Current Developments in Employee Benefits and Compensation

By Terry Richardson, J.D., LL.M., and Bryce Tholen, J.D., LL.M.



  • The health care law's reporting requirements for certain employers and insurers go into effect this year, creating a substantial additional compliance burden.
  • The Trade Preferences Extension Act increased the Secs. 6721 and 6722 information-reporting penalties; these increased amounts apply to failures to comply with the health care act's new reporting requirements.
  • The IRS recently announced that it will eliminate the current staggered five-year determination letter program for individually designed tax-qualified retirement plans and no longer accept "off-cycle" determination letter applications.
  • The Department of Labor issued proposed regulations that redefine who is a fiduciary for purposes of providing investment advice to an ERISA-covered employee benefit plan or to a plan fiduciary, plan participant, or beneficiary, IRA, or IRA owner for a fee.
  • The IRS updated its procedures for the Employee Plans Compliance Resolution System to improve its process and added several safe-harbor methods for making corrections for elective deferral failures.

As has been observed in recent years, much of the changing landscape of the employee benefits world has been driven by the implementation of the Patient Protection and Affordable Care Act (PPACA).1 Perhaps at the forefront for 2015 was the much anticipated and hotly debated Supreme Court decision in King v. Burwell2 in which the Court upheld the subsidy provisions of PPACA. While less a topic of national news, a number of other quite notable developments also occurred with respect to tax-qualified retirement plans, including proposed changes to the IRS's determination letter program, plan fiduciary duties, and correction procedures.

Supreme Court Upholds PPACA Subsidies

In June 2015, the Supreme Court ruled in King v. Burwell that subsidies under PPACA are available to eligible individuals who have purchased insurance under an exchange in any state, whether the exchange was established by the state or the federal government. The Court analyzed the statutory language in the context of other provisions of PPACA to which the language at issue related, and considered the impact of two interpretations of that language on the reforms established under PPACA. If PPACA does not provide tax credits for the purchase of insurance on a federal exchange, then, according to the Court, the coverage requirements also would not apply in a meaningful way, because so many individuals would be exempt from the requirement without the tax credits. The combination of no tax credits and an ineffective coverage requirement could well "push a State's individual insurance market into a death spiral."3 The Court did not believe Congress could have meant PPACA to operate in this manner. The Court examined PPACA's statutory language related to subsidies and the exchanges as a whole and concluded that subsidies are available for insurance purchased on all exchanges.

Now that the question of the availability of federal subsidies in all exchanges has been answered, the implementation of PPACA can proceed. Many of its requirements have gone into effect in the years since its passage, but several of the major provisions are just now becoming effective. Chief among these are the individual mandate, which was first effective in 2014, and the employer mandate, which is effective this year, along with associated reporting by insurers and employers concerning coverage provided beginning in January 2015 (with reporting first due early in 2016).

The individual mandate and associated subsidies require that individuals obtain insurance, either through employer-provided group coverage or governmental coverage or by purchasing their own coverage. Subsidies are available to purchase insurance on any exchange for individuals whose family income is between 100% and 400% of the federal poverty level and who are not offered affordable minimum coverage by an employer or through Medicare, the Children's Health Insurance Program (CHIP), or TRICARE.

The employer mandate became effective this year. This PPACA provision requires applicable large employers (ALEs) (employers with at least 50 full-time equivalent (FTE) employees in the controlled group) to offer coverage to at least 95% of their full-time employees (those working on average 30 hours a week during the month). If the ALE does not offer coverage to the requisite number of full-time employees and any full-time employee obtains subsidized coverage on an exchange in a month, a penalty is assessed for that month equal to one-twelfth of $2,000 multiplied by the total number of full-time employees, less 30 across the controlled group.

