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Participants in the Professional Benefits Trust (“PBT”) may be in danger of having to pay the United States Treasury 50% of their assets in penalties for each year of participation in PBT. The assets of the purported welfare benefit plan were moved off shore and deposited into the Mavin foreign insurance company and into Acadia annuities. The Department of Justice has sued promoter Tracy Sunderlage, Mavin LLC and others in federal court in the Northern District of Illinois, claiming the PBT/Mavin/Acadia scheme constitutes an off-shore income tax scam. Those who chose to continue in the plan after 2004 and allowed the plan assets to be moved off shore may become targets for penalties.

On July 13, 2011, the DOJ filed U.S. v. Sunderlage, et al. The Complaint seeks to enjoin the activities of the owners, organizers and promoters of the PBT/Mavin/Acadia transaction. It also seeks to acquire information about taxpayers who are participating in the Mavin and Acadia off-shore transactions. Once the government acquires the participant list, the IRS will likely commence enforcement activities against the participants on the list.

The vast majority of the participants in the PBT/Mavin/Acadia transactions do not realize the investment in “welfare benefits” actually constitutes an interest in a foreign account that obligated them to file an “FBAR” (or foreign bank account report) every year since the “welfare plan” and its investments left the U.S. The civil penalties for failing to file the FBAR can amount to 50% of the aggregate investment value every year. The criminal penalties for willful failing to file FBARs are up to ten years in prison and $500,000 in fines. These penalties are in addition to the other potentially applicable penalties (e.g., filing a fraudulent income tax return; failing to disclose a listed transaction; and failing to file the proper income tax returns relating to ownership or interest in foreign entities or trusts). The aggregate value of taxes and penalties easily may exceed the value of the investment held off shore.

The FBAR rules apply to all welfare and pension benefit plans that hold direct foreign investments or hold investments in off-shore trusts. The design of the plans dictates whether the trustee, individual plan committee members or plan participants have an FBAR reporting obligation. Reporting obligations commenced in 2003, requiring FBAR filings annually at the end of June.

Any potential penalties may be drastically reduced under the IRS voluntary disclosure program available to FBAR non-filers. However, the August 31, 2011, filing deadline is fast approaching. Participants in welfare benefit plans that have moved assets off shore should contact legal counsel and investigate the voluntary disclosure program.

Write the Rules on Employer Health Care Reform Penalties

Employers now have an opportunity to influence how the Patient Protection and Affordable Care Act’s “employer responsibility” “assessable payment” will apply in 2014. 

 

Section 4980H of the Internal Revenue Code, added by the PPACA, imposes a penalty on employers with more than 50 full-time employees if at least one full-time employee obtains subsidized “exchange” health coverage and the employer does not offer its full-time employees group health plan coverage or the coverage offered fails the PPACA’s affordability or value tests. 

 

The Internal Revenue Service issued Notice 2011-36 on May 3, inviting public comments on approaches the IRS is considering for regulations implementing the employer-penalty provision, as well as other PPACA provisions.  The Notice suggests potential approaches for, among other things, determining which employees are “full-time.”  It also invites comments on the interpretation of the 90-day limitation on group health plan eligibility waiting periods and coordination of that provision with the employer-penalty provision.

 

Comments from employers and employer groups have helped shape the legal and regulatory landscape that affects them.  Despite the PPACA’s primary enforcement agencies’ tendency, so far, to issue final regulations without a public comment opportunity, employer groups already have had significant influence on the curtailment and delay of certain regulations.  (For example, the IRS’ decision to delay enforcement of the new nondiscrimination provisions for insured group health plans.)  Also, employers and employer groups influenced Congress’ decision to repeal the PPACA’s “free choice voucher” provisions, which would have required employers to pay for certain employees’ health exchange coverage. 

 

Here’s an opportunity for employers and employer groups to voice their opinions on a significant regulation.  Our Government Relations practice regularly assists employers and employer groups to prepare comments on proposed regulations. It can pay to speak up!             

