HR Alerts

September 2017 HR Alert

ESOP: What is it?

An Employee Stock Ownership Plan (ESOP) is a type of employee benefit plan, similar to a profit sharing plan, that is designed to invest primarily in the stock of the employer.  ESOPs can be used by private or public companies in a variety of ways: as a vehicle for retirement for employees, a tax-advantaged method to raise new capital, an exit strategy to give owners an avenue to sell their shares, to create a subsidiary of the employer, or as an incentive to increase employee morale by sharing ownership of the company with its employees. ESOPs can own any percentage of the employer, including owning up to 100% of all the employer stock. Because the ESOP is often used as a financing tool for the employer, and because the qualified retirement plan is the shareholder for the employer, there are features unique to ESOPs that are not available for other qualified retirement plans.

Unlike a 401(k) plan, the ESOP typically consists solely of contributions from the employer rather than contributions from the employee, and an ESOP is specifically allowed to finance the purchase of employer stock. To contribute to the ESOP, the employer makes tax-deductible contributions in cash to repay a loan that was used to purchase shares, or the cash is used to purchase shares directly from the employer or owners without the use of a loan. The employer may also make tax-deductible contributions to the ESOP in the form of employer shares rather than cash, but this likely dilutes the value of the existing shares and is not the preferred method of contribution to an ESOP. Once the ESOP obtains additional shares of the employer, the employees then receive the employer shares in their ESOP account based on a formula that takes into consideration the employee’s compensation and years of service with the employer. All employees are eligible to participate in the ESOP after a certain period.

The employee’s stock in the ESOP is generally subject to a vesting period. Once vested, the employee receives his or her vested stock from the ESOP upon a termination of employment, retirement, death, or disability. When the employee receives a distribution of stock from the ESOP, the employer is then required to buy back the stock at its fair market value. The repurchase may occur in a lump sum or over a period of years.

ESOPs serve a variety of purposes other than providing a retirement benefit to employees. An ESOP may provide a market for the shares of a departing owner of a successful closely held employer, providing a motivation for employees to become a partial owner of the employer, and it may allow the employer to take advantages of tax incentives available only to ESOPs.

Several tax incentives are available only to plan sponsors of ESOPs or to the owners selling shares to an ESOPs:

  • Contributions of stock to the ESOP are tax deductible;
  • Cash contributions to the ESOP are tax deductible;
  • Contributions used for both the principal and the interest to repay a loan the ESOP takes out to buy employer shares are tax deductible;
  • In a S-Corporation, the percentage of ownership held by the ESOP is not subject to income tax;
  • Owners of a C-corporation who sell stock to an ESOP can defer tax on the gain; and
  • Dividends paid on the shares associated with the ESOP are tax deductible

Although S-corporations may sponsor an ESOP, there are some special considerations for S-corporations, including a prohibition of allocations to certain disqualified persons, dividends paid on employer securities, the rollover of stock from the S-corporation that is distributed from the ESOP, and other issues only applicable to ESOPs.


Leah Singleton Brings ESOP Experience to Hall Benefits Law

This month’s HR Alert comes compliments of Leah Singleton, HBL’s Director of Legal Operations, and it is the first in a series of HR Alerts covering Employee Stock Ownership Plans (ESOPs). Leah has extensive experience with ESOPs and benefits in mergers and acquisitions, significantly expanding Hall Benefits Law’s capabilities in both of these practice areas.

Leah will be sharing her extensive knowledge of ESOPs at this year’s Fall ESOP Forum this October 3-4 in Tampa, Florida. READ MORE ABOUT THIS EVENT.








Copyright © 2017 Hall Benefits Law, All rights reserved.

This newsletter is intended to provide a Firm update to clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

August 2017 HR Alert



Plan Sponsors and Fiduciaries: Beware the High Costs of Prohibited Transactions

When a plan fiduciary permits certain statutorily forbidden transactions, participants in the transactions may be heavily taxed and penalized for the transaction, even years later. The Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), both aim to prevent certain financial transactions (“Prohibited Transactions”) between a qualified retirement plan and specified people with control or influence over the plan, such as plan fiduciaries. The IRC refers to these people as Disqualified Persons, while ERISA refers to them as Parties in Interest. For simplicity, we will refer to them here as Disqualified Persons.

The goal of the Prohibited Transaction provisions is to avoid use of plan assets to enrich Disqualified Persons. Such enrichment includes both self-dealing by a Disqualified Person and the plan lending or otherwise transferring plan assets to the Disqualified Person. The provisions generally apply to those transactions which carry a risk of Disqualified Persons receiving better treatment than disinterested parties would in the same situation. While penalties differ under IRC and ERISA, both sets of penalties apply to Prohibited Transactions. The Internal Revenue Service (IRS) may assess a 15 percent tax per year and a 100 percent tax if the Prohibited Transaction is not corrected prior to IRS discovery. Under ERISA, the Department of Labor (DOL) may issue penalties of between five percent and 100 percent of the amount involved. Additionally, ERISA requires the plan fiduciary to restore the plan for the benefit of the plan participants. Numerous statutory Prohibited Transaction Exemptions exist to prevent these rules from limiting otherwise legitimate transactions, and when applicable Prohibited Transaction Exemptions allow the underlying transaction without penalty to the Disqualified Person.

