American Benefits Council
Benefits Byte


November 7, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

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Supreme Court to Consider Matter of Subsidies in Federally Facilitated Health Exchanges

The U.S. Supreme Court announced on November 7 that it would take up King v. Burwell, a case that calls into question the legality of federal subsidies for individuals obtaining health coverage in federally facilitated insurance exchanges. The matter could have far-reaching implications for immediate and long-term implementation of the Patient Protection and Affordable Care Act (PPACA). The high court’s decision is expected by June 2015.

The case, being heard on appeal from the U.S. Court of Appeals for the Fourth Circuit, springs from the wording of the subsidy provision in the health care law. The statutory language of the PPACA allows for the provision of subsidies to individuals in “state-based” exchanges. There are currently 36 states in which the exchanges are operated by the federal government, with an estimated five million individuals receiving subsidies in those exchanges. Almost since the law was enacted, this has led to questions whether subsidies were to be available to these individuals.

Treasury regulations have interpreted the law to permit subsidies for insurance plans available in the exchanges that the federal government runs for the states. However, that assertion has been challenged by numerous lawsuits, with different results at the appellate court level.

A three-judge panel of the Fourth Circuit Court of Appeals unanimously ruled on July 22 that PPACA subsidies are indeed allowed for policies purchased on federally facilitated exchanges. However, a panel of the U.S. Court of Appeals for the District of Columbia Circuit released a 2-to-1 ruling on the same day saying that PPACA subsidies are not legally allowed for policies purchased on federally facilitated exchanges. (See the Council’s July 22 Benefits Byte story for more details). The D.C. Circuit recently granted a re-hearing of that decision by a full panel of the court.

As we have previously noted, this litigation has significant implications for the future of PPACA. In particular, since the employer mandate penalty is specifically triggered by an employee’s collection of a subsidy in an exchange, if the some employers may be relieved of penalties, or may have different levels of penalties, depending on which states their workers reside. Also, for those employers that have considered whether their employees might be better served through coverage in exchanges, especially where their workers move from job to job, the lack of subsidies for moderate income workers in some states certainly would change the dynamics in that decision making. Also uncertain is whether legislators and the President will seek to clarify or otherwise address this issue through legislative measures.

The Council will provide additional analysis as this matter further develops. For more information, contact Kathryn Wilber, senior counsel, health policy, or Katy Spangler, senior vice president, health policy, at (202) 289-6700.

DOL Releases Rules on Form 5500 Requirements for MEPs

The Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor released an interim final rule (IFR) on November 7 describing revisions to annual benefit plan filings for multiple employer plans (MEPs).

The Cooperative and Small Employer Charity Pension Flexibility Act (H.R. 4275), which was signed into law on April 7, imposed additional annual reporting requirements for multiple-employer plans covered by Title I of ERISA. These new annual reporting requirements are applicable for plan years beginning after December 31, 2013. The IFR formally changes the Form 5500 and Form 5500-SF Annual Returns/Reports to incorporate these changes.

A multiple-employer plan is defined in this context as a plan that is maintained by more than one employer and is not a “single employer plan” or a “multiemployer plan” for filing purposes. The requirements apply to all multiple-employer plans, including defined benefit pension plans, defined contribution plans, and welfare plans.

Specifically, forms 5500 and 5500-SF will now provide that the Annual Return/Report filed for a multiple-employer plan must include an attachment that identifies the participating employers in the plan by name and employer identification number (EIN) and includes for each participating employer an estimate of the percentage of the contributions made by each employer (including employer and participant contributions) relative to the total contributions made by all participating employers during the plan year. This attachment, entitled “Multiple-Employer Plan Participating Employer Information,” supplements and does not replace other Form 5500 filing requirements that apply to multiple-employer plans.

The IFR becomes effective on November 10. EBSA is soliciting comments and suggestions for final revisions that will be adopted in connection with the 2015 or later year forms. Comments will be accepted through January 9, 2015.

For more information, or to provide input for a possible comment letter by the Council, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.

DOL Issues Guidance on State Regulation of Stop-Loss Insurance

On November 6, the U.S. Department of Labor (DOL) issued Technical Release 2014-01 to provide guidance on state regulation of stop-loss insurance for self-insured group health plans. The guidance addresses state regulation of stop-loss insurance and specifically whether such laws would be preempted by ERISA.

Employers and other sponsors of self-insured group health plans purchase stop-loss insurance who to reduce the risk of large and fluctuating claims. Stop-loss insurance is an insurance contract or provision in a contract between a self-funded benefit plan and an insurance carrier that provides financial protection and insures the employer against losses if claims to the plan exceed a specified dollar amount over a set period of time. Stop-loss insurance contracts protect against claims that exceed a set amount, an attachment point, for either a single enrollee or for aggregate claims over a determined period. The employer self-insures claims costs below the attachment points.

The technical release asserts that “unless prohibited by state insurance law, a stop-loss insurer could offer insurance policies with attachment points [The point at which excess insurance or reinsurance limits apply] set so low that the insurer assumes nearly all the employer's claims risk … [which] effectively gives nearly all the risk protection of a conventional health insurance policy without the consumer protections required for such policies.”

To address this matter, some states have considered measures to prohibit insurers from issuing stop-loss contracts with attachment points below a specified level, but have been unsure of their ability to regulate stop-loss coverage due to ERISA preemption of state regulation of private sector employee benefit plans.

According to Technical Release 2014-01, the Department of Labor takes the view “that states may regulate insurance policies issued to plans or plan sponsors, including stop-loss insurance policies, if the law regulates the insurance company and the business of insurance without ERISA preempting the insurance regulation.” As discussed in the technical release, “Insurance regulation of group health insurance clearly limits insurance policy choices available to third parties, including employee benefit plans. Insurance regulation of stop-loss insurance can have similar consequence without ERISA preempting the insurance regulation.”

For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

PBGC Soliciting Focus Group Participants

The Pension Benefit Guaranty Corporation (PBGC) will be conducting online focus group research for purposes of evaluating and improving customer service to pension practitioners.

If you are a defined benefit pension plan sponsor and are interested in participating as a focus group member, please complete the PBGC’s focus group screening questionnaire. If you have questions about the study, contact the agency at

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.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).