article

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Abstract : Responding to voluminous comments, the Treasury Department proposed comprehensive rules for implementing the Foreign Account Tax Compliance Act (FATCA). The rules as proposed simplify the demands on foreign banks and foreign retirement plan reporting American-owned accounts to the IRS. Foreign financial institutions must meet several qualifications to be deemed compliant and benefit from the rule revision. The rules retain the objectives of transparency and proper taxation, but raise the de minimis threshold, expand the categories of institutions deemed compliant and give institutions more time to comply with the requirement for detailed information starting in 2017.
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Summary of Benefits and Coverage and Uniform Glossary: Final Rule.
Federal Register; v77 no30 pp 8668-8706 Feb 14, 2012; journal article

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Abstract : The Treasury Department, the DOL and the Department of Health and Human Services have issued final regulations on the summary of benefits and coverage (SBC) that group health plans and group and individual insurers much provide under the Patient Protection and Affordable Care Act. The final requirements for the SBC are largely the same as the proposed regulations, requiring 12 specific content elements and a uniform appearance and setting a minimum length and font size. The departments have also issued regulations on the provision of a uniform glossary to be provided with the SBC to assist consumers in understanding and comparing benefits and terms of coverage. Additional guidance documents in the Federal Register provide further assistance with compliance with these disclosure requirements and the uniform glossary.
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Summary of Benefits and Coverage and Uniform Glossary: Templates, Instructions, and Related Materials: And Guidance for Compliance: Guidance for Compliance and Notice of Availability of Templates, Instructions, and Related Materials.
Federal Register; v77 no30 pp 8706-8709 Feb 14, 2012; journal article

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Abstract : The Treasury Department, the DOL and the Department of Health and Human Services (HHS) offer guidance to their final regulations on the summary of benefits and coverage (SBC) that the Patient Protection and Affordable Care Act requires group health plans and individual and group insurers to provide. An SBC template and a uniform glossary are authorized for the first year of applicability for these regulations. Unlike the proposed regulations, the final regulations allow group health plans to include the SBC with other summary materials. To aid in providing notices in a culturally and linguistically appropriate manner, HHS will provide written translations of the SBC template, sample language and uniform glossary in Spanish, Tagalog, Chinese and Navajo. The departments announced the availability of a number of documents online, including the SBC template, a sample completed SBC and the uniform glossary.
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Health Care: DOL, HHS, IRS Issue Final Rule on Disclosures by Health Plans.
Hansard, Sara; Daily Labor Report; no27 p A12 Feb 9, 2012; journal article

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Abstract : The DOL's Employee Benefits Security Administration, Department of Health and Human Services' Centers for Medicare & Medicaid Services and the IRS joined to issue a final rule for health plan insurers. The rule requires a summary of benefits and coverage and a glossary of coverage terms. The goal is to provide a summary and comparative information that is simple to understand and presented in a standardized format. It stems from the Patient Protection and Affordable Care Act and applies to plan years starting September 23, 2012 or later, including large employer plans and limited medical plans known as mini-meds. Consumers Union applauded the standardization and comparability under the rule, while America's Health Insurance Plans objected to the lack of flexibility and Blue Cross and Blue Shield Association asserted the time for implementation is too short.
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Reasonable Contract or Arrangement Under Section 408(b)(2): Fee Disclosure: Final Rule.
Federal Register; v77 no23 pp 5632-5659 Feb 3, 2012; journal article

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Abstract : A rule from the DOL's Employee Benefits Security Administration finalizes details that information service providers must convey to pension plan fiduciaries in order to qualify for a prohibited transaction exemption under ERISA Section 408(b)(2). The rule establishes what constitutes reasonable contracts or arrangements for services and states that compensation information must be disclosed to responsible plan fiduciaries. It includes several changes from the interim rule, such as aligning these disclosures with participant level investment disclosure rules and requiring more detailed information on indirect compensation to service providers. The final rule takes effect July 1, 2012.
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Recordkeeping and Reporting Requirements Under Title VII, the ADA, and GINA: Final Rule.
Federal Register; v77 no23 pp 5396-5398 Feb 3, 2012; journal article

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Abstract : Organizations covered by title II of the Genetic Information Nondiscrimination Act (GINA) are bound to requirements for recordkeeping and reporting, according to a final rule from the Equal Employment Opportunity Commission (EEOC). GINA Section 207 requires the EEOC to make regulations specifying how subject entities are to keep records that enable the EEOC to ensure compliance with GINA. Similar to requirements covering title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act, personnel and employment records must be retained for a certain period and until any charges are resolved.
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