If the ALE offers coverage as required, but the coverage is not minimum coverage that is affordable for all employees, the employer must pay a penalty for any employee who obtains a subsidy on an exchange. That penalty is one-twelfth of $3,000 for each employee who obtains a subsidy in that month. Under two transition rules for 2015, ALEs with fewer than 100 FTE employees are not subject to the employer mandate for 2015 and ALEs with 100 or more FTE employees must offer coverage to at least 70% of their full-time employees in 2015.4

The PPACA reporting requirements that are effective this year are among the most important and difficult aspects of the law to comply with. Insurers and self-insured employers must report on minimum essential coverage provided to individuals, including employees, COBRA participants, retirees, and their dependents, for each month of the year. ALEs also must report monthly information regarding the affordability of the coverage that they offer. ALEs must provide these reports to full-time employees and the IRS beginning in 2015. The reports are due in early 2016 via Forms 1095-C, Employer-Provided Health Insurance Offer and Coverage, and 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. Reporting is done for each federal employer identification number (EIN), including for "disregarded entities." The timing of the distribution of these forms to employees and to the IRS is similar to the timing and delivery requirements for Forms W-2, Wage and Tax Statement, as are the penalties for failure to file or an incomplete filing.

Certain types of benefits and plans are not subject to the PPACA requirements. These benefits, called "excepted benefits," may be provided to employees without causing them to lose eligibility for subsidies. Recent guidance on excepted benefits may be of interest to employers contemplating providing some coverage for part-time employees and retirees, as well as those offering certain voluntary benefits such as vision and dental plans and disability income.5

Among the PPACA provisions not yet in effect are a requirement to automatically enroll new employees in an employer's group health plan and a nondiscrimination requirement for insured group health arrangements. These provisions will not become effective until the agencies issue regulations interpreting the requirements.

Finally, PPACA imposes an excise tax on high-cost plans under Sec. 4980I (sometimes referred to as the "Cadillac tax") that is to go into effect in 2018. Recently, in Notices 2015-16 and 2015-52, the IRS requested guidance from taxpayers on issues arising under this tax and indicated how the Service may implement it. Many questions remain, and however they are answered, this tax will be the next major hurdle for employers and health insurers to overcome. In addition, Congress has introduced legislation with bipartisan support that may revise or repeal this tax before it ever goes into effect.6

Updated SBC Disclosure Rules

In June 2015, the federal agencies tasked with implementing PPACA (the Departments of Treasury, Labor, and Health & Human Services—the departments) released updated final rules (first proposed in December 2014) for providing Summaries of Benefits and Coverage (SBCs) available under group health plans (including self-insured plans) and individual health insurance. The updated final rules include changes to the required content of SBCs, as well as the methods and timing for providing SBCs and notices of material changes in coverage.7

The changes apply to disclosures made to participants and beneficiaries who enroll or reenroll in health coverage through an open enrollment period beginning on or after Sept. 1, 2015. For participants and beneficiaries who do enroll during an open enrollment period (e.g., individuals who are newly eligible for coverage or Health Insurance Portability and Accountability Act of 19968 (HIPAA) special enrollees), the changes apply beginning on the first day of the first plan year beginning on or after Sept. 1, 2015. For disclosures to individuals and dependents in the individual health insurance market, the changes apply to SBCs for coverage beginning Jan. 1, 2016.

PPACA states that SBCs may be no longer than four pages, which the 2012 regulations interpreted as four double-sided pages. The new rules maintain this interpretation, though the agencies are expected to provide further guidance on this issue.

Changes included in the final regulations clarify that an SBC is treated as having been provided when the SBC is sent, and simplify the requirements for providing SBCs to plan participants and beneficiaries upon both an offer of coverage and an application for health coverage.

SBCs must be provided as part of any written application materials that are required for enrollment, including any forms or other information requests in paper or electronic format. If application materials are not distributed as part of enrollment, then SBCs must be provided by the first day the participant is eligible to enroll. In addition, if any of the SBC's information changes before the first day coverage becomes effective, an updated SBC must be provided by the first day of coverage. If SBCs are provided before a participant applies for coverage, an additional SBC is not required upon application unless the information included has changed. If changes occur, an updated SBC must be provided as soon as possible—and not later than seven business days—after receiving the application.

