BENEFITS BYTE

September 24, 2004
BB 04—97

In this issue:

  • Congress Approves Tax Relief Bill with Mental Health Parity Tax Provision
  • IRS Requests Comments on Proposed Staggered RAP System
  • Senate HELP Committee Approves Bill for State High-Risk Health Insurance Pools

Congress Approves Tax Relief Bill with Mental Health Parity Tax Provision

On September 23, the House of Representatives and Senate approved a tax relief bill (H.R. 1308) that includes a one-year extension of the tax provisions for the existing mental health parity law, until December 31, 2005. The current mental health parity law mandates parity in annual and lifetime dollar limits between medical and surgical benefits covered by a health plan and any mental health benefits covered by the same plan.

There are renewed efforts in the Senate to advance before the end of the session a proposal that would significantly expand current law mental health parity requirements (S. 486). There is currently a "hold" on the bill in the Senate, but if the hold is lifted, sponsors Pete Domenici (R-NM) and Edward Kennedy (D-MA) would reportedly seek "unanimous consent" to have the Senate consider the bill as a stand-alone measure immediately. In the House, Speaker Dennis Hastert (R-IL) and Ways & Means Committee Chairman Bill Thomas (R-CA) remain opposed to any expansion of the current mental health parity law. The Council continues to state a preference for the continuation of current law, such as the one-year extension included in the tax relief measure. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.

IRS Requests Comments on Proposed Staggered Remedial Amendment Period System

The Internal Revenue Service (IRS) recently issued an announcement (Announcement 2004-71) which requests comments on draft revenue procedures for issuing determination letters under a staggered remedial amendment period (RAP) system. A determination letter provides assurance that the terms of the retirement plan satisfies the qualification requirements of the Internal Revenue Code, and the determination letter program allows sponsors of qualified retirement plans to request and receive letters of determination regarding the qualified status of their plans. The proposed revenue procedure would establish a regular, five-year cycle for plan amendments and determination letters for individually designed plans and a six-year cycle for pre-approved plans which includes master and prototype (M&P) and volume submitter plans. The IRS does reserve the right to change the cycles. Comments are due by January 3, 2005, and the Council expects to file a comment letter.

In the past, determination letters have been sought after major legislative changes required substantial changes and the remedial amendment period (the period during which amendments can be made and the determination letter requested) has been set on an ad hoc basis by the IRS. This produced significant periodic fluctuations in workload as a result of legislation changes and the proposed staggered RAP system is designed to create a more level determination letter workflow.

The new procedure would first be used for applications for determination letters that take into account the requirements of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and would extend a plan's EGTRRA remedial amendment period to the following dates based on the plan sponsor's taxpayer identification number (TIN).

TIN Ends in Last day of EGTRRA Remedial Amendment Period Next 5-Year Remedial Amendment Period Ends on
1 or 6 January 31, 2007 January 31, 2012
2 or 7 January 31, 2008 January 31, 2013
3 or 8 January 31, 2009 January 31, 2014
4 or 9 January 31, 2010 January 31, 2015
5 or 0 January 31, 2011 January 31, 2016


Under the revenue procedure, the IRS will begin to accept applications for individually designed plans that take into account the EGTRRA requirements on February 1, 2006.

M&P and volume submitter plans would need to apply for new letters every six years with the first cycle for defined contribution plans beginning February 1, 2005 and ending January 31, 2006. Defined benefit volume submitter plans would need to apply between February 1, 2007 and January 31, 2008 while mass submitters would apply between February 1, 2007 and October 31, 2007. For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.

Senate HELP Committee Approves Bill to Increase Funding for State High-Risk Health Insurance Pools

On September 22, the Senate Health, Education, Labor and Pensions (HELP) Committee approved by voice vote the State High Risk Pool Funding Extension Act (S. 2283), which would increase federal funding for state high-risk health insurance pools and extend a high-risk pool grant program established by the Trade Adjustment Assistance Act of 2002. High-risk pools are created by states to help individuals who cannot otherwise obtain health insurance in the individual market due to preexisting conditions or can only obtain coverage at very high rates. HELP Committee Chairman Judd Gregg (R-NH) and Senate Finance Committee ranking Democrat Max Baucus (D-MT) sponsored the measure. The grants are set to expire on September 30, 2004.

Under the bill, $15 million would be reauthorized to help states establish new high-risk health insurance pools and $75 million would be authorized to increase and extend funding for states that have already established high-risk pools. Gregg issued a statement saying he hopes the Senate will approve the bill as a stand-alone bill this year. The House of Representatives, however, has not approved a similar measure. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.