Federal District Court Judge, Roger Vinson, for the Northern District of Florida, Pensacola Division struck down the Patient Protection and Affordable Care Act (“PPACA”), the Federal health reform law dubbed by its critics as “Obamacare,” on Constitutional grounds yesterday. Judge Vinson agreed with the Attorneys General of 26 states that the mandates of the law exceeded the authority granted to the Federal government under the Commerce Clause to the U.S. Constitution. See Bondi v. U.S. Dept. of Health and Human Services, (N.D. Fla. 1/31/2011). The decision follows three prior Federal District Court decisions, two upholding the law and one striking it down for similar reasons.

The essence of the decision is that the law’s “individual mandate” – which requires all Americans to purchase a minimum level of health insurance beginning in 2014 or incur a penalty, goes beyond the Federal government’s power to regulate interstate commence rooted in what is known as the “Commerce Clause” of the Constitution. The District Court also held, citing the Justice Department’s own arguments concerning the critical function the individual mandate serves with respect to the PPACA as a whole, that the law “cannot survive without the individual mandate” and must therefore fail along with the individual mandate. In so ruling, Judge Vinson wrote:

Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void. This has been a difficult decision to reach, and I am aware that it will have indeterminable implications. At a time when there is virtually unanimous agreement that health care reform is needed in this country, it is hard to invalidate and strike down a statute titled The Patient Protection and Affordable Care Act.

The Bondi decision, although it represents a significant victory for opponents of the health reform law, was not a total victory on all points for the Attorneys General and others who filed the lawsuit. Significantly, the District Court declined to order the Federal government to cease its activities in implementing the PPACA. It also rejected the plaintiff’s argument that the PPACA’s provisions requiring States to pay for a portion of the expansion of Medicaid beginning in 2014 improperly interfered with State sovereignty.

As a result of these limitations, Bondi will have little immediate practical effect on the implementation of the health reform law. The U.S. Justice Department immediately announced that it would appeal the District Court’s decision to the Eleventh Circuit.

It is unclear how the Eleventh Circuit or the Supreme Court will resolve these legal issues should the case proceed as most expect it will, or what changes might be made to the law in the coming days and weeks as Republicans buoyed by the decision are marshaling their forces in Congress to advance legislation to “repeal and replace.” We’ll all be staying tuned.

 

The following are some excerpts from the decision which provide a view into the reasoning of the Court . . .

 

Continue Reading Score Tied 2-2 as the Healthcare Challenge Heads to the Legal Superbowl – The Supreme Court

Employers continue to experience a rise in the cost of providing health coverage to employees, despite health care reform under the Patient Protection and Affordable Care Act (PPACA). Whether that will change when the new law is fully implemented remains to be seen. For the time being, however, employers continue to struggle with escalating costs and many are looking to wellness programs as part of the solution.

1303029Congress seems to agree. Under the PPACA, beginning in 2014, employers can increase the wellness incentive they provide under their group health plans from 20% to 30% of premium. The new law also provides for information gathering and funding to study wellness programs with an eye toward enhancing their effectiveness.

Even before health care reform, many looked to wellness programs as an important tool for helping to bend the health care cost curve by getting employees more educated about their own health and their health care options, and by providing incentives to encourage healthier behaviors. Competing statistics concerning wellness programs effectiveness exist for sure, although common sense certainly seems to support providing people with services, tools and/or resources to help them move away from unhealthy behaviors, such as smoking, to healthier behaviors, such as exercising, taking medications as prescribed, and eating right.

The success of any wellness program depends on three things – participation, participation and participation. You could design the best program for your employees and if, for example, they can not trust that their personal information will be maintained privately, participation likely will be low. Likewise, if rank and file employees do not see management participating or cannot understand the program, they might be less inclined to participate.

So what are some tips for designing/driving participation in your wellness programs:

 

Continue Reading Wellness Programs: A 2011 Prescription for Participation and Success