Employers sponsoring qualified retirement plans, health plans, and other employee benefit plans must take actions by the end of this year to ensure their plans comply with changes in applicable laws. This Action Alert provides a high-level general overview of certain plans employers should review and actions employers should take before December 31, 2013.

Qualified Plans


“Safe harbor” 401(k) plans must provide the safe harbor notice by December 1, 2013 (for calendar year plans).

Qualified default investment alternative (“QDIA”) notices must be provided by December 1, 2013 (for calendar year plans).

Sponsors of 401(k) plans that include an automatic enrollment feature must provide notice regarding the automatic enrollment by December 1, 2013 (for calendar year plans).

Cycle C Restatements and Determination Letter Applications

Plan documents for defined benefit plans and Code Section 401(a) defined contribution plans must be amended and restated periodically. Plans are categorized into remedial amendment period cycles based on the type of plan, the type of plan sponsor, and/or the plan sponsor’s employer identification number (“EIN”). Employers with an EIN ending in 3 or 8, as well as governmental plans (unless the governmental employer has elected otherwise), are in Cycle C. The deadline for Cycle C plan sponsors to submit plans to the Internal Revenue Service (“IRS”) for a new determination letter is January 31, 2014. The process of amending a plan, notifying plan participants, and applying for a determination letter can take a significant amount of time, so plan sponsors should contact us immediately to begin the amendment and determination letter process.

Roth In-Plan Transfers

The American Taxpayer Relief Act of 2012 permitted certain qualified plans to permit in-plan Roth transfers. Plans that permit in-plan Roth transfers should adopt an amendment by December 31, 2013.

Defined Benefit Pension Plans

The Pension Protection Act of 2006 added Section 436 to the Internal Revenue Code of 1986, as amended (the “Code”). In general, Code Section 436 limits benefit accruals and restricts distributions if a defined benefit pension plan does not satisfy certain funding levels. For calendar year plans, the deadline to adopt a required amendment to comply with Code Section 436 is December 31, 2013. However, defined benefit plans sponsored by governmental employers are not required to be amended to comply with Code Section 436.

Discretionary Amendments

If changes to a qualified plan were made during 2013 but a formal amendment has not been adopted, appropriate amendments to the plan document(s) should be prepared and adopted by December 31, 2013.

Automatic Revocation of Beneficiary Designations on Legal Separation

On September 13, 2013, an IRS newsletter raised the issue of the effect of a plan automatically revoking a certain beneficiary designation upon legal separation. The newsletter states: “[a]utomatically revoking a participant’s designation of his or her spouse as beneficiary when the participant is legally separated may cause a plan to violate the spousal death benefit rules.” The IRS provided guidance on how plan documents should address this issue. Plan documents and summary plan descriptions should be reviewed to determine whether the plan provides for automatic revocation and, if so, appropriate amendments should be drafted and adopted by December 31, 2013.

Health Reimbursement Arrangements, Health Flexible Spending Arrangements, and Other Employer Health Benefit Agreements

The IRS recently issued Notice 2013-54 and the U.S. Department of Labor (“DOL”) issued Technical Release 2013-03 that address the application of the market reform provisions of the PPACA to health reimbursement arrangements (“HRAs”), health flexible spending arrangements (“FSAs”), employer premium reimbursement arrangements, and employer assistance programs (“EAPs”). Notice 2013-54 addresses two market reforms. The first market reform is the general prohibition on a group health plan establishing annual limits “on the dollar amount of benefits for any individual.” The second market reform is the requirement that non-grandfathered group health plans provide “certain preventive services without imposing any cost-sharing requirements” for the preventive services. Notice 2013-54 applies for plan years beginning on and after January 1, 2014.

The IRS and DOL guidance make significant changes to HRAs, health FSAs, and employer reimbursements of premiums for individually purchased health insurance policies that cover individual employees. Employers should determine whether they sponsor any of these types of plans or arrangements and contact us to discuss compliance issues and any changes that may need to be made before December 31, 2013.

Cafeteria Plans

The IRS recently released new guidance for cafeteria plans (plans established under Code Section 125). Notice 2013-71 permits cafeteria plans to be amended to permit “up to $500 of unused amounts remaining at the end of a plan year in a health FSA [flexible spending arrangement] to be paid or reimbursed to plan participants for qualified medical expenses incurred during the following plan year.” However, to permit such carryovers, the plan must not include “grace period” provisions. Amending a cafeteria plan to permit carryovers is optional, so plan sponsors should review their plan reimbursement experience data closely to determine whether the carry over provision or the grace period provision is more beneficial for plan participants.