The regulations include clarifications for providing SBCs upon request of a participant, beneficiary, or an employer plan sponsor who is merely shopping for coverage options in the open market, as well as additional clarification for using electronic media to provide SBCs. Special rules prevent unnecessary duplication of SBCs when group health plans use a vendor to provide them, use two or more insurance products to provide benefits under a single plan, or where student health insurance coverage is provided by another party.

While revised SBC templates, instructions, and other materials for assisting health plan sponsors to comply with the SBC regulations were published in draft form with the proposed regulations in December 2014, they have not been finalized. The departments released an FAQ on March 30, 2015, indicating their intent to finalize changes to those tools after consideration of consumer testing and public comment. The final revised templates and other materials are expected to be released by January 2016 and will apply to coverage that begins or renews on the first day of the plan year beginning in 2017 (including open enrollment periods beginning in the fall of 2016). Until the new templates are issued and become applicable, plans and issuers may continue to include the statements of whether the coverage provided is minimum essential coverage (MEC) and meets minimum value standards either in the SBC or in a separate contemporaneous disclosure.9

Clarification on Employer Payment Plans

In Notice 2015-17, the IRS addresses new restrictions on employer payments for individual health insurance policies. The Notice clarifies that an employer can no longer maintain programs in which the employer reimburses an employee for substantiated costs of individual health insurance, or for which an employer pays premiums directly to the insurer for individual coverage the employee has purchased, if the program benefits more than one active employee—even if employees are taxed on the premiums. These programs, long permitted under Rev. Rul. 61-146, do not comply with PPACA's benefit mandates for group health coverage.

These reimbursement arrangements cannot be integrated with an individual market plan to satisfy the PPACA market reforms and so will trigger excise taxes. In addition, these arrangements may not be integrated with individual coverage to determine whether an ALE has satisfied its coverage obligations under the Sec. 4980H employer shared-responsibility provisions. However, increases in taxable compensation that are not tied to the purchase of health coverage and where the employer does not endorse a particular policy, form, or issuer of health insurance do not constitute an employer payment plan or a group health plan. Providing employees with information about exchanges or premium tax credits is not an endorsement of particular health insurance.

The notice provides transition relief for small employers, S corporation plans for 2% shareholders, and Medicare and TRICARE-related reimbursement arrangements.

Trade Act Increases Information-Reporting Penalties

President Barack Obama signed the Trade Preferences Extension Act of 2015 (the Trade Act) into law on June 29, 2015.10 The Trade Act includes revenue-raising provisions that increase the potential penalties the IRS may assess for an employer or other responsible party's failure to provide correct payee statements and file accurate information returns under Secs. 6721 and 6722. Sec. 6724 allows the IRS to waive or abate the penalties when the failures are due to reasonable cause. The increased potential penalties apply to information returns and payee statements required to be filed in 2016.

Penalties for failure to file information returns and payee statements arise in the context of many compensation arrangements and employee benefit plans, including Form W-2 reporting for cash and noncash compensation paid to employees, and Form 1099-R reporting for payments from qualified retirement plans.

Significantly, these penalties also apply to the new reporting requirements under PPACA for offers and enrollment in health coverage (i.e., new Form 1095-B, Health Coverage, and Form 1095-C) that are first required for 2015 with reporting to individuals and the IRS due in early 2016.11 Therefore, as many employers continue to refine their information collection and data aggregation procedures to comply with the requirement to begin to file Forms 1095-B and 1095-C in early 2016, they will find themselves faced with increased risk in the form of larger potential penalties for noncompliance.

The increased penalty structure does not affect the limited relief the IRS previously announced from employer information reporting, which applies to ALEs that demonstrate a good-faith effort to comply with the new reporting requirements. This limited relief applies only to failures involving incomplete or inaccurate information, not failures to report to the IRS or to provide information statements to payees by the dates these reports or statements are due.

