December 7, 2004
BB 04—121

In this issue:

  • Council Web Site Named 2004 "Best Of The Web" for Retirement Benefits Information by Business Insurance
  • Sanders' Cash Balance Amendment Deleted from Final FY 2005 Omnibus Budget Bill
  • CMS Announces Medicare Advantage and Prescription Drug Plans Regions
  • Council Sends IRS Comment Letter On 457 Plan Proposed Model Amendment Regulations

Council Web Site Named 2004 "Best of the Web" for Retirement Benefits Information by Business Insurance

The American Benefits Council's web site was recently honored in Business Insurance Magazine's fourth annual "Best of the Web" list. The publication's recommendations to its commercial risk and benefits management professionals highlighted 15 web sites in 12 categories as most "interesting, informative, and innovative". As the best retirement benefits site, the Council's pages were described as "a refreshing change from those of many other lobbying organizations" and "a treasure trove of information". The article also highlighted our issues pages as providing valuable source information and papers from a variety of sources and the Council's action alerts through the Capital Connection page.

We are thrilled to receive this recognition and pleased to pass the news on to our members. As always, we welcome any comments or ideas our members have for additional site content or new features. Comments about the Council's site should be addressed to Jason Hammersla, Council communications associate, at (202) 289-6700.

Sanders' Cash Balance Amendment Deleted from Final FY 2005 Omnibus Budget Bill

On December 6, the House of Representatives completed the final vote on the Consolidated Appropriations Act for fiscal year 2005 (H.R. 4818) and sent the bill on to President Bush for his signature. It is expected that he will sign it into law very shortly. This final language does not contain the amendment by Rep. Bernie Sanders (I-VT) that would have prolonged the U.S. Treasury Department's stalemate over the treatment of cash balance pension plans.

The Sanders amendment, which was passed by the House as part of the Treasury-Transportation Appropriations bill (H.R. 5025), sought to withhold any funding to the Treasury Department "used to assist in overturning the judicial ruling" in the case of Cooper v. IBM. The Senate-passed legislation (S. 2806) did not contain similar language and during the course of the conference to reconcile the two measures into one "omnibus" spending bill, the amendment was deleted. The Treasury Department no longer faces any restrictions on weighing in on the appeal of the Cooper case in the event it would plan to do so.

For more information on the Sanders amendment or cash balance pension plans, please contact Diann Howland, Council vice president, retirement policy, at (202) 289-6700.

CMS Announces Medicare Advantage and Prescription Drug Plans Regions

On December 6, the Centers for Medicare and Medicaid Services (CMS) announced the regions for Medicare Advantage (MA) and Prescription Drug Plans (PDPs) authorized by the Medicare Modernization Act of 2003 (MMA). Beginning in 2006, Medicare will rely on market competition to deliver benefits to Medicare beneficiaries. Any provider that wants to provide health benefits through an MA plan or prescription drug benefits through a PDP must serve an entire geographic region. The guidance establishes 26 regions for MA plans and 34 regions for PDPs.

Employers that maintain their current retiree prescription drug plans and qualify for the new Medicare subsidy to help maintain these benefits will not be affected by the new Medicare regions. Similarly, employers may seek to waive the new Medicare regions if they contract with an insurer or other plan administrator to provide Medicare benefits to their retirees. However, the establishment of the regions is likely to be important to employers, because how CMS drew the regions is a key factor for whether plans will participate. CMS has also previously commented that an employer will only be able to contract with a PDP or MA plan that also provides coverage to Medicare beneficiaries in the individual market in the region.

During a stakeholders' conference call held on December 6, CMS also announced that the final rule, expected in mid-January, will provide more reimbursement to plans for beneficiaries who live in high-cost counties. The decisions about the reimbursement methodology and drawing the new regions were made to alleviate confusion and address concerns about risk, coverage in rural areas, patient access, and cost variations between regions. According to CMS Administrator Mark McClellan, "These new regions provide us with the strongest foundation possible to get affordable and comprehensive new coverage in place quickly, so seniors and people with disabilities can get the most from Medicare's new, up-to-date benefits."

Details about the new regions can be found on the CMS Web site and a CMS press release. In addition, CMS has released the following documents: the three regional maps that include MA and PDP, MA only, and PDP only; Principles for establishing MA regions; and Principles for establishing PDP regions.

For more information on this issue, please contact Paul Dennett, Council vice president, health policy, or Susan Relland, Council health care legal counsel. Both can be reached by phone at (202) 289-6700.

Council Sends IRS Comment Letter on 457 Plan Proposed Model Amendment Regulations

On November 30, the American Benefits Council sent to the Internal Revenue Service (IRS) a comment letter regarding Revenue Procedure 2004-56. The guidance, issued on August 30, proposed a series of model amendments for 457(b) plans operated by state and local governments, but did not address plans sponsored by nongovernmental organizations such as nonprofits.

Beginning with the request to expand the model amendment changes to include nongovernmental plans, the Council's comments focused on several areas for which clarification was requested. These included: confirming that the proposed amendments apply to 457 plans funded through custodial accounts or insurance contracts in addition to the trusteed plans clearly mentioned in the guidance; defining the limits to and effects of adopting the amendments in substantially similar language but not on a word-for-word basis in order to accommodate state and local laws and collective bargaining agreements; acknowledging that a plan sponsor may offer multiple 457 plans to meet the needs of specific classifications of employees; verifying that these plans are not subject to Internal Revenue Code section 401(a)(17) compensation limits or section 415 service credit transfer limitations; and revising the unforeseeable emergency distribution regulations to reflect the new statutory definition of "dependent" under the Working Families Tax Relief Act of 2004 (WFTRA). The Council's letter also urged the IRS to provide additional guidance to the deferral by 457 plan participants of accumulated vacation, sick and back pay.

For more information on this issue, please contact Jan Jacobson, the Council's director, retirement 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.