Disqualified Persons

Prohibited Transactions require participation by a Disqualified Person in a listed transaction; Disqualified Persons typically have a close relationship to the plan or to the employer sponsoring the plan, and they may include:

  • Fiduciaries;
  • Those providing services to the plan;
  • Plan sponsors and those owning significant interests in plan sponsors; and
  • Relatives of any of the previously mentioned people.

Prohibited Transactions

Most direct and indirect transactions between Disqualified Persons and the plan are Prohibited Transactions, and it is the plan fiduciary’s obligation to avoid them. Prohibited Transactions include the sale, lease, or transfer of any property between the Disqualified Person and the plan. Neither party can lend money or extend credit to the other. One party cannot provide goods, services, or facilities to the other. Most importantly, the plan cannot transfer plan assets for use by or on behalf of a Disqualified Person.

Certain Prohibited Transactions occur only when the plan fiduciary is dealing with the plan. The fiduciary cannot deal with plan assets for the fiduciary’s own interest. Additionally, the fiduciary cannot act on behalf of any party whose interests diverge from those of the plan. Finally, the fiduciary cannot receive any compensation from parties managing plan assets.

Prohibited Transaction Exemptions

As written, the Prohibited Transactions statutes are overly broad, and they stifle legitimate transactions occurring between Disqualified Persons and the plan. For example, the plan fiduciary is often a plan participant. Because the plan fiduciary is a Disqualified Person, the Prohibited Transaction rules prevent the plan from transferring any plan assets to the fiduciary, thus preventing the plan from paying retirement or health benefits to a legitimate plan participant. Prohibited Transaction Exemptions (PTEs) cover situations like this by allowing transactions that would otherwise be classified as Prohibited Transactions. The statutes contain over a dozen specific PTEs addressing a wide variety of specific situations. For example, one PTE allows Disqualified Persons to provide services required for plan operation, such as legal and accounting services, provided that no more than reasonable compensation is paid. Another PTE allows plan loans to be made to Disqualified Persons, provided that the loan is made according to the plan document and on terms available to other plan participants.

The DOL also allows for non-statutory exemptions known as administrative exemptions and class exemptions. Administrative exemptions are individual exemptions approved by the DOL. Administrative exemptions apply only to the person who requested the exemption, while class exemptions apply to any person who meets the class exemption requirements.

Penalties Associated with Prohibited Transactions

The IRC and ERISA each have their own set of penalties and excise taxes associated with Prohibited Transactions. The IRS has authority to enforce IRC penalties, and the DOL enforces ERISA penalties. Despite individually assessed penalties, the DOL and IRS are known to communicate with one another upon discovering Prohibited Transaction issues.

The IRS can assess a tax equal to 15 percent of the amount involved in the Prohibited Transaction for each year or part of a year until the Prohibited Transaction is corrected or draws certain action from the IRS. If the IRS discovers an uncorrected Prohibited Transaction, an additional 100 percent tax applies, making uncorrected Prohibited Transactions a costly liability.

Penalties assessed by the DOL are similarly harsh. The DOL may assess a five percent penalty for each year or part of a year in which a Prohibited Transaction continues to occur. Disqualified Persons have 90 days to correct a Prohibited Transaction after notice from the DOL. Failure to do so subjects the Disqualified Person to an additional penalty of up to 100 percent of the amount involved in the transaction. In addition to these penalties, ERISA permits recovery by the plan or plan participants of losses resulting from a breach of fiduciary liability, including all Prohibited Transactions. It is critical that Disqualified Persons and plan fiduciaries avoid the costly penalties, taxes, and liabilities related to Prohibited Transactions.

If your plan has uncorrected Prohibited Transactions or wishes to proactively avoid Prohibited Transactions, Hall Benefits Law encourages you to seek counsel from experienced ERISA attorneys.

UPDATE: In prior HR Alerts, we addressed the implementation of the DOL’s Fiduciary Rule. Previously, many parts of the Fiduciary Rule came into effect on June 9, 2017, but the DOL stated that it would not fully enforce the Rule until January 1, 2018. The DOL has indicated a proposed additional delay until July 1, 2019. The delay is not yet effective and must be approved by the Office of Management and Budget prior to changing the Fiduciary Rule implementation timeline.


Why Care About HIPAA Violations?

July’s HR Alert featured an article titled “We’re Under Cyberattack, What Do We Do Now?”  Most of that article focused on the new “Quick-Response Checklist” (“Checklist”) issued by the United States Department of Health and Human Services (“HHS”), Office of Civil Rights (OCR). OCR is responsible for investigating and enforcing HIPAA Privacy and Security Rules, and the Checklist provides guidance to covered entities and business associates responding to ransomware attacks or other cyber-related security incidents.  Understanding how to mitigate breaches of protected health information (PHI) under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) is critical in today’s global electronic society.

