Employee Benefits Year-End Round-Up

Employee Benefits issues were prominent in 2008, and as the year draws to a close, it is a good time both to remind everyone of pending compliance deadlines for new DOL and IRS requirements and to draw attention to recent legislation and judicial decisions that likely will have important ramifications in 2009 and beyond.

Compliance Deadlines. January 1, 2009 is the deadline for written plan compliance requirements for deferred compensation arrangements under Code section 409A and for tax-deferred annuity programs under Code section 403(b). Of the two, the 403(b) written plan requirement is narrower, applying only to programs maintained by non-profit and governmental entities. The section 409A requirements, by contrast, are very broad, applying to any program by which service compensation can be deferred to a future tax year. Covered deferral programs can include not only traditional executive deferred compensation or stock option programs but also severance pay programs, employment agreements and bonus programs. There is still time to assure that any such programs that were previously informally maintained are, by January 1, 2009, embodied in a written plan that meets all of the requirements of the IRS regulations issued under section 409A.

Health Coverage Mandate Legislation. Two pieces of federal legislation enacted in October significantly expand required coverage under employer-maintained health plans. First, the Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA") requires plans that provide coverage for mental health and substance abuse treatment to provide such coverage in parity with coverage for other health benefits in terms of financial requirements and treatment limitations. Second, "Michelle's Law" (Public Law 110-381) essentially expands the requirement to provide continuation coverage by mandating that college students who leave school due to a serious illness cannot be deprived of dependent coverage as a result. The effective date for both laws is delayed until October 2009 at the earliest and, therefore, both are expected to be the subject of additional guidance and rulemaking from the DOL. 

Ninth Circuit Decision in Golden Gate Restaurant Ass'n v. City & County of San Francisco, 44 Emp. Ben. Cas. (BNA) 2761 (9th Cir. 2008). The Ninth Circuit became the second Circuit Court to enter the health care reform debate by holding that a San Francisco ordinance placing a mandatory health care contribution requirement on local employers was not preempted by ERISA. In doing so, the court not only raised the possibility that this ordinance could become another model for future governmental health care reform initiatives, but also created a potential Circuit split in light of the Fourth Circuit's prior decision in Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (4th Cir. 2007),which held that a somewhat similar statute in Maryland was preempted by ERISA. The fate of the Golden Gate decision on rehearing and possibly at the Supreme Court will be one of the more significant employee benefits stories in 2009.  

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If you have any questions about these or any other employee benefits issues, please contact those listed below, or your usual Crowell & Moring contact.