As with Forms W-2 and Forms 1099, filers subject to the new PPACA reporting requirements may request an automatic 30-day extension to file information reports with the IRS by filing Form 8809, Application for Extension of Time to File Information Returns, on or before the original due date. An additional extension of not more than 30 days may be requested by filing a second Form 8809, which is granted only upon a showing of extenuating circumstances preventing filing by the due date afforded by the first extension.

Failures for purposes of the potential penalties include not only failures to file with the IRS or provide information statements to payees by the due date, but also failures to include all required information or providing incorrect information. The potential penalties are increased for intentional disregard of the filing requirements. While reduced penalties will continue to apply for smaller entities (i.e., those with gross receipts of not more than $5 million) and failures that are promptly corrected, the amounts and annual caps on these reduced penalty amounts also increase in 2016 under the Trade Act provisions.

The actual penalty dollars can be substantial for large employers. Failure-to-file penalties have increased from $100 per return to $250 per return. For Forms W-2 and 1095 this would be $500, as one return goes to the employee and a second return goes to the IRS. Penalties for intentional disregard of these filing requirements have doubled to $500 for each return. Penalties that apply when failures are corrected within 30 days of filing have also increased. The original penalty was $30 per form and has been increased to $50 per form.

New Guidance on Employer-Provided Wellness Programs

In April 2015, the Equal Employment Opportunity Commission released proposed rules that would modify regulations and other guidance on employer wellness programs under the Americans with Disabilities Act (ADA).12 In addition, the departments released a set of FAQs interpreting the 2013 final regulations on employer-provided wellness programs, addressing what it means to be a health-contingent wellness program that is "reasonably designed" to promote health or prevent disease, and clarifying that a wellness program's compliance with the 2013 regulations does not determine the wellness program's compliance with other laws such as the ADA, COBRA, or HIPAA privacy and security standards.13

New Regulations on Excepted Benefits and Limited Wraparound Coverage

In March 2015, the IRS issued final regulations to temporarily allow limited wraparound health coverage during a pilot program.14 Wraparound coverage supplements individual health coverage, including public exchange coverage, for retirees or non-full-time employees, or supplements coverage under multistate plans. Numerous conditions apply, so the opportunity may be unlikely to have broad appeal. The release of these regulations added to an already long list of guidance that addresses "excepted benefits" that are not required to comply with PPACA's market reforms.

States Required to Recognize Same-Sex Marriage

In June 2015, the Supreme Court held that same-sex couples have the legal right to marry in all U.S. jurisdictions and that states must recognize same-sex marriages performed in other jurisdictions. While perhaps a monumental social decision, the Court's decision in Obergefell v. Hodges15 does not raise significant employee benefits issues on the federal level because same-sex married couples have been treated the same way as opposite-sex married couples under federal law since the Court's 2013 decision in Windsor.16 Obergefell will require all states to provide same-sex married couples with the same rights and tax treatment under state law as opposite-sex married couples.

Changes to the Determination Letter Program for Tax-Qualified Retirement Plans

In Announcement 2015-19, the IRS stated that based on the need to more efficiently direct its limited resources, it will eliminate the current staggered five-year determination letter program for individually designed tax-qualified retirement plans, effective Jan. 1, 2017.17 In addition, the IRS stated that effective July 21, 2015, it no longer accepts "off-cycle" determination letter applications, except in the case of a new or terminating plan.

As a result of the elimination of the five-year remedial amendment cycles, the extended remedial amendment period will no longer be available after Dec. 31, 2016, and the general rules under Sec. 401(b), permitting certain retroactive plan amendments, will apply. Announcement 2015-19 does state, however, that the IRS intends to extend the remedial amendment period for individually designed plans to a date no earlier than Dec. 31, 2017.