Mitigating the risk associated with potential breach of PHI is critically important because of the potential penalties that may be levied against covered entities and business associates for violations under HIPAA. For example, HHS issued a press release on February 16, 2017 announcing a settlement in the amount of $5.5 million with Memorial Healthcare System (MHS) for HIPAA violations. Details of this case include:

  • On April 12, 2012, MHS filed a breach report with OCR, advising that two unauthorized employees inappropriately accessed PHI;
  • MHS amended its breach report on July 11, 2012, advising that twelve additional unauthorized users accessed PHI;
  • The breach affected a total of 115,143 individuals; and
  • OCR’s investigation revealed the following:
  • A former employee’s log-in credentials were used to access PHI each day from April 1, 2011, through April 27, 2012, affecting 80,000 individuals; and
  • MHS failed to implement policies and procedures regarding workforce security and reviewing information system activity, as required under HIPAA.

In addition to the monetary settlement, MHS was also required to implement a robust corrective plan, vividly illustrating the importance of implementing, and reviewing with employees, HIPAA policies and procedures.

It would be a mistake to assume that HHS focuses exclusively on PHI breaches affecting 500 or more individuals.  On December 28, 2012, HHS entered into a settlement agreement with Hospice of North Idaho (HONI) in the amount of $50,000 for HIPAA violations affecting 441 individuals.  The settlement required HONI to enact a corrective action plan. The facts of the case are as follows:

  • HONI filed a breach report on February 16, 2011, regarding the theft of a laptop containing the electronic PHI of 441 individuals;
  • OCR’s investigation revealed the following:
  • HONI failed to conduct an analysis of the risk to the confidentiality of electronic PHI on an ongoing basis as required under HIPAA’s Security Rule from the date of required compliance to January 17, 2012;
  • HONI also failed to adopt or implement security measures for the electronic PHI using portable devices as required under HIPAA’s Security Rule from the date of the required compliance to May 1, 2011.

The HONI case emphasizes that all covered entities, regardless of size, must meet HIPAA regulations to avoid liability. Additionally, OCR announced on August 18, 2016, that it will step up investigation of breaches affecting fewer than 500 individuals.

Hall Benefits Law recommends all Covered Entities and Business Associates review their HIPAA Privacy and Security Procedures to ensure compliance under HIPAA. Having procedures in place is not enough; Covered Entities and Business Associates must ensure that said procedures are being followed to mitigate the risk associated with breach of PHI.  The HBL team is happy to assist you with any needs you may have regarding HIPAA compliance matters, including getting policies and procedures in place and providing team training.






Copyright © 2017 Hall Benefits Law, All rights reserved.

This newsletter is intended to provide a Firm update to clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

July 2017 HR Alert

 Is the Fiduciary Rule’s Private Right of Action a Greater Threat than DOL Enforcement?


The Department of Labor (DOL) released a temporary enforcement policy ahead of its recently enacted Fiduciary Rule, which went into effect on June 9, 2017. This policy states that the DOL will not pursue claims against fiduciaries who make a diligent and good faith effort at compliance until the end of the Fiduciary Rule’s transition period on January 1, 2018.

Financial advisors who believe that good faith attempts at compliance will eliminate exposure associated with the Fiduciary Rule should be aware that most Fiduciary Rule provisions came into full effect on June 9, 2017. Moreover, the Fiduciary Rule includes a robust private right of action against financial advisors for compliance failures. Under this private right of action, retirement investors may sue immediately for breach of any Fiduciary Rule provisions currently in effect. Furthermore, liability for those breaches may begin accruing as of June 9, 2017, generating significant exposure for financial advisors who believe the DOL’s temporary enforcement policy limits their Fiduciary Rule liability. The private right of action will remain a significant source of liability even after the transition period, as it provides incentive for plaintiff’s attorneys to sue non-compliant advisors. Under the Fiduciary Rule, private suits will be a prominent enforcement driver.

Overview of the Fiduciary Rule Private Right of Action


The Fiduciary Rule’s individual private right of action builds on existing Employee Retirement Income Security Act (ERISA) rules governing fiduciary duties, fiduciary liability, and an individual’s right to sue. The Fiduciary Rule applies these basic ERISA concepts, but it expands the scope of individuals qualifying as fiduciaries. The Best Interest Contract Exemption (BICE), enacted with the Fiduciary Rule, further enhances the private right of action by forbidding investment advisory contracts that contain exculpatory clauses, limit the investor’s class action rights, or include unreasonable arbitration terms.

