Welfare Benefit Plan ERISA News
January 2013

2013 IRS Limits for Welfare Benefit Plans
Highly Compensated Employees ("HCEs"): $115,000, when nondiscrimination testing is based on prior year compensation
Long-term Care ("LTC") premiums treated as medical care expenses: $360 for age 40 or less; $680 for ages 41 to 50; $1,360 for ages 51 to 60; $3,640 for ages 61 to 70; and $4,550 over age 70
Health Savings Accounts ("HSAs"): $3,250 self-only and $6,450 for family
High Deductible Health Plans ("HDHPs"): minimum deductible of $1,250 for self-only and $2,500 for family coverage. The maximum out-of-pocket amount (including deductibles, co-payments and other amounts, not including premiums): $6,250 for self-only and $12,500 for a family.
Healthcare Flexible Spending Accounts (Health FSAs): $2,500 per employee per year as of the first day of the plan year (i.e., the Cafeteria Plan's Plan Year, not the employer's tax year) beginning on or after January 1, 2013. Unused contributions carried over under a grace period do not count towards $2,500 limit of following year. Plans must be amended to adopt new limit by 12/31/14. Amendment may be retroactive if plan operated in compliance with 2013 limit.
Dependent Care Assistance Plans ("DCAPs"): $5,000. (Not indexed to inflation)
The IRS has not yet announced the maximums for adoption assistance plans, qualified parking expense reimbursement plans or qualified transportation expense reimbursement plans.
$1,000,000 Claim Averted with Wrap Plan
Valery Chapman died in an auto accident with a blood alcohol level of 0.15%, well above the legal limit. Under her group AD&D policy, Prudential denied the $1,000,000 claim based on the policy's exclusion for "...an accident that occurs while operating a motor vehicle involving the illegal use of alcohol..." Chapman's beneficiaries sued for a de novo review (a jury trial in state court allowing a full review of facts, and which often favors the individual over an insurance company) on the basis that the Certificate of Insurance did not grant discretion to the Plan Administrator to determine benefits.
A grant of discretion is usually included in a well drafted, ERISA compliant SPD. Where discretion is granted, the claim denial can only be overturned if the Administrator "abused its discretion." Chapman's employer had a written Wrap Plan Document and SPD that had been delivered to her, and they contained an appropriate grant of discretion. The court concluded that the wrap document and the plan booklet together constituted the plan document so the grant of discretion applied to the AD&D claim denial. The court also said that because an SPD is supposed to describe the plan, the statement in the SPD about the grant of discretion was not sufficient to provide the discretion.
This case underscores that 1) a Certificate of Insurance is generally not an SPD, 2) a Plan Document is needed in addition to an SPD, 3) an ERISA wrapper is necessary, and 4) the use of a Wrap Plan is a proper way to add missing ERISA language to a Certificate of Insurance. Johnson v. Prudential Ins. Co., 2012 WL 5378313 (S. D. Ohio)
ERISA Trivia

How many unique words can you make from the five letters in ERISA? Each letter may only be used once, and all five letters do not need to be used when making a word. Abbreviations, acronyms, and foreign words do not count. Winners will be announced next month. Send your list of words.


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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.


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