Notice 2013-71 also provides transitional guidance for non-calendar year cafeteria plans. As a general rule, cafeteria plan elections must be made before the first day of a plan year and must be irrevocable during the plan year. An exception to this rule exists if an employee experiences certain changes in status. Under existing Treasury Regulations, the availability of coverage under a health insurance plan purchased through an Exchange does not constitute a change in status. Thus, absent IRS guidance, if an employee is participating in a non-calendar year cafeteria plan and is able to purchase health insurance coverage through the Exchange on January 1, 2014, she will not be able to change her salary reduction elections because the availability of coverage through the Exchange does not constitute a change in status event. Notice 2013-71 addresses this issue by clarifying previous IRS guidance regarding how non-calendar year cafeteria plans may be amended to permit employees to make certain changes to their salary reduction elections. Notice 2013-71 permits an employer to amend its non-calendar year cafeteria plan to permit certain salary reduction election changes and identifies two permitted amendments.

Wrap Plans

Wrap plans are employee benefit plans that are composed of other benefit plans. For example, a wrap plan can be a plan that incorporates by reference the plan sponsor’s group health plan and health flexible spending arrangement. Wrap plans are typically used to reduce the number of Form 5500s that must be filed and to supplement the terms of other benefit plans to help ensure compliance with the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Wrap plans may be considered “group health plans” that are required to comply with certain provisions of the Patient Protection and Affordable Care Act, as amended (the federal health care reform law) (the “PPACA”). Accordingly, wrap plans should be reviewed and, if necessary, amended to ensure compliance with the PPACA no later than December 31, 2013.

Wellness Programs

In June 2013, the Department of the Treasury (IRS), Department of Health and Human Services, and DOL issued new federal regulations governing wellness programs. The new regulations are intended to provide “comprehensive guidance” regarding the requirements for wellness programs. Analysis of the wellness program regulations is available here. The wellness program regulations apply to plans for plan years beginning on or after January 1, 2014. Each wellness program should be reviewed to determine whether the program is in compliance with the new regulations and adopt any necessary amendments no later than December 31, 2013.


On January 25, 2013, the Department of Health and Human Services issued significant regulations modifying the HIPAA privacy, security, and enforcement rules (the “Final Rule”). The Final Rule’s effective date was March 26, 2013, and the compliance deadline was September 23, 2013. An analysis of the Final Rule is available here. Given the many significant changes within the Final Rule, it is crucial that employers and plan administrators of group health plans and their business associates take action to ensure compliance with the Final Rule.

Guidance Following United States v. Windsor

On June 26, 2013, the United States Supreme Court issued its opinion in United States v. Windsorand held that the definition of marriage in the federal Defense of Marriage Act was unconstitutional because it deprived same-sex spouses the equal protection of federal laws. An analysis of the Windsor decision is available here. Following Windsor, individuals who are legally married to a same-sex spouse are treated as “married” and as “spouses” for federal tax purposes. The IRS and DOL have issued guidance regarding the effects of the Windsor decision on certain employee benefit plans. Analysis of the IRS guidance is available here and analysis of the DOL guidance is available here. Additional guidance from the IRS is expected. Employers should review their employee benefit plans to determine the extent to which the definitions of “spouse” and “marriage” are implicated and consider whether changes are required based on the IRS and DOL guidance.

Action Steps

To help ensure compliance, employers, plan sponsors, and plan administrators should:

  • identify all employee benefit plans (and any related trusts).
  • review employee benefit plan documents (and any related trusts) to determine whether the documents need to be amended in light of changes in applicable laws.
  • prepare and adopt amendments to employee benefit plan documents (and any related trusts) no later than December 31, 2013.
  • review and revise summary plan descriptions (“SPDs”) and issue summaries of material modifications (“SMMs”) if changes are made to employee benefit plan documents.
  • if employee benefit plans and/or HIPAA issues are discussed in employee handbooks, review and revise employee handbooks as needed.
  • review and revise business associate agreements, HIPAA notice of privacy practices, and other HIPAA-related documents to ensure compliance with the Final Rule.
  • prepare and distribute appropriate employee communications.

Contact Us

Fraser Stryker is a leader in tax, employee benefits law, and health care law. Attorneys in the Firm’s Taxation, Employee Benefits, and Health Care & Physicians Law Practice Groups advise business entities, governments, hospitals, health care professionals, clinics, and nonprofit/tax-exempt organizations on a wide variety of planning, compliance issues, litigation matters, and transactions. Attorneys on the Firm’s Patient Protection and Affordable Care Act & Health Care Reform Response Team advise businesses, political subdivisions and other governmental entities, health care organizations, and tax-exempt entities on all aspects of health care reform compliance and implementation.

For more information or assistance with HIPAA compliance issues, please contact Jim Quinlan or Kristin Crone.

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This article is provided by Fraser Stryker for general informational purposes and is not intended to be and should not be construed as legal advice on any specific facts or circumstances.

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