ERISA Fiduciary Provisions


The Fiduciary Rule only concerns those who render investment advice for a fee or other compensation. This applies to financial advisors who advise retirement plan participants regarding plan investments or offer advice on an overall investment strategy within the plan. The Fiduciary Rule requires the financial advisor to meet the Duty of Prudence and the Duty of Loyalty, ERISA’s two main fiduciary duties. The Duty of Prudence requires advisors to act with the “care, skill, prudence, and diligence” that a prudent advisor would display under similar circumstances. This calls for a careful and measured approach and requires advisors to consider investors’ individual financial circumstances, goals, and risk tolerance. The Duty of Loyalty directs the advisor to act for the exclusive purpose of benefiting the retirement investor. This requires advisors to act in the best interest of the retirement investor without considering potential benefit to the advisor, such as commission or payments offered from third parties. Additionally, transactions using retirement plan assets that financially benefit a fiduciary are considered Prohibited Transactions. ERISA forbids Prohibited Transactions unless the transaction satisfies one of the Prohibited Transaction Exemptions (PTE) listed within ERISA.

Financial advisors who breach their fiduciary duties are personally liable for resulting losses. The financial advisor must restore to the plan any profits the advisor earned through the inappropriate use of assets. In addition, the court has authority to impose any penalty or relief it deems appropriate. For financial advisors, this includes restoring earnings lost due to improper advice, and the court generally restores the retirement investor’s account at the financial advisor’s expense.


Fiduciary Rule Modifications to ERISA Fiduciary Liability


The DOL’s Fiduciary Rule expands the scope of ERISA rules by modifying what constitutes “investment advice.” Under the Fiduciary Rule, investment advice includes advice regarding assets of an employer-based retirement plan, assets housed within an IRA, and assets being considered for rollover into an IRA. By expanding the definition of investment advice, the Fiduciary Rule applies the ERISA fiduciary status to advisors rendering advice to IRA owners. This applies to other ERISA fiduciary provisions, including rules regarding fiduciary duties, liability for fiduciary breach, and who may sue for breaches. Under the Fiduciary Rule, an advisor paid for investment advice regarding IRA assets becomes a fiduciary with respect to those assets, and he or she must adhere to the Duty of Prudence and the Duty of Loyalty.


The Best Interest Contract Exemption


Financial advice regarding retirement assets that benefits the financial advisor, such as advice rendered for a fee, constitutes a Prohibited Transaction under ERISA rules unless a Prohibited Transaction Exemption applies. For financial advisors, the only PTE generally available is the Best Interest Contract Exemption. The DOL released the BICE at the same time as the Fiduciary Rule, and it is functionally a part of the Fiduciary Rule. The BICE provides an exemption for financial advisors rendering paid advice regarding IRA assets, but it requires financial advisors to adhere to rigorous disclosure and impartial conduct standards. If the advisor fails to meet the BICE standards, the advice constitutes a Prohibited Transaction. The BICE contains important standards for how the investment advisory contract between advisor and investor limits investors’ potential claims against the financial advisor. The contract may not limit the financial advisor’s liability for violations of the contract, waive the retirement investor’s right to participate in a class action suit, or unreasonably limit the retirement investor’s ability to bring claims through arbitration or mediation requirements.
The existing ERISA fiduciary structure, the Fiduciary Rule, and the BICE collectively define the investor’s private right of action against investment advisors who violate their fiduciary duties, and the private right of action could become the primary enforcement mechanism for the Fiduciary Rule. The Employee Benefit Security Administration (EBSA) is accepting comments relating to the Fiduciary Rule and BICE. Comments regarding extending the January 1, 2018 applicability date of certain BICE and other PTE provisions must be submitted to EBSA by July 21, 2017. Other comments regarding the Fiduciary Rule and PTE must be submitted by August 7, 2017.

If you have questions regarding compliance with the Fiduciary Rule, Hall Benefits Law encourages you to seek the advice of experienced ERISA counsel.

We’re Under Cyber Attack! What Do We Do Now?

On May 12, 2017, the WannaCry ransomware cryptoworm (“WannaCry cryptoworm”) attacked approximately 230,000 computers in over 150 countries. WannaCry cryptoworm locked computers and required users to pay a ransom to unlock the infected computer and restore the affected files. By May 15th, the global count of infected computers worldwide reached more than 300,000, despite being contained within four days of its initial discovery.

Recently, in response to the WannaCry cryptoworm, the United States department of Health and Human Services (HHS) Office of Civil Rights (OCR) issued a quick-response checklist (the “Checklist”) that explains and outlines the steps a covered entity or its business associate should take in response to a ransomware attack or other cyber-related security incident. According to HHS, in the event of a cyber-related security incident, the covered entity or business associate should:

  • Execute its response and mitigation procedures and contingency plans;
  • Report the crime to appropriate law enforcement agencies, including the Federal Bureau of Investigation and Secret Service;
  • Report all cyber threat indicators to federal and information-sharing and analysis organizations (ISAOs) – for example, the HHS Assistant Secretary for Preparedness and Response and the Department of Homeland Security; and
  • Report the breach to OCR as soon as possible, but no later than 60 days after the discovery of a breach affecting 500 or more individuals, and notify affected individuals (in accordance with the Breach Notification Rule) and the media unless a law enforcement official has requested a delay in the reporting.

