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A More Flexible Contraceptive Mandate? Carve-outs for Religious Organizations Look Likely

February 8, 2012 – 5:37 pm | By Todd Leeuwenburgh | 1 comment

After increasing hammering from conservatives, the White House looks like it is ready to compromise on health reform’s contraception mandate. The administration had included contraceptives and sterilization in its list of preventive services all (except the few grandfathered) plans must cover starting plan years in August 2012. It had offered a year-long delay to religious employers, but the  message was after August 2013 it would apply to them too, regardless of their objections. Growing controversy, we all know, ensued. In his daily briefing on Feb. 7, White House Press Secretary Jay Carney said the process of “working with those organizations and individuals who have concerns about the implementation of this rule … will continue,” and the President is very interested in finding the appropriate balance between religious beliefs and convictions and … making sure that women of all faiths have access to these important health care preventive services.” David Axelrod, a senior strategist for President Obama said Feb. 7. “We certainly don’t want to abridge anyone’s religious freedom,” he said. The administration seems headed to a policy under which plans that object to paying contraceptives would be allowed not to, those plans would have to attest that status, but the feds would ensure that all women in such plans could get free contraceptives elsewhere. Religious groups objected to the rule, calling it an attack on religious freedom because (for example) it would require Catholic charities, schools, and hospitals to provide contraception and sterilization. House Speaker John Boehner (R-Ohio) recently pledged that if the president does not reverse the requirement, then the U.S. House of Representatives will draft legislation to reverse it. The contraceptive rule “must not stand and will not stand,” Boehner said. On Jan. 20, 2012, HHS announced that faith-based employers (such as universities and hospitals) could delay compliance with the contraceptive mandate until Aug. 1, 2013, a one year delay. On Aug. 1, 2011, HHS issued preventive care guidelines that included contraception for women to be provided starting with plan years that begin or after Aug. 1, 2012. Here’s a current press digest on recent developments. Limiting employers’ ability to tailor plans Employers have long been able to tailor health benefits to their demographics and their population size. That means they may choose to exclude certain services, like acupuncture or chiropractic manipulations under anesthesia, because they’re expensive, prone to abuse or just not essential to the company’s workforce. The most important advantage to self-funded plans is the ability to create their own benefit design, many proponents of self-insuring health benefits say. Health reform’s preventive care mandate and essential benefit rules will further limit companies’ ability to offer slimmed-down benefit packages. In response to negative reactions about mandates’ effect on plan design, the government strategy seems to be to back down and add some flexibility. For example, it recently surprised the public by announcing that it would allow states to define health reform’s essential health benefits (EHB) package by referring to prevalent plan or plans in their territories.

OFCCP Gives Employers Until Feb. 21 to Respond to Quota for Hiring Workers With Disabilities

February 8, 2012 – 5:21 pm | By Kathryn McGovern | No comments yet

Federal contractors  have an additional two weeks — until Feb. 21 — to respond to the Labor Department’s proposal establishing goals for hiring workers with disabilities. In December, Labor’s Office of Federal Contract Compliance Programs released proposed regulations that would require federal contractors to aim to have 7 percent of their workforce be individuals with disabilities. Originally, the public comment period  ended Feb. 7.  Some stakeholders, however, sought additional time to comment. And some lawmakers had some of their own about the proposal. In a letter sent to Labor Secretary Hilda L. Solis, members of the House Committee on Education and the Workforce said they are concerned that the goal amounts to a quota and requested an explanation of Labor's authority to impose such a requirement. The panel also asked for evidence that contractors aren't already making a good faith effort to hire workers with disabilities. Their letter also questioned whether it is legal to ask job applicants with disabilities to self-identify. As of Feb. 8, the committee had not yet received answers to their questions,  a panel spokesman said. Lawmakers, he added, are disappointed that DOL did not extend the comment period deadline by 90 days, as they requested. In its announcement of the extension, DOL said it had “determined that the public could use additional time to review the potential impact of the proposed requirements.” Its statement did not mention the lawmakers' request.    

Expert Explains Five Issues Raised by IRS’ Guidance on Lifetime Annuity Contracts

February 8, 2012 – 4:37 pm | By Gwen Cofield | No comments yet

In this post, we reported on new IRS proposed rules on purchasing qualified lifetime annuity contracts (QLACs) under certain retirement plans. Recently in his blog, an industry expert provided more details on the guidance’s significance. In his blog the Business of Benefits, Attorney Robert Toth Jr., explains how:

With just a relatively short regulation and a Revenue Ruling, Treasury simply and in a very straightforward way laid out the definitive structure for defined contribution plans (like 401(k) plans) to start providing lifetime income in a market friendly manner.

Here’s a brief overview of what Toth says are the five significant issues that the IRS regulation, as well as the related Revenue Ruling, 2012-3 on spousal consent, raise:

1. Lifetime income as an investment. The QLAC and revenue ruling “both confirmed a critical point: that the annuity contract can be treated as a plan investment, rather than a plan benefit. They both made it clear that the purchase of the product could be a plan investment, rather than as for funding a benefit feature under a plan design. It is a critical distinction."
2. Spousal rights. "Though the annuity purchase may be an investment, and not a benefit structure, [the revenue ruling] and QLAC clarified that spousal rights will still apply on distribution of funds from the annuity (even if the annuity is distributed from the plan) and described the manner in which those rights will be applied."
3. Annuity starting date. “In outlining spousal rights, [the revenue ruling] -3 also provided us with a sensible definition of annuity starting date. Effectively, it is the payment date on which a contract payment can neither accelerated or commuted. ... This will serve the plan in many ways, including making possible sane application of the manner in which QDROs and the like will apply, as well as the manner in which a required minimum distribution is computed.”
4. Forfeiture. “[T]reasury and the IRS made it clear that, once the benefits are purchased, they can only be forfeited by death (and, then, only if the spouse is protected or given the right to waive), and otherwise subject to the 401(k) rules. This may create portability issues but there are better ways to address that issue than allowing forfeiture. ..."
5. Reporting and disclosure. “A QLAC requires IRA type of reporting, and a new participant disclosure. This is probably the most striking of the new rules: the concept actually enables structural solutions to a number of other problems,” including the ability to enable contract consolidation after leaving the plan.

Toth’s full post on the subject can be found here. Toth will also provide a detailed analysis on the guidance as a contributing editor to The 403(b)/457 Plan Requirements Handbook, published by Thompson Publishing Group.