Because of the timing of the change, the IRS will continue accepting applications for Cycle A plans for the period beginning Feb. 1, 2016, and ending Jan. 31, 2017, which is the end of the Cycle A submission period.18 In addition, if more than one plan is maintained by members of a controlled group under Sec. 414(b), (c), or (m), the employers may elect to file all plans (other than multiemployer or multiple-employer plans) maintained by any members of the group in Cycle A.

The change to the determination letter program means that sponsors of individually designed plans will only be permitted to submit applications for determination letters for initial plan qualification and upon the plan's termination; except in the case of Cycle E filers who have until Jan. 31, 2016, and Cycle A filers who will have from Feb. 1, 2016, until Jan. 31, 2017, to file on-cycle determination letter applications. The IRS, however, will consider certain other limited circumstances under which a sponsor will be permitted to submit a determination letter application.

The IRS is considering ways to make it easier for plan sponsors to comply with qualified plan document requirements, including providing model amendments, not requiring certain plan provisions or amendments to be adopted if they are not relevant or applicable to the sponsor's plan, and expanding the ability to document qualification requirements through incorporation by reference.

ERISA Fiduciary's Duty to Monitor Plan Investments Is Ongoing

In May 2015, the Supreme Court decided unanimously in Tibble v. Edison International19 that an action against an ERISA plan fiduciary with discretion for selecting a 401(k) plan's investment alternatives may proceed because, even though the action was barred by the statute of limitation for fiduciary breaches to the extent it was based on the initial selection of an investment, it was not time-barred to the extent the action was based on the retention of the fund as an investment alternative. The case involves a plan fiduciary who selected a retail mutual fund as an investment alternative when materially identical, lower-cost institutional-class investment funds were available.

The Court did not rule on the scope of the duty or whether the plan fiduciaries had acted imprudently. Rather, the Court remanded the case to the lower court for consideration of this question. The Court's holding in effect recognizes that imprudent retention of an investment alternative is itself an "action" or "omission" that triggers the running of ERISA's six-year statute of limitation for fiduciary breach.

The Court also did not rule on or instruct the lower court how to analyze when changed circumstances are significant enough to give rise to a new fiduciary breach. Rather, citing to general trust law, the Court indicated that fiduciaries must regularly review investments—but the nature and timing of the review depends on the surrounding facts and circumstances.

This duty to monitor plan investments is continuous and exists independently of the fiduciary's duty to exercise prudence in the initial selection of a plan's investment alternatives. The prudence of investment alternatives must be considered systematically at regular intervals to ensure each investment continues to be an appropriate investment alternative. When an alternative is determined to no longer be prudent, it must be disposed of within a reasonable period of time.

DOL Proposes to Redefine Fiduciary Investment Advice and Update Class Exemptions

In April 2015, the Department of Labor (DOL) released proposed regulations redefining who is a "fiduciary" as a result of "investment advice" provided to an ERISA-covered employee benefit plan or to a plan fiduciary, plan participant, or beneficiary, IRA, or IRA owner for a fee.20 The proposed definition is intended to protect plan participants from conflicts of interest and exempts general educational information from the definition of fiduciary investment advice.

The proposed definition of fiduciary applies to any individual who is directly or indirectly compensated for providing individualized advice or advice that is directed to a particular plan sponsor, participant, or IRA owner for purposes of making retirement investment decisions. It covers recommendations for the management of investments, including whether to buy, hold, sell, or exchange investments, and whether to roll over assets from an employer's plan to an IRA, and valuations such as appraisals, fairness opinions, and other similar statements, regardless of whether they are written or oral. The proposed rule would require financial advisers, planners, brokers, asset or investment managers, and other similar persons to adhere to ERISA's fiduciary standards and prohibited transaction exemption requirements, make certain related disclosures, and generally act in their clients' best interest. Under existing rules, nonfiduciary advisers are held to a "suitability" standard—which means they can sell products that generally fit an investor's needs and tolerance for risk, without disclosing conflicts of interest.