Hall Benefits Law strongly recommends adherence to the Checklist because OCR presumes that a cyber-related security incident is a reportable breach unless the covered entity can demonstrate a low probability protected health information (PHI) was compromised through a multi-factor risk assessment based on factors outlined in the Breach Notification Rule. Furthermore, OCR has advised that during a breach investigation it will consider all the covered entity’s mitigation efforts, including the covered entity’s willingness to voluntarily share breach-related information with law enforcement agencies and other organizations identified on the Checklist.

Finally, the penalties assessed for violations under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) can be staggering. These penalties are based on a tiered structure that is contingent upon the covered entity’s knowledge of the HIPAA violation.

Hall Benefits Law recommends you seek the advice of ERISA counsel to ensure your HIPAA policies and procedures align with the requirements outlined above.






Copyright © 2017 Hall Benefits Law, All rights reserved.

This newsletter is intended to provide a Firm update to clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

June 2017 HR Alert | Fiduciary Rule in Effect | Preventive Services Requirements | Upcoming Speaking Engagements

Upcoming Speaking Engagements

June 27th, The Benefit Company
July 27, Smith Communication Partners
August 17, Burnette Insurance
August 31, DOL Panel Discussion

What are the Requirements of Those Held to a Fiduciary Standard?

The Department of Labor (DOL) has implemented the first phase of its new Fiduciary Rule, extending the scope of retirement plan fiduciary duties. In part, the Fiduciary Rule aims to mitigate conflicts of interest that arise from financial advisors’ recommendations regarding retirement accounts. Because of the sweeping changes the Fiduciary Rule brings to the financial advice industry, it has been the subject of great controversy. The primary provisions of the Fiduciary Rule took effect on June 9, 2017, though certain exemption provisions will take effect on January 1, 2018.

Those held to a fiduciary standard are legally and ethically required to act in the best interest of another party. Before implementation of the Fiduciary Rule, fiduciary status only applied to employment-based retirement plans such as 401(k) and 403(b) plans. Under the Fiduciary Rule, any financial advisor providing advice regarding a tax deferred retirement account is held to the fiduciary standard. Individual retirement accounts like IRAs and Roth IRAs that were not covered under the previous standard now fall under the Fiduciary Rule.

Fiduciaries are legally required to act in the best interest of the advice recipient, and those who work with retirements accounts in any capacity must be aware of whether they are a fiduciary and how they might incur fiduciary status. Professionals working with retirement accounts can inadvertently incur fiduciary status by recommending investments or investment strategies. According to the Fiduciary Rule, a professional incurring fiduciary status can be held liable if his or her advice was imprudent or not in the best interest of the recipient.

Under the Fiduciary Rule, an individual becomes a fiduciary when he or she renders investment advice for a fee or other compensation. On its own this definition is overbroad and vague, so the Fiduciary Rule provides additional guidance as to what is and what is not investment advice. Under the new rule, investment advice includes recommendations regarding specific investments. Investment advice also includes higher level recommendations, such as those regarding investment policy, strategies, and portfolio composition. The definition of investment advice includes recommendations relating to assets within a retirement account. Examples include recommendations to distribute assets or roll over assets from an employer-based retirement plan to an IRA. These recommendations can be formal, such as advice rendered pursuant to a contract, or informal.

The Fiduciary Rule includes some specific exclusions, as well. Because the definition of investment advice includes communications directed at specific recipients regarding an investment or management decision, professionals who do not act in a direct advisory role may incur fiduciary status. Financial educators, investment journalists, and investment platform providers could be adversely affected, so the DOL includes numerous exceptions within the Fiduciary Rule that prevent fiduciary status from applying unintentionally. The most important exemptions included in the rule are highlighted below.

General Communications

The Fiduciary Rule states that communications are not investment advice if a reasonable person would not view the communication as investment advice. The rule provides numerous examples including talk shows, newspaper articles, and speeches. The DOL also specifies that general marketing materials and data describing market performance do not fall within the definition of investment advice.

Platform Providers

The Fiduciary Rule excludes financial service platform providers from fiduciary status, provided they meet certain requirements. Generally, to be excluded the platform provider must offer a neutral investing tool which does not favor certain financial products or investments over others. The platform provider must offer investment funds without regard to an individualized plan need. Financial service platform providers may identify investment options based on objective criteria and provide benchmark comparisons for each investment option. A platform provider’s financial interest in any identified investment options must be disclosed. In addition, those platform providers who are not providing impartial investment advice must disclose this fact in writing.

Investment Education

The most detailed exemption within the Fiduciary Rule concerns investor education. The rule attempts to discourage sales pitches disguised as educational seminars without disrupting neutral, even-handed investor education. Investor education broadly covers retirement plan information as well as general financial investment information. Plan information provided may describe the terms and operation of the plan, such as available distribution options and associated features, risks, and expenses, as well as the impact of increasing contributions and making early withdrawals. Providers of investment education may provide their services without the risk of incurring fiduciary status, provided the educator does not recommend specific investment products, investment alternatives, or other investment property.The substantial complexities, ambiguities, and implications of the Fiduciary Rule should not be taken lightly by plan sponsors or financial professionals. The rule and its exceptions include far greater nuance than can be addressed in a newsletter. Hall Benefits Law recommends that you seek the advice of ERISA counsel to determine how this rule will affect your company.

