After six years in the hopper, the Department of Labor finally issued final fiduciary regulations late last week that will greatly impact a wide variety of stakeholders. The Employee Retirement Income Security Act (ERISA) governs fiduciary conduct and establishes rules that bar certain transactions, referred to as “prohibited transactions.” While ERISA’s fiduciary standards and prohibited transaction rules apply principally to retirement plans, ERISA also amended the Internal Revenue Code to impose nearly identical prohibited transaction, but not fiduciary, rules on IRAs, Health Savings Accounts, Archer Medical Savings Accounts and Coverdell Education Savings Accounts. The Department of Labor is charged with interpreting the ERISA and Code provisions relating to fiduciary status and prohibited transactions, and its much anticipated suite of final regulations:

  • Makes sweeping changes to the definition of the term “fiduciary” under ERISA;
  • Imposes strict, new conflict of interest provisions on persons who provide investment advice to ERISA-covered retirement plans and Individual Retirement Accounts; and
  • Modifies a handful of existing prohibited transaction class exemptions.

The purpose of this post is to alert readers to the publication of these new fiduciary and prohibited transaction rules and provide links to the original source materials. In the coming weeks and months we will delve into the particulars of each of the components of the new rules. We will then turn our attention to the impact of these rules on various stakeholders—including large and small retirement plans, the financial services industry (including broker-dealers and registered investment advisors) and other issuers of financial products and providers of financial services.

Continue Reading Hold on to Your (Fiduciary) Hats: the Countdown to Compliance with the Department of Labor’s Final Fiduciary Rules Begins

Written by Alden J. Bianchi

A recent Washington Post article (“Glitch in health care law allows employers to offer substandard insurance,” September 12, 2014) highlights an Affordable Care Act compliance strategy being marketed heavily (and adopted widely) in industries that traditionally did not previously offer coverage to large cohorts of variable hour and contingent workers. (We discussed these arrangements in a previous post. The strategy—which is referred to commercially as a “minimum value plan” or “MVP”— involves an offer of group health plan coverage that, while similar in most respects to traditional major medical coverage, carves out inpatient hospital services.

The Washington Post article (and other commentary) engages in some hand-wringing about why these plans are inconsistent with the goals of the Act. One commentator fumed that an employer that offers these arrangements should “examine its conscience.” (Readers might recall a similar bout of hand-wringing that accompanied “skinny” plans.)

It’s time to take breath.

Continue Reading The Affordable Care Act—Countdown to Compliance for Employers, Week 15: Can a Plan That Fails to Cover Inpatient Hospitalization Services Provide Minimum Value?

Written by Ann Fievet

In Notice 2014-1, the IRS has provided additional guidance for cafeteria plans (including health and dependent care flexible spending accounts) and Health Savings Accounts on compliance with the changes to treatment of same-sex married couples following the Supreme Court’s Windsor decision. The guidance in Notice 2014-1, issued on December 16, 2013, expands on previous IRS guidance issued in Revenue Ruling 2013-17, which we discussed in our client advisory available here. The bullet points below summarize the key guidance points described in the Notice and offer some practical insight for employers in implementing the guidance.

Continue Reading More IRS Guidance on Cafeteria Plan, FSA, DCAP and HSA Administration Post-Windsor