The proposed rule includes a number of carveouts to the general definition of investment advice for relationships that are not appropriately regarded as fiduciary. It does not extend the scope of the fiduciary duty arising from such advice to plan or IRA assets over which the person has no discretionary authority, control, or responsibility; or to assets for which the person does not render, or have any responsibility to provide, investment advice. The rule also excludes certain brokers, dealers, and banks executing sale or purchase transactions on behalf of a plan or IRA in the ordinary course of business where such trades are under a plan or IRA fiduciary's instructions. Additionally, concurrent with the proposed regulations, the DOL also proposed several new prohibited transaction exemptions intended to provide relief for many common types of transactions and released proposed modifications to several existing class exemptions commonly relied on by advisers and financial institutions.

IRS Notice Prohibits Offering Lump Sums to Retirees in Pay Status

Notice 2015-49 informed taxpayers that the IRS intends to propose an amendment to the required minimum distribution regulations under Sec. 401(a)(9) to prohibit defined benefit plans from replacing an annuity currently being paid with a lump sum or other accelerated distribution. The amendment will provide that the types of permitted benefit increases described in the regulations include only those that increase the ongoing annuity payments and do not include those that accelerate the annuity payments. The regulatory exception for changes to the annuity payment period also will be amended to prohibit the acceleration of annuity payments to which an individual was previously entitled; the notice is not clear exactly how this provision will be changed.

The amendments to the regulations are to apply as of July 9, 2015, except for any de-risking program:

  • That was adopted (or specifically authorized by a board, committee, or similar body with authority to amend the plan) prior to July 9, 2015;
  • That was the subject of a private letter ruling or determination letter issued by the IRS prior to July 9, 2015;
  • If plan participants were officially notified about the lump-sum risk-transferring program prior to July 9, 2015; or
  • That was adopted pursuant to an agreement between the plan sponsor and the labor union specifically authorizing a lump-sum window that was entered into and was binding prior to July 9, 2015.
Updated Employee Plans Compliance Resolution System Procedures

In March 2015, the IRS released Rev. Proc. 2015-27, making minor modifications and clarifications to current Employee Plans Compliance Resolution System (EPCRS) procedures. The updates modify, but do not replace, Rev. Proc. 2013-12, including changes to improve the EPCRS, such as reducing voluntary correction program (VCP) compliance fees for failure to satisfy certain participant loan requirements, and clarifying correction methods applicable to overpayments. Within days of issuing Rev. Proc. 2015-27, the IRS also released Rev. Proc. 2015-28, adding several new safe-harbor correction methods for elective deferral failures (including failures to implement automatic enrollment in accordance with a plan's terms).

Rev. Proc. 2015-27 clarifies certain correction rules for overpayments of plan benefits. Under correction rules described in Rev. Proc. 2013-12, an employer must take reasonable and appropriate steps to have an overpayment returned to the plan. In practice, many sponsors demand repayment of large amounts; however, plan participants and beneficiaries often have financial difficulty satisfying repayment demands, including the return of overpayments with interest. Rev. Proc. 2015-27 clarifies that plan sponsors have flexibility in correcting overpayment failures.

Therefore, depending on the facts and circumstances, plan sponsors may not always have to request that a participant or beneficiary return an overpayment. For example, correcting an overpayment resulting from a benefit calculation error may include having the employer or another person contribute the overpayment amount (with interest) to the plan instead of seeking repayment from affected participants and beneficiaries. The correction might also include a plan sponsor adopting a retroactive amendment to conform the plan document to operations. However, in all cases, the correction must be consistent with the EPCRS's generally applicable correction principles, including requirements to notify affected participants and beneficiaries that certain overpayments are not eligible for the favorable tax treatment generally accorded to eligible retirement plan distributions—that is, the overpayment is not eligible for tax-free rollover treatment.

Rev. Proc. 2015-28 adds new safe-harbor correction methods for employee elective deferral failures in Secs. 401(k) and 403(b) plans, including failures to implement automatic enrollment or automatic increases in accordance with a plan's terms and participant elections, and improper exclusions from plan participation. Under these new safe-harbor correction methods, an employer can correct failures to follow a 401(k) or 403(b) plan's automatic enrollment terms and failures to apply an employee's affirmative election with less financial cost if certain conditions are satisfied.