What Preventive Services Must Be Covered Under my Plan?

On March 13, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (the “ACA”). The ACA requires, in part, that non-grandfathered plans provide certain preventive services at no cost to plan participants when provided by a doctor or other provider in the plan’s network. The list of covered preventive services originates from recommendations made by four medical and scientific entities: (i) the U.S. Preventive Services Task Force (USPSTF), (ii) the Advisory Committee on Immunization Practices (ACIP), (iii) the Health Resources and Services Administration (HRSA) Bright Futures Project, and (iv) the Institute of Medicine (IOM) Committee on Preventive Services for Women.

New or revised preventive service recommendations made by the USPSTF, ACIP, HRSA, or IOM must be covered in the plan year beginning on or after the date the recommendation was made. The USPSTF and HRSA have recently revised recommendations with regards to the following:

Statin Recommendations
The USPSTF recommends that adults between the ages of 40 and 75, without a history of cardiovascular disease (CVD), use a low to moderate dose of Statin to prevent CVD, provided the individual has one or more CVD risk factors and a calculated 10-year risk of a cardiovascular event of 10% or greater. Screening for such risk may may require additional assessment. This recommendation is effective for plan years beginning on or after December 1, 2017.
Aspirin Use Recommendations
The USPSTF has revised its prior dosage recommendations regarding aspirin use, recommending initiating a low dosage of aspirin to prevent CVD and colorectal cancer in adults aged 50 to 59 years who: (i) have a 10% or greater 10-year CVD risk, (ii) are not at increased risk for bleeding, (iii) have a life expectancy of at least 10 years, and (iv) are willing to take the low-dose aspirin for at least 10 years. This recommendation is effective for plan years beginning on or after May 1, 2017.
Preventive Services for Women
On December 16, 2016, the HRSA announced nine recommendations in its 2016 Women’s Preventive Services Guidelines. Two noteworthy recommendations:
Cancer Screening
The HRSA recommends cancer screening as follows: (i) for women 21 to 29, a cervical cytology test once every three years, and (ii) for women 30 to 65, a cervical cytology test with Human papillomavirus test once every five years, or a cytology test once every three years.
Breast Cancer Screening for Average-Risk Women

For women in the average-risk category, mammography screening should begin no earlier than 40 and no later than 50 years old. The mammography should occur at least biennially and as frequently as annually, and it should continue through the age of 74 years old. Age should not be the sole basis to discontinue screenings.

These recommendations, along with the other seven included by the HRSA, are effective for plan years beginning on or after January 1, 2018.

Plan sponsors must ensure their health plans implement the new requirements. Penalties for failing to implement preventive service recommendations under the plan include an excise tax of $100 per day for every individual to whom the failure relates.

Hall Benefits Law recommends you seek the advice of ERISA counsel to ensure your plan complies with the new requirements outlined above.

Be in the know. You can find all of our previous HR Alerts and more on our website at

HR Alert April 25, 2017 Navigating Complex Mandates

Bonus HR Alert – April 25, 2017

Navigating Complex Mandates:  The DBA, The SCA, and The ACA | Boon or Bust:  Participant Loan Programs | Upcoming Speaking Engagements

Anne Tyler Hall Featured at Warren Averett’s 2017 Accounting Forum for Educational Institutions and Other Nonprofits

Thanks to all who attended last Friday’s forum!


Upcoming Speaking Engagements

May 3:  One AmericaMay 16:  Greenspring Wealth Management

August 3:  Burnette Insurance


Participant Loan Programs: Boon or Bust?



Participant loan programs are a popular feature within retirement plans. Under a participant loan program, participants borrow money from the retirement plan in exchange for a promissory note, and the borrower’s retirement account is used as collateral. Plan participants appreciate these programs for the flexibility they offer, and they often feel more secure contributing to their retirement plan knowing they can borrow money from the plan in the event of an emergency. Participants save for the long term with confidence, knowing they are not compromising their short-term financial security.

For plan administrators, participant loan programs are a boon and a burden. While loan programs make for a more attractive retirement plan and encourage confident participant contribution, the administrative requirements can be taxing. These requirements control nearly all aspects of the loan program, including the loan amount, the term of the loan, and the amortization rate. Failure to follow the numerous statutory and regulatory requirements can lead to participant taxation on loan amounts or even disqualification of the entire plan, and staying within the legal boundaries of plan loans requires diligent administration.

Unless they meet a multi-pronged prohibited transaction exemption, participant loans are “prohibited transactions” (defined in ERISA § 406). Among the exemption requirements are: (i) operation of the loan program according to a written plan or policy and (ii) treatment of all participants on a reasonably equivalent basis. Additionally, qualified plan anti-assignment rules generally forbid participants from using their account balances as collateral for loans. Improper participant loans are treated as early plan distributions, and the participant must pay tax and penalties on the loan amount. However, an exception does exist for participant loans meeting the prohibited transaction exemption.

