Health and Welfare Plans

The Working Families Tax Relief Act of 2004: Changes to Tax Rules for Health and Accident Coverage and to Other Employee Benefits

The Working Families Tax Relief Act of 2004 (“the Act”) was signed into law on October 4, 2004. The Act provides a uniform definition of “child” that changes taxation of dependent coverage under health and accident plans effective January 1, 2005. This article provides a summary of some of the major changes impacting employee benefit […]

Recent Guidance on Health Savings Accounts

Health Savings Accounts (“HSAs”) were introduced in December 2003 as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Act”). We described the main features of HSAs in our January 2004 issue of Benefits Report, available at Since HSAs were introduced, the Internal Revenue Service and the Department of the […]

Discretionary Clauses in Disability Insurance Policies Ruled Illegal in California

The California Department of Insurance and a federal district court have both recently held that the use of so called “discretionary clauses” in disability insurance policies, including those issued to plans governed by ERISA, violates California law and that the state law in this regard is not preempted by ERISA. A discretionary clause in an […]

California Repeals Senior COBRA Program

On June 23, 2004, Governor Schwarzenegger signed into law legislation repealing the Senior COBRA program in California. After January 1, 2005, terminating employees and their spouses will not be able to extend their health care coverage through Senior COBRA once federal or Cal-COBRA is exhausted. Older workers may instead be eligible for guaranteed individual health […]

The U.S. Department of Labor Issues Final Regulations Regarding COBRA Notices

On May 26, 2004, the Department of Labor published final regulations implementing the COBRA notice requirements for group health plans. These final regulations set minimum standards for the timing and content of various notices required by COBRA and add new notice requirements. Calendar year group health plans must comply with the new regulations by January […]

Ninth Circuit Holds that Health Plan Reimbursement and Subrogation Provisions are Enforceable Under State Law

The Supreme Court’s decision two years ago in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), has, in most circumstances, effectively precluded employee benefit plans from enforcing plan reimbursement or subrogation provisions. Such provisions are common in health plans and typically require plan participants to reimburse the plan for benefits they […]

Getting Serious About Security: Final HIPAA Security Regulations

In February of 2003, the Department of Health and Human Services published the final security regulations under the Health Insurance Portability and Account-ability Act of 1996 (HIPAA). The final regulations, commonly referred to as the HIPAA security rule, are part of HIPAA?s administrative simplification, designed to encourage automation in healthcare information management while addressing concerns […]

Health Savings Accounts — the New Tax-Favored Vehicle for the Payment of Health Care Expenses

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Act”). Title XII of the Act, entitled “Tax Incentives for Health and Retirement Security,” includes provisions which amend the Internal Revenue Code (“IRC”) to provide the basis and favorable tax treatment for Health Savings Accounts […]

Electronic Cards Permitted for Health Flexible Spending Accounts and Health Reimbursement Arrangements

IRS Revenue Ruling 2003–43 provides guidance to plan sponsors that offer participants in Health Flexible Spending Accounts (“Health FSAs”) and Health Reimbursement Arrangements (“HRAs”) the ability to use electronic payment cards to pay service providers at the point of sale. The electronic card may be a debit card or a credit card. However, the following […]

California Mandates Pay or Play Health Coverage

On October 5, 2003, Governor Davis signed Senate Bill 2, the “Health Insurance Act of 2003” (“SB2”). This new law creates a purchasing pool to provide health care coverage “for all working Californians and their families that is not tied to employment with an individual employer.” The law requires employers either to contribute to the […]

IRS Permits Reimbursement for Certain Non-Prescription Medicines and Drugs

The Internal Revenue Service (“IRS”) recently issued Revenue Ruling 2003–102 which allows a Health Flexible Spending Account (FSA) or a Health Reimbursement Arrangement (HRA) to reimburse participants for expenses incurred for eligible non-prescription medicines and drugs, subject to certain limitations. Revenue Ruling 2003–102 states that Internal Revenue Code (“Code”) section 105 (which provides that certain […]

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