Rev. Proc. 2015-28 also provides for an alternative method for calculating earnings for missed elective deferrals under automatic contribution features. This simplified earnings calculation method allows the employer to base missed earnings on the plan's default investment alternative if an affected employee had not otherwise made investment choices. However, cumulative losses in the earnings calculation may not reduce the required contribution for missed matching contributions.

To encourage employers to take quick action to correct employee elective deferral failures, Rev. Proc. 2015-28 adds safe-harbor correction methods for deferral failures that do not exceed three months and for failures that exceed three months but do not continue longer than the self-correction period for significant failures (i.e., the end of the second plan year following the year the failure began).

Each correction method also requires the employer to make corrective contributions (adjusted for earnings) to make up for any missed matching contributions. In addition, these methods require that employers provide affected employees notice not later than 45 days after the correct deferrals begin. Similar to the notices required for automatic contribution failures, the notices for elective deferral failures of limited duration must include the approximate date deferrals should have begun; the deferral percentage that should have been withheld; statements that appropriate deferrals have begun (or are about to begin) and corrective contributions relating to missed matching contributions have been (or will be) made; an explanation of the participant's right to increase elective deferral amounts to make up for missed contributions; and plan contact information.

Under these new correction methods, no qualified nonelective contribution (QNEC) for missed elective deferrals is required if the affected employee's correct deferrals begin on or before the first pay date occurring on or after the three-month period following the date the failure first occurred with respect to the affected employee or, if earlier, the first pay date on or after the last day of the month following the month the employee notifies the employer of the failure. If an elective deferral failure exceeds three months but does not exceed the self-correction period for significant failures, an employer may make corrective QNEC contributions equal to 25% of the affected employee's missed deferrals (instead of the 50% contribution rate generally required under the EPCRS for missed deferrals). To qualify for the 25% corrective contribution rate, correct deferrals must begin no later than the first pay date occurring on or after the last day of the second plan year following the plan year in which the failure occurred, or if earlier, the first pay date on or after the last day of the month following the month the employee notifies the employer of the failure.  


1Patient Protection and Affordable Care Act, P.L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, P.L. 111-152.

2King v. Burwell,135 S. Ct. 2480 (2015).

3Id. slip op. at 15.

4T.D. 9655.

5T.D. 9714.

6Middle Class Health Benefits Tax Repeal Act of 2015, H.R. 2050.

7T.D. 9724.

8Health Insurance Portability and Accountability Act of 1996, P.L. 104-191.

9Department of Labor Employee Benefits Security Administration, "FAQs About Affordable Care Act Implementation (Part XXIV)" (March 30, 2015) (available at

10Trade Preferences Extension Act of 2015, P.L. 114-27.

11Notice 2013-45.

12RIN 3046-AB01, 80 Fed. Reg. 21659 (4/20/15) (available at

13Centers for Medicare & Medicaid Services, "Frequently Asked Questions on Health Insurance Market Reforms and Wellness Programs" (April 16, 2015) (available at

14T.D. 9714.

15Obergefell v. Hodges,135 S. Ct. 2584 (2015).

16Windsor, 133 S. Ct. 2675 (2013).

17Determination letters for retirement plans are subject to a staggered system of five-year cycles, A though E (see IRS, "Determination, Opinion and Advisory Letter for Retirement Plans—Staggered Remedial Amendment Cycles," available at

18Where a plan sponsor's EIN ends in either a 1 or a 6, the plan will be considered a Cycle A plan.

19Tibble v. Edison International, No. 13-550 (U.S. 5/18/15).

2080 Fed. Reg. 21928 (4/20/15).



Terry Richardson is a principal with PwC LLP in Dallas. Bryce Tholen is a manager with PwC LLP in Dallas. For more information about this column, contact Mr. Richardson at


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