Proper establishment and administration of participant loan programs can be challenging and technical, and failure to follow loan program requirements negatively affects the borrowing participant and the plan itself.Contact Hall Benefits Law with questions regarding operation or establishment of retirement plan participant loan programs.

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 Bonus HR Alert

Navigating the Complex Mandates of the DBA, the SCA, and the ACA
The Davis-Bacon Act of 1931, as amended (“DBA”) applies to contractors and subcontractors performing federally funded or assisted contracts of more than $2,000 for construction projects or the alteration or repair of public buildings or public works. Under the DBA, employers are required to pay laborers and mechanics an amount equal to what other laborers and mechanics would receive in wages and fringe benefits for similar projects in the local area. In 1965, Congress passed the McNamara-O’Hara Service Contract (“SCA”). The SCA requires general contractors and subcontractors performing services for the federal government or the District of Columbia in excess of $2,500 to pay service employees in a variety of different classes at least the prevailing wage rates and fringe benefits found in the local area or rates (including prospective increases) contained in a predecessor contractor’s collective bargaining agreement. Services for SCA purposes include, but are not limited to, security and guard services, janitorial services, and cafeteria and food services. Under the DBA and the SCA, employers may satisfy any fringe benefit requirements by paying a cash equivalent of the applicable fringe benefit.

In 2017, the Affordable Care Act (ACA) imposed yet another requirement on employers. Although ACA does not mandate additional wage requirements on employers, it does, under the Employer Shared Responsibilities provision, require certain employers, identified as applicable large employers (ALE’s), to: (i) provide their full-time employees with affordable health coverage that provides minimum value, or (ii) make an employer shared responsibility payment to the Internal Revenue Service (IRS) if it does not offer a health plan and one full-time employee purchases health insurance through the marketplace and receives a premium tax credit.

The provisions of the DBA, the SCA, and the ACA can be confusing and frustrating for employers trying to navigate the maze of benefit requirements mandated by such laws.  Some of the issues facing employers struggling to meet the requirements of the DBA, SCA, and ACA include:

  • Whether an employer is required to furnish an employee with cash or another fringe benefit under the DBA or the SCA if that employee declines health care.
  • Whether the health plan mandate under the ACA is considered a legally required benefit under Federal or state law. Such a scenario  would preclude an employer from receiving a credit towards its fringe benefit obligations under the DBA or the SCA. For example, payments for worker’s compensation benefits cannot be credited by an employer towards its fringe benefit obligations under the DBA or the SCA.
  • Whether an employer may receive credit toward its fringe benefit obligations under the DBA or the SCA for any shared responsibility payments it makes under the ACA.

Because the DBA, the SCA, and the ACA are distinct laws, the Department of Labor requires that employers fulfill the mandates under each law without regard to the others. Fortunately, the DOL has provided guidance on the issues outlined above:

No, an employer’s fringe benefit obligations are not alleviated under the DBA or the SCA simply because an employee declines health care coverage. 

The DOL has stated that because an employer may choose how it satisfies its fringe benefit obligations under the DBA and the SCA (unless subject to a collective bargaining agreement), it controls whether an employee will be given the option to decline or accept the health plan. As such, if an employer decides to provide its employees with the option of declining health care coverage, and an employee opts to do so, then the employer must still satisfy its obligations under the DBA or the SCA and provide the employee either cash or another bona fide fringe benefit.

Yes, employers may continue to take credit for their contributions to a health plan as required under the ACA.

The DOL has advised that the ACA’s health plan requirement is not a legally required benefit because the employer has the choice of providing the health plan or making a payment to the IRS. Therefore, employers may continue to take the DBA or the SCA credit for their contributions to qualifying health plans.

No, an employer liable for the shared responsibility payments under the ACA may not use the payment as a credit toward its fringe benefit obligations under the the DBA or the SCA.

Because an employer’s shared responsibility payment does not confer a benefit to the employee, the payment of the shared responsibility payment is not creditable to an employer’s fringe benefit obligation under the DBA or the SCA.

For specific questions regarding the interplay of the DBA, the SCA, and  the ACA, contact Hall Benefits Law.

Thank you to Laura Delavan of Sterling Risk Advisors for suggesting this article topic.

April 2017 HR Alert | Second Quarter Compliance Calendar for Retirement and Health and Welfare Plans

Employers and plan sponsors must comply with various reporting and notice deadlines for their retirement and health and welfare plans. To avoid costly penalties and excise taxes, employers must remain up-to-date with respect to benefit plan reporting and notice deadlines. The calendar below provides second quarter (April – June) key reporting and notice deadlines for calendar year benefit plans (the deadlines are different for a benefit plan with a non-calendar year plan year). Please note that this calendar does not include all applicable reporting and notice deadlines, just some of the common ones.

