The US Supreme Court on June 5 unanimously ruled[1] that pension plans maintained by church-affiliated organizations (including hospitals) may be exempt from ERISA’s requirements, regardless of what entity established the plan. At issue was the US Congress definition of “church plan,” which left unclear whether a pension plan maintained by a church-affiliated organization (such as a hospital) only qualified for an exemption if the plan also was established by a church in the first instance.

Advocate Health Care v. Stapleton, St. Peter’s Healthcare v. Kaplan, and Dignity Health v. Rollins, the three consolidated cases before the Court, are but three in a recent wave of litigation challenging pension plans maintained by church-affiliated organizations. Participants in these plans claimed, among other things, that because a church did not establish the plans, those plans were subject to ERISA—including its notice and funding requirements.

On May 4 the US House of Representatives passed H.R. 1628, The American Health Care Act of 2017 (AHCA).

Passed through a budget reconciliation process (which only requires a bare majority but limits the provisions to items that impact the budget), the AHCA now goes on to the Senate, which is expected to significantly modify if not fully replace the AHCA with its own legislative language.

Highlights of the AHCA that are of significant interest to employers include the following:

Join Morgan Lewis in May for these upcoming programs on a variety of employee benefits and executive compensation topics:

Disruption in Washington: Impact on Benefits and Compensation | Seminars presented by Morgan Lewis and The ERISA Industry Committee (ERIC)

May 10 | Silicon Valley | Morgan Lewis Seminar Panelist John Ferreira

May 12 | Los Angeles | Morgan Lewis Seminar Panelist John Ferreira

2017 TEI New England Chapter | May 12 | Massachusetts| Seminar presented by Mary B. (Handy) Hevener

Morgan Lewis Public Company Academy - Executive Compensation: Current Trends and Design Challenges | May 16 | Webinar presented by Jeanie Cogill,  Mims Maynard Zabriskie, and Jonathan Zimmerman

2017 Technology May-rathon: Benefits and Compensation – Mission Critical for Tech-Company Success | May 23 | Webinar presented by Saghi (Sage) Fattahian, Carly Grey, and Erin Randolph-Williams

Visit our events page for more of our latest programs.

On March 6, the US House of Representatives Committee on Ways and Means and Committee on Energy and Commerce released long-awaited official proposed legislative language addressing the repeal and replacement of the Affordable Care Act (ACA). As with the unofficial language leaked during the Presidents Day recess (addressed here), this proposed language—known as the American Health Care Act (AHCA)—contemplates using the 2017 budget reconciliation process, which will allow the bill to avoid a filibuster by Senate Democrats.

In contrast to the leaked language, the AHCA does the following:

  • Drops language intended to tax participants on the value of health coverage that falls above the 90th percentile of all plans
  • Retains the Cadillac Tax—but postpones it until January 1, 2025 (however, it may yet be repealed by the Senate)
  • Delays most ACA tax repeals until January 1, 2018 (likely for revenue scoring purposes)
  • Delays health savings account, health reimbursement account, and flexible spending account changes until January 1, 2018 (likely for revenue scoring purposes)

A 105-page “discussion draft” of unofficial legislative language addressing the repeal and replacement of the Affordable Care Act (ACA) contemplates using the 2017 budget reconciliation process—which likely guarantees the bill’s passage through the US House of Representatives and US Senate but also limits it to items that have a budgetary consequence.

While this unofficial discussion draft is at least two weeks old and may differ significantly from the final language, it contains a number of items of interest to employers.

While some of us were donning our party hats and getting ready to ring in the new year, a nationwide preliminary injunction came down from the US District Court for the Northern District of Texas in Franciscan Alliance, Inc. v. Burwell, enjoining the Department of Health and Human Services (HHS) Office of Civil Rights (OCR) from enforcing the provisions of the Affordable Care Act’s (ACA’s) nondiscrimination regulations that prohibit discrimination on the basis of gender identity and termination of pregnancy.

Section 1557 of the ACA prohibits certain federally funded healthcare programs and activities (“covered entities”) from discriminating on the basis of race, color, national origin, sex, age, or disability. The final regulations define “on the basis of sex” to include discrimination based on gender identity, sex stereotyping, and pregnancy (including termination of pregnancy, childbirth, or related medical conditions). Under the final regulations, covered entities may not

  • deny, cancel, limit, or refuse health coverage;
  • deny a claim;
  • impose additional cost sharing; or
  • employ discriminatory marketing or benefit designs based on an individual’s belonging to any of these protected classes.

Seemingly lost among the inauguration activities last week was an important Office of Chief Counsel Memorandum from the IRS. The Memorandum states that a fixed indemnity health plan that is employer-paid or purchased on a pre-tax basis through a cafeteria plan will result in taxable income equal to the amount of any benefits paid under the plan.

Fixed indemnity health plans are offered by a number of insurers and pay a fixed dollar amount for certain health-related events such as a doctor’s office visit or a day (or days) in the hospital. The amounts paid are not related to the amount of medical expenses incurred by the employee. Because the amounts paid are not related to medical expenses incurred, the taxation of amounts paid under these plans has always been the subject of some concern, and insurers are usually unwilling to address the tax impact of their fixed indemnity health plans.

On his first day in office, US President Donald Trump issued an Executive Order to begin the process of dismantling the Patient Protection and Affordable Care Act (ACA). While this action is largely symbolic—the repeal and replacement of the ACA will require congressional action—the Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal (Order) is consistent with the president’s stated position supporting the repeal and replacement of the ACA. However, the Order does not contain any references to employers or self-insured group health plans.

Four companies have recently been accused of failing to provide Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) notices to participants in their health insurance plans. Such suits carry the potential for large damages. Over the past two years, courts have approved settlements for COBRA violations that range from $290,000 to $1 million. In addition to recovering statutory penalties of $110 per day, a court may award qualified beneficiaries relief for damages (as well as attorney fees) that occur as a result of the failure to provide an adequate COBRA notice. The IRS also has the authority to assess excise tax penalties of up to $200 per day for each day on which a plan fails to comply with COBRA.

Much of the recent COBRA litigation pertains to whether qualified beneficiaries have been given the initial COBRA notice (sometimes referred to as the General Notice) and/or the COBRA Election Notice in a timely manner, or whether the contents of these notices were adequate.

December 2016 brought us the 21st Century Cures Act, and with it some good news for small employers wishing to help their employees pay for medical expenses without the burden and expense of offering a full major medical group health plan.

Unlike large employers—those with 50 or more full-time employees in the prior year—small employers are not required to abide by the “pay or play” rules of the Patient Protection and Affordable Care Act (ACA) by either offering affordable, minimum value health coverage to their full-time employees or paying a penalty. However, if small employers do offer their employees group health plans, those plans—like large employer plans—are generally subject to the ACA’s “market reform” requirements, and a noncompliant plan could cost its sponsor an excise tax of $100 per employee per day under Section 4980D of the Internal Revenue Code.