American Benefits Council
Benefits Byte


July 14, 2015

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.

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Final PPACA Preventive Care Regulations Provide Accommodations for Religious Objections to Contraceptive Coverage

The U.S. departments of Treasury, Labor (DOL) and Health and Human Services (HHS) issued final regulations regarding coverage of certain preventive services, including contraceptive services, under the Patient Protection and Affordable Care Act (PPACA) on July 10. The final regulations maintain an existing accommodation for eligible religious nonprofit organizations and provide certain closely held for-profit entities the same accommodation. The regulations also finalize interim final regulations on preventive services generally. HHS released a news release and fact sheet on the new final regulations.

The regulations finalize provisions from prior three rulemaking actions: interim final regulations issued in July 2010 related to coverage of preventive services, interim final regulations issued in August 2014 related to the process an eligible organization uses to provide notice of religious objection to the coverage of contraceptive services and proposed regulations issued in August 2014 related to the definition of “eligible organization,” which would expand the set of entities that may avail themselves of an accommodation with respect to the coverage of contraceptive services. The 2014 proposed regulations were issued in response to the U.S. Supreme Court decision in Hobby Lobby v. Burwell  holding that, under the Religious Freedom Restoration Act of 1993 (RFRA), the requirement to provide contraceptive coverage could not be applied to certain closely held for-profit corporations whose owners hold religious objections to such coverage (see the August 25, 2014, Benefits Byte).

Drawing on a tax-law definition, the regulations establish that to be eligible for the accommodation, a closely held for-profit entity must, among other criteria, be an entity that is not a nonprofit entity and have more than 50 percent of the value of its ownership interests owned directly or indirectly by five or fewer individuals, or must have an ownership structure that is substantially similar. According to the preamble to the final regulation, “Those entities appear to be the types of closely held for-profit entities contemplated by Hobby Lobby, which involved two family-owned corporations that were operated in accordance with their owners’ shared religious beliefs.” The preamble further states that the departments also believe that the definition adopted in these regulations includes the for-profit entities that are likely to have religious objections to providing contraceptive coverage.

The definition of a qualifying closely held for-profit entity in the final regulations generally aligns with recommendations included in the Council‘scomments on the proposed regulations. Specifically, the Council recommended that the definition of “closely held for-profit entity” adopted in any future guidance be one that is commonly understood, such as the definition already included in the Internal Revenue Code and that any approach for defining a “closely held for-profit entity” for the purpose of amending the definition of “eligible organization” should be simple and straightforward (see the October 23, 2014, Benefits Byte).

The final regulations are applicable beginning on the first day of the first plan year (or, in the individual market, the first policy year) that begins on or after September 14, 2015.

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

DOL Clarifies Fiduciary Liability ‘Time of Selection’ Standard for Annuities in Defined Contribution Plans

The U.S. Department of Labor (DOL) released Field Assistance Bulletin (FAB) 2015-02 on July 13, clarifying the “time of selection” standard in its safe harbor rule covering the applicable fiduciary responsibilities when selecting and monitoring annuity providers for a defined contribution plan. The FAB confirms that a plan sponsor’s fiduciary responsibilities regarding a specific annuity provider end when it is no longer offered by the plan. This applies for both immediate and deferred annuities offered.

The FAB also confirms the following two points:

  • “The prudence of a fiduciary decision is evaluated with respect to the information available at the time the decision was made – and not based on facts that come to light only with the benefit of hindsight.” Thus, under DOL’s safe harbor rule, “a fiduciary’s selection and monitoring of an annuity provider is judged based on the information available at the time of the selection, and at each periodic review, and not in light of subsequent events.”
  • “The periodic review requirement in the safe harbor rule does not mean that a fiduciary must review the prudence of retaining an annuity provider each time a participant or beneficiary elects an annuity from the provider as a distribution option.”

However, the DOL provided some examples of how the ERISA Section 413 statute of limitations would apply to the distribution of an annuity and stated “[absent fraud or concealment, these provisions mean that a plaintiff must base his or her claims on actions or omissions that occurred within the six years preceding the lawsuit.  Thus, for example, if the plaintiff bases his or her claim on the imprudent selection of an annuity contract to distribute benefits to a specific participant, the claim would have to be brought within six years of the date on which plan assets were expended to purchase the contract.”

The DOL commented it was releasing the FAB to assist plan sponsors who may be “overestimating” the amount of time or extent under which they would be held liable as a fiduciary for the financial wellbeing of a selected annuity provider. “This, in turn, could create or reinforce disincentives for plan sponsors to offer their employees an annuity as a lifetime income distribution” the FAB noted.

Finally, the DOL noted that it is considering issuing additional guidance on the annuity selection and monitoring issue.

For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.


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.

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