Deadline Document/Item Description Plans Affected
March 31 (Usual deadline of April 1 falls on a weekend) Notification of Age 70 ½ Required Minimum Distribution (RMD) Deadline for plan to distribute prior year’s required minimum distribution for any terminated employee who reached age 70 ½ or older during the prior year. Qualified Retirement Plans
Deadline for plan to distribute prior year’s required minimum distribution for any active employee who is also a 5% owner and who reached age 70 ½ during the prior plan year.
April 14 (Usual deadline of April 15 falls on a weekend) Deadline for Defined Benefit Plan Contributions First quarter defined benefit plan contributions must be paid (if applicable). Defined Benefit Plans
April 14 (Usual deadline of April 15 falls on a weekend) Excess Deferrals Deadline for plan to distribute prior year’s deferrals in excess of Internal Revenue Code §402(g) annual dollar limit and related earnings. 401(k) Plans
April 17 Underfunded Defined Benefit Plan Notice Deadline for underfunded defined benefit plans to provide notice to the Pension Benefit Guaranty Corporation (PBGC). Defined Benefit Plans
April 28 (Usual deadline of April 30 falls on a weekend) Annual Funding Notice Deadline for the plan administrator to provide a plan funding notice to the Pension Benefit Guaranty Corporation (PBGC) and to each plan participant and beneficiary under the plan. The notice must include, among other information, the Funding Target Attainment Percentage (FTAP) for the current and two preceding plan years. Defined Benefit Plans
May 15 (within
4 1/2 months after the end of the plan year)
Form 990 and 990-EZ Deadline for plan administrator to file Form 990 with the IRS. Form 990 is required for organizations exempt from income tax under Internal Revenue Code Section 501(a) with (i) gross receipts greater than or equal to $200,000, or (ii) total assets greater than or equal to $500,0000 at the end of the tax year.

Employers should file Form 990-EZ for tax exempt organizations with (i) gross receipts of less than $200,000, or (ii) total assets of less than $500,000 at the end of the tax year.

Employers may use Form 8868 to request a 90-day extension.

Health and Welfare Plans
June 30 (last day of 6th month following the plan year) Excess Contributions Deadline for employer to distribute eligible automatic contribution arrangement (EACA) excess contributions and earnings from the prior year.

Please note that for purposes of this calendar, “Qualified Retirement Plans” means all defined benefit and defined contribution plans that are intended to satisfy Code Section 401(a) and “Retirement Plans” means all employee pension plans defined in ERISA 3(2).

Hall Benefits Law recommends that you consult with ERISA legal counsel to assist you with any questions you may have regarding compliance with the first quarter reporting and notice obligations listed above and any other reporting and notice requirements (i.e., COBRA and HIPAA) for your employee benefit plans.

This content is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

Anne Tyler is an excellent advisor with a true command of ERISA and Benefits law.  She is an effective communicator and a favorite of clients and colleagues.
Anson AsburyPrincipal |Asbury Law Firm
Anne Tyler is a true expert in her field, and I am honored to refer my clients to her. All that I have referred to her are always impressed with her knowledge, compassion, and ability to give her clients clarity and creative solutions. I highly recommend Anne Tyler to anyone who is looking for an employee benefits attorney; she knows how to get results.
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Hall Benefits Law, LLC assisted me with review, documentation, and a written opinion for a specific DOL situation. Anne Tyler is professional as well as personable, articulate, and knowledgeable on the subject for which I hired her. Working with someone who has personality and good communication skills is not necessarily a common attribute. Anne Tyler brings these attributes. The price for the work done, independent research as well as client presentation, was very fair and I would be happy to recommend Anne Tyler to any associate or colleague in need of her legal expertise.
H.W. YoungbloodPresident |Financial Network Associates, Inc.
Anne Tyler is great at interpreting the law. Her research and easy to understand documents are professional, organized, thorough and delivered in a timely manner. We appreciate her accessibility and willingness to offer suggestions and meet with our clients in person or via phone for meaningful discussions and getting answers quickly.
Andy WeyenbergVP of Operations |Resource Alliance
Hall Benefits Law, LLC brings the unique qualities of availability and approachability, as well as thought provoking discussion that greatly assists us with our clients. Anne Tyler is always willing and available to bring her knowledge and expertise about health care law which eases any concerns about compliance. In a client meeting to discuss the Affordable Care Act, Anne Tyler’s unique way of presenting complex information in an easy to understand manner enabled the client to formulate an action plan. She is an absolute pleasure to work with.
Jeff KochDirector of Benefits & Marketing Communications |Resource Alliance
Anne Tyler is an energetic and conscientious attorney with experience in compliance issues for ERISA and Benefits matters, having worked at some of the most prestigious law firms in the Southeast. She is also very personable, which is a great combination.
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My overall experience with Hall Benefits Law, LLC was very pleasing and the service received from Anne Tyler was exemplary in every way. I required technical research in a number of different areas and Anne Tyler performed them above expectation. She was knowledgeable, responsive, cogent, and accessible. I will be happy to recommend her for similar issues.
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